Markets: What is most important in the week ahead? – Nordea Markets

Analysts at Nordea Markets suggest that this week will be another important data week, as the flash Euro-area core inflation estimate is released, alongside another test of the otherwise surprisingly resilient ISM indices.

Key Quotes

“Euro-area core inflation will rebound in October (Wednesday). Potentially a lot (compared to the 0.9% reading in September). A seasonality study suggests a core inflation reading of 1.2% in October (also our forecast), which is why even 1.2% shouldn’t be seen as a sign of a positive trend shift. We are still some way from the vigorous inflation pressure that Mario Draghi prewarned of in September.”

“In the US, both the ISM index and the monthly job report are out (Wednesday / Friday) The recent cyclical sell-off is a signal that the market is betting on less good times ahead for the ISM index.”

“To put it a bit bluntly, the ISM index has turned into a spurious indicator, as the index has been out of sync with the actual economy for a while.”

“We sound like we are stuck on repeat, but the wage growth component of the US job report on Friday will be more important than the monthly job numbers. We continue to see upside risks to wage growth heading into 2019. This should eventually push US inflation higher, while a short-term (2-3 months) acceleration in US inflation is difficult to spot.”

“Also the updated quarterly funding plan from the US treasury (Monday), may offer some new bond-bearish news.”

“In the UK, a big week is coming up as the Bank of England will meet on Thursday, and the quarterly inflation report is published at the same time. We think the Bank of England will opt for a cautious approach given the huge number of what-ifs due to the Brexit uncertainty. BUT don’t rule out a slight hawkish twist also from the Bank of England in line with recent signals seen elsewhere in G10.”

“Also Monday’s autumn budget proposal could prove to be a market mover, given DUP’s threats to block the budget.”

“Also the Chinese Caixin PMI on Thursday will be extra interesting given the ongoing turmoil between US and China.”