Market Review – Fundamental Perspective 1 November 2017

The markets were seen trading subdued yesterday. The Bank of Japan held its monetary policy steady, and in the Eurozone, flash inflation estimates showed that consumer prices rose 1.4% on the headline and 0.9% on the core. This was weaker than the estimates. However, flash GDP showed a 0.6% increase for the third quarter, while the second quarter GDP was revised higher to 0.7%. In Canada, the monthly GDP data posted a 0.1% decline which missed estimates of a 0.1% increase.
Looking ahead, the economic data today will see the release of the manufacturing PMI for the UK. Economists are forecasting a modest print of 55.8, slightly down from 55.9 in September. The NY trading session will see the ADP private payrolls data coming out. Estimates point to a 202k print for September. Revision for the previous month is expected as well. This is followed by the ISM manufacturing PMI which is expected to show a decline in the index to 59.5 in October, following 60.8 the month before.
On Tuesday, the Bank of Japan made no changes to its huge monetary stimulus plan even as it reduced its inflation forecasts. The BoJ board voted, 8-1, to maintain the central bank’s yield curve control program and asset purchases. The board kept its view that its 2% inflation target is likely to be met at the start of the fiscal year that begins in April 2019. Governor Kuroda continued to stress the importance of maintaining monetary easing as the world major Central Banks are moving towards monetary normalization. However, this is whilst the Japanese economy is seeing its longest expansion since 2001, with equities at their highest level in 20 years and a labor market that is the tightest for several decades.

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