Market movers today
It’s anot her quiet day on t he dat a front wit h no Tier-1 data. The main data releases are UK indust rial product ion, the NIESR UK GDP est imate and US jobless claims. The European Commission is due to publish new economic forecasts at 11:00 CET. The ECB’s Villeroy is due to speak in the afternoon.
US President Donald Trump continues his visit in China today.
In Scandi, the Swedish Riksbank minutes will be released (see next page).
Selected market news
Asian stock markets continued their bull run overnight with the MSCI Asia Pacific Index rising above its past peak from 2007. Nikkei moved above the 23.000 level for the first t ime in 25 years. Asian stocks are supported by a global recovery, st rong profit growth and easy global monetary policy.
US two-year yields has continued higher hitting 1.65% overnight as more Fed hikes are priced into the short end. Two-year yields are at the highest level since 2008. The market is st ill pricing in a lit t le more than one hike throughout 2018 though, which is st ill quite dovish pricing. The rise in two-year yields is not spilling over to the long end and t he US 2-10 yield curve is now at the flat test level in ten years. We expect the flattening t rend to continue as we are close to a peak in the manufacturing cycle and wage inflat ion cont inues t o be subdued. T reasury’s earlier announcement that it will not extend durat ion further in its borrowing is also support ing long bonds.
On his visit to China, US President Donald Trump repeated his views that the US companies do not face a level playing field when competing with China. However, he blamed previous US leaders rather than the Chinese leadership, saying t hat ‘who can blame another count ry for taking advantage of another count ry f or t he benefit s of it s cit izens’.
Chinese CPI inflation rose in October to 1.9% y/y (consensus: 1.8% y/y) from 1.6% y/y in September. The core measure ex food was flat though at 2.4% y/y, st ill comfortably below the 3% target . PPI inflat ion was unchanged at 6.9% y/y. It was higher than consensus at 6.6% y/y but st ill below the peak in February at 7.8%. Rising commodity prices have held up PPI inflation.
The UK RICS house price balance fell again to 1 in October from 6 in September. It adds to the evidence of a slowing UK housing market . Especially London is being hit as Brexit weighs on the market .
Oil prices bounced yesterday as the Saudi-Iran tensions as well as Venezuelan debt woes are st ill making headlines. Regarding the lat ter, Russia agreed t o rest ructure the Venezuelan debt , which eased concerns of a pot ent ial default wit h possible negat ive implicat ions for Venezuela’s crude output . The EIA yesterday reported a rise in crude stocks last week, which is likely to be due to recent geopolit ical tensions, which have given incent ive to build stocks as insurance against supply risk and perhaps also some last minute stock building ahead of the winter season.
