Market movers today
The final day of the week brings a packed calendar, with several tier-1 releases both globally and in the Scandies. Also, we might get news on the next Riksbank governor. In addition, quarter-end volatility will be a theme today in many markets.
In the Scandies, focus turns to the labour market and retail sales in Norway. Also, in Sweden reports suggest that the next Riksbank governor will be announced today. See Scandi markets on page 2 for more details.
In the euro area, euro area HICP figures for September are set for release. Following yesterday’s inflation release in Spain and Germany, we still look for euro area inflation at 1.6% but with the weak service price inflation release in Germany, there is some downside risk to our euro area core inflation forecast of 1.3%. Instead, the increase to 1.6% in September might be driven more by the volatile components energy and food, if similar inflation trends are observed as in Germany. We also get data on German retail sales in August and the German unemployment rate.
In the US, we get the most important release of the week namely PCE inflation for August . We estimate a slight uptick in the monthly increases of both PCE headline and PCE core following the release of the surprisingly high increase in CPI (CPI and PCE numbers tend to follow each other). The monthly increase in the CPI numbers leads us to believe the PCE headline will increase 0.3% m/m (1.5% y/y versus 1.4% in July) and PCE core 0.2% m/m (1.4% y/y versus 1.4% in July). Note that although this relatively strong monthly print in the PCE core does not lead to increases in the yearly rate, this has to do with a very large monthly increase in August 2016. We also get the final University of Michigan consumer confidence. The preliminary number showed a fall compared with August but the index is still at a high level, pointing to solid growth in private consumption. The Chicago manufacturing PMI for September is also due for release.
In the UK, focus turns to Bank of England Governor Mark Carney speaking alongside the final release of second-quarter GDP.
Selected market news
No clear direction on Asian equity markets this morning, despite the move higher in most European and US indices yesterday. Japanese equit ies are trading in the ‘red’, amid Japanese inflation moving higher (CPI excluding fresh food at 0.5% y/y). However, there are still no indications of inflation reaching the Bank of Japan’s inflation target any time soon , suggesting a continuation of current policy should the forthcoming elections not challenge ‘Abenomics’.
There is still a lot of market focus on a potential tax reform in the US. Meanwhile, we still think the most likely outcome will be a smaller tax reform or no deal at all. We also emphasise that any easier fiscal policy could well be offset by tighter monetary policy . This is so even if uncertainty remains high on what the Fed Board of Governors will look like next year, with President Donald Trump potentially having to nominate five members
