Market movers today
Asian data released over the weekend showed manufacturing continues to be in a slump. Today, PMIs will draw headlines as releases come across Asia, Latin America and Europe.
In the UK, we get the PMI manufacturing and we expect the measure to have dropped further due to weakness in both the global and UK economy.
We also have crucial PMI manufacturing releases in Sweden and Norway today (see page 2 for more details) and we expect the Swedish measure to have dropped a lot, while the Norway PMI is expected to have rebounded in August.
More generally this week looks like a very interesting one, with several crucial data releases such as the non-farm payrolls on Friday, the Riksbank meeting on Thursday and the possible showdown in the UK parliament between the government and opposition on Brexit (watching out for a possible vote of no confidence in the Johnson government and/or an emergency debate trying to force PM Johnson to ask for an extension if he has not reached an agreement with the EU). Also in focus is news about a possible trade discussion between China and the US.
Selected market news
Over the weekend a new round of planned tariff increases in the US and China came into effect, raising the stakes in the trade war and the likelihood of further adverse repercussions on global growth and confidence. While the US imposed a duty of 15% on USD110bn of consumer goods ranging from footwear to apparel and tech products, China commenced with stage one of retaliatory tariffs on USD75bn of US imports. The outlook for the Chinese manufacturing sector already deteriorated in August with the official PMI falling to 49.5 this morning. Given the low prospects for a trade deal, we expect further weakness in manufacturing PMI in the coming months. It remains to be seen whether face-to-face talks between American and Chinese negotiators will still take place in September after the latest escalation round. Asian stocks are in the red this morning along with US equity futures, while the Brent oil price tumbled further below USD59/bbl.
Over the weekend British PM Johnson escalated the civil war in his party, threatening to strip Conservative rebels of their party membership should they fail to back him in a key Brexit vote on Tuesday. The move on balance increases the likelihood of new elections (see Brexit Monitor ). On the other end of the channel, Germany’s ruling parties stemmed a surge by the Eurosceptic AfD party in two important state elections in Brandenburg and Saxony over the weekend. For now, this reduces the risk of a break in Berlin’s grand coalition, at least before the SPD leadership contest at the end of the year.
With less than two weeks until the ECB meeting on 12 September, the August HICP figures revealed that euro area inflation trends are still moving sideways. With headline inflation on a downward trend for months and core inflation stuck just below 1%, the stage is set for policymakers to unveil a comprehensive easing package at the upcoming meeting.
