Market movers today
This morning, we published a comprehensive presentation looking into the risk of a global recession, possible recession drivers and the policy space to counter a downturn. Based on our findings, we see about a 30% chance of a global recession over the next two years.
Financial market focus continues to be on the US liquidity situation. In terms of data releases, today’s focus is on the US PCE core, Swedish retail sales and the Norwegian unemployment rate (see next page). We expect US PCE core to have risen +0.2% m/m in August, implying an unchanged PCE core inflation rate at 1.8% y/y.
A range of ECB speakers will also draw attention. We will watch in particular what Chief Economist Philip Lane has to say at 16.30 CEST today, as sceptical voices about the ECB package have grown louder. In a Handelsblatt interview yesterday, he already hinted that the ECB has leeway to cuts interest rates further.
In the euro area, today’s highlight will the Commission’s economic confidence indicators. PMIs and Ifo painted a gloomy picture about the state of the euro area economy. In today’s release, in particular we will look out for whether service sector confidence is sliding further.
Selected market news
Market sentiment continues to be on shaky ground as the US congressional impeachment proceedings and trade concerns continue to weigh on the mood, and safe havens are in demand. Yesterday, a CIA whistle blower alleged White House officials used a classified storage system to hide the transcript of a call between US President Donald Trump and his Ukrainian counterpart . Asian equity markets are in the red this morning and US index futures also point to a weaker opening across the Atlantic. Oil is still on track for a weekly drop of some 3%, after signs that Saudi Arabia is restoring production faster than expected.
After the surprising resignation of ECB Board member Sabine Lautenschläger yesterday, the German finance ministry announced it will soon propose a “suitable candidate” to succeed her. Both Isabel Schnabel, member of German Council of Economic Experts, and Claudia Buch, vice-president of the Bundesbank, have been mentioned as possible successors. With German monetary hawks in retreat, hope for a similar shift in the fiscal policy sphere gained traction again after former finance minister and renowned fiscal hawk Wolfgang Schäuble seemingly endorsed a fiscal policy rethink and Chancellor Angela Merkel admitted at a conference that politicians must ensure, through with sensible reforms and finance policies, that the ECB is not overburdened. Still, we remain sceptical of a sizeable policy shift on the fiscal front from Germany in the near term, not least because the climate package unveiled on Friday was generally received with disappointment
