Futures Rise, Oil Tumbles Ahead Of Pre-Holiday Data Deluge

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by Tyler Durden
Wednesday, Nov 22, 2023 - 01:20 PM

Futures reversed earlier losses and traded at session highs as bond yields slid to two-month lows and oil tumbled after Bloomberg reported that the OPEC+  meeting scheduled for this weekend could be delayed amid Saudi dissatisfaction with member production levels. As of 7:40am ET, S&P futures rose 0.24%, trading at 4,562 and Nasdaq futures gained 0.4% as Wall Street headed for one of the best November rallies on record. Nvidia pared a decline in pre-market trading after investors initially reacted coolly to its latest quarterly report; the stock traded in a 6% range last night when its Q4 guidance was in the middle of the whisper range. Microsoft gained about 0.7% as Sam Altman returned to OpenAI after days of drama. The decision to restore him to the world’s best-known artificial intelligence startup marks a victory for biggest backer Microsoft, which worked with fellow investors to reverse Altman’s firing. Treasury yields dipped to two-month lows at 4.37%, while the USD rebounded from its weakest level in almost three months; commodities are under pressure ex-metals; gold remained just over $2000 as bitcoin recovered some of its overnight losses that dragged it below 35,000 following news of the Binance/CZ fine and settlement. News of a temporary halt in fighting between Israel and Hamas failed to ignite broader risk-on sentiment, with investors instead looking to data including mortgage apps, jobless claims, durable- and capital-goods orders and consumer sentiment, for clues on the direction of monetary policy.  

In premarket trading, Nvidia shares gained 1% as the chipmaker reported third-quarter results that beat expectations and gave an outlook that was seen as strong but not stellar. The company, a major beneficiary of the AI trade, has climbed more than 240% this year as of its latest close. Analysts were positive on the results and forecast. Other MegaCaps are flat to up small. Farming equipment giant Deere reported its results and missed expectations, sending its shares lower. General Motors gained after the CEO of its troubled self-driving car unit resigned. Here are some other notable premarket movers:

  • Autodesk shares fall 5.8% as analysts tracking the software company flagged a weak FY25 revenue growth forecast. The guidance overshadowed an otherwise positive third-quarter result. Piper Sandler downgraded the stock based on the company’s tepid growth rate and tempered margin expectations.
  • HP Inc. shares fall 2.4% after the PC and printer company’s first-quarter forecast for adjusted earnings was weaker than expected at the midpoint, with analysts saying this reflected a tough macro backdrop and weakness in its commercial business. Some brokers, however, suggested it could mean a recovery is in the cards.
  • Microsoft shares rise 0.7% as OpenAI said it would bring back Sam Altman and overhaul its board to bring on new directors including Larry Summers. The stock is also outperforming other major US technology and Internet companies that are trading lower in premarket trading.
  • Virgin Galactic shares slide 6.6% after Morgan Stanley cut its recommendation on the stock to underweight from equal-weight, noting the rocket company has no planned revenue-generating flights from mid-2024 to 2026.
  • Urban Outfitters drops 7% after the clothing retailer reported third-quarter comparable sales for its namesake banner that missed estimates.
  • Guess slumps 15% after the clothing company reported net revenue for the third quarter that missed estimates.

Minutes of the Federal Reserve’s last rates meeting showed policymakers united around a strategy to “proceed carefully” on future interest-rate moves and base any further tightening on progress toward their inflation goal. Swap contracts linked to Fed meetings currently price in around a 25% probability of a first rate cut in March, slightly lower than before publication of the FOMC minutes.

“The fact that markets are considering the potential for rates to be lowered in the first quarter at all does indicate that it’s going to be pretty hard slating for the US dollar at this stage,” Sean Callow, senior currency strategist at Westpac Banking Corp, said on Bloomberg Television. As the Fed’s December meeting approaches, “markets would be looking for a change of language that really dials down the threat of further hikes,” he said.

European stocks also rose, with the Stoxx 600 rising up 0.4%, led by gains in the real estate, telecommunication and technology sectors. Real estate was Europe’s top-performing sector on Wednesday amid broad gains in the region, with bond yields mostly lower. The Stoxx 600 Real Estate Index rises 2% as of 12:50pm in London, with all its components in the green; subindex is trading near levels last seen in March. The technology sector also outperformed as accounting-software maker Sage Group surged after an earnings beat. Steelmaker Thyssenkrupp AG climbed after reporting fourth-quarter results. Kingfisher Plc dropped after the home-improvement retailer lowered profit guidance. Here are the biggest European movers:

  • Sage shares gain as much as 11% to a record high after the software company said organic sales growth in fiscal 2024 will be in-line with the previous year’s level of 10%, a target that analysts said was above estimates
  • Thyssenkrupp gains as much as 7.5%, the most since May 17, after reporting fourth-quarter results that analysts say were better-than-expected, with underlying earnings and cash flow beating expectations. Steel-making peers also edged higher
  • Severn Trent shares edge higher, after the British utility posted a revenue beat in the first half. However, gains remain capped as investors focus on the ongoing regulatory review into water companies’ spending plans
  • Hugo Boss rises as much as 4%, and is leading performer on the Stoxx 600 Consumer Products and Services index on Wednesday, after BofA and Deutsche Bank upgraded their ratings on the fashion retailer to buy
  • Fresenius Medical Care gains as much as 2.9% after the German dialysis provider said the resolution of a legal dispute with the US government will bring a €175 million windfall to fourth-quarter profits
  • Johnson Matthey shares jump as much as 5.2% in early trading. The British specialty chemicals firm’s results show its underlying outlook for FY24 improving, says Citi
  • Adevinta shares gain as much as 5.6% after a private equity consortium offered to buy the European online classifieds company in a deal valuing the company at ~€14 billion ($15 billion) including debt in one of the year’s biggest buyouts
  • Kingfisher shares drop as much as 7.2% after the home-improvement retailer reported third-quarter sales that missed estimates and lowered its full-year adjusted pretax profit guidance below expectations
  • Helvetia shares fall as much as 2.3%, most in a month after the Swiss insurer reported a higher-than-expected natural hazard claims burden in the third quarter
  • Britvic slips as much as 0.5% after the soft drinks producer’s full-year pre-tax profit missed consensus estimates. While analysts generally viewed the headline number as solid, Goodbody expects below-the-line items to weigh on earnings per share
  • Brunel International declines as much as 3.5% after Oddo downgrades the Dutch employment services company to neutral from outperform, writing that earnings visibility continues to be very limited
  • Victoria slumps as much as 24%, the most since Sep. 25, after first-half earnings from the beleagured British flooring firm revealed increasingly tough market conditions, which analysts say won’t improve in the near term

Earlier in the session, Asian stocks were mixed, pausing their three-day winning streak, as chip stocks dragged while Chinese tech shares advanced after earnings results. The MSCI Asia Pacific Index was little changed after seeing an early decline of as much as 0.3%. The biggest drags on the gauge were TSMC and Samsung, as semiconductor stocks dropped after Nvidia’s earnings beat estimates but fell short of lofty expectations. Chinese internet stocks such as Alibaba and Tencent advanced after Baidu rose following better-than-expected earnings. 

  • Benchmarks in mainland China and Hong Kong were lower, after the short-lived rally following a report on a new support measure for the troubled property.
  • Japan's Nikkei 225 was the outperformer and clawed back initial losses in an early turnaround despite the government cutting its view on the overall economy for the first time since January.
  • Australia's ASX 200 was rangebound as losses in tech and consumer sectors were counterbalanced by resilience in defensives, while Westpac Leading Index also showed a slight contraction.
  • Korea's KOSPI was pressured following the satellite launch by North Korea which plans to launch additional spy satellites.

In FX, the Bloomberg Dollar Spot Index rose as much as 0.3% after touching the lowest level since Aug. 31 on Tuesday.  The yen is the weakest of the G-10 currencies, falling 0.4% versus the greenback. Most major currencies traded in narrow ranges after minutes of the Federal Reserve’s latest meeting showed policymakers were united around a strategy to “proceed carefully” on future interest-rate moves. “With underlying inflation trending down and the labor market tentatively cooling, we judge the risk of another hike to be small,” Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia, wrote about the Fed policy. “With volatility low and the market pricing a ‘soft landing’ in the US, the US dollar can stay heavy this week”

In rates, Treasury futures near highs of the day with curve flatter as long-end yields are down ~4bp. 10-year TSY yields around 4.362% trailing bunds in the sector by ~1.5bp; long-end-led gains flatten 2s10s spread by 1.5bp on the day, 5s30s by ~1bp. The move is paced by bull-flattening in German bonds, where long-end yields are 4.5bp richer vs Tuesday’s close, outperforming on the curve after 15-year bond sale. Dollar IG issuance slate empty so far; corporate bond sales are expected to remain muted ahead of US Thanksgiving holiday.

In commodities, oil tumbled after Bloomberg reported the OPEC+ talks scheduled for this weekend could be delayed. Saudi Arabia is said to have expressed dissatisfaction with other members about their oil production levels. The worry is that Riyadh might reverse its unilateral 1 million barrel-a-day curb if its counterparts don’t contribute further to the supply reductions. WTI falls ~2.2% to trade near $76 and Brent is also down over 2%. Spot gold rises 0.1%.

Looking to the day ahead now, in terms of data releases we have the US October durable goods orders, initial jobless claims and Eurozone November consumer confidence. Earnings releases include Deere, and there is a general election in the Netherlands and the UK Chancellor Hunt delivers the Autumn Statement.

Market Snapshot

  • S&P 500 futures little changed at 4,552.25
  • MXAP down 0.4% to 161.76
  • MXAPJ down 0.4% to 505.41
  • Nikkei up 0.3% to 33,451.83
  • Topix up 0.4% to 2,378.19
  • Hang Seng Index little changed at 17,734.60
  • Shanghai Composite down 0.8% to 3,043.61
  • Sensex up 0.2% to 66,060.19
  • Australia S&P/ASX 200 little changed at 7,073.37
  • Kospi little changed at 2,511.70
  • STOXX Europe 600 up 0.3% to 457.24
  • German 10Y yield little changed at 2.59%
  • Euro down 0.1% to $1.0899
  • Brent Futures down 0.2% to $82.31/bbl
  • Gold spot up 0.2% to $2,001.79
  • U.S. Dollar Index up 0.20% to 103.77

Top Overnight News

  • OpenAI said Sam Altman will return as chief executive of the artificial-intelligence startup that he co-founded, ending a dramatic five-day standoff between him and the board that fired him. OpenAI said the parties were “collaborating to figure out the details.” The company announced the formation of a new initial board that won’t include three of the four board members involved in removing Altman. WSJ
  • Chinese gov’t economic advisers are recommending a 5% growth target for 2024, the same one as for 2023, a goal that would require additional stimulus. RTRS
  • Country Garden, Sino-Ocean and CIFI were added to China’s draft list of 50 developers eligible for a range of financing support, people familiar said. Regulators may finalize the roster within days. BBG
  • Israel and Hamas agreed to a deal that would halt fighting for at least four days and see 50 hostages released by the terror group while the Israeli gov’t hands over 150 Palestinian prisoners. NYT
  • The United States conducted a new round of airstrikes — the second in roughly a day — in Iraq early Wednesday, destroying two facilities used by Iranian proxies that had been targeting American and coalition troops, U.S. military officials said. NYT
  • OPEC+ may need to announce deeper production cuts this weekend to offset surprisingly strong supply growth from the US and elsewhere, Pierre Andurand said. The outcome of the meeting will probably be bullish as Saudi Arabia wants to see higher oil prices. BBG
  • US authorities thwarted a conspiracy to assassinate a Sikh separatist on American soil and issued a warning to India’s government over concerns it was involved in the plot, according to multiple people familiar with the case. FT
  • NVDA posted another monster beat/raise print. Stock bouncing around +1% in the premarket… feels just like the reaction last qtr where a huge beat/raise = muted reaction (stock was +10 bps last qtr, T+1) given how (over) analyzed these Nvidia prints become  (e.g. investors seemingly planned for every possible outcome). Positives .. #1 stand-out = upside on GMs (~75%+ in qtr and guide) … Jan qtr revs guided ~$20bn (up DDs q/q), despite China revs expected to “decline significantly” .. valuation support (just did $4.04 in EPS and guided Jan revs up 10% q/q) .. Total DC revs +41% q/q in F3Q with upbeat customer color (“Large language model startups, consumer internet companies and global cloud service providers were the first movers, and the next waves are starting to build”). GS GBM H/T Peter Callahan
  • DE (-7% in preopen trading) reported FQ4 upside, including EPS of 8.26 (vs. the Street 7.48) and revenue of $13.801B (vs. the Street $13.667B). For F24, the mid-point of the net income guidance is ~$8B, a fairly large shortfall compared to the print consensus forecast of ~$9.3B (~$8B represents a sizeable drop from the $10.1B just posted in F23). RTRS
  • Although AI continues to be a hot topic on earnings calls, the proportion of companies discussing AI fell from its high in 2Q, signaling a potential inflection in enthusiasm over the technology. Companies investing heavily in becoming leaders within the AI space discussed the spending implications of these investments, noting that they expect capex and R&D to increase. Our economists estimate that AI investment could grow rapidly in the next couple of years, approaching $100 billion in the US by 2025.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed following the weak handover from the US where sentiment was dampened amid soft data and pre-Thanksgiving positioning, while the latest FOMC minutes were uneventful and had little effect on price action. Furthermore, participants digested the latest geopolitical developments including North Korea’s satellite launch and the agreement between Israel and Hamas for a four-day pause of the fighting in Gaza and a hostages-prisoners swap. ASX 200 was rangebound as losses in tech and consumer sectors were counterbalanced by resilience in defensives, while Westpac Leading Index also showed a slight contraction. Nikkei 225 was the outperformer and clawed back initial losses in an early turnaround despite the government cutting its view on the overall economy for the first time since January. KOSPI was pressured following the satellite launch by North Korea which plans to launch additional spy satellites. Hang Seng and Shanghai Comp were cautious with price action rangebound amid a lack of fresh macro drivers from China although the Hong Kong benchmark was cushioned by strength in Baidu post-earnings.

Top Asian News

  • Chinese government advisers are to recommend a 4.5%-5.5% growth target for 2024, while they noted that maintaining China's growth pace next year requires more fiscal stimulus, according to sources via Reuters.
  • Japan cut its view on the overall economy for the first time since January and stated that the overall economy is recovering moderately but some areas recently stalled, while it cut its view on capital spending for the first time since December 2021 and stated the pace of pickup in capital spending is pausing.
  • Country Garden Holdings (2007 HK) has been placed on the draft list of firms to support by China, via Bloomberg.
  • RBA Governor Bullock says the remaining inflation challenge we are dealing with is increasingly homegrown and demand-driven; reiterates more substantial monetary policy tightening is the right response. prices are rising strongly for the majority of the goods and services we all consume. Liaison with firms indicates that domestic cost pressure are proving persistent; also hear that capacity utilisation is very high and economic demand for the year has been stronger than expected

European bourses are in the green, Euro Stoxx 50 +0.4%, in what has been a choppy but ultimately rangebound session ahead of key US data before Thanksgiving commences. Sectors are primarily firmer, with the exception of Banks and Energy as European yields slip and energy benchmarks slump. Stateside, futures are treading water with volumes thin ahead of US IJC which coincides with the Payroll survey period, ES +0.1%. Nvidia (NVDA) - Q3 adj. EPS 4.02 (exp. 3.37), Q3 revenue USD 18.12bln (exp. 16.18bln). The chipmaker settled 1.75% lower after hours after initially falling as much as 6.3%; its Q3 results topped expectations, though it warned China sales would decline in Q4; Bloomberg suggested that the results "failed to satisfy the loftier expectations of shareholders who have bet heavily on an artificial intelligence boom.". -0.4% in pre-market trade. Deere & Co (DE) Q3 2023 (USD): EPS 8.26 (exp. 7.47), Revenue USD 15.42bln (exp. 13.58bln). Full-year 2024 earnings forecast to be 7.75-8.25bln (exp. 9.33bln), as volumes return to mid-cyclelevels. . -4.4% in pre-market trade

Top European news

  • ECB FSR: shadow banks face the risk of receiving large margin calls or client redemptions they cannot meet because they do not have enough cash on hand, liquidity buffers at such intermediaries were "very low". Many bond funds do not have enough liquid assets to withstand 30 days of severe outflows. "Any sharp increase in sovereign bond yields or a spike in financial market volatility could expose those ICPFs which use interest rate derivatives to large margin calls,". ECB's de Guindos says they have not seen any extreme movements in bond spreads.
  • German government reportedly wants to postpone Thursday's budget meeting, according to Focus citing dpa; "Without a shortening of the deadline in the Federal Council, a decision on the 2024 budget would no longer be possible before the end of the year."
  • UK CBI Trends - Orders (Nov) -35.0 (Prev. -26.0)


  • Buck stops the rot in time for Thanksgiving as DXY bounces from 103.47 to 103.92 after holding just above 103.00 on Tuesday.
  • Yen retreats sharply amidst Dollar revival with USD/JPY probing 149.00 from just over 148.00 via a Fib and alongside decent expiry interest.
  • Aussie underpinned by more hawkish RBA rhetoric, as AUD/USD hovers around 0.6550 and AUD/NZD cross rebounds through 1.0850.
  • Pound maintains 1.2500+ status vs Greenback, but pensive pre-UK Autumn Statement.
  • Euro pivots 1.0900 against backdrop of expiries ranging from the round number to 1.0945
  • PBoC set USD/CNY mid-point at 7.1254 vs exp. 7.1468 (prev. 7.1406).

Fixed Income

  • Debt futures volatile before firm bounce led by EGBs.
  • Bunds breach prior session high between 131.55-130.88 bounds post-strong long dated German auctions and reports that Government wants to delay the 2024 budget meeting.
  • Gilts and T-notes tag along within 97.45-96.74 and 109-06/108-27 respective ranges awaiting UK Autumn Statement, US durable goods data and jobless claims for the week including November NFP.


  • WTI and Brent January futures are softer intraday but within recent ranges in a holiday-shortened week with price action largely moving in tandem with broader sentiment.
  • Benchmarks have been oscillating just above the USD 77.00/bbl (USD 76.88-77.97/bbl range) for WTI while its Brent counterpart sits just below USD 82/bbl (vs USD 81.58-82.65/bbl range)
  • Spot gold is a touch firmer on the session, as US yields slip slightly and market action remains tentative ahead of afternoon events and conscious of a possible geopolitical breakthrough.
  • Base metals are dented by the USD and risk sentiment alongside reporting around China's growth target for 2024, while support for Chinese real estate has kept iron ore afloat.
  • US Energy Inventory Data (bbls): Crude +9.1mln (exp. +1.2mln), Gasoline -1.8mln (exp. -0.2mln), Distillates -3.5mln (exp. -0.8mln), Cushing +0.6mln.
  • Russian Deputy PM Novak says the domestic market is fully provided with fuel, and remaining export restrictions on diesel will be lifted soon. Oil market is balanced; oil prices objectively reflect the current situation and they are on quite a good level. Declines to comment when questioned if there will be changes to OPEC+.


  • Israeli PM's office confirmed the government voted in favour of the proposed deal for the release of some hostages held in Gaza with 50 hostages, women and children to be released over four days during which there will be a pause in fighting.
  • Hamas confirmed an agreement with Israel for a four-day pause in Gaza hostilities and agreed to release around 50 women and children hostages from Gaza in exchange for Israel releasing 150 Palestinian women and children from Israeli jails. Hamas added the truce deal will allow hundreds of trucks of humanitarian, medical and fuel aid to enter all parts of Gaza and said Israel committed to not attack or arrest anyone in all parts of Gaza during the truce period.
  • US senior administration official said a rigorous inspection regime will ensure Hamas does not use the pause in fighting to get more weaponry, while the US hopes the pause will also be observed by Hezbollah and Israeli forces in northern Israel.
  • Senior Hamas figure Musa Abu Marzouq says the truce will begin tomorrow at 10:00 A.M (08:00GMT), according to Walla News' Elster.
  • US Central Command said the US carried out precision strikes against two facilities in Iraq in response to an attack on US troops.
  • UN Secretary-General strongly condemned North Korea's satellite launch and called for North Korea to fully comply with UN resolutions and return to dialogue, while the South Korean National Security Council condemned North Korea's launch as a violation of UN sanctions

US Event Calendar

  • 07:00: Nov. MBA Mortgage Applications 3.0%, prior 2.8%
  • 08:30: Nov. Initial Jobless Claims, est. 228,000, prior 231,000
    • Nov. Continuing Claims, est. 1.88m, prior 1.87m
  • 08:30: Oct. Durable Goods Orders, est. -3.2%, prior 4.6%
    • Oct. Durables Less Transportation, est. 0.1%, prior 0.4%
    • Oct. Cap Goods Orders Nondef Ex Air, est. 0.1%, prior 0.5%
    • Oct. Cap Goods Ship Nondef Ex Air, est. 0.1%, prior -0.1%
  • 10:00: Nov. U. of Mich. Sentiment, est. 61.0, prior 60.4
    • Nov. U. of Mich. Current Conditions, prior 65.7
    • Nov. U. of Mich. Expectations, prior 56.9
    • Nov. U. of Mich. 1 Yr Inflation, est. 4.4%, prior 4.4%
    • Nov. U. of Mich. 5-10 Yr Inflation, est. 3.1%, prior 3.2%

DB's Jim Reid concludes the overnight wrap

Although the overwhelming bulk of Q3 earnings season is now firmly in the rear view mirror with 95% of the S&P 500 and 92% of Stoxx 600 companies having reported, last night saw one last major hurrah with Nvidia's Q3 release. The semiconductor producer beat analysts' estimates on revenue ($18.1bn vs 16.1bn estimated), with stronger-than-expected revenues across data centers, gaming, professional visualization, while just missing in autos. However the stock fell in after-market trading (-1.5%) even as Q4 sales forecast were also above market expectations. Expectations may have simply been highly stretched for a stock that is up over 240% YTD. There hasn’t been much impact on US stock futures with the S&P 500 (-0.03%) and NASDAQ 100 (-0.14%) just a touch lower. Literally as we press send on this, Bloomberg has reported that a deal has been brokered for Sam Altman to return to OpenAI. We'll see the full story later.

The other major story overnight is that a four day pause in the Israeli/Hamas conflict has been agreed in return for the release of some Israel hostages and the same for some Palestinian prisoners. Markets haven't really reacted as it has moved on from the conflict in terms of it being a big market mover. The agreement also doesn't mean that the hostilities are over. It's an important development nonetheless.

Today will slow down very rapidly as the New York lunchtime approaches as planes, trains and automobiles are sequested for the annual US Thanksgiving getaway. We wish our American readers a sumptuous celebration. Ahead of that we have a squeezed data dump in the US. Initial jobless claims are interesting for two reasons. First this week corresponds to payroll survey week and secondly payrolls have been edging higher over the last month. Indeed the +236k our economists expect would be nearly +10% above the survey week from the previous payroll report. So one to watch. Durable goods will also be interesting with payback expected after a strong couple of months. Also in the US watch for the University of Michigan inflation expectations series within the consumer sentiment final read. The initial print for 5-10 year expectations were at 3.2% the highest since 2011. The final reading is often revised lower but if not this will be unwelcomed news for the Fed.

Talking of the Fed, the last FOMC minutes release last night were very similar to the Fed Chair’s remarks at the press conference. There was a unanimous decision to “proceed carefully” and that further tightening could be needed if inflation were to be persistent. Notably, the minutes showed that “ participants expected that the data arriving in coming months would help clarify the extent to which the disinflation process was continuing .” The FOMC saw aggregate demand moderating “in the face of tighter financial and credit conditions, and labor markets were reaching a better balance " On QT, some participants noted that the balance sheet runoff could continue even after fed fund policy eased. During a discussion on financial conditions the staff noted that valuations in equities, housing, and CRE were high. While the FOMC did make note of how much financial conditions were tightened by long-end yields rising sharply, they also acknowledged that those might not persist which could affect the path of monetary policy. The market did not have a large reaction to the minutes, having heard most of this from Fed speakers in the last 2 weeks.

In terms of markets it was a quiet day before Nvidia's release with the S&P 500 slipping -0.20% from its highest level since August. This halted a five-day rally for the index, as the information technology (-0.83%), real estate (-0.47%), and consumer discretionary (-0.38%) sectors underperformed. The tech-heavy NASDAQ fell back -0.59%, likewise breaking a streak of five days of consecutive gains. Ahead of Nvidia’s earnings release, the semiconductor and semiconductor equipment sector underperformed, down -1.44% following a poor Q1 outlook from Analog Devices (-1.40%). Nvidia itself also underperformed, falling -0.92%. The FANG+ index of megacap stocks fell back -0.41 %. The STOXX 600 slipped a more modest -0.09%.

The US Treasury curve steepened a touch, helped by slightly weak data that reinforced the more dovish Fed narrative at the moment. Existing home sales in October were below expectations, at 3.79m (vs 3.90m expected), down -4.1% month-on-month (vs -1.5% expected). The second tier Chicago Fed national activity index for October surprised to the downside at -0.49 (vs 0.00 expected), driven by a decline in production-related indicators. The auto strike could have had an impact. The Philadelphia Fed non-manufacturing activity did improve though, to -11.0 in November, from -20.3 last month .

Against this backdrop, the Fed funds rate priced in for the December 2024 meeting fell -2.6bps 4.41%, with 92.5bps of cuts now priced in for 2024. Futures have also now raised the chance of a March rate cut to 25.6%. 2yr yields fell -3.9bps, while 10yr yields fell -2.7bps, leading to a small +1.2bps steepening in the 2s10s curve to -48.3bps, up slightly from its lowest level since the end of September. Overnight 10yr yields are back up +2.3bps.

In Europe, ECB officials once again cautioned about the expectation of rate cuts. The ECB’s Simkus warned “expectations on ECB rate cuts are too optimistic”, and ECB President Lagarde also stated it was “not the time to start declaring victory on inflation”. But markets were unphased, as they instead added to expectations of ECB rate cuts, with an additional +3.0bps of rate cuts priced in for December 2024. This brings the total of expected cuts through 2024 to 98.5bps. 10yr German bund yields fell -4.5bps to their lowest level since the beginning of September. Yields on OATS also fell -4.5bps despite warnings from EU officials that France was at risk of breaching EU fiscal guidance. Across the channel, the BoE’s Bailey emphasised yesterday the market has put “too much weight on current data” as a “case [remains] for rate pause for extended period”. Despite the pushback, 10yr gilt yields fell -4.7bps on the day. Watch out for the UK Autumn Statement today which is basically a mini budget.

Briefly, over in Canada, core CPI came in below expectations at 3.5% (vs 3.6% expected). This further adds to the recent global dovish narrative. Headline inflation decelerated to 3.1% year-on-year as expected. There is now a near zero probability of an additional hike in this cycle priced into Canadian overnight index swaps.

In Asia this morning there is a little weakness led by mainland Chinese stocks as the CSI (-0.52%) and the Shanghai Composite (-0.29%) are both falling with tech and industrial companies among the laggards. Meanwhile, the Hang Seng (-0.13%) and the KOSPI (-0.32%) are also losing ground while the Nikkei (+0.32%) is bucking the trend so far.

Finally, to the day ahead now, in terms of data releases we have the US October durable goods orders, initial jobless claims and Eurozone November consumer confidence. Earnings releases include Deere, and there is a general election in the Netherlands and the UK Chancellor Hunt delivers the Autumn Statement.