Danske Research Team
Danske Bank A/S
Market movers today
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Today, German ZEW expectat ions. In August , the figure dropped to 10.0, due to weaker export s and t he growing scandal in Germany's aut omobile sect or. Toget her with the appreciat ing euro's pressure on exports, this could cause economic sent iment to deteriorate. However, both business expectat ions (Ifo) and German PMIs increased in August , signalling still increasing op imism on the part of business. Overall, we expect the ZEW expectat ions to show a small decline to 9.5.
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The Central Bank of Hungary will hold its monetary policy meeting today, where it might expand liquidity further by lowering the cap of the three-month deposit and/or cut ting the O/N interest rate, despite inflat ion start ing to pick up recently.
Selected market news
It has been a relatively quiet session overnight both in terms of news and price act ions as investors await the FOMC meeting tomorrow. In the US, equity indices ended the day higher with S&P500 and Dow Jones gaining 0.15% and 0.28%, respectively. In Asia this morning, trading is more mixed with most regional indices trading lower while Japanese equity indices are up 1.3-1.5%.
While a large part of today's outperformance in Japanese equities can be explained by Japan catching up yesterday after returning from holiday, rising expectations of an early election might also boost the rally. Japanese equity markets have previously gained ahead of the dissolutions of the parliament on calls for elections. According to several media, it seems increasingly likely that Japan's Prime Minist er Shinzo Abe will dissolve the Lower House later this month and call for a general election. If an early election is called this month, the Bank of Japan (BoJ) and consumpt ion taxes are likely to come to the fore of political discussions. In particular, the questions about who will lead the BoJ when Haruhiko Kuroda's current five year terms ends in April is a theme that could induce uncertainty about t he BoJ's monet ary policy , as investors will probably link the fate of the Abe administ rat ion with the current accommodat ive policy regime (Abenomics).
In a speech last night in Washington, Bank of England (BoE) governor Mark Carney echoed the surprisingly hawkish statement from the BoE last week and signalled that the MPC might soon hike the Bank Rate as global factors in combinat ion wit h a decline in t he economy's pot ential due to Brexit have increased the chance of overheating and warrant s higher interest rates. We expect the BoE to hike in November.
There were no surprises in the minutes from the Reserve Bank of Australia's (RBA) meeting on 5 September published this morning. The RBA expects the economy to pick up gradually but there was no signal that the RBA is about to change its policy rate. We expect the RBA to deliver one 25bp hike within the next 12 months, which is in line with market pricing.
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