European data drives market lower as recession bets spike

Notes/observations

- European PMI readings plunge as services industry contracts and manufacturing sank deeper into recession; Euro at 23-month low as Germany and France look to be sputtering. Elsewhere on data, German GDP was revised lower in final Q3 reading.

- Quiet on geopolitical developments overnight as dust settles after Russia launched new weapon at Ukraine yesterday. Country leaders chime in on ICC decision to issue arrest warrant for Israeli PM Netanyahu. Hungary extends visit invitation despite being in ICC.

- Bitcoin tried to hit $100K but turned around at $99.5K as weak European PMI’s put bullish momentum into US dollar and fueled risk-off mood.

- US Treasury Sec saga continues; According to WSJ, Trump is reportedly considering appointing Kevin Warsh as Treasury Secretary, with plans to later nominate him as Federal Reserve Chair after Powell's term ends in 2026. Scott Bessent is being considered to lead the National Economic Council and potentially succeed Warsh at Treasury. Warsh has previously criticized protectionist trade policies, and Trump's aides caution that his decisions are subject to change.

- Asia closed mixed with Shanghai underperforming -3.1%. EU indices are -0.6% to +0.7%. US futures are -0.3% to -0.4%. Gold +1.3%, DXY +0.5%; Commodity: Brent +0.3%, WTI +0.3%; Crypto: BTC +1.2%, ETH +7.8%.

Asia

- Australia Nov Preliminary Manufacturing PMI: 49.4 v 47.3 prior (10th month of contraction).

- Japan Nov Preliminary Manufacturing PMI: 49.0 v 49.2 prior (5th straight contraction).

- Japan Oct National CPI Y/Y: 2.3% v 2.3%e; CPI Ex Fresh Food (Core) Y/Y: 2.3% v 2.2%e.

Europe

- UK Nov GfK Consumer Confidence: -18 v -22e.

- German SPD party leadership to nominate Olaf Scholz as the party's candidate for Chancellor on Monday.

- SNB board member Tschudin noted inflation was comfortably in range of 0-2%, where they wanted to see it.

Americas

- Trump named Pam Bondi, the former attorney general of Florida, to be US attorney general just hours after his other choice, Matt Gaetz, withdrew his name from consideration.

- Trump said to consider Kevin Warsh as Treasury Sec and then into Fed Chair position.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.08% at 502.93, FTSE +0.65% at 8,202.59, DAX -0.04% at 19,140.35, CAC-40 -0.28% at 7,193.12, IBEX-35 -0.34% at 11,571.95, FTSE MIB -0.68% at 33,069.00, SMI +0.42% at 11,646.40, S&P 500 Futures -0.31%].

Market focal points/key themes: European indices open generally higher and remained upbeat through the early part of the session; all sectors start the day in the green; easing geopolitical tensions seen as the main catalyst for the upside, but also increased speculation that the ECB will be more aggressive in its easing path added buoyancy; sectors leading the way higher include technology and health care; among lagging sectors are consumer discretionary and real estate; tech sector seen playing catch up after Nvidia’s positive earnings on Wednesday Proximus sells its PLI unit to InfraRed Capital; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: PVA TePla [TPE.DE] +13.0% (share buyback), Games Workshop [GAW.UK] +13.5% (trading update).

- Financials: Commerzbank [CBK.DE] -2.0% (JPMorgan conf comments; European PMIs miss) - Healthcare: Ion Beam Applications [IBAB.BE] +1.5% (Kepler raised to Hold).- Industrials: Thales [HO.FR] -7.5% (bribery and corruption investigation reports), Vinci [DG.FR] -1.5% (mid-term targets at CMD), Komax [KOMN.CH] -3.0% (Affirms FY24 guidance and defers medium term targets by 2 years - investor day).

Speakers

- ECB's De Guindos (Spain) noted that the size of rate cut was less important than trajectory of monetary policy.

- French Audit Court chief Moscovici stated that the country must make an effort on deficit in the coming 5 years.

- Russia Dep PM Novak stated that the energy market was under significant pressure, including price fluctuations. Looked to develop cooperation with OPEC.

- Japan cabinet formally approved ¥39T (~$140B) extra stimulus.

Currencies/fixed income

-USD continued its firm tone as policy divergence favored the greenback. Dealers’ citied cautious remarks from a Fed official about prospects for interest-rate cuts aided the greenback. Safe haven flows also remain dominate as signs of escalation in the war in Ukraine fueled demand. Markets clearly taking the escalation in the Russia-Ukraine war more seriously.

- EUR/USD tested 1.0370 for its lowest level since Aug 2022 before rebounding as market participants priced in more ECB rate cuts. Data released in the session continued to paint gloom for the region. German Q3 Final GDP was revised lower while PMI readings missed consensus expectations. Technically the pair building the case for a test of parity. Dealers now pricing over 50% chance that ECB cuts by 50bps in Dec.

- GBP/USD was lower after UK retail sales and PMI data missed consensus as data seen building the case for BoE dovish bets at the December MPC. Currently markets seeing over 75bps in cuts by the end-2025 period. GBP/USD tested 6-month lows in the session below the 1.25 level.

- USD/JPY drifted lower to test below 154.50. Dealers noted yen strengthened after Japan’s core inflation figure came in higher than estimates thus pricing in a greater chance of a BOJ hike in December.

Economic data

- (NL) Netherlands Oct House Price Index M/M: 0.8% v 0.9% prior; Y/Y: 11.5% v 11.4% prior.

- (UK) Oct Retail Sales (ex-auto/fuel) M/M: -0.9% v -0.4%e; Y/Y: 2.0% v 3.3%e.

- (UK) Oct Retail Sales (including auto/fuel) M/M: -0.7% v -0.3%e; Y/Y: 2.4% v 3.4%e.

- (DE) Germany Q3 Final GDP Q/Q: 0.1% v 0.2% prelim; Y/Y: -0.1% v -0.2% prelim; GDP NSA (unadj) Y/Y: 0.2% v 0.2% prelim.

- (DE) Germany Q3 Private Consumption Q/Q: 0.3% v 0.5%e; Government Spending Q/Q: 0.4% v 0.4%e; Capital Investment Q/Q: -0.1% v -0.5%e.

- (MY) Malaysia mid-Nov Foreign Reserves: $118.0B v $117.6B prior.

- (HU) Hungary Sept Average Gross Wages Y/Y: % v 13.0%e.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 120.2K v 130.5K tons prior.

- (TH) Thailand May Foreign Reserves w/e Nov 15th: $234.0B v $238.1B prior.

- (TW) Taiwan Oct Unemployment Rate: 3.4% v 3.4%e.

- (RU) Russia Narrow Money Supply w/e Nov 15th (RUB): 18.34T v 18.30T prior.

- (TR) Turkey Oct Foreign Tourist Arrivals Y/Y:9.3 % v 4.6% prior.

- (FR) France Nov Preliminary Manufacturing PMI: 43.2 v 44.5e (22nd month of contraction); Services PMI: 45.7 v 49.0e; Composite PMI: 44.8 v 48.3e.

- (DE) Germany Nov Preliminary Manufacturing PMI: 43.2 v 43.0e (29th month of contraction); Services PMI: 49.4 v 51.7e; Composite PMI: 47.3 v 48.7e.

- (EU) Euro Zone Nov Preliminary Manufacturing PMI: 45.2 v 46.0e (29th month of contraction); Services PMI: 49.2 v 51.6e; Composite PMI: 48.1 v 50.0e.

- (IS) Iceland Oct Wage Index M/M: 0.3% v 0.7% prior; Y/Y: 6.0% v 6.1% prior.

- (UK) Nov Preliminary Manufacturing PMI: 48.6 v 50.0e (2nd straight contraction); Services PMI: 50.0 v 52.0e; Composite PMI: 49.9 v 51.7e.

Fixed income issuance

- (IN) India sold total INR320B vs. INR320B indicated in 2034 and 2074 in bonds.

- (ZA) South Africa sold total ZAR1.0B vs. ZAR1.0B indicated in I/L 2031, 2038 and 2058 bonds.

Looking ahead

- (FR) France Oct Retail Sales Y/Y: No est v -0.5% prior.

- (PE) Peru Q3 GDP Y/Y: 3.6%e v 3.6% prior.

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

- 06:00 (UK) DMO to sell £4.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £2.0B respectively).

- 06:30 (IS) Iceland switch auction.

- 6:30 (IN) India announces upcoming bill issuance (held on Wed).

- 06:30 (IN) India Forex Reserve w/e Nov 15th: No est v $575.7B prior.

- 07:00 (MX) Mexico Q3 Final GDP Q/Q: 1.0%e v 1.0% prelim; Y/Y: 1.5%e v 1.5% prelim; Nominal GDP Y/Y: No est v 7.3% prior.

- 07:00 (MX) Mexico Sept IGAE Economic Activity Index (Monthly GDP) M/M: +0.1%e v -0.3% prior; Y/Y: 0.4%e v 0.4% prior.

- 07:00 (MX) Mexico Sept Gold Production: No est v 5.4K kg prior; Silver Production: No est v 317.5K kg prior; Copper Production: No est v 42.3K tons prior.

- 07:00 (CL) Chile Oct PPI M/M: No est v 1.2% prior.

- 07:40 (CH) SNB's Schlegel in Zurich.

- 08:00 (EU) ECB's Nagel (Germany), Villeroy (France) in Frankfurt.

- 08:00 (SE) Sweden Central Bank (Riksbank) Gov Thedeen.

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

- 08:30 (CA) Canada Sept Retail Sales M/M: 0.4%e v 0.4% prior; Retail Sales (Ex Auto) M/M: +0.4%e v -0.7% prior.

- 09:45 (US) Nov Preliminary S&P Manufacturing PMI: 48.9e v 48.5 prior; Services PMI: 55.0e v 55.0 prior; Composite PMI: 54.3e v 54.1 prior.

- 10:00 (US) Nov Final University of Michigan Confidence: 73.9e v 73.0 prelim.

- 10:45 (DE) ECB’s Schnabel (Germany).

- 11:00 (US) Nov Kansas City Fed Services Activity: No est v 5 prior.

- 12:00 (EU) Potential sovereign ratings after European close (Fitch on Greece).

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- 14:00 (AR) Argentina Sept Economic Activity Index M/M: 0.9%e v 0.2% prior; Y/Y: -3.0%e v -3.8% prior.