Futures Flat After OpenAI "Train Wreck" As Markets Brace For Nvidia Earnings

US stock futures erased earlier losses to trade flat as Microsoft gained 2% in premarket trading, sending it to a new all time high, after it said Sam Altman will lead the software developer’s new in-house artificial intelligence team. The OpenAI co-founder was ousted from his startup last week.

We remain committed to our partnership with OpenAI and have confidence in our product roadmap, our ability to continue to innovate with everything we announced at Microsoft Ignite, and in continuing to support our customers and partners. We look forward to getting to know Emmett…
— Satya Nadella (@satyanadella) November 20, 2023

As of 8:30am ET, S&P futures were flat at 4.525, following three weeks of gains that pushed the index nearly 10% higher and propelling it to an 11 week high. Treasuries dropped, pushing US 10-year yields up 3bps to 4.47%. The dollar extended a decline, with a gauge of greenback strength hitting its lowest level since August, amid speculation the Federal Reserve is nearing the end of its rate-hike cycle. Commodities are mixed: oil is higher; base metals are lower. OPEC+ members will meet to set policy on November 26 with RTRS sources reporting that OPEC+ is set to consider whether to make additional oil supply cut. Key catalysts this week include FOMC Minutes (Tue), NVDA’s earnings (Tue), Initial Jobless Claims (Wed), PMIs (Fri) and OPEC Meeting (Sun). We will have a shortened week due to Thanksgiving, and the key event is tomorrow's NVDA earnings. As DB's Jim Reid reminds us, "Nvidia's Q1 earnings in May was probably the event that catapulted AI into the stratosphere in terms of being an important macro topic so the pace of their success will be a key driver in how rapidly AI infiltrates our daily lives."

In premarket trading, Microsoft climbed as much as 2.7% after hiring OpenAI co-founders Sam Altman and Greg Brockman to lead its in-house artificial intelligence team. Here are some other notable premarket movers:

Arm Holdings climbed 0.7% as Wells Fargo initiates coverage of the chip designer with an overweight rating, saying that the company is one of the best-positioned within the S550 billion global semiconductor industry.
Boeing gained 1.7% as Deutsche Bank upgrades to buy on "simple” rationale that aircraft deliveries are beginning to accelerate.
Chegg shares dropped 3.5% after the edtech company was downgraded to underweight at Morgan Stanley, which sees weaker trends in October and greater competition from generative AI in the longer term.

Traders are currently pricing in about a 30% chance of a first Fed rate cut in March and are awaiting publication Tuesday week of minutes of the last Fed rates meeting for further insight into Powell's thinking.

"The dovish Fed narrative remains in place," said Win Thin, global head of currency strategy at Brown Brothers Harriman. "There is likely to be ongoing downward pressure on US yields and the dollar."

In the biggest political news over the weekend, Argentinian libertarian candidate Javier Milei (defeated Economy Minister Sergio Massa to win Sunday's presidential runoff. Argentina's bonds rallied, while a gauge of emerging-market currencies gained along with developing-nation stocks. Elsewhere in emerging markets, Zambia's eurobonds plunged after the country said it can't implement a restructuring pact with bondholders as not all creditors supported the agreement. Securities due 2027 fell more than 2 cents in the dollar.

European stocks reversed earlier gains, and traded at session lows, with the Stoxx 600 down 0.2% as a slew of negative corporate news weighed on shares. Bayer AG slumped by the most ever after the German pharmaceutical giant stopped a key drug trial and suffered a defeat in a trial related to its Roundup weed killer. American peer Bristol-Myers Squibb Co. dropped more than 4% in US premarket trading. Ashtead Group Plc plunged after the UK equipment-rental company cut its revenue forecasts. Julius Baer Group Ltd. fell as much as 12% after the Swiss bank warned of a profit decline amid rising bad-loan provisions. Here are the other notable premarket movers:

Diploma rises as much as 9.7%, the most since July. The British construction components firm reported “very solid” delivery and a margins beat, according to Morgan Stanley. Analysts see upgrades to consensus
Pepco jumps as much as 11% in Warsaw after its majority shareholder Ibex said it wouldn’t sell any stake at current stock price
Currys shares gain as much as 5.3%, reaching the highest intraday level since September 4, after RBC Capital Markets upgraded the stock to outperform from sector perform, noting that the sale of the Kotsovolos unit in Greece has made the electronics retailer “more investable”
Julius Baer shares fall as much as 12% after the Swiss bank’s 10-month results indicated a 10% downgrade to FY EPS estimates, according to Kepler Cheuvreux
Ipsen drops as much as 5.4% after Jefferies downgrades to hold, citing potential pipeline risks for the French drugmaker and a lack of key catalysts.
Aurubis falls as much as 3.5%, the biggest drop since Sept. 21, after the copper recycler had its stock downgraded, citing a lack of upside and “disappointing” smelter fees
Endesa shares decline as much as 3% in Madrid after the International Court of Arbitration of the International Chamber of Commerce has decided Endesa Generación must pay ~$570 million to liquefied natural gas producer as part of arbitration process
AMS-Osram falls as much as 11% after the chipmaker said it will issue ~724 million new bearer shares at CHF1.07 each, a price that Vontobel says is “clearly lower” than expected
Sirius Real Estate shares fall as much as 5% as the firm offers shares via Joh Berenberg Gossler & Co. KG, Peel Hunt, Panmure Gordon, PSG Capital

A rise in energy costs may cloud the outlook for inflation and interest rates in Europe. Natural gas prices jumped after a vessel seized in the Red Sea by Iran-backed Houthi rebels renewed concerns that the Israel-Hamas war could affect vital waterways for the fuel. Benchmark European gas futures rose as much as 6.9%. The increase was also driven by colder weather forecasts and higher crude oil prices ahead of an OPEC+ meeting later this week. ECB Governing Council member Pierre Wunsch said on Monday that the Central Bank may have to raise borrowing costs again if investor bets on monetary loosening undermine the institution’s policy stance. He was the first of a number of ECB officials set to speak Monday and later this week.

Earlier in the session, Asian stocks extended last week’s gain, led by a rebound in Hong Kong-listed equities after losses late last week. The MSCI Asia Pacific Index climbed as much as 0.6%, headed for its fifth gain in six sessions. Index heavyweights Tencent and Alibaba bounced back in Hong Kong after sliding in the wake of the latter’s results announcement Friday. More broadly, risk sentiment has improved with traders adding to bets the Federal Reserve is done with rate hikes.

Hang Seng and Shanghai Comp outperformed amid resilience in tech and with the property sector underpinned by support pledges, while China’s latest benchmark 1-year and 5-year Loan Prime Rates were unsurprisingly maintained.
Australia's ASX 200 finished marginally higher as strength in energy and financials was partly offset by losses in utilities and miners, while a quiet data calendar further added to the non-committal mood.
Japan's Nikkei 225 swung between gains and losses in which an early rally saw the index climb above 33,850 and print its highest level since 1990, before wiping out all its gains and more. The index has been boosted by recent yen weakness, solid company earnings, and corporate governance reforms.
Indian stocks dropped, weighed by India’s largest shadow lender Bajaj Finance, which was pressured by the central bank’s unsecured retail loan crackdown. The S&P BSE Sensex fell 0.2% to 65,655.15 in Mumbai, while the NSE Nifty 50 Index declined by a similar measure. Bajaj Finance Ltd. contributed the most to Sensex’s decline, decreasing 2.1%.

In rates, Treasuries rose, pushing US 10-year yields down 2bps to 4.45%. Italian bonds outperform in Europe after Moody’s revised the outlook on the country to stable from negative. Italian 10-year yields fall 3bps. Treasury auctions resume with $16b 20-year new issue; WI yield at ~4.83% is ~42bp richer than result of October sale. Dollar IG issuance slate empty so far; volume for the week expected to be lighter than the past two weeks with around $10 billion in new bond sales projected.

In FX, the dollar added to its recent decline, with the Bloomberg Dollar Spot Index falling 0.4% to its lowest level since August. The Japanese yen is the best performer among the G-10’s, rising 0.9% versus the greenback. Traders are currently pricing in about a 30% chance of the first Fed rate cut in March after Vice Chair for Supervision Michael Barr said Friday officials are likely at or near the end of their tightening campaign. One-month BBDXY riskies stand around 16 basis points, calls over puts. If July extreme valuations were taken out, bullish sentiment for the greenback hasn’t been this weak in three years. The yen strengthened 0.9% to 148.32 amid speculation that the Bank of Japan will have to tighten policy to fight inflation. The offshore yuan strengthened after the People's Bank of China boosted its daily reference rate for the currency to the strongest since August. The nation's commercial lenders on Monday kept their benchmark lending rates unchanged, in line with the central bank's decision this month to maintain policy rates in favor of other means to support stimulus spending.

Bitcoin is firmer on the session and extending further above the $37k mark, following Milei's victory in the Argentina presidential elections.

US economic data includes October Leading Index at 10am (est. -0.7%, prior -0.7%); ahead this week are existing home sales, durable goods orders, University of Michigan sentiment and S&P Global PMIs. In the holiday-shortened week, jobless claims has been brought forward to Wednesday due to the holiday, and this week's data corresponds to the survey week for payrolls so given this and the fact that it has been edging up (albeit slowly) in recent weeks makes it one of the key data points at the moment

Market Snapshot

S&P 500 futures little changed at 4,531.00
MXAP up 0.7% to 161.94
MXAPJ up 0.9% to 505.22
Nikkei down 0.6% to 33,388.03
Topix down 0.8% to 2,372.60
Hang Seng Index up 1.9% to 17,778.07
Shanghai Composite up 0.5% to 3,068.32
Sensex down 0.2% to 65,651.53
Australia S&P/ASX 200 up 0.1% to 7,058.42
Kospi up 0.9% to 2,491.20
STOXX Europe 600 little changed at 455.76
German 10Y yield little changed at 2.59%
Euro up 0.2% to $1.0939
Brent Futures up 0.8% to $81.24/bbl
Gold spot down 0.0% to $1,979.85
U.S. Dollar Index down 0.43% to 103.48

Top Overnight News

China’s share of the global economy is shrinking at the fastest pace since the Mao era, reaching a peak of 18.4% in 2021 before sliding to 17% this year. FT
TikTok is facing what it views as perhaps its biggest crisis yet, with the world’s most popular app facing an intense backlash over the perception it favors pro-Palestinian and, at times, antisemitic content. Citing anti-Israel posts that surfaced on TikTok since the Gaza conflict began and a decades-old Osama bin Laden letter that circulated this week, Washington lawmakers have renewed calls to ban the app in the U.S. WSJ
China is creating a list of 50 property developers eligible for a range of financial support as the gov’t continues to take steps to stabilize the industry. BBG
Italy secured a major win after Italy raised its outlook on the country to stable, removing the risk of a downgrade into junk territory. BBG
US, Israel, and Hamas are close to a deal that would see fighting halted for 5 days in exchange for the release of women and children being held hostage. WaPo
OpenAI tapped former Twitch CEO Emmett Shear to replace Sam Altman, defying calls from investors to reinstate him. Altman and OpenAI co-founder Greg Brockman will join Microsoft to lead its new in-house AI team, CEO Satya Nadella said. BBG
Biden’s approval rating sinks to 40%, the lowest level of his presidency, and he’s trailing Trump in a hypothetical general-election matchup. NBC News
Washington is confident Arab states won’t weaponize oil and it notes prices are near the lows despite two major wars taking place (in Ukraine and Gaza). FT
Citigroup plans to announce on Monday the first big round of lay-offs in a sweeping restructuring — the bank’s biggest revamp in nearly two decades — that will eventually result in thousands of positions being eliminated. FT

A More detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks were mostly positive albeit with gains capped amid the lack of fresh catalysts from over the weekend and as participants await this week’s key events including tomorrow's FOMC minutes release. ASX 200 finished marginally higher as strength in energy and financials was partly offset by losses in utilities and miners, while a quiet data calendar further added to the non-committal mood. Nikkei 225 swung between gains and losses in which an early rally saw the index climb above 33,850 and print its highest level since 1990, before wiping out all its gains and more. Hang Seng and Shanghai Comp outperformed amid resilience in tech and with the property sector underpinned by support pledges, while China’s latest benchmark 1-year and 5-year Loan Prime Rates were unsurprisingly maintained.

Top Asian News

PBoC 1-Year Loan Prime Rate (Nov) 3.45% vs. Exp. 3.45% (Prev. 3.45%); 5-Year Loan Prime Rate 4.20% vs. Exp. 4.20% (Prev. 4.20%)
China’s securities regulator will adopt different policies to address the risk of bond defaults by large real estate companies depending on their respective circumstances, according to Chinese financial media outlet Yicai.
Taiwan’s APEC envoy Chang said he had informal interactions with US President Biden, Vice President Harris and Secretary of State Blinken but didn’t have any interactions with Chinese President Xi.
China is reportedly drafting a "whitelist" of 50 developers for a financing boost, via Bloomberg; designed to guide institutions as they consider support for the industry.

European bourses in the green, Euro Stoxx 50 -0.1%, with action relatively contained overall in light macro newsflow after a slightly downbeat APAC handover. Sectors are mixed with Retail, Telecom & Utilities firmer given Cinco Dias reporting that Cellnex is looking into options for various units while Healthcare, alongside the DAX 40 -0.1%, is hampered by marked pressure in Bayer -20% after several negative updates. Stateside, futures are essentially flat going into a relatively light schedule expect for a 20yr auction before Tuesday's FOMC minutes and the Thanksgiving closures, ES +0.1%; NQ outperforms slightly as MSFT (+2.0%) extends in the pre-market. Microsoft (MSFT) CEO Nadella says former OpenAI executives Sam Altman and Greg Brockman are to join Microsoft to lead a new advanced AI research team.

Top European News

UK Chancellor Hunt said he will not conduct any tax cuts that would make inflation worse and that the only way to reduce personal taxes is to spend public money more efficiently, while he responded that everything is on the table regarding the Autumn Statement when asked about reports of inheritance tax cuts. Hunt also stated that the tax burden is too high which he wants to bring down, according to Reuters. It was separately reported that Hunt is ‘considering’ a cut to income tax and national insurance in the Autumn Statement but may delay a widely anticipated reduction in inheritance tax until the spring budget, according to the Independent.
UK PM Sunak says we believe in cutting taxes carefully and sustainably, approach starts with controlling inflation. Tax cuts don't automatically pay for themselves, Sunak says; can only cut taxes once inflation and debt is under control. To grow the economy, will need to take five long term decisions.
ECB's Wunch says bet on rate cuts risk prompting hike instead; markets are optimistic to rule out further hiking; rates should stay unchanged in December and January.
German government spokesperson says court ruling on climate fund means we're stepping in to new legal territory; all special funds are being reviewed now.
Hungarian PM Orban said Hungary needs to change the EU not leave it, while he also stated that they will need to correct the mistaken promise to start talks about Ukraine’s EU membership.
Fitch affirmed Spain on Friday at A-; Outlook Stable, while Moody’s raised Portugal’s rating by two notches from Baa2 to A3; Outlook Stable and affirmed Italy at Baa3; Outlook revised to Stable from Negative.
Javier Milei won Argentina's presidential election against Sergio Massa who conceded defeat.

Dollar continues to retreat with DXY losing sight of 104.00 before finding some support sub-103.50 within 103.97-46 range.
Yen and Yuan among main beneficiaries or architects of Buck depreciation as USD/JPY probes 148.50 from high just shy of 150.00 and USD/CNY, CNH top 7.1650 at best.
Kiwi back above 0.6000 vs Greenback ahead of NZ trade data and Aussie over 0.6550 awaiting RBA speeches.
Pound briefly back on 1.2500 handle and Euro reclaims 1.0900+ status
PBoC set USD/CNY mid-point at 7.1612 vs exp. 7.2320 (prev. 7.1728)

Fixed Income

Debt futures regain composure to varying degrees after soaking up more offers.
Gilts bounce firmly from 96.87 to 97.28, T-note tags along within a 108-16/25 range ahead of 20 year issuance and Bunds on coattails between 130.70-131.00 bounds.
BTPs outperform mostly above 114.00 after Moody's Italian outlook upgrade to stable from negative

Commodities

Crude benchmarks continue the rebound which began on Friday, where the contracts settled higher by circa. USD 3/bbl. Specifics have been light on Monday as participants digest Friday's/weekend OPEC+ reporting.
Currently, WTI trades above USD 77.00/bbl (vs low 75.14/bbl) while Brent is just below USD 82/bbl in a USD 79.58-81.75/bbl intraday range.
Energy Intel’s Bakr said she hasn’t heard of any ‘additional’ OPEC+ cuts being discussed at this time. On Friday, it was reported OPEC+ is to consider whether to deepen oil-output cuts at the next meeting on Nov 26th, according to Reuters OPEC+ sources. Additionally, on Friday, reports suggested Saudi Arabia is highly likely to extend its 1mln BPD cut at least until Spring, while an additional OPEC+ cut of up to 1mln BPD could be on the table, according to FT sources.
Russia’s Gazprom and Venezuela’s PDVSA are to discuss new gas projects in Venezuela, according to RIA.
Spot gold is a touch softer as yields remain higher and the DXY lifts from lows, but overall action is contained. Base metals are mostly firmer in a continuation of APAC action, where Shanghai Copper hit two-month highs. Elsewhere, Dalian iron ore extended amid Australian supply concerns around BHP train drivers taking industrial action.
First Quantum, Cobre Panama Operation: Minera Panama has further ramped down operation at Cobre Panama to one remaining ore processing train. Without shipments arriving at Punta Rincon, expects to run out of on-site power plant supplies from Nov. 20th.
Click here for more details.

Geopolitics

Israel, Hamas and the US are close to an agreement to free dozens of hostages in Gaza in exchange for a five-day pause in fighting and were reported to have reached a tentative deal, according to the Washington Post. However, the White House said there is no deal yet and they continue to work hard to get a deal between Israel and Hamas.
Israeli forces advanced in Gaza City as Israeli PM Netanyahu resisted calls for a ceasefire, according to FT. In relevant news, Israel’s ambassador to the US Herzog said Israel is hopeful a significant number of hostages could be freed in the coming days.
US President Biden said in an Op-Ed article that a revitalised Palestinian authority should ultimately govern Gaza and the West Bank, while he added that the international community must establish a reconstruction mechanism to sustainably meet Gaza’s long-term needs.
UN Secretary-General Guterres said he is deeply shocked that two UNRWA schools were struck in less than 24 hours in Gaza which killed and injured dozens of people. Guterres also said the civilian toll in Gaza is staggering and unacceptable, while he reiterated the call for an immediate humanitarian ceasefire.
EU’s foreign policy chief Borrell said at a joint press conference with Qatari PM Al-Thani that the UN Security Council resolution on humanitarian pauses in Gaza must be implemented. It was also reported that Qatar’s PM said challenges to the hostages deal are now very minor and that sticking points in negotiations are practical and logistical, while he is more confident now that a deal can be reached on hostages.
Iran’s Foreign Minister said resistance groups are cleverly adjusting pressure on Israel and its supporters and have an 'unactivated capacity' for pressure.
Iran's Supreme Leader Khamenei called on Muslim states to at least cut off political ties with Israel for a limited period of time, according to TASNIM.
Yemen’s Houthis said they will target all ships owned and operated by Israeli companies or carrying the Israeli flag, while the Houthis later announced that they seized an Israeli ship and took it to a Yemeni port.
Chinese Foreign Minister Wang Yi said the international community must act now and take effective measures to end the humanitarian disaster regarding the Gaza situation and that China fully supports the Riyadh summit call for a two-state solution. Saudi's Foreign Minister also commented that they call for an immediate ceasefire and humanitarian assistance, while he added the international community needs to shoulder the responsibility to stop Israel.
Turkish President Erdogan said Turkey will make efforts to rebuild damaged infrastructure, hospitals and schools in Gaza if a ceasefire is achieved, while he added that Turkey is making a call for nuclear weapons inspections in Israel so no doubt is left on the issue, according to Turkish media.
Armenia and Azerbaijan agreed on basic principles of a peace treaty, according to TASS citing Armenia's PM.

US Event Calendar

10:00: Oct. Leading Index, est. -0.7%, prior -0.7%

Central Bank Speakers

Fed’s Barkin Speaks on Fox Business

DB's Jim Reid concludes the overnight wrap

I can't believe its Thanksgiving week already. Next you'll be telling me Xmas is just around the corner. The holiday will mean a quiet second half of the week for markets but there is still a reasonable number of planned events throughout the week. Nvidia's earnings tomorrow will be fascinating, as will the saga at OpenAI where CEO, and Artificial Intelligence pioneer, Sam Altman was ousted on Friday night by the board but with Bloomberg suggesting there has been a subsequent movement from their investors to get him reinstated, including from Microsoft. The board have hired a new CEO overnight though. So a big week for AI. Remember that Nvidia's Q1 earnings in May was probably the event that catapulted AI into the stratosphere in terms of being an important macro topic so the pace of their success will be a key driver in how rapidly AI infiltrates our daily lives.

In the US this week, jobless claims has been brought forward to Wednesday due to the holiday, and this week's data corresponds to the survey week for payrolls so given this and the fact that it has been edging up (albeit slowly) in recent weeks makes it one of the key data points at the moment. If our economists' forecast of +236k is correct, then the 4-week moving average will be just under 10% above where it was for the October survey week. So while predicting payrolls is more difficult than guessing what the weather will be this time next week here in the UK, this will be an input into models.

Elsewhere in the US durable goods are also due on Wednesday with DB expecting core orders to fall slightly in the first month of Q4 after two strong months at the end of Q3. On the same day the final University of Michigan consumer sentiment survey will bring any revisions to what were high inflation expectations in the first read. 5-10yr expectations were at 12-year highs of 3.2%. There's usually a bit of a bias to downward revisions in the second read but we will see.

Before that, today sees the latest US leading indicator index which has been negative every month since January 2022. Tomorrow sees existing home sales alongside the last FOMC minutes. We will see if it was as dovish as the market interpreted at the time. Powell's subsequent speech was deemed to be a bit less dovish so maybe he was trying to slightly alter the market's interpretation of the meeting. With financial conditions being important to the Fed at the moment, and with them swinging about of late, the bias for the committee can change over time so the minutes will already be a bit out of date as financial conditions have loosened notably since partly due to the Fed's concerns about them. So all a bit circular. Staying on the theme the ECB account of their last meeting will be out on Thursday .

Widening out from the US, the global flash PMIs will be out on Thursday (Europe) and Friday (US and Japan). Germany has its PPI today and a breakdown of Q3 GDP and the latest Ifo survey on Friday. The Dutch have a General Election on Wednesday the same day as the UK autumn statement where there is some talk of a few selected tax cuts around 14 months on from the infamous mega-tax cutting budget of the Liz Truss regime. In Asia Japanese inflation on Thursday will be the key release. See the day-by-day calendar at the end for a full preview of the week.

This morning Asian equity markets have carried on the recent bullish global momentum. Across the region, the Hang Seng (+1.51%) is leading gains with the Shanghai Composite (+0.52%) and the CSI (+0.41%) also edging higher following a rebound in Property stocks after Chinese regulators indicated that they would provide more policy support to the beleaguered real estate sector to help stabilise economic growth. The KOSPI (+1.06%) is also trading in positive territory while the Nikkei (-0.53%) is bucking the trend after briefly touching a 33-year high earlier in the session. S&P 500 (-0.09%) and NASDAQ 100 (-0.26%) futures are lower and 10yr UST yields are around +1.5bps higher.

Coming back to China, the PBOC kept its loan prime rates (LPR) unchanged near record lows as expected. The central bank maintained 1-Yr LPR at 3.45% (the peg for most household and corporate loans) with the 5-Yr benchmark rate intact at 4.2% (the reference rate for most mortgages).

In energy markets, oil has extended its gains in Asia from Friday after a tough couple of weeks (+0.71%) and ahead of an OPEC+ meeting scheduled on November 26 where the oil cartel is set to consider whether to make additional oil supply cuts .

Recapping last week now and markets rallied thanks to a downside surprise in the US CPI release, which led to mounting speculation that the Fed and other central banks would soon be cutting rates. That was cemented by some other weaker data, which led investors to bring forward their expectations of future rate cuts. For instance, last week saw futures raise the chance of a cut by May from 21% to 77%, with a cut now fully priced in by June .

That said, this narrative did lose a bit of steam on Friday thanks to comments from the Fed’s Collins that “I wouldn’t take additional firming off the table”, and that they “need to really stay the course”. Separately, some US data releases were also better than expected, with US housing starts rising to an annualised rate of 1.372m in October (vs. 1.35m expected) .

That backdrop meant that sovereign bond yields rallied significantly over the week, although by Friday there was more of a stabilisation. That included yields on 10yr Treasuries, which ended the week -21.6bps lower (unch. Friday), whilst the 2yr yield saw its biggest weekly decline in two months with a -17.7bps move (+4.8bps Friday). Furthermore, 30yr yields were down for a 4th consecutive week, with a -17.3bps decline (-2.6bps Friday). But the prospect of rate cuts wasn’t so good news for the dollar, and the dollar index weakened -1.84% (-0.41% Friday) .

Over in Europe, markets also bought into dovish narrative, albeit to a lesser extent than in the US. That meant investors were pricing in a 32% chance of an ECB rate cut by March, down from 26% at the start of the week. And on Friday, the ECB’s Villeroy said that the decline in inflation “fully justifies the halting of the sequence of rate hikes”. Given that, we saw yields on 10yr bunds fall -12.9bps last week (-0.2bps Friday), whilst those on 10yr UK gilts were down -23.1bps (-4.6bps Friday) to their lowest level since May. After the US close on Friday, we also heard from Moody’s, who raised their outlook for Italy from “negative” to “stable”.

Equity markets shared in last week’s rally, with the S&P 500 posting a +2.24% advance over the week (+0.13% Friday), and reaching its highest closing level since September 1. That was mirrored by the NASDAQ, which rose +2.37% (+0.08% Friday), and the small-cap Russell 2000 surged by +5.42% (+1.35% Friday). Back in Europe, the STOXX 600 saw a +2.82% gain (+1.01% Friday), and the German DAX saw its strongest weekly performance since January as it rose +4.49% (+0.84% Friday).

Finally in commodities, energy prices fell back last week, with Brent crude posting a 4th consecutive decline. That took it down -1.01% to $80.61/bbl, albeit with some big swings over the week, including a -4.63% slump on Thursday that was followed by a +4.12% recovery on Friday. That also followed a Friday report from the FT that Saudi Arabia was prepared to extend its production cuts in 2024. Elsewhere, copper rallied in line with other risk assets, posting its best week since March thanks to a +4.22% rise (+0.97% Friday).

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