Equities | FX | Global | Rates
Market Moves
Hike expectations are rising across Scandinavia and the $-Bloc. Sweden’s two-year OIS swap jumped +2.7 standard-deviations (std-dev), closely followed by the ten-year OIS swap (+2.6 std-dev). It came as the Riksbank’s minutes revealed all board members were prepared to raise the policy rate quickly if necessary. Similarly, neighbouring Norway saw smaller, but still significant, moves in their two- (+1.9 std-dev) and ten-year (+1.8 std-dev) OIS swaps ahead of Norwegian CPI tomorrow. Markets are expecting it to reach 4.7% YoY. Norges Bank had forecasted 4.5% YoY for March. Meanwhile in the $-Bloc, expectations for a more hawkish central bank have increased, with AUD, CAD and NZD ten-year OIS swaps all up at least 2.0 standard-deviations over the past week.
This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
We standardise price changes across different markets to allow for cross-market comparisons.
Market Moves
Hike expectations are rising across Scandinavia and the $-Bloc. Sweden’s two-year OIS swap jumped +2.7 standard-deviations (std-dev), closely followed by the ten-year OIS swap (+2.6 std-dev). It came as the Riksbank’s minutes revealed all board members were prepared to raise the policy rate quickly if necessary. Similarly, neighbouring Norway saw smaller, but still significant, moves in their two- (+1.9 std-dev) and ten-year (+1.8 std-dev) OIS swaps ahead of Norwegian CPI tomorrow. Markets are expecting it to reach 4.7% YoY. Norges Bank had forecasted 4.5% YoY for March. Meanwhile in the $-Bloc, expectations for a more hawkish central bank have increased, with AUD, CAD and NZD ten-year OIS swaps all up at least 2.0 standard-deviations over the past week.
GBP and CNH continued to weaken. GBP was hurt by a dovish twist from the Bank of England and a weakening economic backdrop. Meanwhile, China’s economy is slowing, with the zero-Covid strategy helping send the Caixin Services PMI down to 36.2, decently below market expectations. Bert has been long USD/CNH for some time, we think we might be only halfway in a CNH weakening move that will eventually take us to the 7.00 area. Staying on EM FX, BRL (-1.1 std-dev) spent most of last week teetering around 5.00, though it ended the week just shy of 5.10.
Equities are struggling globally, as US real yields trend higher – the US ten-year is up 1.7 std-devs while the US breakeven inflation rate fell 0.9 std-devs. On DM equities, Euro Stoxx weakened -1.9 std-devs while DAX and the FTSE-100 both fell 1.3 std-devs as Euro HY CDS widened+1.4 std-devs. In EM equities, the NIFTY (India) moved -1.9 std-devs, though Caroline thinks seven months of consecutive equity outflows could turn around with the LIC IPO, India’s largest-ever public offering, now underway. East-Asian equities fared no better, the Hang Seng (Hong Kong) currently sits around 20,000 and fell 1.7 std-devs, the CSI-300 (China) and KOSPI (Korea) also saw their indices deteriorate over 1.0 std-dev. Similar weakness was seen for BOVESPA (Brazil).
Bitcoin broke down through 38,000 and is now trading comfortably below 35,000. Crypto markets had a poor week in general.
Markets this week
This week, the spotlight remains squarely on US monetary policy, with US CPI out on Wednesday. Consensus expects a higher core than headline increase, which reflects a MoM decline in gas prices in April. Core is expected to rebound to 0.4% MoM, which Dominique agrees with. Meanwhile, in Europe, March (and with it Q1) UK GDP data is released on Thursday. Henry thinks a negative miss would likely add further fears of greater BoE dovishness, while an outperformance would probably be largely overlooked given the bleak path ahead. Meanwhile, ZEW surveys are expected to show another drop lower in expectations.
You can read Dominique’s and Henry’s views on the week ahead and see our weekly COVID trackers here. While you can also watch Dominique and Andrew discuss markets this week here.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.