ON DECK FOR TUESDAY, NOVEMBER 12
KEY POINTS:
- Stocks and bonds fall, dollar firms on market unease toward Trumponomics 2.0
- Trump’s weekend cabinet picks were trade, border, China and Ukraine hawks
- UK job growth cools, wage growth picks up
- German ZEW confidence fell as US, German political risk increased
- RBI watchers can forget about near-term cuts…
- …after CPI exceeded already hot expectations
- Fed-speak, credit survey on tap
- Global Week Ahead reminder here…
- ...including a focus on the US election impact on Canada
All the trades that warn about being overly exuberant toward the Trump trade are signalling caution to start a shortened week. Light data doesn't offer much.
Stocks are broadly lower with Asian equities faring the worst overnight as European cash benchmarks and NA futures are gently lower. US Treasuries are underperforming with higher yields across the curve that are dragging Canadian yields up with them but to a smaller extent. Gilts are slightly cheaper while EGBs are outperforming post-data and BoE-speak. The dollar is broadly firmer.
Why? Stocks were richly valued ahead of the US election without much room for multiple expansion or higher margins. Trump's weekend appointments to his incoming administration were generally trade, border, China and Ukraine hawks. Debt supply, US inflation risk and the harmful effects of population and trade policies on US and global growth are weighed against modest proposed tax cuts that are likely to widen the deficit. There is legitimate reason to view Trumponomics very differently this time.
UK Jobs Cool, Wages Pick Up
Gilts are underperforming this morning on a combination of data and BoE-speak. Wage growth picked up to 4.3% y/y 3moMA from 3.9% previously because the m/m annualized growth rate increased to 5.1% which is the fastest since May (chart 1). That was led by a surge in public sector pay as private sector pay growth cooled a bit. BoE chief economist Pill noted that such gains were well above the inflation target. Job growth cooled somewhat with total employment down 59k m/m in September for the first drop since April (chart 2), and payrolls were down by 5k for the third straight decline and fourth in five months (chart 3). Job vacancies eased again to their lowest level since May 2021 (chart 4), driving a small further overall rebalancing of the job market (chart 5).
German Investor Confidence Cools as German, US Political Risk Heats Up
German ZEW investor expectations fell in both the current and expected conditions indices for November. Germany is being thrown into a period of more intense political uncertainty with an election called for February 23rd.
RBI Watchers Write Off Nearer-Term Cuts
RBI watchers took down a hotter than expected CPI print this morning. October CPI was up 6.2% y/y (5.5% prior, 5.9% consensus). A higher reading was expected given lagging effects of heavy rains on crop prices and particularly staples like onions and tomatoes. Food prices jumped by 10.9% y/y. That pretty much makes what was already an expected hold on December 6th a slam dunk.
Light N.A. Calendar
The US calendar contains Fed-speak (Waller 10amET, Kashkari 2pmET), Barkin 5:30pmET) and the Fed's lending survey (2pmET) that will inform the pace of credit tightening. NFIB small business confidence pick up a bit, but it’s an October reading and hence pre-election. Small businesses will be significantly impacted by labour shortages and tariffs going forward.
Canada is quiet to start the week other than yet more crippling strikes as workers at ports in Montreal and BC were locked out.
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