Investment Research General Market Conditions 05 September 2013

Transcription

1 Investment Research General Market Conditions 05 September 2013 Danske Daily Market movers today Today s main event is the ECB meeting this afternoon. In our view, there are fewer arguments for a rate cut today than a month ago, given recent upside surprises in economic indicators and a slower pace of decline in excess liquidity (see ECB Preview: Keep the powder dry). Hence, we expect the ECB to keep rates unchanged and Draghi to refrain from explaining further the forward guidance. We expect no change in policy at today s Bank of England meeting. Forward guidance is in place (signalling that tighter monetary policy is far off) and Governor Carney stressed in a speech last week that only in a situation where the recovery was being threatened would additional stimulus be an issue. With the recent numbers out of UK this would not be the case at this meeting. Hence no policy move this month. In terms of data, we expect German factory orders for July to decline after a strong June. In the US, we look for an unchanged ISM Non-manufacturing index, as weaker activity in housing-related services is offset by growth elsewhere. Further, US initial jobless claims and the ADP employment report will be the last set of labour market data received ahead of the decisive August employment report released tomorrow. The G20 Summit begins today in Russia. On the economic front focus will be on the EM crisis and the urge for gradual withdrawal of stimulus in developed markets. The Riksbank is due to announce its policy decision (and policy report) at 09:30. Twenty out of 20 economists in the Bloomberg survey including us expect the policy rate to remain on hold at 1.0%. For more on scandi markets see page 2. Selected market news Stock markets saw a decent rally yesterday with S&P500 ending 0.8% boosted by strong auto sales. Most Asian stock markets and currencies also climbed further. US bond yields increased into the close yesterday 2.9% and stayed unchanged overnight. US vehicle sales rose more strongly than expected to 16.0m in August (consensus 15.8m) up from 15.7m in July. It suggests consumption growth may be picking up some speed during Q3. Market overview Note: * The itraxx Europe Index shows the spread development for the most liquid investment grade CDS contracts in the euro credit market. **The itraxx Europe Crossover shows the spread development of the most liquid non-investment grade CDS contracts in the euro credit market. ***The Markit CDX North America Investment Grade Index shows the spread development for the most liquid investment grade CDS contracts in the US credit market. Source: Bloomberg Selected readings from Danske 07:30 1 day +/-,% S&P500 (close) S&P500 fut (chng from close) Nikkei Hang Seng :00 07:30 +/-, bp US 2y gov US 10y gov itraxx Europe (IG) itraxx Xover (Non IG) /-, % EUR/USD USD/JPY EUR/CHF EUR/GBP EUR/SEK EUR/NOK USD Oil Brent, USD Gold, USD Periphery Business Cycle Monitor The Bank of Japan left monetary policy unchanged as expected while upgrading its assessment of the economy, see Bloomberg. Fed s Beige Book reported that activity expanded at a modest to moderate pace. This was unchanged from the July Beige Book. Housing and auto sectors were seen as the strong points whereas manufacturing was expanding modestly. The decent key figures lately put us on track for September tapering from the Fed. Chief Analyst Allan von Mehren alvo@danskebank.dk Important disclosures and certifications are contained from page 5 of this report.

2 Scandi markets today We do not expect the Riksbank to announce any major changes. There are some bright spots emerging, for instance in the labour market where unemployment has dropped earlier than expected by the Riksbank. At the same time, second quarter GDP came in below forecast. Given the fact that inflation remains well below target, we would guess that the policy strategy will remain pretty much intact, suggesting policy will remain on hold until Q4 14. Fixed income markets The main event in the fixed income market today is obviously the ECB meeting and the subsequent press conference. In our view, the main thing to look for is how President Draghi will balance the recent stream of improving data coming out of the euro area with maintaining an easing bias. If this scenario materialises we would expect a moderate decline in market rates as the ECB is likely to repeat its forward guidance and signal that rate cuts are still more likely than rate hikes for the foreseeable future. In the primary EUR sovereign bond market, Spain will today issue EUR bn of 8Y, 10Y and 30Y bonds followed by an Italian issue of 5Y and 10Y bonds for at total of EUR bn. Yesterday, Ireland was again the top performer supported by service PMI jumping to the highest level in more than six years and another decrease in the unemployment rate. Hence Irish sovereign bonds are recovering somewhat after their underperformance to peers over the summer. FX markets For currency markets today s focus will naturally be on the central banks. The Riksbank is first out. We believe the basic message will be less dovish than in July. Some have argued that the Riksbank should turn more dovish given that the FSA has been delegated responsibility for macro-prudential issues. We think that is wrong. The labour market has been stronger than the Riksbank anticipated and forward-looking growth indicators are increasingly supporting the recovery case. In particular, we expect the Riksbank to remove the current easing bias (-6bp in the front end). While this is already discounted in the money market, we think such a move would be a very important signal of no more cuts that will support the krona. The initial target for EUR/SEK is A break below would open for a test of In the afternoon Mr Draghi will draw the usual attention. EUR/USD has lost momentum recently. While partly due to taper-supportive US data and partly geopolitical concerns, positioning ahead of ECB has probably been a factor. If he does deliver dovish comments the cross will continue its decline. The Bank of England fills the gap between the Riksbank and the ECB. While the GBP is well supported by data, we do not see the rate decision (on hold) as a major market mover. US S&P500 future Tue Wed Thu Mon Tue Thu US 10y gov yield Tue Wed Thu Fri Wed Thu Global FX EUR/USD (LHS) USD/JPY (RHS) Tue Wed Fri Mon Tue Thu Scandi FX EUR/SEK (LHS) EUR/NOK (RHS) Tue Wed Fri Mon Tue 2 05 September 2013

3 Key figures and events Thursday, September 5, 2013 Period Danske Bank Consensus Previous 3:30 AUD Trade balance AUD m. Jul :30 FRF Unemployment % 2nd quarter 9:00 DKK Bankruptcies (s.a.) Number Aug 383 9:00 DKK Forced sales (s.a.) Number Aug 386 9:30 SEK Riksbank, Rate decision % :30 SEK Service production m/m y/y Jul -0.4% -0.2% 12:00 DEM Factory orders m/m y/y Jul -1.1% -1.0% 2.9% 3.6% 4.3% 13:00 GBP BoE rate announcement % :00 GBP BoE announces asset purchase target GBP bn :45 EUR ECB announces refi rate % 0.50% 0.50% 0.50% 13:45 EUR ECB announces deposit rate % 0% 0% 0% 14:15 USD ADP employment 1000 Aug :30 USD Initial jobless claims :30 USD Unit labour cost, final q/q 2nd quarter 1.0% 1.4% 14:30 EUR ECB press conference 15:00 USD Fed's Kocherlakota (non-voter, dove) speaks 16:00 USD Factory Orders m/m Jun -3.5% 1.5% 16:00 USD ISM non-manufacturing Index Aug Source: Bloomberg, Danske Bank Markets 3 05 September 2013

4 Today s market data: 05 September DJSTOXX50 Max 1.3 Max 1.0 OM XC Min -0.3 Min -0.9 OM XS OSE BX Grey line indicates closing of Danish markets DOW JONES NASDAQ 1 month -3.2% 1 month -0.7% S&P % Year-to-date 15.9% Year-to-date 5.2% NIKKEI (07:30) % EUR 17:00 07:30 +/- USD JPY day Max ## GBP month Min ## NOK Year-t-date SEK DKK CRB C R B, R aw PLN JPY day month GBP month 7.40 Year-to-date CHF Year-t-date USD-Yields Intraday Spread, P o licy R ate 3M bp 17:00 07:30 +/-, bp 0.49 USD2Y USD10Y 2.92 USD USD 10Y Max 0.5 Max 2.9 EUR USD 30Y Min 0.4 Min GBP JPY 10Y DKK S&P500 Intraday, % USD2Y (lhs) EUR/USD Intraday USD10Y (rhs) SEK STOCKS Eurostoxx Intraday, % Grey line indicates opening of US markets FX & COMMODITIES YIELDS & INTEREST RATES :30 07:30 07:30(-1)* Close Close Go ld, $ M future :00 +/- +/- Oil, B rent, $ Industrials +/-, bp NOK DEM 10Y PLN DKK 10Y % 0.3% -0.1% 0.7% 0.8% SEK 10Y NOK 10Y % PLN 10Y * As of closing previous trading day Y Yield Spread to Germany USDJPYGBPFRF ITL DKKSEKNOKPLN US Yield Curve German Yield Curve ## M ax ## M ax ### ## M in ## M in ### USD2Y USD5Y USD10Y DEM2Y DEM5YR DEM10Y D-t-D +/-, bp (right axis) 07:30 (left axis) 1 month ago (left axis) D-t-D +/-, bp (right axis) 07:30 (left axis) 1 month ago (left axis) USD 17:00 07:30 +/- C redit spread, it raxx s. 11* Credit spreads Swap Spread, bp** :00 07:30 +/- 07:30 1 day 1 month USD 10Y Europe (IG) JPY 10Y HiVol Xover (N-IG) :30(-1)* 17:00 +/ EUR 10Y DKK 10Y Finan. Sr SEK 10Y Finan. Sub Sep Oct Dec Jan Mar Apr Jun Jul Sep NOK 10Y Non-finan itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) * Ask price ** Ask price * As of closing previous trading day 4 05 September 2013

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