Market Activity Set To Pick Up As U.S. and U.K. Resume Trading

In terms of macro data, focus will be on U.S. numbers today. The S&P Case-Shiller house price index is expected to continue the upward trend. House prices have so far increased 7% this year (measured by Case-Shiller), which has been a significant positive factor for households' net wealth. We also expect the U.S. Conference Board's measure of consumer confidence to have continued upwards in May. It will be interesting to see if the job outlook measure will show progress.

In Scandinavia, Swedish trade balance data and the updated economic report from the Danish Economic Council are the highlights.

Market activity is set to pick up, as the U.S. and U.K. resume trading. Furthermore, bond markets are facing a dense issuance calendar, including supply from Denmark, Belgium, Italy and the Netherlands.

Selected market news

Risky assets rebounded in thin markets yesterday. In a very quiet market session, modest risk appetite returned. European equities rebounded, receiving support from speculation on upcoming M&A activity. Moreover, the backdrop generally remains supportive (global monetary policy staying loose, low systemic risk, European data improving somewhat), which has, however, been overshadowed by the sharp recent drop in Japanese equities. The Nikkei opened up with a 1.4% drop, but has since recovered and is currently trading in green territory. Overall, volatility in Japanese equities appears to be easing. Trading volumes have been thin, however, as both the U.S. and U.K. were on holiday; a pick-up in market activity is expected for today.

Sentiment stabilizes on European bond markets. Spanish government bonds advanced as sentiment improved, following a spike higher in yields on Friday, and Italian bonds also received support. Core and semi-core fixed income sold off slightly, with German government yields rising slightly more than French yields in the front end of the curve. Hence, the warning from Standard & Poor's that France must deliver on budget cuts to maintain its current AA+ rating seems to have had no major price impact. France was stripped off its AAA rating in January, and is currently on negative outlook from S&P.

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