Global markets are fairly quiet this morning

Market movers today

This morning markets will digest the results of the German election yesterday.
The fourth round of Brexit negot iat ions begins today. Theresa May's speech in Florence on Friday did not reveal much news after the leaks on Thursday evening.
In Germany, the Ifo business confidence for September is expected to show a further increase and add to the upbeat picture of the euro area witnessed in the PMI data last week.
The Fed's Vice-Chairman Bill Dudley (voter, dove) is set to speak but the theme is workforce development , so it is not clear if he will touch on monetary policy. The Fed's Evans is due to speak tonight on the economy and monetary policy. The ECB speeches from Mario Draghi, Yves Mersch and Benoît Coeuré are also due today.
Later this week, focus will turn to euro inflation and Chinese PMI. In Scandi, the most interesting releases will be Swedish NIER business confidence and Norwegian unemployment.

Selected market news

Global markets are fairly quiet this morning. US yields are t rading close to Friday levels and the S&P 500 equity future is around the S&P500 closing level on Friday. Chinese stocks have taken a small hit as developers are under pressure from new housing rest rict ions in eight cit ies in a move to cool the housing market further.

Angela Merkel secured her fourth term in office as her Conservat ives (CDU/CSU) remained the largest party with 33.0% in yest erday's elect ion, followed by the Social Democrats (SPD) at 20.5%. However, both part ies registered significant losses in their vote shares to the benefit of the euro-scept ic AfD party, which will become the first right -wing nat ionalist party to enter the Bundestag since the 1950s with a vote share of 12.6%. The outcome now leaves only two viable coalit ion possibilit ies that can obtain a majority: Another grand coalit ion of CDU/CSU and SPD or a ‘Jamaica' coalit ion of CDU, FDP and the Greens. However, as the SPD leadership current ly rules out another grand coalit ion under Merkel because of its disappoint ing elect ion result , a Jamaica coalit ion seems increasingly likely, in our view. Wit h t he ‘illegal' Cat alonian referendum this weekend and an Italian general elect ion looming, where the Five Star Movement stands to be a serious compet itor for the premier minister posit ion, European polit ical woes might well become a market driver once again.

On Friday, the ECB's Vítor Constâncio played down the effect of the euro appreciation saying it might have a smaller effect on inflat ion than usual, based on recent ECB research. He also referred to a slight steepening of the Philips curve recently, saying t his gives ‘some hope that the future closing of the output gap will allow us to gradually reach our inflat ion target '.

Japan PMI manufacturing for September rose to 52.6 from 52.2 and cont inues to signal robust manufacturing growth in line with most other regions. It adds to the picture of st ill st rong global growth in H2. Japan 's Prime Minister Shinzo Abe is expected to announce snap elections on Monday to take advantage of improved ratings.

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