In focus today
The main data event will be the US Jobs Report for November. We expect Nonfarm Payrolls growth to recover to 160k (cons: 200k, prior: 12k) after temporary weather-related effects have reversed. We anticipate average hourly earnings growth moderated to +0.2% m/m SA and unemployment rate remaining steady at 4.1%. Preliminary results from University of Michigan’s December consumer sentiment survey are also due for release.
Ahead of the December ECB meeting, we receive the final estimate of Q3 national accounts. September ECB staff projections estimated compensation per employee would remain at 4.5% y/y in Q3 like in Q2. However, due to data on negotiated wages showing a significant increase in Q3 from Q2, we expect wage growth will likely come in above projections. The batch of data today will also include a breakdown of the GDP components as well as profits, productivity, and hours worked.
In Germany, we receive data on industrial production in October. Industrial production has been on a negative trend the past two years, and data on factory orders yesterday indicates that the decline continued in October.
The Swedish National Debt Office will report the results of the state’s payments for November. Deputy Governor of the Riksbank, Anna Seim, will deliver the last scheduled speech (at 10:45 CET) on the theme of current monetary policy and the economic situation, before the publication of the Riksbank’s decision on 19 December.
FOMC’s blackout period ahead of the December meeting starts on Saturday, and Chicago Fed’s Goolsbee, Cleveland Fed’s Hammack and SF Fed’s Daly will have their chances to share final reflections on the data in scheduled speeches in the evening.
Over the weekend, the South Korean opposition has scheduled an impeachment vote for Saturday evening in the hopes of removing President Yoon Suk Yeol.
Economic and market news
What happened overnight
In South Korea, the ruling party leader said that President Yoon Suk Yeol needed to be removed from authority for his move to impose martial law earlier this week.
In Japan, October wage data revealed nominal wage growth of 2.6% y/y – a slight increase compared to revised September data at 2.5% y/y. It leaves real annual wage growth close to zero; neither an argument for rate hikes, nor cuts.
What happened yesterday
In France, President Emmanuel Macron was on the hunt for a new prime minister after Michel Barnier officially resigned following his ousting in Wednesday’s no-confidence vote. President Macron is presumably hoping to avoid a deadlock which could result in an early presidential election before the end of his term in 2027. We anticipate the passing of a ‘special law’ that will extend the 2024 budget into 2025. This measure would ensure the continuation of minimum state expenditures and revenue collection from 1 January 2025, until a new government is able to propose a formal budget.
In the euro area, retail sales rose slightly more than expected by 1.9% y/y in October (cons: 1.7%, prior: 3.0%). Retail sales in the euro area has been on a positive trend the past year, strengthened by improving consumer confidence. Private consumption is expected to be the main growth driver next year, and the increased retail sales is supporting this narrative.
In Sweden, preliminary November inflation sharply overshot the Riksbank’s forecasts as expected. While higher than forecast, we anticipate the Riksbank to look through headline inflation caused by soaring electricity prices for now. However, with core higher and growth data on the positive side, a 50bp rate cut is improbable, instead we expect a 25bp rate cut compared to markets pricing in a 30bp rate cut.
In Oil markets, OPEC+ scaled back pumping plans by 818,000 b/d in 2025. Following the announcement, the global oil benchmark Brent crude LCOc1 gained 0.4% to 72.59, however since June oil has slid by about 10%. The decision is due to a significant downward revision in oil demand for 2025, primarily driven by decreasing demand for oil in China.
Equities: Global equities were lower yesterday, though only marginally, and with the Stoxx 600 higher for the sixth consecutive day. It is now one month since we got strong sense of the US election outcome and the prevailing political challenges. Since the US has remained the strongest performer; however, since we launched our latest strategy update on 8 November, Europe has actually outperformed the US. At the same time, macroeconomic data has been stronger in the US than in Europe. This underscores how low expectations are for Europe and how crowded the US positioning and consensus have become. Finally, one can also highlight the extreme premium at which the US is trading relative to Europe. In the US yesterday, Dow -0.6%, S&P 500 -0.2%, Nasdaq -0.2%, and Russell 2000 -1.3%. Asian markets are mostly lower this morning, with China notably standing out on the positive side. European futures are lower this morning, while US futures are roughly flat.
FI: Risk in European rates dominated with outperformance by French and Italian bonds amid unwinding of safe haven buying in recent days. Le Pen’s comment on it being possible to deliver a French budget within weeks soothed the sentiment. The BTPs-Bund spread is now trading at just 108bp, which is the tightest in 3 years. Markets continued to pull back its expectations of near-term rate cuts from the ECB and next week’s meeting is priced at just 26bp. However, seen through the end of 2025, the markets have virtually traded sideways of discounting 148bp of rate cuts.
FX: EUR/USD had modest upside momentum within the 1.05-1.06 range during yesterday’s session. Political instability in France and slightly softer US data this week have yet to significantly influence the cross. Key today will be the release of the US jobs report. Oil moved modestly lower yesterday amid OPEC+ decision to delay, for a third time, a planned increase in oil production. NOK and GBP both traded to the heavy side, erasing recent gains.
