Bond markets continued the sell-off yesterday

Danske Research Team Danske Bank A/S

Market movers today

Today, we have a busy data calendar in the euro area with German November ZEW expectations, euro area industrial production for September and the German GDP estimate for Q3, where we estimate another solid GDP figure with 0.6% q/q growth, as PMIs remained at a high level. Note that the revised euro area GDP estimate for Q3 is also due for release but we will not get any component breakdown yet .
In the UK, CPI figures for October are expected to show a small uptick to 3.2%, driven mainly by lingering effects of the weak GBP.
The ECB's two-day conference on central bank communication kicks off today with a panel debate at 11:00 CET between the Fed's Janet Yellen, the ECB's Mario Draghi, the BoE's Mark Carney and the BoJ's Kuroda. Judging from the line-up, this could make for a repeat of the Sintra conference in late June (where many a central banker turned hawkish). While it may not provide the same seemingly synchronised policy message it did back then, we do see a good chance that Draghi, in particular, could use this opportunity to underline the seriousness of the talk from recent ECB speakers that markets should not become too complacent as the ECB has entered ‘normalisation' mode.
In the Scandi countries, focus is on the Swedish October housing price and inflation data, while Norwegian Q3 GDP figures are also due – see next page.

Selected market news

Bond markets continued the sell-off yesterday, this time led by the short end where US twoyear yields rose further to a new cycle high. Optimism over a US tax reform got another boost yesterday on the back of a tweet by US President Donald Trump suggesting the Republicans are get ting closer to agree on a tax reform that can be approved in both the House and the Senate. Bond markets will today turn their eyes to the two-day ECB conference mentioned above.

Chinese data on industrial production and retail sales disappointed slightly. Industrial production rose 6.2% y/y (consensus 6.3% y/y, previous 6.6% y/y) and retail sales climbed 10.0% y/y (consensus 10.5% y/y, previous 10.3% y/y). Money and credit data released yesterday also slowed further adding evidence to a picture of slower Chinese activity over the coming year. Chinese 10-year yields rose overnight to the highest level in three years in another sign that the financial tightening continues in China after a short pause in the months ahead of the Party Congress. Weaker Chinese growth will reduce the global inflationary pressure from commodity prices over the next year as demand softens.

Swedish house prices from the so-called Mäkler-statistik showed a decline of 1.0% m/m in October on apartments and 0% m/m on houses. The Valueguard numbers due to be released at 9:00 CET today are regarded as more reliable though (see below).

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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.

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