Market movers today
Today we get German industrial production data for October. Consensus is looking for a 0.6% m/m drop compared to a similar increase in September. Final Q3 GDP data from the euro area is also out and expected to confirm that the euro area economy kept its head above water in Q3.
Sweden releases industrial orders, household consumption and GDP indicator for October. Production figures have held up but both NIER and PMIs point to a slowdown with weak order inflow, which should start to show up in the production figures. The decline in household consumption should continue and probably accelerate and this will probably show up in the GDP figure as well. Q3 GDP came out stronger than we had anticipated and today’s release will give the first indication of growth in Q4.
Industrial production data is also out from Norway.
On the central bank front, ECB’s Lane and Panetta are due to speak ahead of the seven-day quiet period into the December 15-meeting.
The 60 second overview
China: The Chinese health authorities this morning announced that they will allow the use of home quarantine for some Covid patients and scrap test requirements for most public venues. In all, 10 new measures were introduced immediately. This is the second round of easing of Covod restrictions in China. When the first easing was introduced in November it spurred a strong rally in Chinese equities. Hang Seng is up 1.2% this morning as most other markets are in red.
Risk sentiment: The ‘rate fears’ and US investment banks warning about job cuts and slower growth ahead weighed on risk sentiment yesterday. US stocks ended in red with Nasdaq taking the lead down 2.4%.
US yield inversion intensify. The sour risk sentiment supported US treasuries and 10Y yields dropped 6bp to 3.52% – a level last seen in September. The 2s10s US treasury curve continues to invert, the clearest market signal that a recession is on its way. The inversion is now at 82bp. A level only exceeded by the inversion of 1978 and 1982, when Fed Chairman Volcker hiked policy rates aggressively to counter double-digit inflation. He succeeded in bringing inflation under control. But the price was two deep and long-lasting recessions.
Oil lower: The reaction in the oil market was also text-book. Brent oil is now below USD 80 per barrel and close to the lowest level this year. The newly introduced G7 oil price cap has so far done little to support prices. Russia said yesterday they are considering a ‘price floor’ or maximum discounts to benchmark that its oil can be sold at. But for now oil is back trading on the growth outlook and less on price caps/price floors.
Equities: Equities were lower on Tuesday, with US markets down 1-2%. Risk-off with all cyclicals underperforming, but especially the growth oriented ones. Communications, tech, consumer discretionary sold off the most while defensives outperformed.
FI: The global bond market rallied again as the focus returns to the global recession risk rather than the strong US labour market report released on Friday last week. However, the 10Y BTPS-Bund spread continues to tighten despite the increased risk of a recession, expectations of QT from ECB and repayment of the TLTRO.
FX: CHF, SEK, NZD and USD rose vis-à-vis GBP, NOK and CAD yesterday. USD/NOK rebounded back to around 10.00 level and NOK/SEK dropped to around 1.04.
Credit: Credit markets were in slight risk-off mode on Tuesday. Itrax main widened 0.9bp to close at 91bp, while Itrax Xover widened 4.6bp to close at 461.8bp. Primary market activity picked up slightly, relative to Monday, but was still fairly muted.
Nordic macro
Sweden: A string of data from Sweden this morning: production data, industrial orders, household consumption and the GDP indicator. All of these are for October and will hence give a first glance of Q4 which we expect to be a quarter of negative growth. Production figures have so far held up better than expected but both NIER and PMI surveys point to a clear slowdown with weak order inflow. We also get the monthly budget numbers from the Swedish National Debt Office and their forecast is for a surplus of SEK28.7bn in November.
