Markets brace for a flood of US data releases

In focus today

There is no exciting news releases scheduled for today, but this marks the start of a week packed with significant macroeconomic events.

Midweek brings key releases, including the UK October CPI and the FOMC minutes on Wednesday. On Thursday, attention will shift to euro area November consumer confidence. To round off the week, Friday will deliver euro area and US November flash PMIs alongside the ECB's Q3 negotiated wages data.

The focus this week will not least also turn to the delayed release of US data following the end to the US government shutdown last week. Also, central bank signals, growth indicators and on Wednesday the Nvidia earnings release will be important.

Economic and market news

What happened overnight

In Japan, Q3 GDP contracted by 0.4% q/q, beating consensus of a 0.6% decline. This translates to an annualised contraction of 1.8% y/y for the quarter, primarily attributed to a sharp drop in exports amid US tariffs having an impact. Automakers experienced a significant plunge in shipment volumes, reversing earlier gains from front-loaded exports. Additionally, housing investments weighed on growth. Despite these challenges, the economy remains on a relatively stable footing. Sustained wage growth will be crucial for the Bank of Japan to consider further interest rate hikes.

What happened Friday

In euro area, GDP grew by 0.2% q/q in Q3, slightly improving on the 0.1% growth recorded in Q2 and broadly in line with expectations. The data reaffirms a picture of sub-trend yet resilient activity. However, growth remains uneven across the region. France and Spain continue to drive momentum, with Spain's strong performance standing out, while Germany lags, stagnating for the third consecutive year due to weak industrial output, subdued exports, and sluggish private consumption.

Employment in the euro area rose by 0.1% q/q in Q3, a marginal improvement compared to the previous quarter. The labour market remains relatively resilient, although signs of cooling are evident as firms retain staff despite weak demand. This modest increase highlights a subdued employment environment, which aligns with a cautious outlook on wage pressures and broader corporate activity.

In Sweden, the October Labour Force Survey revealed a rise in unemployment to 9.3%, though its volatility and a weaker sample group warrant caution in interpretation. Despite this, the outlook appears more optimistic, with signs of a swifter-than-expected recovery. However, the Riksbank's shift from focusing on high unemployment to addressing inflation risks may be delayed. Encouragingly, early indicators suggest a strengthening labour market, and the Public Employment Service's more stable measure showed unemployment declining to 6.8% in October.

In the UK, Gilts and GBP sold off as Chancellor Reeves ditched plans to raise income tax rates. The decision came as the OBR forecast for the UK economy looks to leave a smaller fiscal gap to close than expected. These forecasts are notoriously uncertain, and this backdrop did little to sooth investors. The final budget will be presented on 26 November.

A trade agreement between the US and Switzerland was finalised on Friday, reducing tariffs on Swiss goods to 15%, down from 39%, and including a Swiss commitment to invest USD 200bn in the US. The deal places Switzerland on equal footing with the EU.

In the cryptocurrency market, Bitcoin hit new lows around USD 93,000 over the weekend before rebounding somewhat overnight to USD 95,000. The cryptocurrency has been on a four-day losing streak, declining 9% week-to-date amidst a broader stock market retreat driven by concerns surrounding AI.

Equities: Global equities ended Friday 0.3% lower, leaving the week only marginally higher overall. The best-performing sectors were energy and tech on what was otherwise a day with limited macro news. In the US on Friday: Dow -0.6%, S&P 500 flat, NASDAQ 0.1% higher and Russell 2000 +0.2%. 

FI and FX: Friday saw some substantial intraday moves across asset classes. UST yields and equities were deep in the red halfway through the session whilst EUR/USD rallied to 1.1650. However, without any apparent trigger these moves were quickly reversed the S&P500 closed flat, up a couple of bp throughout the UST curve and close to 1.16 for EUR/USD. Defying the intraday reversal, scandi weakness was constant throughout the day, with EUR/SEK climbing closer to the 11-mark and EUR/NOK back above 11.70 once again. For this week, attention turns to the release of the delayed US data, the FOMC minutes and Friday's flash PMIs.