Market movers today

Today the 13th round of high-level US-China trade talks kick off in Washington and continues tomorrow. We still see a good chance of an interim deal after China yesterday said it was still ready to make such a deal despite the US blacklisting of Chinese companies. FT also reported that China would offer to buy 10 million tons of soy beans in return for the US taking coming tariff hikes off the table. We do not know exactly when statements will come out of the talks but a good guess is late Friday (European time).

The main event in the Scandies is the inflation numbers for September from Sweden and Norway. Swedish inflation is set to be crucial for the Riksbank outlook, see more on page 2.

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The minutes from the recent ECB meeting are set to be interesting reading. Since the meeting there have been frictions within the Governing Council, which peaked with the resignation of ECB board member Sabine Lautenschläger. Furthermore, we have seen conflicting comments in the media, in which Chief Economist Philip Lane said that he did not believe that the ECB had delivered a big package and that it could cut rates further.

The US releases core inflation numbers and weekly initial jobless claims. We expect core inflation to stay unchanged at 2.4% y/y in line with consensus. Jobless claims are still at a low level around 220k, signalling a low rate of layoffs despite the slowing economy.

UK PM Boris Johnson is set to meet with his Irish counterpart Leo Varadkar on Thursday. A deal looks increasingly unlikely and an extension beyond 31 October and a UK election are more likely.

Selected market news

The FOMC minutes were a bit outdated after the weak ISM data and the mixed picture from the US jobs report that was released after the September meeting and thus the market reaction to the minutes was muted. The minutes showed that the FOMC committee remains very divided on the number of future cuts and ‘several’ participants thought the Fed should clarify its intensions, so we could see change in the forward guidance language at the upcoming meeting. The Fed also discussed the liquidity conditions but we already know from Powell’s recent comments that the Fed will make an announcement in October on ‘organic growth’ in the balance sheet. We believe consumer confidence tomorrow and retail sales on Wednesday next week are going to be key for the Fed’s decision on 30 October, when we expect another 25bp cut.

It is a mixed picture on the Asian equity markets this morning, while we are awaiting the trade talks between China and US. Interest rates rose yesterday on the back of some optimism that a partial deal could be reached. Asian government bond markets have followed the move with a modest rise in bond yields this morning.

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