More central bank thoughts today

Market movers today

Today we have only tier-2 data. US existing home sales are expected to fall a bit further from an already low level as high mortgage rates weigh on housing demand.

Tonight FOMC minutes will give more insights into the thinking of the Fed. However, it may be a bit outdated as the main theme at the time of the meeting was the tight financial conditions. Since then we have seen a big decline in bond yields and a rally in equities and credit bonds.

The central bank of Hungary meets today and we expect a 25bps rate cut to 12.0%.

We also have Canada CPI and ECB's Lagarde, Schnabel and Centeno speaking late in the day.

The 60 second overview

Markets: Yesterday was another risk-on session with the VIX volatility index at the lowest levels since mid-September. USD weakened and oil traded to USD 83 per barrel. Also industrial metals took a leg higher.

German inflation: It has been very slow on the data front, but we have received German producer prices, which declined 0.1% mom. They are now 15% below the peak in September last year, which continues to weigh on goods inflation in the biggest euro area economy.

Equities: Global equities started the week higher as the hope of a soft landing could not hold back the positive sentiment. Yields were lower, credit spreads tighter, the dollar weaker and cyclical growth outperforming in equity space. Not a classic old-fashioned risk-on as yields moved lower, but a classic inflation-relief risk-on rally as we have seen it post the last Fed meeting. In the US: Dow +0.6%, S&P 500 +0.7%, Nasdaq +1.1% and Russell 2000 +0.5%. Some of the optimism is moving on to Asia this morning with most indices higher. China is taking a next step in saving their developers with a "white list" that should secure better financing conditions. US and European futures marginally positive this morning.

FI: The global yield curves flattened from the front end as the 2Y German government bond yield rose 4bp, while 30Y was unchanged. In the US the curve flattened some 5bp between 2Y and 30Y after a solid auction of 20Y US Treasuries. This was the first long-dated Treasury auction after the very poor 30Y auction in early November. 

Italian government bonds performed after the change in the outlook from negative to stable by Moody's. Moody's also upgraded Portugal with two notches from Baa2 to A3 although the Portuguese government has resigned and a snap election has called for 10 March.

FX: EUR/USD has stabilised above the 1.09 mark in a quiet start to the week as the USD sell-off has continued steadily after the soft US CPI print last week. Today, focus turns to the release of the FOMC minutes. Scandies were the big winners yesterday with EUR/NOK trading close to the 11.70 mark and EUR/SEK ending the day around to the 11.45 mark. Scandies were boosted by positive risk sentiment while the NOK leg additionally took comfort in a move higher in oil prices.

Credit: The positive tone continued in credit markets yesterday, and spreads were tighter with iTraxx Main closing at 68bp (-1bp) and Xover at 381bp (-6bp). There was plenty of action in the primary market as both corporate (Ford, SNAM) and financial issuers (Credit Agricole, Nationwide) priced deals in EUR. In the Nordics, Ericsson and Vestas announced new mandates.