Market movers today
In the euro area, we receive inflation data from Spain and Germany which will give some clues ahead of the aggregate euro area inflation print tomorrow.In the US, Powell hosts a town hall speech at 22:00 CET with Q&As. There are several ECB speeches today including Holzman as well as a couple of speeches by the Riksbank members.
The 60 second overview
The oil price keeps rising as an unexpected decline in China’s inventory added to the speculation of a “deficit” in the supply versus demand as US stockpiles are also running low. Rising energy prices will add to the inflationary pressure and supports the view that central banks will be “higher for longer”.
Federal Reserves Kashkari stated in various interviews yesterday that he believes that more than one hike could be necessary should the past tightening not have the desired effect. On the other hand, a potential US government shut-down could have the opposite effect.
The main event in the European markets today is the Spanish and German inflation data where inflation is expected to have risen to 0.6% m/m in September relative to 0.5% m/m in August (and 3.3% y/y vs. 2.6% y/y). German inflation is expected to rise 0.3% m/m relative to 0.4% in August (4.5% y/y vs. 6.4% y/y).
Equities: Global equities were marginally higher yesterday but with huge regional and sector differences. There were two big drivers yesterday, higher yields primarily in the long end of the curve and higher oil prices. Energy sector as the best performer is no surprise under those circumstances. However, the sector shifts out defensives into industrials and other cyclicals was more surprising as investors currently see higher yields as a challenge for the economic backdrop. In the US: Dow -0.2%, S&P 500 +0.02%, Nasdaq +0.2% and Russell 2000 +1.0%. Markets in Asia are quite negative today as the oil price continues to march towards 100 dollar per barrel. US and European futures are mixed this morning.
FI: Yields rose significantly yesterday after an initial decline and thus follow the rise we have been seeing after the central banks meetings during the past weeks. There was a very modest bullish flattening as well as a modest tightening of the 10Y Italian-German yield spread after a significant widening for most of September, where the spread moved from 160-165bp to 190-195bp.
FX: New year-highs for both broad USD and oil prices. EUR/NOK broke below the 200D-MA on the back of the oil price rally. EUR/GBP went below 0.87 once again on a generally weak day for the EUR. The SEK continues to perform, although with signs that downside momentum might start to abate soon.
Credit: Credit indices continued to drift wider yesterday where iTraxx Xover widened 7bp further and Main 1bp. While primary market activity picked up, investors seem more price sensitive as reflected in a lower travel from IPT to final pricing.
Nordic macro
In Norway, retail sales is expected to have stabilised from April through to June but dropped 0.8% in July. Low real wage growth, higher mortgage rates and a shift towards consumption of services are presenting huge headwinds for retailers, so we expect a further decrease of around 0.5% in August.
