Euro area final HICP inflation for September will be released

Market movers today

• US industrial production is expected to rebound in September on the back of subdued industrial production in the previous two months. The overall picture remains that growth in industrial production has eased a bit in Q3 compared with Q2. The NAHB house builder survey for October will give the first early indication of the strength of the housing market in the US. The NAHB index has improved in the past four months and on the surface suggests that the housing market has regained its strength from mid-2013. Finally, weekly initial unemployment claims is expected to remain below 300k, underscoring that the US labour market remains strong.

• In the euro area final HICP inflation for September will be released today. Based on the data released for the individual countries we expect September HICP inflation to be confirmed at 0.3% y/y.

• In the US we have a flood of Fed speeches today. Plosser (hawk, non-voter), Lockhart (neutral, voter 2015), Bullard (hawk, non-voter) and Kocherlakota (dove, voter) are all scheduled to speak today. Fed chairwoman Janet Yellen is also scheduled to make a public appearance but no speech or Q&A session is scheduled. In Europe ECB’s Coene and Visco will speak today. In the current environment central bank speeches both in the US and euro area will be followed closely.

Selected market news

The risk-off sentiment intensified yesterday after weak US retail sales increased worries about the global growth outlook, see Weak retail sales point to slowdown in US economy. In the US 10Y Treasury fell sharply and touched below 2% for the first time since the Fed began talking about tapering in May 2013. In Germany bonds with a shorter maturity than 5Y yield negative and also in the euro area there has been a significant widening of the spread between the periphery and core countries (see more on page 2).

Last week we argued that when market rumbles set in the market turns to policymakers for relief. But yesterday, we did not get support from central bankers.

ECB president Draghi was scheduled to speak last night, but no speech or comments have been released. The absence of comments is currently disappointing especially as the 5Y5Y inflation expectations are down at 1.72% and Draghi was concerned when it declined just below 2% back in August.

In the US it was reported that Fed Chairwoman Yellen voiced confidence in the durability of the US economic expansion in the face of slowing global growth and turbulent financial markets. The comment was given at a closed-door meeting in Washington last weekend, see Bloomberg. Following dovish comments about another potential round of QE, which have pushed the discussion of first rate hikes in the background, Yellen’s comment is seen as hawkish.