US initial jobless claims continue to hover at low levels

Market Movers

• German trade balance for August could attract some attention after weak numbers for both factory orders and industrial production. German exports were quite strong over the summer driven especially by car exports. However, this is unlikely to continue to drive exports following the VW scandal. Order data suggests that demand from outside the euro area - most likely Emerging Markets - took a hit in August.

• We expect the Bank of England to keep the Bank Rate unchanged at 0.50%. We anticipate another 8-1 split vote on whether to keep the Bank Rate unchanged against increasing it immediately. We think the tone in the minutes will be more or less as in the minutes from the September meeting. The MPC members should be positive about the domestic development (especially about the labour market) but slightly worried about the global market turmoil and the slowdown in China.

• This afternoon the Fed's Bullard (non-voter, hawk) is to give a welcome at a symposium on savings. It is unclear if he will touch on the current situation and being a non-voter this year, his views are less important. He will be a voter in 2016 though.

• Tonight, FOMC minutes from the September meeting will be released. The minutes are likely to reveal a lengthy discussion about whether the Fed should lift rates with a clear majority, expressing some concern over the global developments as signalled by the soft tone by Janet Yellen at the press conference following the meeting.

• US initial jobless claims continue to hover at low levels, pointing to a still robust job market. If the economy is slowing down as some indicators suggest, we would normally see claims trend a bit higher. Today’s data will reveal whether this is starting to happen. Consensus is for a broadly flat reading of 274k from 277k.

• No key data releases in Scandinavia today.

Selected Market News

Risk sentiment is still decent and US stocks closed +0.7-0.9% across the leading indices despite yesterday being a quiet day. US stocks posted their sixth gain in seven sessions.

China’s markets reopened after a week-long holiday break. Shanghai and Shenzhen are up (at the time of writing) +3.8% and 4.5%, respectively, catching up with the recent rally in global equity markets. CNY was fixed lower at 6.3503, which is the strongest level since the shift in monetary policy regime on 11 August. Reuters reports that PBoC deputy governor Yi Gang has stated that the exchange rate is more or less at fair value.

Japanese machine orders declined for the third consecutive month in August. Machine orders declined a further 5.7% m/m. Consensus was looking for an increase of +2.3% m/m. Although machine orders are quite volatile from month to month, the weak data fuels speculation that the BoJ will ease monetary policy at its next meeting on 30 October. The weak machine orders weighed on Nikkei, which is currently 0.9% down.

Yesterday, oil dropped as data showed that US crude inventories and production climbed. Oil has regained some since following a statement from OPEC’s El-Badri to the IMF’s International Monetary and Financial Committee stating that global oil demand is increasing. Brent oil is currently trading around USD51.5/bbl.

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