Market movers today
Today, the two-day EU summit in Brussels kicks off. Markets will again focus on any headlines regarding Brexit , as UK Prime Minister Theresa May will share her reflections on the current state of negotiations during EU leaders’ working dinner later today.
In the UK, we get retail sales for September. The indicator usually moves markets but in reality it is a very weak indicator of actual consumption growth.
The Philly Fed index is due to be released in the US and consensus is for a moderate decline to 22.0, as any meaningful progress with tax legislation and the potential for fiscal stimulus remains absent .
In Scandinavia, the Swedish unemployment rate for September is due out , which we estimate to have decreased slightly to 6.5% (see next page).
Selected market news
Yesterday, the UK jobs report showed an unchanged unemployment rate at 4.3% and weekly earnings excluding bonuses at 2.1% y/y in August down from 2.2% y/y in July. In our view, the report should not alter the core Bank of England (BoE) members’ view, i.e. that it is appropriate to raise the Bank Rate by 25bp at the upcoming monetary policy meeting next month.
Today, the political developments in Spain will again be back in focus as the deadline for the Catalan President Carles Puigdemont to clarify the Catalan leader’s position on independence is 10:00 CEST.
In China, the 19th Congress of the Communist Party opened yesterday with Xi Jinping presenting the so-called work report. Overall, the report contained few surprises. With Xi Jinping starting on his second five-year term, we should expect continuity on all policies: a continuation of the corruption campaign, strengthening of economic and financial reforms and a continued gradual opening of the Chinese economy. However, it is likely to happen in the usual ‘two steps forward, one step back’ fashion, as China is balancing reforms with control by the leadership. If something rocks the boat , China favours regaining control at the expense of opening up, as we have seen over the past few years when it sealed capital out flows following the financial storm in 2015/early 2016.
Overnight economic data releases showed Chinese growth in Q3 17 at 6.8% y/y (in line with consensus). We look for a moderate slowdown in China over the next year due to financial tightening and measures to cool housing. We forecast GDP growth to be 6.8% in 2017 and to fall to 6.3% in 2018. A hard landing is not likely though, as residential inventories are low and exports are supported by robust global growth.
