Danske Research Team
Danske Bank A/S
Market movers today
We do not expect any changes to Norges Bank's policy rate today, as it will be one of its smaller interim meetings (for more details see the Nordic Macro and Markets section).
Neither should the Bank of England meeting bring any new policy signals, but keep an eye on the updated growth and inflation forecasts to be released. What is most interesting is whether we will get any new guidance on QE, which is set to expire by the end of the year.
More interesting could be the UK local elections. Especially the outcome of the Scottish election could have important implications for the likelihood of another Scottish independence referendum and trigger some volatility in the GBP.
Central bank speakers from the ECB (Lagarde, Schnabel) and Fed (Williams, Mester, Kaplan) round off the day.
The 60 second overview
Macro: Too early to change US monetary policy: Some of the more hawkish members of the Fed's policy board like Eric Rosengren and Loretta Mester of the Boston and Cleveland Federal Reserve Banks respectively, yesterday downplayed the risk of excess inflation and the need to begin tapering of the Fed asset purchase programme.
US service sector activity strengthening: In the US, the services output PMI rose to a record level in April, while the ISM services business activity index stepped back from its all-time high in March but remained at an elevated level. These indicators suggest strong growth in the US economy in the second quarter bolstered by a combination of reopening dynamics and fiscal stimulus.
Equities: Equities in a little comeback yesterday but still with very mixed regional and sector performance. The benefit from price pressure and supply shortage once again outperforming the group of tech, momentum and long duration. Value extended the streak of outperformance of growth to 7 days with an aggregated outperformance of 4%. Europe outperformed US by almost 2% after the underperformance Tuesday. US indices: Dow Jones -0.3%, S&P500 +0.1%, Nasdaq -0.4% and Russell 2000 -0.3%. Asian equities mixed this morning as Japan and mainland China resume trade. US and European futures are flat.
FI: European bond yields rose yesterday, led by periphery. After a 3bp sell-off in the morning with 10y German bund yields touching -0.21%, the afternoon recorded a small setback to end around -0.225%., i.e. 1bp higher on the day as a whole. Peripheral spreads widened led by Italy (with the exception of Greece), while semi-core spreads to Germany tightened marginally. Greece saw the biggest performance after a 5y bond syndication that recorded strong investor demand in excess of EUR20bn for the EUR3bn volume.
FX: In a fairly unusual price action yesterday NOK did not join the camp of commodity winners in CAD, AUD, ZAR and not least NZD. EUR/USD, EUR/GBP and EUR/SEK were all little changed.
Credit: Credit paired some of Tuesday's losses yesterday where iTraxx Xover tightened 3bp (to 251bp) and Main ½bp (to 50bp). Gains were more modest for cash bonds where both IG and HY closed only marginally tighter.
Nordic macro and markets
We expect Norges Bank to keep the policy rate unchanged at 0.00 %. This is an interim meeting with no accompanying monetary policy report or press conference, only a brief press release. At the full meeting in March, the bank signaled the first rate hike in H2, and that it was 50/50 whether this would be in September or December. Developments since then have pulled in different directions, but the overall picture is unlikely to have changed sufficiently for the bank to depart from the "plan" communicated in March.
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.
Recommended Content
Editors’ Picks
EUR/USD flirts with 1.0700 post-US PMIs
EUR/USD maintains its daily gains and climbs to fresh highs near the 1.0700 mark against the backdrop of the resumption of the selling pressure in the Greenback, in the wake of weaker-than-expected flash US PMIs for the month of April.
GBP/USD surpasses 1.2400 on further Dollar selling
Persistent bearish tone in the US Dollar lends support to the broad risk complex and bolsters the recovery in GBP/USD, which manages well to rise to fresh highs north of 1.2400 the figure post-US PMIs.
Gold trims losses on disappointing US PMIs
Gold (XAU/USD) reclaims part of the ground lost and pares initial losses on the back of further weakness in the Greenback following disheartening US PMIs prints.
Here’s why Ondo price hit new ATH amid bearish market outlook Premium
Ondo price shows no signs of slowing down after setting up an all-time high (ATH) at $1.05 on March 31. This development is likely to be followed by a correction and ATH but not necessarily in that order.
Germany’s economic come back
Germany is the sick man of Europe no more. Thanks to its service sector, it now appears that it will exit recession, and the economic future could be bright. The PMI data for April surprised on the upside for Germany, led by the service sector.