Preliminary PMI releases in focus

Market movers today

This week, focus turns to the real economy, where the highlights are today's PMI figures . Last month, the manufacturing PMIs ticked up in both the euro area and Germany. However, both remain two-speed economies, with the service sectors shielding growth from the weak manufacturing sectors. With new orders improving slightly in August, we expect the manufacturing PMI to remain broadly stable at 47.0 in September. However, we see downside potential for the service print after the drop in business expectations last month and expect it to decline to 53.0. If there is no increase in PMIs in the US, this will indicate that Q3 showed the weakest growth since 2009.

Today at 15:00 CEST Draghi will make his usual appearance at the European Parliament. We will look for any signs of the monetary policy stance and how he will address the diverging views within the governing council.

Market specialists will also continue to carefully monitor the repo and overnight activities in the US .

The UN General Assembly takes place this week, although it is likely to have little to no impact on markets.

Selected market news

Asian stocks slid this morning as the China-US trade war developments remain fragile and things on the news front continue to be volatile. After last Friday's sour sentiment in trade war developments, the Chinese media wrote that a cancelled visit to US farm states by China's delegations was not linked to trade discussions. The yen fell, US stock futures and crude advanced, while Japanese markets are closed for a holiday today.

Last Friday, the US Fed declared measures for easing concerns about financing Treasury purchases and to make more confident bidding at this week's auctions. The Fed will provide overnight repo operations from Monday until Friday, 10 October. The first will be hold for up to USD75bn, and later for at least that amount.

The geopolitical environment in the Middle East remained shaky over the weekend. The US Secretary of State Mike Pompeo said in an interview that the US is trying to avoid war with Iran, while the additional troops sent to the Gulf region are for "deterrence and defence." Pompeo added that that US President Donald Trump would take the necessary action if Iran failed to change its behaviour. Iran's Foreign Minister Mohammad Javad Zarif declined to rule out a war after the US announced it sent more troops to Saudi Arabia.

In the UK, focus will be on Brexit developments as the economic data calendar is very light. A particular focus is the UK government's negotiations with the EU over a solution to the Irish backstop, which seems to be the main sticking point in striking a deal with the EU. EU Commission president Juncker expressed earlier some optimism that a deal could be reached before 31 October, while the Irish government sounded more cautious.

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