Investment Research General Market Conditions 16 October 2015

Transcription

1 Investment Research General Market Conditions 16 October 2015 Market Movers US September industrial production is expected to fall 0.2% m/m, following the 0.4% decline in August. This would be in line with the manufacturing survey data, which have generally shown that activity remained weak. US University of Michigan preliminary consumer sentiment for October is released today. The final September release was revised 1.5pt higher from the flash reading to 87.2 and today s number is expected at However, that would still put it 2.9pt below August s reading, potentially reflecting that US consumers have become more cautious following the recent market turmoil. Euro area final CPI figures are expected to confirm that the headline figure slipped back into negative territory in September (at -0.1% y/y), while core is expected to remain at 0.9% y/y. Hence, pressure for further ECB easing is likely to remain, even as market-based inflation measures have increased slightly (5y5y break-evens are trading around 1.65%, having troughed at 1.56% in late-september). Euro area trade balance data for August is expected to decline, in line with the weak German data seen last week. Spain s Baa2 sovereign debt rating may be revised today by Moody s. Following the surprise upgrade by S&P last week to BBB+, we believe an upgrade is likely, as Spain is on positive outlook by Moody s. However, there is also the possibility that Moody s remains on hold until after the general election on 20 December. Vote in the Greek parliament on reforms needed to unlock the first EUR2bn subtranche of funding from the recent EUR86bn bail-out package will take place tonight. There are no data-releases in Scandinavia today. Selected Market News Fed s Dudley reiterates uncertainties, casting further doubt on 2015 lift-off. New York Fed President Dudley (voter, dovish) yesterday said in a speech that he would favour a rate hike this year if the economy performs but that recent data suggest that the economy is slowing. Earlier this week, Governors Tarullo and Brainard had spoken in favour of a wait-and-see approach. Divisions within the Fed remain, as underlined by yesterday s renewed call from Cleveland Fed President Mester (non-voter, hawkish) that the Fed should hike this year. US data mixed. The weekly initial jobless claims dropped to a new low of 255k and the CPI report was stronger than expected, showing a rise in the core measures to 0.2% m/m. The manufacturing surveys (Empire, Philly) were both weak, however, pointing to more weakness in the sector in October. Yields reverse higher, stocks supported. Treasury yields were higher yesterday, taking the 10Y back above 2% and thereby reversing some of Wednesday s rally. US stocks were higher, taking comfort in the positive signals from the labour market statistics. The slightly positive sentiment has also carried over to Asia this morning. Market overview USD Oil Brent, USD Gold, USD 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 show 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 Bank US retail sales slow in September Senior Analyst Sverre Holbek holb@danskebank.dk 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 T Important disclosures and certifications are contained from page 5 of this report.

2 Scandi Markets There are no data releases in Scandinavia today. Fixed Income Markets Aggressive moves in front Euribor futures yesterday once again ignited pricing of a ECB deposit cut. As long as the deposit rate stays at -20bp we view Eonia pricing below -15bp as a probability for further cuts, as the Eonia fixing has a natural lower bound some 5-6bp above the deposit rate. With future ECB dated Eonia swaps being priced below -20bp, a depo cut would be required for the forward curve to be realised. We still consider this option as being remote as 1) we think an extension of the QE programme is the preferred easing measure for ECB and 2) we see the threshold for ECB skipping the current analysis of being at the effective lower bound on rates somewhat higher than implied in the market. Thus we think a position for a flatter Eonia curve in the 0-3y segment or even paying outright in the segment offer attractive risk/reward going into next week s ECB meeting. Spain is up for review by Moody's tonight. Spain is currently on positive outlook by Moody's and with the recent positive surprise by S&P, there is a strong possibility that Spain will receive a one-notch upgrade tomorrow to Baa1 and will just be one notch below single-a by all three rating agencies. We expect that an upgrade will be supportive for the Spanish government bonds relative to the other peripheral markets and swaps. FX Markets In FX markets EUR/SEK has moved significantly higher as yesterday s worse-thanexpected labour market report seems to have triggered second-thought thinking among market participants as to the likelihood of further Riksbank easing. While it remains our base case that we will have to wait until December for additional Riksbank action, we do see a risk of further monetary stimulus already this month. Indeed the SEK seems likely to remain an unofficial target for the Riksbank in keeping a floor under import prices and as long as SEK appreciation is driven - directly and indirectly (Fed, ECB monetary policy) - by global growth worries we could see a very responsive Riksbank. Fundamentally, we forecast a gradually stronger SEK but for the coming months we still expect EUR/SEK to edge higher from current levels a view that we for some weeks have expressed via a long EUR/SEK position in the Danske Bank FX Trading Portfolio. US S&P500 future Wed Thu Fri Tue Wed Fri US 10y gov yield Wed Thu Fri Tue Thu Fri Global FX EUR/USD (LHS) USD/JPY (RHS) Wed Thu Mon Tue Wed Fri Scandi FX 9.43 EUR/SEK (LHS) EUR/NOK (RHS) Wed Thu Mon Tue Wed October

3 Key figures and events Friday, October 16, 2015 Period Danske Bank Consensus Previous - EUR Moody's may publish Spain's debt rating, Fitch may publ 10:00 EUR EU summit in Brussels 11:00 EUR CPI, final m/m y/y Sep -0.1% 0.2% -0.1% % 0.1% 11:00 EUR CPI - core, final % Sep 0.9% 0.9% 0.9% 11:00 EUR Trade balance EUR bn Aug :30 EUR ECB's Coeure speaks at German parliament 15:15 USD Capacity utilization % Sep 77.3% 77.6% 15:15 USD Industrial production m/m Sep -0.2% -0.4% 15:15 USD Manufacturing production m/m Sep -0.2% -% 16:00 USD University of Michigan Confidence, preliminary Index Oct :00 USD TICS international capital flow, Net inflow USD bn Aug Source: Bloomberg, Danske Bank Markets 3 16 October

4 Today s market data: 16 October 2015 STOCKS S&P500 Intraday, % Eurostoxx Intraday, % Close DJSTOXX % Max 1.8 Max 2.3 OMXC % 0.90 Min Min OMXS % OSE BX % Close DOW JONES % Grey line indicates closing of Danish markets Grey line indicates opening of US markets NASDAQ % 1 month 1.4% 1 month % S&P % Year-to-date -1.7% Year-to-date 3.2% NIKKEI (07:30) % FX & COMMODITIES EUR/USD Intraday EUR 17:00 07:30 Gold, $ USD : JPY day Max GBP month Min 113 NOK Year-t-date SEK DKK CRB Oil, Brent, $ CRB, Raw Industrials YIELDS & INTEREST RATES USD-Yields Intraday Spread, 0.62 Policy Rate 3M bp 17:00 07:30, bp USD2Y USD10Y 3 USD USD 10Y Max 0.6 Max EUR USD 30Y Min Min USD2Y 1 GBP JPY 10Y (lhs) 0 0 DKK USD10 6 Y (rhs) 1.99 SEK :30(-1)* 17:00, bp NOK DEM 10Y PLN DKK 10Y SEK 10Y NOK 10Y PLN 10Y * As of closing previous trading day Y Yield Spread to Germany USD JPY GBP FRF ITL DKKSEKNOKPLN US Yield Curve 3.00 Max Max Min Min USD2Y USD5Y USD10Y D-t-D, bp (right axis) 07:30 (left axis) 1 month ago (left axis) German Yield Curve DEM2Y DEM5YR DEM10Y D-t-D, bp (right axis) 07:30 (left axis) 1 month ago (left axis) Non-finan. Credit spread, itraxx s. 11* 07:30 1 day 1 month Credit spreads USD 10Y * Ask price ** Ask price Swap Spread, bp** Europe (IG) JPY 10Y HiVol Xover (N-IG) :30(-1)* 17: EUR 10Y DKK 10Y Finan. Sr SEK 10Y Oct Dec Jan Mar Apr May Jul Aug Oct Finan. Sub NOK 10Y itraxx Europe (IG) (left axis) itraxx Xover (Non IG) (right axis) :00 * As of closing previous trading day 07: PLN M future USD 17:00 07:30 07: JPY day month 0.97 GBP month 2 Year-to-date CHF Year-t-date Source: Bloomberg, Danske Bank Markets 4 16 October

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