A fairly thin week for data will see the G20 Summit in Brazil (Mon-Tue), key earnings including AI giant Nvidia (Wed) and central bank chatter. Later today we will hear from the ECB’s Vujcic (and again on Tue), Fed’s Goolsbee and BoE’s Greene, Guindos and Lane at separate events. Eurozone CPI and US housing starts are due on Tuesday. UK CPI will draw attention on Wednesday, and we’ll hear from the BoE’s Ramsden, and the ECB’s Lagarde, Guindos and Stournaras. Eurozone consumer confidence and US existing home sales, jobless claims and Phili, Fed factory index will shed more light on the state of the economy. The Fed’s Hammack and Goolsbee, BoE’s Mann, and a number of ECB officials speak on Thursday. Eurozone HCOB manufacturing and services PMIs, UK retail sales, and UK and US S&P Global manufacturing and services prints will garner market interest on Friday.
A mixed session for asset classes last week, amid US inflation, Fed chatter and US political developments. US inflation in October aligned with market expectations, as the headline CPI increased by 2.6%yoy, up from September’s three-year low of 2.4%yoy. Housing costs remained a key driver, with the shelter index climbing 0.4%mom in October and accounting for more than half of the overall monthly increase. Core inflation, excluding food and energy prices, remained steady at 3.3%yoy, while the super core CPI (core inflation less housing) printed 4.4%yoy.
Fed chatter included Musalem stating that while the Fed is close to achieving its inflation and employment goals, monetary policy should remain moderately restrictive until inflation fully reaches the 2% target. Kashkari cautioned that whilst one-off tariffs might not affect long-term inflation, a “tit for tat” escalation could destabilise the economy and hamper the Fed’s inflation control efforts. Powell said the Fed is prepared to decelerate its interest rate cuts. The central message from his speech is that the Fed sees no immediate need for drastic action, with the economic resilience allowing it the flexibility to adopt a more measured approach. As Powell noted, “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”
The US 10-year benchmark yield rose 14bps to 4.44%, while the S&P Index fell 2.08%, driven by Friday’s pharmaceutical sell-off. The dollar, DXY Index, rose 1.61%. The stronger dollar pushed oil prices lower, as did reports that China’s oil demand fell 5.4%yoy in October. Brent fell 3.83% to $71.04pb last week.
Elsewhere, China’s October economic data indicates strengthening momentum from recent stimulus measures, with infrastructure investment rebounding for the first time since March, while equipment purchases surged 16.1%yoy. Consumer spending accelerated as retail sales grew 4.8%yoy, boosted by trade-in programs and holiday spending, while the services sector posted its strongest performance this year. Though real estate investment continued to contract, positive signs emerged including increased household loans and the first expansion in real estate services since June 2023.
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