Macroeconomics: The Day Ahead for 26 November

As was amply demonstrated yesterday, political factors (Trump nomination of Bessent to Treasury Secretary, and then later renewed Trump tariff threats, talk that a truce between Israel and Hezbollah is apparently imminent, OPEC+ again opting of a virtual meeting this Sunday, when the original plan was to meet in person) can easily ride roughshod over a day’s statistical schedule, especially when the data is second division, as it is again today with the exception of US Consumer Confidence. There are Japan’s Services PPI, UK BRC Shop Prices and Singapore Industrial Production to digest, while ahead also lie Brazil’s IPCA-15 inflation, US House Prices, New Home Sales and a bevy of regional Fed surveys. The Fed publishes the November 6/7 FOMC minutes, with ECB’s Lane and Rehn, and BoE’s Pill the only scheduled central bank speakers. With the UK’s Labour government facing increasing and very stiff opposition to many of the Budget measures (above all the hike in minimum in combination with the hike in employers National Insurance contributions), and a good deal of market and general public scepticism on the measures to boost growth and investment, there will also be a lot of focus on what is in the government’s legislative proposals to lower its social benefits bill that are scheduled for announcement today, along with measures to boost the UK’s notoriously labour force participation rate. Otherwise, retailers (Best Buy, Kohl’s & Macy’s amongst others) will dominate the US corporate earnings run, which also sees results from Crowdstrike, Dell Technologies and HP. While Japan’s Services PPI was unchanged at 2.9% y/y, this was well above the expected drop to 2.5%, which had been anticipated due to benign base effects. It also implies upside risks for Friday’s Tokyo CPI, given the clear evidence of companies passing through increased costs for wages, and imports due to the weakness of the JPY. If Japan Inc does follow PM Ishiba’s exhortation for another round of large wage increases in 2025, then this will only add to the upside risks on BoJ rates.

** U.S.A. **

– Trump’s promise overnight to implement tariffs immediately on taking office in January were no great surprise, though the fact that he is taking initial aim at Mexico and Canada as much as China may have surprised some, though it is in line with his narrative during the election. Still it serves as a reminder that markets will have to reattune themselves to his frequently erratic approach to policymaking, and his likely hefty reliance on executive orders where possible to circumvent the legislature. The FOMC minutes should shed some further light on the rationale for the Fed’s shift to a more cautious rate cut trajectory, even if they will likely have skirted around any discussion about the incoming Trump 2.0 regime’s policy impacts on the economy, as Powell noted in his press conference, they will just wait and see what is actually implemented, and assess the implications for the policy outlook . Be that as it may, Consumer Confidence is expected to get a modest boost from the election to 111.8, having already jumped 9.5 pts to 108.7 in October, with particular focus on the Labour Differential, which rebounded sharply last month to 18.3 from 12.7. CS and FHFA House Price measures are seen up 0.3% m/m, but thanks to base effects are set to ease in y/y terms, while New Home Sales are seen falling -1.8% m/m as the rebound in mortgage rates took out the steam of the prior boost from the Fed’s September rate cut.