New sanctions looming on Russia

Market movers today

US ISM Services PMI will be released in the afternoon, consensus is looking for a slight uptick on the back of a strong Markit figure released earlier. In contrast, China's Caixin Services PMI, released overnight, will likely move clearly lower due to the recent lockdowns.

Aside from economic data, focus remains on the possible next round of Russian sanctions by the EU, with an increasing number of member countries now appearing more open towards the energy embargo. We will also have a number of Fed speakers on the wires, including Kashkari, Brainard and Williams

The 60 second overview

Ukraine-Russia: The international community condemned the actions in Butja, Ukraine, looking to impose more sanctions, which dented the sentiment as oil rose. It is unclear what measures the West will impose on Russia, in particular since Germany does not want to impose measures that would hurt the German/European population. That likely also means that a full embargo on gas and oil is questionable, but the matter will be discussed today according to Eurogroup head Donohoe. Media reported that France and Germany may want to expel Russian embassy staff. US President Biden aide said that they would impose new sanctions on Russia this week. Bloomberg reported that the US Treasury halted dollar payments from Russian government accounts at US financial institutions.

Nordic Outlook: This morning, we have published our Nordic Outlook with updated economic forecasts for the Nordic countries. We expect the impact of the war in Ukraine to be relatively modest, as the Nordics are less dependent on oil and gas, and as economies such as Denmark is constrained by a lack of labour and other input, so have less to lose from lower demand. Finland, however, has more direct economic links to Russia and will hence see a bigger impact from war and sanctions. The Nordic countries have all recovered from the Covid-19 crisis, and our forecasts imply relatively soft landings from that recovery. Nordic Outlook - Highly uncertain times, 5 April.

Australia: The Reserve Bank of Australia (RBA) left monetary policy unchanged in its meeting this morning, but hawkishly opened the door for an upcoming rate hike. Global inflation pressures and recession risks are on the rise, yet the Australian economy remains resilient due to its isolated position away from Russia. While wage inflation still appears modest, the tight labour market conditions suggest a further pick-up seems likely. Thus, RBA appears ready to start hiking rates if the upcoming data confirms the expected acceleration in underlying inflation, likely as early as either in June or July. Nevertheless, already the next May meeting will likely be 'live', with markets pricing a small probability of a hike already then. AUD has strengthened this morning after the release.

China/Covid: Shanghai cases rise further: The number of symptomatic infections in Shanghai rose a bit further over the weekend to above 400 from 300-350 earlier in the week. There are also more than 8,000 asymptomatic infections. Cases have yet to peak in China's most populous city and financial centre. Today the city started a three-day mass testing of all 25 million citizens. More than 30,000 medical workers and military personnel have been sent to help with the testing. The city's lockdown continues this week in what seems to be China's most challenging outbreak since the initial outbreak two years ago with signs frustrations are growing among citizens.

Equities: Equities were higher for another session, led by growth stocks on both sides of the Atlantic. The inverted yield curve shoved investors into the classic value/growth play. Communication services and tech led the gains while defensives and banks were underperforming. Dow closed up 0.3%, Nasdaq 0.8%, Nasdaq 1.9% and Russell 2000 0.2%. US futures have dipped into negative this morning though.

FI: Yesterday the 5-10y point of the European rates curves outperformed the rest of the curve on increased geopolitical tensions and speculation about additional sanctions. The 10y point rallied 'only' 4-5bp in Germany, while spreads widening in all jurisdictions. The move was larger than 4-5bp for most of the day until ECB's Vasle at the end of the day said he was hoping to end negative rates this year, which led to a small sell-off. France underperformed against peers ahead of the first round elections this coming Sunday.

FX: EUR/USD retraced some additional 60pips yesterday to just below 1.10. Like other crosses - EUR/CHF and EUR/GBP also declined yesterday.

Credit: Credit markets went along with the bullish sentiment in equity markets on Monday. ITraxx Main was 1.5bp tighter at 70.7bp while Xover was 4.9bp tighter at 333.4. Also cash bonds saw decent tightening with Investment Grade 1bp tighter at 62.7bp while High Yield was 5.6bp tighter at 323.7bp.

Nordic macro

Focus of the day is Riksbank's Flodén laying out his views about inflation etc. and hopefully giving some clues about how soon and how much to act. We also have the March Services PMI is released 08.30 CET. We would be surprised if it didn't dip markedly given the fact that the manufacturing has trended down for some time and Euro Area services PMI stand at a considerably lower level.

Finally, Riksbank buys SEK 0.75bn munis bonds from specific municipalities.