Global Bonds Plunge As "Trumpflation" Rally Returns, Dollar Jumps

After taking a one day breather, the "Trumpflation" Rally returned with a vengeance as global government bonds tumbled and the dollar rose on renewed speculation the economic outlook is strong enough to allow the Federal Reserve to hike in December (odds are now 94%). Asian shares rose, industrial metals and crude oil fell, European shares and US equity futures were pressured.

As reported last night, the latest bond selloff started in Japan where JGB futures slid after a BOJ buying operation was poorly received, and yields on both the 2Y and 5Y rose to or above the BOJ's -0.1% interest rate. 10 year Japanese yields have edged back above zero intra-day for the first time since September 21st and the market will at some stage focus on whether the BoJ will defend the zero level, especially if the global yield sell-off gathers pace over the coming weeks and months. It would be a strange decision to abandon the new policy so soon after announcing it so assuming global yields remain elevated they may be forced to buy more JGBs than they thought when the new scheme was announced.

As DB's Jim Reid observes, if the BoJ sticks to defending zero in a world where the US is likely to increase fiscal spending then you could make an argument that there is full blown helicopter money except that the BoJ is flying the copter over the US and may be about to become the new US government’s best friend. Without them, and without the ECB, it might be that Trump would be less able to spend freely on the fiscal side as yields would be less supported globally. Certainly one way to think of in our opinion.

The selling shifted over to Portuguese and Italian debt which led declines in Europe, while Treasuries also fell. Russia’s ruble lost the most among emerging-market currencies as the dollar rallied. Crude oil reversed an earlier gain with U.S. stockpiles forecast to increase and optimism waning that OPEC’s latest push for a production-cutting deal will pay off. Zinc fell from a six-year high as industrial metals sank. European shares advanced for a third day, helped by technology and telecommunications companies.rate.

As even Bloomberg notes, the "Trumpflation" move has "defied expectations" and forced Wall Street to make a complete U-turn on its forecasts. While analysts spent early November warning a Trump administration would hurt economic outlook and slow the pace of rate increases, his election has instead made Fed action a near certainty. The odds of an increase in interest rates by December have risen to about a 94 percent probability, the highest level this year, from 68 percent at the start of November, on speculation the Republican’s policies will boost inflation.

"The narrative on the dollar is strong," said Simon Smith, chief economist at FXPro. "A move higher in interest rates next month is now a near dead cert, with the implied path for rates next year also moving higher and providing further support for the dollar."

“The inflation story is still in play,” said Birgit Figge, a fixed-income strategist at DZ Bank AG in Frankfurt. “The market is expecting an interest-rate hike in December, and there is no fundamental reason for the Fed” to disappoint, she said.

St. Louis Fed President James Bullard said there’s a chance the U.S. economy could get a medium-term boost if Trump increases infrastructure spending and tax reforms.

The overnight session in stocks has been mostly subdued, with the Stoxx Europe 600 Index added 0.2 percent, paring gains of as much as 0.6 percent. Nokia Oyj rebounded from a three-day losing streak, pacing technology stocks higher. Bayer AG sank 1.6 percent, dragging chemical companies to the worst performance on the Stoxx 600, after issuing 4 billion euros ($4.3 billion) of convertible bonds. Among stocks moving on corporate news, Wirecard AG, a German payments provider, gained 6.1 percent as the top end of its 2017 profit forecast exceeded some analysts’ estimates. Hugo Boss AG slipped 6.9 percent after saying it will eliminate two brands and slow down expansion of its store network.

S&P 500 Index futures slipped 0.1 percent, after the equity gauge rose 0.8 percent Tuesday. As earnings season winds up, Lowe’s Cos. and Target Corp. will be in focus for indications of the health of the U.S. consumer. About 76 percent of S&P 500 members that have reported so far beat profit projections and 56 percent topped sales estimates.

The MSCI Asia Pacific Index added 0.3 percent. Japan’s Topix index rallied to a nine-month high, driven by gains in banking stocks as investors bet earnings at financial companies will benefit from the recent pickup in bond yields. The Topix Banks Index has jumped more than 20 percent in five days, the steepest surge since 2008. The MSCI Emerging Markets Index rose for a second day, adding 0.3 percent.

But the big move was again in bond yields and currencies, which resumed their levitation higher, further pressuring financial conditions, which as reported yesterday tightened to the highest level since Marc.

The yield on 10Y Treasuries rose six basis points to 2.28 percent as of 10:41 a.m. London time, after retreating from its highest level of the year in the last session. It’s up more than 40 basis points since Trump’s election, having surged amid growing speculation the Fed will boost interest rates next month and beyond. The bond-market rout pushed Bank of America Corp.’s Global Broad Market Index down 1.5 percent in November, heading for the biggest monthly decline since May 2013. The renewed selloff spread to Europe, with the yield on Portugal’s 10-year bonds adding 19 basis points to 3.68 percent. Italy’s 10-year yield increased nine basis points to 2.05 percent, while that on similar-maturity German bunds climbed three basis points to 0.34 percent. Japan’s 10-year government bonds fell for a fifth day, lifting their yield to 0.035 percent. Tuesday marked the end of almost eight weeks of negative rates, the first time the bond market has tested the Bank of Japan’s resolve to contain 10-year yields since it shifted its focus to controlling the benchmark yield around zero. The BOJ said after its September meeting that it could carry out unlimited bond-buying operations at a set rate, if needed, in order to control yield levels. After that meeting, the bond market rallied in search of a floor for the 10-year note yield, eventually settling just above the minus 0.1 percent policy rate.

the Bloomberg Dollar Spot Index reversed Tuesday's losses and rose 0.3%. It slipped on Tuesday after surging more than 3 percent in the four trading days following the Nov. 8 U.S. election. A bout of USD buying was observed just around the time of the European open, which send the USDJPY to new highs, rising just why of 110, down some 9% since last election's lows, and last trading at 109.70. Currencies of commodity-producing nations, including the Australian dollar and South African rand, were among the biggest losers. The MSCI Emerging Markets Currency Index declined 0.3 percent and Russia’s ruble dropped 1.9 percent, after jumping 2.9 percent on Tuesday, the most since February. Turkey’s lira, Poland’s zloty and Mexico’s peso all dropped at least 0.7 percent as higher U.S. yields boosted the dollar. The yuan fell to 6.8729 against the dollar, the weakest since December 2008.

Fed Presidents Neel Kashkari and Patrick Harker are both scheduled to speak Wednesday and may shed more light on the likely trajectory of borrowing costs in the world’s biggest economy. Fed Chair Janet Yellen is scheduled to testify to the Joint Economic Committee of Congress on Thursday.

Bulletin Market Summary from RanSquawk

  • European equities enter the North American crossover relatively mixed while fixed income markets have centred around JGB's which slipped overnight following a poor bank buying operation
  • FX trade continues the strong USD theme, led by USD/JPY pressing higher in the quest to test (through) 110.00.
  • Looking ahead, highlights include UK jobs data, US PPI, DoE's, Fed's Bullard, Harker, Kashkari and BoE's Cunliffe

Market Snapshot

  • S&P 500 futures down 0.1% to 2176
  • Stoxx 600 up less than 0.1% to 339
  • FTSE 100 down 0.3% to 6775
  • DAX down 0.4% to 10692
  • German 10Yr yield up 2bps to 0.33%
  • Italian 10Yr yield up 9bps to 2.05%
  • Spanish 10Yr yield up 8bps to 1.53%
  • S&P GSCI Index down 0.2% to 358.5
  • MSCI Asia Pacific up 0.4% to 135
  • Nikkei 225 up 1.1% to 17862
  • Hang Seng down 0.2% to 22281
  • Shanghai Composite down less than 0.1% to 3205
  • S&P/ASX 200 up less than 0.1% to 5328
  • US 10-yr yield up 4bps to 2.26%
  • Dollar Index up 0.09% to 100.32
  • WTI Crude futures down 0.7% to $45.50
  • Brent Futures down 0.4% to $46.78
  • Gold spot down 0.1% to $1,227
  • Silver spot down 0.2% to $17.03

Top Global News

  • Snapchat Said to File Confidentially for Public Offering: Company could sell shares as soon as first quarter of 2017
  • Fed’s Bullard Sees Medium-Term Boost From Trump Economic Policy: Rate increase in December still Bullard’s favored option
  • China’s Yuan Tumbles to Eight-Year Low as Banks Weaken Forecasts: Lenders cite risk of imminent Fed rate increase, Trump concern
  • Another China Red Flag Rises With Loans on Track to Top Deposits: Broad loan-to-deposit ratio at 80% for top 50 China banks, S&P says
  • Modi’s Money Crackdown Threatens India Corporate Profit Recovery: Earnings at consumer companies, developers seen impacted
  • Wesfarmers Said to Start $1.5 Billion Australian Coal Sale: Conglomerate is gauging interest in Curragh, Bengalla mines
  • Trump Takeover Won’t Speed Bank-Mortgage Talks, DOJ’s Baer Says: Deutsche Bank among lenders seeking to resolve mortgage cases
  • Ted Cruz Said to Be Considered by Trump for Attorney General: Cruz was at Trump Tower in New York on Tuesday
  • Microsoft Offers Concessions in EU Review of LinkedIn Bid: Microsoft had Nov. 15 deadline to submit remedies to regulator
  • Options Traders Say Red-Hot Small Cap Rally Has Further to Run: Hedging costs on Russell 2000 subdued despite recent gains
  • Singapore Bond ‘Open Bar’ Ending as Borrowing Costs Surge: Companies face S$28.2 billion of bond maturities in four years

* * *

Looking at regional markets, we start in Asia where markets traded mostly higher following a positive lead from the US where tech rebounded and the energy sector outperformed amid 5.8% gains in oil, while the Dow also posted a 7th consecutive increase, hitting a fresh record high for the 4th straight day. Nikkei 225 (+1.1%) was once again the outperformer in the region on the back of continued JPY weakness, while financials have extended on the moves seen post-US election. ASX 200 (+0.0%) closed flat as weakness in materials and mining names capped upside following a 7% drop in iron ore prices, while China traded mixed as the Hang Seng (+0.1%) conformed to the upbeat tone, while weakness was seen in the Shanghai Comp (-0.1%) amid a slump in iron ore prices and a weaker liquidity operation by the PBoC. 10yr JGBs traded down by as much as 50 ticks with demand dampened amid gains in riskier assets and after a poor BoJ "rinban" buying operation. This resulted in the 10yr yield rising to as much as 0.034% with the curve flatter amid underperformance in the short-end, while analyst at Informa also noted real-money accounts and Japanese banks selling in 5yr-10yr. PBoC injected CNY 110bIn 7-day reverse repos and CNY 30bIn in 14-day reverse repos and set the mid-point at 6.8592 (Prey. 6.8495).

Top Asian News

  • China’s Yuan Tumbles to Eight-Year Low as Banks Weaken Forecasts: Lenders cite risk of imminent Fed rate increase, Trump concern
  • Another China Red Flag Rises With Loans on Track to Top Deposits: Broad loan-to-deposit ratio at 80% for top 50 China banks, S&P says
  • Modi’s Money Crackdown Threatens India Corporate Profit Recovery: Earnings at consumer companies, developers seen impacted
  • Wesfarmers Said to Start $1.5 Billion Australian Coal Sale: Conglomerate is gauging interest in Curragh, Bengalla mines
  • Singapore Bond ‘Open Bar’ Ending as Borrowing Costs Surge: Companies face S$28.2 billion of bond maturities in four years

In Europe, equities (Euro Stoxx 50: -0.2%) traded mixed with notable underperformance in the health care sector on the back of Bayer (-5%) issuing EUR 4bIn worth of convertible bonds to help fund its proposed acquisition of Monsanto. Elsewhere, WTI and Brent crude futures have extended on overnight losses amid the fall out of the latest API crude report which showed inventories rose 3.65m1n barrels, subsequently weighing on energy names. Focus in fixed income markets have centred around JGB's which slipped overnight following a poor bank buying operation in 1-3yrs and as such this led to selling in the short-end and the belly of the curve. This led to spillover selling in bunds which slightly dipped below the 160.00 level, consequently this saw a pull back from yesterday's gains.

Top European News

  • Hugo Boss to Reduce Brands, Limit Store Expansion in Revamp: Clothesmaker trims luxury ambitions, plans online expansion
  • Delta Lloyd Sees $215 Million Annual Cost Savings From NN Tie-Up: Delta Lloydconfirmed a target for operational expenses of EU610m in 2016, lowering its target for 2018 by EU30m
  • Bouygues Shares Jump on Improved Telecom Profit Margin: CFO says construction may get North America infrastructrure boost
  • Iliad Sales Rise as Niel’s Phone Carrier Wins Mobile Clients: Promotions helped carrier gain 305,000 wireless subscribers
  • U.K. Labor Market Shows Signs of Cooling in Wake of Brexit Vote: Jobless rate fell to 4.8% from 4.9% q/q
  • London Land Values Fall Most in Five Years as Banks Lend Less: Shares in developers with central London home sites lag index

In currencies, the Bloomberg Dollar Spot Index reversed Tuesday's losses and rose 0.3%. It slipped on Tuesday after surging more than 3 percent in the four trading days following the Nov. 8 U.S. election. Currencies of commodity-producing nations, including the Australian dollar and South African rand, were among the biggest losers. The MSCI Emerging Markets Currency Index declined 0.3 percent and Russia’s ruble dropped 1.9 percent, after jumping 2.9 percent on Tuesday, the most since February. Turkey’s lira, Poland’s zloty and Mexico’s peso all dropped at least 0.7 percent as higher U.S. yields boosted the dollar. The yuan fell to 6.8729 against the dollar, the weakest since December 2008 and beyond a Bloomberg survey’s year-end median estimate of 6.8. Standard Chartered Plc on Wednesday joined at least four other banks in lowering its forecasts for the yuan, predicting a year-end level of 6.9, compared with 6.75 earlier.

In commodities, crude oil fell 0.9 percent to $45.42 a barrel in New York, after earlier rising as much as 0.8 percent. Oil retreated for the past three weeks amid skepticism about the ability of OPEC to implement a deal at its Nov. 30 meeting. The group is seeking to trim output for the first time in eight years as Iran boosts production and Iraq seeks an exemption because of war with Islamic militants. Prices will probably remain around current levels if OPEC fails to cut, according to BP Plc Chief Executive Officer Bob Dudley. U.S. crude stockpiles expanded by 3.65 million barrels last week, the industry-funded American Petroleum Institute was said to report Tuesday. Government data Wednesday is forecast to show supplies rose by 1 million barrels. Copper and aluminum declined in London, extending their retreats from one-year highs reached last week, and zinc retreated from its highest close since 2010. Metals rallied last week on a combination of increased speculative interest in China and optimism Trump’s pledge to spend as much as $1 trillion on infrastructure will boost demand. The 14-day relative strength index for the London Metal Exchange Index climbed as high as 87 last week, well above the 70 threshold that signals to some traders prices may have risen too far, too fast. “Investors took the opportunity to lock in gains after some big moves over the past week,” ANZ Bank said in a note on Wednesday. “Skepticism grew about the impact that Trump’s infrastructure spending program would have on demand.”

Looking at US events today, it’s another busy day: we kick off with the October PPI print where expectations are for a +0.3% mom rise in the headline but a slightly lower +0.2% mom print for the core, before we then get last month’s industrial and manufacturing production readings, both of which are expected to have risen modestly, along with the capacity utilization reading. Later on we’ll then get the NAHB housing market index for this month. Away from the data we’ve got Kashkari (7.45am) and Harker (5.30pm) all on the cards for today.

US Event Calendar

  • 7am: MBA Mortgage Applications, Nov. 11 (prior -1.2%)
  • 7:45am: Fed’s Kashkari speaks in New York
  • 8:30am: PPI Final Demand m/m, Oct., est. 0.3% (prior 0.3%); PPI Ex-Food and Energy m/m, Oct., est. 0.2% (prior 0.2%)
  • 9:15am: Industrial Production m/m, Oct., est. 0.2% (prior 0.1%)
    • Capacity Utilization, Oct., est. 75.5% (prior 75.4%)
    • Manufacturing (SIC) Production, Oct., est. 0.3% (prior 0.2%)
  • 10am: NAHB Housing Market Index, Nov., est., 63 (prior 63)
  • 10:30am: DOE Energy Inventories
  • 4pm: Total Net TIC Flows, Sept. (prior $73.8b)
  • 5:30pm: Fed’s Harker speaks in Philadelphia

* * *

DB's Jim Reid concludes the overnight wrap as usual

Have been reading a steady stream of commentators speculate in recent days that there could be a global regime shift following Trump’s victory last week. This is something we discussed as our base case back in early September in our latest long-term study "An Ever Changing World". Back then we suggested that a 35-year super cycle of politics, policy, globalisation and ever lower inflation and yields were about to reverse and that 2016 would be seen as an inflection point in years to come. At the time the biggest push back was on inflation and yields with most thinking that they would remain low for many years to come. Whilst we think nominal yields will eventually be capped by central banks at relatively low levels to pay for higher fiscal spending in the years ahead, negative real returns in government bonds should be a regular feature going forward.

Staying with yields, although we saw a reversal in the four-day bond sell-off yesterday (more below) there are some interesting dynamics emerging post the sell-off. One such theme is that with 10 year Japanese yields briefly edging back above zero intra-day yesterday and again this morning (currently 0.020%) for the first time since September 21st the market will at some stage focus on whether the BoJ will defend the zero level, especially if the global yield sell-off gathers pace over the coming weeks and months. It would be a strange decision to abandon the new policy so soon after announcing it so assuming global yields remain elevated they may be forced to buy more JGBs than they thought when the new scheme was announced.

Where this gets more interesting though is what it means internationally. If the BoJ sticks to defending zero in a world where the US is likely to increase fiscal spending then you could make an argument that there is full blown helicopter money except that the BoJ is flying the copter over the US and may be about to become the new US government’s best friend. Without them, and without the ECB, it might be that Trump would be less able to spend freely on the fiscal side as yields would be less supported globally. Certainly one way to think of in our opinion.

Back to those moves for bonds yesterday. Indeed it was the countries that had been most beaten up in the prior four days which saw the biggest reversals yesterday. In Europe that was the case for the periphery where 10y BTP’s rallied back -11.6bps, compared to Bunds which were down just -1.1bps. In the EM space similar tenor hard currency bonds for Mexico (-18.4bps), Brazil (-26.3bps) and Argentina (-18.8bps) were mopped up while across the Treasury curve the peak low in yield for the benchmark 10y actually came during the Asia session yesterday (around 2.180%) before yields finished at 2.220% last night and which is where they hover this morning too, albeit still -4.3bps lower from Monday’s close. Some better than expected US retail sales data – which was good enough to see the Atlanta Fed lift their Q4 GDP forecast to 3.3% from 3.1% - seemingly shut the door on yields drifting much lower. More on the data later.

In fact it was a day of reversals across most markets yesterday. With the US Dollar rally taking a breather the outperformers in FX included the Russian Ruble (+2.93%), Mexican Peso (+2.10%), South African Rand (+1.83%) and Canadian Dollar (+0.81%). WTI Oil surged +5.75% and back above $45/bbl for its best-one day gain since April 8th as a fresh set of headlines suggested that OPEC nations were making a final diplomatic push towards sealing an output cut deal. Gold (+0.60%) also rose for the first time since Wednesday while US HY spreads tightened 21bps and are pretty much back to where they were last Tuesday again. Meanwhile equity markets continue to trudge along resiliently. The Stoxx 600 finished up +0.27% while across the pond the Dow (+0.29%) marked a fourth consecutive record high and the S&P 500 finished +0.75% despite Banks finally pausing for breath and being little changed. Instead it was the turn of energy and telecoms stocks to lead the move higher.

This morning in Asia most equity markets are generally taking their cue from the gains on Wall Street last night. The Nikkei (+1.21%), Hang Seng (+0.61%) and Kospi (+0.75%) are higher while bourses in China and Australia are little changed. The latter has seen the mining sector take a bit of a hammering this morning after iron ore followed a near -3% decline on Monday with another -7% decline yesterday. Meanwhile, aside from the move higher in yield for JGB’s, most major bond markets are a little firmer this morning while Oil is little changed following the big rally yesterday.

Moving on. So with the US signaling a significant rotation towards fiscal policy, there is a chance for a new trend to express itself in the UK Autumn Statement (a mid-year Budget) on 23 November. Overnight our economists published a preview. The Chancellor, Philip Hammond, has reduced expectations for the volume of his fiscal ‘reset’. Resources are not unlimited. Even with a modest relaxation, our economists expect a GBP30bn increase in Public Sector Net Borrowing (PSNB) on average over the 5-year planning period given the general deterioration in public finances (GBP10bn in 2017/18). They also expect Hammond to say there is some “fiscal space” in reserve if needed. There may be some space relative to the UK’s low Gross Financing Needs, but the more Hammond uses this fiscal space, the steeper the debt trajectory. The more credible the fiscal down-payment, the easier it will be to convince the markets of sustainability if the policy needs to be scaled up later. Credibility is a function of how well the policy targets the problems and the balance Hammond’s new fiscal rules achieve between flexibility and commitment. The Chancellor’s ability to target spending at boosting potential GDP growth (e.g. infrastructure spending) and protect it in weaker-than-expected economic scenarios will determine the success and sustainability of the Autumn Statement.

Staying with the UK, the October consumer inflation data out yesterday came in a touch on the softer side compared to what most in the market expected. Headline CPI printed at +0.1% mom (vs. +0.3% expected) which had the effect of lowering the YoY rate to +0.9% from +1.0% in September. The core also dropped to +1.2% yoy from +1.5%. Headline RPI also missed (0.0% mom vs. +0.2% expected) although PPI output prices (where Sterling depreciation had a clearer impact) did rise a little bit more than expected (+0.6% mom vs. +0.4% expected) last month. BoE Governor Carney said following the data not to ‘take a steer from the October numbers’ and that instead the consequence of the move in the exchange rate means inflation will go up and that ‘we do want it back towards 2%’ and that ‘we’re willing to tolerate an overshoot for broader reasons’.

Yesterday was actually a fairly busy data for newsflow in the UK. There was some early focus on an apparent leaked memo by Deloitte which was picked up by the FT (but later downplayed) suggesting that the UK government has no overall Brexit plan and that given the complexity facing the process of leaving, may need an additional 30,000 civil servants to deal with it. Later on the BBC then reported that the government was looking at drawing up a very narrow bill after the Supreme Court decision to trigger Article 50 which would limit parliament’s ability to attach conditions to their negotiating position and so begin the Brexit process, allowing PM May to meet her March deadline. Finally late last night Sky News was then out with headlines suggesting that Brexit could be delayed for ‘as long as two years’ with a Supreme Court Judge suggesting that “comprehensive” legislation would be required for triggering Article 50. The key takeaway from the story was the suggestion that the Supreme Court ‘could adjudicate not just the validity of the Government’s appeal against the ruling, but also the precise remedy the Government must offer to the claimants if it loses its appeal’. Needless to say, Sterling had a choppy session yesterday but it finished a touch lower (-0.26%) at $1.2457 and is hovering around those levels this morning.

Over in the US yesterday it was that aforementioned retail sales data which stood out. Headline sales rose a better than expected +0.8% mom in October (vs. +0.6% expected) while the September data was also revised up to +1.0% from +0.6%. Both the ex-auto (+0.8% mom vs. +0.5% expected) and ex auto and gas (+0.6% mom vs. +0.3% expected) prints surprised to the upside while the GDP sensitive control group component rose a bumper +0.8% mom too (vs. +0.4% expected). Indeed much of the commentary was focused on the impressive breadth in the growth of sales last month.

Elsewhere, the NY Fed’s manufacturing survey for November was also better than the market pegged after rising 8.3pts to +1.5 (vs. -2.5 expected) and the highest level since June. The remaining data was largely second tier with business inventories up +0.1% mom in September and the import price index rising +0.5% mom in October. Along with those retail sales numbers, the Fedspeak did little to dampen a now well priced in Fed rate hike next month. The usually dovish Fed Governor Tarullo said that ‘the discussion of when is the appropriate moment for raising rates in order to prevent the economy from overheating too much is now, from my point of view, more on the table than it may have been before’. The Boston Fed’s Rosengren said prior to this that ‘I felt that the changes in the FOMC statement were well aligned with the notion of a high likelihood of tightening in December’ and ‘as a result, I did not dissent’. The market implied December odds for a Fed hike now sit at 94% compared to 84% pre-election.

In terms of the other interesting newsflow yesterday, there was some focus on the conflicting reports concerning German Chancellor Merkel and whether or not she had committed to a fourth term as Chancellor at the elections next year. Initially CNN ran a story suggesting that she would run for Chancellor, quoting one of her CDU party lawmakers. Following that however we heard from one of Merkel’s spokesman who denied Merkel had come to such a decision and instead said that Merkel would comment ‘at the appropriate time’. That didn’t come as a huge surprise as our Economists weren’t expecting to hear anything until perhaps the CDU party conference early next month.

Meanwhile in Italy another referendum poll was released yesterday (Tecne institute poll) and it showed that 53.5% of Italians would reject the constitutional referendum compared to 46.5% who would vote Yes. That poll was conducted post the US Election on November 12th and shows that the proportion of those who would reject is up 0.5% compared to the previous poll run by the same pollsters on November 8th (and pre election).

Wrapping up the remaining economic data yesterday, there were no surprises in the preliminary Q3 GDP print for the Euro area which came in at +0.3% qoq as expected and +1.6% yoy. There was some disappointment in Germany however where Q3 GDP surprised to the downside (+0.2% qoq vs. +0.3% expected) which has had the effect of nudging annual growth down to +1.7% yoy from +1.8%. Meanwhile the November ZEW survey for Germany was a bit more mixed however. While the current situations index was down a modest 0.7pts to 58.8, the expectations component was up a bumper 7.6pts to 13.8 and the highest since June.

Looking at today’s calendar, this morning we’re kicking off in the UK where we’ll get the September and October employment data including the ILO unemployment rate, average weekly earnings and claimant count print. This afternoon in the US it’s another reasonably busy diary. We kick off with the October PPI print where expectations are for a +0.3% mom rise in the headline but a slightly lower +0.2% mom print for the core, before we then get last month’s industrial and manufacturing production readings, both of which are expected to have risen modestly, along with the capacity utilization reading. Later on we’ll then get the NAHB housing market index for this month. Away from the data we’ve got the Fed’s Bullard (8.05am GMT), Kashkari (12.45pm GMT) and Harker (10.30pm GMT) all on the cards for today. The ECB’s Lautenschlaeger is also due to make an appearance this morning. The French National Front leader, Marine Le Pen, is also due to inaugurate her presidential-election campaign headquarters today which could be worth keeping an eye on.

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