US auto sales released yesterday

Market movers today

The main event will be the press conference following the ECB meeting. Since rates have reached the bottom, focus will be on the details of the ABS and covered bond purchase programme see ECB Preview Draghi will reveal details on ABS andcovered bond programmes, 30 September. We expect the press conference to revolve around the ECBâ€™s new â€˜soft targetâ€™ of a balance sheet expansion. Draghi did not interpret last weekâ€™s low TLTRO take-up as a disappointment but insisted that the December auction is needed in order to assess the success of the programme. Hence, it seems evident that the ECB will be in waiting mode for the next couple of months. While the pressure on the ECB to use outright Quantitative Easing (QE) in public assets is increasing, it is still premature to take this step in our view. Instead, we believe Draghi will continue to strike a very dovish tone and reiterate that the ECB is ready to use QE if necessary.
US jobless claims are expected to rise a bit after hitting very low levels in the past two weeks. Consensus is for a rise to 297k from 293k the previous week.
Danmarks Nationalbank will publish FX reserves.

Selected market news

The US stock market closed yesterdayâ€™s session markedly lower on the back of weaker-than-expected US data. Most importantly, ISM manufacturing in September declined more than expected to 56.6 from 59.0, see ISM manufacturing declines - moredownside risk in coming months, 1 October. In addition, Markit US manufacturing for September was revised lower to 57.5 from 57.9. It should be remembered that this comes on the back of similar large downward revisions of final manufacturing PMIs in, for example, Germany and China suggesting possible weakness in global manufacturing activity in late September. The September US auto sales released yesterday also showed a substantially larger-than-expected decline to 16.3m/ann. (consensus 16.8) from 17.5m/ann.. On the other hand, the ADP employment report for September released yesterday still suggests a decent labour market report for September tomorrow.

In the US the S&P 500 closed yesterdayâ€™s session 1.3% lower and Asian stock markets are also markedly lower this morning with Nikkei down 2.0%. Mainland China and Hong Kong are closed for a public holiday. Ten-year US government bond yields plunged 11bp to 2.39% and the FX market has weakened across the board, albeit there continues to be considerable pressure on the Russian rouble and the Brazilian real.

In Hong Kong demonstrators threaten to escalate demonstrations and start occupying public buildings if Hong Kong chief executive Leung does not resign, see BBC News. Hence, there is risk of escalation in Hong Kong later today and on Friday.

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