Allan von Mehren
Danske Bank A/S
Market movers today
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It is a very light day in terms of data releases; hence market focus is likely to be on the evolving political stand still in forming a new government in Germany after SPD left the coalition talks over the weekend.
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In Hungary, the central bank decision is due and we expect unchanged rates along with concensus expecations. The central bank may continue its dovish signals despite fast wage growth and strong economic activity.
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Statistics Denmark publishes employment data for September. The number of people in work rose in August after a slight fall in July, and we expect a further improvement in September.
Selected market news
In Germany snap elections moved closer yesterday as Chancellor Angela Merkel stated that she favours a new poll over a minority government. With SPD having ruled out a new ‘grand coalition' and Merkel ruling out a minority government the only option left seems to be a new election. A new government is not likely to be formed until well into 2018 delaying any potential Eurozone reforms.
Fed Chairman Janet Yellen yesterday announced she will not continue at the Fed when Jerome Powell takes over as Chairman after Yellen's term ends in February, see Bloomberg. Her decision leaves Donald Trump with a fourth spot to fill on the Federal Reserve Board.
The US leading indicator from Conference Board jumped back in October rising 1.2% m/m (consensus 0.8% m/m). September was revised up to 0.1% m/m from -0.2% m/m. The data underlines the strong picture of the US economy currently. US 2-year yields rose to a new high yesterday flat tening the US yield curve further. The flattening has received much at tention lately in relation to Fed policy with some arguing it worries the Fed as it is a signal of an economic slowdown. However, a San Francisco Fed paper yesterday argues that the low long-term yield is justified by a lower ‘normal rate', risk of persistently low inflation and fiscal and geopolitical uncertainty, see paper.
Asian stock markets were strong overnight with gains across the board defying signs of a Chinese slowdown. China's Tencent grabbed the headlines yesterday as they joined the ranks of Apple and Facebook breaking the USD500 bn mark in market value. Tencent is the maker of the Chinese social media We Chat with close to one billion users. Chinese company Alibaba might be next in line as they currently have a market value of USD 474 bn.
Yesterday we published an update on the latest Chinese measures to crack down on shadow banking announced Friday last week. We also released travel notes from US trip visiting political analysts, think tanks, economists and journalists, see US travel note Tax cuts are coming but will be watered down.
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