Futures, Global Stocks Slide Ahead Of Key Inflation Report

US equity futures, and global markets dropped for the second day in a row on Wednesday as rising yields and a stronger dollar dented the euphoric sentiment behind the Trump rally, and as investors awaited key US inflation data amid concerns that Trump’s proposed America-First policies will reignite price growth. As of 8:00am S&P500 futures and Nasdaq 100 futures slipped 0.2% into the CPI print which is expected to rise for the fourth month (full preview here). Pre-mkt, Mag7 is mixed, and semis are lower; Banks, Energy, Industrials, and Healhcare are seeing a bid. Treasuries steadied after a renewed selloff Tuesday while the dollar was flat after earlier rising beyond 155 per dollar for the first time since July, raising the risk that Japan will intervene to slow the depreciation; the EURUSD briefly dropped to 1.0594 the lowest in a year. Commodities are higher led by Energy and Precious Metals. CPI and five Fed speakers are the macro focus for today as the earnings calendar thins out.

In premarket trading, Cava Group surged 15% after the Mediterranean restaurant chain increased its annual projections for comparable sales. Chegg tumbles 15% after the education technology company gave a fourth-quarter forecast that was weaker than expected. Tesla (TSLA) gains 1.6% and Roivant (ROIV) rises 3% after President-elect Donald Trump picked billionaire Elon Musk and entrepreneur Vivek Ramaswamy to lead a new department that will aim to make the government more efficient. Here are some other notable premarket movers:

• Dave Inc. (DAVE) rises 34% after the financial services firm boosted its full-year revenue outlook.
• Groupon (GRPN) tumbles 20% after the shopping deals website cut its adjusted Ebitda guidance for the full year.
• Instacart (CART) falls 7% after the online grocery delivery company gave a weaker-than-expected fourth-quarter Ebitda forecast.
• Rivian (RIVN) rises 8% after Volkswagen raised investment plans in the electric-vehicle maker by $800 million.
• Rocket Lab USA (RKLB) jumps 24% after providing a 4Q revenue forecast that beat estimates, fueled by more Electron launches scheduled in November and December.
• Rocket Cos. (RKT) tumbles 13% after the mortgage lender issued a weaker-than-anticipated adjusted revenue forecast for the current quarter.
• Spirit Airlines (SAVE) slumps 70% as the company is closing in on a deal with creditors that would restructure its crushing debt load in bankruptcy court after discussions for a tie-up with rival Frontier Group Holdings fell apart.
• Spotify (SPOT) rise 8% after the audio-streaming company reported 3Q results that beat expectations on both margins and users.
• ZoomInfo Technologies (ZI) drops 14% after the infrastructure software company gave a revenue forecast that disappointed analysts.

According to Bloomberg, traders are adding inflation hedges and pricing in fewer interest-rate cuts next year amid the threat that Trump’s pro-growth agenda could unleash price pressures. Today’s US data is expected to show the overall consumer price index rose by 0.2% for a fourth month.

“We’ve been pouring our way into long-dated inflation linked bonds in the US where I see the inflation risk as the highest,” Freddie Lait, managing partner at Latitude Investment Management in London, said in an interview with Bloomberg TV. “I would look at the Trump win and think that became more likely.”

The president elect’s anti-trade stance is already taking a toll on assets in the developing world. An MSCI gauge of equities excluding the US is posting its worst day in three months, while an index of emerging market currencies is close to erasing this year’s gains. China’s yuan hit a three-month low Tuesday, forcing authorities to set the currency’s reference rate higher.

European stocks are flat in early trading Wednesday, pausing after a selloff in the previous session; the Stoxx 600 is flat at 502.01. Siemens Energy and Just Eat Takeaway both rose more than 20%. Smiths Group and Dowlais rallied by a similiar amount before paring the surge. Here are the biggest movers Wednesday:

• Siemens Energy surges as much as 21%, the most since 2020, taking the stock to a record high. The company increased its medium-term targets, boosted by demand in its grid tech business
• AstraZeneca shares gain as much as 3.2%, continuing a recovery into a fourth day following last week’s slump, after Nordea and Intron Health both upgrade their ratings to buy
• Just Eat Takeaway shares soar as much as 23% after the food delivery company announced it’s selling Grubhub to Marc Lore’s Wonder Group for an enterprise value of $650 million
• RWE jumps as much as 8.9%, the most in over two years, after the German energy company announced a €1.5 billion buyback, which Citi sees as the most positive element in today’s earnings
• Smiths Group briefly surged to a record high on Wednesday as the more than 150-year-old British engineering firm reported a strong quarter and increased its revenue guidance
• Dowlais shares rise as much as 21%, the most ever, after the British auto engineering specialist published results that were described as much better than feared by analysts at Jefferies
• SoftwareOne shares gain as much as 14% after the Swiss IT service provider announced a step-up in cost savings and gave investors a February deadline for its take-private discussions
• Babcock International shares jump as much as 19%, briefly touching their highest level since 2020, after the support services provider delivered stronger earnings growth than expected
• Lundbeck shares rise as much as 7.2%, the most in almost six months, after the Danish pharmaceuticals firm reported revenue and net income for 3Q that beat market expectations
• Ypsomed drops as much as 5.9% after the supplier of auto-injectors reported 1H Ebit which missed estimates. The company also said it has initiated the sale process of its diabetes care business
• Jenoptik drops as much as 6.1% after Hauck & Aufhaeuser downgrades the German optoelectronics firm to hold from buy and slashes its price target to a Street-low

Earlier in the session, Asian equities slumped again, headed for their lowest close since September, amid continued selling in the region’s technology stocks. The MSCI Asia Pacific Index declined as much as 1.3%, with TSMC and Samsung Electronics the biggest laggards. A guage of the region’s technology stocks fell as much as 1.4%. The region’s stocks tracked US peers lower after Treasury yields spiked ahead of data expected to show an uneven path of easing consumer price pressures. South Korea led losses in the region as global funds sold shares in companies that are vulnerable to Trump’s protectionist trade policy. Benchmarks in India, Japan, Australia and Taiwan also declined. Stocks in China were volatile before closing higher. The onshore CSI 300 index rose 0.6%, while a gauge of Chinese shares listed in Hong Kong erased a drop of as much as 1.3% to close little changed. Worries over an escalating trade war with the US and China’s unclear prospects for recovery remain as headwinds for investors.

In FX, a gauge of the dollar was little changed Wednesday near two-year highs. Dollar strength has pushed the yen beyond 155 per dollar for the first time since July, raising the risk that Japan will intervene to slow the depreciation. The EURUSD briefly dropped to a new one-year low below 1.06 before rebounding.

In rates, treasuries staged a minor rebound from Tuesday’s sharp selloff ahead of key US inflation data due later on Wednesday. US 10-year yields fall 1 bp to 4.41%. That’s put the brakes on the recent dollar rally with the Bloomberg Dollar Spot Index near flat. Yields are 1bp-2bp richer on the day from belly to long-end with front-end little changed, flattening 2s10s spread by ~2bp; it steepened 3.5bp in Tuesday’s selloff. The 10-year yield around 4.42% is less than 2bp richer on the day, outperforming bunds and gilts in the sector by 4bp and 3bp. Treasuries have been pummeled by the prospect that Trump’s vowed policies, like tax cuts and tariffs, could fuel price pressures and force the Federal Reserve to keep rates elevated. Traders are pricing in just over a 50% chance of another quarter-point cut in December, after yields on two- and five-year Treasuries surged to their highest levels since July.

In commodities oil prices advance, with WTI rising 0.7% to $68.60 a barrel. Spot gold climbs $9 to $2,608/oz.

Bitcoin fell 1% after a chart-busting rally took the digital asset to almost $90,000.

Looking at today’s event calendar, US economic data calendar includes October CPI (8:30am) and federal budget balance (2pm). The Fed speaker slate includes Kashkari (8:30am), Williams (9:30am), Logan (9:45am), Musalem (1pm) and Schmid (1:30pm)

Market Snapshot

• S&P 500 futures little changed at 6,007.25
• STOXX Europe 600 little changed at 502.63
• MXAP down 1.0% to 183.07
• MXAPJ down 0.8% to 579.96
• Nikkei down 1.7% to 38,721.66
• Topix down 1.2% to 2,708.42
• Hang Seng Index down 0.1% to 19,823.45
• Shanghai Composite up 0.5% to 3,439.28
• Sensex down 1.4% to 77,555.88
• Australia S&P/ASX 200 down 0.8% to 8,193.36
• Kospi down 2.6% to 2,417.08
• German 10Y yield little changed at 2.36%
• Euro little changed at $1.0626
• Brent Futures up 0.8% to $72.50/bbl
• Gold spot up 0.5% to $2,610.45
• US Dollar Index little changed at 105.94

Top Overnight News

• China is relieved by Trump’s national security staffing decisions as Beijing feels they could have been worse. WSJ
• China needs more stimulus to revive domestic copper demand according to a major importer. BBG
• The PBOC signaled its unease with the yuan’s weakness by setting a stronger-than-expected reference rate. Separately, China’s securities regulator increased the frequency of its interactions with global banks, people familiar said. BBG
• The FTC under Trump could sustain Biden’s aggressive approach to tech regulations/enforcement based on the frontrunners to replace Lina Khan. FT
• Donald Trump picked John Ratcliffe for CIA Director and will nominate Pete Hegseth for Defense Secretary, while it was also reported that Trump told allies he wants Robert Lighthizer as his trade czar.
• Donald Trump’s former trade chief, Robert Lighthizer, and those close to him are preparing to aggressively sell their plans for massive new tariffs on imports that will go far beyond anything seen in Trump’s first term. Politico
• Donald Trump picked Elon Musk and Vivek Ramaswamy to lead a new Department of Government Efficiency — DOGE — tasked with slashing bureaucracy, regulation and spending. The structure may allow Musk to avoid resigning from his companies. BBG
• Punchbowl News notes that the GOP is planning to pass a major tax bill in the first 100 days of the new Trump presidency. Sources add that conversations between Republicans from the House and Senate Budget Committees yesterday were largely a big-picture discussion about what Republicans are looking at for reconciliation.
• SoftBank will be the first to build a supercomputer with chips using Nvidia’s new Blackwell design. BBG
• Spirit Airlines is preparing to file for bankruptcy protection after failing to reach a merger deal w/ULCC (Frontier). WSJ

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly subdued following the negative lead from the US amid higher yields and cautiousness ahead of US CPI data, while the region also digested a slew of earnings releases. ASX 200 was dragged lower by underperformance in the mining-related stocks and with the top-weighted financial industry also pressured in the aftermath of CBA’s earnings which posted a flat Y/Y cash profit of AUD 2.5bln for Q1. Nikkei 225 retreated following the hotter-than-expected PPI data, while losses were initially stemmed by recent currency weakness and with Sharp and Tokyo Electron among the best performers post-earnings, although selling eventually worsened. Hang Seng and Shanghai Comp were mixed amid light catalysts and as participants await Chinese tech earnings, while US President-elect Trump’s first picks for his administration included China hawks such as Waltz, Rubio and Lighthizer, although he also named China-friendly Elon Musk to lead the department of government efficiency with Vivek Ramaswamy.

Top Asian News

• China cuts taxes for home purchases in fiscal support effective December 1st; MOF says tax cuts targets boosting the property market
• China is to release its homebuying tax cut plans soon and will likely cut taxes for home purchases by end-2024, according to China Securities Times.
• China’s Taiwan Affairs Office said in response to the TSMC (2330 TT) chip curbs that the US is playing the Taiwan card to raise tensions in the Taiwan Straits and these chip curbs ultimately undermine the interests of Taiwan’s companies, while it added that restrictions also cause Taiwan companies to miss further opportunities for industrial development.
• Tencent (700 HK) Q3 (CNY): Revenue 167.19bln (exp. 167.93bln). Net Income 53.23bln (exp. 45.33bln). EPS 5.6444 (prev. 3.752 Y/Y)
• Japan’s government is considering restarting electricity and gas price subsidies from Jan-March

European bourses, Stoxx 600 (+0.2%) initially opened very modestly lower across the board, in a continuation of the subdued price action seen in Asia overnight. However, sentiment soon improved just after the cash open to display a more positive picture in Europe. European sectors are mixed, having initially opened with a slight negative bias. Energy takes the top spot, lifted by significant gains in Siemens Energy after it raised its mid-term targets; gains in oil prices in recent trade may also be propping up the sector. Basic Resources follows closely behind, attempting to pare back some of the prior day’s losses. Tech is found at the foot of the pile. US Equity Futures are very modestly lower across the board, with price action tentative ahead of US CPI.

Top European News

• BoE’s Mann says headline CPI “is not telling us whether underlying inflation dynamics have been vanquished”. UK services inflation is pretty sticky. Energy prices are more likely to go up than down. Sees more volatility and upward bias to some inflation drivers. Will focus on how much UK financial conditions are affected by BoE actions vs moves in the US. Better for the BoE to lean against risk that inflation is higher than expected, than to wait and see. Ready to cut rates in bigger steps when inflation risks have gone. Still sees a desire from workers and firms to catch up on lost wages and margin caused by past high inflation. Some evidence that hospitality firms are finding it harder to pass on cost increases.
• ECB’s Villeroy says he expects more rate cuts. Regarding France, expects inflation to remain moderate and the unemployment rate to increase to ~8% before easing back down to 7%. US election result risks lifting inflation. Bitcoin remains a risky asset.
• ECB’s Kazaks says ECB should not deliberately set out to undershoot or overshoot its 2% inflation target, via Econostream. ECB’s best bet was therefore to aim strictly for 2% at all times, so, it should continue to follow its current cautious approach. ECB should proceed with a ‘measured pace, step by step’, avoiding ‘sharp moves’ but retaining ‘full optionality and flexibility. Economic activity was ‘still within the confines of the baseline scenario’. Kazaks said the analysis underlying the Governing Council’s monetary policy decision next month should more heavily weight what it projected would happen next year rather than in 2027, for which an initial set of projections would be unveiled.
• ECB’s Nagel says core inflation rate is still quite high; there is still noticeable price pressures, particularly in services. Trump’s proposed tariffs could cost Germany 1% in economic output
• UK grocery sales growth slows as consumers wait for Christmas and Black Friday, according to NIQ; says UK has a polarised consumer with half the households feeling pressure on personal finances.
• German Chemical Association VCI says in Q3, production rose 0.1% Y/Y or +3.3% without pharma; Q3 producer prices -0.3% amid weak demand and falling raw material costs

FX

• DXY started the session off on the front foot once again as the ramifications of a Trump Presidency remain at the forefront of investor sentiment, but is now flat and holding around 105.98. Focus ahead will no doubt be on US CPI, and then a slew of Fed speakers thereafter.
• EUR started the session on the backfoot vs. the USD and briefly made a fresh YTD low at 1.0594. The pair has since moved back onto a 1.06 handle. However, the ramifications of a Trump Presidency continue to act as a drag for the Eurozone outlook.
• JPY’s run of losses since the start of the week has continued with USD/JPY crossing the 155 threshold for the first time since 30th July (155.21 was the high that day); this may spark some further jawboning from Japanese officials.
• GBP steady vs. the USD and EUR with fresh macro drivers for the UK on the quiet side aside from commentary from MPC-hawk Mann. She kept her hawkish-tone and noted that inflation has “definitely not been vanquished”, adding that UK services inflation is pretty sticky.
• AUD/USD initially extended on its recent run of losses with sentiment surrounding China acting as a drag on the pair. NZD is steadier than its Antipodean peers vs. the USD and is currently caged within yesterday’s 0.5909-72 range.
• PBoC set USD/CNY mid-point at 7.1991 vs exp. 7.2305 (prev. 7.1927).

Fixed Income

• USTs are incrementally firmer. Specifics so far have been light with USTs coming under modest pressure overnight, to a 109-9 trough, on a soft 30yr JGB tap and above-forecast Japanese corporate good prices. Docket ahead is headline by CPI, after which we hear from numerous Fed speakers. USTs at a 109-17+ peak, resistance some way off at yesterday’s 110-04+ best before 110-07+ from Monday.
• Bunds are softer, printed a 131.62 base in the early European morning with drivers at the time light. Since, the benchmark has been gradually making its way off that trough but is struggling to make real ground above 132.00; current high 132.08. US CPI is the highlight, but for Germany specifically, Chancellor Scholz is set to speak at 12:00GMT, remarks which follow him seemingly accepting calls for an early confidence-vote with December 16th touted.
• Gilts are once again the underperformer. Gapped lower as the benchmark caught up with overnight UST action and then extended further below yesterday’s 93.30 trough to a 93.19 base. BoE’s Mann kept her hawkish-tone and noted that inflation has “definitely not been vanquished”, adding that UK services inflation is pretty sticky. This sparked some very modest pressure in Gilts. UK auction was well received, but had little impact on price action.
• UK sells GBP 4bln 4.375% 2028 Gilt Auction; b/c 3.12x, average yield 4.499%, tail 1.0bps.
• Italy sells EUR 8.25bln vs exp. EUR 7-8.25bln 2.70% 2027, 3.50% 2031, 2.50% 2032, 4.15% 2039 BTP Auction.
• Germany sells EUR 3.346bln vs exp. EUR 4bln 2.60% 2034 Bund: b/c 2.30x (prev. 2.30x), average yield 2.38% (prev. 2.31%) & retention 16.35% (prev. 17.43%)

Commodities

• Modest gains across the crude complex this morning after a relatively flat settlement on Tuesday as the initially heightened Middle East rhetoric was later offset by the broad Buck bid. Brent Jan trades towards the upper end of 71.78-72.63/bbl.
• Mild gains across precious metals as DXY pulls back from best levels (105.88-106.21 parameter) with newsflow light and with traders gearing up for US CPI. Spot gold resides in a current USD 2,597.72-2,613.28/oz range
• Copper futures hold a modest downward bias after lacking direction in APAC trade in a continuation of price action seen from the disappointing NPC Standing Committee announcement on Friday.
• Iran reportedly made plans to keep oil exports stable under a Trump presidency, according to local press Shana.
• Citi revised its 0-3M copper price target to USD 8,500/t (prev. USD 9,500/t); revised Q4 2024 average to USD 9,000/t (prev. USD 9,500/t)
• Oil output at Kazakhstan’s Tengiz field -21% since Oct 26th to 496,200 BPD, according to Reuters sources.
• Russia’s seaborne oil product exports in October -7% on the month, according to data and Reuters calculations.

Geopolitics: Middle East

• Lebanon is reportedly awaiting concrete ceasefire proposals, according to Reuters citing Parliamentary speaker Berri, after a senior US official said he saw a shot at a truce soon
• Israel conducted raids on the Haret Hreik and Lilaki areas in the southern suburbs of Beirut, according to Al Jazeera.
• US envoy to the UN told the Security Council that Israel has taken some important steps to address the undisputed humanitarian crisis in Gaza and that it is of urgent importance that Israel pause implementation of legislation targeting UNRWA, while the envoy added Israel must ensure its actions are fully implemented and improvements are sustained over time.Syrian media reported air strikes targeting the outskirts of the city of Albu Kamal on the Syrian-Iraqi border, while the US military later confirmed that it conducted strikes against an Iranian-backed militia group’s weapons storage facility in Syria.

Geopolitics: Other

• Chinese military organised naval and air forces to patrol the territorial waters and airspace of Scarborough Shoal in the South China Sea and surrounding areas on November 13th.
• US sanctions agency OFAC conducts an inquiry into Russian clients UBS (UBSG SW) took over with Credit Suisse, according to Reuters sources.

S Event Calendar

• 07:00: Nov. MBA Mortgage Applications +0.5%, prior -10.8%
• 08:30: Oct. CPI MoM, est. 0.2%, prior 0.2%
  • Oct. CPI YoY, est. 2.6%, prior 2.4%
  • Oct. CPI Ex Food and Energy MoM, est. 0.3%, prior 0.3%
  • Oct. CPI Ex Food and Energy YoY, est. 3.3%, prior 3.3%
  • Oct. Real Avg Hourly Earning YoY, prior 1.5%, revised 1.4%
• Oct. Real Avg Weekly Earnings YoY, prior 0.9%, revised 1.1%
• 14:00: Oct. Federal Budget Balance, est. -$225b, prior $64.3b

Central Bank Speakers

• 08:30: Fed’s Kashkari Appears on Bloomberg Television
• 09:30: Fed’s Williams Gives Welcome Remarks
• 09:45: Fed’s Logan Gives Opening Remarks at Energy Conference
• 13:00: Fed’s Musalem Speaks on Economy, Monetary Policy
• 13:30: Fed’s Schmid Gives Keynote Remarks at Energy Conference

DB’s Jim Reid concludes the overnight wrap

The inspiration for the report is that we’re now within touching distance of completing the first quarter century (QC) of this millennium (assuming our definition), so we thought we’d review what’s happened since the end of 1999 and what we can learn from it across economic data, asset price returns, and crucial factors like demographics. Yesterday’s CoTD from the report showed how in early 2000 the CBO expected all US government debt to be paid back by 2013 at the latest with 2025 still having zero debt/GDP. We’ll start the new quarter century in 2025 with $28 trillion more debt than expected back then and nearer to 100% of GDP. It shows how quickly the narrative can change. See the full report for much, much more.

Talking of debt, Treasury yields surged yesterday as the market continues to try to come to terms with the implications of the US election result that was emerging exactly a week ago as I type. This is all ahead of today’s US CPI which will be a key factor in the Fed’s decision next month. That’s particularly important this time around, as there’s been speculation the Fed might skip this meeting and not cut at all, with futures only pricing in a 59% chance of another cut next month. However Minneapolis Fed’s Kashkari, one of the more hawkish FOMC voices, did suggest a still reasonably high bar for the Fed to pause next month, saying that “there’d have to be a surprise on the inflation front to change the outlook so dramatically”.

Nevertheless, the December 2025 Fed futures contract was up another +6.0bps to 3.88% yesterday. In turn, that led to a clear run-up in Treasury yields, and the 2yr yield (+8.7bps) reached its highest since July at 4.34%, whilst the 10yr yield was up +12.4bps to 4.44%. That repricing also led to a fresh move up for the dollar index (+0.46%), which closed at its highest level since June. But that meant it was a different story elsewhere, with the Euro down to a one-year low of $1.0607, and sterling fell to a 3-month low of $1.2733.

With regards to today’s US CPI, the backdrop is that last month’s core CPI print was the strongest in 6 months, at +0.31% so there may be another upside surprise from a pause in December. In terms of what to expect, our US economists think that core CPI will tick down a bit from last month to +0.26%, which would keep the year-on-year reading at 3.3%. For headline inflation, they expect that to be at +0.20%, with the year-on-year reading up a tenth to +2.5%. Click here for our economist’s full preview and how to register for their subsequent webinar.

Back to yesterday and while yields and the dollar resumed their march higher, several other “Trump trades” struggled. Tesla was down -6.10%, while Trump Media & Technology Group was itself down -8.80%. Small-caps struggled as the Russell 2000 (-1.77%) saw its weakest day in two months, while the KBW Bank index retreated by -0.52%. More broadly, the S&P 500 was down -0.29%, the first decline in six days, but the declines were fairly broad, and the equal-weighted version of the index was down by a larger -0.77%. Big tech helped limit the extent of the headline decline, as aside from Tesla’s reversal the Mag-7 saw average gains of nearly 1%, led by Nvidia (+2.10%).

Over in Europe, the main news came from Germany, where the political parties agreed to hold an early federal election on February 23. So Chancellor Scholz will table a confidence vote on December 16, and once that’s lost the President is able to hold early elections. That’s a change from the timetable that had previously been proposed, which was for a confidence vote on January 15, and then elections in March. As it stands, opinion polls have consistently placed the centre-right CDU/CSU group in the lead, with Politico’s polling average putting them on 32%. They’re followed by the far-right AfD on 17%, Chancellor Scholz’s centre-left SPD on 16%, the Greens on 10%, and the new far-left group BSW on 8%. Then behind them are the FDP on 4%, and the Left on 3%, both of whom are beneath the 5% hurdle required to enter the Bundestag.

Markets slumped across the continent, with the STOXX 600 (-1.98%) posting its worst daily performance since the market turmoil back in early August. The declines were very broad-based, and other indices posted even sharper losses, including the CAC 40 (-2.69%) and the DAX (-2.13%). External uncertainty weighed on sentiment with Stoxx luxury (-3.58%) and industrials (-2.68%) indices seeing sizeable declines, while materials stocks (-2.91%) also underperformed as the Bloomberg Industrial Metals index fell to its lowest since mid-September. Perhaps a weak session in China contributed. Moreover, there was little respite on the rates side, with yields on 10yr bunds (+3.5bps), OATs (+4.0bps) and BTPs (+4.6bps) all moving higher.

Meanwhile in the UK, gilts underperformed after data showed that wage growth was stronger than expected in September. For instance, average weekly earnings over the 3m to September were up +4.3% compared to the previous year (vs. +3.9% expected). That led investors to dial back the chance of rate cuts from the Bank of England, with just 51bps of cuts now priced in by the August 2025 meeting, down -8.6bps on the day. And in turn, yields on 10yr gilts were up +7.4bps to 4.50%, a larger rise compared to the rest of Europe.

Asian equity markets are continuing to decline overnight on the general uncertainty post the election.

The KOSPI (-2.22%) is the biggest underperformer, pulled lower by the index heavyweight Samsung Electronics (-3.40%) as it declines for the fourth consecutive session, reaching its lowest level in over four years. Elsewhere, the Nikkei (-1.84%) is also trading noticeably lower as wholesale inflation reached its highest level since August of last year (more below) with the Hang Seng (-0.91%) and the S&P/ASX 200 (-0.75%) also trading in negative territory. The Shanghai Composite (-0.14%) is outperforming.

Moving back to Japan, the producer price index (PPI) rose +3.4% from the same month last year (v/s +2.9% expected) as a spike in rice costs pushed up overall wholesale inflation. That compares to an upwardly revised +3.1% increase in September.
In FX, the Japanese yen (-0.15%) continues to remain on the backfoot for the third consecutive session, trading at 154.86 against the dollar, the lowest since July 29 amid growing market conviction that Japan’s political landscape could make it difficult for the BOJ to hike interest rates again. DB’s Francis Yared thinks the opposite and believes the US election result and domestic Japanese wages opens the door to higher front end Japanese rates than the market expects.

On the data front yesterday, the highlight in the US was the Fed’s quarterly Senior Loan Officer Survey (SLOOS), which showed aggregate bank credit conditions staying at around neutral levels. The SLOOS showed further normalisation of credit standards for CRE lending, while banks’ willingness to make consumer loans turned positive for the first time in two years. But the positive credit cycle read through was offset by a renewed decline in demand for C&I lending and a tightening in mortgage standards.

Looking at yesterday’s other data, the German ZEW survey came in beneath expectations, with the current situation down to -91.4 in November (vs. -85.0 expected). That’s the lowest reading since May 2020 during the Covid-19 pandemic. Moreover, the expectations component fell back to 7.4 (vs. 13.2 expected). Otherwise, the NFIB’s small business optimism index was out in the US, which rose to 93.7 in October (vs. 92.0 expected).

To the day ahead, and the main data release will be the US CPI report for October. Otherwise, central bank speakers include the Fed’s Kashkari, Williams, Logan, Musalem and Schmid, along with the BoE’s Mann.