Market movers today
This morning, we published our quarterly Nordic Outlook, including our updated macro forecasts for the four Nordic economies .
In Denmark, FX reserve figures for September are due out at 16:00 CEST. Danmarks Nationalbank has not intervened for a long time but DKK traded on the weak side of the central parity rate against EUR for some days in September. Even if it turns out Danmarks Nationalbank had to buy DKK to counter the weakening of the currency, we do not expect that a unilateral rate hike is imminent. Danmarks Nationalbank has large foreign currency reserves, and we also expect the weak DKK to prove a temporary phenomenon.
In the UK, focus remains on the Conservative Party Conference and the development so far has shown that the party remains extremely divided on how to proceed with the Brexit negotiations. Ex foreign secretary and leading Brexiteer Boris Johnson is speaking today. We still believe PM Theresa May’s room for manoeuvre is bigger after the conference and still think a ‘decent Brexit’ is the most likely outcome. See Brexit Monitor: Get ready for the end-game , 27 September.
We do not expect Fed Chair Powell to send any new signals in his speech at 18:45. In our view, the Fed is on autopilot at least until the neutral rate of 3.00% is reached, probably in June next year. See FOMC Review: Gradual Fed hikes are set to continue , 26 September.
Selected market news
Turbulence surrounding the Italian budget continued yesterday. With no DEF published and scarce communication on further underlying assumptions from the government, the day ended with 30bp higher yields in the 2Y area. Particularly noteworthy are the media reports yesterday morning where the EU was said to reject the budget and President Juncker’s comment in the evening that ‘we have to prevent Italy from being able to get special treatment here that, if everybody were to get it, would mean the end of the euro’.
Wage growth in Sweden moderated to 2.5% in July according to fresh data from the National Mediation Office. So far, this year’s wage growth has averaged 2.4%. If this number is not revised, the rest of the year must average 2.9% in order to meet the Riksbank’s full-year forecast. This seems highly unlikely.
The recent turmoil in Turkey showed up in the PMI, which came in very bad yesterday. It is signalling a clear slowdown in economic growth. Manufacturing PMI slid to 42.7, the lowest in the track history we can see since late 2015.
Brent surged above USD85/bbl yesterday on reports of another decline in Iranian oil exports due to sanctions imposed by US earlier this year. Japanese equities rose to the highest level in 27 years.
