The Beginning of the Worries

Economic

Summary:

To me, being lower than the most optimistic of the Wall Street forecasts is not a concern, bit there are two flags that are emerging right now.

Nvidia announced another very strong quarter after the bell. The company surpassed its own revenue forecast by around $2bn (again!) and printed a sales number of $35.1bn. That’s around $5bn more than last quarter’s number and almost the double of the amount earned during the same period a year ago. The company printed a total profit of an eye-watering $19.3bn – that’s also around $2bn more than pencilled in by analysts. And it made a revenue forecast of $37.5bn for the current quarter. That’s $2bn more than the actual revenue – as it has been the case for the past few quarters – but only slightly above the consensus of $37bn.

To me, being lower than the most optimistic of the Wall Street forecasts is not a concern, bit there are two flags that are emerging right now.

The company’s gross margin slightly fell last quarter from 75% to 74.6%. This number is still around 20 percentage points above AMD’s profit margin and more than double Intel’s BUT the switch to the now-famous Blackwell chip – and the manufacturing challenges, there – has been costlier than thought and took a toll on the profit margin. And Nvidia expects its gross margin to dip to 73% before rebounding back to mid-70s as it reaches large-scale production.Happily, demand for Blackwell chips is expected to exceed supply for a few more quarters but the composition of Nvidia’s customer book worries. Big Tech companies make up to 50% of revenues – up from 45% a quarter earlier. And these companies will be done buying chips at large-scale at some point. And come that day, Nvidia must find new clients. The problem is that companies other than Big Tech certainly don’t have the same means to make Nvidia’s bread and butter when competition proposes more affordable AI chips. Hence, competition and market share will become a challenge.

Nvidia fell 2.5% in the afterhours trading. Failure to break a record post-earnings, and the rising worries regarding margins and competition could lead to a certain profit taking over the next few sessions. The 100-DMA – near $125 per share – should provide the first important support to a potential pullback. We expect dip buying opportunities to emerge into $117pb – the minor 23.6% Fibonacci retracement on the AI rally.

But one thing is clear, yesterday’s announcement sounded like the next few quarters won’t be as fun as the last few ones.

As such, the S&P 500 and Nasdaq futures are in the red this morning, and we could see a deeper retracement from the ATH levels with the lack of support from Nvidia earnings.

Elsewhere, the US 20-year note sales saw a tepid demand, and Federal Reserve’s (Fed) Michelle Bowman called for caution on further rate cuts citing at slower progress in reducing inflation. The US 2-year yield rebounded yesterday, as the 10-year yield steadied near 4.40% level. Activity on Fed funds futures points at a near 50-50 chance for the December rate cut right now, and that hawkish shift in Fed expectations continues to give support to the US Dollar new a year-high levels.

This being said, the major counterparts also see some hawkish shift to their own expectations, and the latter slows the US dollar purchases. The UK, for example, printed a higher-than-expected set of inflation figures yesterday morning. Headline inflation in the UK jumped to 2.3% and core inflation to 3.3%. The jump in numbers was expected for October amid a 10% rise in the British energy price cap, but the higher-than-expected figures tamed the dovish Bank of England (BoE) expectations. And because things are expected to get worse before they get better with Donald Trump’s tariff plans and the expansionary fiscal policy from the British government, the first rate cut from the BoE is fully priced in for March, and a second for August. That hawkishness gave an energy shot to the GBP bulls yesterday, although most of the gains were given back rapidly on Fed hawkishness. Moving forward, a smaller divergence between the Fed and the BoE outlook should help throw a floor under Cable near the current levels and encourage recovery in the coming weeks.

Across the Channel, news weren’t encouraging for the European Central Bank (ECB) doves, either. Wages in the Eurozone jumped by 5.4% from a year ago, the most since the single currency exists. Germany is to blame. Wages, there, jumped by 8.8% in Q3 from a year earlier. The jump in wages growth will complicate the ECB’s plans to cut rates at the desired speed. Consequently, the retreat in dovish ECB expectations could slow down the euro selloff, and levels near $1.05 could serve as a dip to shoulder a rebound toward the 1.07-1.08 range.

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Economic

Forex

USD: Dollar holds gains

The DXY dollar index is holding gains and it is not hard to see why. US rates are being repriced modestly higher as the market shifts away from pricing a December Fed rate cut. Just 8bp of easing is now priced. At the same time, the market is bracing for Trump 2.0 and developments in overseas economies are far from encouraging. Equally, one-week USD deposits now pay 4.61% annually, second only to GBP (4.74%) in the G10 space. It is not a surprise then to see investors and corporates holding onto their USD investments.

On Monday we mentioned that the choice of the next US Treasury Secretary could prove a banana skin for US asset markets. However, it now looks (according to betting markets) that ex-Fed member Kevin Warsh is the front-runner for this role. He would be seen as a safe pair of hands given his experience at the Fed and liaison role with Wall Street after the 2008-09 financial crisis.

For today, we doubt US data will move markets although investors will again be watching whether any rise in the weekly jobless claims numbers portends a weaker November NFP report (released 6 December). Expect DXY to remain bid in its new 106-107 range with continued focus on developments in Ukraine and European speakers today.

EUR: Geopolitics and Trump threat weigh

EUR/USD looks to have been buffeted by events in Ukraine this week. The war is going through a period of escalation as both sides seek to gain ground ahead of potential ceasefire discussions early next year. That the Biden administration is providing more support before year-end warns of a more aggressive Russian response – a development which is weighing on European currencies and starting to show up in higher natural gas prices. As Warren Patterson notes in his Commodities Feed, Europe's gas inventories are now fractionally below their five-year average for this time of year. We all recall the spike in gas prices in 2022 and the damage they did to European currencies.

At the same time, we have the ECB publicly debating the potential inflationary impact of Trump's impending tariffs and what they mean to the easing cycle. Hawks think the tariff effects could be meaningful, but the doves disagree. On today's agenda, we have the full range of doves and hawks speaking and collectively they perhaps will not move the needle on the 30bp of easing priced for the December ECB meeting. This leaves EUR:USD swap differentials very wide in the dollar's favour, and combined with the threat of some soft flash November PMI numbers across Europe, tomorrow should keep EUR/USD subdued in its 1.05-1.06 range today.

Elsewhere, EUR/CHF remains on the low near 0.93. In August we had felt that EUR/CHF would stay offered for the rest of the year and recent events only add to that conviction. What interests us is whether the Swiss National Bank will take rates below 0.50% in this easing cycle (we think not). And spread compression should weigh on EUR/CHF as the ECB cuts rates 150bp into next summer. Expect EUR/CHF to grind towards 0.92 – with the main risk now probably being an SNB official saying the policy rate could go negative again after all.

TRY: Last step before first rate cut

The Central Bank of Turkey (CBT) is expected to leave rates unchanged at 50% today. The main focus will be on the central bankers' tone and forward guidance for the first rate cut. In the latest inflation assessment, while acknowledging slower-than-expected disinflation so far, the CBT pointed out a deceleration in underlying inflation last month, driven by lower core goods inflation and a more pronounced loss of momentum in services excluding rent. We think that the CBT will wait to see further inflation data, however, given the dovish signals contained within the latest inflation report release. Yet chances of a December cut have increased, in our view.

The lira saw a significant sell-off earlier in the week and a spike in the borrowing rate indicating some closing of carry trades and probably fears of an overly dovish CBT today. However, the market quickly returned to normal and after moving up to 34.600 USD/TRY the market returned to 34.455 yesterday. Even though the first rate cut is imminent, we believe the carry trade will remain a popular position here with us expecting 35.000 USD/TRY at year-end.

ZAR: Another 25bp cut from South Africa today

Given South Africa's exposure to China, the rand has been hit hard by the US election result and what it will mean for the Chinese economy and world trade next year. Unlike some other EM economies, however, South Africa has less of an inflation problem with both headline and core inflation largely within the central bank's target range. This is allowing the South African Reserve Bank to ease interest rates in an orderly manner and the market is expecting another 25bp rate cut today. This would take the policy rate to 7.75%.

Were it not for the threat of Trump 2.0, we would be a little bullish on the rand. Relatively high real interest rates in South Africa and some improvements in the domestic economy – better electricity supply is helping business confidence – should be helping the rand. Currently, USD/ZAR is trading above the one-month 17.75 target we outlined in our recent FX Talking publication. But we still have some hope for the rand.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Economic

The European Central Bank (ECB) has raised the alarm over a potential resurgence of eurozone sovereign debt vulnerabilities, as elevated debt levels, sluggish growth, and fiscal slippage converge into a dangerous cocktail.

In its latest November 2024's Financial Stability Review, the ECB warns that these factors, coupled with geopolitical tensions and policy uncertainty, could reignite fears of a sovereign debt crisis akin to the turmoil a decade ago.

“Elevated debt levels and high budget deficits, coupled with weak long-term growth potential, increase the risk that fiscal slippage will reignite market concerns over sovereign debt sustainability,” the monetary institution stated.

Rising debt costs heighten financial stability risks

The ECB warns that the era of cheap borrowing is firmly over.

Maturing debt is now being rolled over at significantly higher interest rates, pushing up sovereign debt service costs.

This dynamic poses particular risks for high-debt countries where limited fiscal space could leave governments vulnerable to sudden market shocks.

Geopolitical tensions exacerbate the problem. Energy subsidies and other fiscal measures aimed at mitigating global disruptions are further stretching budgets.

“Sovereign vulnerabilities are deepening. Despite recent reductions in debt-to-GDP ratios, fiscal challenges persist in several euro area countries, exacerbated by structural issues such as weak potential growth and heightened policy uncertainty.” ECB vice-president Louis de Guindos remarked.

The numbers don’t lie

Debt levels across the eurozone remain a glaring concern, with significant imbalances between member states highlighting the bloc’s underlying fragility.

While the eurozone’s average debt-to-GDP ratio stands at 88.1%, as per the latest Eurostat data, this figure conceals stark contrasts.

Greece leads with a towering debt ratio of 163.6%, followed by Italy at 137% and France at 112.2%. Meanwhile, fiscally disciplined countries like Germany and the Netherlands boast much lower ratios, at 61.9% and 43.2%, respectively.

Looking ahead, the outlook for debt sustainability is increasingly worrying in some of the eurozone’s largest economies. While the broader region’s government debt levels are projected to remain relatively stable, certain member states face a dangerous upward trajectory.

The International Monetary Fund (IMF) in its latest October Fiscal Monitor forecasts that by 2029, France’s debt-to-GDP ratio will climb from 112% to 124.1%, while Italy’s will surge to a staggering 142.3%, up from 136.9%. Belgium, too, is expected to see its debt rise sharply, from 105% to 119%.

These figures underscore growing vulnerabilities that could leave heavily indebted nations struggling to manage fiscal pressures in an environment of higher interest rates and subdued economic growth. Eurozone Sovereign Debt Crisis? ECB Warns of Fiscal and Growth Risks_1

Eurozone Sovereign Debt Crisis? ECB Warns of Fiscal and Growth Risks_1

A déjà vu for markets?

The markets, so far, have remained relatively calm, with volatility spikes proving short-lived. However, underlying vulnerabilities suggest that calm may not last. Fiscal slippage in high-debt countries could reignite market concerns, leading to widening bond spreads reminiscent of the eurozone debt crisis a decade ago.

The ECB acknowledges that "heightened policy and geopolitical uncertainty, weak fiscal fundamentals, and sluggish trend growth raise concerns about the sustainability of sovereign debt in some euro area countries."

"While financial markets have proved resilient so far, there is no room for complacency. Underlying vulnerabilities make equity and corporate credit markets prone to further volatility," Frankfurt warns.

The corporate domino effect

The corporate sector is not immune to sovereign vulnerabilities. Rising sovereign bond yields could spill over into the private sector, driving up funding costs for companies.

This would be particularly damaging for small and medium-sized enterprises (SMEs), which are already under pressure from high borrowing costs and weak growth.

"High borrowing costs and weak growth prospects continue to weigh on corporate balance sheets, with euro area firms reporting a decline in profits due to high interest payments," the ECB stated.

Banking resilience: A silver lining?

Unlike during the previous debt crisis, eurozone banks are better capitalised and more profitable, providing a buffer against potential sovereign and corporate credit shocks.

However, the interconnectedness of sovereign and bank risks—known as the “doom loop”—remains a concern. A deterioration in sovereign creditworthiness could erode bank balance sheets, potentially triggering a broader financial instability.

The ECB advises regulators to keep banks’ capital buffers strong and uphold rules ensuring borrowers can repay loans, aiming to maintain financial stability and prevent risky lending.

An old crisis, new risks

The ECB’s warning is clear: the eurozone is not out of the woods. Elevated debt, weak growth, and fiscal slippage are laying the groundwork for potential market turbulence.

For now, the message from Frankfurt is unequivocal: vigilance is paramount, and complacency is not an option.

Without decisive action to address these vulnerabilities, the region risks sliding into a new sovereign debt crisis.

Source: Euronews

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Warren Takunda

Stocks

London stocks were set to rise at the open on Thursday as investors mulled third-quarter results released overnight by US tech giant Nvidia.

The FTSE 100 was called to open around 40 points higher.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "Nvidia announced another very strong quarter after the bell. The company surpassed its own revenue forecast by around $2bn (again!) and printed a sales number of $35.1bn. That’s around $5bn more than last quarter’s number and almost the double of the amount earned during the same period a year ago.

"The company printed a total profit of an eye-watering $19.3bn - that’s also around $2bn more than pencilled in by analysts. And it made a revenue forecast of $37.5bn for the current quarter. That’s $2bn more than the actual revenue - as it has been the case for the past few quarters - but only slightly above the consensus of $37bn."

Shares in Nvidia fell after hours, however. Ozkardeskaya highlighted two red flags in the results.

"1. The company’s gross margin slightly fell last quarter from 75.1% to 74.6%. This number is still around 20 percentage points above AMD’s profit margin and more than double Intel’s BUT the switch to the now-famous Blackwell chip - and the manufacturing challenges, there - has been costlier than thought and took a toll on the profit margin. And Nvidia expects its gross margin to dip to 73% before rebounding back to mid-70s as it reaches large-scale production.

“2. Happily, demand for Blackwell chips is expected to exceed supply for a few more quarters but the composition of Nvidia’s customer book worries. Big Tech companies make up to 50% of revenues - up from 45% a quarter earlier. And these companies will be done buying chips at large-scale at some point. And come that day, Nvidia must find new clients. The problem is that companies other than Big Tech certainly don’t have the same means to make Nvidia’s bread and butter when competition proposes more affordable AI chips. Hence, competition and market share will become a challenge."

In UK corporate news, JD Sports Fashion said it expected full-year profits to be at the lower end of its forecast range after a "volatile" trading environment in October due to bigger discounts and milder weather, which saw third quarter like-for-like sales fall by 0.3%.

The sportswear retailer forecast profit before tax and adjusting items of £955m to £1.035bn.

Frasers Group urged shareholders to remove Boohoo's executive chairman Mahmud Kamani, to appoint Mike Ashley and James Lennon to the Boohoo board.

In response, Boohoo announced the appointment of Tim Morris as independent chair, with Kamani transitioning to executive vice chair and committing to governance measures including limiting his influence over board decisions and operations.

Frasers, which owns just over 28% of Boohoo, requisitioned a meeting for the appointment of Ashley and Lennon for 20 December, and urged shareholders to remove Kamani at a separate shareholder meeting.

Postal and courier giant International Distribution Services returned to an adjusted operating profit in the first half, as revenues grew across the group and losses at Royal Mail shrank.

The company said that Royal Mail was on track to return to a profit for the full year, though the outlook for parcel services division GLS remains uncertain with the macro environment across Europe still “challenging”.

Source: Sharecast

Risk Warnings and Disclaimers

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SAXO

Economic

Macro data and headlines:

France’s National Rally leader Le Pen threatens to bring down the French government on budget dispute as she weighs in against PM Michel Barnier’s taxation increases.

Fed Governor Bowman, who dissented at the September Fed decision to cut rates by 50bps, remained hawkish calling for a cautious approach, noting how she sees greater risks to the price stability mandate. Governor Cook largely kept options open in her speech, noting policy is not on a pre-set path.

Geopolitical enthusiasm on reports that Russian President Putin is open to talking about a Ukraine ceasefire with US President-elect Trump. However, risk off was later seen in wake of Bloomberg reports that Ukraine fired a UK storm shadow missile into Russia.

Equities:

US: Markets closed mixed on Wednesday, with the S&P 500 flat and the Nasdaq 100 dipping 0.1%. Nvidia's earnings exceeded expectations, reporting a 94% YoY revenue increase to $35.08 billion and net income nearly doubling to $19.3 billion. Despite these strong results, its shares fell 1.8% in after-hours trading due to tempered Q4 guidance. (read more here:

Why Nvidias Story is Far From Over) Target tumbled 21% after missing earnings expectations, while Snowflake rose 19% after hours on better-than-expected revenue growth and positive guidance.

Asia: Most Asian markets declined as Nvidia's mixed signals triggered cautious sentiment, with Japan's Nikkei 225 down 0.7% and TSMC losing 1%. Some Nvidia suppliers, such as SK Hynix and Samsung, gained on news of advanced chip production. Chinese markets weakened as the PBoC held rates steady, disappointing stimulus expectations. Geopolitical tensions around Ukraine and Russia further dampened sentiment.

Europe: The Stoxx 50 fell 0.5%, while the Stoxx 600 edged down 0.1% amid escalating geopolitical tensions as Ukraine fired missiles into Russian territory. Banks and autos led losses, with key players like Santander and Mercedes-Benz down over 1%. ASML dropped 1.5% ahead of Nvidia’s earnings, as investors brace for AI demand guidance.

Volatility

Volatility increased notably, with the VIX rising 4.95% to 17.16 and the VIX1D climbing over 64% to 19.11, reflecting elevated short-term risks. The VVIX spiked 4.83 points to 102.2, signaling heightened hedging activity. Nvidia's implied move remains significant at ±8%, driving market-wide volatility expectations. For broader indices, expected daily moves are 0.87% for the S&P 500 and 1.46% for the Nasdaq 100. Most active options included MicroStrategy, Mara Holdings due to continued interest in crypto related stocks and Target, reflecting post-earnings momentum. Economic data releases today, including jobless claims and home sales, could further shape sentiment.

Fixed Income

European sovereign yields rose modestly as UK inflation unexpectedly accelerated in October, pushing long-dated gilts yields higher. The German curve steepened slightly, with 10-year Bund yields ending the day at 2.35%, while 10-year gilt yields closed at 4.47%. Markets held steady on ECB rate-cut expectations despite strong euro-zone wage growth. In the US, Treasuries weakened across the curve after a poorly received 20-year bond auction, with 10-year Treasury yields finishing at 4.44%, erasing earlier risk-off gains tied to geopolitical tensions. Overall, both European and US bonds faced selling pressure amid weaker auction results and inflation concerns.

Commodities

Gold has retraced half the recent 253-dollar correction, reaching its 50-DMA at USD 2,661 as geopolitical concerns continue to feed fresh momentum. Silver’s so-far sluggish recovery highlights this concern as the main driver, with limited support from industrial metals, which continue to be weighed down by the tariff threat to demand. Crude remains stuck near the range low after US inventories exceeded expectations, and concerns persist about a surplus next year from slowing Chinese demand and high production. US natural gas surged to a ten-month high at USD 3.335 due to incoming cold weather and exports lifting demand, while European prices trade near a high for the year on winter supply concerns. Arabica coffee futures rose to a 13-year high at USD 2.925 per pound due to supply concerns in Brazil, the top producer, as it faces reduced arabica output this season due to drought.

Currencies

The US dollar rebounded broadly yesterday, though largely continues to churn within a range against the other major currencies. USDJPY retreated sharply in the Asian session overnight on rhetoric from the Bank of Japan, as governor Ueda said that the bank is closely watching the impact of FX on the economy and inflation, though he refused to provide guidance for the December BoJ meeting, saying that there would be a lot of further data available before that meeting. This will likely enhance market reactivity to the Japan CPI figures up tomorrow in Asia (late tonight European time). Yesterday’s hotter than expected UK CPI failed to sustain a sterling rally, suggesting a concern that sustained high BoE rates are not necessarily supportive of the currency if the UK is suffering mild stagflation.

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Warren Takunda

Economic

Stocks

Asian shares were mostly lower on Thursday as regional markets tried to digest the strong and highly anticipated profit report from Nvidia.

Nvidia again topped analysts’ expectations. But technology shares in Tokyo declined as they had already risen earlier in anticipation. In after-hours trading, Nvidia’s shares lost 2.5%.

Japan’s benchmark Nikkei 225 shed 0.9% to 38,025.66, as shares in semiconductor equipment maker Advantest Corp. dropped 2.6%. Chip maker Tokyo Electron shed 0.5%.

Australia’s S&P/ASX 200 slipped less than 0.1% to 8,323.00. South Korea’s Kospi rose 0.5% to 2,493.73. Hong Kong’s Hang Seng dipped 0.2% to 19,667.42, while the Shanghai Composite rose less than 0.1% to 3,368.80.

Stephen Innes, managing partner at SPI Asset Management, noted the market reaction to Nvidia’s results was muted, partly because of the positioning that happened before the release. Its long-term prospects remain complex, he added.

“The bigger question remains: where exactly is the bar for Nvidia now?” Innes said. “This push to integrate AI into every corner of the corporate world risks backfiring when the technology is forced into roles it isn’t fully equipped to handle.”

Trading in the options market suggested Nvidia’s profit report was the most anticipated event left in 2024, more than even the Federal Reserve’s upcoming meeting on interest rates, according to Barclays Capital.

Nvidia has grown into a nearly $3.6 trillion behemoth because of nearly insatiable demand for its chips used in artificial-intelligence technology.

It’s grown so fast, with its stock nearly tripling for the year so far, that pressure has grown for it to show it can keep leapfrogging past analysts’ already high expectations.

On Wall Street, the S&P 500 finished the day virtually unchanged, at 5,917.11 after coming back from a loss of 1%. The Dow Jones Industrial Average eked out a 0.3% gain, to 43,408.47, and the Nasdaq composite slipped 0.1% to 18,966.14.

AdvertisementU.S. retailer Target’s 21.4% tumble followed a report showing weaker profit and revenue for the latest quarter than analysts expected. The retailer also gave a forecast for profit in the upcoming holiday season that was below analysts’ estimates.

Rival Walmart reported another quarter of stellar sales Tuesday and released optimistic projections for the holiday season.

Hints about how U.S. consumers are doing are under particular scrutiny, since their spending will help determine if the U.S. economy will continue growing and avoid a recession. Shoppers are contending with high prices across the economy and still-high interest rates.

“I find the Target and Walmart earnings very interesting because we typically see a waterfall type effect when the economy begins to struggle, with shoppers trading down from stores such as Target to Walmart,” said JJ Kinahan, CEO of IG North America.

Comcast rose 1.6% after announcing the spinoff of USA, CNBC, MSNBC and other cable television networks into a standalone company that will have its own stock trading on the market.

AdvertisementAll told, the S&P 500 inched up by 0.13, or less than 0.1%, to 5,917.11. The Dow Jones Industrial Average added 139.53 points to 43,408.47, and the Nasdaq composite slipped 21.32 to 18,966.14.

Financial markets are also still absorbing the impacts of Donald Trump’s victory in the presidential election, including expectations that Trump’s policies will drive faster U.S. economic growth and inflation.

Treasury yields held relatively steady in the bond market. The 10-year yield edged up to 4.41% from 4.40% late Tuesday. It has been generally rising from less than 3.70% in September.

In energy trading, benchmark U.S. crude gained 12 cents to $68.87 a barrel. Brent crude, the international standard, added 12 cents to $72.93 a barrel.

In currency trading, the U.S. dollar fell to 155.09 Japanese yen from 155.31 yen. The euro cost $1.0552, down from $1.0546.

Source: AP

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Danske Bank

Economic

In focus today

Today, in the euro area we receive data on consumer confidence for November. We have seen a strong upward trend the past year, which bodes well for consumption next year if it continues.

In Sweden, we have a speech by Riksbank vice governor Per Jansson at 14:45 about the economic situation. According to the Minutes, Jansson cited a slower-than-anticipated economic recovery as his reason for supporting a 50bp rate cut. He concluded that overall inflation risk is trending downward, although he balanced that by highlighting two upside risks: the krona and food prices, which in the worst case could delay rate cuts or even justify hikes.

In the US, we receive initial jobless claims and the Philly Fed Business index for November, which measures growth in the manufacturing sector, where consensus suggests 8.0.

Several central bank speeches from both ECB and Federal Reserve again today including Knot, Holzman and Lane, where the market will look for clues on monetary policy ahead of December announcements.

Overnight, the Japanese Statistics Bureau publishes inflation data for October. Tokyo data indicates, inflation declined further, but price momentum rhymed with 2% annual inflation. Consensus sees 2.2% with September inflation of 2.4%. This will be the last nationwide print ahead of the December BoJ meeting.

Economic and market news

What happened overnight

In the US, Yesterday’s auction of USD 16bn in the 20Y was very weak with a very high tail and low demand from direct bidders. However, the 20Y segment on the US Treasury curve usually attracts low demand as it is a new segment on the yield curve (was introduced in 2020) similar to what we see on the German curve, where the 15Y-20Y segment also attracts low demand and have to offer an extra premium to investors. Hence, it should not have significant impact on the long end of the Treasury curve.

What happened yesterday

In the euro area, negotiated wage growth increased to 5.4% y/y in Q3 from 3.5% in Q2, influenced by seasonal factors such as bonuses and recent increase in German special payments. Despite this volatility, average negotiated wages have now increased 4.6% y/y, up from 4.4% y/y in 2023, indicating persistently strong wage trends. This sustained wage growth is expected to continue influencing services inflation. However, the ECB’s focus has shifted from inflation concerns to growth, lessening the impact of the data on future policy rate decisions.

In the UK, October’s inflation figures surpassed expectations with headline CPI at 2.3% y/y (cons: 2.2%, prior: 1.7%), and core CPI at 3.3% y/y (cons: 3.1%, prior: 3.2%). The rise in the headline is primarily due to quarterly adjustments in household energy bills. Given this, we therefore caution reading too much into this print given the significant impact of energy costs.

Equities: Global equities were marginally lower yesterday, and it was definitely not the Trump trades outperforming. Health care is finally showing some defensive characteristics after having faced several challenging weeks following the elections. Materials also outperformed on a negative day, a sector which has also been challenged over the last couple of weeks. European stocks once again started the day in the green before ending in the red. This illustrates quite well the investor scepticism, fear, and uncertainty related to geopolitics, German politics, struggling manufacturing sectors, and challenging structural outlooks related to Europe. What seems to be missing is the belief in potential upside surprises in Europe, despite economic surprises currently being positive for the region. In the US yesterday, Dow +0.3%, S&P 500 +0.00%, Nasdaq -0.1%, and Russell 2000 +0.03%. Asian markets are mixed this morning, with South Korea standing out once again, this morning on the positive side. European futures are higher – let’s see if the strength can continue throughout the cash session. US futures are slightly lower but without a massive impact following the Nvidia earnings in the after-hours yesterday.

FI: Geopolitics continued to add downward pressure on global rates through yesterday’s session. The EUR swap curve rose modestly across tenors during the first part of the session, but the move faded quickly as news of another Ukrainian attack on Russian soil reached the wire. The EUR swap curve ended the day marginally higher across tenors, while the Bund ASW-spread move slightly higher to 2-week high of 2.5bp.

FX: USD and CAD gained the most yesterday and NOK and SEK lost out on another relatively quiet day for the FX market. EUR/USD traded in the 1.05-1.06 range, EUR/SEK rose above 11.60 and EUR/NOK climbed towards 11.70.

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The Beginning of the Worries

FX Daily: Soft Euro Story Dominates

USD: Dollar holds gains

EUR: Geopolitics and Trump threat weigh

TRY: Last step before first rate cut

ZAR: Another 25bp cut from South Africa today

Eurozone Sovereign Debt Crisis? ECB Warns of Fiscal and Growth Risks

Rising debt costs heighten financial stability risks

The numbers don’t lie

A déjà vu for markets?

The corporate domino effect

Banking resilience: A silver lining?

An old crisis, new risks

Source: Euronews

London Pre-Open: Stocks Seen Up as Investors Mull Nvidia Results

Source: Sharecast

Global Market Quick Take: Europe – 21 November 2024

Macro data and headlines:

Equities:

Volatility

Fixed Income

Commodities

Currencies

Stock Market Today: Asian Shares Mostly Slip Despite Nvidia’s Solid Earnings Report

Source: AP

Euro Area Consumer Confidence Out Today

In focus today

Economic and market news

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