Market movers today
Today we have a lot of data from the US. April PCE inflation is released along personal spending. The final University of Michigan survey is also released.
In the Nordics we have retail sales out of Sweden and Norway. We expect a 1.5% mom increase in the latter. See more below.
The 60 second overview
Japan: Tokyo CPI inflation declined more than anticipated in May to 3.2% y/y from 3.5% y/y in April. Consensus had expected inflation to fall only to 3.4% y/y. New Bank of Japan Governor Ueda yesterday gave his first little hawkish hint, when he indicated the central bank would have to respond if inflation did not fall later this year. JPY rallied temporarily on the headline.
US: Hopes of a deal to solve the debt ceiling rose yesterday, when Republican House Speaker McCarthy said a deal would get done at the end of day. It looks like negotiators are zeroing on a deal that would raise the debt limit and cap federal spending for a period of two years. The market reacted promptly with the gold price taking a nose dive.
Fed: Boston Fed's Collins yesterday said that the Fed may be at or near the point where it can pause on rate hikes and further stressed a pause would allow it to assess its actions so far. Collins favours a meeting-by-meeting approach. The market discounts another 25bp rate hike by the July meeting.
Equities: Equities were mixed on Thursday, with tech-intense indices like Nasdaq and S&P 500 up 1-2% while Dow and Russell 2000 were lower. This selective performance did not come down to yields but by earnings. Given the huge multiple expansion YTD in the tech sector it is healthy to see earnings deliverance leading the way higher. Chip maker Nvidia issued its sales guidance 50% ahead of expectations for the coming quarter, driven by the AI segment. Overall though, earnings were better and as the semi-cycle correlates well with the inventory cycle, this gives further support that the worst of the inventory destocking is behind us, with positive spill-over to many cyclical sectors. Naturally, tech beat the tape, but also cars/trucks, industrials, banks and real estate performed well while defensives reversed some of the outperformance this week. Futures are a tad lower this morning.
FI: US T-bill rates are slowly declining as the possibility of a deal on the debt ceiling seems to be getting closer. Some of the T-bills maturing in August have been trading around 7%, but are slowly decreasing. On the other hand, we are seeing 2Y yields rise as the market is looking for more hikes from the Federal Reserve combined with a solution to the debt ceiling issue. Hence, 2Y Treasury yields has risen some 20bp since Monday.
FX: SEK and NZD have been this week's underperformers within G10. Safe haven USD and CHF, but not low-yielding JPY, are winners in the current environment. EUR/SEK moves higher and higher and now breached 11.60. NOK is also not doing well, though NOK/SEK has erased some of the losses during the week.
Credit: Yesterday the credit markets regained its footing with iTraxx Main tightening 1.5bp to 83.1bp and Xover tightened 7bp to 437.5bp. We suspect that the spread tightening was driven by equal doses of lower primary printing and renewed hopes of an undramatic solution to the US debt ceiling worries.
Norway: Norwegian retail sales have been trending down for almost two years now, driven by a shift towards consumption of services and the decline in households' purchasing power. Based on the monthly numbers from BankAxept, it looks like this trend will have continued in April, with retail sales falling 1.5% m/m.
Sweden: Swedish retail sales are down 11.6% (y/y), marking the steepest yearly decline in the history of the series. As Swedish households continue to be under pressure, we expect today's number to corroborate that picture and signal a continued challenging outlook for Swedish retailers. The past year we have seen a sharp decline in Swedish producer prices, which in due time is expected to lead consumer prices lower as well. Hence, PPI data from April, released today, might warrant some interest from markets.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Follow us on Telegram
Stay updated of all the news
EUR/USD battles 1.0700 after mixed Eurozone data
EUR/USD has come under renewed selling pressure, battling 1.0700 after mixed Eurozone Retail Sales data for April. The pair remains undermined by the cautious market mood, disappointing German Factory Orders and a broad US Dollar rebound.
GBP/USD turns south toward 1.2400 as US Dollar recovers
GBP/USD is heading south toward 1.2400, meeting fresh supply in the European session. The US Dollar is seeing renewed safe-haven buying amid a risk-off market profile, acting as a headwind to the pair.
Gold oscillates around $1,960 amid mixed responses to Fed’s June policy
Gold price is auctioning inside the woods around $1,960.00 in the early London session. The precious metal is displaying back-and-forth action as the investing community is divided about the interest rate decision by the Fed to be taken in June’s monetary policy meeting.
Is the metaverse hype back in action?
Although there are no major macroeconomic events this week, investors can expect massive volatility on a daily basis. The reasoning behind this outlook is that Apple will be conducting the 2023 Apple Worldwide Developers Conference (WWDC) on June 5.
Markets are likely to focus on ECB commentary
This is a very quiet week in terms of data and hence markets are likely to focus on last minute central bank commentary. The FOMC blackout period kicked off already on Sunday, but today we have a bunch of ECB speakers on the wires.