Market movers today

The US Empire index is the first regional survey for September. It showed a big drop in August but came from a very high level. Consensus is a broadly flat number. Industrial production for the US is also released today and expected to show a decent gain of 0.5% m/m. US import prices may also get some attention given the high focus on inflation.

The euro area releases industrial production as well as labour costs. It will be interesting to see if wage gains also pick up in the euro area as labour shortages are also a challenge here. European Commission President von der Leyen will hold her annual State of the Union speech at 9:00 CEST, where green transition efforts will again be in focus.

Sweden releases Prospera inflation expectations (see below).

The 60 second overview

US CPI inflation surprised on the downside yesterday with CPI core at +0.1% m/m as used cars and public airline fares declined, the latter likely driven by the Delta variant of the coronavirus. US treasury yields dropped 6 bps to the levels we saw two weeks ago and EUR/USD increased but later corrected for the entire gain. Wall Street received the news positively opening in green an hour later as the risk of Fed hikes due to high inflation subsided.

New paper on stagflation: Despite the lower US inflation figures yesterday, we do see a rising risk of a stagflationary scenario for the global economy, in which growth slows down more than expected while underlying inflation pressures from stronger wage growth moves higher. This morning we sent out the paper Research Global - Stagflation' risks on the rise, 15 September, outlining why we could be in for a longer period of labour shortages and supply chain disruptions - and what it implies for growth, inflation and central banks.

Data out of China disappointed this morning as industrial production slowed to 5.3% in August from 6.4% in July and retail sales slowed to 2.5% from 8.5% in July. Particularly the latter falling way short of expectations and adding pressure on Chinese policymakers.

Equities: Equities in a bit of a roller coaster ride yesterday. Conflicting economic signals challenges investors but at the end of the day, US equities closed near day low with all sectors lower. Growth reversed yesterday's underperformance and small cap underperformed large cap. Healthcare, tech fared best. Despite fading risk appetite the VIX index stayed close to the 19-level where it started the day. In the US, Dow -0.8%, S&P 500 -0.6%, Nasdaq -0.5% and Russell 2000 -1.4%. News from Asia this morning rather downbeat but most markets are holding up quite well. European and US futures showing small gains.

FI: Bond yields declined on the back of weaker than expected US CPI data for August. The m/m rise in US CPI-data both headline and especially core-CPI was lower than expected and bond yields declined although the y/y CPI-data is still very high. However, yesterday's CPI-data was supportive for those believing that spike in inflation is temporary.

FX: Spot dollar will remain highly driven by equity markets in the very near term. USD/JPY followed US yields lower yesterday on the back of the CPI figures with the cross dropping from 110.1 to the 109.6 level. We still see risks to the upside for EUR/SEK, even after yesterday's inflation surprise.

Credit: Credit markets performed well yesterday where iTraxx Xover tightened almost 2bp (to 225.8bp) and Main 0.3bp (to 44.4bp). HY bonds tightened 1bp and IG was unchanged.

Nordic macro

In Sweden, Prospera releases the "big" (quarterly) inflation expectations survey. Throughout the summer months, money market 1-2-year CPIF expectations have levelled off at 1.7% while 5-year expectations rose to 1.8% in August (highest since early 2019). Although yesterday's positive inflation surprise came too late for this to affect the survey outcome, it seems reasonable to expect the broader survey to show a similar development.

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.

Feed news

Latest Forex Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD holds above 1.1700 but the upside is limited

The EUR/USD pair flirted with 1.1750 but was unable to retain its modest intraday gains. Now trading in the 1.1720 price zone, bears retain control ahead of the US central bank monetary policy decision.


GBP/USD: Pressure mounts ahead of central banks’ announcements

The Fed and the BoE will make announcements this week. UK public inflation expectations are up for this year and the upcoming ones. GBP/USD is technically bearish in the near term, poised to retest August monthly low.


Gold: Further advances depend on the Fed

A better market mood put pressure on the American currency. The US Federal Reserve will announce its monetary policy decision on Wednesday. Gold advanced for a second day in a row, but additional gains are in doubt.

Gold News

Shiba Inu bulls can't hold SHIB from dropping to $0.000006

Shiba Inu price has fallen -28% over the past four trading sessions. Bears remain in control as bulls fail to complete a breakout above $0.000008. Bulls must hold $0.000007 to prevent a drop towards $0.000006.

Read more

Fed Preview: Three ways in which Powell could down the dollar, and none is the dot-plot

No taper now, but when? That is the main question for the Fed in its all-important September meeting. The bank buys $120B worth of bonds every month and it is set to reduce the pace at some point – the first step toward raising interest rates. 

Read more