Macroeconomics: The Day Ahead for 18 November

The week gets off to a relatively quiet start, with BoJ Ueda’s overnight speech that signalled a December rate hike remains very clearly on the table probably the most important news item overnight. There are also the unexpected weaknesses in both Japan’s Private Machinery Orders and Singapore Exports, along with a drop in UK Rightmove House Prices to digest, and the flow of news around the formation of the new Trump administration. Ahead lie the first rash of a busy week for central bank speakers, US NY Fed Services and NAHB surveys, along with Q3 GDP reports from Chile and Colombia. Friday’s US Retail Sales strength (above all the upward revisions to September) served to return UST yields to its upward trajectory, but the relentless upward shift in JGB yields, above all at the front end of the curve (see attached charts) requires as much if not more attention. At the end of the day, Japan remains the world’s largest creditor, and with so much uncertainty in economic and geopolitical terms, the temptation for Japan asset managers to repatriate some of their foreign holdings will only grow.

RECAP: The Week Ahead – Preview:

The new week’s statistical schedule is not overwhelming, but still has items of significance: inflation data in UK, Canada, Japan and final Eurozone CPI; G7 and India ‘flash‘ PMIs, a slew of US housing indicators regional Fed surveys, Eurozone ECB Q3 Negotiated Wages, UK Retail Sales, Japan Orders and Trades. Fed, ECB and BoE speakers are very plentiful, while China’s LPR rates are seen unchanged, with rates also seen on hold in Egypt, Indonesia and Turkey, but cut a further 25 bps in South Africa, while Brazil hosts a G20 summit, which seems unlikely to achieve nothing, with the COP29 conference in Azerbaijan concluding on Friday. Nvidia will be the standout in a relatively light run of corporate earnings, along with a run of major US retailers (Walmart, Lowe’s Target and TJX), as well as Deere & Co, while Baidu and PDD Holdings (Pinduoduo, Temu) are the retailer focal points in China. Nvidia is expected to post net income of $18.4 Bln, with revenue jumping over 80% to $33 Bln, and it is also expected to left its guidance, after getting over some production ‘snafus‘ earlier in the year related to its newest chip. Given that its more recent earnings ‘beats‘ have been dwindling in size, this report will have to beat estimates more than comfortably, especially with broader valuations looking rather lofty, and bond yields turning back higher after a brief respite. In the commodity sector, there are a few conferences in China, some USDA monthly Livestock reports, though the focus will likely remain on how much further oil prices may fall given a weak demand outlook, and plentiful supply.

U.S.A.: The run of housing sector data are expected to show some weakness, with the NAHB index seen slipping 1 pt to 42, in no small part due to the run-up in mortgage rates and continued affordability headwinds, with Housing Starts forecast to fall 1.3% m/m, mostly due to some disruption from Hurricane Milton, while Existing Home Sales are expected to dip -0.3% m/m. The Philly and KC Fed Manufacturing surveys will closely watched to see if they echo the huge jump in the often very erratic and highly volatile NY Fed equivalent. But the primary talking point will remain the appointments to the Trump 2.0 administration. Thus far, this has been notable for a) hitting the ground running in sharp contrast to the first Trump administration, b) the appointment of many loyal supporters to key positions, in some cases without much to suggest any obvious skills or experience to operate in their appointed functions, outside of Chris Wright as Energy Secretary, and c) the extent to which Elon Musk is exercising influence on Mr Trump. In terms of the latter, one observation would be that with SpaceX already the beneficiary of colossal US Defence dept contracts, and the nebulous operating parameters of the ‘Department for Government Efficiency’, whether other tech and defence behemoths may exercise some pressure for an anti-trust case to be brought against Mr Musk – just a speculative thought. Be that all as it may, this will be Trump’s final term, and with full control of Congress, he will be just as eager to hit the ground running in terms of policy initiatives and changes, knowing that any measures that require ratification by the legislature may not be enacted until late 2025, by which stage Congress members will already be focussing on the 2026 mid-term elections.

U.K. After dipping sharply to 1.7% y/y CPI is expected to see a sharp reversal higher (0.5% m/m 2.2% y/y) thanks to the 9.5% rise in the Household Energy price cap that took effect at the start of October. But the focus will be on both core and Services CPI, which are forecast to ease modestly (-0.1 ppt) to 3.1% and 4.8% y/y, still uncomfortably high, but gradually trending lower; much may depend on the recently very volatile hotel and airfares components but should ease further. Friday brings Retail Sales, which are expected to slip 0.3% m/m, both due to household caution ahead of the budget, and consumers likely waiting for Black Friday deals in November. GfK Consumer Confidence is also seen dipping for a third month to -22 from -21, with the generally negative media reaction to the Budget, and the prospect of interest falling less than had been previously anticipated suggesting some downside risks, despite rising real wage growth. PSNB, CBI Industrial Trends survey and Rightmove House Prices are also set for release this week.

Eurozone: October’s final CPI is likely to be confirmed at 2.0% y/y with the uptick from September almost wholly due to the rise in food prices, with core CPI unchanged at 2.7% y/y; the report should however show that ‘core core‘ CPI measures continued to edge lower. With many ECB speakers expressing confidence that wage pressures are continuing to ease, there may be less sensitivity to the ECB’s Q3 Negotiated Wages report, which should a much more modest drop than the slide from Q1’s 4.8% y/y to Q2’s 3.5%, particularly as forward-looking indicators for 2025 wages suggest further easing in pay settlements.

Canada: As with the US, a rise in gasoline prices is expected to account for much of the anticipated 0.3% m/m rise, which would see the y/y rate rebound to 1.9% from 1.6%, while core measures are expected to be broadly steady at 2.4% y/y. Having surprised to the downside in recent months, the headline upturn will not deter the BoC from further rate cuts, particularly if labour and growth indicators remain sluggish.

There are 14 S&P 500 companies reporting this week, with worldwide corporate earnings highlights as compiled by Bloomberg News likely to include: Airports of Thailand, Baidu, Deere & Co, Imperial Brands, Intuit, KE Holdings, Keysight Technologies, Kuaishou Technology, Lowe’s, Medtronic, MS&AD Insurance, NetApp, Nvidia, Palo Alto Networks, PDD Holdings, Ross Stores, Snowflake, Target, TJX, Tokio Marine, Trip Group, Walmart, Xiaomi.