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Jens Peter Sørensen
Danske Bank A/S
Market movers today
The result of the first ECB TLTRO will be announced and we expect a fairly low take of EUR97bn. The banks may be hesitant to participate ahead of the publication of the Asset Quality Review at the end of October and hence may wait for the second TLTRO in December.
Another key event will be the Scottish referendum. The outcome is uncertain and should it turn out to be a ‘Yes’, it could have significant market impact.
In the US housing starts are released. We look for a decline but mainly due to strong levels in previous months. The housing market seems to be recovering, as we saw another strong increase in the US NAHB housing index yesterday and home sales have been better as well over the past months. The US also releases initial jobless claims, which rose more than expected last week but might have been distorted due to Labour Day. In that case it should fall back today.
UK retail sales are expected to be robust and rise 0.4% m/m in August. Domestic demand indicators have remained strong lately, not least service PMI, while manufacturing has eased a bit.
Ireland will release the first Q2 GDP reading. While leading indicators were strong during Q2, we look for a moderate reading of 0.3% q/q as there could be some negative payback after very strong readings in both Q1 and Q4. Compared to a year ago we expect GDP to be up by more than 4%.
In Switzerland the SNB will announce rates. It will be interesting to see if it follows in the footsteps of the ECB and introduces negative rates.
Fed chairman Janet Yellen speaks today but she is unlikely to reveal more after yesterday’s press conference, which had a hawkish twist as the continued time dependent forward guidance was downplayed.
In Scandi markets the main focus will be on the meeting in Norges Bank.
Selected market news
Yesterday the Fed, as expected, moved to a slightly more hawkish policy stance. It hung on to its forward guidance of ‘considerable time’ in the statement but projections for the key policy rate were revised markedly higher. The Fed now projects the Fed funds rate to be at 1.375 at the end of 2015, which means the central bank looks set to hike four times next year, probably starting in April. The US stock market greeted the change in Fed’s policy stance with relative ease – it was more or less flat on the day, while the dollar jumped higher – EUR/USD dropped below 1.29 to a new year-low. While the recovery in the US looks to be on track, China and Japan are currently battling an imminent slowdown in economic growth confirmed by key figure releases today. The Japanese foreign trade data were weak. At minus 1.3% y/y and minus 1.5% y/y both exports and imports declined on an annual basis and new-home prices in China fell in August.
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