Market movers today
The Spanish general election yesterday ended with an uncertain political situation, even though PM Sanchez’s Socialist party is still the largest political party in Spain. There is a risk of a hung parliament.
In light of the dovish message sent by Bank of England last week, economic data in the UK will be interesting to follow. Today we get the monthly GDP estimate for September. Given the weak PMIs, growth seems to remain sluggish but there might have been a positive contribution from stockpiling ahead of the previous 31 October Brexit deadline.
In Europe, investors will today digest the repercussions of yesterday’s Spanish election. While trade news continues to drive market sentiment, markets will also stay attuned to any new signals from a range of Fed speakers this week.
Inflation figures for October will be in focus in Denmark and Norway today (see next page).
Selected market news
The Spanish general election yesterday ended with an uncertain political situation, even though PM Sanchez’s Socialist party is still the largest political party in Spain. However, the Socialists ‘gamble’ that a new election would give them sufficient seats to rule either as a majority government or with just one coalition partner did not pay off and the blocked political situation in Spain seems even more blocked now than before he election. The big winners yesterday were the conservative party PP and the far right party Vox. PM Sanchez still has the possibility of forming a coalition government with the left-wing parties. Hence, we expect to see some short-term underperformance in Spanish government bonds on the back of the election result.
It has been a volatile week for the European fixed income market, where yields have been trending upwards, as the market is pricing out rate cuts from both the Federal Reserve and the ECB given the possible trade deal between the US and China and seemingly pays little attention to the reopening of the QE programme. We expect that rates will stabilise as there is plenty of commitment to keeping rates low for long at especially the ECB and the direction for the Federal Reserve is still more on the downside than on the upside.
Asian equity markets are in trading in red this morning led by a decline in the Hong Kong equity market, as the political tensions in Hong Kong continue to affect the market. Furthermore, the market is awaiting more progress on the trade deal between China and Hong Kong. It is Veterans Day in the US.
