Market movers today
Globally, we do not have many important data releases due today but the week is going to be interest ing. US PCE inflat ion data may at tract some at tention today but note that we implicitly got t he dat a in connect ion wit h Friday’s first estimat e of Q3 GDP . Assuming no revisions to previous months, both CPI and GDP figures indicate PCE core rose 0.1% m/m in September (unchanged at 1.3% y/y).
In Europe, confidence indicators for consumers and businesses is due out .
In the Scandies, Norwegian retail sales and Swedish wage growth data are due out this morning.
After last week’s ECB meet ing (see ECB review: ECB opts for ‘lower-for-longer’ QE extension, 26 October 2017), focus turns to the Fed on Wednesday and Bank of England on Thursday. We do not expect Fed to send any new signals (see FOMC preview: No new signals, while Trump is set to announce new Fed chair soon, 25 October 2017) but the bank of England will most likely hike the Bank rate by 25bp from 0.25% to 0.50%. See Bank of England Preview: Taking back emergency cut from 2016, 30 October 2017.
Selected market news
The Spanish political crisis continues to develop as a test of strength looms today. On Sunday, hundreds of thousands of Catalans marched in the st reet s of Barcelona, calling for the region to remain part of Spain in the biggest show of force so far for a united Spain since the crisis began. T he demonst rat ion followed t he regional parliament ‘s declarat ion of independence on Friday, which led Madrid to act ivate Art icle 155, dissolving the Catalan government and calling for new elect ions in the region for 21 December. Today, Catalan regional minist ries will reopen under direct cont rol by Madrid, which could be a real test of st rength for both sides. Former Catalan leader Carles Puigdemont is calling for peaceful opposit ion and some Catalan ministers have refused to accept the direct ives from the central government removing them from power. Hence, there is a risk that Madrid could st ruggle to enforce its rule.
Decision on Fed Chair imminent. According to a video President Trump has posted on Instagram, he is set to announce the next Fed Chair this week. Our base case scenario is that Trump will nominate Jerome H. Powell (current Fed Board Governor nominated by President Bush) as Janet Yellen’s successor. Republicans can support Powell while he at t he same t ime is a guarantor of the status quo (i.e. to cont inue the gradual hiking cycle and quant itat ive t ightening programme). The other favourite is John B. Taylor, who would be the hawkish choice.
Russia’s central bank cut its key rate by 25bp to 8.25% on Friday, following a decline in inflat ion to 2.7% y/y.
Equity markets ended the week on a positive note. In the US, S&P500 closed 0.8% up at a new record high, while most European bourses also closed in the green. In Spain, however, the IBEX index closed 1.5% lower, reflecting the polit ical turmoil in the country. This morning, Asian stocks are trading higher, boosted by solid earnings from US tech companies.
