Market movers today
In the US, Fed Chair Yellen is due to give the opening remarks at a Conference Bank seminar tonight . It is scheduled to take only 15 minutes and we do not expect her to express any new views (also because she has been quite outspoken recently). We think markets are more interested in ADP employment , as it may give us some hints about how jobs growth was affected by Hurricanes Harvey and Irma (but keep in mind that ADP jobs growth has overest imated non-farm payrolls this year). Also note that ISM nonmanufacturing is due at 16:00 CET.
In the UK, PMI service are due, which we estimate fell to 52.7 in September from 53.2 in August . If so, this would be another sign that growth was also weak in Q3 after the weak GDP growth prints in Q1 and Q2. Also, there will be focus on PM Theresa May, due to speak here on the final day of the Conservative Party conference.
In Poland, we expect the central bank to keep the policy rate unchanged at 1.50% in line with consensus.
The Oil market is likely to be positioned for EIA data today (4:30 pm CEST) to show a large drop in crude inventories after API data yesterday posted a 4mb drop last week. There was a limited response in oil market to the news though.
In the Nordics, PMI services in Sweden are due at 08:30 CEST and Norwegian house prices for September at 11:00 CEST. See also the Scandi section on page 2.
Selected market news
The US equity markets closed at record high levels and Asian markets also increased overnight, spurred by strong US September vehicle sales data suggesting that US consumption continues to do well. Meanwhile, the dollar’s rally and the fall in US treasuries stalled as investors assessed the prospects for tax reform after a Republican senator raised a question about the deficit impact of such proposals. Prominent investors such as Warren Buffet and Blackrock CEO Larry Fink quest ioned the structure of the tax proposal, calling into question the necessity of deep cuts to corporate income taxes. The various criticism underscores our belief that passing of the tax reform will be difficult (see also our take on the Republican tax reform proposalStill a long way to go for tax reform, 29 August ). Furthermore, the USD witnessed some headwinds after news broke that US Treasury Secretary Steven Mnuchin is said to favour Jerome Powell as new Fed Chair over Kevin Warsh. Powell is seen as less hawkish.
The Chinese financial markets are on a weeklong holiday ahead of the important Party Congress on 18 October. We published a review yesterday of the congress and why it is key for China’s road ahead. We are cautiously optimistic that Xi Jinping will find a middle road and not strengthen his power so much that it creates a backlash at a later stage. We also see a good chance that reform implementation will move up the agenda next year following his first term in which Xi has focused on politics and his power base.
