Europe's gas crisis escalates

Market movers today

Market's focus remains on central bank speeches, with ECB's Lagarde as well as Fed's Powell, Bostic, Bullard and Evans on the wires today.

Economic data calendar is quieter, August retail sales data will be released for Sweden and Norway while consumer confidence indicators are due for release for Germany, France and Sweden.

The 60 second overview

Gas: European natural gas prices rose yesterday following the wrecking of three major natural gas pipelines. At the time of writing, the cause of the incident remains unclear, but the natural gas market will monitor closely results of investigations to gauge the implications for European energy security.

UK: Bank of England's Chief Economist, Huw Pill, yesterday warned a significant monetary policy response was needed to counter fiscal easing, but played down the possibility of intermeeting action.

Oil: Oil prices rebounded yesterday as the oil market weighs the possibility OPEC+ may announce more production cuts at next week's meeting amid the recent slide in oil prices and following the mostly symbolic 100kb/d output cut last month.

FI: Global rates seem to be in a search for an anchor of stability or even just some sort of handle as uncertainty is extremely elevated and Gilts markets are setting the scene. Gilts were again in focus, in particular in the latter part of the session where the long end sold off rapidly. 30y Gilts rose above 5% for the first time in 20y (+44bp on the day) amid today's 30y green bond issuance. German 10y bunds rose 11bp on the day to 2.23%. The German ASW spreads have widened markedly during the past week and the Bund ASW is not above 95bp.

FX: EUR/USD dropped below 0.96 yesterday, where broad USD rose further and spike in natural gas prices weighed on EUR. USD/JPY inched closer to the 145 level again as 10Y US Treasury yields continue to climb. EUR/SEK and EUR/NOK were broadly stable over the day.

Credit: Credit spreads as measured by CDS indices ended yesterday wider mirroring the overall soft sentiment, with iTraxx Main wider by 4bp to 138bp while Crossover was wider by 15bp to 670bp. For reference, iTraxx Main is now back at the Covid-peak, while Crossover has another c.40bp to go. The Euro primary market saw continued drip wise issuance, with Sydbank printing a EUR500m 3NC2 senior non-preferred deal.

Nordic macro

Sweden: Riksbank Deputy Governor Jansson speaks about monetary policy at a breakfast seminar 08.00 CET. It should be less interesting as he has to stick to the Board's common message ahead of the release of the Minutes later this week.

The NIER September confidence survey is more likely to be a market mover, with manufacturing confidence still very high, private services and construction close to neutral while retail is clearly below normal and consumer confidence at a 30-year low. Expect further declines in most cases. Hiring plans and price expectations will be in focus. Both are at cyclical highs with a tendency to turn lower.

August retail sales may not sound so hot, but may reveal another leg down from the -3.9 % yoy reported in July. There are signs of significant August weakness in for instance clothing and shoe sales as suggested by the STIL flash apparel index. That in turn would suggest a downside risk for the broader consumption indicator.

Norway: Retail sales has naturally been under pressure from the shift in consumption in favour of services following the reopening of the economy, as well as a general erosion of purchasing power due to stronger inflation and higher interest rates. Of course, a continued slide in private consumption is an important assumption for Norges Bank's recent signals of a more moderate tightening cycle.