Surfing the 'Trump trade' wave into a Fed decision that has 25bps cut baked in

Notes/Observations

- Busy session for earnings across Europe as impact of Trump trades reverberates around markets; All-time highs were hit for SP500, NDAQ and DOW yesterday; Crypto and US dollar retain strength; European indices are higher but less correlated to Trump optimism as US-EU relationship to undergo notable shift.

- German Govt in disarray after Chancellor Scholz fired Fin Min Linder and allows a confidence vote in January that may trigger snap election by end of March.

- UK Gilt sell off marches on following UK budget last week, UK 10YR at 4.60% and ahead of BOE decision today at 07:00 ET (12:00 GMT), expected to cut by 25bps.

- FOMC decision in focus with CME futures pricing in almost 100% chance of 25bps cut.

- Upcoming US premarket earnings: APD, GOLD, PCG, BDX, TRP, TAP, HAL, HSY, TPR, UA, VYX, DUK, ROK, HBI, PENN, SEE, RL.

- Asia closed mixed with Shanghai outperforming at +2.6%. EU indices are +0.1-1.3%. US futures are +0.1-0.2%. Gold +0.2%, DXY -0.2%; Commodity: Brent -0.3%, WTI -0.5%; Crypto: BTC +1.5%, ETH +7.2%.

Asia

- Japan MOF Top FX diplomat Mimura: Currently seeing one-sided and excessive market moves.

- RBA Asst Gov Kent (Financial Markets) stated that large tariffs on China (by the US) could have adverse effects on Australia export.

- RBNZ Dep Gov Hawkesby noted that Trump policies presented a ‘higher inflation package’.

- South Korea Sept Current Account Balance: $11,1B v $6.6B prior.

- Japan Sept Labor Cash Earnings Y/Y: 2.8% v 3.0%e.

- Australia Sept Trade Balance Sep (A$): 4.6B v5.3Be; Exports M/M: -4.3% v -0.6% prior; Imports M/M: -3.1% v -0.2% prior.

- China Oct Trade Balance: $95.7B v $75.0Be; Exports Y/Y: 12.7% v 5.0%e; Imports Y/Y: -2.3% v -2.0%e.

Europe

- German Chancellor Scholz fired Fin Min Lindner last night due to persistent rifts on spending and economic reform; to table a confidence vote on Jan 15th, which could trigger a snap election by end of March.

- ECB's Villeroy (France) stated that the Trump election raised risks for the global economy, including potential for higher US inflation.

- UK Chancellor of the Exchequer (Fin Min) Reeves said to have told House of Commons that she will not be coming back with more tax increases or more borrowing before the end of the current parliament.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.58% at 509.74, FTSE +0.06% at 8,171.27, DAX +1.28% at 19,281.45, CAC-40 +0.58% at 7,412.35, IBEX-35 +0.62% at 11,566.42, FTSE MIB +0.52% at 34,121.00, SMI +0.89% at 11,952.70, S&P 500 Futures +0.21%].

Market focal points/key themes: European indices open generally higher and advanced through the early part of the session; DAX outperforming to the upside after Chancellor Scholz calls for a snap election; among sectors leading the way higher are financials and materials; while consumer discretionary and health care were among the underperformers; reportedly Carrefour looking at divestment of Italian or Belgian units; focus on FOMC and BOE rate decisions later in the day; earnings expected in the upcoming US session include Air Products, Airbnb, Arista Networks and Duke Energy.

Equities

- Consumer discretionary: Wizz Air Holdings [WIZZ.UK] -4.0% (earnings), Delivery Hero [DHER.DE] +1.5% (earnings) - Consumer staples: J Sainsbury [SBRY.UK] -2.5% (earnings) - Utilities: Engie [ENGI.FR] +1.0% (earnings).

- Financials: Munich Re [MUV2.DE] +0.5% (earnings).

- Industrials: Maersk [MAERSKB.DK] +3.0% (market update), Rheinmetall [RHM.DE] +2.5% (earnings), Daimler Truck [DTG.DE] +5.0% (earnings), John Wood Group [WG.UK] -44% (trading update; independent review) - Technology: ams OSRAM [AMS.CH] -3.5% (earnings), Adyen [ADYEN.NL] -5.5% (earnings) - Telecom: BT Group [BT.A.UK] -5.5% (earnings), Telefonica [TEF.ES] -2.0% (earnings).

Speakers

- ECB's Schnabel (Germany) stated that there were signs banks are adapting to less ample liquidity.

- Sweden Central Bank (Riksbank) Policy Statement reiterated stance to possible cut at the Dec meeting and into H1 2025.

- Sweden Central Bank (Riksbank) Gov Thedeen post rate decision press conference noted that rate cuts were rapid and gradual. Biggest change was weakness in the export markets. FX impact of SEK currency weaken with subdued demand.

- Norway Central Bank (Norges) Policy Statement noted that a restrictive policy was still needed to bring inflation down to target within a reasonable period. Reiterated forward guidance that policy rate likely to be kept at 4.50% to end-2024 and saw gradual reduction in rates from Q1.

- Norway Central Bank (Norges) Gov Bache post rate decision press conference noted that NOK currency (Krown) was a little weaker than expected.

- Germany President Steinmeier stated that was prepared to dissolve Parliament following a confidence vote.

- German State Secretary and Deputy Fin Min Joerg Kukies to become Finance Minister after Christian Lindner was fired on Nov 6th.

- China MOFCOM: EU EV technical team arrived in Beijing Nov 2nd; two sides currently negotiating.

- Renew optimism circulating over potential China’s stimulus package with rumors of total CNY12.0T stimulus including CNY2.0T additional measures for consumption related support measures (**Reminder: China NPC Standing Committee's was meeting between Nov 4-8th).

Currencies/fixed income

- USD consolidated some of its post Trump election victory gains with focus on the upcoming FOMC rate decision. Fed expected to deliver a 25bps rate cut as easing inflation and a cooling labor market support such a move. Dealers noted that a rate cut in December was now more of an open question over concerns that Trump's plans could stoke inflation. Fed futures now price 29% chance (v 45% pre-Election Day) that FOMC cuts rates by 25bps at each of next three meetings ahead of Fed's meeting later today.

- EUR/USD at 1.0760 as the German political landscape became more uncertain.

- GBP/USD at 1.2925 with focus on BOE which is also expected to deliver a 25bps rate cut later in the session. Pair drifted higher but take as the BOE could take a cautious approach to future cuts.

- USD/JPY holding below the 154 level as Japanese officials began to reiterates concerns over one-sided FX moves.

Economic data

- (ZA) South Africa Oct Gross Reserves: $63.0B v $63.6B prior; Net Reserves: $61.2B v $61.0B prior.

- (DE) Germany Sept Industrial Production M/M: -2.5% v -1.0%e; Y/Y: -4.6% v -3.0%e.

- (DE) Germany Sept Trade Balance: €17.0B v €20.9Be; Exports M/M: -1.7% v -2.4%e; Imports M/M: 2.1% v 0.6%e.

- Oct Halifax House Price Index M/M: 0.2% v 0.3% prior; Y/Y: 3.9% v 4.7% prior.

- (SE) Sweden Oct Preliminary CPI M/M: 0.2% v 0.1%e; Y/Y: 1.6% v 1.5%e.

- (SE) Sweden Oct CPIF M/M: 0.4% v 0.3%e; Y/Y: 1.5% v 1.3%e.

- (SE) Sweden Oct CPIF (ex-energy) M/M: 0.2% v 0.1%e; Y/Y: 2.1% v 2.0%e.

- (SE) Sweden Oct Budget Balance (SEK): -5.7B v -29.4B prior.

- (NO) Norway Sept Industrial Production M/M: -11.3% v -1.7% prior; Y/Y: -0.5% v+ 6.0% prior.

- (NO) Norway Sept Manufacturing Production M/M: -0.8% v -1.3% prior; Y/Y: 2.7% v 3.2% prior.

- (NO) Norway Q3 Average Monthly Earnings Y/Y: 5.2% v 5.4% prior.

- (DK) Denmark Sept Industrial Production M/M: -4.9% v -4.8% prior.

- (MY) Malaysia end-Oct Foreign Reserves: $117.6B v $119.6B prior.

- (HU) Hungary Sept Retail Sales Y/Y: 1.7% v 3.7%e.

- (FR) France Q3 Preliminary Private Sector Payrolls Q/Q: -0.1% v 0.0%e.

- (ES) Spain Sept Industrial Production M/M: 0.5% v 0.4%e; Y/Y: 0.6% v 0.2%e; Industrial Output NSA (unadj) Y/Y: +0.1% v -3.9% prior.

- (CH) Swiss Oct Foreign Currency Reserves (CHF): 718.8B v 715.7B prior.

- (CZ) Czech Sept Retail Sales (ex-auto) Y/Y: 5.6% v 5.5%e.

- (CN) China Oct Foreign Reserves: $3.261T v $3.287Be; Gold reserves: 72.80M v 72.80M troy oz prior (6th straight month of holding steady).

- (SE) Sweden Central Bank (Riksbank) cut Repo Rate by 50bps to 2.75% (as expected).

- (DE) Germany Oct Construction PMI: 40.2 v 41.7 prior.

- (HK) Hong Kong Oct Foreign Reserves: $421.4B v $422.8B prior.

- (NO) Norway Central Bank (Norges) left Deposit Rate unchanged at 4.50% (as expected).

- (CZ) Czech Oct International Reserves: $149.4B v $154.6B prior.

- (SG) Singapore Oct Foreign Reserves: $383.7B v $389.8B prior.

- (EU) Euro Zone Sept Retail Sales M/M: 0.5% v 0.4%e; Y/Y: 2.9% v 1.3%e.

- (CY) Cyprus Oct CPI M/M: 0.1% v 0.3% prior; Y/Y: 0.6% v 0.7% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €3.997B vs. €3.5-4.5B indicated range in 2030 and 2054 SPGB bonds.

- Sold €2.385B in new 2.70% Jan 2030 SPGB bonds; Avg Yield: 2.749%; bid-to-cover: 1.70x.

- Sold €1.612B in 4.00% Oct 2054 SPGB bonds; Avg Yield: 3.877% v 3.192% prior ; bid-to-cover: 1.77x v 1.38x prior.

- (ES) Spain Debt Agency (Tesoro) sold €495M vs. €250-750M indicated range in 0.7% Nov 2033 inflation-linked bonds (SPGBei); Real Yield: 1.104% v 1.042% prior; Bid-to-cover: 2.20x v 2.64x prior.

- (FR) France Debt Agency (AFT) sold total €12.497B vs. €10.5-12.5B indicated range in 2034, 2035, 2044 and 2055 Bonds.

- Sold €6.938B in 1.25% in 3.00% Nov 2034 Oat; Avg Yield: 3.24% v 2.92% prior, bid-to-cover: 1.98x v 2.15x prior (Oct 3rd 2024).

- Sold €2.350B in 4.75% Apr 2035 Oat; Avg Yield: 3.24% v 0.18% prior; Bid-to-cover: 1.97x v 2.39x prior (Aug 1st 2019).

- Sold €1.195B in 0.50% Jun 2044 Oat; Avg Yield: 3.55% v 3.77% prior; bid-to-cover: 3.33x v 1.93x prior (Nov 2nd 2023).

- Sold €2.014B in 3.25% May 2055 Oat; Avg Yield: 3.78% v 3.55% prior; Bid-to-cover: 2.84x v 3.41x prior.

Looking ahead

- (IL) Israel Oct Foreign Currency Balance: No est v $220.4B prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:40 (UK) BOE allotment in 7-day short-term repo operation (STR).

- 05:45 (NL) ECB’s Elderson (Netherlands).

- 06:00 (IE) Ireland Oct CPI M/M: No est v -0.9% prior; Y/Y: No est v 0.7% prior.

- 06:00 (IE) Ireland Oct CPI EU Harmonized M/M: No est v -1.0% prior; Y/Y (final): No est v 0.1% prelim.

- 06:00 (ZA) South Africa Sept Electricity Consumption Y/Y: No est v 4.2% prior; Electricity Production Y/Y: No est v 6.3% prior.

- 06:30 (CL) Chile Oct Trade Balance: $1.5Be v $1.8B prior; Exports: No est v $7.9B prior; Imports: No est v $6.0B prior; Copper Exports: No est v $4.6B prior.

- 06:30 (CL) Chile Central Bank Traders Survey.

- 06:30 (CL) Chile Oct International Reserves: No est v $45.6B prior.

- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to cut Bank Rate by 25bps to 4.75%.

- 07:00 (UK) BOE Nov Minutes.

- 07:00 (UK) BOE Quarterly Monetary Policy Report (MPR).

- 07:00 (CL) Chile Sept Nominal Wage Y/Y: No est v 8.7% prior.

- 07:00 (MX) Mexico Oct CPI M/M: 0.5%e v 0.1% prior; Y/Y: 4.7%e v 4.6% prior.

- 07:00 (MX) Mexico Oct CPI Core M/M: 0.3%e v 0.3% prior; Y/Y: 3.9%e v 3.9% prior.

- 07:00 (ES) ECB’s Escriva (Spain).

- 07:30 (UK) BOE Gov Bailey post rate decision press conference.

- 08:00 (PL) Poland Oct Official Reserves: No est v $218.8B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Q3 Preliminary Nonfarm Productivity 2.5%e v 2.5% prior; Unit Labor Costs 1.0%e v 0.4% prior.

- 08:30 (US) Initial Jobless Claims: 223Ke v 216K prior; Continuing Claims: 1.870Me v 1.862M prior- 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to cut 2-week Repurchase Rate by 25bps to 4.00%.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:30 (IE) ECB's Lane (Ireland, chief economist).

- 09:00 (UK) Bank of England (BoE) Decision Maker Panel (DMP) Oct Survey.

- 09:00 (PL) Poland Central Bank (NBP) Gov Glapinski post rate decision press conference.

- 09:00 (CA) Bank of Canada (BOC) Mendes.

- 09:30 (EU) ECB' members Lane, Stournaras in Athens.

- 09:30 (TR) Turkey Oct Cash Budget Balance (TRY): No est v -201.0B prior.

- 09:45 (CZ) Czech Central bank (CNB) post rate decision press conference.

- 10:00 (US) Sept Final Wholesale Inventories M/M: -0.1%e v -0.1% prelim; Wholesale Trade Sales M/M: +0.1%e v -0.1% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 10:45 (GR) ECB's Stournaras (Greece).

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 14:00 (AR) Argentina Sept Industrial Production Y/Y: -7.0%e v -6.9% prior; Construction Activity Y/Y: No est v -26.4% prior.

- 14:00 (US) FOMC Interest Rate Decision: Expected to cut Target Range by 25bps to 4.50-4.75%.

- 14:30 (US) Fed chief Powell post rate decision press conference.

- 15:00 (US) Sept Consumer Credit: $12.1Be v $8.9B prior.

- 18;00 (PE) Peru Central bank (BCRP) Interest Rate Decision: Expected to cut Reference Rate by 25bps to 5.00%.

- 18:30 (JP) Japan Sept Household Spending Y/Y: -1.8%e v -1.9% prior.

- 21:35 (CN) China to sell special 20 Year Bonds.

- 21:45 (AU) RBA's Jones.

- 22:30 (JP) Japan to sell 3-Month Bills.

- 23:00 (MY) Malaysia Sept Industrial Production Y/Y: 3.5%e v 4.1% prior; Manufacturing Sales Y/Y: No est v 7.7% prior.