EXECUTIVE SUMMARY
- MNI FED PREVIEW - CUTTING THROUGH THE STORMS
- MNI BOE PREVIEW - FOCUS ON INFLATION FORECASTS
- CDU'S MERZ CALLS FOR IMMEDIATE CONFIDENCE VOTE IN SCHOLZ MINORITY GOV'T
- JAPAN CHIEF CURRENCY OFFICIAL WARNS ON EXCESSIVE FX MOVES
Figure 1: German Federal Election Opinion Polling, % and 6-Poll Moving Average
Source: INSA, Forsa, FGW, Allensbach, Ipsos, YouGov, Infratest dimap, Verian, Wahlkreisprognose, MNI
NEWS
MNI FED PREVIEW - NOVEMBER 2024: Cutting Through The Storms
The FOMC is on course to cut the Fed funds rate by 25bp on Nov 7, as it takes another step in paring back restraint. Stronger-than-expected activity and labor market data have removed a second consecutive 50bp cut from the conversation, but a soft if distorted October payrolls report cemented that November would see a cut and not a "skip". Given that Powell has previously endorsed the September Dot Plot as the best guide to policy, we would expect him to have to address whether it’s still current as of November 7. A hawkish reply would involve him setting up a “skip” in December, whereas a simple reiteration that the SEP still states the base case would be taken dovishly.
MNI BOE PREVIEW - NOVEMBER 2024: Focus on Inflation Forecasts
We, along with the vast majority of analysts and markets, would be very surprised to see anything other than a 25bp cut at the November MPC meeting. Inflation no longer consistently overshooting targets and continued moderation in wage growth argue in favour of removing restriction further. However, we think there is a good chance of higher-than-expected inflation forecast. We are concerned that the extra cost of lower paid workers' wage increases plus employer NI increases will be passed through to services inflation.
GERMANY (MNI): CDU's Merz Calls for Immediate Confidence Vote in Scholz Minority Gov't
Leader of the main opposition conservative Christian Democratic Union (CDU) Friedrich Merz has called for an immediate confidence vote in Chancellor Olaf Scholz's gov't following the collapse of the tripartite 'traffic light' coalition on 6 Nov. After the removal of Finance Minister Christian Lindner from office, and the withdrawal of Lindner's pro-business liberal Free Democrats (FDP) from the governing coalition, Scholz said that federal elections would be moved from September 2025 to March. However, Merz is demanding a confidence vote next week followed by an early election in January.
GERMANY (MNI EXCLUSIVE): German Turmoil Dashes EU's Joint-Funding Hopes - Officials
The collapse of the German government has implications for the EU's competitiveness drive - On MNI Policy MainWire now, for more details please contact sales@marketnews.com
NORGES BANK (MNI): Norges Bank Holds, No Change Likely in Dec Either
Norges Bank left its policy rate on hold at 4.5% at its November meeting and said that the rate was likely to remain unchanged through to the end of the year. The Norwegian central bank's guidance back in Spetember was for the rate likely to be "gradually reduced from 2025 Q1" and it stuck with this guidance in November. In its policy update it noted that inflation had come in a little lower than it had projected and that economic growth had been low throughout this year.
RIKSBANK (MNI): Riksbank Cuts By 50bps; Notes Political Risk
The Riksbank cut rates 50bps Thursday, as expected, lowering the policy rate to 2.75% as policymakers said that previous guidance for a further cut in December and in the first half of next year remained in place. The 50bps cut had been widely expected with inflation running below target and recent activity data coming in soft and the Riksbank Executive Board said "If the outlook for economic activity and inflation remains the same, the policy rate may also be cut in December and during the first half of 2025."
US (FT): Billionaire Hedge Fund Manager Lines Himself Up for Treasury Secretary Role
Scott Bessent, a top fundraiser for Donald Trump, is canvassing candidates to serve as his deputy as he positions himself to become Treasury secretary, one of the most important positions in the president-elect’s cabinet. Bessent, a hedge fund manager who has served as an economic adviser to the former president, is widely viewed as a leading candidate for the post in Trump’s new administration. Bessent declined to comment. But one person close to the billionaire investor said he was only seeking suggestions for a deputy Treasury secretary because Trump’s transition team had asked him for the names of candidates whom he had helped to vet.
US/CHINA (BBG): Xi Congratulates Trump on Victory, Urges Stable US-China Ties
Chinese President Xi Jinping congratulated Donald Trump on his victory in the presidential election and called for stable ties between the world’s two largest economies. The Chinese leader sent a congratulatory message to the president-elect and expressed his desire to keep relations “healthy and sustainable,” state broadcaster China Central Television reported Thursday. CNN had said that Xi and the Republican held a phone call, citing people it didn’t identify, though it’s unclear that happened.
US/UKRAINE (The Times): Trump ‘Considering 800-Mile Demilitarised Zone in Ukraine’
The president-elect’s transition office is reportedly considering a plan to establish an 800-mile demilitarised zone along the front lines in Ukraine. The proposal would also include assurances from Kyiv that it would not join Nato for at least 20 years, according to the Wall Street Journal. It would also confirm Russia’s seizure of approximately 20 per cent of formerly Ukrainian territory currently occupied since the invasion.
UK (BBG): UK House Prices Climbed to Record High in October, Halifax Says
UK house prices hit record levels in October, according to a top mortgage lender, suggesting the boost from cheaper mortgages offset any anxieties homebuyers had ahead of Labour’s budget at the end of that month. Halifax said the average price of a home climbed 0.2% to £293,999, ($380,200) £492 above a previous all-time high reached in June 2022. Prices were up 3.9% from a year ago, gaining at a slightly slower pace than in September.
ECB (MNI): Schnabel Content w/ BS Reduction; Uncertain on Banks' Liquidity Preferences
ECB governing council member Schnabel's speech on the ECB's balance sheet reduction concludes that "excess liquidity remains ample in the Euro area" - she remains content with the ongoing developments, but flagged that the liquidity decline is starting to impact Euro area money markets in some regards. As the liquidity reduction progresses further, she expects "banks increasingly sourcing liquidity through [the ECB's] standard refinancing operations".
CHINA (MNI): Pan Says PBOC's Supportive Policy Stance Remains
MNI (Beijing) The People’s Bank of China will continue to implement supportive monetary policies, enhance communication with the market and improve financial services, said Governor Pan Gongsheng in a meeting with representatives from foreign financial institutions.
JAPAN (BBG): Japan Warns on Excessive FX Moves as Yen Responds to Trump Win
Japan’s chief currency official warned that authorities will take appropriate action against any excessive currency moves, in an apparent attempt to stem the yen slide triggered by Donald Trump’s election win. “We’re seeing one-sided, sudden moves in the currency market,” Atsushi Mimura told reporters Thursday, after the yen weakened toward 155 against the dollar.
BOJ (BBG): Trump Win May Spur BOJ Hike If Yen Falls More, Ex-Official Says
Donald Trump’s US presidential election victory intensifies uncertainties for the Bank of Japan, with the yen’s weakening in the wake of the outcome a potential catalyst for a near-term rate hike if the trend extends further, according to a former executive director in charge of monetary policy. “Uncertainties got elevated not only for the BOJ but for everyone around the world” as a result of the US election, Kazuo Momma, the former BOJ executive, said in an interview Thursday. “Pretty much the only reason the BOJ might raise rates early would probably be a rapid weakening of the yen.”
BRAZIL (MNI): Brazil's Copom Hikes 50bps, Accelerating Tightening
The Central Bank of Brazil (BCB) unanimously decided to accelerate the pace of its rate hikes, raising the official Selic rate by 50 basis points to 11.25% Wednesday, following a 25 basis point increase in September. The outlook "remains marked by resilient economic activity, labor market pressures, positive output gap, an increase in the inflation projections, and deanchored expectations, which requires a more contractionary monetary policy," the Copom statement said.
CORPORATE (BBG): Nissan Slashes Outlook, Pares Production and Will Cut 9,000 Jobs
Nissan Motor Co. cut its annual profit outlook and announced plans to eliminate thousands of jobs globally as it looks to counteract deteriorating sales in major markets. The Japanese carmaker now sees operating income of ¥150 billion ($975 million) for the fiscal period ending March 2025, down from from ¥500 billion. Nissan also said it will reduce production capacity by 20% and sell 10% of shares it owns in Mitsubishi Motors Corp., reducing its stake from the current 34%. Some 9,000 positions will be slashed globally.
DATA
EUROZONE DATA (MNI): Retail Trade Slightly Higher Than Expected - Decent Revisions
- EUROZONE SEP RETAIL SALES +0.5% M/M, +2.9% Y/Y
Eurozone retail trade volumes printed a tenth above consensus at 0.5% M/M in September (vs 0.4% consensus, 1.1% revised prior from 0.2%). On an annual basis, volume of retail trade firmly exceeded expectations rising 2.9 % Y/Y (vs 1.3% consensus, 2.4% revised prior from 0.8%). Note the substantial upward revisions to earlier periods, including August. The index number for August was previously estimated at 99.7 (seasonally and calendar adjusted) and that is now estimated at 100.9. So even though the M/M improvement was broadly in line with expectations, this is from a notably higher base. Note that this may be partly due to incorporating the German data which was unavailable from May onwards at the time of the last release.
GERMANY DATA (MNI): September Industrial Production Sees Broad-Based Weakness
- GERMANY SEP INDUSTRIAL PROD -4.6% Y/Y (FCST -3.0%)
- GERMANY SEP INDUSTRIAL PROD -2.5% M/M (FCST -1.0%)
German industrial production declined more than expected in September, at -2.5% M/M, vs consensus of -1.0% and a downwardly revised +2.6% in August (2.9% previously reported). On a yearly basis, IP came in at -4.6% (vs -3.0% cons; -3.0% prior, -2.7% previously reported). The reversal of August's strong print underpins the narrative of ongoing weakness in German manufacturing - also sentiment remains close to cycle lows. The less volatile 3M/3M measure went further into negative territory, printing -1.9% (-1.3% prior).
GERMANY DATA (MNI): Broad-Based Exports Weakness; Imports Stronger in September
- GERMANY SEP TRADE BALANCE +E17.0BLN (FCST: 20.9BLN)
- GERMANY SEP IMPORTS +2.1% M/M (FCST 0.6%)
- GERMANY SEP IMPORTS +2.1% M/M (FCST 0.6%)
The German trade balance declined significantly in September, to E17.9bln (seasonally-adjusted, vs E20.9bln cons; E21.4bln prior). This was driven by a 2.1% rise in imports (+0.6% cons; -2.6% prior) and a 1.7% decline in exports (-2.4% cons; +1.2% prior). Across countries, the picture was rather one sided this month: declining exports (EU -1.8%, non-EU -1.6%) and an increase in imports (EU +1.6%, non-EU +2.6%).
SPAIN DATA (MNI): Spain Industrial Production Marginally Firmer Than Consensus
Spain September industrial production was a tenth higher than consensus on a monthly basis printing 0.5% M/M (vs -0.1% prior). On a seasonally and calendar adjusted annual basis it also exceeded expectations at 0.6% Y/Y (vs 0.2% consensus, -0.1% in August) - the highest reading since February 2024. The higher than above M/M reading was driven by non-durable consumer goods
reading 1.1% M/M (vs -1.1% in August), whilst durable consumer goods production capped the upside move printing -1.7% M/M (vs 3.3% in August).
SWEDEN DATA (MNI): Higher-Than-Expected Flash Inflation Too Late to Influence Riksbank
- SWEDEN OCT CPIF +1.5% Y/Y
Swedish flash October inflation was 2.1% Y/Y (vs 2.0% cons and prior; 1.8% Riksbank). This was the second consecutive month that underlying inflation has been above the Riksbank's September MPR projection. The data will not have come in time to influence today's Riksbank decision, but will be an input into the December decision and projection round. Headline CPIF was 1.5% Y/Y (vs 1.3% cons, 1.1% prior and 1.1% Riksbank). Analysts had expected an uptick on the back of higher electricity prices. No details are provided in the flash release, with the final print due next Thursday.
CHINA DATA (MNI): China Oct Exports Grow, Imports Slide
- CHINA OCT TRADE SURPLUS +$95.72 BLN VS SEP +$81.71 BLN
- CHINA OCT EXPORTS +12.7% Y/Y VS MEDIAN +5.0% Y/Y
- CHINA OCT IMPORTS -2.3% Y/Y VS MEDIAN -2.0% Y/Y
MNI (Beijing) China's exports grew 12.7% y/y to USD309.1 billion in October, exceeding the 5.0% y/y consensus and last month's 2.4% y/y increase due to increasing orders before Christmas, according to data released by China Customs on Thursday. Imports, which amounted to USD213.3 billion, registered a 2.3% y/y drop, dipping further from the consensus of a 2.0% y/y fall and last month's 0.3% y/y increase. Imports increased 1.7% y/y over the Jan-Oct period, while exports increased 5.1%. China’s trade surplus in the first 10 months hit USD785.3 billion, with October contributing USD95.72 billion.
CHINA DATA (MNI): China FX Reserves Fell in Oct, Gold Purchase Paused
MNI (London) China foreign exchange reserves fell by 1.67% month-on-month in October, and the central bank continued to pause its purchases of gold, according to the State Administration of Foreign Exchange on Thursday. As of the end of October, China's foreign exchange reserves amounted to USD3.261 trillion, a decrease of USD55.3 billion compared to the end of September, SAFE’s data showed.
JAPAN DATA (MNI): Japan Sept Negative Real Wage Narrows
The inflation-adjusted real wage, a barometer of households' purchasing power, held within negative territory for the second straight month in September, but narrowed to -0.1% from August’s -0.8%, preliminary data released by the Ministry of Health, Labour and Welfare on Thursday showed. Bank of Japan officials expect real wage to turn positive gradually as nominal wages continue to rise, supporting private consumption. Real wages turned positive in June for the first time in 27 months, up 1.1% in June and +0.3% in July.
AUSTRALIA DATA (MNI): Trade Surplus Narrows, Capex Imports Soften
- AUSTRALIA SEP TRADE BALANCE A$+4609
The September merchandise trade surplus narrowed more than expected to $4.61bn from $5.28bn as the fall in exports outpaced imports. Coal and iron ore prices fell on the month. The surplus has been trending lower for around a year as commodity prices have eased but looking through the volatility it may be stabilising. Q3 data showed another terms of trade deterioration in the quarter.
FOREX: USD Eases Off Post-Election Highs
- Following the acute post-election rally on Wednesday, the USD is easing off highs into the Thursday crossover, slipping against all others in G10. As a result, EURUSD is back above 1.0750 and USD/JPY has slipped back toward the Y154.00 handle.
- Should the Fed decision later today be absorbed smoothly enough, focus will remain on the sustainability of near-term USD/JPY given the proximity in price to levels at which the BoJ intervened to buy the currency during periods of financial instability earlier this year. Similarly, we see 155.27, a Fibonacci projection, as the next upside target, with initial firm support at 151.29, the 20-day EMA.
- NOK is leading the G10 bounce following the unchanged Norges Bank rate decision this morning, at which the Bank gave no firm indication that their hawkish stance on policy would ease in the immediate future. Conversely, the Riksbank cut rates by 50bps which, while alongside expectations, helped NOK/SEK print a new multi-month high today.
- The Bank of England rate decison set for 1200GMT/0700ET is expected to see a further 25bps rate cut, with much market focus on the extent to which the BoE are baking in risks from the UK Budget into their forecast for the coming years.
- US data picks back up today with the weekly jobless claims release, with the Fed rate decision set to follow. The FOMC are expected to back a 25bps rate cut at today's meeting, and are unlikely to comment directly on this week's election results - although will certainly be questioned on them at the press conference with Fed Chair Powell.
BONDS: Bunds Widen vs. Peers, Gilts Steady Into BoE
The presence of long end supply in France & Spain, coupled with continued German swap spread tightening, has weighed on EGBs this morning.
- Bund vs. 3-month Euribor ASW has broken below 0bp.
- While the removal of Lindner as German Finance Minister increases the odds of a debt break tweak, all else equal, our political risk team currently views the odds of a move on this front as slim, given the likely make up of government after elections.
- Bund futures ~25 ticks off yesterday’s low, last 130.83.
- German yields 5.0-9.5bp higher, curve steepens. 2s10s to fresh cycle highs.
- EGBs 0.5-1.0bp tighter vs. Bunds.
- Gilts more resilient, with futures trading around late Wednesday levels.
- Bearish technicals intact but contract ~60 ticks off initial support at yesterday’s low, last 93.14.
- Yields 2-4bp lower, curve steeper. Most benchmark yields hit fresh ’24 highs yesterday.
- Gilts narrow by ~11bp vs. Bunds after the spread closed at fresh cycle highs yesterday. Last ~204bp.
- BoE-dated OIS has removed ~30bp of cuts through ’25 since the Budget was delivered.
- Almost all analysts look for a 25bp cut from the BoE today, with markets pricing ~23bp of easing.
- Risk of larger-than-expected increase in inflation forecasts post-Budget.
- Full BoE preview here.
EQUITIES: E-Mini S&P Continues to Trade Above Bull Trigger
Eurostoxx 50 futures are volatile. A bearish condition remains intact and yesterday’s sell-off reinforces current conditions. The contract has traded to a fresh cycle low and pierced 4815.50, the 50.0% retracement of the Aug 5 - Sep 30 bull cycle. This exposes 4757.00, the Sep 6 / 10 low and a key support. Initial firm resistance has been defined at 5015.00, the Oct 29 high, where a break would highlight a reversal. Bullish conditions in S&P E-Minis remain intact. A key short-term support has been defined at 5724.25, Nov 4 low. Price is trading above both the 20- and 50-day EMAs and this week’s gains have resulted in a breach of the bull trigger at 5927.25, Oct 17 high. Clearance of this level confirms a resumption of the primary uptrend and opens the 6000.0 psychological handle. A breach of 5724.25, the Nov 4 low is required to reinstate a bearish threat.
- Japan's NIKKEI closed lower by 99.26 pts or -0.25% at 39381.41 and the TOPIX ended 27.16 pts higher or +1% at 2743.08.
- Elsewhere, in China the SHANGHAI closed higher by 86.855 pts or +2.57% at 3470.661 and the HANG SENG ended 414.96 pts higher or +2.02% at 20953.34.
- Across Europe, Germany's DAX trades higher by 242.95 pts or +1.28% at 19282.24, FTSE 100 higher by 10.88 pts or +0.13% at 8177.74, CAC 40 up 49.87 pts or +0.68% at 7419.48 and Euro Stoxx 50 up 42.73 pts or +0.89% at 4843.36.
- Dow Jones mini up 63 pts or +0.14% at 43964, S&P 500 mini up 10 pts or +0.17% at 5968.75, NASDAQ mini up 48 pts or +0.23% at 20943.25.
Time: 09:55 GMT
COMMODITIES: Trend Condition in WTI Futures Still Bearish Despite Recent Gains
A bearish theme in WTI futures remains intact and the latest recovery, including this week’s gains, appears to be a correction. A resumption of weakness would expose $65.99, the Oct 1 low, and $64.16, the Sep 10 low and key support. For bulls, a clear reversal would instead refocus attention on the key S/T resistance at $77.70, the Oct 8 high. Clearance of this level would resume the recent uptrend. Initial resistance is $72.67, the Nov 5 high. The trend condition in Gold is unchanged, it remains bullish and the latest pullback is considered corrective. The yellow metal has cleared the 20-day EMA and this highlights potential for an extension of the corrective cycle. Attention is on a key support at $2643.4, the 50-day EMA. A clear break of this average would expose $2604.9, the Oct 8 low. For bulls a reversal higher would refocus attention on the bull trigger at $2790.1, the Oct 31 high.
- WTI Crude down $0.46 or -0.64% at $71.25
- Natural Gas down $0.01 or -0.33% at $2.738
- Gold spot up $4.08 or +0.15% at $2661.77
- Copper up $9.8 or +2.31% at $434.75
- Silver down $0.05 or -0.17% at $31.1105
- Platinum down $6.22 or -0.63% at $981.05
Time: 09:55 GMT
| Date | GMT/Local | Impact | Country | Event |
| 07/11/2024 | 1045/1145 |  EU | ECB's Elderson in panel on climate leadership | |
| 07/11/2024 | 1200/1200 | *** |  GB | Bank Of England Interest Rate |
| 07/11/2024 | 1200/1200 | *** | GB | Bank Of England Interest Rate |
| 07/11/2024 | 1230/1230 | GB | BoE Press Conference | |
| 07/11/2024 | 1330/0830 | *** |  US | Jobless Claims |
| 07/11/2024 | 1330/0830 | ** | US | Preliminary Non-Farm Productivity |
| 07/11/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 07/11/2024 | 1330/1430 | EU | ECB's Lane speech on Public Debt | |
| 07/11/2024 | 1400/1400 | GB | Monthly Decision Maker Panel Data | |
| 07/11/2024 | 1400/0900 |  CA | BOC Deputy Mendes gives opening remarks before a lecture. | |
| 07/11/2024 | 1430/1530 | EU | ECB's Lane in panel on Lesson Learnt in Past Crises | |
| 07/11/2024 | 1500/1000 | ** | US | Wholesale Trade |
| 07/11/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 07/11/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 07/11/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 07/11/2024 | 1900/1400 | *** | US | FOMC Statement |
| 07/11/2024 | 2000/1500 | * | US | Consumer Credit |
| 08/11/2024 | 2330/0830 | ** |  JP | Household spending |
| 08/11/2024 | 0001/0001 | ** | GB | KPMG/REC Jobs Report |
| 08/11/2024 | 0230/0230 | GB | BOE's Breeden at Singapore Fintech Festival | |
| 08/11/2024 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 08/11/2024 | 0745/0845 | * |  FR | Foreign Trade |
| 08/11/2024 | 0900/1000 | * |  IT | Industrial Production |
| 08/11/2024 | 0900/1000 | EU | ECB's Cipollone moderating event on Italy and the World Bank Group | |
| 08/11/2024 | 1000/1100 | * | IT | Retail Sales |
| 08/11/2024 | 1110/0610 | CA | BOC Deputy Gravelle speaks on panel at ECB conference. | |
| 08/11/2024 | 1215/1215 | GB | BOE's Pill and Shortfall hold MPC Agency briefing | |
| 08/11/2024 | 1330/0830 | *** | CA | Labour Force Survey |
| 08/11/2024 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 08/11/2024 | 1600/1100 | US | Fed Governor Michelle Bowman | |
| 08/11/2024 | 1700/1200 | *** | US | USDA Crop Estimates - WASDE |
| 08/11/2024 | 1930/1430 | US | St. Louis Fed's Alberto Musalem |