Market movers today
In Germany, we get the Ifo expectations, which we expect to rise further to 107.9 in October, in line with the improved economic expectations indicated by the ZEW October release last week.
In the UK, we are set to get the first estimate of Q3 GDP growth. According to the soft economic indicators released so far, GDP growth was around 0.3-0.4% q/q, with 0.4% being our estimate. We do not get subcomponents but it is likely growth was held back by a combination of negative real wage growth and Brexit uncertainties, which have slowed private consumption growth and business investment growth, respect ively.
In the US, we will get one of the most important data releases of the week in terms of core capex for September. We believe core capex rose just 0.2% m/m after two very strong months, which would still be a sign that the investment recovery continues.
Today, we have the Bank of Canada rate decision, but more important are the monetary policy decisions tomorrow. For more on ‘what to watch’ from the ECB.
In Scandinavia, the Swedish Debt Office is due to release its new forecast , see next page.
Selected market news
Asian shares are broadly flat this morning, while US Treasury yields broke above 2.4% (highest since March) and the US dollar got a lift following a report that Republican senators were leaning towards John Taylor to be the next Fed Chair. US stock index futures signalled that equities might take a breather, as tensions between Republicans and President Trump intensified on Tuesday after two senators accused Trump of debasing US politics and the country’s standing abroad, a rebellion that could cause trouble for his legislative agenda and planned tax cuts.
Euro area PMIs for October released yesterday indicated that the economic recovery continued at a healthy pace at the start of Q4. The rate of job creation was the strongest rise in a decade, while output price inflation accelerated for the third consecutive month. Both should be welcome news for the ECB, which we still expect to scale back its QE purchases tomorrow. Despite a further increase in the manufacturing PMI, the composite measure has stabilised over recent months, pointing to GDP growth around 0.5-0.6% q/q in H2 17, see here. US PMIs also registered another increase, suggesting that the service sector remains the main growth river and that GDP growth was slightly above 2% AR in Q3 17.
China has this morning presented its new leadership in the Politburo Standing Commitee. The line-up was as expected following the news reports yesterday as out lined in our Flash Comment China: Xi gets name in Constitution, Wang Qishan steps down. It points to continuation as the amount of members is unchanged at seven and the five new members represent different factions of the Communist Party. However, there is also no successor to Xi Jinping as President in 2022, which will add to speculation he may stay on after his second term. With Xi Jinping having Congress behind him and a team he has been part of forming, we believe reforms will get a further push in 2018.
