Stock Futures Drop Ahead Of Data Barrage After Trump Unveils Trade Picks

Futures are lower as markets digested Trump’s latest cabinet appointments and looked ahead to a barrage of macroeconomic data ahead of the Thanksgiving holiday for clues on the outlook for interest rates. As of 8:00am ET, Nasdaq 100 futures dropped 0.3% while the S&P 500 slipped 0.1% with Mag 7 names mostly lower (NVDA -1.2% and MSFT -0.6%).  Treasuries advanced, pushing the 10-year benchmark yield down by five basis points to 4.26% with a slew of pre-Thanksgiving holiday US data expected, including the Fed's preferred inflation gauge and an update on economic growth. The dollar fell versus all Group-of-10 peers amid month-end flows while the euro rose to a fresh day high after hawkish comments from ECB Board member Isabel Schnabel. Commodities are mixed with precious metals and oil higher, while base metals are lower. Today, the main macro focus will be PCE release and Durable/Cap Goods Orders.

Among individual premarket movers, Dell shares tumbles 12% as revenue generated by the company’s PC business declined 1% in the fiscal third quarter, falling short of estimates. Peer HP also slumped 8% after sales in its PC unit missed the average analyst estimate. Similar to its peer Dell, the firm flagged a delayed PC refresh cycle. Here are some other notable premarket movers:

• Ambarella (AMBA) climbs 21% after the semiconductor device company issued a stronger-than-anticipated revenue forecast for the current quarter.
• Autodesk (ADSK) slides 7% after the software company posted third-quarter adjusted operating margin that fell short of expectations.
• CrowdStrike (CRWD) drops 3% after the cybersecurity firm’s issued a weaker-than-expected earnings forecast. The outlook disappointing investors who have been watching for signs that the company has recovered from a flawed update that crashed computers around the world.
• Guess (GES) slides 11% after the clothing company cut its full year guidance.
• Nutanix (NTNX) gains 5% after the infrastructure software company reported first-quarter results that beat expectations.
• Symbotic (SYM) sinks 22% after filing to delay its 10-K report.
• Urban Outfitters (URBN) jumps 12% after the clothing retailer reported stronger-than-expected quarterly sales growth. Citi upgraded the stock to buy.
• Workday (WDAY) drops 11% after the software company provided a forecast that is seen as disappointing. Analysts noted that investor confidence will likely be affected by slowing subscription growth.

Trump's tariffs agenda gathered further momentum, after the president-elect named Jamieson Greer as the US Trade Representative and Kevin Hassett to direct the National Economic Council. Greer was intimately involved in Trump’s first-term trade policy decisions.

“If we get close to a place where we are talking about across-the-board tariffs, I think that would be a wake-up call for risk assets, equities and credit alike,” Wei Li, global chief investment strategist at BlackRock Inc., said in an interview with Bloomberg TV. “We’re risk-on for now, but things could change.”

Investors have plowed money into US stocks this year, with inflows on course for a record and have been rewarded with a gain of 26% in the S&P 500, vindicating bets on American exceptionalism. European stocks are trading at a record 40% discount to the S&P 500 with the region’s benchmark gauge up just 5% this year. That divergence is making global stock market performance ever more polarized and that’s unlikely to change anytime soon, JPMorgan's strategist Mislav Matejka wrote.

European stocks fall for a second day as traders trim their ECB interest rate cut bets after Governing Council member Isabel Schnabel warned against lowering borrowing costs too far. The Stoxx 600 is down 0.3% with underperformance in auto shares suggesting tariff risks from the US are also still providing a drag. In France, a measure of risk on the country’s bonds rose to levels last seen during the euro-area debt crisis as a political standoff over the budget threatens to bring down the government. The market nerves reflect investor concerns over Prime Minister Michel Barnier’s ability to pass a budget for next year. French bank stocks underperform following the country’s political standoff over budget. Real estate and mining stocks are the strongest-performing sectors. Among individual stocks, EasyJet gains as the airline proposed to more than double its dividend payout for this year amid robust demand for its holiday package offerings. Here are some of the most notable premarket movers:

• Henkel shares climb as much as 4.1% after the chemicals company was upgraded by analysts at JPMorgan, highlighting the stock trades at a sizable discount to peers despite a rebound in earnings this year.
• Anglo American shares rise as much as 2.9% in London after the miner raised 9.6 billion rand ($530 million) from the sale of a 6.6% stake in Anglo American Platinum, a move aimed at increasing the South African unit’s free float ahead of a full exit.
• Ackermans & Van Haaren shares gain as much as 3.1%, rallying from an almost three-month low closing price yesterday, as Berenberg slightly lifts its Street-high target on the Belgian industrial holding company.
• EasyJet shares rise as much as 4.4% to the highest intraday level since April. The travel company more than doubled its annual dividend on the back of a strong demand outlook for next year.
• Idorsia shares soar as much as 28% after announcing talks with an undisclosed party for the global rights to its aprocitentan (Tryvio) drug. The deal would result in a fee of $35 million.
• French bank stocks fall as the risk premium for the country’s government bonds soared to 2012 highs amid a political standoff over the budget, which threatens to bring down the government.
• Grifols shares slide as much as 11% after Bloomberg reported that Brookfield Asset Management is preparing to walk away from a plan to acquire the Spanish drug maker over disagreements on valuation.
• CD Projekt shares drops as much as 3.9% in early trading as 3Q earnings triggered profit taking after strong gains on stock seen in last days.
• Frontline shares fall as much as 12% after the Oslo-listed crude-oil shipper reported 3Q earnings described by DNB as soft on account of a weak 4Q outlook that’s likely to lead to estimate cuts.
• Johnson Matthey shares drop as much as 7%, to the lowest since July 2009, following results from the British specialty chemicals firm which analysts see as mixed.
• Elekta shares fall as much as 7.8% after the Swedish medical technology firm’s 2Q report fell short of expectations on most key metrics. While guidance was reiterated, it requires a big effort from the company in its 2H, analysts note.
• Pets at Home shares slump as much as 9.8% to the lowest level since July 2020 after the company warned that the pet retail market will remain subdued for the rest of the financial year.

Earlier in the session, Asian stocks gained as Chinese shares rebounded after a recent rout, while traders continued to digest the potential impact of US president-elect Donald Trump’s policy plans. The MSCI Asia Pacific Index rose as much as 0.5%, lifted by Chinese tech giants such as Tencent and Meituan. An index of Chinese stocks in Hong Kong gained 2.6% amid speculation that authorities will unveil more stimulus at key meetings that are expected to take place next month. Elsewhere, stocks dropped in Japan and Taiwan, while Australia and New Zealand saw gains. Korean chipmaker stocks fell after one of Trump’s picks to lead the Department of Government Efficiency called Chips Act subsidies to the industry “wasteful.” Japanese automakers extended declines as the yen strengthened and after US peers fell on Trump’s tariff threats.

In rates, treasuries climb, with US 10-year yields falling 4 bps to 4.27%. Gilts and bunds also gain, although the Schnabel comments did dent German shorter-dated bonds while lifting the euro. French bond spreads widen again, hitting a yield gap to Bunds of 89bps, the widest since the 2012 European debt crisis as a political standoff over the budget threatens to bring down the government. The market nerves reflect investor concerns over Prime Minister Michel Barnier’s ability to pass a budget for next year. Back to Treasuries which hold most of their advance that sent yields toward the low end of two-week ranges, led by UK bond market, the outperformer in core European rates so far. Rally precedes a packed slate of US economic data including 3Q GDP revision, weekly jobless claims and PCE price indexes. A $44 billion 7-year note auction at 11:30am New York time concludes this week’s Treasury supply cycle, which has been well received.

In FX, the Bloomberg dollar index fell to the lowest this week, snapping a rally that’s propelled eight straight weeks of gains through Friday. The dollar is seen as one of the biggest beneficiaries of Trump’s pro-growth agenda. The euro rose after ECB Executive Board member Isabel Schnabel warned against cutting interest rates too far. The currency has been singled out as one of the most vulnerable to Trump’s tariff agenda by strategists at Goldman, JPMorgan and Citigroup. The yen tops the G-10 FX leader board, rising 1.1% against the greenback and pulling USD/JPY down to 151.40. The kiwi dollar is not far behind even after the RBNZ cut rates by 50 bps.

In commodities, oil prices advanced as traders monitor the cease-fire agreement between Israel and Hezbollah. WTI is up 0.3% at $69 a barrel. Middle East tensions abated somewhat as President Joe Biden said Israel reached a cease-fire deal with the Lebanese militant group Hezbollah after weeks of talks mediated by the US. Spot gold adds $15 to $2,648/oz.  Bitcoin rises above $93,000.

The US economic data calendar is busy and includes second estimate of 3Q GDP, October durable goods orders and weekly jobless claims (8:30am), November MNI Chicago PMI (9:45am, several minutes earlier for subscribers), October personal income/spending with PCE price indexes and October pending home sales (10am). The Fed speaker slate blank.

Market Snapshot

• S&P 500 futures down 0.2% to 6,026.00
• STOXX Europe 600 down 0.4% to 503.87
• MXAP up 0.4% to 183.22
• MXAPJ up 0.5% to 579.48
• Nikkei down 0.8% to 38,134.97
• Topix down 0.9% to 2,665.34
• Hang Seng Index up 2.3% to 19,603.13
• Shanghai Composite up 1.5% to 3,309.78
• Sensex up 0.3% to 80,232.67
• Australia S&P/ASX 200 up 0.6% to 8,406.67
• Kospi down 0.7% to 2,503.06
• German 10Y yield little changed at 2.15%
• Euro up 0.2% to $1.0515
• Brent Futures up 0.5% to $73.20/bbl
• Gold spot up 0.7% to $2,650.62
• US Dollar Index down 0.46% to 106.53

Top Overnight News

• Chinese stocks rallied on Wed as investors speculate a critical upcoming gov’t meeting could result in more stimulus support as Beijing looks to mitigate the fallout from Trump 2.0 trade restrictions. BBG
• China places its defense minister under investigation for corruption (this is the third consecutive serving or former defense minister to face an investigation), although the country’s foreign ministry denied the news. FT
• Sales of foreign-branded smartphones, including Apple's iPhone, in China fell 44.25% year-on-year in October, according to data from a government-affiliated research firm released on Wednesday. RTRS
• New Zealand’s central bank slashed its policy rate by 50bp to 4.25%, a move widely anticipated by markets. WSJ
• The ECB needs to be wary of cutting interest rates too far as borrowing costs are already near a level that no longer restrains the economy and going lower could backfire, according to Executive Board member Isabel Schnabel. BBG
• Trump is preparing to eliminate funding to cities that fail to participate in deportations of undocumented immigrants (he tried to do so in his first term but ran into myriad obstacles). WaPo
• Israel and Lebanon/Hezbollah struck a ceasefire agreement on Tues, a move Biden said he hoped would yield a similar settlement w/Hamas in Gaza. NYT
• Business leaders aren’t panicking over Trump’s tariff threats as many consider to be simply a starting point for negotiations rather than the articulation of a long-term policy. WaPo
• Donald Trump’s tariffs agenda gained more momentum as the president-elect named Jamieson Greer, a longtime protégé of Robert Lighthizer, as the US trade representative. Kevin Hassett was picked to direct the National Economic Council, a post that doesn’t require Senate confirmation. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mixed following a somewhat similar performance stateside where the S&P 500 and DJIA posted fresh record highs but the small-cap Russell 2000 underperformed amid higher yields owing to Trump's recent tariff threat. ASX 200 traded higher with strength in gold, consumer discretionary, tech and financial stocks, while mixed data releases also provided some encouragement as monthly CPI printed softer-than-expected, whilst the trimmed mean metric rose and Q3 Construction Work Done topped forecasts. Nikkei 225 underperformed amid a firmer currency and with money markets leaning towards a hike by the BoJ next month. Hang Seng and Shanghai Comp were positive albeit with gains capped by a lack of major catalysts and as Industrial Profits data continued to show a double-digit percentage drop Y/Y for October although was not as steep as the prior month's decline.

Top Asian News

• Leaked BYD Letter Signals China EV Price War Is Set to Intensify
• Asian Stocks Rise as Chinese Shares Rebound on Stimulus Hopes
• Seoul Hit By Highest Snowfall in Over 100 years Causing Chaos
• Pony AI Is Said to Raise $260 Million in US IPO Priced at Top
• Vietnam Mogul Told to Refund Missing Billions to Save Her Life
• Philippine VP Duterte Faces Police Charges Amid Marcos Feud
• Yen Erases Post-US Election Drop and Hedging Costs Pick Up
• Volkswagen Sells Xinjiang Sites to Exit Controversial Region
• Prabowo Pick Trails in Jakarta Governor Race in Blow for Leader

European equities are on the backfoot, Stoxx 600 -0.4%, from a macro perspective the main update for the region has come via hawkish comments by ECB's Schnabel. Sectors are mixed: outperformance in Personal Care, Drug and Grocery names, whilst a pullback in yields has benefitted the Real Estate sector. Tech hit with SAP pressured after Workday numbers. US equity futures are showing a modest reversal of Tuesday's price action where small-caps lagged peers, ES -0.3%, RTY +0.6%. Focus is very much looking ahead to the day's raft of tier 1 US data points. US updates from Dell Technologies (-12.6%), HP (-10%), ADSK (-6.3%), CRWD (-5.7%) & Workday (-10%) in focus among others. CAICT says shipments of smartphones in China were up +1.8% Y/Y in October at 29.67mln (prev. -25.7% Y/Y in September). Domestic Chinese brands shipped 18.55mln phones in October (79% of the total), while foreign brands shipped 4.903mln units (-28.7% Y/Y). Shipments of foreign branded phones including Apple's (AAPL) iPhones within China were down 55.75% Y/Y in October (prev. -39.8% Y/Y), according to Reuters calculations.

Top European News

• BoE's Lombardelli said US tariffs would pose a risk to UK economic growth and it is unclear what impact tariffs would have on UK inflation, while she added that a tight UK labour market remains a problem and is worried that services inflation remains above pre-COVID levels.
• ECB's Schnabel says she sees only limited room for further rate cuts, via Bloomberg; estimated range for the neutral rate is 2-3%. Can gradually move rates to neutral, not lower. Shouldn't go accommodative on rates. Strong preference for a gradual approach. Need to see services inflation come down. Impact of past tightening fading visibly. May not be so far from neutral rates. Economy is stagnating, no recession risk.

FX

• JPY outperforms with USD/JPY down to a 151.23 trough as traders continue to position for a BoJ rate hike next month following the recent fiscal stimulus announcement by the Japanese government.
• As such, the USD has been hampered with the DXY slipping further on the 106.00 handle and down to a 106.33 base thus far. Docket ahead packed given Thanksgiving adjustments to the data schedule.
• EUR firmer, benefitting from general USD downside and bolstered by hawkish remarks from ECB's Schnabel. Single currency as high as 1.0540, having climbed significantly an overnight 1.0474 base.
• Fundamentals light out of the UK, GBP benefitting from the above USD action and is holding ground against the EUR for the most part thus far.
• NZD a close second to JPY as it stands in terms of best performers, following the RBNZ's 50bps cut which while as expected saw the unwinding of some outside bets for a 75bps move. NZD topped out at 0.59 vs the USD.

Fixed Income

• Benchmarks in the green. Spent the first part of the European morning at highs though pulled back modestly on hawkish Schnabel commentary. Since, back towards best as the risk tone continues to deteriorate.
• USTs towards their 110-21+ peak, pulled back modestly on Schnabel but only briefly. Docket ahead is packed with PCE the highlight, and will help to inform the view into December’s FOMC, with markets leaning towards a 25bps cut (60% chance) vs unchanged (40% chance) into the releases.
• Bunds came under pressure on a set of particularly hawkish remarks from ECB’s Schnabel; in particular, her remark on not going below the estimated 2-3% neutral rate is at odds with market pricing.
• OATs near the unchanged mark with focus on the domestic political situation after PM Barnier's remarks around "serious turbulence on financial markets" if the gov't collapses; as such, the OAT-Bund yield spread has hit 90bps, its highest since 2012.
• Gilts outperform, unaffected by Schnabel, specifics for the UK have been light thus far with the docket ahead also sparse.

Commodities

• Crude modestly firmer in narrow ranges and well within familiar territory awaiting updates around the ceasefire, US data and OPEC+. Holding around USD 69/bbl and USD 73/bbl respectively for WTI and Brent.
• Gold has gleaned support from the tepid risk tone, which has been deteriorating throughout the morning, and softer USD. As such, XAU is at a USD 2653/oz peak with resistance ahead at USD 2673/oz from November 21st.
• Base metals in the green, despite the tepid tone, action which comes as the complex bounces back from Tuesday’s pressure. Thus far, this has taken the likes of 3M LME Copper back to yesterday's best but shy of the USD 9.1k from Monday.
• US Private Inventory Data: Crude -5.9mln (exp. -0.6mln), Distillates +2.5mln (exp. +0.1mln), Gasoline +1.8mln (exp. -0.1mln), Cushing -0.7mln
• Russia may lift the ban on gasoline exports from refineries for two months from December 1st to January 31st, according to Kommersant citing sources.
• Citi Research said its base case is for OPEC+ to delay the unwind of output cuts by a quarter to April 2025.
• JPMorgan forecasts Henry Hub prices at USD 3.50/MMBtu; TTF at EUR 41.75/MWh. Sees NatGas production likely to grow 3bcf/day in 2025 and again in 2026.

Geopolitics

• Hamas says it is ready for truce in Gaza after the ceasefire deal between Israel and Hezbollah, according to journalist Guy Elster.
• Israel conducted a series of raids on the town of Naqoura in southern Lebanon and Hezbollah announced targeting "sensitive" military sites in Tel Aviv with a swarm of drones in the hours prior to the ceasefire.
• Streams of cars headed to southern Lebanon after the ceasefire came into force, according to Reuters.
• US senior official said they must all focus on making sure Iran does not continue to use Syria as a highway for weapons into Lebanon.
• Iran's Foreign Ministry said it welcomes the ceasefire in Lebanon and emphasises the responsibility of the international community in effectively pressuring Israel to stop the war in Gaza.
• Syrian state agency reported six people died including two soldiers in an Israeli attack on border crossings between Syria and Lebanon in the Homs countryside.
• Russia’s new missile fired at the Ukrainian city of Dnipro last week carried warheads without explosives causing limited damage, according to Reuters citing sources.

US Event Calendar

• 07:00: Nov. MBA Mortgage Applications 6.3%, prior 1.7%
• 08:30: 3Q GDP Annualized QoQ, est. 2.8%, prior 2.8%
  • 3Q Personal Consumption, est. 3.7%, prior 3.7%
  • 3Q GDP Price Index, est. 1.8%, prior 1.8%
  • 3Q Core PCE Price Index QoQ, est. 2.2%, prior 2.2%
• 08:30: Oct. Durable Goods Orders, est. 0.5%, prior -0.7%
  • Oct. Durables Less Transportation, est. 0.1%, prior 0.5%
  • Oct. Cap Goods Ship Nondef Ex Air, est. 0.1%, prior -0.1%
  • Oct. Cap Goods Orders Nondef Ex Air, est. 0.1%, prior 0.7%
• 08:30: Oct. Retail Inventories MoM, est. 0.5%, prior 0.8%
  • Oct. Wholesale Inventories MoM, est. 0.1%, prior -0.2%
• 08:30: Oct. Advance Goods Trade Balance, est. -$102.7b, prior -$108.2b, revised -$108.7b
• 08:30: Nov. Initial Jobless Claims, est. 215,000, prior 213,000
  • Nov. Continuing Claims, est. 1.89m, prior 1.91m
• 09:45: Nov. MNI Chicago PMI, est. 45.0, prior 41.6
• 10:00: Oct. Personal Spending, est. 0.4%, prior 0.5%
  • Oct. Personal Income, est. 0.3%, prior 0.3%
• 10:00: Oct. PCE Price Index MoM, est. 0.2%, prior 0.2%
  • Oct. PCE Price Index YoY, est. 2.3%, prior 2.1%
  • Oct. Core PCE Price Index MoM, est. 0.3%, prior 0.3%
  • Oct. Core PCE Price Index YoY, est. 2.8%, prior 2.7%
• Oct. Real Personal Spending, est. 0.2%, prior 0.4%
• 10:00: Oct. Pending Home Sales (MoM), est. -2.0%, prior 7.4%
  • Oct. Pending Home Sales YoY, est. 0.2%, prior 2.2%

DB's Jim Reid concludes the overnight wrap

As the title of our World Outlook suggests, one of the main themes for 2025 will be how President-elect Trump prioritises his various policies. Indeed since we published, that’s become a little clearer for markets given the announcement of additional tariffs on Canada, Mexico and China we discussed yesterday. As a reminder, Trump said on the Truth Social platform that he’d put 10% tariffs on China, above any additional tariffs, along with 25% on Canada and Mexico on all products. And that led to a very clear reaction yesterday, with the Canadian dollar (-0.58% vs USD) as the worst-performing G10 currency, whilst the Mexican Peso was also down -1.82%. Similarly, the stock markets in the affected countries also underperformed, with Mexico’s S&P/BMV IPC down -0.93% even if Canada’s S&P/TSX Composite recovered to just make it to +0.01% after being down -0.48% initially after trading started.

Such tariffs would also have implications for the US though with our economists yesterday estimating that US core PCE inflation for 2025 could increase from 2.6% to 3.7% if fully implemented (link here), albeit with uncertain passthrough assumption that they go through. Before Trump's victory the assumption was for 2.3% inflation in 2025. On that topic remember that today sees the latest monthly core PCE inflation print with DB expecting +0.29% vs. +0.25% last month. This would take the YoY rate to 2.81% from 2.65%.

Back to the tariffs, clearly at one end of the scale we don't know how much of the rhetoric is a negotiating tactic, but at the other end we don't know how other countries might retaliate if it's not, particularly if that leads to a global trade war. For instance, Mexican President Sheinbaum said yesterday that “one tariff will come in response to another, and so on until we put shared companies at risk”. And we know from both the first Trump and the Biden administrations that others have been willing to react against protectionist policies, so this is set to be a very important part of the outlook for 2025 and beyond. Overnight Trump has nominated Jamieson Greer for the role of Trade Representative which confirms the direction of travel as he served as Chief of Staff under Lighthizer who had the job in Trump's first administration. He also announced Kevin Hassett to lead the National Economic Council. During the last Trump administration, Hassett was a senior adviser to Trump and the chair of the Council of Economic Advisers. He has backed the President-elect’s tariffs proposals in the past.

Despite the tariff threats, US equities held up fairly well yesterday, with the S&P 500 (+0.57%) advancing for a 7th consecutive session as US exceptionalism continued. That said, those companies more exposed to trade saw a clear underperformance. For instance, the NASDAQ Golden Dragon China Index (which includes companies publicly traded in the US where the majority of their business is in China) fell -0.84%, and the Philadelphia Semiconductor Index was also down -1.21%. Similarly in Europe, the STOXX 600 saw a -0.57% fall, but the automobiles and parts component was down by a larger -1.71%.

One factor that supported US equities yesterday was strong data releases. For instance, the Conference Board’s consumer confidence measure was up to a 16-month high of 111.7 in November, whilst the expectations component was up to its highest in nearly 3 years, at 92.3. Moreover, there was also an improvement in their labour market indicators, with the gap between those saying jobs were plentiful and hard to get widening for a second month running.

The FOMC minutes from the November 6-7 meeting showed that committee members thought that “ with inflation continuing to move down sustainably to 2% and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time.” “Many” officials noted that ongoing uncertainty around what the neutral rate should be, "made it appropriate to reduce policy restraint gradually.” That represented an increase after the previous minutes referenced “some” officials. The staff upgraded both growth and inflation forecasts from the prior meeting, this can also be seen from fewer members being concerned with the risk of growth slowing. Last meeting, “most remarked that the downside risks to employment had increased,” but this meeting, “some participants judged that downside risks to economic activity or the labor market had diminished.”

Overall, the minutes gave slightly more credence to a rate cut next month with fed futures now pricing a 63% chance. That’s the most in nearly two weeks. The 2yr yield fell (-3.7bps) into the close from an intraday high of 4.2932% just four minutes before the Fed minutes were released to close -1.2bps lower on the day. 10yr yields were less impacted by the Fed minutes, and finished +3.3bps higher on the day at 4.306% but are back around 4.29% in Asia this morning.

Whilst there’s still a question mark about whether the Fed cut rates in December, there’s little doubt among investors that the ECB will continue on the path downwards. That was confirmed yesterday by ECB Vice President de Guindos, who said in an interview published yesterday that if their projections were confirmed, “we will continue making our monetary policy stance less restrictive.” In light of that, yields on 10yr bunds fell back -2.3bps, but there was also a notable widening in spreads across the continent. For instance, the Franco-German 10yr spread moved up to 86.3bps, which is its highest level since 26 July 2012, the day that Mario Draghi delivered the famous “whatever it takes” speech.

A reminder that we have the passing of the French budget coming to a head in the next few weeks with some concern of a government shutdown if it's not passed. See “Focus Europe: France Budget 2025: Tensions could mount as endgame approaches” (link here) for more. Last night, French Prime Minister Barnier warned that “there will probably be a rather serious storm and serious turbulences in financial markets” if there were to be a no-confidence vote when he presents the 2025 budget. This followed reports, which President’s office Macron later denied, that President Macron expected the government to dissolve.

Elsewhere, Israeli Prime Minister Netanyahu announced a cease-fire agreement with Hezbollah in Lebanon, with President Biden later confirming the ceasefire arrangement and stating that it would start at 4am local time. Brent crude oil prices fell -2.47% intraday around the news before grinding higher into the close to finish down -0.04% to $72.98/bbl yesterday following Prime Minister Netanyahu’s press conference announcing the cabinet vote.

Asian equity markets are mixed this morning and trying to decipher all the tariff related stories. The Nikkei (-1.07%) and the KOSPI (-0.67%) are lower. Elsewhere, Chinese stocks are outperforming with the CSI (+0.64%) leading gains followed by the Shanghai Composite (+0.37%) and the Hang Seng (+0.36%). The S&P/ASX 200 (+0.57%) is also seeing decent gains. US stock futures are slightly lower.

In monetary policy action, the Reserve Bank of New Zealand (RBNZ) lowered the cash rate by half a percentage point to 4.25%. It was the second straight cut of 50bps as the RBNZ seeks to revive the economy now that inflation is under control, making it one of the most aggressive cutters among its western peers. RBNZ Governor Adrian Orr indicated that another 50bps cut is coming in February if the economy evolves as expected.

Early morning data showed that Australia’s headline inflation rate remained well within the RBA’s target band in October, as the CPI was +2.1% higher than a year ago (v/s +2.3% expected), holding steady at its lowest level since July 2021. However, the trimmed mean, or underlying inflation rate, came in at 3.5%. In September, that measure was 3.2%.

Looking at yesterday’s other data, US new home sales in October were at their lowest since November 2022, at an annualised rate of 610k (vs. 725k expected). Separately, the Richmond Fed’s manufacturing index remained at -14 in November (vs. -11 expected).

To the day ahead now, and US data releases include the PCE data for October, the weekly initial jobless claims, the second estimate of Q3 GDP, and the preliminary reading of durable goods orders for October. Central bank speakers include the ECB’s Lane. Finally in the political sphere, the European Parliament will vote on whether to approve the new College of Commissioners.