Futures Drop As Walmart Consumer Caution Pours Cold Water On Sentiment

S&P futures dropped and global stocks paused their rally on Wednesday as the euphoria over a potential dovish pivot by central banks faded and earnings from a slew of companies undershot expectations. A boost to sentiment from the US averting a government shutdowns was offset by a last minute debacle in the Biden-Xi talks in which the US president (correctly) called his Chinese counterpart a "dictator"; sentiment was also pressured by disappointing guidance and commentary on the US consumer from retail giant Walmart. As of 8:15am, S&P futures ticked 0.2% lower. 10YTreasuries steadied just below 4.5%, after yields increased by almost nine basis points in the previous session. The dollar was little changed and West Texas Intermediate declined toward $76 a barrel.

In premarket trading Cisco tumbles 10% after its forecast raised concerns that corporations are reining in their technology spending. Walmart sank over 6% after it modestly raised its annual profit forecast, but struck a cautious tone about the outlook for US shoppers. Alibaba Group fell 8% after the company said it won’t proceed with a full spinoff of its cloud unit. Cisco Systems Inc. headed for its biggest drop in 18 months after saying new product orders are slowing. Children’s Place falls 19% after posting 3Q profit that fell short of estimates.

This week’s rally in stocks and bonds has prompted some to ponder whether the market is jumping the gun on expectations of interest rate cuts. While data has showed US inflation slowing, other economic measures such as retail sales and Target Corp. earnings indicate consumer demand remains resilient.

“The inflation discussion is done and dusted,” said Peter Kinsella, head of FX strategy at Union Bancaire Privee UBp SA. “Now the narrative will slowly shift from inflation to growth risks, and we have to wait and see what happens with labor market data.”

In other news, President Xi Jinping’s comment that his country will not fight a cold, or a hot, war with the US is being viewed as a sign Beijing is intent on repairing recently soured relationship with the US. He spoke after a meeting with his US counterpart Joe Biden. “The tone from both sides seems conciliatory and that is good,” said Redmond Wong, a market strategist at Saxo Capital Markets in Hong Kong.

The focus now turns to US initial jobless claims and industrial production figures due later Thursday, with investors also likely to tune in to a lineup of speakers from the Fed and European Central Bank.

European stocks are on course to snap a three-day winning streak. The Stoxx 600 is down 0.3%, led by declines in energy and leisure shares while utilities and industrial goods lead the outperformers. Burberry plunged 9% after saying weaker demand for high-end goods may make its sales forecast impossible to hit. Meal-kit firm HelloFresh SE sank 18% after cutting sales expectations. Here are the biggest movers Thursday:

Siemens gains as much as 5.8%, the most since February, after the German industrial conglomerate presented an overall strong report, with analysts noting a return to growth for its key Digital Industries division, impressive cash flow and a fresh EU6 billion buyback as key positives
Arcadis rises as much as 5.3%, the most in more than six months, after the Dutch engineering firm announced targets for 2024-26 on its capital markets day that Degroof Petercam says were substantially above expectations
SSE rise 2.8% as BNP Paribas Exane says the UK utility is “entering a sweet spot” after upgrading its rating to outperform. Reports that UK will upgrade offshore wind auction price caps could open bidding opportunities for SSE next year
EFG International shares gain as much as 3.4% after the Swiss asset manager reported results for the first 10 months of the year that signal a strong 2023, according to ZKB. Other analysts also point to the company’s hiring as a good sign
Premier Foods advances as much as 5.2%, the biggest intraday advance since May, after the packaged-food company reported first-half results that were seen as good by analysts. Jefferies highlighted the company’s strong momentum carrying into the second quarter
Hotel Chocolat shares jump as much as 164%, the most on record, after US candy giant Mars agreed to buy the premium chocolate maker and retailer for £534 million ($662 million)
City Pubs shares gain as much as 33%, the most on record, after Young & Co.’s Brewery agrees to buy the chain of pubs operator for 108.75 pence in cash and 0.032658 new Young’s A Shares
Soitec shares flip to gains after erasing a 6.1% drop at the open. The French firm’s results for fiscal 2Q showed a strong rebound in its core segment of providing wafers to smartphone-chip vendors, with the division recording a 90% jump in sales from a quarter earlier
HelloFresh declines as much as 21%, the most ever, as the meal-kit company cut full-year sales and Ebitda guidance, citing challenges in acquiring customers in the US and a slow ramp-up of its capacity to produce ready-to-eat pre-made meals
Burberry shares drop as much as 11% after the UK trench-coat maker warned that a global slowdown in luxury demand has taken a toll on its sales and put its yearly revenue targets at risk
Allegro drop as much as 6.9% after the Polish e-commerce platform’s guidance for 4Q signals ballooning losses in Czech Republic and modest gross merchandise value (GMV) growth despite stronger trends in October

Earlier, Asian stocks halted a three-day winning run. Chinese shares were undermined by data showing home prices fell at the fastest clip since 2015; traders also cited profit-taking following the meeting between Xi Jinping and Joe Biden. The MSCI Asia Pacific Index fell as much as 0.8%. Xiaomi was one of the biggest contributors to the loss as investors were unimpressed by its new electric vehicle, while Tencent fell as amid concerns on its revenue. Hong Kong and mainland benchmarks led losses across the region. Chinese home prices fell by the most in eight years in October, signaling the property slump is worsening even after government stimulus. Meanwhile, the much-anticipated meeting of Xi and Biden delivered an outcome that was seen as largely in line with expectations.

Hang Seng and Shanghai Comp weakened amid mixed tech earnings ahead of Alibaba’s results and with participants digesting the rhetoric from the Biden-Xi meeting which was said to be constructive and productive as they agreed to restart cooperation on counter-narcotics and create forums for military-to-military contact. However, reports noted that Biden said Xi was a dictator and he also raised concerns about human rights abuses.

Australia's ASX 200 was lower with the energy and mining-related sectors pressured by a deterioration in the commodities complex and with stronger-than-expected employment data doing little to spur risk appetite.
Japan's Nikkei 225 failed to sustain its early gains despite better-than-expected exports and machinery orders.
India stocks logged their best back-to-back gains since July, skirting losses in their Asian peers, led by gains in technology stocks. The S&P BSE Sensex rose 0.5% to 65,982.48 in Mumbai, while the NSE Nifty 50 Index advanced by the same magnitude. The MSCI Asia Pacific Index was down 0.3% for the day.

In FX, the Bloomberg Dollar Spot Index is unchanged. The kiwi is the worst performer among the G-10’s, falling 0.5% versus the greenback.

GBP/USD steadied at 1.2400 after the Bank of England’s Megan Greene said she wasn’t even thinking about rate cuts
NZD/USD sank as much as 0.9% to 0.5971 and AUD/USD fell as much as 0.7% to 0.6456 on falling Chinese house prices and a mixed Australian job report

In rates, treasuries were richer across the curve, unwinding a portion of Wednesday’s losses and following wider gains in gilts where yields are richer by almost 10bp across long-end of the curve. US session features several economic data releases and at least five Fed speakers. Also, corporate deal flow is expected to be heavy for a second straight day. US yields richer by ~4bp across long-end of the curve with futures on session highs in early trading; 10-year is around 4.48%, near day’s low, trailing gilts in the sector by 4bp. Long-end outperformance in Treasuries pushes 2s10s spread flatter by around 1bp on the day with 5s30s spread also slightly tighter vs Wednesday close. Gilts have outperformed their German counterparts as UK 10-year borrowing costs fall by 7bps.

In commodities, oil fell as an increase in US inventories added to market sentiment over weaker demand and steady supplies. WTI fell 0.6% to trade near $76.20. Gold edged up, after a modest decline on Wednesday as US data pointed to signs of resilience in the US economy that could affect the Federal Reserve’s rate path.

Bitcoin remains stuck in very narrow USD 37-37.5k range after a failed attempt to break out above $38k last night. Ethereum spiked to $2100 after confirmation that Blackrock had filed for an ETH ETF.

US economic data includes October import/export price indexes, initial jobless claims, November Philadelphia Fed business outlook and New York Fed services business activity (8:30am), October industrial production (9:15am), NAHB housing market index and Kansas City Fed manufacturing (11am) and September TIC flows (4pm). Scheduled Fed speakers include Mester (8:30am, 11:45am and 1:30pm), Williams (9:25am), Waller (10:30am), Barr (10:35am) and Cook (12pm)

Market Snapshot

S&P 500 futures little changed at 4,516.50
STOXX Europe 600 down 0.3% to 453.20
MXAP down 0.2% to 160.68
MXAPJ down 0.2% to 504.48
Nikkei down 0.3% to 33,424.41
Topix down 0.2% to 2,368.62
Hang Seng Index down 1.4% to 17,832.82
Shanghai Composite down 0.7% to 3,050.93
Sensex up 0.7% to 66,138.36
Australia S&P/ASX 200 down 0.7% to 7,058.42
Kospi little changed at 2,488.18
Brent Futures down 0.4% to $80.85/bbl
Gold spot up 0.4% to $1,967.34
German 10Y yield little changed at 2.63%
Euro little changed at $1.0857
U.S. Dollar Index little changed at 104.35

Top Overnight News

Biden and Xi met for four hours on Wed and reached agreements on curbing fentanyl production and resuming military-to-military communications, but otherwise it was a fairly uneventful gathering (the most important takeaway was that the two men agreed to continue talking as relations thaw, although Biden reiterated that considered Xi to be a dictator). NYT
A decision by Germany’s top court to strike down off-budget funding for climate action has called into question about €770 billion ($840 billion) of state funding, according to people familiar with the matter. BBG
The US and EU are haggling over terms to extend a truce on steel and aluminum trade after talks stalled on a more lasting agreement. The US proposed prolonging the status quo until end-2025, but the EU wants changes to the current deal before agreeing to an extension, people familiar said. BBG
Hamas agrees to a deal whereby it will release 50 women and child hostages in exchange for a 3-5 day ceasefire and the release of certain women and children being held in Israeli prisons. WaPo
Israeli president Isaac Herzog has said that his country cannot leave a vacuum in Gaza and would have to maintain a “very strong force” in the coastal enclave for the near future to prevent Hamas re-emerging in the besieged strip. FT
Iran's supreme leader delivered a clear message to the head of Hamas when they met in Tehran in early November, according to three senior officials: You gave us no warning of your Oct. 7 attack on Israel and we will not enter the war on your behalf. RTRS
Senate passes bill to avoid a shutdown (the vote was 87-11), sending it to the White House for Biden’s signature (the new spending deadlines are 1/19 and 2/2). WaPo
Larry Summers said transitory factors like bottlenecks are partly behind the faster-than-expected slowdown in US inflation. He still doesn’t see a return to 2% without a significant downturn. BBG
CSCO reported solid EPS upside, but the guidance was very soft (mgmt. said the culprit behind the poor forecast isn’t macro weakness but instead absorption hiccups as customers take time to install and implement prior purchases before making new ones). RTRS
Liquidity - Top book liquidity has doubled from $8M to $16M month-to-date. The ability to transfer risk has increased. We expect liquidity to tick lower heading into Thanksgiving.

More details on overnight moves from Newsquawk

APAC stocks were mostly negative as the recent data-driven momentum eventually lost steam. ASX 200 was lower with the energy and mining-related sectors pressured by a deterioration in the commodities complex and with stronger-than-expected employment data doing little to spur risk appetite. Nikkei 225 failed to sustain its early gains despite better-than-expected exports and machinery orders. Hang Seng and Shanghai Comp weakened amid mixed tech earnings ahead of Alibaba’s results and with participants digesting the rhetoric from the Biden-Xi meeting which was said to be constructive and productive as they agreed to restart cooperation on counter-narcotics and create forums for military-to-military contact. However, reports noted that Biden said Xi was a dictator and he also raised concerns about human rights abuses.

Top Asian News

US President Biden said talks with Xi were constructive and productive, while they made real progress and are restarting cooperation on counter-narcotics, as well as resuming military-to-military contact. Biden also raised concerns about people detained in China and about China's human rights abuses in Xinjiang, Tibet and Hong Kong, while he emphasised the US would take actions to prevent US technology from being used to undermine US security and said that Chinese President Xi is a dictator.
Chinese President Xi said China has no plan to replace the US and that he hopes the two countries can be partners, respect each other and coexist peacefully. Xi added that both sides should have more dialogue, discuss more and handle differences calmly, as well as promote mutually beneficial cooperation in fields including the economy, trade, agriculture, climate change and AI. Furthermore, he said the US should stop arming Taiwan and support China's peaceful reunification with Taiwan, while he hopes the US will lift its unilateral sanctions and provide a fair and just environment for Chinese companies.
Chinese President Xi said during his APEC address that the door of US-China relations cannot be shut and the world needs China and the US to work together. Xi also stated China is ready to be a partner and friend of the US and that the US should not bet against China, while he added that there is plenty of room for US-China cooperation and that it is wrong to view China as a threat and play a zero-sum game.
US senior administration official said the Biden-Xi meeting lasted for over 4 hours and both leaders acknowledged that they want to keep lines of communication open, while there are no plans for another visit between Biden and Xi at this time although they kept the door open to it.
China's state planner said it will continue to expand domestic demand and promote high growth in services consumption. NDRC added it will coordinate the link between macro policies this year and next year and make sure there is a good start to the economy in 2024, while it will roll out policy measures to attract foreign investment with bigger efforts and will increase household income in urban and rural areas, as well as improve consumption capability of low- and mid-level income groups.
"China's Ministry of Commerce said on Thu it will implement tariff reduction and exemption for imported equipment for foreign investment projects encouraged by the government", according to Global Times. "The Ministry also urged responsible authorities to study relevant policies encouraging foreign investment and help the involved enterprises to report corresponding projects in accordance to national policies."

European bourses are struggling for direction, Euro Stoxx 50 -0.1%, as newsflow slows considerably in European hours and the tailwind from US data begins to fizzle out. Sectors are tilting negative with stock specifics dictating, aside from Energy which lags on recent benchmark action. Elsewhere, Luxury names slump post-Burberry's concerns around attaining guidance while Utilities and Industrials benefit from broker action and Siemens results respectively. Stateside, futures are in the red but as above action is very contained and limited thus far with futures flat/0.10% lower ahead of a number of Fed speakers incl. Williams and key earnings from WMT & M, among others. NetEase Inc (NTES) Q3 2023 (USD): EPS 1.84 (exp. 1.47), Revenue 3.7bln (exp. 3.82bln). Cuts quarterly dividend to 0.495/ADS (prev. 0.525/ADS).

Top European News

BoE's Greene says the latest inflation data is good news and labour market data is positive. The question is whether BoE policy is restrictive enough and we may need to be restrictive for longer; Greene makes clear that we are in restrictive territory. Markets globally have not really clocked on to how long central banks will need to stay restrictive. UK wage growth is still incredibly high. I am not thinking about cuts.

Buck continues to recover from post-US CPI lows as DXY forms a base above 104.00 between 104.30-56 parameters.
Euro and Yen relatively firm within 1.0831-60 and 151.13-47 respective ranges on yield spread and data dynamics.
EUR/USD flanked by hefty option expiries and USD/JPY solidly underpinned.
Sterling gleans some support around 1.2400 via hawkish remarks from BoE's Greene and Aussie on either side of 0.6500 via strong payroll gain.
Kiwi lags sub-0.6000 in the face of big upside expiry and AUD/NZD headwinds
PBoC set USD/CNY mid-point at 7.1724 vs exp. 7.2474 (prev. 7.1752)

Fixed Income

Debt futures regroup and rebound after early buying petered out for a while.
Bunds off lower 130.56 low having peaked at 130.89.
Gilts extend both ends of the Liffe range to 96.34-74 amidst hawkish BoE rhetoric.
T-note hovers towards the top of 108-17/07 band awaiting US IJC, IP and a host of Fed speakers.

Commodities

WTI Dec'23 and Brent Jan'24 futures are softer around USD 76.30/bbl (vs high 76.61/bbl) and USD 80.90/bbl (vs high 80.98/bbl) following a session of selling on Tuesday; as mentioned, newsflow has been slow with specifics for crude equally limited.
Spot gold moving back above its 50 DMA (USD 1,962.30/oz) from a USD 1,956.55/oz trough, but off its intraday peak of USD 1,968.61; Spot silver found support at its 200 DMA.
3M LME copper has reclaimed a USD 8,300/t handle for the first time since the end of September, although iron ore futures fell overnight after China’s NDRC yesterday said it is investigating “unreasonably high prices; LME zinc prices meanwhile slipped some 3% following a larger-than-usual build in zinc inventories (+65kt).
US and the EU discussions on a permanent steel agreement have reportedly reached a stalemate, according to Bloomberg sources; Biden admin has proposed prolonging the status quo until the end of 2025 to hammer out a permanent deal.

Geopolitics

US senior official said Chinese President Xi said there were no such plans for China military action against Taiwan in the coming years, while Xi told Biden China's preference was for a peaceful reunification but also talked about conditions in which force could be used.
North Korea said the US and its allies are raising tensions in the region, while it will respond to military threats by the US and its allies with more aggressive and strategic military acts, according to KCNA.
Pentagon said the State Department approved a potential sale of sidewinder missiles to South Korea.

US Event Calendar

08:30: Oct. Import Price Index YoY, est. -1.8%, prior -1.7%
08:30: Oct. Import Price Index ex Petroleu, est. -0.3%, prior -0.3%
08:30: Oct. Import Price Index MoM, est. -0.3%, prior 0.1%
08:30: Nov. New York Fed Services Business, prior -19.1
08:30: Nov. Continuing Claims, est. 1.85m, prior 1.83m
08:30: Oct. Export Price Index MoM, est. -0.5%, prior 0.7%
08:30: Oct. Export Price Index YoY, prior -4.1%
08:30: Nov. Philadelphia Fed Business Outl, est. -8.0, prior -9.0
08:30: Nov. Initial Jobless Claims, est. 220,000, prior 217,000
09:15: Oct. Capacity Utilization, est. 79.4%, prior 79.7%
09:15: Oct. Manufacturing (SIC) Production, est. -0.4%, prior 0.4%
09:15: Oct. Industrial Production MoM, est. -0.4%, prior 0.3%
10:00: Nov. NAHB Housing Market Index, est. 40, prior 40
11:00: Nov. Kansas City Fed Manf. Activity, prior -8
16:00: Sept. Total Net TIC Flows, prior $134.4b
16:00: Sept. Net Foreign Security Purchases, prior $63.5b

DB's Jim Reid concludes the overnight wrap

I like to think I've had a relatively decent career so far but I did doubt myself yesterday given where I was late at night. I'm in Frankfurt and after a busy day was very hungry when I arrived back at my hotel after meetings. Looking at the room service menu I decided that to satisfy my hunger would be an unreasonable cost so I went for a walk in search of food. I'm not sure if I went the wrong way but after half a mile of going past closed shops and empty buildings, I found myself in a row of kebab shops. By this stage I had lost the will to carry on and ended up in a fried fish bar. I choose something that required cooking and waited. It was only when I left with my takeaway 20 minutes later that I realised my suit smelt of fried food. So if you have a meeting with me today in Frankfurt excuse the smell.

While I was locked in meetings yesterday there was just a 13bps range for 10yr US yields. It all felt quite dull in comparison with Tuesday. In all seriousness it was another large move across the curve with US yields selling off around 7-9bps from 2s to 30s as the moves the prior day were deemed to be a bit overdone with just under half the rally reversed. This reversal was helped by some positive news on the corporate earnings side, as well as some better data releases, which led to growing doubts about whether the Fed would actually cut rates as swiftly as many were hoping. We've seen yields fall 2-4bps across the curve in Asia again though so volatility remains. Risk has managed to shrug this all off with the S&P 500 (+0.16%) hitting a 2-month high, with US HY spreads reaching their tightest level since September. President Biden and Chinese Premier Xi Jinping have held what was a tightly-scripted diplomatic encounter their first in a year. It has generally gone without incident with relations thawing a little. More below.

Delving in now with more detail. The bond moves had several drivers throughout the day, which all added up to a broadly positive narrative about the economy. One was the latest retail sales print for October, which saw a slightly smaller -0.1% contraction than the -0.3% expected, with the September number revised up two-tenths to +0.9% but with August revised down. Retail control which goes into GDP was in line at 0.2% down from 0.7% (revised up 0.1pp) last time so some slowing. Later on, we had t he New York Fed’s Empire State manufacturing survey, which hit a 7-month high of 9.1 (vs. -3.0 expected). And on the corporate side, Target (+17.8%) was the strongest performer in the entire S&P 500 after they announced better than expected earnings.

The stronger newsflow meant there was a bit more scepticism about the rate cuts being priced for 2024 after Tuesday’s CPI report. For example, the rate priced in at the Fed’s December 2024 meeting was back up by +10.8bps to 4.437%, which reversed almost half of the previous day’s -25.2bps decline. And in the near term, the likelihood of a cut by the May meeting came down from 86% on Tuesday to 73.5% by the close. So we’ve now got a slightly shallower pace of cuts priced in relative to 24 hours ago. Bear in mind this is now the 7th time in the last two years we’ve had a very clear example of markets getting excited about a dovish pivot, and on the previous 6 those dovish expectations have entirely unwound again. For reference, Henry has collated all the times we’ve seen this in an update yesterday (link here). It all started with the Omicron variant being seen as the reason the Fed wouldn’t be able to raise at all in 2022! It’s a a fascinating trip down memory lane of the last two years of the markets continually being fooled on rates. At some point there will be a dovish pivot, and this could be closer than the others to it, but be wary that we’ve now been to this well 7 times in 2 years.

Moving back to those Treasury moves in more detail. The 2yr yield was up +7.6bps to 4.91%, and the 10yr yield +8.4 bps to 4.531%. As mentioned at the top we've rallied back again overnight with yields 2-4bps lower across the curve.

In Europe yields on 10yr bunds (+4.4bps), OATs (+4.9bps) and BTPs (+3.2bps) all moved higher, whilst gilts (+7.5bps) underperformed in spite of a lower-than-expected CPI print for October. The release showed headline CPI falling to a two-year low of +4.6% (vs. +4.7% expected), whilst core CPI fell to a 19-month low of +5.7% (vs. +5.8% expected). In turn, that saw investors grow in confidence that the Bank of England was finished hiking rates, with only a 11% likelihood of a further hike now priced in.

For equities, the S&P 500 (+0.16%) hit a two-month high. The gains were driven by a mix of cyclicals and staples; with food (+2.47%), autos (+2.03%), banks (+1.44%), and transports (+1.24%) the highlights. Small-cap stocks continued the post CPI climb, with the Russell 2000 advancing +0.16% even if they were up +1.75% early in the session. Likewise in Europe, the STOXX 600 (+0.42%) posted a 3rd consecutive advance, closing at its highest level in nearly two months as technology (+2.18%) and basic resources (+1.46%) led the way.

Presidents Biden and Xi met in California yesterday ahead of the Asia-Pacific Economic Cooperation summit. Following the meeting, President Biden noted that the talks were “some of the most constructive and productive discussions we’ve had .” The talks came with agreements on reopening military communications, and cracking down on fentanyl manufacturing in China. The two leaders and their advisors also discussed topics such as climate change, AI, and the upcoming Taiwanese elections. Ahead of the meeting, there was a joint statement from both governments detailing new climate change commitments including building carbon-capture technology in order to curtail pollution. The post-meeting news conferences and speeches are carrying on as we type and there's generally an air of cautious diplomatic progress. However, make no mistake that these tension will likely be hovering over us for many, many years.

Staying with the US, the Senate has joined the House in passing the bill to avert the shutdown this week. President Biden will now look to sign the bill into law. This short-term funding kicks the problem into January. So join us then for the latest in this drama.

Another important story yesterday came from Germany where the federal constitutional court said that €60bn from unspent pandemic funds could not be moved into an off-budget climate fund. In 2022, the government approved a plan to retroactively shift 2021 funds into the extra-budgetary "Climate and Transformation Funds" ("Klima- und Transformationsfonds"; KTF) in an attempt to prefinance future KTF spending. The ruling is something that could have important ramifications for fiscal policy over the coming years, and finance minister Christian Lindner acknowledged that the judgement “has potentially far-reaching implications for government practice and the budgetary policy”. The final parliamentary 2024 budget draft consultations will start today as planned. See more on the ruling and the implications from our German economists here.

Bucking the recent trend, Asian equity markets are lower this morning with Chinese equities leading losses after home prices fell at their fastest pace since 2015. The Hang Seng (-1.65%) is emerging as the biggest underperformer with the CSI (-0.96%) and the Shanghai Composite (-0.64%) also edging lower. Elsewhere, the Nikkei (-0.66%) and KOSPI (-0.10%) are also slightly lower. S&P 500 (-0.19%) and NASDAQ 100 (-0.29%) futures are also on the softer side.

Coming back to Japan, data showed that exports rose +1.6% on the year (v/s +1.0% expected), a second consecutive month of growth but decelerating from a +4.3% increase the previous month. Imports slipped -12.5% y/y in October (v/s -12.8% expected) as against a revised -16.6% decline previously, mainly due to lower demand for energy-related products like coal, crude oil, and LNG. Still, the trade balance swung back to a deficit of ¥662.5 billion in October.

Elsewhere, Australia’s October employment was strong. Data showed that net employment increased last month by 55,000 well above the modest 7,800 increase in September. Most of the gain was due to a 37,900 gain in part-time jobs while full-time employment rose 17,000. Meanwhile, the official unemployment rate edged higher to 3.7% last month as expected, up from 3.6%.

Lastly, the main other data release came from the US PPI yesterday, which surprised on the downside like the CPI. For instance, monthly headline PPI was at -0.5% (vs. +0.1% expected), and the measure excluding food, energy and trade was ‘only’ up +0.1% (vs. +0.2% expected). In turn, that took year-on-year headline PPI down to +1.3% (vs. +1.9% expected), which reversed a run of three consecutive increases in the year-on-year measure. Interestingly airfares that fell -0.9% in CPI were up +0.8% in the PPI. Healthcare was at 0.5% in the PPI and this feeds more into core PCE than the softer healthcare data in the CPI on Tuesday. So some food for thought on inflation after a big week.

To the day ahead now, and US data releases include industrial production for October, the NAHB’s housing market index for November, and the weekly initial jobless claims. Central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Centeno, Knot and De Cos, Fed Vice Chair for Supervision Barr, and the Fed’s Mester, Williams, Waller and Cook, and BoE Deputy Governor Ramsden. Lastly, today’s earnings releases include Walmart.

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