Market movers today
Focus will be on the ECBs asset quality review and stress test, which were released yesterday. Overall, we expect a muted positive reaction, as capital shortfalls were less than expected, ECB comprehensive assessment: Capital shortfall less than expected, 27 October 2014 .
The European banking sector will get additional attention, as bank lending and money supply figures are due for release. We expect the lending to non-financial corporations to show a continued decline in the pace of deleveraging.
German IFO expectations are expected to be unchanged in October. Although the German PMI increased in October, the upside risk should be limited, as history suggests we need to see a period of smaller declines or stabilisation before the index moves higher again and we have not seen this yet.
During the rest of the week, focus will be on the Fed meeting, where the 'considerable time' forward guidance is likely to be reiterated. In the euro area inflation is set to increase to 0.6% y/y in October from 0.3% y/y in September. The Swedish Riksbank is expected to cut the policy rate by 15bp to 0.10% and to present a significantly flatter rate path.
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