market today’s movers
Preliminary first quarter GDP data for Sweden and the US are released today. The consensus is looking for a small contraction in the former (-0.1% q/q) and a gradual yet fairly solid growth in the latter (+2.0% q/q AR).
A measure of economic sentiment for the Eurozone is due out in April, and a previously released Flash Consumer Confidence Index showed a slight uptick in sentiment.
The consensus is that Turkey’s central bank will not change its rate at today’s meeting.
We also do not expect the Bank of Japan to change monetary policy overnight. For more information, see the Bank of Japan Preview on April 21st.
60 seconds overview
Bank Confusion: Concerns about the regional banking sector, especially First Republic Bank, continued yesterday as global equity markets fell in risk-off mode.
Sweden: Riksbank hiked 50bp to 3.50% as expected, but future policy signals are dovish, with another June or September rate hike of less than 25bp, clearly below the market price for release . Anna Breman and Martin Flodén voted against this decision and instead she opted for a 25bp rate hike, with a rate path suggesting additional her 25bp rate hikes in June and/or September. For now, we hold the June 50bp call, but the call has downside risks given yesterday’s release. Given the signals, we cannot rule out a scenario of 25bp in June followed by 25bp in September.
Geopolitics: Chinese President Xi Jinping met with Ukrainian Prime Minister Volodymyr Zelensky yesterday for the first time since Russia’s aggression. It’s too early to trade as a market theme, but it should be seen as a positive sign that all is on par.
EU fiscal policy: The European Commission yesterday released its latest proposals for EU rule reform that would leave 3% and 60% of the GDP reference figures for deficit and debt unchanged. Countries need to set a course for fiscal adjustment, and the key variable for fiscal oversight is now multi-year spending targets. The new framework will also come with a stricter enforcement regime. In countries facing real public debt problems, deviations from agreed fiscal adjustment paths lead to the initiation of excessive deficit procedures by default. In the next step, both the EU Council (heads of state) and her EU parliament will have to agree before her new EU financial framework comes into force. The year-end deadline looks increasingly ambitious.
stock: No news is no longer good news for the market. Lower bond and equity volatility is no longer enough to push equities higher. That makes the stock more sluggish when drivers are short like they were yesterday. A strong tech report wasn’t enough to lift stocks Wednesday. Europe and the Nordic countries fell, with the S&P ultimately falling -0.4% with the US session down. Growth stocks outperformed not because of yields, but because of the turnaround in earnings. Otherwise, both cyclical and defensive were directionless trades that sold out. But today US futures are a step higher.
FIs: The yield curve steepened significantly yesterday, 5bp lower in the first half and 2-4bp higher in the long run. Over the past two days, the market has robbed him of 12bp from his ECB policy pricing peak, leading to a notable reversal of the 2024 segment as well. The market is now 10bp lower at 2.4% after Germany’s first in a decade reached her 2.5% on Monday.
FX: Riksbank hiked as expected yesterday, but left a dovish mark on the SEK, leading to a EUR/SEK gain above 11.40. EUR/NOK rose as well, with the pair reaching new highs above 11.70. Broad US dollar selling temporarily pushed EUR/USD to the high end of the range near 1.11.
credit: The corporate bond market as a whole is slightly negative, supported by the negative trend in the overall stock market. The iTraxx Main was 3bp wide on him and the ITraxx Xover was 5bp wide on him. Finnish nuclear power company TVO has been upgraded from BB+/positive to he BBB-/stable by S&P following the start-up of its commercial reactor OL3, which has been delayed for several years. We believe the upgrade is already heavily priced into the spread. That said, following his TVO upgrade included in the IG benchmark, portfolios are likely to see his manager increase exposure to her TVO, so we see the upgrade as a positive one. Furthermore, we expect the market to start pricing in over time on the potential for further upgrades to ‘BBB’ over the medium term.
nordic macro
Today we got the first quarter GDP figures for Sweden. This could be somewhat stronger than Nordic Outlook’s forecast of -1.0% for her QoQ. Somewhere between -0.3% and -0.5% seems more likely, given recent data releases. More interesting than the retrospective GDP data is the forward-looking NIER survey of firms and households. Consumer confidence is likely to remain very low, but sentiment could improve. Retailer pricing plans will also be watched as they remain high despite other indicators indicating easing cost pressures.
