Equities sold off and US yields dropped on Friday

Allan von Mehren Danske Bank A/S

Market movers today

Starting a busy week, today we are due to get euro flash CPI and US core PCE inflation. We look for euro inflation to rise to 0.5% y/y in October from 0.4% in September, which is in line with consensus. As base effects from commodity prices kick in, we expect euro inflation to reach 1.5% in H1 17 before levelling off again in H2 17. US core PCE inflation is expected to rise 0.2% m/m implying an unchanged annual rate of 1.7% y/y.
For the rest of the week, focus will be on the FOMC meeting (Wednesday), US ISM manufacturing (Tuesday) and US non-farm payrolls (Friday). We do not expect any big changes at the FOMC meeting as it was already quite hawkish in October and the Fed still wants some flexibility to refrain from hiking if circumstances change, 31 October 2016. On US ISM, we are slightly above consensus, looking for a rise from 51.5 to 52.5 (consensus: 51.7) while we are close to consensus on non-farm payrolls (170,000 versus consensus 175,000). Chinese PMI manufacturing is also up this week (Tuesday) and we estimate a slight decline in October.
In the Scandi region, Norge Bank is due to release the credit indicator today, while wage data for September is due out in Sweden. For the rest of the week, focus will be on PMI data for September.

Selected market news

Equities sold off and US yields dropped on Friday as the news hit that Hillary Clinton is again being investigated by the FBI over a new batch of files being sent from her private email account while she was serving as Secretary of State. The pricing of a rate hike in December dropped back to 70% from 74% following the news on Friday.

Over the weekend, polls have shown a setback for Clinton, making it a closer race again only one week ahead of the election on 8 November, see Bloomberg. An ABC poll found that Clinton now receives support from 46% of likely voters versus 45% for Trump. A week ago, Clinton had a 12-point lead in the same poll.

Oil prices have fallen further to just below USD50 per barrel as non-OPEC producers made no commitment to follow an OPEC cut at a meeting on Saturday.

Bank of England (BoE) Governor Mark Carney is said to be ready to serve a full eightyear term at the BoE and has told friends he is likely to make a statement this week.

Japan industrial production for September released overnight disappointed as it was flat m/m versus an expected 0.9% m/m gain by consensus. The JPY weakened slightly after the numbers.

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Author

Allan von Mehren

Danske Bank A/S

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