Market movers today
In China, the 19th Congress of the Communist Party begins today, where the top leadership will see a big reshuffle. The Congress will reveal how much President Xi Jinping will st rengthen his power and is also likely to give a signal of a deepened reform focus.
In the UK, we are due to get the labour market report for August , which is likely to show no further reduct ion in the unemployment rate and unchanged wage growth and should hence not be a game changer for the Bank of England (BoE) members’ view of t he economy ahead of the 2 November meet ing.
In Germany, coalition talks to form a ‘Jamaica’ coalition of CDU/CSU, FDP and the Greens kicks off officially today but given large policy and ideological differences between the part ies, negot iat ions are expected to drag on and conclude only some t ime towards the end of this year.
Selected market news
Yesterday, final September euro area HICP figures confirmed the preliminary releases at 1.5% for headline and 1.1% for core inflation. In line with recent ECB communication, which point s t o a preference for a ‘lower for longer’ scenario, we have changed our call and now expect the ECB to announce a QE extension by nine months at a pace of EUR30bn at the meet ing on 26 October.
Yesterday, German ZEW expectations came out higher at 17.6 in October (from 17.0 in September), in line with recent st rong readings in indust rial product ion and cont inued investor opt imism in the face of a robust eurozone growth out look, while the euro appreciat ion pace has abated somewhat . Current condit ions decreased slight ly to 87.0 in October from 87.9 in September, possibly due to some lingering uncertainty around German coalit ion building.
UK CPI inflation came out in line with expectations yesterday at 3.0% in September from 2.9% in August. Core inflation was unchanged at 2.7%. In line with market expectations, we expect the Bank of England to hike the Bank Rate by 25bp in November, which is current ly priced in with around an 85% probability in the UK money market .
According to Reuters Tankan monthly survey, there was strong confidence among Japanese manufacturers in October wi th sentiment at 31 versus 25 in September. The poll follows the bigger quarterly Bank of Japan survey from 2 October, which showed the most opt imist ic business out look for the manufacturing sector in a decade, and st rong export figures for Q3 so far.
US senators in both pol itical parties say that they have reached an agreement on fixes to stabi l ise Obamacare, according to Bloomberg. A deal has st ill to make it through both houses and be signed by President Donald Trump.
