Danske Research Team
Danske Bank A/S
Market movers today
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In the US today, the preliminary Markit PMI service index for September is due. The index has been right about the weak GDP growth rates over the past three quarters, so another weak print will be a strong sign that GDP growth in Q3 may have disappointed as well, as the service sector is supposed to be the main growth driver.
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In the euro area today, M3 money supply growth data, loans to households and NFCs figures for August are due out. Money supply growth has averaged 4.9% in the three months up to August and we expect the figure to persist. On the other hand, the more important loan growth figures have showed promising numbers. Particularly, the loans to NFCs have increased steadily since March and improved to 1.9% in July from 1.7% in June. We expect the positive tendencies to have continued into August.
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German retail sales for August are due out today.
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In Sweden, the two most interesting releases are retail sales and the trade balance for August, see page 2.
Selected market news
The first of three presidential TV debates between the Democrat nominee Hillary Clinton and the Republican nominee Donald Trump was held overnight. While there was not much news in terms of politics, it is interesting that a CNN poll shows that 62% think Clinton won the debate (against Trump's 27% but the sample is biased towards the Democrats). However, the markets also think Clinton came out on top as the implicit probability of a Clinton win rose approximately 5pp to 68% from 63% while the USD/MXN (‘the Trump proxy') declined from 19.877 to 19.555 (a 1.6% appreciation) at the time of writing. US S&P500 futures are up 0.4pp. But with Brexit fresh in mind, it is too early for Clinton supporters to celebrate. We will continue to monitor incoming polls as the gap between Clinton and Trump has narrowed significantly in recent weeks indicating a close race. The next two debates are due to take place on 9 October and 19 October.
Yesterday, the German Ifo survey for September showed that Ifo expectations rose to 104.5 from 100.1 in August – the biggest monthly increase since August 2009 and the third biggest increase ever recorded (the survey began in 1991). The index is now at the highest level since November 15 and above the 103 level prior to the UK's vote to leave the EU. The rise in Ifo expectations is in line with German manufacturing PMI released on Friday last week and confirms the signal that GDP growth in Germany could surprise on the upside in H2 despite the Brexit vote.
As expected, ECB president Mario Draghi did not give any new information about what to expect from the ECB at his speech in the EU parliament yesterday, as we are still awaiting the committees' analyses of the QE programme. While the Fed's Kashkari repeated his dovish stance that the risks of too low inflation are greater than too high inflation, thus supporting the Fed maintaining the target range unchanged at last week's FOMC week, it was a surprise that Kaplan said he would have voted for a hike, as he has previously sounded more dovish. Both are non-voters this year but will be voting FOMC members next year.
Yesterday, the Italian government announced that the referendum on the Senate reform is due to be held on 4 December.
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