Market movers today
Another quiet day on the data front. German consumer sentiment and US Conference Board’s consumer confidence surveys will be released today.
There will be a range of Fed speakers on the wires today, including Goolsbee, Waller and Bowman.
Overnight, the Reserve Bank of New Zealand (RBNZ) will have a monetary policy meeting, we expect an unchanged rate decision in line with market pricing.
The 60 second overview
Market wrap: Markets are mostly in a wait-and-see mode ahead of Thursday’s key inflation data out of the US and the Euro area. Equities have not moved much while US yields dropped further after the European close. EUR/USD moved back up above 1.095 in US trading hours.
US new home sales fall more than expected: The sale of new homes (chart) dropped to 671k in November from 719k in October (revised from 759k). However, it is still above pre-pandemic levels while existing home sales have declined more than 25% compared to 2019 levels hit by the sharp rise in mortgage rates.
Lagarde speech in European Parliament: In her hearing at the EU Parliament yesterday, Christine Lagarde signalled an openness to discussing the reinvestment timeline for the PEPP program in the “not-too-distant future.” Several ECB hawks have been vocal in recent months about the need to accelerate the reduction of PEPP reinvestments, but until now, Lagarde has been cautious about opening that debate.
Israel-Hamas extend truce: Israel and Hamas agreed to extend the truce by another two days until Thursday morning as 11 more hostages held by Hamas were freed. More hostages are expected to be freed in the coming days.
China’s central bank to support domestic demand with forceful policy: The People’s bank of China yesterday said it would use precise and forceful monetary policy “with greater emphasis on cross-cyclical and countercyclical adjustments, enriching the monetary policy toolbox”. The signals point to further easing in the pipeline but it may not be in terms of rate cuts but rather more discretionary financial support in troubled areas such as developers and via cuts in the Reserve Requirement Ratio to free up liquidity for lending. We also expect continued fiscal stimulus in order to keep growth close to 5%.
Equities: Equities were slightly lower on Monday in a very quiet session. Both Europe and US surfed closed to the zero-line, despite a 10bp drop in yields. In fact, VIX even rose a little, which is a contrast to the sharp drops in November. Growth- and quality stocks generally beat value and cyclicals beat defensives. However, with a small margin and sector performance was tight. Utilities, retail and real estate were some of the better groups while an odd mix of health care and industrials underperformed. S&P 500 -0.2% and Stoxx 600 -0.3%. Another slow session could be emerging, as US futures are unchanged and Asian markets mixed this morning.
FI: Global yields declined gradually yesterday as markets priced in more rate cuts from major central banks to be delivered in 2024. No single factor appeared to be driving the move. Bund yields closed down by 10bp across the curve, while the 10-year US Treasury yield fell 8bp throughout the session. German ASW spreads widened marginally along with European credit spreads during the day. Markets are now pricing the ECB to cut rates by 88bp next year, up from 80bp last Friday.
FX: EUR/USD consolidated within the mid 1.09-1.10 range after a quiet start to the week. USD/JPY declined below 149 on a strong day for the JPY amid month-end flows. EUR/GBP declined during yesterday’s session, trading firmly around the mid 0.86 mark.. Both the SEK and, especially, the NOK appreciated against the EUR, with EUR/SEK at around 11.40 and EUR/NOK declining to around 11.65
Credit: Yesterday, credit markets followed a cautious sentiment while global rates moved downwards across the curves, leaving CDS indices slightly wider with iTraxx Main (+1.5bp) at 69.6bp and iTraxx Xover (+7.6bp) at 382.2bp. In addition, the primary Euro market started the week with a number of new mandates including the pharmaceutical company, Roche Holding AG who priced a total of EUR1.5bn in two tranches with noticeable spread tightening relative to IPT levels.
Nordic macro
No key movers out of the Nordics today.
