US eco data will again tale center stage with the delayed release of the US September Payrolls

Markets

The Minutes of the end October Fed meeting and Nvidia results were the main features for global tradingyesterday. The latter were poised to address market concerns on a developing tech bubble causing hiccups of market volatility of late. Both sales for the previous quarter and the outlook were materially stronger than expected and CEO Jensen Huang indicated that at least his company did see ‘something very different’ from an AI bubble. US equity indices already slowed recent correction in the run-up to the (post-market) Nvidia results and US futures are firmly in positive territory this morning. (Nasdaq Future + 1.8%) setting the stage for a risk-rebound today. Of late, the (US) interest rate markets showed an indecisive trading pattern as investors grew ever more uncertainty whether the Fed would already execute a next follow-up insurance rate cut at the December 10 meeting. The minutes at least showed highly different views on policy going forward. ‘Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate as the Committee moved to a more neutralpolicy stance over time, although several of these participants indicated that they did not necessarily view another 25 basis point reduction as likely to be appropriate at the December meeting’, the report reads. US yields moved againtowards the upper part of recent short-term rage adding about 2 bps across the curve. The odds on a December rate cut declined to < 30%. German yields in technical trading mostly gained up to 1.0 bps. Even as equity sentimentimproved, the dollar remained well bid, with USD/JPY taking the lead as uncertainty on sustainability of Japan fiscal policy hammered the yen. USD/JPY jumped to close north of 157. DXY (100.25) is again testing the 100.25/36resistance area. EUR/USD drifted further south in the 1.15 big figure (close 1.154). UK gilts underperformed (30-y +6.2 bps) despite a further easing of inflation in October (3.6%). Sterling slightly underperformed (close 0.8835.

This morning, Asian indices (ex-China) mostly join the Nvidia-driven rebound. Headlines (Reuters) on the Japanese government preparing a JPY 21.3 trillion fiscal stimulus package (to be released tomorrow), continue to both pressure Japanese bonds (10-y + 4.5 bps) and the yen (USD/JPY 157.7). Still, the dollar remains well bid overall (EUR/USD 1.152). Later today, for once, US eco data will again tale center stage with the delayed release of the US September payrolls, which will be the only new labour market report available for the December Fed meeting. Consensus expected a 51k month job growth. It remains a bit strange for the FOMC to give a heavy weight at one outdated data release to decide on the (timing) of further easing. Even so, a softer figure (September ADP was -32k) might ease recent ‘rise’ in US yields and rebalance expectations on a December fed rate cut. In this process the dollar also nears important resistance levels (DXY 100.25/50 area, EUR/USD 1.1469 November low ) which might also have a role to play in case of a soft report.

News & Views

The Chinese government mulls additional measures to get the ailing housing sector back on its feet, Bloomberg reported citing people familiar with the matter. Options include mortgage subsidies for new homebuyers but on a nationwide level for the first time, raising income tax rebates for mortgage borrowers and lowering home transaction costs. The real estate downswing has been around for four years and shows little signs of improving. Completed investment in the sector has been declining sharply but after having appeared to find a bottom through 2024, things took another turn for the worse from Q2. Y/Y investment measures (-14.7%) are nearing the 2020 crash (and alltime) low of -16.3%. With many consumers heavily indebted, the malaise weighs on sentiment and consumption. It also raises the question whether measures aimed at stimulating even more borrowing are actually worth doing.

The French 2026 budget will probably be rejected when parliament votes on it this Sunday. PM Lecornu unlike his predecessor said he won’t circumvent parliament in pushing through the budget and insisted on having lawmaker’s backing. But that resulted in thousands of amendments of the original draft which turned it into a document policymakers now say no one can recognize themselves in. Voting it down means the government is running ever shorter on time to have it agreed on time. While France can resort to measures that roll over 2025 spending levels into 2026, it would kill off ambitions to narrow down the gaping deficit.

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