Will the UK Autumn Budget calm fiscal concerns?

In focus today

The UK Autumn budget will be released in the afternoon. Expectations for an ambitious plan to cut costs and boost productivity have declined after the plans to raise income taxes were abandoned, although a less ambitious approach will also do for investors for now. Gilt and GBP investors will zoom in on the headroom, which will serve as a buffer against future debt issuance. Chancellor Reeves will likely have to increase it from the previous modest GBP 10bn closer to GBP 30bn.

In the morning, Norwegian mainland GDP growth is released, which we expect will have slowed to 0.2% in Q3, somewhat lower than Norges Bank's forecast from the September MPR (0.4%). However, monthly figures indicate that employment grew around 0.1% in Q3, which may suggest some upside risk to our estimate.

Overnight China releases its industrial profit growth for October. It recovered in late summer to reach 21.6% in September but likely did not sustain that level in October, when US tariff threats hit exports. We look for a decline to around 10% y/y, but it could go lower.

Economic and market news

What happened overnight

In the Ukraine war, Moskov signalled it could reject the 19-point peace plan developed by Ukraine and the US earlier this week, citing the significant changes from the plan developed in Alaska. US President Trump announced that there was no deadline on reaching an agreement and that he would meet with the two other Presidents only when the "deal to end this War is FINAL or, in its final stages". US envoy Steve Witkoff is set to meet President Putin next week to further the peace plan.

What happened yesterday

In the US, the delayed September producer price index (PPI) for final demand came in at 0.3% m/m and 2.7% y/y SA, matching low consensus expectations. The core measure (excluding food and energy) was lower at 0.1% SA y/y. US retail sales growth slowed in September, with sales increasing by a modest 0.2% m/m and the Conference Board's consumer confidence index saw a decline in November to 88.7 from 95.5 in October. It was the second lowest reading in five years. Overall, the data prints from the US added fuel to the fire of worries surrounding the US economy and markets are currently pricing about an 80% chance of an interest rate cut at the FOMC December meeting.

According to Bloomberg News, White House economic advisor Kevin Hassett is the frontrunner to be the next Fed chair. Prediction markets are telling the same story, with his nomination sitting just above 50%.

In Sweden, the October PPI came in at 0.4% y/y and 0.4% m/m. The numbers were nothing dramatic and were primarily driven by a rise in electricity prices.

Equities: Equities were sharply higher again on Tuesday, for a third straight day, with S&P 500 and Stoxx 600 eventually closing up 0.9%. This means that equities are only some 1-2% off previous highs. This session was much more like Friday's markets; investors were selectively buying the company outside the obvious AI plays. Russell 2000 gained 3% and sectors like healthcare, consumer discretionary and materials sector led the gains, ~2% higher. All in all, risk appetite was solid evident in a wide breadth (426 of the S&P 500 closed higher) and VIX falling below 20. Tech did okay, but with a lot of company specific news driving the sector in opposite directions (Nvidia down sharply on competition concerns, Alphabet and Meta higher on rumours that Meta will buy Google's chips). Similarly, heavy tech-indices in Asia are rebounding 1-2% higher this morning.

FI and FX: The money market is increasingly convinced that there will be a December cut from the Fed with futures now indicating 21bp. The longer end is lower as well with US10y at 4,00%. The UST 5y auction met strong demand. Equities like what they see. Broad US equity indexes closed higher for the third consecutive day, and futures are in green. The USD took a hit yesterday on the news that Russia's war in Ukraine might come to an end. EUR/USD moved from 1.1520 to 1.1590 and USD/SEK fell 10 figures. EUR/SEK and EUR/NOK trade just above 11.00 and 11.80.