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Lagarde’s First Public Appearance As ECB President

Market movers today

  • Today, Christine Lagarde will give her first public speech in her role as ECB president, which markets will scrutinise for any hints on her stance on monetary policy. Final euro area PMI figures for October are also released.
  • In Denmark, the central bank is scheduled to publish FX reserve figures for October (see next page).
  • A new House of Commons speaker will be elected today.
  • Later this week the Bank of England announces its interest rate decision as the UK general election campaign gets under way, while Chinese trade data will also be in focus.
  • Tomorrow in Sweden, the Riksbank minutes from the meeting where a December rate hike was announced are released.

Selected market news

  • Over the weekend we had more good news on global trade. US Commerce Secretary Wilbur Ross said after holding ‘good conversations’ with European auto makers that it might not be necessary to put tariffs on imported cars. The plan from May this year was that if no agreement was reached that later this month tariffs would kick in. The US made an agreement with Japan last month. Wilbur Ross also said that the ‘phase 1’ trade deal would be signed this month with China despite the APEC meeting in Santiago being cancelled, and that US companies would soon be able to sell components to Huawei.
  • On Friday, two US key indicators were released. Firstly, the labour market data were surprisingly strong. Non-farm payrolls came in at +128k in October and the September and August numbers were revised higher as well. Consensus expected a reading of +85k. On top of the pay-rolls growth we can add the 48.000 persons that were affected by the strike at General motors, Hence the number was even stronger than the headline indicated. The unemployment rate edged slightly higher to 3.6% from 3.5%, but it dropped significantly in September and was hardly a sign of labour market weakness. Wage growth came in at +0.2% m/m, which was more or less in line with expectations.
  • Secondly, the ISM manufacturing index edged slightly higher to 48.3 from 47.8. Hence, the ISM still paints a more negative picture than the equivalent Markit PMI manufacturing. Also lower than expected by consensus, as both regional PMIs and Markit PMI indicated a bigger increase.
  • US yields and equities edged higher after the strong labour market report and as the positive trade news dominated. S&P reached a new all-time high. After the FOMC meeting last week, recent Fed speeches and the positive labour market data there is little doubt that the Fed is now on a ‘data dependent’ hold. Hence, the market is now pricing just 3-4 bps cut at the December meeting and some +30bps of rate cuts over the next year in total.
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