Fundamental Analysis 09.10.2017 - German Industrial Production

There’s not much on the schedule today, and with the US market thinned out for the Colombus Day holiday, activity is likely to be particularly slow.

The Scottish National Party Conference began yesterday. Normally this wouldn’t be a market-worthy event, but with Catalonia erupting in a drive for independence and the Brexit talks faltering, it’s natural to question how Scotland is going to react to all this. Will they resume their demand for independence?

The only major indicator out during the European or US day today is the German industrial production (IP). It’s expected to show a rebound in activity on a month-on-month basis, but for the year-on-year rate of growth to decelerate somewhat. Nonetheless, the manufacturing PMI for August was sharply higher at an extremely high level (59.3, up from 58.1) and rose even higher (60.1) in September. The Ifo index for current assessment also rose in August. While this does illustrate the often-discussed gap between the “hard” data, such as the IP figures, and the “soft” data from surveys such as the PMI and Ifo, I think the unusually high level of the surveys, plus the general optimism towards the European economy, will allow markets to ignore a slight slowdown in the year-on-year data. EUR-neutral.

After that, nothing on the schedule until Japan announces its current account balance. For some reason the market seems to pay more attention to the not seasonally adjusted data than to the seasonally adjusted data. In this case however both are expected to be little changed, so I don’t think the figure will have a big effect on the yen.

The campaign for the 22 Oct 2017 Lower House election in Japan also gets under way today.

National Australia Bank (NAB) announces its business conditions and business confidence indices. No forecasts are available. The figure is occasionally market-moving, though. I would expect that if the divergence between the two indices continues, that would tend to be negative for AUD, while if it starts to reverse, that would be positive.

Finally, early in the European day Tuesday 10 October 2017, Germany announces its trade data. The country’s trade surplus, which has become politically sensitive now with the Trump administration, is expected to decline. That may be good news for the euro, although a fall in the country’s overall trade surplus doesn’t necessarily mean a fall in its surplus with the US.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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