Oil price continued lower

Market Movers

It is a quiet day in terms of data releases. Only release of interest are US factory orders, which are expected to have rebounded in June following weak prints in April and May.
In Denmark, the Danish central bank will publish currency reserve data for July. In our view, today's numbers should not point to any imminent Danish rate hikes despite an expected continued outflow in July.
In Norway we expect a slight rebound in the PMI index in July. For more on Scandi markets see page 2.

Selected Market News

Yesterday the oil price continued lower during the day and this morning Brent crude oil is trading below USD50/bbl for the first time since January. Yesterday’s decline in the oil price followed after Chinese Caixin manufacturing PMI was revised down to the lowest level in two years, while signs of increasing Opec output also had a negative impact. The drop in the oil price in July was mainly the result of the Iran nuclear deal but the weak Chinese activity figures add a risk to our outlook for stronger global growth, which should support a pick-up in commodity prices over the coming year.

The US manufacturing ISM figure was weaker than expected in July as it declined to 52.7 from 53.5 (consensus 53.5). However, the details were stronger than the headline figure as domestic demand led to an increase in new orders. At the same time, higher inventories resulted in an improved order-inventory balance, which suggests the headline figure will strengthen. In line with this, we expect a moderate pick up in ISM manufacturing in H2 as the manufacturing sector should benefit from an overall strengthening of demand.

The latest weak US data resulted in lower US treasury yields in the 2-10Y segment. However, the details in both the manufacturing ISM and the Employment Cost Index have been stronger than the headline figure and core PCE prices also increased in line with expectations in June. Hence, we still expect the Fed to deliver a 25bp rate hike at the meeting in September.

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