Focus on German and Spanish inflation

Market movers today

In the euro area, today's main focus will be on preliminary inflation data from Germany and Spain. The November figures will give markets the first sense of what to expect from the euro area HICP which is due for release tomorrow.

In Sweden, October retail sales and NIER consumer confidence will be released.

In the US, the 2nd estimate of Q3 GDP will be released in the afternoon, and the Fed's Barkin and Mester will be on the wires in the evening.

Overnight, Chinese NBS PMIs are due for release for November. Generally, most indicators suggest we are likely to see either flat or moderately improving numbers.

The 60 second overview

Euro area: Credit to the private sector in the euro area continues to be weak and was the main weak point for ECB in the monetary aggregate release yesterday. The decline in loan growth continued with the loans to NFC decreasing by -0.3% in Oct. Loans to households grew by 0.6% in Oct (-0.2pp from Sep).

US: The US' Conference Board consumer confidence released weakened slightly in November. The labour market indicators gave somewhat mixed signals as both the 'jobs plentiful' and the 'jobs hard-to-get' index rise at the same time (usually these would move in opposite directions). Promisingly for the Fed however, inflation expectations return back to a declining trend (5.7%; from 5.9%).

NZ: Overnight the RBNZ kept policy rates unchanged yet signalled that they may hike rates in 2024 if inflation do not decelerate quickly enough.

Geopolitics: Yesterday, we published a new Research article where we discuss the political and economic relations in the Middle East. The piece is less about the day-to-day developments in the Gaza war and more about the long-standing religious and ideological rifts in a region that is often referred to as powder keg. Despite the temporary ceasefire between Israel and Hamas, we think the risk of escalation remains. Moreover, we think there is a risk that bottled tensions in the region explode, potentially leading to a scenario similar to Arab spring. We highlight that broader social unrest or political instability in the region could have severe implications globally, and that here, the West also has a lot at stake. International investors and corporates should be aware of the geopolitical risks related to Middle East, particularly since the Gulf states have grown to become increasingly important partners for the West, both in trade and in politics. Read more in Research Global: The Middle East unveiled - how a regional storm could ignite global flames, 28 November.

Equities: Equities closed somewhat higher, recovering at the end of the session, driven by falling yields. US closed up 0.1% but Europe down -0.3%. Interestingly, a new drop in yields were not enough to whip new risk appetite into equities. Cyclicals and growth admittedly outperformed, but not by a huge margin. Industrials were even a tad lower for the session. One explanation is that we are approaching a point where weakness in macro (and thereby yields) could even be interpreted negatively in equity markets again. Another explanation is that the drop in yields reiterates that bond volatility remains too high, which is typically disliked among investors. US futures are a notch higher this morning but Asian markets lower.

FI: European bond market was virtually unchanged for most of the day, yet in the afternoon a 5bp rally across the sub 10y segment occurred following dovish interpreted remarks from Fed's Waller saying monetary policy is well positioned. 10s30s steepened as the 30y only ended 2bp lower. 10y Bunds ended just below the 2.5% mark, which is the lowest since late August. Markets added 10bp of ECB rate cut expectations to 2024 and have now 4 full 25bp cuts priced for 2024.

FX: EUR/USD briefly breached the 1.10 mark but mostly traded just below as the USD weakened against most G10 currencies, hitting a three-month low against most major currencies. USD/JPY fell below 148, while EUR/GBP remained around the mid-0.86 mark. EUR/SEK declined to below 11.40, while EUR/NOK mostly traded below 11.70.

Credit: Credit markets turned around late yesterday, iTraxx Main went 1.4bp lower to 68.2bp while iTraxx Crossover went 4.8bp lower to 377.3bp. The new issue activity across the Nordic market remains busy demonstrated by deals in SEK from Gettinge AB, Stockholm Exergi and Volkswagen Financial Services. In the broader Euro primary market Piraeus Bank, Mediobanca, Hamburg Commercial Bank, Electricite de France and Lottomatica were active with benchmark transactions. We see a constructive investor appetite as we observe sizeable spread compression in most deals relative to the initial price indications.

Nordic macro

No key movers out of the Nordics today