In focus today
From the US, October PPI is due for release today. Yesterday’s CPI print was largely in line with expectations (see more in section below) hence it will be interesting to see if October PPI data mirrors this. In the evening, the Fed chair Powell will be on the wires.
In the euro area, we will receive the second estimate of Q3 GDP. Focus will be on employment developments in Q3, since a continued strong labour market is important for the growth outlook in 2025. We will also receive industrial production data for September, which will show how actual production fared. The data is interesting as hard data has been better compared to PMIs in the manufacturing sector. We also get the ECB minutes from the October meeting.
In Sweden, the final inflation data for October is released at 8.00 CET. The reading will provide insights into last week’s flash estimate, which was a bit higher than expected, and deviated 0.3-0.4 pp. from the Riksbank’s September forecasts. We suspect the deviation could be due to higher food prices, as was largely the case in September.
Overnight, we get the monthly batch of data in China for retail sales, home sales, home prices, industrial production and investments. Focus will be on the housing data as a recovery here holds the key to unleashing private consumption as well. Some early data has suggested home sales rebounded in October following the recent stimulus measures.
Similarly, we also receive Japanese Q3 national accounts including GDP growth overnight. Both the Tankan and PMI surveys suggest the recovery has remained on track. Demand also looks quite solid, particularly exports. Consensus sees modest 0.2% GDP growth following the 0.7% Q2 rebound.
Economic and market news
What happened yesterday
In the US, October CPI was largely in line with expectations at 0.2% m/m SA (cons: 0.2%, prior: 0.2%). While the annual figure jumped to 2.6% y/y from 2.4%, the uptick was almost purely related to a weaker print a year ago. The core measure also came in as expected at 0.28% m/m SA (cons: 0.3%, prior: 0.31%). Around 60% of the increase in core prices attributed to the shelter component, which ticked higher in October, but remains on a cooling trend. All other major components in the core inflation basket showed easing price pressures. Overall, the print supports our call for the Fed to deliver a 25bp cut in December. Moreover, a series of Fed speakers was on the wire, all expressing uncertainty over where rates ultimately would settle.
In politics, the US Republican party secured the 218 seats required to control the House of Representatives. This officially confirms the very widely anticipated red sweep as the GOP now controls the House, the Senate and the Presidency.
In Germany, the country’s biggest industrial union, IG Metall, reached a new wage agreement with employers. The new agreements include a wage increase of 2.0% in 2025 and 3.1% in 2026 plus a one-off payment of EUR 600 in 2025 (down from EUR 1,400 in 2024). The low increase for 2025 reflects weaker bargaining power in German industry. With 3.9 million members, IG Metall’s deal sets a key low benchmark for other sectors and may also influence the ECB’s December staff projections for wage growth next year, supporting the case for back-to-back rate cuts in 2025. However, the employment situation in German industry is relatively weak, meaning that its impact on aggregate euro area wage growth could be lower than usual. In 2026 real wage growth in Germany is expected to markedly rebound as the collective agreement also includes an 8pp increase in the supplementary payment, benefitting lower-wage groups most. While wage growth has been elevated in the recent period, we believe elevated wage growth concerns have become smaller for the ECB.
In Sweden, the Rikbank’s minutes from the November meeting suggested that the board see balanced risk to their inflation forecasts and that upside risks to inflation stem primarily from a weaker SEK and food prices.
In crypto space, Bitcoin continued its upward trend, breaching USD 90,000 for the first time ever during yesterday’s session spurred by Trump’s election win last week. Prior to his victory, Bitcoin was hovering around USD 70,000. As of this morning, it is trading around USD 89,840.
Equities: Global equities were marginally lower yesterday with the US once again outperforming, although not to the same extent as in the first days after the US election. The Republican party surpassed the 218-line for the House of Representatives. Hence, we can now firmly conclude the red sweep, although nine districts still need to be decided.
Despite equities moving slightly lower yesterday, we observed the VIX index drifting lower. While not being overly controversial, it still suggests to us that investors are rather confident about the economic outlook, and we are seeing opinions converging. We would not be surprised to see surveys soon indicating that investors are aligning in terms of risk levels, regional, sectoral, and style allocations. In the US yesterday: Dow +0.1%, S&P 500 +0.02%, Nasdaq -0.3%, and Russell 2000 -0.9%. Asian markets are mixed this morning. The same could be said about Western market futures, with European futures being higher while US ones are slightly lower.
FI: European rates traded in a very tight range yesterday, with 10y bunds in a 4bp high-low range. The US CPI sent short-end US bond yields sharply lower, albeit it was short lived. By the end of the trading session the US yield curve steepened in both the 2s10s and the 10s30s segments. After a couple of days with ASW-spreads trading in positive territory, the Bund-spread went negative again yesterday amid significant supply. ECB’s Kazaks argued for a measured pace in rate cuts and highlighted that the Q3 GDP print made him less concerned with the labour market situation.
FX: Despite details leaning to the softer side, a renewed leg of broad dollar strength followed yesterday’s US CPI. EUR/USD is consolidating at year-to-date lows below 1.06 whereas USD/SEK is challenging previous 2024-highs around 11.00. EUR/SEK and EUR/NOK both kept within previous ranges, but NOK/SEK edged slightly higher. The sterling fared second best within G10, holding steady versus the dollar on the day and strengthening slightly versus the euro. USD/JPY is back above 155 for the first time since the last round of Japanese FX interventions in mid-July.
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