European countries remain on high alert due to threats of terror attacks

Market Movers

In the euro area the new week will be kicked off with the release of the preliminary PMI figures. We expect the manufacturing figure to improve moderately mainly due to the signs of stabilisation in the Chinese PMI. Moreover, we have started to see the effective euro weakening, which will support exports while the financial stress has also eased off.
This afternoon we will also get preliminary Markit PMI manufacturing figures for the US. The manufacturing PMI has not painted the same negative picture as the ISM manufacturing and the question is whether the PMI is too high or the ISM too low (or both?).
This week there will be a lot of focus on Norway as there are several important data releases. Most important is the oil investment survey due tomorrow. The survey will say a lot about activity and growth contributions in 2016, which could affect Norges Bank’s growth projections and so its interest rate decision in December.
In the Scandi markets focus is on a speech by Norges Bank governor Olsen and employment figures in Denmark. For more details see Scandi Markets.

Selected Market News

During the weekend, Fed’s Williams (neutral, voter in December but not next year) said he sees a strong case for a December hike if data hold. Stocks performed well in the US last week despite the expectations of the first hike in 11 years. S&P 500 increased 3.3% last week, the largest increase so far this year. 2Y US government bond yield closed at 0.9172%, the highest since May 2010. The USD has continued to strengthen. The combination of lower demand from China and the strong USD continues to put pressure on commodity prices.

The expectations of further ECB easing in December continues to impact front-end rates, reaching new all-time low levels (2Y Germany to -0.38% and 1Y1Y Eonia at - 0.33%).

Many European countries remain on high alert due to threats of terror attacks. The Belgian Prime Minister Charles Michel has said that there is a ‘very serious and imminent’ threat that Brussels will be hit by ‘an attack similar to the one that unfolded in Paris’. 16 people were arrested in a police action during the night. Brussels is still locked down with schools and the metro system in Brussels being closed today. From an economic point of the view, the impact on financial markets has so far been limited but the question is whether fear and uncertainty may result in lower confidence among European consumers and corporations hurting the small recovery.

In Argentina, the centre-right opposition leader Mauricio Macri won the election ending 12-years’ leadership of Front of Victory. Mauricio Macri wants more liberalisations and a tighter relationship with the US.

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