Market movers today
In the US, the ISM non-manufacturing index in August is due out today. We believe the fall in July was too big and that it will have recovered some of the lost ground in August . Hence, weest imate the ISM non-manufacturing will come in at 55.0, which is also in line with what the PMI services for August indicates. Tonight at 20:00 CET, the Fed is due to release the Beige Book ahead of the FOMC meeting later this month.
We estimate German factory orders rose 0.4% m/m in July after the big increases in May and June (1.1% and 1.0%, respect ively). With respect to the political development , Angela Merkel still seems on track to secure her fourth term in office, see German Election Monitor No. 1: Next euro area election unlikely to rock the boat, 29 August ).
We expect the Bank of Canada to keep the policy rate unchanged at 0.75% in light of the reduced out look for another Fed hike this year. We still pencil in one 25bp hike in Q4 this year.
In Poland, we expect the central bank to maintain the policy rate at 1.50%.
In Sweden, indust rial and service production data for July are due at 09:30 CET, see page 2.
Selected market news
US Treasuries continue to perform as the crisis in North Korea intensifies and another hurricane is approaching the US mainland. This is also reflected in the equity markets, where the main US indices all fell yesterday. The Asian equity markets have followed the move from the US markets yesterday with falling share prices across the region. The volatility in the markets is increasing as there seems to be a lack of consensus how to deal with North Korea among the US, Russia and China. Most recently, Russian President Put in has rejected more sanct ions against North Korea.
The US bond market also received support from dovish comments by Fed officials Brainard and Kashkari. Neel Kashkari stated that the rate hikes could do real harm against the economy and was against raising rates in March and June. Lael Brainard urged caution in raising rates given the low inflation. The dollar lost versus the euro and the yen on the back of the comments from the officials.
In the front end of the US yield curve, the yield on four-week US T-bills rose at the auction yesterday to the highest level since 2008 as the deadline for raising the US debt ceiling is approaching.