The big picture – Darkest before dawn

Market movers today

Brexit negotiations and vaccine developments continue to be the main market movers.

In addition, the euro area November flash HICP is released today. Overall our expectation is for core inflation and headline to stay subdued (0.2% and -0.3%, respectively). Interesting on the core side will be especially how service price inflation is evolving (also from an ECB perspective), see also Euro Area Research: Measuring the euro area inflation pulse, 9 November 2020.

In the US, the ISM manufacturing survey for November is released. As the survey index has hovered at high levels compared to the PMIs and there has been a little bit of weakness in the regional PMIs, the gauge may decline.

OPEC+ is said to continue talks on Thursday, after originally being scheduled for today. The cartel is expected to discuss a possible three-month delay of the planned 1.9mb/d output hike set to 1 January.

The 60 second overview

New Big Picture publication. This morning we published our latest take on the global economy. While COVID-19 restrictions are likely to stay in place until early spring, creating some headwinds for the global economy in Q4 20 and Q1 21, the roll-out of a COVID-19 vaccine in the coming quarters will pave the wave for a solid global recovery from Q2 and onwards and reduce the tail risk for the global economy.

Final phase 3 results from Moderna. Yesterday, Moderna released its final late stage phase 3 trial results showing an overall efficacy of 94.1% with no severe COVID-19 cases or deaths in the vaccine group, see press release. Moderna will now apply for Emergency Use Authorisation in both the US and the EU. The US Food & Drug Administration's external adviser group will meet on 17 December to discuss the findings, according to Moderna's press release. The vaccine seems on track to get approved in the second half of December (with Pfizer's vaccine candidate expected to get approval in mid-December). With the vaccination process of risk groups and healthcare workers about to start soon, we have become more optimistic on the global macro outlook.

Equities ended lower the last day of November but that does not change the fact that November 2020 was one of the strongest months on record with global equities rising 11.5% (MSCI world AC local currency). Regionally Europe outperformed rising 17%, while Denmark together with the US lagged as two of the most growth-heavy nations. Sector-wise Energy stood out rising almost 30% followed by Financials rising 19%, while defensive sectors like Utilities, Consumer Staples and Health Care lagged.

Asian stocks have started December on a higher note, US futures are close to 1% higher, while European futures show small gains.

FI. European yields rose 1-2bp yesterday across the maturities, with a small skew to steeper curves up to 10y. Intra-euro area spreads to Germany were slightly wider. The 'month-end'-day carried little new info to move European rates. With the year-end approaching and three potential risk factors ahead, investors seem to await a potential trigger for breaking the current ranges. Even US Treasuries stayed in a tight 1.5bp range yesterday. We do not believe that the ECB's or the Fed's monetary policy meetings will change the market sentiment materially, hence a potential risk-on factor should be seen in the progress of a potential Brexit deal, which is facing a crucial week. The 10Y Bund ASW tightened 1.5bp yesterday.

FX. EUR/USD briefly hit 1.20 yesterday on a rather volatile day, where month-end flows and risk off set the tone. NOK will await OPEC+'s decision - we see slight upside potential for NOK and oil prices if the cartel agrees to delay the planned output hike.

Credit. Only small movements in the credit market yesterday where iTraxx Xover tightened to 265bp (-1bp) and Main was unchanged at 49bp. Both IG and HY cash bonds saw a small widening of around 1bp.

Nordic macro and markets

Norway. The signs of weakness in the global economy are yet to have an effect on manufacturers, so we expect the Norwegian manufacturing PMI to have fallen only marginally to 53.0 in November.

Sweden. Taking its lead from the preliminary German manufacturing PMI the Swedish November ditto is set to moderate slightly. That may, however, be a premature conclusion, as the corresponding NIER survey instead showed a considerable jump. Hence, the outcome is quite unclear, but unlikely to disappoint markets.

Riksbank Governor Ingves talks about the economic situation and monetary policy at 13.30 CET. Note that he needs to stick to the common view as laid out in the monetary policy report before the release of the Minutes. However, market focus today is on whether he clarifies if the SEK200bn QE extension includes coupons and redemptions or not. Riksbank set to buy SEK750m 2025 bonds issued by specific munis.