Market movers today
A quiet day on the data front gives markets plenty of time to focus on central bank comments from various ECB speakers (Lagarde, Nagel and Knot) and Fed’s Collins during the day.
In Norway, we expect mainland GDP to have risen 0.4% q/q in Q3, higher than Norges Bank expected in its monetary policy report in September. But as leading indicators have weakened considerably, we think this will be regarded as ‘yesterday’s news’ anyway.
The 60 second overview
US: St. Louis Fed President James Bullard has raised his own estimate for how high Fed needs to raise interest rate. He now sees a rate of 5-5.25% as a minimum level compared to 4.75-5% in the past.
Japan: Inflation has also come to Japan. CPI inflation ex fresh food rose to 3.6% y/y in October, which was the highest level in 40 years in October.
Oil: Brent dropped to USD90/bbl – the lowest in about a month. Demand worries and US selling of SPR are probably main reasons for the drop, which comes only weeks before EU’s embargo on Russian oil imports are set to begin.
Equities: A hawkish Fed speech and inflationary data brought equities lower yesterday. The negative correlation between yields and equities returned, with the US 10y adding 10bp but S&P -0.3%. Sector performance was scattered without direction between cyclicals and styles. US futures are unchanged this morning.
FI: It was a rather uneventful session yesterday with European rates mostly range trading and 10y German Bunds ended 2bp higher on the day at 2.02%. The little volatility should be seen in light of the overnight ECB sources story suggesting a slowdown of rate hikes at the December meeting. In the afternoon, we saw a small parallel move higher in the trading range on the back of spillover from the UK’s Hunt comments and projections not showing a decline debt to GDP trend until 2025/2026.
FX: Continued Scandi weakness with EUR/SEK trading around 11.00 for the first time in almost a month at the same time as EUR/NOK is testing 10.50 from the downside. EUR/USD consolidating between 1.03-1.04. The antipodean currencies strengthened against the USD over the night. USD/JPY stable at 140.
Credit: For the second day in a row credit markets were slightly weak, with iTraxx Xover widening 9bp and Main 2bp.
After a revision of historical figures, we have upgraded our forecast for Norwegian mainland GDP to 0.4% q/q in Q3, among other things because consumption growth came out stronger than anticipated. That would be a fair deal higher than Norges Bank expected in its monetary policy report in September, but as leading indicators have weakened considerably, we think this will be regarded as ‘yesterday’s news’ anyway.