Later this week, attention will turn to the ECB meeting

Market movers today

• Today, focus will be on US industrial production figures for September. Manufacturing production declined in August, in line with a sharp decline in the ISM manufacturing index. As the ISM manufacturing index rebounded sharply in September, it will be interesting to see whether ‘hard data’ confirms that the manufacturing sector performed better in September. The first indicator on the manufacturing sector in October is also due today, with the release of Empire manufacturing index.

• After markets close in Europe, FOMC board member Stanley Fischer, who is considered neutral, is scheduled to speak. Following Fed Chair Janet Yellen’s dovish comments on Friday (see below), it will be interesting to see if other FOMC members share the same view.

• Later this week, attention will turn to the ECB meeting. We expect a balanced tone from President Draghi and no new easing measures. Focus will be on a potential QE extension in December together with questions about tapering, see more in ECB preview: too early to discuss tapering, 14 October. Investors will also follow the US CPI figures to see whether core inflation has started to pick up. The UK data will be in focus as attention is on a possible impact from the Brexit vote.

Selected market news

On Friday night, Fed Chair Janet Yellen expressed a dovish stance. According to Yellen, ‘A tight labour market might draw in potential workers who would otherwise sit on the side lines’ suggesting that the Fed should be in no hurry to hike rates even in a situation of strong GDP growth. This supports our non-consensus call that the Fed will not hike in December as we believe the Fed is too optimistic on the current economic situation. The case for a December hike was, on the other hand, supported by hawkish comments from the Fed member Eric Rosengreen saying that the market’s pricing of a December hike (currently around 66%) sounds about right and that the FOMC might hike rates faster than the market is pricing in.

US retail sales report for September was weak. The control group figure, which feeds into GDP growth, increased only 0.1% m/m in September versus consensus of 0.4% m/m. This implies that the retail sales control group is up only 0.3% q/q AR in Q3 versus a growth rate of almost 7.0% q/q AR in Q2. The University of Michigan consumer survey came out weaker than expected at the lowest level since September 2015. Private consumption is the main US growth engine; hence, the figures do not support the Fed’s view that economic growth has rebounded.

The UK’s PM Theresa May’s cabinet discussed a less ‘hard’ Brexit. According to the FT, May has not ruled out making future payments to the EU budget to secure single-market access, benefiting mainly the financial sector as it has been feared the passporting rights would be lost.New poll shows Donald Trump drifting further behind Hillary Clinton, see FT. In our US election monitor published on Friday, we argued that a Trump comeback should not be ruled out yet although Clinton is significantly ahead in the polls. See US election monitor, 14 October.

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