Signe Roed-Frederiksen
Danske Bank A/S
Market Movers
The Greek parliament is scheduled to vote at noon on the proposal delivered to the creditors yesterday. According to the media, the proposal is in line with the creditors’ proposal for the Greek referendum. The markets welcomed the latest signs of progress, which also means that the relief rally on a deal Sunday should not be exaggerated.
On Saturday the Eurogroup will meet to discuss the proposal and this will be followed by the ‘make it or break it’ EU leader summit on Sunday.
Fed Chair Yellen will speak this evening on the US economic outlook. The market is currently pricing only a 50% probability of a rate hike this year (at the December meeting) and Yellen’s comments could give us an indication of whether this pricing is in line with current FOMC thinking. Comments on Greece and China will be at the centre of attention.
Selected Market News
According to the media, the proposal delivered by Greece yesterday meets most of the demands from the creditors. Markets already embraced the prospects of a deal being reached between Greece and its creditors yesterday and combined with a 6% increase in the Shanghai composite index some of the flight to quality seen earlier in the week was reversed. This morning, Chinese shares have continued higher with the Shanghai composite index up 5%.
In the euro-area periphery market sentiment turned sharply after Tuesday night's Euro Leader meeting, which provided a firmer deadline. The spread tightening in the periphery continued yesterday and we are currently only 25bp from the June low in the Italy-Germany yield spread and we will probably go to around the lows or a bit tighter on a deal this weekend. US treasury yields also moved 4-11bp higher yesterday driven by the long end of the curve and stock markets rose.
Scandi Markets
In Norway, we expect core inflation to increase moderately to 2.5 % y/y in June. Lower wage growth and higher productivity growth should dampen domestic inflation further in the coming months but the recent deterioration in the NOK will push up import prices over the autumn and winter.
Yesterday relative rates, oil and sentiment sent EUR/NOK below 9.00 again reducing fears of an imminent repetition of the December 2014 NOK sell-off. However, according to our models ‘fundamentals’ can only account for roughly 50% of the recent moves suggesting a considerable increase in the NOK liquidity premium in the past weeks.
In Denmark we will receive inflation data for June. We expect the same y/y rate as in May because of the base effect from falling prices last year.
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