Time for the house to vote

In focus today

• Focus today turns to the vote in the US House of Representatives to pass the funding bill ending the shutdown.
• Later in the day we will follow speeches from several Fed speakers in the US. This includes FOMC members Williams and Waller, as well as Atlanta Fed President Bostic.
• In Sweden, we get the monthly public employment numbers (PES) for October. The weekly data have been encouraging.

Economic and market news

What happened overnight

In the US, the Supreme Court extended its pause on a judge's order requiring the Trump administration to fully fund the Supplemental Nutrition Assistance Program (SNAP), which has been impacted by the ongoing government shutdown. The decision allows the administration to continue withholding USD 4bn in food aid for 42 million low-income Americans until Thursday.

What happened yesterday

In the US, NFIB's October small business optimism survey was to the dovish side. The headline index rose marginally (98.2, from 98.8) and firms reported easing uncertainty. But at the same time, firms' realized and expected sales and earnings weakened, as did their expected price increases. Labour market indicators were less changed, as indices reflecting hiring plans and labour shortages remained mostly steady.

ADP published its new weekly rolling 4-week employment growth estimate, showing a decline of -11K. This contrasts with the stronger-than-expected monthly reading of +42K released last week. While the estimate lacks detailed explanations, it suggests that job growth momentum may have weakened towards the end of October.

In the UK, the labour market report was more dovish than expected. Payrolls declined by 32K in October, marking the steepest drop seen so far, alongside September. The unemployment rate rose to 5.0%, exceeding expectations, while private sector wage growth (3M rolling average) slowed to 4.2% in September, slightly below the November BoE projection. Notably, payrolls for September were revised sharply lower from -10K to -32K. EUR/GBP gained, returning to levels seen late last week, and the data supports our call for a December rate cut from the BoE.

In Switzerland, a deal to lower US tariffs on Swiss exports from 39% to 15% could be finalised as early as this week, though it still requires President Trump's approval. Swiss business leaders have engaged with US officials to push for the reduction, which would ease pressure on Swiss exporters, including watchmakers. Shares in Richemont and Swatch Group rose on the news, as the US accounts for 19% of Swiss watch exports.

In Germany, the ZEW index fell short of expectations in November. The assessment of the current economic situation rose less than expected to -78.7 (cons: -78.2) from -80.0 while expectations declined to 38.5 from 39.3 in contrast to the consensus forecast of 41.0. The report thus indicates that the economy is still at a weak footing and the expectation for an improvement is weakening. Note that the ZEW has been somewhat in contrast to the more positive signals from the PMIs in recent months. 

In Portugal, Microsoft announced a USD 10bn investment in an AI data hub in Sines, partnering with Start Campus, Nscale, and NVIDIA on one of the largest AI projects in Europe. The project will deploy 12,600 GPUs and aims to position Portugal as a leading AI hub in Europe, leveraging its green energy initiatives and subsea cable connectivity.

Equities: Global equities extended gains yesterday, led by Europe. Interestingly, the healthcare sector topped the performance tables, rallying more than 2% and clearly outperforming tech, which declined on the day. This kind of rotation, healthcare outperforming tech, on a risk-on day, underscores that the session was not macro-driven, but rather driven by idiosyncratic factors and sector-specific narratives. In Europe, healthcare was the best-performing sector while utilities, the other traditionally defensive sector was the worst performer yesterday. Again, a rather unusual rotation pattern, suggesting that investors are repositioning within defensives rather than chasing cyclicals.

Macro data came in on the soft side, meaning that the equity rally was not fundamentally supported by yesterday's data flow. In the US yesterday, Dow +1.2%, S&P 500 +0.2%, Nasdaq -0.3% and Russell 2000 +0.1%. The S&P 500 and Nasdaq declined as concerns over elevated technology valuations weighed on sentiment. Nvidia fell 3.0% after SoftBank offloaded USD 5.83bn worth of shares, while CoreWeave dropped 16.3% following a cut to its revenue forecast. AI-related stocks remained volatile, dragging the tech-heavy Nasdaq down 0.3%, while gains in health and energy stocks helped the Dow rise 1.2%.

Asian markets are trading higher this morning, with US and European futures also in positive territory. Notably, US tech futures are showing some early signs of recovery after yesterday's underperformance.

FI and FX: The primary development over the last 24 hours has been the drop in US and UK yields following weaker-than-expected labour market data and (UK) wage figures. The 10Y US Treasury yield is now back below the 410bp level while swaps curves have flattened driven by the long end. In FX markets intraday moves were limited albeit with a slight unusual outperformance-combination of Scandies and CHF while the JPY and GBP underperformed. EUR/USD rose during yesterday's session towards 1.1600 but has fallen towards 1.1575 overnight.