Jens Nærvig Pedersen
Danske Bank A/S
Market movers today
Focus will be on flash estimates for PMIs. In the euro area we expect both manufacturing PMI and service PMI to have continued to edge slightly lower in September, as geopolitical uncertainty continues to weigh on sentiment. That said, service PMI is expected to remain relatively resilient above 52 and there are tentative signs that the soft patch in the manufacturing sector has started to ease.
In the US, on the other hand, we expect the flash estimate for the Markit manufacturing PMI to have improved further in September despite its already very high level close to 58. This underscores a very strong US economy and the current substantial divergence between the US economy and the rest of the world.
A flood of speeches from FOMC members. St. Luis Fed president James Bullard (hawk, non-voter), Kansas City Fed president Esther George (hawk, non-voter), Minneapolis Fed president Narayana Kocherlakota (dove, voter) and board member Jerome Powell (neutral, voter) are all scheduled to speak. Powell will speak in connection with a conference on bank supervision and will as usual probably stick to supervisory topics and be tight-lipped about monetary policy.
Danmarks Nationalbank will present new economic forecasts.
Selected market news
The highly anticipated release of September’s Chinese HSBC manufacturing PMI brought good news to the market. It came out at 50.5, a rise from 50.2 in August, better than our own and consensus expectations, which were for a decline. Recently concerns had emerged that Chinese economic growth was bound to slow more significantly but the PMI release suggests that the slowdown in growth may only be moderate. See China:Slight improvement in HSBC manufacturing PMI suggests slowdown less severe thanfeared, 23 September. The news was well received by the market, triggering an immediate positive reaction in the Asian stock market and lifting the copper price and the AUD.
A couple of comments from the Fed yesterday managed to draw some attention. Kocherlakota was out arguing for the Fed to employ a specific two-year time horizon for meeting its 2% inflation target. Furthermore, he argued that the Fed should be open about how financial stability affects policy. Dudley hinted at some worry about the recent dollar strengthening, which he fears could hamper US growth. Overall, Dudley argued in favour of letting the economy run a little hot, including allowing unemployment to fall below the level that corresponds to maximum employment, in order to push inflation back to 2%. On the matter of asset bubbles, Dudley argued for the Fed to actively assess whether there is an asset bubble, which is an argument for putting more weight on financial stability.
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