In the spotlight today

In the United States, the October PPI is expected to be released today. Yesterday’s CPI index was largely in line with expectations (see more in the section below), so it will be interesting to see if October’s PPI data reflects this. In the evening, Fed Chairman Powell will be on social media.

In the Eurozone, we will receive the second estimate of GDP for the third quarter. The focus will be on employment developments in the third quarter, as a continued strong labor market is important for growth prospects in 2025. We will also receive industrial production data for September, which will show how the Actual production took place. The data is interesting because the hard data has been better than the manufacturing PMIs. We also receive the minutes of the October ECB meeting.

In Sweden, final inflation data for October will be released at 8:00 CET. This figure will provide insight into last week’s flash estimate, which was a bit higher than expected and off by 0.3-0.4 pp. September forecasts from the Riksbank. We believe this gap could be due to rising food prices, as was largely the case in September.

Overnight we get the monthly batch of data in China for retail saleshousing sales, housing prices, industrial production and investment. The focus will be on housing data, as a recovery is also key to unlocking private consumption. Some early data suggests that home sales rebounded in October following recent stimulus measures.

Similarly, we also receive the Japanese national accounts for the third quarter including GDP growth overnight. The Tankan and PMI surveys suggest the recovery remains on track. Demand also seems quite solid, particularly from exports. Consensus forecasts modest GDP growth of 0.2% following the 0.7% rebound in the second quarter.

Economic and market news

What happened yesterday

In the United States, October CPI was largely in line with expectations at 0.2% m/m SA (vs: 0.2%, previously: 0.2%). While the annual figure rose from 2.4% to 2.6% year-on-year, the rise was almost purely linked to a lower figure a year ago. The basic indicator also registered as expected at 0.28% m/m SA (compared to: 0.3%, previously: 0.31%). About 60% of the increase in core prices is attributed to the housing component, which increased in October but remains on a slowing trend. All other major components of the underlying inflation basket showed easing price pressures. Overall, these numbers support our call for a 25 basis point Fed cut in December. Additionally, a series of Fed speakers were on the wire, all expressing uncertainty about the future of the Fed. prices would eventually settle down.

In politics, the American Republican Party obtained the 218 seats needed to control the House of Representatives. This officially confirms the widely expected red sweep as the GOP now controls the House, Senate and presidency.

In Germany, The country’s largest industrial union, IG Metall, has reached a new wage agreement with employers. The new agreements provide for a salary increase of 2.0% in 2025 and 3.1% in 2026, plus a one-off payment of EUR 600 in 2025 (compared to EUR 1,400 in 2024). The small increase for 2025 reflects weaker bargaining power in German industry. With 3.9 million members, the IG Metall deal sets a low threshold for other sectors and could also influence ECB staff’s December projections for wage growth next year, supporting arguments for consecutive rate cuts in 2025. However, the employment situation in German industry is relatively weak, meaning that its impact on overall wage growth in the Eurozone could be weaker than that of ‘habit. In 2026, real wage growth in Germany is expected to rebound significantly, as the collective agreement also provides for an 8 percentage point increase in the additional payment, benefiting the lowest wage groups the most. Although wage growth has been strong in the recent period, we believe that concerns about wage growth have eased for the ECB.

In Sweden, Rikbank’s November meeting minutes suggest the board considers risk balanced in its inflation forecasts and that upside risks to inflation come mainly from a weaker SEK and food prices.

In the crypto spaceBitcoin continued its upward trend, surpassing $90,000 for the first time during yesterday’s session, boosted by Trump’s election victory last week. Before his victory, Bitcoin was hovering around $70,000. This morning, it is trading around 89,840 USD.

Actions: Global actions were down slightly yesterday, with the US once again outperforming, but not to the same extent as in the first days after the US election. The Republican Party has surpassed the mark of 218 seats in the House of Representatives. So we can now conclude the red sweep with certainty, even though nine districts still need to be decided.

Despite a slight decline in stocks yesterday, we observed the VIX the index drifts downward. Even if it is not too controversial, it nevertheless suggests to us that investors are rather confident about the economic situation. outlookand we see opinions converging. We would not be surprised to soon see surveys indicating that investors are aligning in terms of risk levels, regional, sector and style allocations. In the United States yesterday: Dow +0.1%, S&P 500 +0.02%, Nasdaq -0.3% and Russell 2000 -0.9%. Asian markets are mixed this morning. The same could be said about futures in Western markets, with European futures being higher while US futures are slightly lower.

FI: European rates traded in a very tight range yesterday, with 10-year bonds in a high-low range of 4 basis points. The US CPI caused US bond yields to fall in the short term, although this decline was short-lived. By the end of the trading session, the US yield curve steepened in both the 2-10 year and 10-30 year segments. After a few days where ASW spreads traded in positive territory, the Bund spread became negative again yesterday in a context of significant supply. The ECB’s Kazakhs argued for a measured pace in rate cuts and stressed that third-quarter GDP figures made it less concerned about the labor market situation.

Effects: Despite the details leaning towards the softer side, a fresh wave of dollar strength followed yesterday’s US CPI. EUR/USD consolidates at a year-to-date low below 1.06, while USD/SEK challenges previous 2024 highs around 11.00. Both EUR/SEK and EUR/NOK remained within previous ranges, but NOK/SEK rose slightly. Sterling ranked second in the G10, remaining stable against the dollar on the day and strengthening slightly against the euro. USD/JPY is back above 155 for the first time since the last round of Japanese foreign exchange interventions in mid-July.