US ADP jobs report takes centre stage amid BLS delay

In focus today

In the US, the October ADP private sector employment report is due for release this afternoon. The release is likely to get more attention than usual due to the delays to the BLS's monthly jobs report. ADP's early estimate based on weekly employment data until 11 October indicated small, but positive employment gains (+14k) after a negative reading in September (-32k). The ISM Services index for October will also be released. US Treasury will publish additional details of its quarterly refunding announcement (QRA), we expect the Treasury to maintain its forward guidance of unchanged coupon auction sizes 'for the next several quarters'.

In Sweden, the Riksbank will announce its rate decision. We expect the policy rate to stay unchanged at 1.75%, in line with market expectations and the Riksbank's guidance. As the meeting is also a "smaller" one without forecast updates, there are few reasons to expect any shift from the Riksbank.

In the euro area, we will receive the final services and composite PMI for October. The services PMIs surprised strongly on the upside in the flash release to 52.6. We expect the composite PMI to confirm the flash release of 52.2 as the final manufacturing print released on Monday was similar to the flash release of 50.0. Read more in Euro Area Macro Monitor - Better than expected growth, 5 November.

In Poland, the National Bank of Poland (NBP) is set to announce its rate decision. While the consensus view is another cut to 4.25%, we expect the NBP to hold rates steady. Recent communication from the Board has been mixed, with some members calling for a near-term pause in rate adjustments. Over the past years, the NBP has a track record of surprising markets, suggesting that consensus expectations do not necessarily carry much weight in their internal discussions.

In Japan, wage data for September is released overnight. A pick-up in wage growth is a prerequisite for a Bank of Japan hike following a few disappointing revisions lower of the otherwise promising wage data over the summer.

Economic and market news

What happened overnight

In the US, Democrats secured major victories in the first significant elections of Trump's second term, winning governor races in Virginia and New Jersey and the New York City mayoral race. Zohran Mamdani's victory in the New York City mayoral race marks a significant shift in political sentiment, with his campaign focused on addressing affordability concerns resonating strongly with voters. These wins, coupled with California's approval of a Democratic-leaning redistricting plan, offer momentum to the party ahead of next year's mid-term elections.

In US-China relations, China's State Council tariff commission announced the suspension of the additional 24% tariff on US goods for one year, while retaining a 10% levy. Additionally, tariffs of up to 15% on certain US agricultural goods, including soybeans, will be lifted from 10 November. The decision follows the consensus reached in the China-US economic and trade consultations last week.

In Japan, the Bank of Japan's September minutes revealed growing support for resuming rate hikes, as concerns over the potential impact of higher US tariffs on Japan's fragile economy begin to ease. While the board kept rates steady at 0.50% during both its September and October meetings, some members now favour a gradual approach to hiking as domestic economic conditions show signs of improvement.

What happened yesterday

In Denmark, the Danish central bank made no FX interventions in October, as revealed in yesterday's balance sheet statement. This, combined with easing pressure on the DKK, has reduced the risk of a rate hike by the central bank.

Equities: US equities sold off sharply yesterday, driven lower by a retreat in AI-related tech. The S&P 500 fell 1% and the Nasdaq 2%. While it may sound like a major pullback, it merely takes the Nasdaq back to levels seen about a week and a half ago. The selloff was concentrated in tech - primarily hardware and semiconductors - with Micron -7%, Intel -6%, and Nvidia -4%, while hyperscalers fared much better. As a result, we are also seeing significant pullbacks this morning in Asia, the world's key hardware region, with the KOSPI and Nikkei down 3-4%.

The trigger: interestingly, media reports attributed the weakness to "Wall Street CEOs" warning of a correction in the sector due to valuations at a financial summit in Hong Kong. We find that explanation unconvincing. Stretched valuations in tech are hardly new, and yesterday's selloff was more concentrated in lower-valued hardware names than in hyperscalers. Rather, this appears to reflect stretched positioning and a sharp rally during earnings season. It is also worth noting that this was not a macro-driven selloff; banks actually closed higher, and the Dow Jones ended only 0.5% lower.

FI and FX: Amid sour risk sentiment, the JPY and the USD gained yesterday, where especially the Scandies struggled. EUR/USD fell below 1.15. EUR/SEK rose above 11.00 yesterday ahead of the Riksbank meeting today. Bond yields fell slightly across the curve and regions yesterday.