Trade deal talks and easing lockdowns dominate markets

Danske Research Team Danske Bank A/S

Market movers today

The US jobs report for April is due this afternoon. We expect it to show a historical drop in employment of 25m (which is slightly more than the 21m consensus) and a rise in the unemployment rate to 15-20%. Despite some US states gradually opening up, yesterday's weekly jobless claims showed that a total of 33m Americans have lost their job over the past seven weeks.

Euro-area finance ministers will hold a video conference to discuss the general elements of the Pandemic Crisis Support instrument to be established under the ESM, the Commission's new Spring Economic Forecast and the ruling of the German Constitutional Court on the ECB's QE programme.

Italy's sovereign debt is scheduled to be rated by Moody's, which currently has Italian debt a single notch above 'junk'. We do not expect a downgrade, but the outlook is likely to be changed to 'negative'.

In Sweden, March household consumption data is due out and we expect Norwegian industrial production to have fallen by -4% m/m in March. Public holiday in Denmark today.

Selected market news

Both Germany and France reported a significant decline in industrial production yesterday. Germany was down 9.2% m/m. The decline was across sectors, but particularly pronounced for car manufacturing. The same was the case for France, which was down 16.2%. Both by far the largest decline on record. Meanwhile in Denmark, industrial production declined 0.4%. It is a good time to make medicine and not cars.

There were also two central bank meetings yesterday. Norges Bank cut rates in a surprise move. Essentially it abandoned the rate path and signalled that it does not want to send signals of future hikes at this stage. Bank of England kept rates and QE programme unchanged with a strengthening of GBP as a consequence.

The Danish government announced a substantial reopening of the economy over the coming weeks. All stores will be allowed to open Monday and restaurants from 18 May. However, especially restaurants will be under strict (not yet announced) restrictions. Also, there is no decision yet about travel restrictions and foreign tourists are still barred from Denmark. Nevertheless, this opening should have a large economic impact. The government also intends to significantly increase testing and other containment measures for the coronavirus, which - if successful - should pave the way for more reopening.

Today, top Chinese and US trade representatives held a phone call and agreed to strengthen macroeconomic and public health cooperation, according to China's commerce ministry. Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin also agreed they will work together to create a favourable environment for implementing the Phase 1 trade deal reached early this year. On back of this, Asian shares opened up higher this morning in line with Wall Street yesterday with Nikkei up 1.8%. SP500 futures are also higher in Asian trading today.

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Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

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