Danske Research Team
Danske Bank A/S
Market movers today
A quiet day on the data front. German consumer confidence released at 08:00 is expected to fall slightly to 8.1 in October from 8.3 in September. German manufacturing has slowed considerably this year and there has been some spill-over to consumer confidence.
UK GDP for Q3 is expected to rise 0.7% q/q slowing a bit from 0.9% q/q in Q2. PMI and housing data generally point to a slowdown in manufacturing and the housing market, whereas service has held up well.
US new home sales are expected to fall 7.5% in September but this is mainly a correction from a very strong rise in August of 18.0%. The trend in total home sales (existing and new) has been gradually higher over the past months.
No market movers out of Scandinavia today.
Selected market news
US stocks followed the European indices higher in the wake of better-than-expected flash PMIs out of Asia and Europe, which reduced worries of a global slowdown. Better-thanexpected corporate earnings and solid US figures (i.e. initial jobless claims and manufacturing PMI) also helped lift the large US indices. Despite the gains, fears of Ebola weighed on sentiment in last night’s US session as a doctor tested positive in New York – the most populous US city - after returning from West Africa. Ebola fears and a low new-home price release in China weighed on Asian trade this morning, limiting the initial gains from opening.
Yesterday Brent Crude oil prices saw the second largest single day rally this year, as speculations of OPEC’s largest producer, Saudi Arabia, having cut market supplies in September lifted the price of the black gold by 3%. Irrespective of the unconfirmed media reports, we have long argued that the recent record lows in oil prices are not sustainable due to the relatively high marginal costs among unconventional oil producers in e.g. Brazil, Canada and the US as well as the high fiscal breakeven oil price among a large share of OPEC members, most notably Saudi Arabia. During 2015 we expect the Brent crude oil price to climb back up towards USD97/bbl, averaging USD94/bbl.
In more oil-related news, the US Treasury yesterday blamed Turkey, Iraq’s Kurdish community and the regime of Bashar al-Assad for providing the Islamic State (IS) with oil revenues of as much as USD1m a day. Turkish and Iraqi Kurdish officials have denied all claims.
New Zealand trade figures for September came out stronger than expected with exports at NZD3.61bn (consensus 3.50bn) and imports at NZD4.96bn (consensus 4.20bn). Despite the better-than-expected figures, the release marked a historical decline in exports to China of c.30% y/y – the largest drop since 2005. The collapse in milk powder and pine log prices this year has been the driving factor for the decline.
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