Market movers today
Tuesday kicks off with inflation data out from Sweden. Again, and despite last month’s miss, we expect Swedish July inflation to print close to Riksbank’s forecasts of CPIF 6.6% y/y and CPIF excl. energy 7.8% y/y, as we expect 6.5% y/y and 8.0% y/y. Core inflation is expected to be 0.4% m/m.
The morning also brings GDP indicator for Q2 from Statistics Denmark. This will be the first preliminary estimate of GDP growth, which we expect to print at 0.5% q/q.
We also get German ZEW index for August where both the expectations component and the current state assessment are expected to slump further.
From the US, the main focus will be on July retail sales. Leading indicators and early data suggest that spending growth has remained fairly robust, partly reflecting higher gas prices, but also more broadly.
The 60 second overview
This morning the Chinese central bank unexpectedly lowered key monetary policy rates given the uncertain outlook for the Chinese economy. The yuan weakened on the back of the rate cut. Furthermore, Chinese economic data (industrial production and retail sales) published this morning also showed weakness in the Chinese economy.
The Argentine Peso and the Russian ruble came under significant pressure yesterday. The peso was under pressure due to preliminary election victory of one of the outside candidates, which has promised a radical shift in monetary and financial policies of Argentine. The Argentine central bank devaluated the currency by 18% and raised rates from 97% to 118%.
The ruble is also under pressure and traded above 100 to USD 1. The Russian central bank is holding an emergency meeting.
Equities: Equities were a notch higher on Monday with little news. Reignited fears in the Chinese property sector spilled over to the European session but market recovered at the US opening (S&P 0.6%, Nasdaq 1.1%, Stoxx 600 0.2%). Cyclicals beat defensives but entirely owing to big tech. Otherwise, sector differences were quite small yesterday, except for the weak performance in European materials sector on the back of Chinese worries. The bleeding continues today with Chinese equities about -1% lower, in contrast to Japanese equities which are up on the back of macro profiles. US and European futures are indicating a positive opening as well.
FI: Modest rise in global bond yields as 10Y US Treasuries rose some 3-4bp and 10Y Germany rose 2-3bp. The rise was driven by the risk of tighter regulation/policy action by Chinese regulators in order to curb the mounting risks in the Chinese financial and property markets. However, this kind of risk is usually rather deflationary and thus we should see a reversal also after the Chinese central bank eased monetary policy this morning. Focus this week should be mainly on the minutes from the FOMC meeting on Wednesday and a speech by Fed member Kashkari.
FX: In relatively calm markets yesterday, the USD came out on top vis-à-vis the rest of G10. Both EUR/USD and USD/JPY reached levels they have not seen in some time. USD/JPY climbed firmly above 145 for the first time since last November. EUR/USD tested the 1.09 level for the first time in over a month.
Credit: Credit markets traded mostly sideways yesterday under relatively thin liquidity. The underlying support from less hawkish CB’s seemed to be partly offset by renewed focus on problems in the Chinese real-estate sector and its potential spill-over effects to the broader economy. ITraxx main ended the day 0.1bp tighter at 71.6bp whereas Xover tightened a meagre 0.3bp to 404bp. The primary markets remain subdued.
Nordic macro
July inflation outcome is in focus in Sweden this morning. Danske Bank’s forecast for CPIF and CPIF excl. Energy is spot on the market consensus i.e. 0.1 % mom/6.5 % yoy and 0.4 % mom/8.0 % yoy, respectively. This is 0.1 p.p. below and 0.1 p.p. below Riksbank’s yoy forecasts, respectively. The risk picture appears quite symmetric with a possible downside to food prices while holiday expenditures (airline tickets, charter packs, restaurant/hotel prices and cultural event tickets) may very well continue to surprise on the upside. The latter is more likely to impact Riksbank pricing than the former.
 published this morning also showed weakness in the Chinese economy.){kind=link}