The German ZEW index has been very weak lately

Market movers today

• Main data releases will be German ZEW and UK inflation.
  

• The German ZEW index has been very weak lately, falling in August to the lowest level in almost two years. We expect a slight further decline in September on the back of a continued negative news flow.

• UK inflation is expected to decline slightly to 1.5% in August from 1.6% in July, while core inflation should remain flat at 1.8%, slightly below Bank of England's target of 2%.

• Otherwise focus will continue to be on the developments in the Ukraine crisis and polls on Thursday’s Scottish referendum.

• In Sweden focus will be on SDP’s attempt to form a government in the hung parliament.

Selected market news

The markets are in wait-and-see mode ahead of tomorrow’s Fed announcement and the referendum on Scottish independence on Thursday. Both US government bond yields and the USD have edged slightly lower in the wake of the weaker-than-expected US industrial production data released yesterday but really nothing dramatic. The US stock market also closed lower. The Alibaba IPO, which could prove to be the largest IPO ever, is weighing a bit on the overall stock market as investors create room in their portfolios for the new listing. This has particularly weighed on Nasdaq that closed down 1.1%.

In Ukraine fighting appears to have flared up, particularly around Donetsk airport that is still controlled by the Ukrainian government, see Financial Times. This underscores that the ceasefire remains fragile but the Ukraine forces have announced that they are still observing the truce.

There were no surprises in the minutes released overnight by Reserve Bank of Australia (RBA) from its meeting on 2 September, where RBA maintained its benchmark at a record low 2.5% for a 13th consecutive time.f In the minutes RBA continues to signal status quo, as on the one hand it is concerned about a possible bubble in house prices but also believes an overvalued AUD was hurting attempts to rebalance the Australian economy.

Foreign Direct Investment (FDI) in China in August declined 14.0% y/y after declining 16.9% y/y in July. The decline in FDI in the past two months has been the largest in more than four years in China. Both the general weaker investment demand and the recent antitrust campaign particularly targeting major foreign companies could be weighing on FDI.