Market movers today

It is time for the first euro area inflation print for November. After the German HICP we expect headline inflation to increase to 1.0% y/y and core inflation to increase to 1.2% y/y.

Also look out for the Swiss KOF indicator and any comments on US-China trade negotiations.

Over the weekend we will get Chinese PMIs for November. We look for a big drop in the Caixin PMI manufacturing as it has leaped to very high levels. On the other hand, we expect the NBS manufacturing PMI to rebound as it fell back to a very low level last month. The two PMIs thus point in opposite directions and we believe the truth is somewhere in the middle, as signalled by other activity indicators such as rail freight, electricity production and exports from economies close to China, which have all shown a moderate rebound lately.

In Scandi it is time for Swedish and Danish (second release) GDP for Q3 as well as retail sales in Norway (see page 2 for more on Scandi). The Riksbank committee presents its proposal at 11.30 CET today. Much of it was released on 11 October. None of the proposed changes is likely to affect the monetary policy stance.

 

Selected market news

This morning we published a publication taking a deep dive into euro area inflation dynamics, looking at the latest developments in inflation drivers, market dynamics and the core inflation outlook from a bottom-up approach.

US President Trump has signed two bi-partisan bills supporting the pro-democracy protesters in Hong Kong. The first bill says the US executive branch must re-examine Hong Kong's status annually and imposes sanctions on people violating human rights. The second bill blocks new export licences selling police products (tear gas, rubber bullets etc.) to Hong Kong police. China has promised to come with countermeasures, but nothing has been announced yet. This is also important in the light of the ongoing trade negotiations between the US and China where a phase 1 deal is still not finalised, although the two sides so far have kept trade and other political issues separate. This is also in both countries' economic interest.

UK Prime Minister Boris Johnson has said the UK will not strike a free trade deal with the US after Brexit if the US also wants full access to health services.

In Japan, industrial production fell 4.2% in October (-7.4% y/y), which is quite a big fall despite the volatility of production data. Normally this would be a cause of concern, especially in the current environment where the world economy remains fragile despite signs of stabilisation, but we are not too concerned as it is probably driven by a combination of the typhoon and the VAT hike. Bank of Japan governor Kuroda has said the Bank of Japan has sufficient room to lower rates at present but that rates cannot be lowered endlessly.

 

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