Trump reminds global markets about “the most beautiful word”

EU mid-market update: Trump reminds global markets about "the most beautiful word" and that the trade named after him is a double-edged sword.

Notes/observations

- President-elect Trump reiterated his warning on imposing trade tariffs on China, Mexico and Canada immediately after his inauguration in January; Some analysts view such an early announcement as a potential negotiation tactic to make Canada, Mexico and China submit their counteroffers.

-Worth noting that in May 2019, Trump announced escalating tariffs on Mexican imports to pressure Mexico on illegal immigration, but the threat was withdrawn in June 2019 after an agreement was reached.

-Later today, EU Commission is expected to approve the multi-year spending plan proposed by French PM Barnier's government and lay out a series of recommended reforms; The key moment will come just before Christmas, when Barnier will likely need to employ a constitutional maneuver trying to pass his budget or face no-confidence vote, with some analysts expecting France to see another snap elections in 2025.

-Israeli Security Cabinet said to meet in few hours to discuss Lebanon ceasefire deal.

Asia

- South Korea Nov Consumer Confidence: 100.7 v 101.7 prior.

- Japan Oct PPI Services Y/Y: 2.9% v 2.5%e [highest since Jun].

Global conflict/tensions

- US had informed Lebanese officials that ceasefire could be announced 'within hours'.

- Israeli official noted that its security cabinet might meet on Tues (Nov 25th) and vote on Hezbollah truce.

- Lebanon Dep Parliament Speaker noted that US-proposed truce to see Israeli forces withdraw from South Lebanon; Lebanese troops to deploy within 60 days.

Europe

- UK Nov BRC Shop Price Index Y/Y: -0.6% v -0.6%e.

- ECB's Makhlouf (Ireland) stated that was 'open-minded' on pace of rate cuts; Confident in hitting 2% inflation target in 2025 but services inflation stickiness left room for caution.

- ECB’s Nagel (Germany)noted that rates were still restrictive at the moment but must not cut interest rates too quickly; Inflation goal would be met soon, but risks remained.

Americas

- Pres-elect Trump: On first day in office will charge Mexico and Canada 25% tariffs on all products coming into the US; Will charge China "an additional" 10% tariff.

- Fed's Kashkari noted that was reasonable consideration to cut rates in Dec by 25bps.

- Fed's Goolsbee (non-voter for 2024; voter for 2025) reiterated that interest rates will be lower by the end of 2025.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.63% at 505.58, FTSE -0.40% at 8,258.65, DAX -0.58% at 19,296.75, CAC-40 -0.72% at 7,205.53, IBEX-35 -0.76% at 11,622.27, FTSE MIB -0.63% at 33,216.00, SMI -0.56% at 11,629.44, S&P 500 Futures -0.36%].

Market focal points/key themes: European indices open lower across the board and remained under pressure through the early part of the session; resurgence of trade concerns seen weighing on risk appetite in the way of statement by Trump; among sectors managing gains are telecom and utilities; sectors leading the way lower include materials and industrials; automakers seen declining over trade concerns; Poseida Therapeutics to be acquired by Roche; reportedly Talgo’s main shareholder wants a more generous offer from Sidenor; focus on FOMC minutes later in the day; earnings expected in the upcoming US session include Analog Devices, HP, Best Buy and Macy’s.

Equities

- Consumer discretionary: Compass Group [CPG.UK] -2.5% (earnings), Dustin Group [DUST.SE] -22.5% (trading update), AO World [AO.UK] -1.5% (earnings) -
Consumer staples: Nestle [NESN.CH] -1.0%, Danone [BN.FR] -0.5% (China's healthcare security regulator vowed to improve the birthinsurance system to lower maternity costs), Cranswick [CWK.UK] -4.0% (earnings).

- Healthcare: Roche [ROG.CH] -1.5% (trial results; acquisition in US).

- Industrials: ABB [ABBN.CH] -1.0%, Stellantis [STLA.FR] -4.0% (Trump's tariff announcement).

- Materials: ArcelorMittal [MT.NL] -3.5% (delays EU decarbonization investment decision).

Speakers

- ECB's Villeroy (France) commented that investors and businesses need clarity on French budget deficit; vital that it is brought down to 3% of GDP.

- ECB’s Centeno (Portugal) commented that inflation was close to 2% target while the region's economy was stagnant.

- ECB’s Rehn (Finland) commented that salary and service inflation remained persistent. Risk that inflation would moderate more slowly than anticipated.

- Hungary Fin Min Nag commented that was up to new central bank gov on how to contribute to the country's economic recovery; selection to be made in the coming days.

- Russia Intelligence official Naryshkin stated that was against freezing the Ukraine conflict. Russia needs a solid and long-lasting peace.

- Japan Cabinet Office (Govt) Nov Monthly Report maintained overall assessment that domestic economy is recovering at moderate pace.

- China Foreign Ministry official stated that was willing to work with US on anti-drug cooperation (**Note: response over Trump claim that China had not kept its promises to apply the death penalty to fentanyl traffickers.

- China Vice President stated that was willing to work to promote an open world economic system and maintain stability of global supply chains.

- Lebanon Foreign Min stated that hopefully by tonight a ceasefire agreement would be in place.

Currencies/fixed income

- Some risk aversion flows were apparent after President-elect Trump reiterated his warning on imposing trade tariffs on China, Mexico and Canada immediately after his inauguration in January. USD holding onto gains against the major European pairs. Since the election markets have been betting that Trump's plans for tariffs and tax cuts would lift inflation and limit the scope for Fed rate cuts.

- EUR/USD probe the 1.05 level in the session with focus on upcoming EU inflation and growth data later in the week. Market dialing back the potential of a 50bps cut by the ECB at the Dec meeting. Dealers noted that Trump’s social media post on tariff did not mention Europe and gave some boost to the EUR currency.

- GBP/USD steady around 1.2570 level.

- USD/JPY drifted lower to test 153.60 before consolidating.

Economic data

- (FI) Finland Oct Unemployment Rate: 8.1% v 8.1% prior.

- (ZA) South Africa Sep Leading Indicator: 113.9 v 112.8 prior.

- (SE) Sweden Oct PPI M/M: +0.5 v -1.8% prior; Y/Y: -1.3% v -2.3% prior.

- (HK) Hong Kong Oct Trade Balance (HK$): -31.0Bv -23.7Be; Exports Y/Y: 3.5% v 6.7%e; Imports Y/Y: 4.5% v 4.6%e.

- (PL) Poland Oct Real Retail Sales M/M: 7.8% v 7.0%e; Y/Y: 1.3% v 0.7%e; Retail Sales (current prices) Y/Y: 2.3% v 0.6%e.

Fixed income issuance

- (UK) DMO opened its book to sell 1.25% Nov 2054 inflation-linked Gilts (UKTi) via syndicate; guidance seen bps to +4.0-4.25bps to 2055 UKTi.

- (ZA) South Africa sold total ZAR3.75B vs. ZAR3.75B indicated in 2033, 2038 and 2040 bonds.

- (IT) Italy Debt Agency (Tesoro) sold €2.0B vs. €1.5-2.0B indicated range in 3.10% Aug 2026 BTP bonds Avg Yield: 2.47% v 2.56% prior; Bid-to-cover: 1.81x v 1.70x prior.

- (IT) Italy Debt Agency (Tesoro) sold total €1.75B vs. €1.25-1.75B in 2029 and 2033 I/L Bonds (BTPei).

Looking ahead

- (NG) Nigeria Central Bank (CBN) Interest Rate Decision: Expected to raise Key Rate by 50bps to 27.75%.

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

- 05:15 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €4.0B in 2.50% Oct 2029 BOBL.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) bids recd).

- 05:30 (EU) ECB 3-month LTRO operation (prior).

- 06:00 (UK) Nov CBI Retailing Reported Sales: -15e v -6 prior; Total Distribution Sales: No est v -12 prior.

- 06:00 (BR) Brazil Nov FGV Construction Costs M/M: No est v 0.7% prior.

- 07:00 (BR) Brazil Nov IBGE Inflation IPCA-15 M/M: 0.5%e v 0.5% prior; Y/Y: 4.6%e v 4.5% prior.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:00 (PL) Poland Oct M3 Money Supply M/M: 1.0%e v 0.7% prior; Y/Y: 7.1%e v 6.5% prior.

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

- 08:20 (CA) Bank of Canada (BOC) Mendes.

- 08:30 (US) Nov Philadelphia Fed Non-Manufacturing Activity: No est v 6.0 prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (US) Sept FHFA House Price Index M/M: 0.3%e v 0.3% prior; Q/Q: No est v 0.9% prior.

- 09:00 (US) Sept S&P CoreLogic House Price City (20-City) M/M: 0.30%e v 0.35% prior; Y/Y: 4.70%e v 5.20% prior; House Price Index (overall) Y/Y: No est v 4.25% prior.

- 10:00 (US) Oct New Home Sales: 725Ke v 738K prior.

- 10:00 (US) Nov Consumer Confidence: 111.4e v 108.7 prior; Present Situation Index: No est v 138 prior; Expectations Index: No est v 89.1 prior.

- 10:00 (US) Nov Richmond Fed Manufacturing Index: -11e v -14 prior; Business Conditions: No est v -4 prior.

- 10:30 (US) Nov Dallas Fed Services Activity: No est v 2.0 prior.

- 11:30 (US) Treasury to sell 52-Week Bills.

- 11:30 (US) Treasury to sell 2-Year FRN Reopening.

- 13:00 (US) Treasury to sell 5-Year Notes.

- 14:00 (US) FOMC Nov Minutes.

- 16:00 (KR) South Korea Dec Business Manufacturing Survey: No est v 71 prior; Non-Manufacturing Survey: No est v 69 prior.

- 16:30 (US) Weekly API Oil Inventories.

- 19:01 (IE) Ireland Nov Consumer Confidence Index: No est v 74.1 prior.

- 19:30 (AU) Australia Q3 Construction Work Done: 0.4%e v 0.1% prior.

- 19:30 (AU) Australia Oct CPI Y/Y: 2.3%e v 2.1% prior; CPI Trimmed Mean Y/Y: No est v 3.2% prior.

- 20:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to cut Official Cash Rate (OCR) by 50bps to 4.25%.

- 20:30 (CN) China Oct Industrial Profits Y/Y: No est v -27.1% prior; Industrial Profits YTD Y/Y: No est v -3.5% prior.

- 21:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision: Expected to cut Key Rates by 25bps; Expected to cut Standing Lending Rate by 25bps to 9.00%; Expected to cut Standing Deposit Rate by 25bps to 8.00%.

- 21:00 (NZ) RBNZ Gov Orr post rate decision press conference.

- 22:35 (JP) Japan to sell 40-year JGB Bonds.