The big CPI day today

Market movers today

Today's key event will be US CPI for April. We look for a moderation in core CPI to 0.3% m/m down from 0.4% m/m and slightly below consensus expectation of 0.4% m/m. Focus will also be on the development in the services ex shelter component, which the Fed highlights as the key component to gauge underlying inflation pressure.

Any news regarding bank stress or the US debt limit also continues to be in focus.

In the Scandies we get inflation releases in both Norway and Denmark while the consumption and production value indicators are released in Sweden. For more information see the Nordic Macro section below.

The 60 second overview

Markets. While the end to last week and beginning to this week were characterised by risk on and green equity markets sentiment yesterday turned more nervous amid the recent rise in yields; the major equity indices ended in "red", the USD gained and commodities traded slightly on the back foot.

Markets are back in a wait-and-see mode not least ahead of today's US CPI print which could prove instrumental for the very short end of the USD rates curve amid markets second-guessing the outlook for H2 Fed rate cuts and the potential for yet another rate hike in June. That said, markets still price around 145bp worth of rate cuts from the Federal Reserve over the coming 12M.

US debt ceiling. Yesterday US President Joe Biden met with Congressional leaders on the topic of the US debt ceiling problem. Meanwhile, apart from a pledge to continue the negotiations there were little signs of concrete breakthroughs in the talks. We still think the so-called x-date is too far away to find a solution as both the Democrats and the Republicans have incentive to try and use their political leverage in the negotiations. While markets did little on the lack of progress yesterday we could well see the US debt ceiling increasingly turn a market driver by end-May as nervousness could pick up similar to 2011. It remains our clear base case that a solution will be found in the 11th hour, yet we highlight that the coming month is likely to be filled with political noise and posturing.

Oil. The recovery following last week's sell-off has started to lose steam albeit the oil curve did find some late support yesterday on the US administration reiterating plans of a rebuild of their strategic reserves later this year. Overall, the oil market has tracked sentiment in the equity market in recent sessions, which was down yesterday. The dollar was on the rise, which likely also held back a further rise in oil prices. The drop in China's import in April probably also feeds into recent growing demand concerns in the oil market and could be weighing on oil prices. Today the market will watch the weekly US inventory report and in particular how many strategic reserves US sold the past week.

Equities: Equities took a breather on Tuesday with most indices drifting into red. It was an uneventful session with few market drivers; regional banks are still not bouncing, positioning/valuation is back at average, on top of wait-and-see mode ahead of CPI. S&P 500 closed down -0.5% with sectors quite tightly bunched. Directionless is the word, with an odd mix of materials, health care and tech lagging. US futures are a notch higher this morning.

FI: Global bond yields rose modestly yesterday and ahead of the US CPI data for April released today. The consensus expectation is for a rise of 0.4% m/m and 5.5% y/y in the core CPI relative to 0.4% m/m and 5.6% y/y in March. Hence, the market is prepared for some solid US CPI data and if the data surprises on the downside we expect a solid positive reaction in the global bond market.

FX: Yesterday, EUR/USD moved below the 1.10 mark on the back of broad risk-off sentiment in markets. Likewise, EUR/GBP moved firmly below 0.87 and is currently trading at the lowest level since December 2022. EUR/SEK ended the day slightly lower but was overall relatively unfazed by the Riksbank minutes that were less dovish than expected. For NOK, the key release today will be release of Norwegian inflation.

Credit: Reflecting the weak overall sentiment, iTraxx Main widened by 2bp to 88bp while Xover widened 9bp to 459bp yesterday. In the Nordic markets the decision by Swedish property lender SBB to postpone its dividend payment and cancel its planned rights issue following the recent S&P downgrade to high-yield status put focus back on the challenges faced by the CRE sector (please see our comment for more details here).

Nordic macro

In Denmark we expect a big decline in CPI inflation in April to 5.3% from 6.7% in March. Energy prices will be the key driver as what looks like a decline in electricity and natural gas prices replaces the April price surge from last year in the inflation measure. The April 2022 increase in tobacco fees also exits the inflation measure which reduces inflation by another 0.1-0.2 percentage points. Food prices will be key to the outcome and uncertainty here is high. German food prices declined quite significantly in April, but they have also increased a lot more than Danish prices. We continue to expect an elevated price pressure here, although not nearly as big as what we saw in Q1.

Norwegian core inflation remains high, but no longer seems to be accelerating. However, looking beyond the aggregate figures, we can see that while the price of goods (including agricultural goods) have started to fall, prices of services are clearly still rising and import prices have now also started to climb sharply. This last factor is probably due to the NOK weakening seen since the autumn, and there is much to suggest that it will continue to do so for some time. Core inflation was likely also relatively high in April, and we believe it rose by 6.2% y/y in April.

In Sweden March consumption and production value indicators are released at 08.00 CET. Considering that we already have the Q1 GDP indicator, these two will only add colour to that figure. We believe it will illustrate the increasing division between the production and demand sides of the economy. The Swedish market will also take a special look at the April inflation data in Norway and Denmark as these may have implications for the Swedish ditto released Monday 15th.