Danske Research Team
Danske Bank A/S
Market Movers
We have several important releases in the US today ahead of Thanksgiving on Thursday and Black Friday. Most important is the release of PCE inflation in November. Consensus anticipates that PCE core (the inflation measure FOMC targets) increased 0.1% m/m in October (1.3% y/y). The subdued core inflation is the number one worry for the FOMC as growth remains solid and the labour market continues to tighten.
The slowdown in China and the strong USD weigh on the US manufacturing sector. This is likely to be reflected in the durable goods orders which, however, is quite volatile from month to month.
Also due today in the US is the October report on personal income and spending, preliminary data for Markit PMI services in November, initial jobless claims and final University of Michigan consumer sentiment for November. New home sales in October could also attract attention as the September figure was very weak.
In the Scandis, focus is on Swedish PPI figures and Norwegian LFS-unemployment data. For more see Scandi Markets.
Selected Market News
In general, markets are still awaiting the policy actions by the Fed and the ECB at their meetings in December. Risk appetite is mixed. Euro closed in red yesterday. In the US, S&P500 closed slightly higher despite trading lower most of the day thus reversing Monday’s decline. Chinese Shanghai and Shenzhen equity indices are up while the Hong Kong Hang Seng and the Japanese Nikkei225 indices are down at the time of writing. Oil has rebounded somewhat and Brent oil is currently trading above USD46/barrel, up from a level around USD44/barrel between 12-23 November.
Against our expectations, Bank of Japan kept its monetary policy unchanged at its 29-30 October meeting. Minutes from the meeting revealed that the view among most members had not changed significantly, supporting our new view that BoJ will not ease further. BoJ thinks that growth will be above trend next year driven by increasing domestic demand. BoJ believes that it will reach its inflation target in H2 16. Especially the board members think that the increasing trend in core inflation is encouraging.
Markit/Caixin does not publish a flash estimate for manufacturing and services PMIs in China anymore. Unofficial PMIs published by Minxin have painted a much more negative picture than the official Chinese PMIs this year. The November figures suggest that the Chinese economy continued to struggle this month. Chinese Westpac- MNI consumer confidence increased to 113.1 in November from 109.7 in October.
The Syria conflict took a surprising turn yesterday as Turkey shot down a Russian war plane around the Turkey-Syria border. It is unclear how this new situation will affect a possible alliance between Europe, the US and Russia against Islamic State.
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