Anders Møller Lumholtz
Danske Bank A/S
Market movers today
EU foreign ministers are meeting today to decide on further sanctions against Russia following the MH17 crash. In particular UK’s Cameron is pushing for additional sanctions. However, the ministers that are meeting today cannot approve ‘phase three’ sanctions, which include targeting entire sectors of the Russian economy. Such a move needs backing from the heads of state and government. Cameron and other hardliners are pushing for the foreign ministers to lay the groundwork, see more below and in Financial Times.
In the US focus is on inflation data and existing home sales. Core CPI has been edging upwards recently. We are expecting an increase of 0.2% m/m and 2.0% y/y, in line with consensus. Fed’s preferred inflation gauge, the core PCE, is also edging upwards although the level is still somewhat lower currently at 1.5% y/y. The lower level stems mainly from a lower weight on housing. With the US labour market strengthening, inflation data are set to have a bigger market interest and impact during H2.
Earnings season is peaking this week and Coca-Cola, Apple and Microsoft will report today. Both sales and earnings have in general been coming in a tad better than expected by analysts. This is supporting US equities that are hovering around an alltime high, despite the geopolitical tensions.
Selected market news
Market remains focused on the geopolitical tensions with the US and Europe increasing the pressure on Russia. The Malaysian PM Razak announced Monday evening that he had reached a deal with separatists in which both the bodies and the black boxes will be handed over to Dutch and Malaysian authorities. Last night the UN Security Council, with support from Russia, unanimously approved a resolution calling for unrestricted access for investigators to the crash and that ‘all military activities, including by armed groups, be immediately ceased in the immediate area surrounding the crash site to allow for security and safety of the international investigation.
The negative sentiment from yesterday’s European session carried over to the US. S&P500 ended down 0.2%. However, Asia stock indices are trading in green. Hang Seng is up 1.2% while Nikkei is up 1.1% as the market reopens after Monday’s holiday.
In the fixed income market the semi-core tightened further vs Germany and outright yields hit new all-time lows. Spreads also tightened further in the periphery. In particular the short end is going lower as the effect of ECB’s negative repo is driving the hunt for yield. 2Y Portugal is now back at the level from before the concerns regarding Banco Espirito Santo hit the market. In the 10Y Italy, Spain and Ireland are all trading with yields around all-time lows (2.77%, 2.56% and 2.24, respectively).
Scandi markets today
There are no important releases in Scandinavia today.
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