Market movers today
The main event today is the Riksbank meeting which will also see the release of new forecasts. On the back of inflation prints on track with its forecasts and inflation expectations close to the target, we expect the Riksbank to stick to its intentions set out in September, i.e. it will basically signal an intention to raise the repo rate by 25bp in December and then twice a year going forward.
The euro area flash PMIs for October are due today. In September, manufacturing numbers continued this year's declining trend and fell to 53.2, while services rose slightly to 54.7. We expect services PMI to extend the pickup and rise to 54.9; in contrast, we see a downside risk for manufacturing PMI, declining further to 53.0 due to the deteriorating new orders component in the latest reading.
Selected market news
Unleashed risk-off sentiment has spread through the markets pushing stocks and major yields lower. Oil price sank, while Europe's periphery spreads widened further. The global sentiment has been weighed by declining Chinese stocks, which lost the rest of their recent rebound, spilling over the contagion to Asian markets. As the EU published 'a negative opinion' on Italian budget, country's spreads started leading widening across the rest of European periphery.In emerging markets yesterday, the Turkish lira was under pressure as domestic politics hit the sentiment: the President Recep Erdogan's AK Party and the nationalist MH Party seem to face a rift. The AKP needs other parties in the parliament to pass laws. The MHP's leader told that he would terminate a voting union with Erdogan. Also yesterday Erdogan got tough on Saudis claiming that the Saudi journalist Jamal Khashoggi's murder was a part of planned operation. (Geo)politics seem to be the main driver for Turkish assets in the near term.
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