Market movers today
Today’s highlight is US ISM non-manufacturing. After the weak manufacturing reading on Monday, there is a risk of a small downside to the most recent print. However, we do not have many indicators for ISM non-manufacturing.
In Sweden, we get the PMI services for November, which we expect to remain at a low level. In Norway, housing prices for November are in focus (see next page).
Bank of Canada is widely expected to leave rates unchanged at today’s interim monetary policy meeting. Things are slowly shaping up for an easing of monetary policy and with one full cut priced for 2020, markets will look for confirmation.
Markets will also watch out for further tariff and trade indications from Trump (see market news below) and Chinese reactions to the US House legislation passed overnight, sanctioning Chinese officials for human right abuses in Xinjiang.
Selected market news
With global trade news swinging back into negative, a risk-off mood captured global equity markets yesterday and Asian shares continue to be in the red this morning. After the significant fixed income sell-off on Monday, the move reversed yesterday, as European rates bull flattened and 10Y US Treasuries tumbled back to 1.72%.
Sentiment was dented by news that the Trump administration is not only planning to slap new tariffs on French goods (and preparing for a next tariff round in the Airbus subsidies battle with the EU), but also mulls going ahead with the planned 15 December tariff hike on Chinese imports if nothing changes in the remaining two weeks. While talks between the two sides continue, no big meeting is scheduled. Trump yesterday also indicated some patience about striking a deal with China only after the US election, casting further doubts on a ‘phase one’ deal. To us the comments suggest some frustration on the US side on how much China is willing to give in exchange for a tariff rollback. However, without the tailwind from a ‘phase one’ deal with China, Trump will face a difficult battle in important ‘farming’ swing states in the upcoming election in our view.
Danmark’s Nationalbank (DN) intervened in the FX market for a second consecutive month. Since October, DN has drawn down the FX reserve by DKK1.6bn to halt the DKK weakening. However, that is still a modest amount compared to the DKK14bn from last December and January. Our base case remains that it will take another DKK40bn in FX intervention before DN would deliver a 10bp rate hike. Hence, it is too soon to speculate in a near-term Danish rate hike in our view (see Flash Comment Denmark, 3 December).
Finnish Prime Minister Antti Rinne (SDP) resigned after a scandal handling postal office labour relations caused lack of confidence between parties in the government. Sanna Marin (SDP), Finland’s transport minister, is a likely candidate to form a new government with the same coalition.
