Market movers today
We have only tier-2 data due today with German industrial production and Euro sentix released this morning. After strong German factory orders on Friday, we are likely to be in for a robust print on German industrial production as well. The euro Sentix index is at a high level but we look for a further rise in September, partly reflecting strong equity markets.
During the week, there will be FOMC minutes (Wednesday) and US CPI and retail sales (both Friday). A long list of Fed and ECB speakers is also coming up.
In Scandinavia, it is CPI week with inflation releases in Norway and Denmark on Tuesday and in Sweden on Thursday. Most interesting is Sweden where we estimate an increase to 2.5% in CPIF from 2.3% in August.
Selected market news
Friday’s US jobs report showed a spike in average hourly wages which increased 0.5% m/m and 2.9% y/y in September up from 2.7% y/y in August . The unemployment dropped from 4.4% to 4.2% despite a decline in non-farm payrolls of 33,000. While data is probably highly distorted by the recent hurricanes, the strong earnings figure strengthened the case for a December hike in the US, as it supports the Fed’s Phillips curve view that it is due to the tight labour market and hence it is appropriate to tighten monetary policy by hiking. The market is now pricing in a December hike with a probability of 76%.
Spain continues to set the tone in the European financial market , and the developments in Catalonia will be in the spot light in the first half of the week. On Saturday, PM Mariano Rajoy said that he would not rule out removing Cat alonia’s government and suspending the region’s autonomous status (i.e. act ivate art icle 155). Madrid is expected to call for a new local election in that scenario. On Sunday, thousands protested across Spain against Catalan independence with media reports suggesting that more than 350,000 were on the streets in Barcelona representing the ‘Silent Majorit y’. Today, the local government will meet in Catalonia, but focus is on Tuesday where the Catalan leader Puigdemont could declare unilateral independence according to different news sources. According to Diario, Carles Puigdemont ‘s call for independence could be more modest and conditional on the out come of the next local election.
An escalation of a diplomatic situation between the US and Turkey initially weakened the Turkish lira 6% versus the dollar on Friday, with USD/TRY spiking to the highest level seen since January after the US suspended the processing of new visas in Turkey as a response to the arrest of an US embassy employee by the Turkish government
