The crude oil price fell with Brent crude back at USD48/bbl

Market Movers

Norges Bank meeting to take centre stage in Scandi markets. We look for a rate cut, whereas market pricing and consensus are for unchanged rates.
German Ifo expectations are expected to decline in line with the German PMI and ZEW figure but if the decline is modest like the PMI’s, it suggests that the latest weakness is mainly in the financial sector, which might reduce some of the growth concerns. However, we expect the euro area PMI to weaken further.
In the US durable goods orders are due for release. The core measure in the report, non-defence capital goods orders ex aircraft, rebounded in July, suggesting a healthy momentum in business capex into August and it will be interesting to see if the August data look equally strong.
Fed chair Yellen speaks late tonight and any elaboration on the FOMC’s decision to take the cautious approach will be in focus. Earlier this week Fed members Lockhart, Williams, Bullard and Lacker signalled that it is most likely that the Fed will raise rates later this year.
Nordic Outlook is due for publication at 09:00 CET.

Selected Market News

Sentiment soured overnight not least in Japan after the September manufacturing PMI came in at a disappointing 50.9, down from 51.7 last month. Nikkei is down more than 2% at the time of writing but USD/JPY remains around the 120 level. Although our baseline remains that Bank of Japan will simply continue its existing QE programme until 2017, speculation is mounting that BoJ will be forced to do more, not least if USD/JPY dips to the 115 level. US equities ended the day slightly lower after small gains in Europe; the Volkswagen emission scandal yesterday led CEO, Winterkorn, to step down and the company expects to announce a new head on Friday.

Yesterday’s ECB member communication did not succeed in pricing out the likelihood of a deposit rate cut despite both Nowotny and Draghi emphasising that the QE scheme can be adjusted if the inflation target is at risk and that this is the preferred option; Weidman’s comments that deflation fears were ‘exaggerated’ should not come as a surprise in any case. The market is now pricing in close to a 50/50 chance of a 10bp cut in the deposit rate from the ECB, which we do not expect to happen at this stage given that Draghi has consistently dismissed it as a likely option after the cut to - 20bp in spring 2014. Bund yields have been under pressure recently but rose a tad on Wednesday; US Treasury yields were little changed on the day with benchmarks up a few bp across the curve.

The crude oil price fell with Brent crude back at USD48/bbl after EIA data showed a climb in US production and as seasonal refinery shutdowns are starting to take their toll on demand.

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