Risk sentiment recovering

Market movers today

Today is a fairly quiet day on the data front. We will keep an eye on Conference Board consumer confidence and new homes sales in the US.

At the ECB forum on central banking several ECB speakers are scheduled to speak, including Lagarde and Schnabel.

The 60 second overview

Risk sentiment seems to be recovering this morning with all but Japanese equities higher in Asia. Euro is marginally higher against the dollar and weaker versus the Nordic currencies. Brent oil is range-trading at the 74-75 level. The dramatic events in Russia over the weekend have not led to big market moves, at least not yet. Rates markets currently price in one more hike for the Fed by November and 47bp worth of hikes by the ECB by December.

Russia: Pieces of new information have come up since yesterday, but it is still largely a mystery what happened in Russia over the weekend and what to expect going forward. Yesterday, Russia's foreign minister Lavrov confirmed that Wagner operations in Africa will continue. Russian state media also reported that the criminal cases brought against Wagner leader Prigozhin have still not been closed. Prigozhin's whereabouts are unknown but he did release an audio message yesterday, where he said that Saturday's march was to demonstrate protest against the destruction of Wagner and bring responsibility to those who have made mistakes in the war. The objective, he said, was not to topple the Russian government, i.e. not a coup attempt. Putin also gave a televised address in the evening saying those who organised the revolt had betrayed their country and people. He also said Wagner fighters could now join the regular military, go home or relocate to Belarus.

China has been fairly muted in its response to developments in Russia over the weekend, although expressing support for Russia's actions to maintain national stability while stating that it is Russia's 'internal affairs'. China's Foreign Minister Qin Gang met with Russia's Deputy Foreign Minister Andrey Rudenko. China is probably watching the events with some concern as it generally dislikes instability and has spent several years building a good relationship with Russia and President Putin. Any Russian regime change would create uncertainty over what the future path for both Russia as well as the China-Russia relationship would look like.

Equities: Global equities ended lower yesterday in a relatively uncommon mix of sectors outperforming and underperforming. Energy and materials were the best performing sectors with communication service and tech being the laggards. That could sound like fear of stagflation but look at the bond market and you find the short end of the curve being lower yesterday. In the US we saw the odd combination of Nasdaq down 1.2% while small caps in Russell 2000 higher by 0.1%. The challenging environment is continuing this morning with tech stocks in Hong Kong making solid advances at the same time as Japanese stocks are coming lower. Futures in Europe and US are higher this morning.

FX: USD fell slightly vis-à-vis EUR and JPY yesterday with EUR/USD recovering back above 1.09 and USD/JPY briefly touching the 143 level. The ECB forum at Sintra marks the highlight for majors this week, where Largarde, Powell, Bailey and Ueda all are set to attend. 

FI: Rates continued to move lower in yesterday's trading session, but there was no clear impact from the chaotic events in Russia over the weekend. Oil prices (spot Brent) gained about +1% during the day, but overall the reaction in energy markets did not indicate a reprising of geopolitical risks, nor the inflation impulse from volatility in the energy market (inflation forward swaps were broadly unchaged on the day). 

Credit: It was a busy day for EUR credits in the primary market. In the corporate segment a number of issuers where active, including Abertis, Floene Energias, Porsche and Deutsche Post, the latter bringing its inaugural sustainability-linked bond to the market. Financial issuers were also active, with Permanent TSB, RBC and Santander Consumer Bank bringing senior unsecured deals, while Intesa proved that demand for higher-yielding EUR covered bonds remains intact even after a German Pfandbrief was pulled last week as it struggled to generate sufficient orders. iTraxx Main was unchanged during the day closing at 79bp, while Xover closed 6bp wider at 424bp.