Market movers today
We are heading for another relatively quiet week, with no major market movers in the US or Europe today.
The ECB’s Vitor Constancio is due to speak in Frankfurt today and markets will watch out for any hints that he is mirroring Benoît Coeuré’s message from last week that loose monetary policy will not last forever.
Later this week, the US and UK CPI inflation for October, the first German Q3 GDP estimate and Chinese industrial production data will be in focus.
Selected market news
On Friday, the ECB’s Governing Council member Ewald Nowotny (usually considered neutral) said in an interview that ECB’s forward guidance regarding key interest rates does not leave policy makers room to hike interest rates before 2019. In addition, he said that the ECB should end QE after September 2018 if the economy allows, which adds to the recent indications that the Governing Council has shifted in a slightly more hawkish direction.
The Fed’s Patrick Harker (voter, hawkish) said in a speech today in Tokyo that he has an other rate hike ‘lightly pencilledin’ this year. Later this week (on Wednesday), focus will turn towards the US CPI release for October. Although we expect inflation pressure to have remained muted in October with the headline CPI inflation rate falling to 1.9% y/y from 2.2% in September, it remains our base case that the Fed will hike in December, as the core voting FOMC members put more weight on labour market data than current inflation data. A Fed hike in December is close to fully pricedin with a market -implied probability currently around 90%.
On Friday, Danish CPI October inflation came out at 1.5% y/y in line with our expectations, against 1.6% y/y in September. Overall, it seems as if Danish CPI inflation has reached a new higher level since the summer. We should still keep in mind though that food price increases are a big part of it and they could decrease in coming months.
It has been a calm session in global financial markets this morning. Asian stock markets have mainly been moving sideways and in fixed income markets, changes in the US 10-year government benchmark bond yield have been subdued.
