In the US, ISM New York data is due to be released

Danske Research Team Danske Bank A/S

Market movers today

We have a fairly thin data calendar ahead of us today. Markets will continue to focus on the resolution of the Deutsche Bank issue and political developments in the US, UK, Italy and Spain.
In the UK, PMI construction data is due out, which is estimated to remain around 49. This suggests that the construction sector is still being undermined by the uncertainty created by Brexit.
In the US, ISM New York data is due to be released. Following yesterday’s increase in the ISM manufacturing index, the market will now look for indications of whether the nonmanufacturing sector is also picking up speed ahead of tomorrow’s ISM non-manufacturing number.

Selected market news

Risk sentiment continues to be in positive territory. Most Asian stock indices are up this morning, helped by surprisingly strong US ISM manufacturing numbers released yesterday. The index increased to 51.5 in September from 49.4 in August. Especially, new orders looked strong, with the index surging to 55.1 from 49.1, although employment intentions remain weak. The release gave way to a stronger USD overnight while the probability of a Fed rate hike by December as implied by the Fed fund futures was raised slightly to 61% from 58%, nearing the top of the recent probability range. US treasury yields were higher across the board, crude oil gained for the fourth consecutive day. Meanwhile, the Japanese yen retreated for the sixth day on increased expectations of a US rate hike.

Furthermore, Australia’s central bank kept its cash rate unchanged this morning amid a positive impact on the Australian economy of the recent rise in commodity prices. The unchanged rate decision was as expected. The new central bank governor, Philip Lowe, welcomed in his first policy meeting the recent gains in commodity prices but also noted ‘that inflation remains quite low, given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this (eq. low inflation) is expected to remain the case for some time’. The surge in the Australian dollar, which has increased by about 10% against the US dollar since the lows in January, is also complicating the RBA’s efforts to increase inflation.

Meanwhile, focus continues to be on the new signals from the UK government on its Brexit strategy. British Prime Minister Theresa May stressed at the conservative party conference that British financial services companies will not get special treatment in the upcoming Brexit negotiations with the EU. This marks a departure from her predecessor David Cameron, who put the risk to financial services at the heart of his failed referendum campaign to keep the UK in the EU. For more on the British EU exit strategy, see Flash Comment UK: PM May set to trigger Article 50 before March 2017 - EUR/GBP set to move higher, 3 October 2016.

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Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

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