Industrial production for the euro area rebounded in August by 1.6% m/m
Market movers today
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Today, we have a thin calendar in terms of global data releases.
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Focus in the US today will be on the initial jobless claims figures and Fed member Patrick Harker (non-voter, hawkish), who is scheduled to speak.
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In Sweden, Riksbank governor Stefan Ingves is scheduled to speak today. Comments on the disappointing inflation release earlier this week for September will be most interesting.
Selected market news
Industrial production for the euro area rebounded in August by 1.6% m/m after the large drop of 0.7% m/m in July (revised up from -1.1% m/m). The figures confirm the signal from the PMI and Ifo expectations from September and the German ZEW expectations from October that the euro area is, so far, resilient to the UK's decision to leave the EU. It looks as if GDP growth could surprise on the upside in H2.
The FOMC minutes from the September meeting confirm that we are dealing with a very divided FOMC. See FOMC minutes: Confirmation of a very divided committee - a Fed hike will depend on incoming data, 12 October 2016. We do not change our Fed call based on these minutes, as they confirm more or less what we already knew due to the many Fed speeches since the last meeting. For now, we stick to our non-consensus view that the Fed will stay on hold for the rest of the year, although it is a close call whether the Fed will hike or not in December. The reason for our call is that the Fed seems too optimistic on Q3 GDP growth and we fear that economic data may continue to disappoint in the short term. Incoming data will be important for the Fed's decision to hike or not later this year. The market reaction to the minutes was muted. Markets have priced in a two-thirds probability of a hike by the end of the year.
In general, it was a rather mixed session in global financial markets yesterday. Risk sentiment in equity markets was mainly skewed towards risk-off with European and Asian stocks markets in the red, whereas changes were subdued and mixed in the US. Moreover, Brent oil decreased quite sharply, closing at USD51.8/bbl. In fixed income markets, yields continued higher in the euro area. The 10Y government benchmark bond yield in Germany rose by approximately 4bp and is now more than 20bp above the level observed at the end of September 2016. In the US and Japan, the 10Y government benchmark bond yields are just below 20bp and 3bp higher than the level observed, respectively, at the end of September 2016.
Today, risk sentiment has been negative so far with Asian stock markets in the red and Brent oil dropping further to USD51.5/bbl at the time of writing. However, changes in the 10Y government benchmark bond yield in Japan have been subdued this morning.
Author
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.
