Market movers today
The equity rout has continued overnight and will be the main focus of all markets today, see more below.
In the euro area, we have the ECB Governing Council meeting, which we expect to be a meeting with little action, see ECB Preview – vigorous Draghi, moderate inflation, 22 October 2018. Since the last meeting, incoming data has not warranted a change in policies, not least the wording on ending its asset purchase program (APP). Therefore, we expect, the word ‘anticipate’ to remain. Should it be changed (meaning an official end to APP), it could lead to a knee-jerk market reaction, but without long-lasting implications. Furthermore, we expect a ‘vigorous’ Mario Draghi, pointing to continued solid wage dynamics but still somewhat moderate inflation assessment.
In Germany, the IFO business climate for October is on the agenda today, which has defied the recent downward trend in the PMI, and it will be interesting to see whether this divergence persists in Q4.
Norges Bank holds its rate-setting meeting, where we do not expect any new signals emerging from the meeting, which is only an ‘interim’ one, with no new monetary report, only a press release and the Executive Board’s assessment.
In Sweden, the Debt Office releases its new forecasts . The period since the previous DO forecast (June-September) borrowing has been close to the forecast, just a SEK2bn deviation. Hence, there is currently no reason to expect any significant change to the DO’s forecasts. In Sweden, there is also a bunch of data due, such as NIER’s October confidence survey and September data for PPI and household lending
Selected market news
The equity rout continued yesterday in the US and spilled over to Asian markets. The sharp US sell-off was driven by tech, with Nasdaq falling more than 4%. S&P500 is now down close to 10% from the peak, wiping out all of the gains in 2018. While there is no immediate trigger, the decline in tech stocks could be due to profit taking, with investors trying the protect the past years’ strong gains as markets have turned softer on negative tech stories recently. In Asia, the Japanese market is taking the biggest hit with Nikkei falling more than 3%. The decline in risk sentiment is spilling over to lower US bond yields.
Economic data has also turned a little softer in the US lately with especially housing looking weaker. US new home sales released on Wednesday dropped more than 5% in September, adding to a decline of 3% in August. Euro area PMI data yesterday also showed a continued decline, bucking the expectation of stabilisation. The PMI manufacturing index is now the lowest in two years. In South Korea, GDP growth dropped from 2.8% y/y in Q2 to 2.0% y/y in Q3, the lowest growth since 2013.
