Arne Lohmann Rasmussen
Danske Bank A/S
Market movers today
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After the release of PMIs in both Europe and the US yesterday, focus will remain on economic activity indicators today.
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In Germany , Ifo expectations are due for release. Similar to the PMIs, the Ifo expectations have been declining in recent months, reflecting the lower optimism on the future. The latest print showed 100.1 in March, compared to its peak at 103.9 in November 2017. In April, we expect Ifo expectations to decline further. Note though that index changes will take effect in April.
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In the US , capital goods orders figures for March are due to be released, which will give us an impression of whether investments will gain momentum after a few weak months. We still expect that investments will drive US growth to a greater degree this year compared to the past couple of years.
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In Hungary , the central bank rate decision on Tuesday 24 April is not expected to bring any change into the key rate or monetary policy rhetoric, as inflation has remained far below the target despite economic expansion.
Selected market news
The US bond market remained under pressure yesterday night as the 10Y US treasury is trading very close to the pivotal 3.0% mark driven by a combination of rising oil prices and the record high supply of US Treasury bonds over the next couple of years. Before close, the yield level edged slightly lower and now stands at 2.96.
Despite the rising yields - which was one of the reasons behind the market jitters in February - the equity market was trendless, with S&P closing marginally higher and Nasdaq slightly lower. Hence, the rising yields have so far been unable to derail investor optimism. The market is positive in Asia, among other things boosted by a positive after-hour earnings report from Google. The market might also have taken its lead from a better US Markit PMI report than expected. Along with better-than-expected preliminary PMIs in Europe, it removed some of the fears that we are seeing a global cyclical slowdown in the business cycle.
Neither JGB nor Bund yields have followed US Treasury yields higher to the same degree and the spread towards US Treasury yields both in the short end and the long end has widened and added support to the US dollar. This morning, EUR/USD is trading at 1.2209 and USD/JPY at 108.79.
The aluminium market has seen significant volatility over the past couple of weeks as US sanctions against Russia have forced the biggest supplier of aluminium out of the world market. However, it seems that the US administration is ready to soften the sanctions against Russia and yesterday aluminium prices dropped 7.1% in London.
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