Market movers today
With no market movers in the calendar focus will be on central bank comments as both Lagarde and Powell will speak this evening.
The 60 second overview
China: Chinese economies remains on the brink of deflation after CPI inflation dropped to -0.2% y/y in October and thus back to negative territory. The drop was slightly bigger than expected by consensus.
Japan: Bank of Japan chair Ueda reiterated that the central bank will keep easy policy until inflation target is in sight, while adding that the order of the normalisation process for the yield curve control and negative interest rate policies had not been decided yet.
Oil: Oil prices fell further yesterday with Brent dropping below USD80/bbl. With no oil specific news to report, it may be that the oil market has started to price a bigger downturn in global economic growth, which would likely hit global oil demand along the way.
Equities: Global equities were almost unchanged yesterday. Relatively big regional differences with Asia trailing especially Europe. It is maybe worth nothing that Denmark was outperforming because of mostly well received earnings. On that note, it is rare to see 4 stocks up almost 10% and 1 down 12% in just one day for the OMXC25 index. Globally, energy was again lagging the rest as the oil price continues to drop. Elsewhere the preference for cyclical growth is still dominating with yields ticking lower. In the US: Dow -0.1%, S&P 500 +0.1%, Nasdaq +0.1%, Russell 2000 -1.1%. Asian markets are catching up this morning, mostly driven by the renewed appetite for tech and cyclical stocks. Futures in Europe and US are roughly unchanged.
FI: Yesterday was mostly about lower rates, lower inflation (with 5y5y EUR swap touching 2.43%, lowest since June) and flattening of the euro curves from the long end. We saw a number of ECB hawks on the wires, not least Wunsch pointing to downside risks to growth and upside risks to inflation, yet they were largely ignored by markets. Similar was the tier2 releases yesterday, captured by the ECB’s Consumer expectations survey, ticked higher for the 12m ahead.
FX: The persistent JPY weakness is a bit of a puzzle to us. The combined drop in US yields and the oil price would normally provide tailwind for JPY, but USD/JPY still hovers above 150. Scandies performed somewhat yesterday, where in particular we note that the slide in NOK came to a halt. On the news front, the Polish central bank surprisingly kept interest rates unchanged, which led to a bounce in PLN.
Credit: A positive tone in the corporate bond market supported by overall risk-on sentiment. Yesterday iTraxx Main was 2bp tighter at 75bp while iTraxx X-over was 6bp tighter at 410bp. The positive tone led to a number of new issues including Heineken, Swedavia and Sandoz. Notably UBS came to the bond market with two USD denominated bonds (including AT1’s) for USD3.5bn in total. The combined order book was more than USD36bn according to Bloomberg! According to Bloomberg the UBS AT1 issue contains a mechanism that would allow the bonds to be converted into ordinary shares once the bank’s articles of association are amended to provide enough conversion capital. In March 2023 Credit Suisse AT1 holders were left with a complete write-down of outstanding AT1’s while the bank’s shareholders managed to retain some value. The equity trigger in the newly issued UBS AT1’s would cushion potential investor losses.
Nordic macro
Statistics Norway will publish wage and employment figures for Q3. Please note that the wage growth will probably be above 6 % y/y in Q3, partly due to the effects from the central wage negotiations in the spring. The figure will still be well in line with Norges Bank’s estimate from the September MPR at 5.5 % for 2023. Any signs of employment stalling could be more important to Norges Bank, as this will indicate that the output gap is falling.
Riksbank releases the second Financial Stability Report this year 09.30 CET, press conference at 11.00 CET with Governor Thedeén. He later presents the report at a meeting 17.00 CET at the Swedish Bankers’ Association. The previous June Report concluded that the Swedish financial system works well despite high inflation and rising rates, but at the same time acknowledged vulnerabilities in the form of high debt burden at real estate companies and banks’ high exposure to this sector. We expect a similar message this time.
