Market movers today
The week kicks off in a quiet fashion as many Europeans are still on summer holiday.
Later this week, tomorrow brings German ZEW index and US retail sales.
On Wednesday, we expect the RBNZ to keep rates unchanged. FOMC minutes are released on the same evening. On Thursday, we have Norges Bank where we expect a 25bp hike in line with consensus. Overall, due to holiday period, very few central bank speeches are scheduled.
Friday brings July final HICP print for euro area with detailed data on components.
The 60 second overview
10Y US Treasury yields moved higher on Friday on the back of higher than expected producer prices. Given the hawkish comments from some of the Federal Reserve members the markets will read the minutes from the FOMC meeting extra carefully when it is released on Wednesday.
There are plenty of speculation in the market when the Federal Reserve will begin to ease monetary policy and whether they will keep policy rates higher for longer. Currently, the market is pricing an unchanged Federal Reserve for the rest of 2023 and rate cuts already in late Q1 and Q2 for a total of 125bp in 2024.
The hot weather is adding pressure on the oil price and thus on inflation. This is seen in e.g. both 5y5y US and EUR inflation swaps, which are drifting higher.
The big events in the Nordic market this week is the Swedish inflation data on Tuesday and the Norges Bank meeting on Thursday. Swedish inflation is expected to decline as CPIF is expected to decline from 0.9% m/m in June to 0% m/m in July according to the consensus forecast. Norges Bank is expected to raise rates by 25bp. This is fully priced by the market and the risk is if they do 50bp, but we expect they will only do 25bp.
There are some speculation regarding intervention in the JPY as the JPY is testing the 145-level versus the dollar. Some market participants are looking for an intervention in the 145-150-level.
Equities: Global equities lower Friday with several indices seeing another weekly decline. The most interesting part was the US session where we saw a preference for defensives but also a stagflationary rotation where banks were in favour together with defensives as yields ticked higher. US PPI data blamed weak risk sentiment, but may be more a reflection of investors having too high hopes on the soft-landing scenario. In US on Friday, Dow +0.3%, S&P 500 -0.1%, Nasdaq -0.7% and Russell 2000 +0.1%. Negative sentiment in Asia this morning dragged down by China and new worries in the property sector. US and European futures down 0.2%-0.3% this morning.
FI: 10Y US Treasury yields moved higher Friday on the back of higher than expected producer prices. Given the hawkish comments from some of the Federal Reserve members the markets will read the minutes from the FOMC meeting extra carefully when it is released on Wednesday.
FX: Scandies dropped along with NZD and AUD on Friday, where the USD came out on top together with GBP. In particular, EUR/SEK is under the rise again and now close to the historic high form early July. EUR/USD trades in the 1.09-1.10 range.
Credit: iTraxx Main traded slightly wider during Friday and closed 1bp wider at 71.6bp, while Xover moved out 7.2bp during the session to close at 402.7bp. The week was characterized by basically unchanged CDS levels and relatively muted activity in the primary market, sentiment remains constructive in credit space and investor appetite for new deals continue to look solid
