Today's Key Points

Daily Forex Fundamentals | Written by Danske Bank | Aug 04 08 07:23 GMT |

Danske Daily The bearish sentiment in the equity markets continue, led by automakers and commodity producers. However, the US bond market rallied after the labour market report and ended Friday down a few bp. Key events today are Euroland PPI data and personal spending from the US including the core PCE deflator - we expect an 0.3% m/m rise in the core PCE deflator. Markets Overnight Asian stock markets declined for a second day following the negative sentiment from the US markets. The decline was led by automakers and commodity producers, after Nissan and Olympus Corp. said that their earnings dropped, and metal prices retreated. BHP, the world's largest mining group, lost 1.6%. The MSCI Asia pacific index lost 1.3% and the Nikkei index has shed 0.6% this morning. US stocks performed very poorly on Friday, adding to two months of losses for the S&P 500 Index, after the labour market report showed an increase in the unemployment rate to 5.7% in July, and some horrible data from General Motors, the number one US car maker, which plunged after posting the third-biggest loss in its 100-year history. This coincided with a report showing that US auto sales tumbled 13% in July. S&P500 lost 0.6% on Friday. The US bond market had a volatile session on Friday, starting at 3.95% in 10Y Treasuries bouncing up to 4% before ending the session at 3.93%. A mixed session in Asian bond markets, where yields on 10Y JGB rise ahead of a government bond auction tomorrow. In the currency markets USD/JPY and EUR/USD have been range trading this morning. USD/JPY is trading at 107.7 more or less unchanged from Friday's close. The dollar is modestly weaker against the euro this morning, trading around the 155.8-level after having traded at 155.5-level on Friday. SEK has stabilised at the 947- level versus the euro, while EUR/NOK is trading at the 800-level this morning. Global Daily After a hectic ending of last week, today's calendar is somewhat lighter. In Euroland the only data of interest is the June PPI data at 11:00. Later in the day, at 14:30, the June US personal spending report is due. The key data of the report is the core PCE deflator. Here we expect that an unfavourable decimal rounding will result in a 0.3% m/m reading - slightly higher than the consensus expectation of 0.2% m/m. This should take annual core PCE inflation a notch higher to 2.3% m/m. The report will also include personal nominal spending, where we look for a 0.5% m/m (consensus 0.5% m/m) reading. Despite solid nominal growth, real personal spending should decline slightly in June due to extremely high headline PCE inflation. Generally, however, the information in the report should be relatively redundant, as Q2 national accounts were released last week and the June data had been implemented in these numbers. In the bond markets attention is likely to mostly focus on key events later this week, when all G3 countries will see monetary policy decisions - Tuesday at the Fed and Thursday at ECB and BoE. Lending surveys from the Fed and ECB, which may be published this week, are also likely to be key events. As the earnings season continues at full speed, it will also be important to keep an eye on the Q2 reports throughout the week. Given the weight of the events ahead, we expect bond markets to trade relatively sideways today, barring any significant sentiment drivers from commodity or equity markets. Danske Bank http://www.danskebank.com/danskeresearch Disclaimer This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets' research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.