Macroeconomics: The Day Ahead for 28 November

Despite the US Thanksgiving holiday, there is still a reasonably busy schedule of data and events for markets to work through. There are Bank of Korea’s unexpected 25 bps rate cut ot 3.0%, Australia’s Q3 CapEx and Spanish CPI to digest, as well as the deferral of the OPEC+ production strategy meeting from December to December 5, the latter implies both disagreements within the group, and the potential for one or other surprise on how its current production plans may be amended (bear in mind that the UAE is scheduled to have a higher than expected production quota as of January 2025, which was very hard won0. Ahead lie German CPI, Eurozone M3 and EC & Italian Confidence surveys, while Canada looks to its Q3 Current Account and CFIB Business Barometer, and tonight brings Tokyo CPI and the usual month end dump of activity indicators. ECB speakers are quite plentiful, while a light day for corporate earnings features Remy Cointreau, and Italy holds its regular end of month auction of 5, 9 & 11-yr BTPs.

** Germany, Spain – Nov HICP **

– German HICP will likely echo the already reported slightly smaller than expected m/m rise in Spanish HICP y/y, despite an expected drop -0.5% m/m, with unfavourable base effects in both household energy and road fuel costs likely to account for much of the upturn. This should prove to be a temporary uptick, and given clear downside risks to growth, suggests that this will not be a bar to the ECB cutting rates again in December, and all the more so as a number of ECB speakers have emphasized that they see downside risks to the inflation target. That said, Schnabel signalled considerable resistance from the hawks to cutting rates below neutral (which she identified as being somewhere between 2.0% and 3.0%), in part to conserve the ECB’s fire power. She was also keen to emphasize that she did not see any immediate recession risks for the Eurozone as whole, and also noted that lowering rates was not the way to deal with structural problems, and indeed emphasized that Germany had ample budgetary firepower to deal with those problems.

** Japan – Tokyo CPI, Industrial Production & Retail Sales **

– Tonight’s Tokyo CPI will go some way to deciding whether the BoJ opts for a December rate hike, or defers this to January. Headline is forecast rebound to 2.2% y/y from 1.8%, and core ex-Fresh Food to pick up to 2.0%, both paced by a cut in household energy subsidies, though the ex-Food & Energy measure is also expected to tick up 0.1 ppt to 1.9% y/y. Industrial Production should get a further strong boost from the recovery from August’s slide, as the impact of the earthquake and storms, and the temporary shuttering of auto output at Toyota due to a safety scandal unwinds, with a jump of 4.0% m/m wining the y/y back into positive territory at 1.7%. Record tourist arrivals in October should help Retail Sales to pick up 0.4% m/m, to push the y/y rate back up to 2.0%, though the BoJ will be focussing on Household Consumption, which remains sluggish, despite the rise in wages. As noted previously, the performance of the JPY remains central to the BoJ’s policy deliberations, and it will be very alert to upward pressure on goods prices from the JPY, and to Services prices rising on the back of companies passing through wage increases.