Market movers today
In the US, we get the job reports for October. We estimate non-farm payrolls rose by 190,000 – tightening the labour market and putting upward pressure on wage growth, thus we expect average hourly earnings rose +0.25% m/m, bringing this year’s annual growth to 3.2%.
In Denmark, currency reserve figures for October will attract some attention since the Danish krone (DKK) has been hovering on the week side of the central parity rate throughout most of October. The numbers will reveal whether or not the central bank intervened by buying DKK during the month.
Today’s Riksbank minutes could be market mover, where we look after any hints as to whether the Board members preferred December or February.
We expect Norwegian unemployment rate to land at 2.3%.
Selected market news
Risk appetite improved yesterday on the news that US-China trade talks are progressing. A reported phone call between Presidents Donald Trump and Xi Jinping showed that the door is still open for US-China trade talks and has improved prospects of a meeting between Xi and Trump on the side lines of the G20 Summit in Argentina in mid-November. Talks are going ‘nicely’ US President Donald Trump wrote on Twitter, while Chinese state media also reported about constructive discussions.
US equities ended the day higher with the S&P500 and Dow Jones indices gaining more than 1%. In Asia, the momentum in the equity rally has eased over night, but most regional indices are still up with markets in South Korea and China in the lead.
In the FX market, the CNY strengthened while the USD sold off on the news that US-China trade talks are progressing. Besides trade talks, weak US ISM manufacturing data and lower US yields also weighed on the USD which underperformed against all G10 currencies. EUR/USD bounced back above 1.14 after testing a 2018 low at 1.1302.
Oil prices have continued to sell off past days despite stabilisation in equity markets. Key drivers have been data showing US selling strategic reserves in the market and new data out Thursday showing a rise in OPEC output led by Libya and Saudi Arabia. Going into October the market was positioned for a tightening of global oil supply, but these concerns have since eased due in part the factors mentioned above.
The Bank of England voted unanimously to keep the Bank Rate unchanged at 0.75% yesterday and did not make any big policy signal shifts either. We still expect the Bank of England to hike around once a year and our base case is that the next hike will arrive in May 2019, so after the UK formally leaves the EU. Our view is that a ‘no deal Brexit’ would most likely hit the economy also through lower demand due to lower business confidence, which would most likely force Bank of England to ease monetary policy by cutting the Bank Rate. See Bank of England Review – Hiking cycle continues but depends on Brexit deal ,1 November.
