Futures Flat As War Threat Fades

US equity futures were flat, having traded in a narrow range on either side of unchanged, as investors braced for the latest retail sales data, assessed the easing path of inflation and remained calm in the face of rising geopolitical concerns resulting from a NATO attempt to paint rocket a Ukraine strike on a Polish village as Russian, in hopes of dramatically escalating the war.

Russia now promotes a conspiracy theory that it was allegedly a missile of Ukrainian air defense that fell on the Polish theory. Which is not true. No one should buy Russian propaganda or amplify its messages. This lesson should have been long learnt since the downing of #MH17.

— Dmytro Kuleba (@DmytroKuleba) November 15, 2022

Luckily, video evidence refuted the false flag, and overnight NATO was forced to admit that the “:Explosion in Poland was Likely Due to Ukraine Air Defense” Even so, the Western pro-war alliance still blamed Russia with  NATO’s Secretary General saying the blast in Poland was likely caused by a Ukrainian air defence missile but that Russia was ultimately responsible because it started the war. “They are responsible for the war that has caused this situation.” Propaganda aside, fears of an immediate spillover from the conflict were soothed, knocking the yen and dollar lower, as demand for safe-haven assets gradually faded.  

“It’s a reminder that the risk of escalation is in the background. It’s something we need to watch for, because any escalation of military action and additional impact on energy supply could seriously disrupt markets,” said Kiran Ganesh, managing director at UBS Global Wealth Management.

Failed Gulf of Tonkin 2.0 aside, contracts on the Nasdaq 100 were down 0.1% and the S&P 500 was flat as of 7:30 a.m. in New York, erasing modest earlier losses and gains; the dollar dropped and the euro and the Polish zloty recouped earlier knee-jerk losses. 10Y yields traded near session lows at 3.758%. 

In premarket trading, stocks linked to Donald Trump, including blank check company Digital World Acquisition Corp., surged after the former president officially entered the 2024 presidential race. Meanwhile, suppliers to Apple could be active, following a report about the iPhone maker preparing to begin sourcing chips for its devices from a plant under construction in Arizona. Here are the other notable premarket movers:

Carnival (CCL US) shares fall 13% after a private offering of $1 billion of convertible senior notes.
Ginkgo Bioworks (DNA US) shares dropped as much as 7.5% after the cell-programming platform provider launched a share sale, with the company planning to use the net proceeds to offset the cash used to finance the acquisition of assets and liabilities of Bayer CropScience, and for other general corporate purposes.
Tattooed Chef (TTCF US) slides as much as 15% after the plant-based food company said it intends to raise additional debt or equity capital in the “near future.”
Advance Auto (AAP US) shares dive as much as 14% set for its biggest drop since March 2020, with analysts saying that the car parts retailer’s results were underwhelming and a surprise with earnings per share missing estimates and the firm nudging down its guidance. Analysts also flagged a negative impact from currency and higher expenses.
Lulu’s Fashion Lounge (LVLU US) fell 26% after its revenue forecast for 2022 fell short of the average analyst estimate. The company also said Chief Financial Officer Crystal Landsem will succeed David McCreight as chief executive officer, effective March 6.

US stocks rose Tuesday as fresh data added to evidence that inflation may have peaked, strengthening the case for the Federal Reserve to moderate the pace of interest-rate hikes. “Investors’ euphoria is understandable given the first small signs of easing on the inflation front, but we wonder whether it isn’t also a bit overdone,” said Marko Behring, head of asset management at Fuerst Fugger Privatbank. “The current recovery moves, which are overshooting a bit, could trigger exactly what many market participants no longer have on their radar: a US central bank that might have to act more aggressively again, precisely because of the burgeoning euphoria.”

Colin Asher, senior economist at Mizuho Bank Ltd. sees the moves as overdone, and predicted more volatility ahead. US retail sales and housing market data due later on Wednesday may offer more clues on the state of the US economy.

“I am more in the dollar-plateau versus the dollar-peak camp,” he said. “Inflation may have peaked but that doesn’t mean it’s coming down rapidly. We have probably seen the peak for the dollar but it wouldn’t surprise me if we go back into a period of softer equities.”

In Europe, the Stoxx Europe 600 Index dropped as geopolitical developments weigh on sentiment; risk was dragged down by real estate, autos and retail. Energy outperformed. The FTSE 100 outperforms, adding 0.2%, IBEX lags, dropping 0.9%. There were signs of overheating in the region after a 19% rally since Sept. 29 for euro-area blue chips, which reached their most overbought level in nearly 23 years. UK inflation data for October was higher than expected, increasing pressure on the Bank of England to keep raising interest rates. Here are the biggest European movers:

Siemens Energy rises as much as 7.8% to its highest since Aug. 31 after the energy development company reported a “solid finish” to FY22 with the growth and margin outlook looking strong, according to Jefferies.
Sage Group jumps as much as 7.1%, with analysts saying the software maker’s annualized recurring revenue growth of 12% and FY23 outlook are bright spots of its full-year results.
Alstom climbs as much as 6.3% after the French rail equipment maker reported first-half results, with orders beating expectations.
Prosus gains as much as 4.8% after Chinese online giant Tencent reported better-than-expected profit and said it will distribute the majority of its shares in food delivery firm Meituan to investors.
Swedish landlord Balder falls as much as 8.1% on reports it may face a credit downgrade by S&P, pulling local peers lower.
Mercedes-Benz falls as much as 6.2%, the most intraday since Sept. 5 and the worst performer in the Stoxx 600 Automobiles & Parts Index; the German carmaker cut prices on two EV models in China, with Oddo saying the move is “new evidence of tough competition” in the country.
Evotec falls as much as 6.2% after Deutsche Bank downgrades to hold from buy, with the broker seeing risks to the German pharma firm’s 2022 guidance and saying its ability to meet 2023 consensus estimates is “ambitious.”
SGS shares drop as much as 5.9%, the most since March 2020, after an unscheduled trading update from the Swiss industrial that Morgan Stanley said could drive downgrades in the mid single-digits.

Asian stocks fell as traders weighed rising geopolitical tensions and surging Covid cases in China. The MSCI Asia Pacific Index fell as much as 1.1% before paring to 0.4%. Key gauges in China and Hong Kong led declines, with most national benchmarks in the red. Risk-off sentiment returned after a Russian-made missile struck Poland, though US President Joe Biden said it was unlikely to have been fired from Russia. A jump in China’s daily virus tally further fueled investor caution, casting doubt over a potential exit from its Covid Zero policy. Signs that the Federal Reserve is slowing its pace of monetary tightening have lifted markets this month, with a slew of Fed speakers indicating a readiness to moderate the size of their rates hikes. The Asian stock benchmark is up 13% so far in November, poised for its best monthly performance since 1998. “The Fed has garnered more catalysts to slow its pace of hikes, which also provides further support to the equity market rally,” said Jessica Amir, market strategist at Saxo Capital Markets. The next important data sets the Fed will be watching are due early next month, including US jobs and CPI, she added.

Japanese stocks closed mixed as US President Joe Biden and key European leaders urged caution after a rocket struck a Polish village just over the border from Ukraine. The Topix closed little changed at 1,963.29, while the Nikkei advanced 0.1% to 28,028.30. The yen weakened against the dollar, erasing earlier gains. Out of 2,165 stocks in the index, 1,076 rose and 966 fell, while 123 were unchanged. “There is a bit of a risk-off mood after news that a Russian missile landed in Poland,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “In an extreme case, if NATO were to move, the market would become more risk averse in general.”

In FX, the Bloomberg dollar spot index falls 0.2%. JPY and GBP are the weakest performers in G-10 FX, EUR and DKK outperform.

The euro led G-10 gains and rose for a second day versus the dollar, but remained within yesterday’s range. The common currency’s volatility skew shifted lower this week, urging caution to those long the euro in the spot market.
The pound held its ground against a broadly weaker dollar, but underperformed most major currencies after data showed UK inflation rose; UK CPI rose to 11.1% from a year ago in October, the highest in 41-years. That was more than the central bank’s peak forecast for 10.9% and the 10.7% median that economists had expected. Focus turns to Bank of England officials’ testimony to lawmakers later and then the fiscal statement Thursday. Gilt yields were 1bp lower to 2bps higher.
The Aussie trades near its strongest level in more than two months as the nation’s relationship with China appears to be stabilizing and on the back of a weaker greenback from easing concerns over geopolitical tensions in eastern Europe. The nation’s wages climbed 1% in the three months through September from the prior quarter, the fastest pace since early 2012, for an annual gain of 3.1%

In rates, Treasuries were narrowly mixed after paring losses, with 2s10s curve flatter; bunds and gilts outperformed during London morning. 20-year new-issue auction is a focal point of US session, along with retail sales and three scheduled Fed speakers. 10-year TSY yields dropped to 3.76% vs day’s high 3.84%, lagging bunds and gilts in the sector by ~3bp; front-end underperformance flattens 2s10s by ~1bp to -59bp, within 3bp of cycle low reached Nov. 4. There is a $15 billion 20-year TSY bond auction at 1pm which has a WI yield ~4.160%, around 23.5bp richer than October’s result, a 2.5bp tail. In Europe, Bunds were steady, while Italian bonds advanced, led by the long end, and outperforming euro-area peers.

In commodities, crude benchmarks began the session a touch softer, with participants digesting the multiple updates around the Poland missile incident and the Druzhba pipeline. However, the complex then spiked on the below reports of an oil tanker being attacked near Oman; sending WTI and Brent to USD 87.51/bbl and USD 94.79/bbl peaks. Defense Official says that an oil tanker has been struck in an exploding drone attack off Oman, amid heightened tensions with Iran, via AP’s Miller. The attack happened Tuesday night off the coast of Oman, according to the official. Spot gold is modestly firmer given the aforementioned geopolitical concerns and as the DXY languishes below 106.00; albeit, the yellow metal is yet to surpass Tuesday’s USD 1786/oz peak.

To the day ahead now, and data releases include UK and Canadian CPI for October, as well as US retail sales, industrial production and capacity utilisation for October, and the NAHB housing market index for November. Central bank speakers include BoE Governor Bailey, ECB President Lagarde, the ECB’s Muller, Centeno, Villeroy and Panetta, and the Fed’s Williams, Barr and Waller. Finally, earnings releases include Nvidia, Cisco Systems, Lowe’s, TJX Companies and Target.

Market Snapshot

S&P 500 futures up 0.2% to 4,006.50
STOXX Europe 600 down 0.7% to 431.49
German 10Y yield up 0.3% to 2.11%
Euro up 0.6% to $1.0411
MXAP down 0.4% to 154.12
MXAPJ down 0.4% to 500.16
Nikkei up 0.1% to 28,028.30
Topix little changed at 1,963.29
Hang Seng Index down 0.5% to 18,256.48
Shanghai Composite down 0.4% to 3,119.98
Sensex up 0.2% to 62,005.19
Australia S&P/ASX 200 down 0.3% to 7,122.24
Kospi down 0.1% to 2,477.45
Brent Futures up 0.8% to $94.57/bbl
Gold spot up 0.1% to $1,780.53
U.S. Dollar Index down 0.23% to 106.16

Top Overnight News from Bloomberg

US President Joe Biden said a rocket that struck a village in Poland near the Ukraine border was unlikely to have been fired from Russia, comments that may limit the risk of a major escalation in tensions over the incident.
The cost-of-living squeeze is hurting people’s ability to service debts, while Europe’s worsening growth prospects threaten corporate profits, the ECB said Wednesday in its Financial Stability Review
Things are finally looking up for China’s economy, and with that traders are ditching government bonds for riskier bets. Yields on benchmark 10-year debt jumped as much as four basis points to 2.85% on Wednesday, the highest since December
A world-beating rally across Asian markets is starting to look precarious as some analysts caution China reopening euphoria will give way to the sober reality of a looming global recession

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded lower throughout the session but climbed off session lows as markets juggled the US PPI data with the latest geopolitical development. ASX 200 was pressured by its heavyweight Financials sector, with losses also seen across gold miners. Nikkei 225 briefly fell back under the 28k mark but losses were cushioned by the weaker JPY, whilst machinery names were after the Japanese government cutting its machinery orders assessment. KOSPI conformed to the downbeat tone across the region with the heaviest losses seen across the electronics and construction sectors.

Top Asian News

China’s state planner said growth stabilisation policies will take effect in Q4, will actively expand effective investment and speed up consumption recovery in key sectors, via Reuters.
China reported 1,623 (prev. 1,661) new coronavirus cases in the mainland for Nov 15
China’s Beijing reported 197 new local symptomatic cases (vs 303 the prior day)
Shanghai Disney said parts of the resort will resume operations on Nov 17th; Disneyland Park will remain closed until further notice, via Reuters.
Xinjiang’s Yining announced on Tue life & production will return to normal, after successfully curbing the latest COVID 19 spread, according to Global Times.
PBoC injected CNY 71bln via 7-day reverse repos at a maintained rate of 2.00% for a CNY 63bln net injection.
PBoC Governor Yi said talks with US Treasury Secretary Yellen were candid and constructive, via Bloomberg.
   US Treasury Secretary Yellen and PBoC Governor Yi discussed macroeconomic and financial developments, high and volatile commodity prices, the sides exchanged macroeconomic views outlooks of US and China. Yellen noted that she looks forward to future engagements with the Chinese side, according to the Treasury Department.

European bourses have spent much of the morning fairly contained but with a gradually increasing negative bias, Euro Stoxx 50 -0.5%, as the recent rally pauses amid numerous geopolitical developments. US futures are marginally firmer, ES +0.1%, but similarly contained as the ES clings onto the 4k mark ahead of numerous metrics and more Fed speak. Amazon’s (AMZN) retail business is reportedly bracing for a tough holiday season by “sellers for lump sums of cash and limiting inventory”, according to Business Insider. Lowe’s Companies Inc (LOW) Q3 2023 (USD): Adj. EPS 3.27 (exp. 3.10), Revenue 23.5bln (exp. 23.13bln); raises FY22 outlook

Top European News

UK Inflation Hits 41-Year High on Soaring Energy Prices
Carnival Drops After $1b Convertible Senior Notes Offering
Air France-KLM Falls on Convertible Bond Offer, Strike Plans
Inflation Is Peaking ‘Right Now,’ World’s Top Cement Maker Says
Druzhba Pipe May Resume Soon as Market on Edge: Energy Latest
UK Braces for ‘Austerity on Steroids’ With Little Left to Cut

Central Banks

Fed’s George (voter) says Fed should continue raising rates, but Fed should slow pace of hikes, WSJ reports. Bringing inflation down without a recession might not be feasible. Inflation is at risk of growing entrenched in the economy due to an overheated job market, and that will make it increasingly difficult for the Federal Reserve to bring inflation down without a recession.
ECB’s Muller says both 50bps and 75bps rate hikes are ‘substantial’, adding that he favours a ‘substantial’ rate hike in December.
ECB’s Visco says price growth could return to target by the end of 2024; ECB needs to continue with restrictive policy.
ECB’s de Guindos says it is difficult to have financial stability without price stability.
ECB Euro Zone Financial Stability Review: Risks are increasing and banks may need to build up provisions.

FX

DXY once again on the backfoot and sub-106.00 to the modest benefit of peers, ex-JPY.
EUR/USD is the current outperformer given the soft USD with specific developments limited aside from numerous ECB speakers though largely on financial stability; currently, holding above 1.04.
Cable briefly spiked on the hot UK CPI release, to a 1.1942 high; however, this proved shortlived given the overarching headwind of a bleak domestic outlook.
As mentioned, JPY is the G10 laggard, with USD/JPY briefly rising as high as 140.29 though it has since managed to move back below 140.00.
PBoC sets USD/CNY mid-point at 7.0363 vs exp. 7.0409 (prev. 7.0421)

Commodities

Crude benchmarks began the session a touch softer, with participants digesting the multiple updates around the Poland missile incident and the Druzhba pipeline.
However, the complex then spiked on the below reports of an oil tanker being attacked near Oman; sending WTI and Brent to USD 87.51/bbl and USD 94.79/bbl peaks.
Defense Official says that an oil tanker has been struck in an exploding drone attack off Oman, amid heightened tensions with Iran, via AP’s Miller. The attack happened Tuesday night off the coast of Oman, according to the official.
US Private Energy Inventories (bbls): Crude -5.8mln (exp. -0.4mln), Cushing -0.8mln, Gasoline +1.69mln (exp. +0.3mln), and Distillate +0.9mln (exp. -0.5mln).
Russian Kremlin says hard work continues on reviving the grain deal, if necessary President Putin and Turkish President Erdogan will coordinate within hours; Russian Finance Minister says supported an extension of the grain deal at the G20 summit, via Reuters.
Spot gold is modestly firmer given the aforementioned geopolitical concerns and as the DXY languishes below 106.00; albeit, the yellow metal is yet to surpass Tuesday’s USD 1786/oz peak.

Central Banks

Fed’s George (voter) says Fed should continue raising rates, but Fed should slow pace of hikes, WSJ reports. Bringing inflation down without a recession might not be feasible. Inflation is at risk of growing entrenched in the economy due to an overheated job market, and that will make it increasingly difficult for the Federal Reserve to bring inflation down without a recession.
ECB’s Muller says both 50bps and 75bps rate hikes are ‘substantial’, adding that he favours a ‘substantial’ rate hike in December.
ECB’s Visco says price growth could return to target by the end of 2024; ECB needs to continue with restrictive policy.
ECB’s de Guindos says it is difficult to have financial stability without price stability.
ECB Euro Zone Financial Stability Review: Risks are increasing and banks may need to build up provisions.

Geopolitics

Polish Foreign Ministry said a “Russian-made” rocket landed in a Polish village at 15:40 local time; Poland has summoned the Russian ambassador, via Reuters.
US officials said initial findings suggest the missile that hit Poland was fired by Ukrainian forces at an incoming Russian missile, according to AP
US President Biden said the missile that hit a Polish village near the border with Ukraine was probably not launched from Russian territory, citing information on the rocket’s trajectory, via dpa.
US President Biden said leaders will determine the next steps after finding out what happened in Poland, and added that Russia continues to escalate its attacks in Ukraine.
Polish President said there is no definitive evidence of who fired the rocket that fell onto the village, and added that what happened was a one-off incident and there are no indications that it will happen again, via Reuters.
Local Polish media reports citing sources said what hit Przewowo is most likely the remains of a rocket shot down by the Armed Forces of Ukraine, via Radio Zet.
Polish PM said they are working to establish the cause of the explosion in the village near the border with Ukraine, and decided to increase monitoring of air space, according to Reuters.
Kremlin spokesperson said he has no information on the incident in Poland, via Reuters.
Ukraine’s President Zelenskiy said Russian missiles have struck Poland; strikes on NATO territory a significant escalation and action is required, via Reuters.
Polish President said it is very likely that Poland will activate Article 4 of the NATO Treaty on Wednesday at the NATO meeting, via Reuters. Subsequently, reports via local press indicate that Poland will not request the Article 4 activation. A view the Polish PM has since intimated as well.
NATO ambassadors to meet on Wednesday at Poland’s request on the alliance’s Article 4, according to European diplomats cited by Reuters. NATO SecGen to brief at 11:30GMT/06:30ET.
US President Biden told the G7/NATO that the Poland blast was caused by Ukrainian air defence missile, via Reuters citing a NATO source.

US Event Calendar

DB’s Jim Reid concludes the overnight wrap

The good news for markets has continued over the last 24 hours, despite headlines after Europe closed of Russian rockets landing in Poland injecting a fresh bout of uncertainty and intraday volatility. This dented sentiment but we recovered around half of the earlier gains by the US close as the general conclusion was that it was more likely to be accidental than an enormous escalation. As we go to press an AP reporter has suggested that US officials’ initial investigations suggest it was in fact a Ukrainian rocket fired at incoming Russian missles. This follows Biden’s earlier overnight remarks that it was unlikely the rocket was fired from Russia.

More on that later, but all told, bonds and equities managed to hold onto their post-data surge after US producer price inflation eased by more than expected. That follows on the heels of last Thursday’s downside surprise in consumer price inflation, and added to the narrative that we’re past the worst on inflation and that the Fed will soon be able to slow down its rate hikes. The S&P 500 (+0.87%) just about erased the previous day’s losses even though they came off their +1.80% highs earlier in the session. The index did briefly go negative on the Poland headlines. The S&P’s gains over the last 4 sessions now stand at +6.49%, just shy of the largest 4-day gain for the index in over two years.

In terms of the details of that PPI release, monthly headline inflation surprised to the downside with a +0.2% reading (vs. +0.4% expected). And as with the CPI reading, core PPI also came in beneath expectations with an unchanged reading (vs. +0.3% expected), thus cementing the idea that this downshift could prove more durable. In turn, those weaker-than-expected inflation readings took the year-on-year numbers to their lowest in some time, with headline PPI down to +8.0% (vs. +8.3% expected), which is the lowest since July 2021. The big test now will be whether these very positive numbers from October can be sustained, or whether it’s a repeat of July’s downside surprise that was then followed by more negative prints once again.

More on the Poland story now and the spike down in risk occurred as reports indicated Russian rockets landed in Poland, a NATO member, and killing two people. The initial reaction was understandable given that any deliberate strike on a NATO member would mark an enormous escalatory step. It soon became apparent that this was highly unlikely to be a direct attack, and the overnight comments mentioned at the top suggest a rapid deescation.

As such markets can go back to focusing on the positives, which was given further momentum by some decent corporate news from Walmart (+6.66%). The company raised their full-year outlook, and now see adjusted EPS declining by 6-7% rather than 9-11% as previously suggested, and also approved a new $20bn share buyback plan. This collection of good news meant that there was a very broad-based advance for equities, with every sector group bar two rising on the day, and even those two sectors just missed, with health care down -0.07% and materials -0.11% lower. Tech stocks saw a particular outperformance, with the NASDAQ up +1.45%, which brings its own 4-day rally to an even bigger +9.71%.

This strength was echoed among sovereign bonds, with 10yr Treasury yields down -8.4bps yesterday to a new one-month low of 3.77%. However, the declines were smaller at the front end of the curve, which led the 2s10s curve to flatten another -3.3bps to -57.5bps, making it the most inverted the curve has been since 1982, which is alarming when you consider its record as a recessionary indicator, having inverted prior to all of the last 10 US recessions. The 3m10yr curve also moved even deeper into inversion, falling another -15.7bps to -45.5bps, which is something we haven’t seen since September 2019. While the Fed’s preferred yield curve measure (18m3m – 3m) fell deeper into inflationary territory, falling -8.7bps to -11.4bps. Meanwhile, this morning in Asia, yields on 10yr USTs (+5bps) have pushed back up, trading at 3.82% as we go to press. 2yr yields are +3bps. Watch out for UK CPI just after we hit your email boxes.

Over in Europe, sovereign bonds also rallied yesterday with trading done before the stray rocket news, with yields on 10yr bunds (-3.8bps), OATs (-5.7bps) and BTPs (-12.2bps) all moving lower. And that came in spite of a further uptick in natural gas prices yesterday, which gained +6.9% to €122 per megawatt-hour. Meanwhile, equities similarly rallied in line with their US counterparts, with the STOXX 600 (+0.37%) advancing for the 7th time in the last 8 sessions, taking it to its highest level in nearly 3 months.

This morning equity markets in Asia are mixed but with China risk weaker again after a very strong run. Across the region, the Hang Seng (-1.4%) is leading losses, with the Shanghai Composite (-0.47%) also lower. Elsewhere the KOSPI (-0.2%) is also lower but the Nikkei 225 (+0.14%) is trading up, reversing its opening losses. Markets have got a small spike since the AP report mentioned in the first paragraph. US stock futures are flat but European futures are still down around half a percent.

Early morning data showed that Japan’s core machine orders in September unexpectedly slid -4.6% m/m (v/s +0.7% expected) following the -5.8% contraction in August.

Moving to China, Covid cases continue to climb with cases surging to almost 20,000 yesterday, the highest level since late-April when Shanghai (the country’s financial hub) was in the middle of a two-month lockdown. The outbreaks are a major test for authorities after the country’s leaders relaxed some of its strict Covid Zero measures.

Overnight we also heard from former US President Donald Trump, who has confirmed he’s running in the 2024 presidential election. So far he’s the only major contender from either party to announce his candidacy, with the election still almost two years away. His hope will be that this effectively clears the Republican primary field and the party coalesces behind him over the months ahead. If he succeeds, he would become just the second president to serve non-consecutive terms in the White House, after Grover Cleveland in the 19th century. In other news yesterday, the Republicans remain just one seat away from winning control of the House of Representative. The latest count from the Associated Press gives the Republicans 217 seats, with the Democrats on 205. So it would require the Democrats to sweep every outstanding seat now in order to keep the House, including a number in which they’re behind in the current vote count.

Here in the UK, attention is turning towards tomorrow’s Autumn Statement from the government, but ahead of that we had a mixed set of data releases on the labour market. On the one hand there was some positive news, with the number of payrolled employees up by +74k in October (vs. +44k expected), with positive revisions to the previous month as well. However, the unemployment rate in the three months to September unexpectedly picked up a tenth to 3.6%, and the economic inactivity rate among the working-age population also rose by two-tenths to 21.6% over the same period. All eyes will be on the October CPI release this morning, where our economist is expecting it to rise to a fresh 40-year high of +10.9%. In the meantime though, sterling (+0.93%) strengthened to $1.187 yesterday, marking its strongest level since mid-August. The dollar index rebounded from its morning lows when it appeared that the pivot was gaining steam following the rocket news. It ultimately finished just -0.24% lower.

Looking at yesterday’s other data, there were some positive developments in the German ZEW survey for November, where the expectations component rose to -36.7 (vs. -51.0 expected), and the current situation reading rose to -64.5 (vs. -69.3 expected). Otherwise, the US Empire State manufacturing survey rose to 4.5 in November (vs. -6.0 expected), which is its highest level since July.

To the day ahead now, and data releases include UK and Canadian CPI for October, as well as US retail sales, industrial production and capacity utilisation for October, and the NAHB housing market index for November. Central bank speakers include BoE Governor Bailey, ECB President Lagarde, the ECB’s Muller, Centeno, Villeroy and Panetta, and the Fed’s Williams, Barr and Waller. Finally, earnings releases include Nvidia, Cisco Systems, Lowe’s, TJX Companies and Target.