Market Movers
Focus will be on the release of euro area PMIs. So far, the manufacturing PMI seems broadly unaffected by the weakness in emerging markets, even though we have had a couple of months with falling financial sentiment indicators (Sentix and ZEW). In line with the financial sentiment we expect a decline in the manufacturing PMI, which would also be consistent with the lower order-inventory balance and the recent weak German data. The German PMIs should decrease the most as the Volkswagen (DE:VOWG) exhaust scandal is likely to add to the negative sentiment, whereas the French PMIs are set to be less affected as suggested by the recent improvement in French business surveys.
US manufacturing PMI is also released and consensus is for a broadly unchanged figure of 53 from 53.1 in September. Despite the fall in September the manufacturing PMI was still much higher than the manufacturing ISM, which came out at 50.2. The question, then, is whether there will still be a big gap between the two indices or whether they will converge. Weak export data for September suggest that the manufacturing sector is still under pressure from reduced global demand and a stronger dollar, so we see a slight risk of the PMI falling to a level closer to 50.
In the euro area the inflation expectations in the Survey of Professional Forecasters are released and although we expect a decline in the longer-term inflation expectation it should not have a large market impact following the very dovish comment at yesterday's ECB meeting (see below).
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