Market movers today
US CPI for October is the highlight of this week in terms of data releases. We expect headline at 0.1 m/m and core at 0.3% m/m in line with consensus but with uncertainty coming from the auto worker’s strike which might have temporarily raised car prices, as well as from technical factors related to the calculation of health insurance premiums. If there is an upside surprise related to those issues, the market should see through it.
In Sweden the October inflation numbers will be released at 8:00 CET. We expect a slight uptick in CPIF inflation to 4.5% YoY (from 4% in September), and a decrease in CPIF excl. energy to 6.3% YoY (from 6.9% in September). Looking at the Riksbank’s latest forecast, their trajectory shows a 0.4 percentage point lower CPIF YoY estimate and CPIF excl. Energy print that is some 0.3 p.p YoY below our own forecast. We judge today’s outcome to potentially be decisive for next week’s policy decision by the Riksbank. We judge our call for an unchanged policy rate by the Riksbank next week to remain in play, should today’s inflation outcome be in line (or below) our own forecast.
German ZEW increased more than expected in October which, together with the IFO survey, gave a small ray of hope for the German economy, so it could be interesting to see today’s November figure. Second release today of euro area GDP, but still without details.
In the UK, we get the labour market report where focus will be on developments in wage growth, which has remained stubbornly elevated the past months, while the data on unemployment and employment continues to be published on an experimental basis given the poor data quality.
We get Chinese industrial production, retail sales and home sales early Wednesday morning. Especially home sales will be interesting but retail sales as well. Service PMI was soft in October so expectations are pretty low. We might also get a Chinese rate cut Wednesday.
Japanese Q3 GDP growth also early Wednesday will likely print close to zero as foreign demand has slowed.
The 60 second overview
Markets. It has been a quiet start to the week amid markets awaiting key data releases in not least today’s US CPI print. European equities have generally outperformed peers, yields and the USD are little changed and commodity prices are generally a little higher to start the week.
US inflation expectations. Yesterday’s release of New York Fed inflation expectations was a slight source of relief for markets following last week’s surprise rise in the University of Michigan motheasure. By the 1Y and 5Y inflation expectations declined in the New York Fed measure to 3.57% and 2.72%, respectively.
Oil prices. After a series of weekly declines the oil price has rebounded somewhat since the bottom last Wednesday completing a four day consecutive rally – the longest rally in two months. Brent crude is now back close to the USD 83/bbl mark after having traded below USD 80/bbl last week. While it is difficult to pinpoint one single driver it does seem a slight improvement to the cyclical mood in markets alongside some hawkish OPEC comments have contributed to the rise.
UK politics. Yesterday, UK Prime Minister Rishi Sunak reshuffled his Cabinet ahead of the Autumn Statement, which is scheduled for 23 November. As expected, Chancellor Jeremy Hunt remains in place but in a more surprising move, former PM David Cameron was appointed foreign secretary. While the return of the former PM is not expected to be universally popular, his significant international standing is valuable with the Conservatives firmly behind in the polls. At present, Labour is set to win by a majority in the next general election, which is due to be held by January 2025 at the latest.
Equities: Equities were in wait-and-see mode yesterday ahead of the US inflation release today. Market movers were few, leaving US equities struggling for direction while Europe rose about 1% in a catch-up move from Friday. Little differences between sectors or styles in a classic wait-and-see manner but if any a slight preference for defensive momentum. Hesitancy continues this morning with US futures unchanged.
FI: It was a trading session with very limited volatility, while markets await today’s US CPI release. 10y Bunds ended virtually unchanged at the 2.71%, where it started the day. The European curves twist-flattens as the short end ended higher 2bp while the long end ended by a similar amount lower.
FX: It has been a quiet start to the week in global markets including FX. Yesterday’s session saw very limited moves with most notably NOK and SEK enjoying green equity markets and a move higher in oil prices as we head into this morning’s Swedish CPI release.
Credit: Credit markets were in wait-and-see mode ahead of the important US inflation data release today. The tilt was, however, slightly risk seeking, with Itrax Main tightening 1.2bp to close at 74.4bp, while Itrax Xover tightened 5.2bp to close at 405.6bp. Primary markets were fairly active in both financials and corporates, with among others, S-Bank and Heidelberg materials, launching EUR bench-mark deals.
