Macroeconomics: The Day Ahead for 21 November

While the data run is a good deal busier today, there is an avalanche of central bank speakers to accompany an expected 25 bps rate cut to 7.75% in South Africa, and no changes from 50.0% in Turkey and 27.25 in Egypt. Statistically, there are South Korean Trade, UK PSNB Budget, French Business Confidence and Norway’s Q3 GDP to digest, while ahead lie US Philly and KC Fed Manufacturing surveys, weekly jobless claims and Existing Home Sales. While yesterday’s Nvidia earnings will continue to reverberate, reports today from China’s Baidu and PDD, and in the US from Deere & Co and Gap will be watched closely. Disappointment about Nvidia’s still very positive outlook was primarily a case of overstretched valuations taking a rain check, with increasingly fickle risk appetite in the face of a sea of uncertainties behoving many fund managers to address some often serious imbalances in their portfolios, which in risk management terms are simply not justifiable other than for the most inveterate of gamblers. A busier day for govt bond sales sees multi-maturity sales in France and Spain, US 10-yr TIPS and 6-yr in Canada. Yesterday’s 5.4% y/y rebound in the ECB’s Negotiated Wages, paced by a very large 8.8% y/y jump in Germany, the largest in the past 30 years, will make for uncomfortable reading for the ECB council. But in truth, it highlights another reason why the German economy has derailed, i.e. surging labour costs that render its economy even more uncompetitive than it already was, and also presenting a big headwind to any recovery.

In terms of the overnight run of news outside of the Nvidia results, BoJ’s Ueda underlined once again that the JPY remains front and centre to the policy outlook, but this remains a double edged sword as I outlined earlier in the year in this Ghost in the Machine article: click to read. The wider than expected UK PSNB budget deficit at £17.4 Bln vs. expected £12.9 Bln, and implies an even thinner margin of error in terms of Chancellor Reeves’ fiscal headroom. Ahead of tomorrow’s flash PMIs, French Business confidence was decidedly mixed, with the welcome rebound in Manufacturing (97 vs. Oct 93), offset by the drop in Services to 99 (vs. 101), which brings to an end a run of steady increases since sliding to a cyclical low of 95 in July.

** U.S.A. – Nov Philly & KC Fed Manufacturing, Oct Existing Home Sales **

– The Philly and KC Fed Manufacturing surveys will be closely watched to see if they echo the huge jump in the often very erratic and highly volatile NY Fed equivalent, with the consensus looking for a modest setback for both: Philly Fed 8.0 vs. prior 10.3, KC Fed -5 vs. -4. Existing Home Sales are expected to rebound 2.9% m/m after dipping -1.0% m/m in September, largely predicated on a solid rise in September Pending Home Sales in the wake of the Fed’s 50 bps rate cut. Eminently mortgage rates have rebounded since then, per se any sharper than expected gains in today’s report are likely to prove to be short-lived.