Volatility rises as market fails to shake off AI bubble fears and circulating Japan affects

EU mid-market update: Volatility rises as market fails to shake off AI bubble fears and circulating Japan affects; Bitcoin hit the hardest.

Notes/observations

- European markets hit by the selloff that began mid US session and flowed into Asia. Market was initially upbeat from Nvidia earnings but lingering concerns about an AI bubble resurfaced alongside some bear market technicals and potentially early positioning for a yen carry trade unwinding as Japan approved ¥21.3T economic package with officials saying they would defend yen weakness from breaking 160 against USD. Combination of the above is running thesis for the reversal with no one specific catalyst attributed.

- Flash PMIs for France, Germany, Euro Zone and UK were mixed. More weak data from the UK, with miss in retail sales and borrowing rising more than expected (budget on Wed).

- Japan’s ¥21.3T [~$135B] (top end of all estimates) stimulus package lands just as ten-year JGBs hover near 1.75%, forcing investors to absorb one of the largest bouts of deficit financing since the pandemic at the very moment the yen is behaving like the world’s most fragile funding currency. The result is a live experiment in whether the global AI-and-carry regime can survive a Japan that is simultaneously injecting massive fiscal horsepower into its economy and exporting rate volatility through a steeper JGB curve, a weaker yen and BOJ policy risks that now threaten to reprice the entire edifice of yen-funded leverage.

- Optimism over Ukraine war with Zelenskiy confirming receipt of draft 28-point peace plan from Trump admin. Plan appears to give concessions from both sides and includes cap on Ukraine military size and prohibition from joining NATO.

- OpenAI is quietly signaling that the AI race just got harder, telling staff to brace for economic headwinds as it scrambles to close the gap with a resurgent Google and bets on a new LLM, Shallotpeat, to fix deep pretraining flaws and restore momentum. This week, Gemini 3 has delivered the first real rupture in the myth of OpenAI’s inevitability since ChatGPT’s debut, shifting the center of gravity toward a rival with more compute, more silicon, and more balance-sheet firepower, and making the multibillion-dollar fundraising game far less forgiving.

- Traders point to Nvidia’s latest 10-Q reveals a company transforming from the industry’s premier chip vendor into the financial backbone of the AI ecosystem, carrying ~$83B in long-dated manufacturing, cloud, and investment commitments, swelling inventories, soaring warranty reserves, and even a facility lease guarantee that effectively turns it into its customers’ co-signer and capital partner. The filing underscores a pivotal test for 2026: whether Nvidia’s $500 billion-plus Blackwell and Rubin pipeline is genuinely self-funding or whether its own cash, credit rating, and equity portfolio are now propping up an AI flywheel that is spinning faster on Nvidia’s balance sheet than on the industry’s demand curve.

- TTN Reminder: on November 25th, Michael Burry promised more details on his discoveries regarding Oracle and Meta, framing them as overextended pillars of the AI trade whose earnings and cash-flow assumptions he believes are far ahead of reality.

- Crypto takes new step lower, Bitcoin breaking down to $81K (reminder all time high at $126K).

- Asia closed lower with KOSPI underperforming -3.8%. EU indices -0.7% to -1.4%. US futures +0.2% to -0.7%. Gold -0.9%, DXY 0.0%; Commodity: Brent -2.2%, WTI -2.5%; Crypto: BTC -10.6%, ETH -10.7%.

Asia

- Japan cabinet approves Economic Package for ¥21.3T [~$135B] (top end of estimates ¥20-21.3T).

- Japan govt panel member: Japan may intervene in the Yen before it reaches 160.

- Japan Oct National CPI Y/Y: 3.0% v 3.0%e; CPI (ex-fresh food) Y/Y: 3.0% v 3.0%e; CPI (ex-fresh food/energy) Y/Y: 3.1% v 3.

- Japan Nov Preliminary PMI Manufacturing: 48.8 v 48.2 prior (5th month of contraction); PMI Services: 53.1 v 53.1 prior (12th month of expansion); PMI Composite: 52.0 v 51.5 prior.

Europe

- EU said to issue formal warning to Italy over 'golden power' rules - FT.

- EU Trade Commissioner Sefcovic: EU considering how to best invest in Australian resources projects.

- Hungary Central Bank (MNB) Dep Gov Virag reportedly to step down; Chief economist Banai said to become new Dep Gov.

Americas

- Treasury Sec Bessent: A lot of signals are coming out of the Fed; Fed should be looking at data and continue the interest rate cutting cycle.

Trade

- Taiwan Min Cheng-Wen: US will not put 'punishing tariffs' on chip sector - FT.

- Pres Trump: Signs executive order modifying scope of tariffs on Gov of Brazil; Removes tariffs on imports of Brazilian beef, coffee and orange juice.

- Brazil Pres Lula: US Pres Trump has 'sent a good sign' with tariff relief; Want more than 40% tariff relief.

- China 'could' seek to restrict rare earths shipments to Japan.

- US Agricultural Under-Sec Lindberg: US open to dropping tariffs on EU beef, lemons and other food items - FT.

- EU Commission Pres Von der Leyen: Europe is doubling down on core belief that rules-based trade delivers - comments at G20.

Conflict/tensions

- Reportedly US draft peace plan would compel Ukraine to surrender some eastern territory to Russia, would provide security guarantees, and limit its military forces to 600K troops (would still be the biggest army in Europe) - Axios.

- Hungary PM Orban: Trump's 28-point Ukraine peace plan is step toward Budapest Peace Summit - state radio interview.

- US officials said to brief EU ambassadors in Kyiv, Ukraine on peace plan draft on Fri, Nov 21st.

- Germany Chancellor Merz reportedly to hold urgent call with UK's Starmer, France's Macron and Zelenskiy about US-Russian plan to end Ukraine War - press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.90% at 558.84, FTSE -0.42% at 9,487.40, DAX -1.07% at 23,059.13, CAC-40 -0.55% at 7,936.84, IBEX-35 -1.01% at 15,852.03, FTSE MIB -0.88% at 42,541.00, SMI +0.05% at 12,556.25, S&P 500 Futures +0.03%].

Market focal points/key themes: European indices open lower across the board, but came off the lows in the early part of the session; returning concerns over valuations in the tech sector weighed on risk appetite; among sectors managing gains are consumer discretionary and telecom; sectors leading to the downside include energy and technology; oil & gas sector under pressure amid hopes of a peace deal to end the war in Ukraine; Veolia to acquire Clean Earth from Enviri; SGS acquires Sami; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Asos [ASC.UK] -2.5% (earnings), CTS Eventim [EBD.DE] +7.0% (earnings).

- Energy: Tullow Oil [TLW.UK] -30.0% (trading update).

- Financials: Ackermans & Van Haaren [ACKB.BE] -2.0% (earnings).

- Technology: Ubisoft Entertainment [UBI.FR] +11.0% (published delayed results), ASML [ASML.NL] -6.0% (global tech sell-off).

Speakers

- SNB Board Member Tschudin: Inflation will rise slightly in next quarters.

- ECB Chief Lagarde: ECB cuts increasingly supporting financing conditions; Fiscal packages will have a measurable growth effect.

- ECB’s De Guindos (Spain): Current level of rates is appropriate; Spain's new outlook unlikely to differ much from EU's.

- Japan govt panel member: Japan may intervene in the Yen before it reaches 160.

- Japan Fin Min Katayama: Reiterates this year's Total JGB bond issuance to be below last year's (¥41.2T); Can't comment on expected size of additional bond issuance to fund the latest package.

- Japan PM Takaichi: Will fund the package with new bond issuance if higher tax revenue is not enough; Overall JGB issuance expected to be smaller than last year's total (¥41.2T) - financial press.

- Japan BOJ Gov Ueda: Weaker Yen raises import costs, pushing up inflation and import costs - appearance at Lower House Finance Committee.

- Japan Fin Min Katayama: It's vital that FX moves stably, reflecting fundamentals; Will take appropriate action against excessive moves; Refrains from commenting on specific moves to trigger intervention; FX intervention is an option - references Japan-US agreement in Sept.

- Japan Chief Cabinet Sec Kihara: Closely watching FX moves with a high sense of urgency; Won't comment on Forex levels.

- Senior BOJ Official: Underlying inflation is gradually heading toward 2.0% target, cannot 'pin-point' the exact level.

- Fed's Miran (FOMC voter, dovish dissenter): It's 'Incumbent upon' the Fed to move interest rates closer to neutral.

- New Philadelphia Fed Pres Paulson (voter in 2026): Approaching Dec's rate decision 'Cautiously'; Expects to learn a lot from data between now and Dec.

-Treasury Sec Bessent: A lot of signals are coming out of the Fed; Fed should be looking at data and continue the interest rate cutting cycle.

Economic data

- (EU) Euro Zone Q3 Negotiated Wages: 1.9% v 2.5%e.

- (UK) Nov Preliminary Manufacturing PMI: 50.2 v 49.2e (highest since Sept 2024); Services PMI: 50.5 v 52.0e v 52.3 prior; Composite PMI: 50.5 v 51.8e v 52.2 prior.

- (IS) Iceland Oct Wage Index M/M: 0.2% v 0.8% prior; Y/Y: 7.7% v 7.8% prior.

- (EU) Euro Zone Nov Preliminary Manufacturing PMI: 49.7 v 50.1e (back into contraction); Services PMI: 53.1 v 52.8e v 53 prior; Composite PMI: 52.4 v 52.5e v 52.5 prior.

- (DE) Germany Nov Preliminary Manufacturing PMI: 48.4 v 49.8e; Services PMI: 52.7 v 54.0e v 54.6 prior; Composite PMI: 52.1 v 53.5e v 53.9 prior.

- (FR) France Nov Preliminary Manufacturing PMI: 47.8 v 49.0e (lowest since Feb); Cost inflation accelerated; Services PMI: 50.8 v 48.5e v 48 prior; Composite PMI: 49.9 v 48.1e v 47.7 prior.

- (FR) France Oct Retail Sales Y/Y: -0.7% v -1.2% prior.

- (CH) Swiss Oct M3 Money Supply Y/Y: 4.8% v 4.0% prior.

- (TH) Thailand Foreign Reserves w/e Nov 14th: $272.1B v $271.6B prior.

- (TR) Turkey Oct Foreign Tourist Arrivals Y/Y: 4.3% v 0.5% prior.

- (FR) France Nov Manufacturing Confidence: 98 v 100e; Business Confidence: 98 v 97e v 97 prior; Production Outlook Indicator: -10 v -10e v -11 prior; Own-Company Production Outlook: 14 v 10e v 18 prior.

- (SE) Sweden Q3 Industry Capacity: 88.8% v 89.0% prior.

- (MY) Malaysia mid-Nov Foreign Reserves: $124.1B v $123.8B prior.

- (UK) Oct Public Finances (PSNCR): +£20.8B v -£10.8B prior; Net Borrowing (PSNB): £17.4B v £15.0Be; PSNB (ex-banking groups): £17.4B v £19.9B prior; Central Government NCR: £21.7B v £15.9B prior.

- (UK) Oct Retail Sales (ex auto fuel) M/M: -1.0% v -0.5%e ; Y/Y: 1.2% v 2.5%e; Retail Sales M/M: -1.1% v -0.2%e ; Y/Y: 0.2% v 1.4%e.

- (NL) Netherlands Oct House Price Index M/M: 0.5% v 0.0% prior; Y/Y: 6.6% v 7.0% prior.

- (IN) India Nov Preliminary PMI Manufacturing: 57.4 v 59.2 prior (53rd month of expansion); PMI Services: 59.5 v 58.9 prior (52nd month of expansion); PMI Composite: 59.9 v 60.4 prior.

- (UK) Nov GfK Consumer Confidence: -19 v -18e.

- (JP) Japan Oct National CPI Y/Y: 3.0% v 3.0%e; CPI (ex-fresh food) Y/Y: 3.0% v 3.0%e; CPI (ex-fresh food/energy) Y/Y: 3.1% v 3.1%e.

- (JP) Japan Oct Trade Balance: -¥231.8B v -¥284.2Be; Adjusted Trade Balance: -¥4.2B v -¥128.9Be.

Fixed income issuance

- South Africa sells total ZAR1.0B vs. ZAR1.0B indicated in 2033, 2043 and 2050 I/L bonds.

- India sells total INR300B vs. INR300B indicated in 2040 and 2065 bonds.

- Japan sells ¥4.3T vs. ¥4.3T indicated in 3-Month Bills ; Avg Yield: 0.4766% v 0.4529% prior; Bid-to-cover: 2.96x v 3.00x prior.

Looking ahead

- 06:00 (UK) DMO to sell £6.0B in 3-month, 6-month and 12-month bills.

- 06:00 (IE) Ireland Oct PPI M/M: No est v -0.4% prior; Y/Y: No est v -2.6% prior.

- 06:00 (IN) India Forex Reserve w/e Nov 14th: No est v $687.0B prior.

- 06:00 (EU) ECB’s Guindos.

- 07:00 (MX) Mexico Q3 Final GDP Q/Q: -0.3%e v -0.3% prelim; Y/Y: -0.2%e v -0.2% prelim; GDP Nominal Y/Y: No est v 5.4% prior.

- 07:00 (MX) Mexico Sept Economic Activity IGAE M/M: 0.0%e v 0.6% prior; Y/Y: +1.0%e v -0.9% prior.

- 07:30 (US) Fed’s Williams.

- 07:40 (CH) SNB’s Schlegel.

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

- 08:00 (EU) ECB’s Nagel.

- 08:30 (CA) Canada Sept Retail Sales M/M: -0.7%e v 1.0% prior; Retail Sales (Ex Auto) M/M: -0.5%e v 0.7% prior.

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

- 09:00 (US) Fed’s Logan.

- 09:30 (EU) ECB’s Kocher.

- 09:45 (US) Nov Preliminary Manufacturing PMI: 52.0e v 52.5 prior; Services PMI: 54.6e v 54.8 prior Composite PMI: 54.6e v 54.6 prior.

- 10:00 (US) Nov Final University of Michigan Confidence: 50.6e v 50.3 prelim; Current Conditions: No est v 52.3 prelim; Expectations: No est v 49 prelim; 1-year Inflation: No est v 4.7% prelim; 5-10 year Inflation: 3.6%e v 3.6% prelim.

- 10:30 (US) EIA Natural Gas Storage.

- 10:40 (UK) BOE’s Pill.

- 11:00 (US) Nov Kansas City Fed Services Activity: No est v -5 prior.

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