Complex tapestry of macro themes sees Germany avert recession with stubborn CPI

EU mid-market update: Complex tapestry of macro themes sees Germany avert recession with stubborn CPI, an imminent UK budget, US Treasury Refunding and a BOJ decision.

Notes/observations

-ECB rate cut bets are pared for Dec meeting after German preliminary Q3 GDP reading avoided recession and resilient CPI out of initial state prints, national reading later in session. Also saw Preliminary GDP readings out of France, Spain and Italy as well as Spanish flash CPI.

-UK budget to begin at 08:30 ET (12:30 GMT) with sweeping tax rises expected. Some of the highlights expected to include 6.7% increase to minimum wage, 4% rise to state pension and freezing of income tax thresholds, while DMO remit expected to include additional ~£20B for total 2024 issuance at £295B. OBR will be releasing staff projections at the same time. Implied volatility for Sterling is at >1-year highs. Bonds jumped at open, with 10-year yield down ~8bps to 4.23%.

-Catalysts to continue, with US ADP Employment at 08:15ET, US Treasury Quarterly Refunding at 08:30ET and BOJ decision tonight (no change to policy expected).

-Key EU earnings from BASF, Sandoz, Telenor, Volkswagen, Glencore, GSK and Next.

-Upcoming US Premarket Earnings: BG, HUM, CAT, NI, EXC, ADP, LLY, FLEX, GPI, OSK, BIIB, AVT, GHC, HES, ITW.

-Asia closed lower with Hang Seng underperforming -1.6%. EU indices are -0.4% to -1.0%. US futures are +0.1-0.2%. Gold +0.3%, DXY -0.2%; Commodity: Brent +0.7%, WTI +0.8%; Crypto: BTC +1.9%, ETH +2.2%.

Asia

- Australia Sept CPI Y/Y: 2.1% v 2.3%e.

- Australia Q3 CPI Q/Q: 0.2% v 0.3%e; Y/Y: 2.8% v 2.9%e.

- China Top Legislative Body said to be planning to approve over CNY10T in extra debt over the coming years and to consider a stronger fiscal package if Trump wins the US Presidential election.

Europe

- EU imposed import duties on Chinese EVs; BYD 17.0%; Geely 18.8%; SAIC 35.3%; Tesla 7.8% (**Note: China MOFCOM stated that China and EU technical teams are in a new round of talks).

- SNB President Schlegel stated that must ensure policy did not become too restrictive; SNB was now focused on normalizing monetary policy. Further rate reductions could be necessary in coming quarters to maintain price stability.

- Germany ruling coalition party said to be on the verge of breaking up; speculation of early elections in spring.

Energy

- Weekly API Crude Oil Inventories: -0.6M v +1.6M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.57% at 515.04, FTSE -0.36% at 8,190.19, DAX -0.49% at 19,387.85, CAC-40 -1.05% at 7,432.09, IBEX-35 -0.55% at 11,730.81, FTSE MIB -0.89% at 34,614.00, SMI -0.39% at 12,055.00, S&P 500 Futures +0.18%].

Market focal points/key themes: European indices open lower across the board and continued to trend into the red through the early part of the session; lack of risk appetite seen related to earnings releases; all sectors start the day in the red; among less negative sectors are energy; sectors leading the way lower include materials and consumer discretionary; Eckoh to be acquired by Bridgepoint; Synlab to be taken private following agreement with Cinven and Elliott; Orsted to sell interest in four UK wind farms to Brookfield; focus on US and EU GDP first readings later in the day; earnings expected in the upcoming Americas session include Microsoft, Meta, Eli Lilly and Caterpillar.

Equities

- Consumer discretionary: Next [NXT.UK] +2.0% (Q3 trading update, raises Q4 and FY guidance).

- Materials: Glencore [GLEN.UK] +2.0% (Q3 production, affirms guidance).

- Financials: UBS Group [UBSG.CH] +2.5% (earnings; raises cost savings target) - Healthcare: GSK [GSK.UK] -3.5% (earnings), Sandoz [SDZ.CH] -2.0% (Q3 results) - Industrials: Volkswagen [VOW3.DE] +2.5% (Q3 results, narrows delivery guidance; affirms dividend policy), BASF [BAS.DE] -0.5% (Q3 results, adjusts guidance), Aston Martin [AML.UK] +3,0% (Q3 results, affirms guidance), Schneider Electric [SU.FR] +1.0% (earnings) - Technology: ASM International [ASM.NL] +6.0% (earnings; raises outlook), Capgemini [CAP.FR] -6.0% (earnings).

- Telecom: Telenor [TEL.NO] +4.5% (Q3 results, narrows guidance).

Speakers

- SNB President Schlegel noted that the CHF currency (Franc) was a safe haven, which appreciated in times of uncertainty; Reiterated ready to react to pressure on Swiss franc.

Currencies/fixed income

- USD was consolidating its recent strength with focus on US GDP data later in the session. US growth expected at 3.0% and would highlight the country’s economic strength as it outperforms its G10 peers.

- EUR/USD moved higher during the session as various EU inflation and GDP data came in higher than expected. ECB futures were now pricing ~31bps in rate cuts by year-end v ~45bps last week. Higher German State CPI readings also dialed back expectations of any 50bps cut by ECB in Dec.

- GBP/USD at 1.3020 with focus on Fin Min Reeves Autumn budget. Dealers note a possible risk for sterling was probably related to the announcement on additional supply of UK Gilts.

- USD/JPY hovering around the 1.53 level.

Economic data

- (NL) Netherlands Oct Producer Confidence Index: -3.2 v -1.7 prior.

- (FI) Finland Sept Retail Sales Volume Y/Y: -2.2% v +0.4% prior.

- (FR) France Q3 Preliminary GDP Q/Q: 0.4% v 0.3%e ; Y/Y: 1.3% v 1.2%e.

- (FR) France Sept Consumer Spending M/M: 0.1% v 0.1%e; Y/Y: % v 0.0%e.

- (SE) Sweden Aug Non-Manual Workers’ Wages Y/Y: 4.3% v 4.5% prior.

- (NO) Norway Sept Retail Sales (ex-auto) M/M: -0.3% v +0.1% prior.

- (TR) Turkey Oct Economic Confidence: 98.0 v 95.0 prior.

- (HU) Hungary Q3 Preliminary GDP Q/Q:-0.7 % v +0.1%e; Y/Y: -0.8% v +0.7%e (**Note: Country moved into a technical recession).

- (ES) Spain Q3 Preliminary GDP Q/Q: 0.8% v 0.6%e; Y/Y: 3.4% v 3.0%e.

- (ES) Spain Oct Preliminary CPI M/M: 0.6% v 0.7%e; Y/Y: 1.8% v 1.7%e; CPI Core Y/Y: 2.5% v 2.3%e.

- (ES) Spain Oct Preliminary CPI EU Harmonized M/M: 0.4% v 0.4%e; Y/Y: 1.8% v 1.8%e.

- (CH) Swiss Oct KOF Leading Indicator: 99.5 v 105.0e.

- (AT) Austria Q3 GDP Q/Q: +0.3% v -0.4% prior; Y/Y: -0.1% v -1.2% prior.

- (AT) Austria Sept PPI M/M: -0.2% v+ 0.2% prior; Y/Y: -2.6% v -2.0% prior.

- (SE) Sweden Oct Consumer Confidence: 101.3 v 99.7 prior; Manufacturing Confidence: 91.8 v 93.72 prior; Economic Tendency Survey: 93.6 v 94.6 prior.

- (CZ) Czech Q3 Advance GDP Q/Q: 0.3% v 0.4%e; Y/Y: 1.3% v 1.4%e.

- (DE) Germany Oct Unemployment Change: +27.0K v +15.0Ke; Unemployment Claims Rate: 6.1% v 6.1%e.

- (DE) Germany Q3 Preliminary GDP Q/Q: +0.2% v -0.1%e; Y/Y: +0.2% v -0.3%e; GDP NSA (unadj) Y/Y: 0.0% v 0.2%e.

- (DE) Germany Oct CPI North Rhine Westphalia M/M: 0.3% v 0.0% prior; Y/Y: 2.0% v 1.5% prior.

- (DE) Germany Oct CPI Hesse M/M: 0.5% v 0.0% prior; Y/Y: 1.8% v 1.2% prior.

- (DE) Germany Oct CPI Bavaria M/M: 0.5% v 0.1% prior; Y/Y: 2.4% v 1.9% prior.

- (DE) Germany Oct CPI Brandenburg M/M: % v 0.0% prior; Y/Y: % v 1.4% prior.

- (DE) Germany Oct CPI Saxony M/M: 0.4% v 0.2% prior; Y/Y: 2.8% v 2.4% prior.

- (DE) Germany Oct CPI Baden Wuerttemberg M/M: 0.7% v 0.1% prior; Y/Y: 2.1% v 1.4% prior.

- (CH) Swiss Oct UBS Expectations Survey: -7.7 v -8.8 prior.

- (IT) Italy Q3 Preliminary GDP Q/Q: 0.0% v 0.2%e; Y/Y: 0.4% v 0.7%e.

- (IS) Iceland Oct CPI M/M: +0.3% v -0.2% prior; Y/Y: 5.1% v 5.4% prior.

- (IS) Iceland Sept Final Trade Balance (ISK): -24.8B v -27.5B prelim.

- (PT) Portugal Q3 Preliminary GDP Q/Q: 0.2% v 0.2%e; Y/Y: 1.9% v 1.6% prior.

- (PT) Portugal Oct Consumer Confidence: -13.9 v -13.1 prior; Economic Climate Indicator: 2.1 v 1.8 prior.

Fixed income issuance

- (IN) India sold total INR190B vs. INR190B indicated in 3-month, 6-month and 12-month bills.

- (BE) Belgium Debt Agency (BDA) opened its book to sell USD-denominated 10-year OLO bonds; guidance seen +64bps to mid-swaps.

- (DK) Denmark sold total DKK200M in 3-month and 6-month Bills.

Looking ahead

- (BE) Belgium Oct CPI M/M: No est v -0.5% prior; Y/Y: No est v 3.1% prior.

- (MX) Mexico Sept Public Balance (MXN): No est v -894B prior.

- (BR) Brazil Sept Central Govt Budget Balance (BRL): No est v -22.4B prior.

- 06:00 (EU) Euro Zone Q3 Advance GDP Q/Q: 0.2%e v 0.2% prior; Y/Y: 0.8%e v 0.6% prior.

- 06:00 (EU) Euro Zone Oct Economic Confidence: 96.3e v 96.2 prior; Industrial Confidence: -10.5e v -10.9 prior; Services Confidence: 6.5e v 6.7 prior; Consumer Confidence (final): No est v -12.5 advance.

- 06:00 (IT) Italy Sept PPI M/M: No est v 1.2% prior; Y/Y: No est v -1.1% prior.

- 06:00 (EU) Daily Euribor Fixing.

- 06:00 (EU) ECB, BOE and SNB hold weekly 7-day USD Liquidity Tender.

- 06:00 (SE) Sweden to sell combined SEK15.0B in 3-month and 6-month Bills.

- 06:00 (NO) Norway to sell combined NOK2.0B in 2026 and 2029 Bonds.

- 06:00 (IT) Italy Debt Agency (Tesoro) to sell €4.75-5.5B in 5-year and 10-year BTP Bonds.

- 06:00 (IT) Italy Debt Agency (Tesoro) to sell €3.0-3.5B in new Apr 2033 Floating Rate Note (CCTeu).

- 06:00(GR) Greece Debt Agency (PDMA) to sell €500M in 3-month bills.

- 06:25 (EU) Daily ECB Liquidity Stats.

- 06:30 (IN) India Sept Fiscal Deficit (INR): No est v 4.352T prior.

- 06:30 (IN) India Sept Eight Infrastructure (Key) Industries: No est v 6.1% prior.

- 06:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 07:00 (US) MBA Mortgage Applications w/e Oct 25th: No est v -6.7% prior.

- 07:00 (BR) Brazil Oct FGV Inflation IGPM M/M: 1.5%e v 0.6% prior; Y/Y: 5.6%e v 4.5% prior.

- 07:00 (IL) Israel Sept Unemployment Rate: No est v 2.6% prior.

- 07:00 (IL) Israel Aug Manufacturing Production M/M: No est v 1.5% prior.

- 07:00 (IE) Ireland Oct Preliminary CPI EU Harmonized Y/Y: No est v 0.2% prior.

- 07:30 (BR) Brazil Sept Total Outstanding Loans (BRL): No est v 6.117T prior; M/M: No est v 0.9% prior; Personal Loan Default Rate: No est v 5.5% prior.

- 08:00 (MX) Mexico Q3 Preliminary GDP Q/Q: 0.8%e v 0.2% prior; Y/Y: 1.3%e v 2.1% prior.

- 08:00 (CL) Chile Sept Retail Sales Y/Y: 4.1%e v 6.8% prior; Commercial Activity Y/Y: No est v 4.6% prior

- 08:00 (CL) Chile Sept Industrial Production Y/Y: 1.8%e v 5.2% prior; Manufacturing Production Y/Y: 2.3%e v 3.4% prior; Total Copper Production: No est v 470.5K tons prior.

- 08:00 (UK) Weekly PM Question time in House.

- 08:15 (US) Oct ADP Employment Change: +110Ke v +143K prior.

- 08:30 (US) Q3 Advance GDP Annualized (1st of 3 readings) Q/Q: 3.0%e v 3.0% prior; Personal Consumption: 3.2%e v 2.8% prior.

- 08:30 (US) Q3 Advance GDP Price Index: 2.0%e v 2.5% prior; Core PCE Price Index Q/Q: 2.1%e v 2.8% prior.

- 08:30 (US) Treasury Quarterly Refunding.

- 08:30 (UK) Chancellor of the Exchequer (Fin Min) Reeves Autumn budget speech.

- 08:30 (UK) Office for Budget Responsibility (OBR) Staff Projections.

- 09:00 (DE) Germany Oct Preliminary CPI M/M: 0.2%e v 0.0% prior; Y/Y: 1.8%e v 1.6% prior.

- 09:00 (DE) Germany Oct Preliminary CPI EU Harmonized M/M: 0.2%e v -0.1% prior; Y/Y: 2.1%e v 1.8% prior.

- 09:00 (ZA) South Africa Sept Monthly Budget Balance (ZAR): No est v -19.4B prior.

- 09:30 (UK) DMO Gilt Remit.

- 10:00 (US) Sept Pending Home Sales M/M: 1.3%e v 0.6% prior; Y/Y: No est v -4.3% prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (DE) ECB’s Schnabel (Germany).

- 11:15 (FR) ECB’s Villeroy (France).

- 12:00 (RU) Russia Sept Unemployment Rate: 2.5%e v 2.4% prior; Aug Real Wages Y/Y: 7.1%e v 8.1% prior.

- 14:00 (DE) ECB’s Nagel (Germany).

- 16:15 (CA) Bank of Canada (BOC) Gov Macklem with member Rogers in Senate.

- 19:00 (KR) South Korea Sept Industrial Production M/M: 1.2%e v 4.1% prior; Y/Y: 0.5%e v 3.8% prior; Cyclical Leading Index Change: No est v -0.1 prior.

- 19:50 (JP) Japan Sept Preliminary Industrial Production M/M: +0.8%e v -3.3% prior; Y/Y: -3.2%e v -4.9% prior.

- 19:50 (JP) Japan Sept Retail Sales M/M: -0.3%e v +1.1% prior (revised from 0.8%); Y/Y: 2.1%e v 3.1% prior (revised from 2.8%); Dept. Store, Supermarket Sales Y/Y: No est v 4.4% prior.

- 20:00 (NZ) New Zealand Oct ANZ Business Confidence: No est v 60.9 prior; Activity Outlook: No est v 45.3 prior.

- 20:01 (UK) Oct Lloyds Business Barometer: No est v 47 prior; Own Price Expectations: No est v 65 prior.

- 20:30 (AU) Australia Sept Retail Sales M/M: 0.3%e v 0.7% prior; Q3 Retail Sales (ex-inflation) Q/Q: +0.5%e v -0.3% prior.

- 20:30 (AU) Australia Q3 Import Price Index Q/Q: -0.3%e v +1.0% prior; Export Price Index Q/Q: -4.0%e v -5.9% prior.

- 20:30 (AU) Australia Sept Building Approvals M/M: +2.1%e v -6.1% prior; Private Sector Houses M/M: No est v 0.5% prior.

- 20:30 (AU) Australia Sept Private Sector Credit M/M: 0.5%e v 0.5% prior; Y/Y: No est v 5.7% prior.

- 21:30 (CN) China Oct Manufacturing PMI (Govt Official): 49.9e v 49.8 prior; Non-manufacturing PMI: 50.4e v 50.0 prior; Composite PMI: No est v 50.4 prior.

- 21:35 (UK) BOE’s Breeden at HKMA/BIS joint conference.

- (JP) Bank of Japan (BOJ) Interest Rate Decision: Expected to leave Target Rate unchanged at 0.25%.

- BOJ Quarterly Outlook for Economic Activity and Prices (aka Staff Projections).