Anders Møller Lumholtz
Danske Bank A/S
Market movers today
A light global calendar today with focus likely to remain on the geopolitical tensions. Both US and Europe are increasing the pressure on Russia following the MH17 crash. European leaders are calling for ‘immediate, unconditional and secure access for international experts’ to the plane wreckage and to begin the recovering of remains. The dispute on who was behind the downing of the MH17 is ongoing. Financial Times writes that intelligence information suggests it was pro-Russian separatists and Russian military personnel -and that it was by mistake. Further sanctions on Russia could follow this week.
The main releases in Europe this week are the flash PMIs on Thursday and Ifo on Friday. Leading indicators have recently been casting doubt on the strength of the recovery. Money supply and lending growth data from ECB will attract more than usual attention on Friday as the lending growth data will determine how much banks can take on the second stage of the TLTROs.
In the US the focal points this week are inflation data on Tuesday, new home sales data on Thursday and durable goods orders on Friday. The US labour market has been strengthening and with inflation on the rise, these prints will be increasingly in focus.
Selected market news
The global news picture has over the weekend centred on the geopolitical tensions, not only Ukraine/Russia but also the escalation in the Palestine/Israel conflict. Israel has intensified the ground war in Gaza with at least 60 Palestinians reported dead on Sunday. Financial markets ended last week on a negative note with the crashed passenger jet causing a risk-off move across markets on Thursday and Friday. However, US stocks recovered Friday with S&P500 increasing 1.0% led by Google that jumped 3.7% after the company reported stronger sales of advertising and web-search results. In Asia stock indices are also trading in green this morning.
The fixed income markets are also affected by the recent risk-off move. The yield on 10Y US Treasuries ended the week down by 4bp despite a 4bp increase in Friday’s session. Bund yields are currently around 1.15%. If the global risk-off move extends into this week we could be testing the all-time intra-day low of 1.127% from June 2012. In the Euro govie space peripherals tightened vs Germany last week and semi-core yields hit new all-time lows. EURUSD has been grinding lower to 1.35 the past week. The recent move has been supported by a diverging rate spread with the 10Y Treasury/Bund spread hitting new highs. Yesterday, the deadline for a new deal to replace the interim deal on Iran’s nuclear programme, which was struck in November, expired with Iran and the so-called P5+1 agreeing to extend the deadline for a new deal to 24 November. The fact that negotiations ended with an extension of the deadline was probably more or less what was expected in the weeks leading up the 20 July deadline. Hence, we do not expect any significant market reaction to begin the week.
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