Market movers today

Today's key release is US retail sales in September due out 14:30 CEST. Given that COVID-19 infections have started to rise again and that unemployed people have experienced a significant negative income shock after the expiration of the temporarily higher unemployment benefits, it is interesting to see whether the recovery has continued. Consensus expects the control group rose +0.3% m/m. Besides that we get US production data and preliminary US consumer confidence during the afternoon.

We have some central bank speeches today with Fed governor Brainard, NY Fed president Williams and Riksbank's Ingves scheduled.

The 60 second overview

Brexit. There was no drama, as the EU council decided to issue a statement saying that the EU and the UK should continue negotiating in coming weeks to reach an agreement but that it is the UK that should move closer to the EU's position. EU's chief negotiator Michel Barnier was more 'bullish' saying that the EU is ready to negotiate until the last possible day, wants to give the negotiations every chance to be successful and is ready to speed up negotiations in the next few days. We do not know how the UK is responding yet but the UK's chief negotiator said he was 'disappointed' about the EU council statement and the Financial Times reports that PM Boris Johnson will give the EU an ultimatum over the coming days and will decide today whether to stay and negotiate or not. We think this should just be considered as a play to the gallery and continue to think a deal is more likely than not. That said, negotiations are likely to extend into November, in our view.

Infections in swing states. US health departments yesterday reported the largest nationwide number of new COVID-19 infections since July, with especially presidential election swing states recording high numbers. Wisconsin, Ohio and North Carolina reported record-high day-to-day increases on Thursday. Biden's chance of winning seems to increase in states where the virus has taken a serious hold and looking at prediction markets the probability of an overall Biden win has been at above 60% for some time now. See more in US election monitor, 16 October.

Trade war. The EU has been allowed to impose tariffs on US goods worth USD4bn by the WTO. The allowance follows an EU complaint filed against the US over federal funds making its way to Boeing and yesterday the WTO came to the conclusion that those funds in fact did constitute illegal state aid. The current case is very similar to the one filed against Airbus last year, which allowed the US to impose tariffs worth USD7.5bn on EU goods. US President Donald Trump has promised a forceful retaliation if tariffs are imposed, but it is understood that the EU will remain side-lined until after the presidential election.

FI. Yesterday, there was some safe-haven buying of Bunds as well as profit-taking on Italy, where the number of new infections is increasing rapidly again, and the 10Y German-Italian yield spread widened 5bp after the spread had rallied from 135bp at the start of October and traded below 120bp earlier this week.

FX. Once again the NOK led yesterday's losses in G10 and Majors space as risk sold off and core FI rallied. The USD strengthened versus almost all other currencies with commodity and Eastern European currencies posting daily losses around 1% (versus USD). EUR/USD rebounded late in the session limiting the drop to 0.5%. GBP faces headwinds from both Brexit uncertainty and the global environment and was also among the bigger losers.

Credit. The poor sentiment in credit continued yesterday, with iTraxx Xover 9bp wider and Main 3bp wider. While IG cash bonds continue to hold up relatively well, weakness did creep into high-beta cash bonds yesterday, which widened around 10bp overall.

Nordic macro and markets

The Danish Debt Management Office announced a syndicated short-maturity USD bond deal yesterday, with books to be opened potentially already today. The DMO issued USD CPs back in March and April in order to relieve pressure on domestic short-term funding markets and we suspect that parts of that funding will be rolled into the announced USD bond in order not to draw immediately on the government's cash account. It has been some years since the last foreign debt rolled off and traditionally foreign currency issuances have solely been used in order to replenish the FX reserve. However, this year has been different in that foreign currency denominated funding has been used to replenish the government's coffers instead.

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