In the UK, PMI manufacturing data is due out
Market movers today
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In the US, September figures for both the ISM manufacturing index are due out. Together with ISM non-manufacturing index, these indices declined sharply in August, indicating that growth has also disappointed in Q3. Regarding the manufacturing sector, regional indices and the Markit PMI manufacturing index for September have declined, suggesting that the ISM manufacturing index could move even lower in September from the level of 49.4 in August. Though the Markit manufacturing PMI index declined to 51.4 in September, it is still above the 50 threshold, suggesting growth. We think there might be a risk that the ISM index declined ‘too much’ in August and there could be a (small) upward correction in September. We estimate the ISM manufacturing index increased slightly to around 50.0 in September. However, this is still a low level.
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In the UK, PMI manufacturing data is due out. The PMI rebounded significantly in August after falling sharply in July just after the vote. Consensus is for a drop to 52 in September versus 53.3 in August.
Selected market news
Asian markets are higher this morning as concerns about the possible failure of Deutsche Bank eased. Sentiment improved due to reports suggesting that the lender was lining up a less-costly settlement with US regulators than investors feared. The Nikkei index is up almost 1% while European and US stock futures are pointing to a higher opening.
The UK pound is set to come under further pressure after Prime Minister Theresa May said over the weekend that the UK government intends to trigger the Article 50 of the EU’s Lisbon Treaty in Q1 17. She also hinted that the UK is heading for a ‘hard Brexit’, i.e. the UK is set to leave the single market and that the government intends to introduce a bill to convert all existing EU laws into UK legislation to provide certainty for business and investors. Our view is that the British pound will weaken further given the UK’s sizable current account deficit and waning capital inflows due to investor concern about the possible impact of Brexit.
Focus will also be on Spain today following the resignation of Socialist party leader Pedro Sanches on Saturday. This increases the chance that the Socialist party will back or accept a government led by the Conservatives and Mariano Rajoy. It is not yet clear what stance a new leadership will take but Sanches was a key obstacle to ending the political deadlock that has lasted since December. In Hungary, the referendum about EU refugee policy was claimed invalid as the voting turnout at 39.7% fell short of the 50% threshold required. However, 98.2% of the votes turned out to be in favour of the prime ministers preferred ‘no’ vote. The result will heap some of the pressure on EU immigration policies and more widely the unity among EU member countries.
Author
Danske Research Team
Danske Bank A/S
Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.
