Market movers today
Today is quiet in terms of economic data releases. US NFIB small business optimism at 12:00 may attract some attention due to the recession fears.
We have some Fed speeches today, not least Fed chair Powell at 20:30 CET. With investors pricing in a high probability of another cut later this month, the Fed probably needs to correct market pricing in case they are not going to deliver the cut. Consumer confidence on Friday and retail sales next week are going to be vital.
Otherwise focus remains on politics. Look out for any political statements ahead of the US-China trade negotiations on Thursday-Friday, the Brexit negotiations which need to be concluded this week and the US-Turkey-Syria situation.
Selected market news
On the back of heavy criticism of his decision to not stand in the way of a Turkish incursion into Syria, US President Trump tweeted that “if Turkey does anything that I […] consider to be off limits, I will totally destroy and obliterate the Economy of Turkey “. Senator Lindsey Graham has threatened Turkey to introduce legislation sanctioning Turkey and suspend the country from NATO if it invades Syria, something which may also affect European politics. The Turkish lira weakened yesterday after the controversy.
Ahead of the US-China trade talks Thursday to Friday, the Trump administration has placed eight Chinese tech companies on a US blacklist. The US says the companies are implicated in the human rights violation against Muslim minorities in China. So far, US and China have tried to distinguish between the trade war and the tech war so it may not mean much for the trade talks later this week.
While a Scottish judge did not intervene in the Brexit Delay Bill discussions yesterday, the judge stated that the government has assured it will obey the law, which requires PM Johnson to ask the EU for an extension in case Parliament has not passed a deal by 19 October. The UK and the EU have agreed to continue talks today. We still think that the most likely outcome is another extension followed by a snap election, see also our Brexit Montor from Friday .
However, a text message (see The Spectator ) from a person inside the Downing Street No 10 is not encouraging for the negotiations and would (if true) only make it more difficult to reach an agreement. Basically, the source hints that any breakdown in the negotiations will be EU’s fault and that the UK government will punish countries who accept further delay (e.g. not helping on security). The source also hints that the government will sabotage EU from within in case of an extension and will fight for no deal in an election.
Chinese PMI Caixin services came in weaker than expected by dropping to 51.3 from 52.1 previously. The composite index still rose marginally to 51.9 from 51.6.
