Danske Research Team
Danske Bank A/S
Market movers today
Today's highlight will be the ECB meeting. We expect the ECB to expand the Pandemic Emergency Purchase Programme (PEPP) envelope by EUR500bn into June 2021 to avoid undue tightening of financial conditions. Focus will also be on comments regarding the German constitutional court ruling on the PSPP programme and the updated staff forecasts, which we expect to paint a dire economic outlook (see more details in ECB Research - PEPP'in it up, 28 May).
In Sweden, the April production data are likely to look dismal (see details overleaf). Same goes for euro area retail sales for April.
In Norway, there will be a lot of interest in the Q2 oil investment survey due to the lower oil price and heightened uncertainty (see details overleaf).
Of more recent data, we get US initial jobless claims at 14:30 CEST and Bloomberg's weekly US consumer confidence indicator at 15:45 CEST. With respect to the former, it will be interesting whether we will see continued claims continuing to move lower or not. With respect to the latter, it will be interesting to see signs of a rebound (however, the current protests may suppress it further).
Selected market news
The global equity rally maintained its momentum on Wednesday as investors clung to optimism about a quick economic recovery from the pandemic despite continued violent protests in US cities. However, the risk-on sentiment was not limited to equity markets. EUR/USD rose above 1.12 for the first time since mid-March after data showed job losses in Europe remaining contained in April/May and economic activity slowly getting back on its feet. The US labour market also seems to be stabilising, with private payrolls falling by less than expected in May (-2.76m). This bodes well for tomorrow's US job report, although it is not always the most reliable indicator for non-farm payrolls. Oil prices defied the positive sentiment though, and gave up earlier gains, after this week's OPEC meeting was cast in doubt over cheating by some nations on their output cuts.
Germany keeps the spending taps running. Yesterday, the government approved another significant recovery stimulus package of EUR130bn (3.8% of GDP) for 2020 and 2021. The package is a combination of support for struggling municipalities, car sales incentives, a VAT reduction until the end of 2020 as well as direct payments to families with children. The fiscal boost comes on top of the EUR750bn coronavirus emergency package already deployed in March and the strong fiscal policy response is one reason why we expect the German economy to weather the COVID-19 storm better than other European countries (see The Big Picture - Reopening, recovery and risks, 2 June). That said, the package will come as somewhat of a disappointment for the battered car industry, as buying incentives exclude conventional petrol and diesel cars. As the bulk part of the spending (EUR120bn) will be funded by the federal government, we expect the supply of German government bonds to increase (see fixed income section).
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 clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.