Market movers today
In the UK, we look forward to the Chancellor’s Autumn Statement today, where PM Sunak’s government will spell out its fiscal plans. It is widely expected to include tax increases across the board to fill up the hole of approximately GBP 50bn in the UK’s public finances.
Euro area inflation surprised again to the upside in October and the final release today will provide details on the drivers.
US housing starts will probably bring more evidence that the housing market continued to cool in October. A range of Fed speakers will also be on the wires.
Norges Bank (NB) will release the results of its Q4 expectations survey. For NB to continue to signal a trade-off between inflation and growth, wage and price expectations need to be anchored. We believe it is too soon to expect a meaningful drop in inflation expectations, but wage expectations (for next year) could well level off, giving some support to NB’s narrative.
The 60 second overview
US: Votes from the US midterm election have been counted and the Republican party won majority in the House of Representatives by a slim margin.
Macro: US retail sales rose 1.3% in October and much more than expected by analysts. Higher gasoline prices explain some of the rise in consumer retail spending, but sales were broad based. It also means that the drop in CPI hardly reflects a drop in US demand.
Oil: The Druhba oil pipeline was up and running again yesterday after a power outage due Russian missile strikes on Tuesday halted flows. Quiet has returned to oil prices after the brief spike.
FI: Global bond yields continue to decline from the long end of the curve. 10Y US Treasuries fell 9bp, while 10Y Bunds fell 11bp and we are again below 2% in the Bund. We also saw a widening of the German ASW-spreads after a long period where the ASW-spreads have tightened.
FX: Relatively quiet day yesterday, as soon as the geopolitics were taken care of. EUR/USD rally potentially losing steam and consolidating around 1.04 for now, while Scandies have traded on the back foot in recent sessions. Brent oil 1.5% lower since start of the week and US equities in red yesterday. PLN regain its previous losses, with EUR/PLN back at 4.70, as there was no further escalation yesterday.
Credit: Credit markets took a breather from a long streak of gains, with iTraxx Xover widening almost 14bp while Main widened 3bp.
Nordic macro
Norges Bank (NB) will release the results of its Q4 expectations survey. For NB to continue signal a trade-off between inflation and growth, wage and price expectations need to be anchored. We believe it is too soon to expect a meaningful drop in inflation expectations, but wage expectations (for next year) could well level off, giving some support to NB’s narrative.
