Market movers today
Japanese inflation data for November was as expected, but at a high level of 3.7% y/y. Hence, this supports the tightening move from BoJ earlier this week.
There is PPI data from Finland, France and Spain as well as personal income and durable goods numbers from US. The data should have limited impact on the markets.
The 60 second overview
Japanese inflation rose at the fastest pace since 1981. This is supportive for BoJ after their move on the YCC. It is likely to fuel expectations that BoJ could move again in 2023, if inflation does not decline.
CPI excl. fresh food rose 3.7% y/y in November. This was as expected by economists. The rise in headline inflation was lower than expected.
Asian equity markets is following the negative trend from the US markets yesterday and are posting losses across the region this morning. The move is driven by Tech stocks in both US and Asia, it is fuelled by the expectations that the Federal Reserve will continue tightening, after better than expected data from the US yesterday. The data showed that the job market remain resilient and the GDP for Q3 was revised upwards.
FI: The stronger than expected US economic data also sent US Treasury yields higher yesterday. In the European market yields also rose, but the BTPS-Bund spread continue to remain range bound even as Italy has to sell EUR 310-320bn in bonds next year. The estimate is actually lower than the estimate for 2022, which was EUR 325-330bn. However, Italy sold EUR 285bn in 2022 given the proceeds from NGEU of some EUR 45bn. Italy will also receive significant support from NGEU in 2023, and thus the sale of bonds is likely to be lower than the estimate.
FX: Yesterday’s session was primarily characterised by modest USD strength and a setback to cyclically sensitive currencies. EUR/USD has moved back below 1.06 while EUR/NOK and EUR/SEK are back close to 10.50 and 11.10, respectively. EUR/GBP is back above 0.88 for the first time since mid November.
Credit: The credit markets were slightly negative yesterday with Itraxx main finishing the day 0.7bp wider ending in 95.1bp and Xover being some 7.8bp wider ending at 485.4bp. With the exception of a slew of investors rebalancing up to year-end, the activity in the credit markets remained low and is expected to remain so throughout the rest of the year. The low primary activity seen in the latter part of December could bode for a rather busy start to 2023.
