Weekly Update

Transcription

1 Improving labour market Norway: Improving labour market, retail sales slightly down Sweden: Ingves continues as Riksbanken governor for five more years Fixed Income: m NIBOR Stable Despite Falling EURUSD Basis Weekly Update Headquarters Dronning Eufemias gate 9 Oslo Offices Abroad New York London Singapore Stockholm Sales Oslo (+47) Equity Fixed Income Regional Sales (+47) Bergen 56 7 Bodø Fredrikstad Hamar Lillehammer Kristiansand Oslo Stavanger Tromsø Trondheim Tønsberg 7 8 Ålesund Private Clients Research Regional Sales (+47) Eirik Larsen Research FX/IR (+47) Kjersti Haugland Jeanette Strøm Fjære Ole André Kjennerud Knut A. Magnussen Magne Østnor Marit Øwre-Johnsen Kyrre Aamdal Norway Assessment: The decline in retail sales came after a substantial rise earlier this year. Registered unemployment fell further, but the drop was not as big as in previous months. Also LFS unemployment is on a downward trend. Households optimism fell in September, but is still high. Over all the figures were as expected or a little weaker. But there is no sign of changing trends that should induce Norges Bank to change the view of the economic development. Lower unemployment, employment rising slowly: LFS unemployment was 4. per cent in July (average for June-August). Consensus expected a decline to 4. per cent, while we expected 4. per cent. Unemployment is. percentage points lower than in April (previous not overlapping threemonth period). Employment increased by 8 people both from June to July and from the previous three month period. These figures have fluctuated on a monthly basis, but the level in July is slightly higher than the average for the past year. Registered unemployment further down: Registered unemployment was.5 per cent of the labour force in September, down from.7 per cent in August. The decline was partly seasonal and partly caused by a declining trend. The seasonally adjusted decline in the registered unemployment was however only 5 (!) persons, but inclusive people on labour market measures the decline was 6 persons, somewhat less than in the previous months. The initial claims continued on a downward trend. Retail sales below expectations: The volume of retail sales ex autos fell.6 per cent m/m in August. According to Reuters the consensus expectation was. per cent and we expected. per cent. The y/y rise hence fell back to.5 per cent, down from.6 per cent in July. The goods consumption index, that also includes autos and fuel, fell. per cent m/m. The annual growth increased from.5 per cent y/y in July to.7 per cent in August. Consumer confidence fell slightly from high levels: The monthly households sentiment fell from.4 points in August to. points in September. The level was however higher than in July and still close to peak levels. Risk advisory (+47) Børge Rogstad Trygve Jean-Hansen Bjørn Erik Johansen Ståle Johansen Arvid Larsen Kenneth Lauritzen Karl Magnus Maribu Øystein Stephansen Anders Øksendal Coming up this week: Tuesday: Manufacturing PMI Wednesday: Housing prices Friday: Manufacturing output Norway: Unemployed of labour force. Sep-7 Sep-9 Sep- Sep- Sep-5 Sep-7 Reg.+measures LSF Reg Detaljhandel Sesongjustert volum. m/m årlig rate, % -9 Aug- Aug- Aug-4 Aug-5 Aug-6 Aug-7 Kilde: Statistisk sentralbyrå/dnb Markets

2 Sweden Assessment: We expected that Ingves would be replaced as Riksbanken governor from next year and considered Karolina Ekholm as the most likely successor. However, that Ingves is continuing as governor does not change our forecast for Swedish monetary policy. Both inflation and GDP-growth have surprised positively recently, and the minutes from the September meeting shows that the monetary policy board is now discussing monetary policy tightening, although it is emphasized that it must be done gradually and depends on monetary policy abroad. Now that inflation is above target and SEK remains weak, we believe the Riksbank will end the asset purchase program by the end of the year, although we expect the European Central Bank to taper its asset purchases through next year. We are also expecting the key policy rate to be hiked in mid-8. That is slightly earlier than the Riksbank itself indicates with the interest rate path from September. Having said that, we considered a new central bank governor as a risk of a somewhat faster rate hike than our forecast indicates. That risk is no longer present. About the decision: Riksbanken announced in a press release last week that the current central bank governor Stefan Ingves will continue for five new years. He has already been governor for two terms of six years (for a total of years) and it was expected that he could be replaced in January 8 when his second term was over. Karolina Ekholm, now Secretary of State at the Ministry of Finance, was one of the favorites to take over as governor. In recent days, rumors have argued that several in the opposition believed Ekholm was too political to take over the role of central bank chief. It further led to rumors that the solution was that Ingves would continue. Riksbanken also announced that Kerstin af Jochnick will continue in the Riksbanken board for six new years (her six year term also ends in January 8). About current monetary policy: Riksbanken lowered the key policy rate to the present level of -.5 per cent in February 6 as a response to sustained inflation below the target of per cent. In February 5, the key rate was reduced to negative levels for the first time. At the same time, Riksbanken announced the first government bond purchases of SEK billion. The asset purchase program has been extended several times to amount to about SEK 9 billion by the end of 7. This corresponds to more than 4 percent of outstanding government bonds. Last week s key figures: Retail sales fell. per cent m/m in August, as expected. June growth was revised up from.9 per cent to. per cent. The trend rose to 4. per cent (m/m a.r.), while the annual growth rate fell from 4. per cent y/y to.7 per cent. Manufacturing confidence was up 8.p to 4.6 in September, more than reversing the drop in August. Consumer confidence (CCI) rose by.8p to.8, well in line with the historical average. Coming up this week: Monday: PMI manufacturing Tuesday: Speech Riksbanken Ingves Wednesday: PMI services Thursday: Industrial production Jeanette Strøm Fjære, DNB Markets Sweden: Repo-rate path Percent Q 7 Q 8 Q 9 Q Jul-7 DNB Markets Sep-7 Source: Riksbanken/Thomson Datastream/DNB Markets Sweden: Riksbanken's APP SEK bn Feb Mar Apr Jul Oct Apr Dec Apr Source: Riksbanken//DNB Markets 5 6 7

3 Fixed Income m NIBOR Stable Despite Falling EURUSD Basis The S&P5 ended the week up.7 per cent after a slightly bearish start. For the month the index rose.7 per cent, and the quarter ended up 4. per cent. The European Eurostoxx6 added. per cent the past week, bringing the monthly rise to. per cent. For the quarter the Eurostoxx6 rose. per cent. In Sweden the OMX added. per cent for the week and 5. per cent for the month. For the quarter the index is up. per cent. The Norwegian OSBX rose. per cent the past week and 4.8 per cent for the month. OSBX outperformed the other three indices this quarter with a surge of. per cent. y Treasury yield added 7 bps the past week. The yield has risen 8 bps from the bottom 7 September and is up bps over the quarter. The y German Bund yield rose only bps the past week, but has climbed bps from the quarterly low 9 August. Over the quarter however, the yield is roughly unchanged. In the currency markets the EURUSD fell back with. per cent for the week. The EURUSD rose in the second quarter and into the third quarter. But since the end of July the exchange rate has moved sideways with.5 per cent decline the last month and increase of.7 per cent over the quarter. EURSEK added. per cent the past week, contributing to the monthly increase of.8 per cent. Most of the rise took place on Friday after the announcement at lunchtime of Riksbank governor Stefan Ingves getting the nod for another five dovish years at the helm of Riksbanken. For the quarter the EURSEK is up. per cent. EURNOK climbed. per cent for the week, despite the.8 USD/bbl rise in the oil price, but strongly affected by the SEK move. Over the quarter the EURNOK had dropped.5 per cent, and the oil price ( st Brent future contract) has increased by 9.8 USD/bbl. y USD, EUR and SEK swaps rose to 4 bps the past week and the yy curves steepened -4 bps. The y NOK swap was up bps and the steepness unchanged. The U.S. core PCE inflation came in at. per cent y/y in August, a tick below expectations and the lowest reading since October 5. The data for wages and salaries stalled rather than accelerated in August. The market reaction to the PCE was however surprisingly muted. The market probably believes the Fed is determined that their inflation outlook is correct, and so December is live with regards to a Fed hike. According to Bloomberg the OIS market prices in 6-65 per cent probability for a December rate hike. This probability rose after the September Fed meeting, but was relatively stable the past week also after the low inflation data. The news that Trump was said to meet with Kevin Warsh about the Fed Chair post may have counteracted softness after the inflation data. Warsh is considered much more hawkish than Yellen. m USD forward rates rose 4 bps for both red and green contract over the past week. EUR and NOK FRAs were little changed, while the SEK FRAs dropped -4 bps, lowered by the Riksbank governor news. m NIBOR fixed today at.8 per cent, a tick up from Friday s fixing and from the fixing the previous Friday. The m EURUSD cross currency basis fell last week. Trading around -9 points the first three weeks of September, the m EURUSD xccy had dropped to -4 points today. This normally contributes to increase the m NIBOR. So far it seems as the m NOKEUR cross currency basis is absorbing much of the EURUSD xccy movements. We think is almost unlikely Norges Bank will hike rate as early as next summer, but m NIBOR fixing may increase as a result of the FED balance sheet reduction and a possible solution to the debt ceiling. The red June m FRA is trading 8 bps above the front June m FRA, indicating markets price in a rate hike in the middle of 9, in line with Norges Bank s own forecast. Kyrre Aamdal, DNB Markets.5. - curves Maturity (years) m Forward Interest Rates

4 NOK Curve Bps and per cent.5 4 SEK Curve Bps and per cent Change from -Sep-7 (bp, lha) Change in spread to EUR 9-Sep-7 -Sep Change from -Sep-7 (bp, lha) 9-Sep-7 -Sep-7 - EUR Curve Bps and per cent Change from -Sep-7 (bp, lha) 9-Sep-7 -Sep USD Curve Bps and per cent Change from -Sep-7 (bp, lha) 9-Sep-7 -Sep Year. Sep-6 Dec-6 Mar-7 Jun-7 Sep Spread over Gov. Bonds, y, basis points -4 Sep-6 Dec-6 Mar-7 Jun-7 Sep-7 Year Sep-6 Dec-6 Mar-7 Jun-7 Sep Spread - Year Percentage points. Sep-6 Dec-6 Mar-7 Jun-7 Sep-7 4

5 Curve Steepness Basis points Change in Steepness from -Sep-7 Basis points % NOK 5Y with 5 year fwd. start 6.% SEK 5Y with 5 year fwd. start 5.% 5.% 4.% 4.%.%.%.%.%.% Sep-7 Sep-9 Sep- Sep- Sep-5 Sep-7 +/- std dev 5Y5Y Avg last years.% Sep-7 Sep-9 Sep- Sep- Sep-5 Sep-7 +/- std dev 5Y5Y Average last years 6.% EUR 5Y with 5 year fwd. start 7.% USD 5Y with 5 year fwd. start 5.% 6.% 4.% 5.%.% 4.%.%.%.%.%.% Sep-7 Sep-9 Sep- Sep- Sep-5 Sep-7 +/- std dev 5Y5Y Average last years.% Sep-7 Sep-9 Sep- Sep- Sep-5 Sep-7 +/- std dev 5Y5Y Average last years NOK: m Forwards change in %-points in spread to foreign currencies -. Dec-7 Dec-8 Dec-9 Dec- Dec- -Sep-7 til 9-Sep Steepness, Month Fwd q-q, %-points -. Dec-7 Dec-8 Dec-9 Dec- Dec-

6 m, Fwd and Forecast, NOK Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun- MPR /7 9-Sep-7 -Sep-7 DNB Source: Norges Bank/DNB Markets m, Fwd and Forecast, SEK -.75 Dec-7 Mar-8 Jun-8 Sep-8 9-Sep-7 -Sep-7 DNB m, Fwd and Forecast, EUR -.5 Dec-7 Mar-8 Jun-8 Sep-8 9-Sep-7 -Sep-7 DNB. m, Fwd and Forecast, USD Dec-7 Mar-8 Jun-8 Sep-8 9-Sep-7 -Sep-7 DNB 6

7 Table Curves. ing swaps (Annual /6) NOK Tenor Spot Y Y Y 4Y 5Y 6Y 7Y 8Y 9Y Y Y Y Y Y Y Y Y Y.88.7 Y.95 Rate above %. ing swaps (Annual /6) EUR Tenor Spot Y Y Y 4Y 5Y 6Y 7Y 8Y 9Y Y Y Y Y Y Y Y Y Y.8.4 Y.9 Rate above %.5 Spread between NOK and EUR (basis points) Tenor Spot Y Y Y 4Y 5Y 6Y 7Y 8Y 9Y Y Y Y Y Y Y 7 9 7Y Y 8 9Y 9 Y 4. ing swaps (Annual /6) SEK Tenor Spot Y Y Y 4Y 5Y 6Y 7Y 8Y 9Y Y Y Y Y Y Y Y Y Y.4.46 Y.6 Rate above %.4 ing swaps (Annual ACT/6) USD Tenor Spot Y Y Y 4Y 5Y 6Y 7Y 8Y 9Y Y Y Y Y Y Y Y Y Y..4 Y.5 Rate above %.6 Spread between SEK and EUR (basis points) Tenor Spot Y Y Y 4Y 5Y 6Y 7Y 8Y 9Y Y Y Y Y Y Y Y Y Y 5 4 Y 5 7

8 Table Market Update -Oct-7 -Sep-7 Diff. 5-Sep-7 -Sep-7 -Dec-6 NOK DEC FRA MAR FRA JUN FRA SEP FRA month money mkt year swap year swap year gov SEK month money mkt year swap year swap year gov USD month money mkt.4... year swap year swap year gov EUR month money mkt year swap year swap year gov (Germany) Spreads i basis points NOK-EUR year swap NOK-EUR year swap NOK-Germany year gov SEK-EUR year swap SEK-EUR year swap SEK-Germany year gov USD-EUR year swap USD-EUR year swap USD-Germany year gov Source: Thomson Datastream/Reuters/DNB Markets 8

9 Table Interest Rates Forecasts Policy rates 5-Sep-7 -Oct-7 Dec-7 Mar-8 Sep-8 USA: Fed Funds.5.75 Japan: Day-to-day Euro: Repo UK: Base rate.5 Sweden: Repo Norway: Folio Switzerland: M Libor CHF month money market rates Country 5-Sep-7 -Oct-7 Dec-7 Mar-8 Sep-8 USA Japan Euro U.K Sweden Norway Switzerland year swap rates Country 5-Sep-7 -Oct-7 Dec-7 Mar-8 Sep-8 USA Japan Euro area.9.5 U.K..4 Sweden Norway Switzerland

10 Table 4 Calendar Importance GMT+ Country Event Period Unit Last Cons. DNB Actual Monday October 8: Sweden Manufacturing PMI Sep Index :5 France Manufacturing PMI, final Sep Index :55 Germany Manufacturing PMI, final Sep Index : EMU Manufacturing PMI, final Sep Index : UK Manufacturing PMI Sep Index : EMU Unemployment Rate Aug % :45 USA Manufacturing PMI, final Sep Index 5 6: USA Construction Spending Aug % m/m : USA ISM Manufacturing PMI Sep Index Tuesday October 7: Japan Consumer Confidence Sep Index 4. 9: Norway Manufacturing PMI SA Sep Index : UK Markit/CIPS Cons PMI Sep Index : EMU Producer Prices Aug %.. : Sweden Riksbank Gov. Ingves on Economy and Monetary Policy : USA Total Vehicle Sales Sep M Wednesday 4 October 8: Sweden Service sector PMI Sep Index :5 France Service sector PMI, final Sep Index :55 Germany Service sector PMI, final Sep Index : EMU Service sector PMI, final Sep Index : EMU Composite PMI, final Sep Index : UK CIPS service sector PMI Sep Index : Norway Housing Prices Sep %, y/y. 4:5 USA ADP National Employment Sep 7 7 6: USA ISM Non-manufacturing PMI Sep Index Thursday 5 October 9:5 Switzerland CPI Sep %, y/y.5 9: Sweden Industrial production Aug %, m/m : Sweden New Orders Manufacturing Aug %, y/y. : USA Challenger Layoffs Sep.85 4: USA Initial Jobless Claims w/e 7 4: USA International Trade Aug bn USD USA Speeches by Fed's Williams, Harker, George, Powell and Dudley Friday 6 October 8: Germany Industrial Orders Aug % m/m : Norway Manufacturing Output Aug % m/m : UK Halifax House Prices Sep % m/m. 4: USA Non-Farm Payrolls Sep 56 4: USA Unemployment Rate Sep % : USA Average Earnings Sep % m/m.. 4: USA Labor Force Partic Sep % 6.9

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