Market movers today
The general market conditions continue to be the main focus. Yesterday we saw the first signs of stabilisation – see more below.
In terms of economic data releases it is a quiet day but we have a series of Fed speeches today with the outgoing vice-chairman Bill Dudley (voter, neutral) being the most interesting. He will speak in a moderated Q&A and will probably get quest ions on the current market situation and hopefully he will shed light on whether the Fed has become more hawkish or just more confident in its out look, including its three hikes signal for 2018 after inflation and wage growth surprised slightly to the upside. T he Fed’s Evans, Kaplan and Williams also speak.
German industrial production for January should be robust following strong factory orders data yesterday. Chinese FX reserves should show a decent increase due to valuation effects as the USD weakened sharply in January (raising the value of non-USD reserves).
In Europe , the EU Commission publishes new economic forecasts at 12:00.
In Scandi it is time for Norwegian and Danish industrial product ion (see next page).
Selected market news
After a rollercoaster day, S&P500 closed 1.75% higher yesterday after the big correcion Monday and the improved sentiment is also reflected in Asian markets, where most equity indices are flashing green (although the indices in Japan and Hong Kong fell during the night after a very strong opening). S&P500 future for March is trading unchanged this morning. Also VIX recovered after a bumpy day and is now at 30, which is st ill elevated compared to what we are used to but below the 50 peak yesterday. It is worth noting that the higher equity volatility has not spilled over significantly to other markets yet – the reason is probably that investors betting on calm markets (low VIX) have lost money causing VIX to rise even further. US 10- year Treasury yield has declined a few bp this morning to 2.78% after it recovered to 2.80% yesterday. Brent oil is trading at 67.4 dollars per barrel and EUR/USD has stabilised at 1.2388.
While it is difficult to say whether the market turmoil is over for now, we still believe that the correction is more technical than fundamental and we remain overweight in equities. The business cycle st ill looks strong, as PMIs are st ill high and optimism is high among businesses and consumers. We st ill believe the central banks will only tighten monetary policy gradually despite increasing concerns in the markets that inflation is on the rise. After having struggled with low inflation for so long, central banks will likely welcome higher inflation if it comes true.
In Germany, the IG Metal l agreed to a wage settlement yesterday, which shows that wage pressure is increasing but not going through the roof yet .
The US House of Representatives passed another short-term funding bill, as the current funding bill expires tomorrow, meaning the government may shut down again on Friday. While the bill is dead on arrival in the Senate, the Senate is working on a two-year funding bill, which may be put to a vote today or tomorrow. Overall, political analysts see the risk of a government shutdown as low.
. S&P500 future for March is trading unchanged this morning. Also VIX recovered after a bumpy day and is now at 30, which is st ill elevated compared to what we are used to but below the 50 peak yesterday. It is worth noting that the higher equity volatility has not spilled over significantly to other markets yet – the reason is probably that investors betting on calm markets (low VIX) have lost money causing VIX to rise even further. US 10- year Treasury yield has declined a few bp this morning to 2.78% after it recovered to 2.80% yesterday. Brent oil is trading at 67.4 dollars per barrel and EUR/USD has stabilised at 1.2388.){kind=link}