Market movers today
This morning, focus turns to the release of UK monthly GDP figures for September and likewise the preliminary Q3 figure. Consensus expects the monthly figure at 0.0% m/m (down from 0.2% in August) and Q3 GDP at -0.1% q/q. Compared to the BoE’s latest forecast from the November monetary policy report of 0.0 q/q for Q3, we would need to see a significant uptick in growth in September for this to be the case.
In the afternoon, we receive the University of Michigan survey from the US. Focus will be on the survey results on inflation expectations following the October uptick.
The 60 second overview
US: Fed chair Jerome Powell yesterday said that he was not confident the Fed had reached a monetary policy stance to achieve the 2% inflation target and he thought there was still a long way to go. He also underlined that more tightening would come if needed.
Oil: Oil prices have stabilised with Brent trading around the USD80/bbl level after the sharp drop since last week. There has not been any particular oil related news the past couple of days to explain the drop.
Equities: Global equities were lower yesterday driven by US stocks as both European and Asian markets ended higher. I t was no surprise to see central banks and not least Powell being the factors that ended the streak of eight straight gains for S&P 500 and nine straight for Nasdaq. Powell touched on the fact of recent yield moves as these have a big impact on financial conditions; and that became the reason for selling stocks yesterday. Cyclicals still managed to outperform as healthcare was the big loser yesterday. In the US: Dow -0.7%, S&P 500 -0.8%, Nasdaq -0.9% and Russell 2000 -1.6%. Sour sentiment in Asia this morning with China leading the declines. European futures are lower while US futures are flat this morning.
FI: US Treasury yields rose significantly yesterday on the back of hawkish comments from Federal Reserve Chairman Powell as well as a very poor 30Y treasury auction. The 30Y US Treasury auction was very weak given a very large tail of more than 5bp. Hence, it was considered to be one of the worst auctions in a decade Powell stated that “if it becomes appropriate to tighten policy further, we will not hesitate to do so”. The US curve steepened from the long end of the US Treasury curve, as 2Y US Treasury yields rose some 10bp, while 10Y Treasuries rose some 15bp and 30Y Treasuries rose 16bp.
FX: Not much to report from G10 FX markets. The drop in oil prices has been the big story the past week, but oil prices steadied yesterday. Fed Chair Powell gave some slightly hawkish comments, which supported USD and sent EUR/USD below 1.07. EUR/SEK and EUR/NOK were about flat on the day.
Credit: The solid activity in the primary corporate bond market continued Thursday with issuers such as Fiskars OYJ, INEOS Quattro Finance, and Intesa Sanpaolo SpA coming to the market. As the Q3 reporting season is drawing to an end the overall impression is that Nordic Corporates are in good shape with solid cash flow generation and low leverage. This is comforting as the outlook for 2024 is more uncertain. iTraxx Main was unchanged at 75bp while iTraxx X-over was 2bp tighter at 408bp.
Nordic macro
In Sweden, the September PVI (production value indicator) and consumption indicator will add some colour to the already released Q3 GDP indicator (unchanged q/q SA). September data already released suggests real goods net exports demand made a significant positive contribution (+0.7pp) to GDP growth while retail sales basically remained unchanged. Consumption data released today is likely to be affected by the moderation in retail sales growth. Looking at composite PMI, which appears to have stabilised in Q3, there should be a modest decline in PVI.
We expect Norwegian core inflation will edge down further to 5.6% y/y in October, which would be well below Norges Bank’s forecast of 6.0% in the September monetary policy report. There is a slight risk of an upward adjustment of prices ahead of Black Week offers this month, but that would then reverse in the November data.
