ECB bank lending survey will give insights into credit conditions

In focus today

Today, we look out for the ECB bank lending survey for Q1 2024. The survey gives information on euro area bank lending and credit conditions, which is an important input for the growth outlook. In the latest survey, banks still reported a net tightening of credit standards but to a smaller extent than previously. A continuation of this development would support the manufacturing sector in the coming quarters. The survey will also shed light on household lending and the strength of private consumption.

We also get NFIB's Small Business Survey from the US. Over the past months, firms' optimism has remained at low levels but on a more positive note, fewer companies have reported trouble finding new employees.

In Sweden, Riksbank Deputy Governor Flodén speaks about the economy and monetary policy at 12.00 CET. We expect him to continue the common recent approach that a weak Krona and/or delayed rate cuts form major central banks may affect the timing Riksbank's decision to start the easing cycle.

Overnight, the Reserve Bank of New Zealand (RBNZ) is widely expected to keep its monetary policy unchanged, according to both analyst consensus and the markets.

Economic and market news

What happened overnight

US 2Y and 10Y yields gained during yesterday's session as markets weighed the recent strong macro data and hawkish speeches by Fed officials. Futures pricing now indicates that markets expect 60bp of rate cuts this year, less than the 75bp projected by the Fed earlier this year.

The JPY slid against the USD overnight with the cross hitting 151.88 as of this morning, close to the 152-level watched by markets. Japanese Finance Minister Suzuki warned they would be ready to act against potential excessive moves in the currency. Previously, the Finance Ministry has intervened to strengthen the JPY when it has slid towards 152, which it did in September and October 2022.

What happened yesterday

Both hard and soft data releases from the euro area surprised to the upside, with data showing German industrial output expanded 2.1% m/m in February (cons: 0.5%). This was mainly due to construction and energy-intensive sectors such as auto, which have been hit particularly hard during the spike in energy prices and borrowing costs, and so have some catchup to do. The Sentix survey of Eurozone investor morale improved to -5.9 (prev: -10.5) in April, indicating investors have become less pessimistic about the economic recovery.

In the geopolitical space, Janet Yellen gave a speech in China where she voiced concerns about China's large subsidies for Greentech such as solar panels and EVs, stating that she would not rule out tariffs in response.   

Equities: Global equities were higher yesterday with US lagging after the strong performance Friday. There was big dispersion between sectors yesterday with half of the sectors higher and half of the sectors lower. Once again, value cyclicals and small caps outperformed which has been greatly backed by data releases in April including the data out yesterday, German industrial production and Sentix. It is quite rare to see so many macro indicators supporting a positive equity outlook at the same time. In US yesterday, Dow -0.03%, S&P 500 -0.04%, Nasdaq +0.03%, and Russell 2000 +0.5%. Asian markets are mostly higher this morning with South Korea and Mainland China going against the trend. US futures marginally higher while European futures are lower.

FI: Global bond yields continue to rise as macroeconomic data proves resilient to the tight monetary policy. Hence, the repricing of monetary policy continues and there was a bearish flattening of the yield curves in US and Europe.

FX: In a quiet start to the week, EUR/USD remained unchanged around 1.0850. USD/JPY remains slightly below 152. The SEK was the strongest performer in the G10 space yesterday, causing EUR/SEK to decline below 11.50. EUR/NOK also slightly declined and is trading around 11.60. EUR/GBP continues to hover around 0.8580.