Core CPI inflation was unchanged at 1.9% y/y in October

Market Movers

The main event today is the release of the FOMC minutes from the October meeting. Here we will get more details on why the Fed flagged a clear tightening bias. The FOMC revealed that it will determine â€˜whether it will be appropriate to RAISE the target range at its NEXT meetingâ€™ (our emphasis). We think that with the strong job report FOMC will consider a hike â€˜appropriateâ€™ (see also First Fed hike in December due to very strong job report, 10 November) but it will be interesting to see what conditions made the FOMC flag a tightening bias before the strong job report. Look for possible details on how the FOMC will proceed next year.
Denmark is set to auction the new 2Y (Nov-18) and the 10Y (Nov-25) benchmarks.
Not many data releases scheduled for today. Numbers for US housing starts and building permits in October are due today. We expect them to support our overall view that the housing market is improving.
The Fed and the ECB continue to be in the spotlight. Several ECB and FOMC members are speaking today and the market will listen to what they may have to say about the upcoming meetings in December.

Selected Market News

Focus continues to be on terror attack threats from IS. Yesterday a football match in Hannover between Germany and the Netherlands was cancelled due to a tip that a bomb attack was planned inside the stadium. During the night, two Air France flights from the US to Paris were diverted due to bomb threats. According to Bloomberg, there has been shooting during an anti-terrorist operation 9 kilometres from Paris. The anti-terrorist operation is still under way at the time of writing.

The Chinese housing market recovery slowed in October according to new housing data released overnight. New-home prices rose in 27 cities in October against 39 in September. Prices dropped in 33 cities. Also the pace of home sales slowed. The housing market recovery is still weak especially in the smaller cities despite many different easing measures this year. This suggests that housing investments will continue to be weak.

US CPI inflation data releases yesterday showed that headline CPI inflation increased from 0.0% y/y to 0.2% y/y, while core CPI inflation was unchanged at 1.9% y/y in October. The FOMC is targeting PCE core inflation but the pickup in CPI services excluding rents should provide some relief for the doves.

Risk sentiment is generally positive. Stock markets in Japan and China are slightly up this morning (at the time of writing), while US equity indices closed almost unchanged. Europeâ€™s stocks advanced the most in six weeks yesterday.

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