Powell and profit taking, with S&P 500 trimming a third of post-election rally

EU mid-market update: Powell and profit taking, with S&P 500 trimming a third of post-election rally; Quiet Friday gives investors a chance to re-evaluate.

Notes/observations

- Monetary policy regaining attention of traders as US futures decline on back of hawkish Fed Chair Powell comments at Dallas yesterday. CME futures dropped chances of Fed rate cut in Dec from ~85% to ~60%. Previous trade in the week from Trump effect still around but not at the forefront as much as before Powell; Some analysts call that Fed may hold rates unchanged during 2025.

- Tier1 analysts in the note highlight that the risks around forecasts for next year’s US growth are unusually large; They claim there are plausible scenarios in which growth could run above 3%, or the US economy could enter a recession in 2025, adding that US inflation could get stuck just above 2.5%, since the upcoming Trump policy mix appears to be modestly inflationary.

- Euro popping higher as investors rethink its likelihood of hitting parity against US dollar, last seen up ~0.5% at 1.058. Variety of complex factors at play with Trump and tariffs against Europe, with little upside reasons for Euro and plenty for the dollar.

- Asia closed mixed with Shanghai underperforming -1.5%. EU indices are -0.3% to +0.3%. US futures are -0.5% to -0.9%. Gold -0.1%, DXY -0.1%; Commodity: Brent -1.4%, WTI -1.4%; Crypto: BTC -2.2%, ETH -2.7%.

Asia

- Japan Q3 Preliminary GDP Q/Q: 0.2% v 0.2%e; Annualized GDP Q/Q: 0.9% v 0.7%e.

- China Oct Industrial Production Y/Y: 5.3% v 5.6%e.

- China Oct Retail Sales Y/Y: 4.8% v 3.8%e.

- China Oct YTD Fixed Urban Assets Y/Y: 3.4% v 3.5%e.

- China Oct YTD Property Investment Y/Y: -10.3% v -9.9%e.

- China Oct Surveyed Jobless Rate: 5.0% v 5.1%e v 5.1% prior.

- China Oct New Home Prices M/M: -0.5% v -0.7% prior.

- New Zealand Oct Manufacturing PMI: 45.8 v 47.0 prior (20th month of contraction).

- China National Bureau of Statistics (NBS) Spokesman reierated view of being increasingly confident of achieving 2024 GDP growth target. Domestic demand remained insufficient but noted major economic indicators recovered markedly in October.

- Japan Fin Min Kato reiterated stance of seeing one-sided, sharp moves in FX markets; Watching with extremely high sense of urgency. Would take appropriate action vs excessive FX moves.

Europe

- Chancellor of the Exchequer (Fin Min) Reeves speech at Mansion House called for Britain to rebuild ties with the EU. told City regulators to dial up the risk in the UK financial services sector, claiming that rules drawn up after the 2008 banking crash had “gone too far” and were stifling growth.

- ECB's Schnabel (Germany) noted that asset purchases are more powerful for stabilizing markets than for stimulating the economy. Interest rates remained the primary monetary policy tool.

Americas

- Fed Chair Powell noted that recent US economic performance was remarkably good; Economy was not signaling that the Fed needed to hurry on rate cuts. Reiterated was on a sustainable path to the 2% inflation target. Noted that was aware that reducing policy restraint too quickly could hinder progress on inflation. At the same time, reducing policy restraint too slowly could unduly weaken economic activity and employment.

- Treasury Semi-annual FX report did not name any currency manipulators; Noted that seven economies were on the Monitoring List (China, Japan, Korea, Taiwan, Singapore, Vietnam, and Germany. (**Note: number remained the same but removed Malaysia and added Korea to list).

- Mexico Central Bank (Banxico) cut Overnight Rate by 25bps to 10.25% (as expected) for its 3rd straight cut under the current phase of its easing cycle. Headline inflation was still expected to converge to the target in the fourth quarter of 2025.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.28% at 505.58, FTSE +0.12% at 8,081.25, DAX +0.08% at 19,257.55, CAC-40 +0.01% at 7,312.71, IBEX-35 % at #, FTSE MIB +0.28% at 34,455.00, SMI -0.67% at 11,710.30, S&P 500 Futures -0.65%].

Market focal points/key themes: European indices open generally lower and failed to gain traction through the early part of the session after Fed’s Powell comments yesterday; risk appetite seen muted on growth worries; sectors managing gains include financials and utilities; among sectors leading lower are health care and technology; tech sector underperforming in sympathy to Applied Materials’ earnings disappointment; Evotec receives takeover approach from Halozyme; TT Electronics rejects takeover offer from Volex; Robertet discloses new investors and asset sales; Cargotec divests MacGregor unit; focus on US retail sales later in the day; earnings expected in the upcoming Americas session include Alibaba and Spectrum Brands.

Equities

- Financials: Generali [G.IT] +4.5% (9-month results).

- Healthcare: Evotec [EVT.DE] 20.0% (Halozyme confirms proposal to combine with Evotec for €11.00/shr in €2.0B All-Cash deal), Sanofi [SAN.FR] -3.5%, Astrazeneca [AZN.UK] -2.5% (Trump taps vaccine skeptic RFK Jr. to head HHS), Bavarian Nordic [BAVA.DK] -17.5% (Q3 results, heavily misses estimates; Trump taps vaccine skeptic RFK Jr. to head HHS).

- Technology: ASML Holding [ASML.NL] -2.5% (Applied Materials results), TT Electronics [TTG.UK] +38.5% (rejects offers to be acquired), Nexans [NEX.FR] -3.5% (Bpifrance confirmed selling 2.5% stake in Nexans).

- Materials: Givaudan [GIVN.CH] -1.5% (Barclays cuts to underweight; accident).

Speakers

- EU Commission Autumn economic forecasts maintained EU-19 2024 GDP at 0.8%while cutting GDP from 1.4% to 1.3%.

- German Fin Min Joerg Kukies reportedly would not put 2025 budget to vote.

- Germany Govt Spokesperson noted that Chancellor Scholz to meet with China Pres Xi on Tue, Nov 19th: Focus of meeting to be on Ukraine and economic issues.

- Czech Central Bank (CNB) Nov Minutes noted that the decision to cut by 25bps was not unanimous (5-2). Dissenters saw Zamrazilová voted for leaving rates unchanged while Holub (chief economist) voted for lowering rates by 50bps. To approach future rate decisions with more caution; could pause if appropriate.

- Hong Kong govt revised its 2024 GDP growth forecast from 2.5-3.5% range to 2.5% and cut 2024 Headline CPI forecast from 1.9% to 1.7%.

Currencies/fixed income

- USD consolidate a tad of its post Trump election gains. Fed futures were pricing 60% chance (v 83% d/d and 59% pre-CPI) that FOMC cuts rates again by 25bps at Dec 18th's meeting after Fed's Chair Powell comments yesterday. Focus on upcoming US retail sales data.

- GBP/USD was a tad lower after Q3 and Sept GDP readings were below forecasts. Dealers believe that BoE would still keep rates unchanged in Dec, despite UK Q3 GDP miss. Pair at 1.2660 by mid-session.

- EUR/USD drifted higher after testing the 1.05 handle on Thurs. Pair at 1.0560 by mid-session.

- USD/JPY off its Asian sessions higher after Japanese officials reiterated concerns of seeing ‘one-way’ price movements in the pair.

Economic data

- (DE) Germany Oct Wholesale Price Index M/M: +0.4% v -0.3% prior; Y/Y: -0.8% v -1.6% prior.

- (UK) Sept Monthly GDP M/M: -0.1% v +0.2%e.

- (UK) Q3 Preliminary GDP Q/Q: 0.1% v 0.2%e; Y/Y: 1.0% v 1.0%e.

- (UK) Q3 Preliminary Private Consumption Q/Q: 0.5% v 0.2%e; Government Spending Q/Q: 0.6% v 0.6%e; Gross Fixed Capital Formation Q/Q: 1.1% v 0.0%e; Exports Q/Q: -0.2% v +1.1%e; Imports Q/Q: -1.5% v -0.8%e.

- (UK) Q3 Preliminary Total Business Investment Q/Q: 1.2% v 0.6%e; Y/Y: 4.5% v 0.2% prior.

- (UK) Sept Industrial Production M/M: -0.5% v +0.1%e; Y/Y: -1.8% v -1.1%e.

- (UK) Sept Manufacturing Production M/M: -1.0% v -0.1%e; Y/Y: -0.7% v 0.0%e.

- (UK) Sept Construction Output M/M: 0.1% v 0.2%e; Y/Y: -0.4% v -0.6%e.

- (UK) Sept Index of Services M/M: 0.0% v 0.2%e; 3M/3M: 0.1% v 0.2%e.

- (UK) Sept Visible Trade Balance: -£16.3B v -£15.8Be; Overall Trade Balance: -£3.5B v -£1.2Be.

- (SE) Sweden Oct Unemployment Rate: 7.8% v 8.2% prior; Unemployment Rate (seasonally adj): 8.4% v 8.6%e; Trend Unemployment Rate: 8.5% v 8.5% prior.

- (NO) Norway Oct Trade Balance (NOK): 63.7B v 41.7B prior.

- (DK) Denmark Oct PPI M/M: 0.3% v 2.0% prior; Y/Y: 6.3% v 6.0% prior.

- (TR) Turkey Nov Expected Inflation Next 12 Month: 27.2% v 27.4% prior.

- (CH) Swiss Oct Producer & Import Prices M/M: -0.3% v -0.1% prior; Y/Y: -1.8% v -1.3% prior.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 130.5K v 139.7K tons prior.

- (TH) Thailand Foreign Reserves w/e Nov 8th: $238.1B v $237.9B prior.

- (FR) France Oct Final CPI M/M: 0.3% v 0.2% prelim; Y/Y: 1.2% v 1.2% prelim.

- (FR) France Oct Final CPI EU Harmonized M/M: 0.3% v 0.3% prelim; Y/Y: 1.6% v 1.5% prelim; CPI (Ex-Tobacco Index): 118.83 v 118.76e.

- (CH) Swiss Q3 Preliminary GDP (Sports Adj) Q/Q: 0.2% v 0.2%e.

- (TR) Turkey Oct Central Gov’t Budget Balance (TRY): -186.3B v -100.5B Prior.

- (RU) Russia Narrow Money Supply w/e Nov 8th (RUB): 18.30T v 18.29T prior.

- (HK) Hong Kong Q3 Final GDP Q/Q: -1.1% v -1.1% advance; Y/Y: 1.8% v 1.8% advance.

- (IT) Italy Oct Final CPI M/M: 0.0% v 0.0% prelim; Y/Y: 0.9% v 0.9% prelim.

- (IT) Italy Oct Final CPI EU Harmonized M/M: 0.3% v 0.3% prelim; Y/Y: 1.0% v 1.0% prelim; CPI (ex-tobacco index): 120.1 v 120.0e.

- (IS) Iceland Oct International Reserves (ISK): 893B v 899B prior.

- (PL) Poland Oct Final CPI M/M: 0.3% v 0.3% prelim; Y/Y: 5.0% v 5.0% prelim.

- (UK) Q3 Final Output Per Hour Y/Y: -1.8% v -0.1% prelim.

- (IT) Italy Sept General Government Debt: €2.962T v €2.962T prior.

- (IT) Italy Sept Total Trade Balance: €2.6B v €1.3B prior; EU Trade Balance: -€1.2B v -€1.5B prior.

Fixed income issuance

- (ZA) South Africa sold total ZAR1.0B vs. ZAR1.0B indicated in I/L 2038, 2046 and 2050 bonds.

Looking ahead

- (NG) Nigeria Oct CPI Y/Y: 33.0%e v 32.7% prior.

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

- 06:00 (IE) Ireland Sept Trade Balance: No est v €5.5B prior.

- 06:00 (UK) DMO to sell £4.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £2.5B respectively).

- 06:30 (IN) India Forex Reserve w/e Nov 8th: No est v $682.1B prior.

- 07:00 (IL) Israel Oct CPI M/M: +0.5%e v -0.2% prior; Y/Y: 3.5%e v 3.5% prior.

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

- 08:30 (US) Nov Empire Manufacturing: 0.0e v -11.9 prior.

- 08:30 (US) Oct Advance Retail Sales M/M: 0.3%e v 0.4% prior; Retail Sales (ex-auto) M/M: 0.3%e v 0.5% prior; Retail Sales (ex-auto and gas): 0.3%e v 0.7% prior; Retail Sales (control group): 0.3%e v 0.7% prior.

- 08:30 (US) Oct Import Price Index M/M: -0.1%e v -0.4% prior; Y/Y: +0.3%e v -0.1% prior; Import Price Index (ex-petroleum) M/M: 0.1%e v 0.2% prior.

- 08:30 (US) Oct Export Price Index M/M: -0.1%e v -0.7% prior; Y/Y: -1.7%e v -2.1% prior.

- 08:30 (CA) Canada Sept Manufacturing Sales M/M: -0.8%e v -1.3% prior.

- 08:30 (CA) Canada Sept Wholesale Sales (ex-petroleum) M/M: +0.9%e v -0.6% prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (CA) Canada Oct Existing Home Sales M/M: 6.0%e v 1.9% prior.

- 09:15 (US) Oct Industrial Production M/M: -0.3%e v -0.3% prior; Capacity Utilization: 77.1%e v 77.5% prior; Manufacturing Production: -0.5%e v -0.4% prior.

- 10:00 (US) Sept Business Inventories: 0.2%e v 0.3% prior.

- 10:00 (PE) Peru Sept Economic Activity Index (Monthly GDP) Y/Y: 3.1%e v 3.5% prior.

- 10:00 (PE) Peru Sept Unemployment Rate: 5.9%e v 5.9% prior.

- 11:00 (EU) Potential sovereign ratings after European close (Moody's on Portugal; S&P on Ireland; Fitch on Ireland).

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

- (AR) Argentina Oct Budget Balance (ARS): No est v 816.4B prior.