Danske Research Team
Danske Bank A/S
Market Movers
On a day with a very thin calendar in terms of data releases focus will be on US MBA mortgage applications. The overall picture is of a US housing market continuing to benefit from a favourable mix of low interest rates and positive real income growth. Homebuilding activity is also still below the long-term trend, which points to further improvements in the housing market.
We expect Bank of Canada to keep its policy rate unchanged at 0.5%. Last month’s policy statement was very balanced and suggested that Governor Poloz is comfortable remaining sidelined for now post the two rate cuts earlier in the year.
Turkey’s central bank will also make its rate decision today and is expected to keep its key rate unchanged at 7.50%.
Fed member Powell who is a voter and considered neutral will speak tonight.
There are no Scandi market movers today.
Selected Market News
Japanese trade data disappointed and fuel concerns about weakness in the global manufacturing sector. Export growth was the weakest in more than a year increasing 0.6% y/y in September down from 3.1% in August and against consensus of an increase of 3.8% y/y. Import growth was also very weak declining 11.1% y/y, reflecting that there is weakness in Japanese domestic demand as well.
We expect Bank of Japan to add further stimulus at the 30 October meeting. Today’s data confirm our view of sluggish GDP data in Q3, which should result in a substantial downward revision of Bank of Japan’s growth and inflation forecast in the semi-annual outlook report for FY 16. We expect the monetary easing to be in the form of additional QE with an increase of its target for the annual monetary base expansion from JPY80trn to JPY100trn.
Asian stocks are higher this morning despite the disappointing Japanese export figures. Japan’s Nikkei is trading 1.1% higher amid spurring speculation about more monetary easing from Bank of Japan. EUR/USD continues to trade without clear direction ahead of the ECB meeting on Thursday.
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