Market movers today
Today we have only second tier data releases, with the US Empire manufacturing PMI being the most interesting.
Markets will continue to watch the developments in Catalonia, with a deadline set by the Spanish PM Rajoy to the Catalan president Puigdemont expiring today, regarding clarification of his independence declaration.
Later in the week, we have China’s Communist party congress kicking-off, which will have important implications for the future reform progress in China or hear our short video on the congress on YouTube. Chinese President Xi Jinping gives his opening speech on Wednesday.
UK. PM Theresa May is in Brussels meeting with the EU’s chief Brexit negotiat or Michel Barnier and head of EU commission Jean-Claude Juncker trying to unlock the Brexit negotiations ahead of the EU summit later this week.
Furthermore, markets will continue to scrutinise central bank speakers during the week for any hints on ECB, Fed and BoE policy direction in 2018.
Selected market news
Over the weekend, a bunch of central comments from the IMF gathering. Fed’s Yellen reiterated ‘my best guess is that these soft (inflation) readings will not persist’ supporting our view that the Fed is hiking in December despite another lower-than-expected US CPI inflation print published Friday, see FOMC minutes. The main argument is still that strong growth will tighten the labour market further, which will eventually push wage growth higher, and hence inflation. On the ECB, all comments echoed the recent communication confirming that the council is moving towards the point that next week’s QE extension will be a ‘lower for longer ‘ one. In short , it appears that the ECB has managed to pre-announce the bulk of next week’s decision and a 50% reduction in the QE purchases to 30bn is probably market consensus by now.
While central banks are turning more hawkish, they are only doing so slowly due to continuing low inflation. This in combination with the strong global business cycle and low risks are good for equities and Asian stocks are up this morning (also European and US stock futures are point ing higher). Brent oil is trading higher at USD57.9 per barrel, as fight ing between Iraq and Kurdish forces has broken out . Overnight , Chinese CPI inflation in September was 1.6% as expected (down from 1.8% in August ), while PPI inflation rose to 6.9% from 6.3%, which is the highest since April.
In Austria, the general election result Sunday confirmed the anticipated strong result for the right wing parties with the People Party led by Kurtz set to take power (possibly supported by the populist Freedom Party).
In Germany, the social democrats (SPD) surprisingly won the local election in Lower Saxony ahead of Angela Merkel’s government coalition talks this week and some argue that the result is another sign of the fall in Merkel’s popularity, see FT.
