Progress in talks to end US shutdown

In focus today

In Norway, October inflation data is released today, and we expect unchanged core inflation at 3.0% y/y. October is a month with limited seasonal variations so the range of outcomes this time is lower than usual. We believe the figures will show that the disinflationary trend continues, but at a moderate pace. The most interesting thing will be to see whether services inflation continues to decline as we saw a tendency in September. With Norges Bank's fear that high wage growth will keep inflation up, this will be the most important thing for monetary policy going forward.

In Denmark, we receive inflation data for October. We expect inflation will edge lower to 2.2% y/y from 2.3% y/y in September. It is particularly driven by a base effect on energy. That said, electricity prices also increased this October, and the winter tariff kicks in, which lifts consumer prices. Food prices continue to be the big joker following the price surge over the summer, which weighs heavy on consumer confidence.

In Sweden, the week starts with the release of September's production value index (PVI). If the production figures included in the Q3 GDP indicator published at the end of October are any guide, today's release should confirm the strong growth in September. Retail sales, however, moved sideways at elevated levels, suggesting today's household consumption indicators will remain broadly unchanged. Households appear to have been the main driver of Q3 growth.

The coming week is rather light on market movers due to the US government shutdown. However, the US NFIB Small Business Optimism Index will be released on Tuesday, providing insights into labour market developments. In Sweden, labour market data will be released from the Public Employment Service on Wednesday and from Statistics Sweden's labour force survey on Friday. Given the macro data improvement from recent months, there is hope that the labour market will gradually respond positively.  On Friday, China is set to release its monthly data for retail sales, industrial production, home sales and house prices.

Economic and market news

What happened since Friday

In the US, the Senate has taken a key step toward ending the 40-day government shutdown by advancing a bill to fund the government through 30 January 2026 and include three full-year appropriations measures. The deal, brokered with bipartisan support, ensures back pay for federal employees and a December vote on extending ACA subsidies, a key Democratic demand. The bill now moves to the House and then to President Trump for approval. Markets seem to see short-term relief as global shares rose on optimism over the progress to end the shutdown. US stock futures gained, US treasury yields edged higher, and the dollar recovered some of last week's losses. However, concerns about the shutdown's economic toll remain.

Also in the US, the University of Michigan's preliminary November consumer sentiment survey showed a decline, driven by weaker assessments of both the current situation and future expectations. Inflation expectations for 1 year ticked up to 4.7% (from 4.6% in October), while the 5-year inflation expectations declined to 3.6% (from 3.9%).

In China, exports surprised to the downside in October as it dropped into negative growth of -1.1% y/y (cons: 2.9% y/y) from 8.3% y/y in September. However, the decline may be due to the uncertainty around Trump's 100% tariff threat and extra holiday in October compared to last year. We expect exports to rebound in November as the US-China trade deal in late October led to a tariff decline of 10% to the US rather than the increase of 100%.

CPI inflation surprised to the upside, coming in at 0.2% y/y in October. This was the fastest growth in consumer prices since January, while core inflation reached a 20-month high of 1.2% y/y. Meanwhile, PPI fell 2.1% y/y, marking the 37th consecutive monthly decline, though deflationary pressures eased slightly.

In Norway, manufacturing production declined 1.7% m/m in September, driven by a drop in activity in mainland industries. These figures tend to be volatile on a monthly basis, but the underlying trend is now clearly downwards, so 3M/3M is down 0.3 %. Hence, hard data now start to align with the recent weakness in leading indicators.

Annual wage growth (incl. bonuses etc.) dropped from 6.3% to 4.8% in Q3, as we had expected. The figures confirm our suspicion that the high reading in Q2 was driven mainly by accrual effects, and illustrates that wage growth is slowing, but still higher than Norges Bank expected in the MPR in September (4.7%).

In Hungary, Prime Minister Viktor Orban announced that the country has secured an indefinite exemption from US sanctions on Russian energy imports, following a meeting with President Donald Trump. However, the White House stated the exemption is valid for only one year. Hungary, which remains heavily reliant on Russian energy, also agreed to purchase USD 600m worth of US liquefied natural gas as part of the deal.

In the bidding war for obesity drug developer Metsera, Pfizer secured a USD 10bn deal after Novo Nordisk exited the race on Saturday. The acquisition grants Pfizer a key foothold in the rapidly expanding weight-loss market, while Novo remains focused on advancing its own pipeline of obesity treatments.

Equities: Global equities were lower last week, including on Friday, with the MSCI World Index down roughly 1.5% for the week. Defensive sectors outperformed, while cyclical growth lagged as valuation concerns resurfaced in financial media, with discussions of a potential correction. One of the more interesting developments was the strong daily positive correlation between equities and yields, meaning a negative correlation between equities and bonds. This pattern largely reflected the mixed US labour market data: upbeat ADP employment figures one day, followed by weaker Challenger numbers the next.

From a broader perspective, despite the recent equity weakness, we continue to view the backdrop positively. Macro fundamentals remain solid, and earnings results, particularly in the US supportive. Moreover, the latest developments in US-China trade relations have been constructive. Hence, we do not see an increased probability of a market correction compared to several weeks ago. If anything, the combination of resilient data and market dynamics strengthens our confidence that equity markets are likely to move higher in the near term. Asian equities are off to a strong start this morning, with South Korea up more than 3%. Futures in both Europe and the US also point higher. Sentiment will likely be supported by growing signs that the US government shutdown could soon come to an end.

FI and FX: After a volatile end to last week, sentiment this morning has improved following news of Democratic party members in Senate voting to support a deal to end the US government shutdown. US yields are roughly 3bp higher across the curve overnight while EUR/USD is little changed. Risk sensitive currencies are also bid this morning with oil exporting FX benefitting from oil prices moving moderately higher.