Market movers today
The big event of the day is the ECB meeting. The QE extension details are set to be released at 13:45 CEST in the ‘monetary policy decision’ press release, while ot her technicalities will first be announced in the press conference at 14:30 CET. We expect the ECB to announce a QE extension by nine months at a pace of EUR30bn. Apart from a scaling down of QE purchases, we do not expect the ECB to make any changes to its forward guidance at the upcoming meeting.
However, we also have central bank action in the Nordic region with both the Riksbank and Norges Bank decisions at 9:30 and 10:00 CEST, respectively. In terms of the Riksbank, our view is that the will Riksbank end QE (but continue to reinvest coupons) by year -end but that the announcement will wait until the December policy meeting. Also, we do not expect changes to the Swedish repo rate forecast when the Riksbank meets. In Norway, we expect Norges Bank to stay on hold, as it is one of the intermediate meetings without a Monetary Policy Report and a press conference. Please see page two for further details.
Selected market news
Race for fed chair is narrowing. According to Bloomberg sources (link), President Trump is now ruling out National Economic Council Director Gary Cohn becoming the next leader of the Federal Reserve. The field thus seems to have been narrowed to Fed Governor Jerome Powell, who appears to be the front runner, followed by incumbent Fed Chair Janet Yellen and Stanford University economist John Taylor.
Strong US data out yesterday. Durable goods orders rose 1.3% in September (0.3% expected, 1.3% in August revised higher from 1.1%) indicators that business capex spending remained on a solid footing in Q3, which should cushion the negative impact on GDP from the hurricanes. Separately, new home sales surprised to the upside, surging 18.9% in September to the highest level in 10 years.
Bank of Canada puts hiking cycle on hold for now. At yest erday’s BoC meeting, rates were kept steady as expected following two consecutive hikes in July and September. Moreover, the statement indicated that policy makers are now on hold; in addit ion to highlighting the negative impact of the strong currency on inflation and exports, for the first time growing risks stemming from a renegotiation of NAFTA were also noted. As a result , the Canadian dollar weakened in the wake of the announcement as expectat ions for further hikes were priced out .
US stocks lower, while rates increased. The S&P index fell 0.49% yesterday as earnings reports from several companies including AMD, AT&T, Boeing and Chipot le disappointed. Furthermore, a story in the Wall Street Report suggest ing that Republicans are still considering limits on 401(k) retirement savings plans, which could dampen flows into investment plans, also weighed on sentiment . However, bond yields rose, supported by the strong economic data, causing 10-year yields to hit a seven-month high of 2.475%.
