China's COVID-19 crash

Market movers today

This week will be a quiet one on data front, but we do look for signals on how the global consumer is holding up in the context of rising prices, as we get retail sales data from the US on Tuesday and the EA consumer confidence data on Friday.

Central banks remain in the spotlight with some Fed speakers on the wires and ECB minutes out on Thursday. For Fed, there seems to be a broad consensus on front-loading rate hikes by hiking 50bp the next two meetings. For ECB, markets will focus on any discussion about the timing and pace of upcoming rate hikes and the Governing Council's concerns about de-anchoring inflation expectations. Final EA HICP print is due on Wednesday.

Also, Finland and Sweden are expected to take further steps towards joining NATO after which NATO is expected to invite countries to accession talks. Focus will be on NATO's current member countries' reactions after Turkish President Erdogan's comments he does not support Finland and Sweden joining the alliance.

The 60 second overview

Macro: China's industrial production plunged 2.9% y/y in April as the economy feels the strains of large Covid-related lockdowns and the global energy crunch. The drop in industrial production surpassed the drop in March 2020, when the first round of lockdowns were imposed and thus underscores the current struggles of the Chinese economy.

Wheat: India on Friday announced it will suspend wheat exports to help manage its food security amid surge in global grain prices. India is not a big wheat exporter, but the fact that a big country scrambles to secure food supply left the market anxious with wheat prices up around 5% this morning.

Fed: On Friday, Cleveland Fed's Mester reiterated Fed is committed to doing what it needs do on inflation and added market has been handling Fed's withdrawal of support.

Oil: The US oil rig count rose further on Friday and continues its trend higher. High oil prices has increased the profit margin on US oil production, which in turn should result in higher production over the coming months.

FI: European rates markets experienced an unusually volatile session last week, with a 35bp trading range from low to highs as markets remain sensitive to global central bank signals and faltering growth outlooks. Most recently, Bloomberg reported that the European Commission's upcoming spring forecasts will see a revision of the European growth down by 1.3pp and 0.4pp in 2022 and 2023, respectively. With central bank meetings still 3.5 weeks away or more, markets will continue to remain sensitive to signals from speakers and no clear calming factor is in sight.

FX: Last week was dominated by growth concerns across asset classes incl. FX. The USD was among the biggest beneficiaries although notably JPY strengthened even more on the drop in yields. Otherwise NOK, AUD, NZD were all among the biggest underperformers.

Credit: Friday the credit market was supported by a general, positive tone in equity markets. Hence iTraxx Xover tightened 14bp to 446bp while Main was 3bp tighter to 92bp.