Market movers today
There are no market movers today in the calendar.
This week focus will be on US data releases with both the November jobs report, ISM services, and the University of Michigan survey scheduled. We expect a further cooling in non-farm payrolls on Friday to +140k and see average hourly earnings growth stable at 0.2%. Markets will keep a close eye on the Michigan survey on Friday after two consecutive months of rising short-term inflation expectations.
We have several central bank meetings this week in Poland, Canada, and Australia. We expect unchanged policy rates from all three.
The 60 second overview
Market focus and overnight: On Friday, both the S&P 500 and Nasdaq marked a fifth consecutive week of gains, underscoring sustained positive momentum in the market. US Treasury yields experienced a notable sell-off across the curve, triggered by cooler-than-expected inflation data and dovish remarks from the Federal Reserve. The 10-year yield saw a significant decline, reaching a three-month low. Notably, the market is currently pricing in the anticipation of over 100 basis points of Federal Reserve cuts in 2024, with the possibility of an initial move as early as March, aligning with our expectations of the first Fed cut in March. Federal Reserve Chair Jerome Powell tempered these expectations in a speech on Friday, suggesting it would be “premature” to speculate on the timing of any easing of monetary policy. Elsewhere, gold prices surged to record levels, achieving their highest close on record, reflecting a shift in investor preferences. EUR/USD is consolidating below the 1.09 mark. This morning, yields are somewhat rebounding while gold is declining from highs. Oil is trading lower as Brent fell below USD80/bbl. Asian markets are mixed together with European futures. US futures are a tad lower as we start the week.
US manufacturing ISM: The US November ISM manufacturing stayed at 46.7 (consensus: 47.8, prior: 46.7). The details were mixed. Prices paid rose to 49.9 from 45.1, the highest since April 2023. Additionally, new orders rose to 48.3 from 45.5. However, employment fell to 45.8 from 46.8.
Equities: Global equities rose on Friday, thereby securing a five-week winning streak. Last week was in some sense even more interesting than some of previous weeks where equities rose more than last. The reason is the underlying rotation where the soft-landing narrative is super visual. Thinking being: lower inflation, central bank losing is coming, lower yields, lower risk of recession, massive defaults in CRE avoided. Hence, REIT, small caps and banks (not least US regionals) performing very strongly although yields are moving lower. Again, the “inflation-normalization” trade has come a long way and we need to start seeing the “good data/bad data” differently as we move in 2024. To a large extent, this also means an end to the positive correlation for bonds and equities. Only caveat is inflation data where bonds and equities will still be positive-correlated at least in the beginning of 2024. US major indices on Friday: Dow +0.8%, S&P 500 +0.6%, Nasdaq +0.6%, Russell 2000 +3.0%. Asian markets are mixed this morning together with European futures. US futures are a tad lower as we start the week.
FI: Comments from Villeroy on Friday afternoon staged a massive rally led by the front end to end a week which was mostly a one-way trend for lower rates. With Villeroy saying that rate hikes are over and ‘The question of a cut may arise when the time comes during 2024, but not now’, 2y German yields dropped 10bp. 10y German yields are now trading at 2.36%. Markets added 13bp to the ECB rate cut expectations for 2024 and now points to 127bp. The awaited speech from Powell on Friday afternoon did not provide signals ahead of the blackout period that started this weekend.
FX: EUR and USD were the big losers on Friday, where in particular NOK, JPY and AUD saw strong gains. EUR/USD traded close to the 1.09 level. EUR/NOK fell to around 11.60 and EUR/SEK just below 11.30.
Credit: iTraxx Main traded again tighter on Friday and closed 13.2bp tighter than the week before at 65.9bp, while Xover tightened 57.3bp during the week to close at 363.8bp. The week was characterized by high activity in the primary market, sentiment remains constructive in credit and investor appetite for new deals continues to look solid.
Nordic macro
The Riksbank is publishing the minutes from the November monetary policy meeting today at CET 9:30. Interesting to see what the most hawkish members, Thedéen och Jansson, focused on in the latest decision. After the publication of the minutes Anna Breman will discuss ‘the economic situation and current monetary policy’ at CET 11:00. Governor Thedéen will follow up (on Tuesday) and the remaining three board members will speak on the same topic on Wednesday, Thursday and Friday, respectively.
