The euro Flash CPI for September is expected at 0.3% y/y

Market movers today

• German retail sales and French consumer spending figures are due for release this morning. These data are quite volatile so they will not provide much new information. Overall, euro-area retail sales have held up well but they might soon see some negative spill-over from the weaker activity in manufacturing.

• The euro Flash CPI for September is expected at 0.3% y/y from 0.4% in August. However, following slightly higher than expected German inflation yesterday there is some upside risk to this number.

• The euro-area unemployment rate is expected to be unchanged at 11.5%. The trend in unemployment has been lower over the past year but the recent softening in activity is expected to lead to a pause in the decline in the short term.

• US consumer confidence is expected to rise further in September to a new cycle high. Not least the job component will be interesting as non-farm payrolls are released on Friday. Finally, US Chicago PMI will give the last clue to ISM on Wednesday. It has been very volatile lately, though, and hence may not give much useful information. Consensus is for a small decline.

Selected market news

In Hong Kong, demonstrations are expected to continue tonight, which has been the routine for two days now – with the crowd diminishing during the day to return in full force in the evening and stay during the night. Asian equity markets were lower overnight, again led by the Hang Seng Index, as the negative sentiment carried over from the US session and as the final HSBC China manufacturing PMI disappointed by being revised lower to 50.2 from 50.5. As a result of the sell-off, the price gap between duallisted shares in Hong Kong and Shanghai has been eliminated.

While focus is on Hong Kong, the situation in Ukraine appears to be worsening again with Ukraine suffering the highest number of casualties since the 5 September. According to the Ukraine military nine servicemen have been killed in the last 24 hours.

Japanese data released overnight were a mixed bag with a surprise drop in preliminary August industrial production (-1.5% m/m), strong August retail sales (1.9% m/m), and a further increase in labour cash earnings (1.4% y/y). USD/JPY continues to trade just below 110 but as US rate hikes ‘roll’ in on the money market curve, we expect upwards pressure on spot to remain.

In the bond market, the 10-year US Treasury yield closed below 2.5%, which implies that half of the September correction (that took yields from 2.34% to 2.61%) has now been regained. In Europe, pressure returned to the peripheral bond markets yesterday, which have, however, held up well in recent months, despite the increased uncertainty about the depth of the European growth slowdown. The key market support factor remains ECB monetary policy easing.