The S&P500 managed to reverse its initial losses

Market movers today

• Another quiet day on the data front. Only number of interest will be US existing home sales, which is expected to have stabilised over the summer.

• Otherwise focus will be on the continued development in risk appetite and any voices from central banks. Judging from recent Fed speeches, the FOMC remains on track to end tapering next week as the US economy is still doing well, although downside risks have risen recently.

Selected market news

It was yet another volatile day on the financial markets, where risk sentiment quickly faded in the European session following a strong rebound in risk assets in the US and Asia. In last night’s US session optimism returned to the markets, primarily supported by a series of solid earnings reports. The S&P500 managed to reverse its initial losses and ended the day 0.9% higher, while yields on 10-year US treasuries declined 3bp to 2.19%.

In Asia this morning risk sentiment has once again deteriorated and most regional equity indices trade in negative territory, following a series of rather mixed data from China showing that Chinese GDP growth in Q3 fell slightly less than expected to 7.3% y/y from 7.5% y/y in Q2, which is the weakest pace of growth since Q1 09. Industrial production advanced more than expected to 8.0% y/y in September, while growth in retail sales eased to 11.6% y/y in September from 11.9% y/y in August. The overall picture for the Chinese economy remains that growth is slowing, mainly driven by weaker investment demand in the wake of the slower credit growth in recent months. However, so far the slowdown does not appear to be severe because private consumption appears to have been relatively resilient and exports have improved. We expect growth to continue to slow moderately in Q4 to 1.8% q/q and we maintain our 7.4% GDP forecast for 2014.

Minutes from the Reserve Bank of Australia’s policy meeting on 7 October released this morning did not reveal any significant surprises. Overall, the board still believes that interest rates are likely to remain unchanged at 2.5% for a while. The RBA also reiterated that the exchange rate remained high by historical standards, particularly given recent declines in key commodity prices, which offer less assistance than would normally be expected in achieving balanced growth.