Market movers today
US-China trade talks continue today and given the statements from President Trump, the trade talks have developed well so far. Hence, we still see a decent chance of an interim deal being struck.
UK and Ireland held "constructive" talks on Brexit yesterday. EU and UK will meet today and continue negotiations - see more below. The optimism had a significant impact on Gilts as well as the GBP. GBP strengthened against the Euro and 10Y Gilts moved some 12bp yesterday.
On the data front, the preliminary consumer confidence for October from University of Michigan will be interesting. The service PMI has declined lately and suggests the slowdown is spreading to this part of the economy too. Consumer confidence has still held up well, which has also been highlighted by some Fed members. Any sign of weakness here would add to the pressure for more rate cuts.
Tonight, Fed members Rosengren (non-voter, hawk) and Kaplan (non-voter, neutral) will both speak.
Selected market news
Yesterday, the Brexit negotiations got back on track after Irish PM Varadkar and UK PM Johnson met. We have not received many details yet (probably because neither side wants to risk jeopardising the fragile negotiations) but the most difficult part of the negotiation is customs, so Varadkar and Johnson may have found a way forward here. The problem is that PM Johnson's potential majority in the House of Commons is also very fragile and he cannot afford to lose support from DUP and the group of hard Brexiteers within his own party. This means that one should not get hopes too high yet, and our base case remains another extension followed by snap election but the coming days are going to be extremely important. Today, UK Brexit Secretary Barclay and EU Chief negotiator Barnier meet at 09.30 CET followed by a briefing to the EU ambassador. EU has set a deadline today to reach an agreement before the EU summit next week but this is probably a soft deadline so a deal can be reached at a later stage (also the EU still has an possibility to call an extraordinary EU summit to ratify an agreement).
The trade talks between the US and China went very well according to President Trump. The talks continue today. The combination of more optimism on Brexit as well as the US-China trade talks sent bond yields higher in both Europe and US yesterday as risk sentiment turned positive. Asian equity markets have followed the positive sentiment this morning, while the Asian bond markets have seen rising yields this morning.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.