More Lock-Down In Europe

Market movers today

Overall, still a quiet day in terms of economic data releases, with US jobless claims being the highlight of the day. Besides that different confidence measures from Norway, Denmark, Germany, France, the euro area, the UK and the US are due out during the day. Also the Norwegian labour force survey for August is due out this morning.

Today we have some central bank speeches from the Fed and Norges Bank.

We will also follow the Brexit developments as negotiations resume today.

Finally, overnight the presidential debate between President Donald Trump and Joe Biden takes place.

The 60 second overview

Equities: US markets finished yesterday in red with S&P500 down 0.2% and Dow Jones down 0.3% as investors are closely watching negotiations in Washington on a stimulus package. The day started off on a positive note as House Speaker Nancy Pelosi said there is still a chance for a stimulus deal before the election but acknowledged it might not pass until after. According to a senior republican aide, Senate Majority Leader McConnell does not want to bring a large aid bill to the Senate floor before the election, though, and President Trump later accused Democrats of being unwilling to craft an acceptable compromise. This morning, sentiment in Asian markets are mixed with MSCI’s broadest index of Asia-Pacific outside Japan up 0.4% and Nikkei down 0.7% at the time of writing.

COVID-19: More of Northern England is preparing for lockdown with South Yorkshire joining Liverpool and Lancashire in the highest tier on Saturday. In France, new infection numbers continue to be high, and the government will likely extend the 21:00 to 06:00 curfew on Paris and eight other major cities imposed on Saturday. In Germany, the number of confirmed cases rose by more than 10,000 in a single day for the first time.

FI: As markets were still digesting the EU supply on Tuesday, European yields rose 2bp in core and semi-core countries. Italian and Greek bonds lead the peripheral underperformance. The Greek government (which are still rated junk) came with a EUR2bn supply of a 15y bond at MS+125bp which given the tight pricing shows the demand for duration and risk appetite currently prevailing in markets. The Italian DMO announced a new 30y benchmark bond, which is expected to be today’s business. BTPs-Bund spread have widened 4bp yesterday to 137bp after touching 120bp last week. Bund ASW tightened 0.5bp to 34.8bp.

FX: USD/JPY dropped sharply yesterday despite the strong rise in US yields. Broad decline in USD and a stronger CNH were the main reasons behind the move. GBP rallied on optimistic Brexit comments from the EU-side, but it is still too early to be carried away.

Credit: Credit markets did not move much yesterday, where both cash and CDS were more or less unchanged in the IG segment while there was a small tightening in HY (Xover 3bp tighter and cash 1bp tighter).

Nordic macro and markets

Sweden: Riksbank’s first business survey in roughly four months is on the agenda today (09.30 CET). In early June about 80 % of corps saw small or no production/delivery disturbances, but 2) 60 % saw weaker demand for their products/services , 60 % had low demand for labour and 60 % expected the recovery to take nine months or longer to be back to normal. Now, four months later we expect these numbers in general to have improved. However, the impact from increasing Covid19 contagion is a joker.

Riksbank buys SEK 5.5bn coverds in 2023 maturities.

Norway: We hope that Q3 manufacturing confidence will show the same improvement as the monthly PMI numbers, especially since hard production data have been even stronger than the PMI has suggested. We will also be interested to see how the different segments are faring now that global industrial activity has picked up and there are signs that demand from the oil companies has improved. We therefore expect the indicator to climb from -10.1 in Q2 to just over -5 in Q3.