Heavy Euro area data release this week

In focus today

• Today, in China, PBOC will set the Medium Lending Facility rates, but they are widely expected to keep rates unchanged due to the recent sharp depreciation on the CNY, aiming to avoid to further downward pressure on the currency.  

• Today, in the euro area, we have a string of ECB speeches including Lagarde, Lane and Nagel. The market will be looking for comments on monetary policy.

This week is heavy on euro area releases. On Tuesday, we receive the final euro area October HICP inflation. Wednesday, we receive the ECB's indicator of negotiated wage growth in Q3. Thursday, data on euro area consumer confidence for November is released. Finally on Friday the data highlight of the week is released in form of the November euro area PMIs and US PMIs.

Economic and market news

What happened overnight

Russia-Ukraine, the Biden administration has permitted Ukraine to deploy US-made weapons to strike deep into Russa, escalating tensions. This comes following an air strike by Russia on Sunday where the target was Ukraine's energy infrastructure, which damaged power systems further ahead of winter. Subsequently, oil prices increased due to heightened tensions between Russia and Ukraine over the weekend.  

What happened over the weekend

In the US, October retail sales released on Friday initially seemed weak, with control group sales declining by 0.1% m/m SA (cons. +0.3%). However, in non-seasonally adjusted terms, annual growth rate picked up with growth to a solid 5.2% y/y. This might have contributed to the dip in EUR/USD following the data release. Despite fluctuations in monthly data, it looks like the US consumer overall remains on a solid footing. Friday, we also received industrial production, which followed consensus of -0.3% m/m (prior: -0.3% m/m). 

In the euro area, the EU commission published their new economic projections for 2025 and 2026. The commission expects GDP growth at 1.3% y/y in 2025 (prior: 1.4%) and 1.6% in 2026. Inflation is expected to decline to average of 2.1% y/y in 2025 and 1.9% in 2026. The projections for 2025 have been revised slightly down due to increased downside risks, while inflation remains unchanged. The Commission anticipates that growth next year will stem from domestic demand, with net trade expected to be unchanged.

In Japan, Comments from BoJ's Ueda over the weekend send the JPY modestly weaker against the USD and EUR this morning, as he stated that the next move in Japanese policy rate was dependent on the economic data such as inflation and did not give a clear signal that BoJ would raise rates at the next BoJ meeting in December 18-19.

Equities: Global equities were lower on Friday and for the week overall. The US led the decline, which should be viewed in the context of its significant outperformance in the days following the US election results. Additionally, when examining both Friday and the past week, it is difficult to attribute the negative equity markets to macroeconomic data. We received robust data, with economic surprise indices reaching new highs after the summer's decline.

In the technology sector, there was a notable downturn on Friday and throughout the week, whereas financials, energy, and utilities sectors all registered gains last week. Health care also saw a sharp decline last week, leading to defensive stocks underperforming cyclicals.

Friday indicated a bit more uncertainty coming into the markets, with the VIX index ticking higher. In the US on Friday, the Dow closed down by 0.7%, the S&P 500 by 1.3%, the Nasdaq by 2.2%, and the Russell 2000 by 1.4%.

This morning in Asia, performance is mixed, with most indices lower, while South Korea is up almost 2%. European futures are marginally higher this morning, while US futures are mixed, with the technology-heavy indices outperforming.

FI: Friday's price action was without a clear catalyst resulting in the tight trading range through the day in the 10y point. The front end, ended marginally higher, thus leading to a bearish flattening of the curves. On Friday Ireland was placed on positive outlook by S&P bringing them closer to regaining AAA-status.

FX: JPY rallied on Friday followed by CHF and NOK, while GBP, CAD and SEK lost ground. The intraday move in EUR/USD was relatively large, but the pair remained below the 1.06 level. The rally in USD/JPY came to an end and the pair dropped to 154. EUR/SEK held steady just below the 11.60 level, while EUR/NOK dropped 11.70.