Market movers today
The week starts quietly on the data release front, so most attention will be on Brexit. The UK government is expected to put the Brexit deal forward for another “meaningful vote” today but House Speaker Bercow is expected to rule it out of order. Otherwise we are monitoring statements from various politicians and political parties ahead of the debate on the Withdrawal Agreement Bill, which is expected to start tomorrow Tuesday. The purpose of the bill is to write Johnson’s deal into British law. If the bill is amended (for instance by stating that the UK should negotiate a permanent and comprehensive UK-wide customs union), Johnson may be forced to pull the bill, as there may no longer be support for the overall deal. For more details see below or see Brexit Monitor – Johnson has the numbers but has not won the battle yet, 21 October.
Later this week, the Riksbank meeting on Thursday will be important, where we expect it to signal a delay of the intended next rate hike. Also Norges Bank and ECB meet on Thursday, and neither are expected to send new policy signals.
In Norway, manufacturing survey will be released while in Denmark we get employment figures (see next page).
Selected market news
Risk sentiment was on a weak footing on Friday, with global equity markets ending lower. Global bond markets continued the gradual upward move seen in recent weeks, leaving the 10Y German Bund yield at -38bp.
While it seems that PM Boris Johnson has support for his Brexit deal in a simple yes/no vote, things have become more complicated after the so-called Letwin amendment was passed on Saturday, which withholds approval for PM Johnson’s deal until the legislation has become law. Unfortunately for Johnson, this means the MPs have the possibility to tweak his deal in a softer direction, which may imply that there is no longer a majority for the overall deal. We think there is a 40% probability of the deal passing this week, either because there is no majority for any amendments or because the Johnson government accepts a softer Brexit (he can always try changing this after an election). Our base case (60% probability) is that amendments mean there is no longer support for the overall deal. For more details see Brexit Monitor – Johnson has the numbers but has not won the battle yet.
During the weekend, ECB sources suggested that the central bank is not expected to ease in the coming months despite a likely downgrade of staff projections in December. Incoming ECB-president Christine Lagarde was confirmed by EU leaders on Friday.
On the trade war, Chinese VP Liu He said that the China/US trade negotiations made ‘concrete progress towards a trade war deal in Washington. We how set the probability of a deal at 50% from previously 40%. More China Weekly – US compromise raises chances of a real trade deal.
