We have seen a rise in most Asian stock markets this morning as it is expected that the global recovery will be resilient to the new Omnicron variant. Hence, the Asian markets follow the positive sentiment from yesterday, where we also saw decent gains in the global equity markets.

A new study shows that a third shoot of the Pfizer vaccine could neutralise the omicron virus. If this is case, focus in the markets should move back to the monetary policy. We did see a big jump in yields yesterday, where 10Y Treasuries moved above 1.50%, and Bunds tested -30bp while the BTPS-Bund spread widened. This morning we have seen a bit of stabilisation of US Treasuries in the Asian markets, as the 10Y yield did not rise further.

Germany: Yesterday Olaf Scholz was elected Germany's new chancellor and head of the country's first centrist 'traffic-light' coalition. Near-term, dealing with a rapidly worsening Covid-19 situation will probably top the list of priorities, not least as the German economy has shown signs of weakness lately. But tricky foreign policy issues also await, with the US again pushing for a blockage of North Stream 2 approval should Russia invade Ukraine (see FT). Over the coming years, the new government is planning an ambitious investment offensive, but financing remains the Achilles' heel of the coalition deal. Read more in German Politics Monitor - Traffic light is flashing green.

Equities: Global equities ended higher yesterday as the US session went from flat to solid gains, closing near day-high. European stocks underperformed and sector moves very different across the Atlantic. Health care the biggest winner yesterday resulting in slight defensive outperformance despite the positive sentiment and VIX running below 20. In US Dow +0.1%, S&P 500 +0.3%, Nasdaq +0.6% and Russell 2000 +0.8%. Asian markets mixed this morning with Japanese stocks underperforming. European futures are slightly positive while US futures are slightly negative this morning.

FI: There was a significant rise in global bond yields as the on the back of a study from Pfeizer-Biontech, that a third injection will improve the effect significantly against the new corona variant, Omicron. If this is the case the bond market should begin focus on the Federal Reserve, ECB and the tapering process in the US and EU.

FX: Scandi currencies rallied yesterday, where USD lost out to most of G10 currencies. EUR/NOK fell below 10.10, while EUR/SEK hovered close to 10.25. EUR/USD rose back above 1.13 level.

Credit: Following the last few days' very storng performance, credit markets took a breather yesterday. iTraxx Xover widened 0.5bp and Main closed unchanged. HY bonds tightened an additional 3bp and IG widened 0.5bp.

Nordic macro

Today brings Norwegian GDP data for October, and we expect mainland growth to slow to 0.2%. This would still be on course for mainland GDP growth of more than 4% for 2021, but is less important after the regional survey earlier this week.

Author

Jens Peter Sørensen

Danske Bank A/S

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