Authored by Simon White, Bloomberg macro strategist,

The clamor for a US recession has grown louder in recent weeks, but forward-looking data shows the risk of one is easing not rising.

Despite the abrupt turn in the mood music in recent weeks it is looking increasingly likely the official arbiter of US recessions, the National Bureau of Economic Research, won’t call one, leaving stocks priced for too negative an outcome.

Warning sounds about a US recession have been growing louder. But that has been fueled by principally lagging economic data telling us where the economy’s been, not where it’s going next. Leading data is inflecting higher, suggesting the US may skirt a NBER-recession for most of next year.

Academic disputes are said to matter so much as they mean so little. The same can be said for recession prediction — after all, it’s what the market does that ultimately counts for investors. Nonetheless, the recent flurry of recession chatter deserves a reply, as a close look at the data shows that a slump in the medium term is no longer the base case.

I come at this as a soft-landing skeptic. Multiple reliable data points had been pointing toward a recession, but there is now enough contrary data to sow sufficient doubt.

Before going any further we have to set the terms of reference. It can be argued the US has experienced or is already in a recession, for instance by looking at GDI, manufacturing, goods GDP, or earnings. But with no hard-and-fast definition of an economic contraction (the technical definition of two-consecutive quarters of negative growth is too simplistic), having a referee in the NBER is the best option.

The downside is the NBER doesn’t announce recessions until after they have started, and thus is impractical for investors in real time. The utility instead comes from noting that the times the NBER deems to be recessions are when stocks have experienced their worst downturns — thus trying to figure out ahead of the NBER when there will be a contraction can save investors from considerable losses.

Since March this year, the S&P has been trading as if an NBER-recession will be avoided. Lately stocks have sold off, but they are still a long way above the median S&P in bear markets that had a recession (the blue line in the chart below). That means there is still sizable downside risk today if there is a downturn; but equivalently there is the risk from missed opportunity as stocks could eclipse their recent highs, or more, if a slump is avoided.

NBER recession dating is not an exact science. As the bureau itself puts it, “there are no fixed rules or thresholds that trigger a determination of decline.” But the research body requires a recession be durable, diffuse and deep. It also gives four of the key variables it uses as recession determinants:

• real personal consumption expenditure (PCE)

• payrolls

• industrial production

• real personal income net of transfer payments

Let’s start there. In the chart below we can see the four series over the last 50+ years. All of them contracted on an annual basis at some point during each NBER recession since 1970, apart from the one in 2001, where real PCE didn’t contract (recessions are vertical gray bars in the chart below).

Zooming in to the present in the next chart, we can see that none of the four indicators are currently contracting. Industrial production is flat-lining around zero, payrolls growth is turning lower from a high level, while real PCE and real personal income are positive and have been rising.

Not only is the NBER very unlikely to call a recession based on the current state of play, leading data shows that is unlikely to change in the next 6-9 months.

All four indicators are coincident-to-lagging, and most of them are released with a delay.

That’s why we must turn to leading data series to pre-empt the NBER. It is increasingly pointing in the direction that the current slowdown won’t last quite long enough (have the duration) or fall hard enough (have the depth) to trigger an NBER recession.

First, there is the recent upturn in the manufacturing ISM, which anticipates that industrial production should soon recover. October’s ISM disappointed to the downside, and if sustained this would cause some concern. But leading data for the ISM, such as the rising new orders-to-inventory ratio and the steepening in the global yield curve (shown below), intimate the ISM has bottomed and should continue its rise.

Second, there is the strong upturn in the US Leading Indicator (composed of leading data series such as building permits), which points to a continued rise in real retail-sales growth, and thus real PCE.

Third, real wage growth has been growing positively, keeping real income less transfer payments supported. However, of the four indicators, real income faces the most downside risk. Leading indicators for wages are rolling over, pointing to lower wage growth next year.

Finally, an inflection lower in the annual growth of unemployment claims points to eventual support for payrolls growth. WARN data (which leads claims) is also now flat again, indicating any claims growth should be contained. The jobs market should continue to slow, but leading data is showing the slowdown may not be of sufficient depth for the NBER to deem it recession worthy.

None of the indicators are screaming recession. The NBER has stated it gives more weight to real income growth and payrolls in its assessment, but even if these two end up contracting, the data is showing that the other series do not look like following them down soon. Remember, the bureau has never called a recession in the last 50 years when fewer than three of the four indicators have been contracting, and then only once.

Instead, the biggest risk to a soft landing come from two other factors: geopolitical, and credit.

I won’t dwell on the first – an unexpected escalation in global hostilities would likely hit sentiment enough to tip the US into recession.

Credit is the biggest endogenous risk facing the economy and the market. Bankruptcy filings and charge-off rates are rising, indicating underlying stress not reflected in credit spreads. Moreover, the opacity in rapidly growing private-credit markets is becoming a greater concern. Credit should be monitored closely as a fast unraveling would swiftly take the economy into recession territory.

Until then an NBER-recession looks less likely than so over the next 6-9 months. Which is not how the situation looked earlier in the summer. Abnormally high fiscal deficits; the asynchronous recovery after the pandemic disrupting the traditional interplay between the goods and services economy; and money illusion to a degree most haven’t experienced before are all factors why this time is not following the usual script.

When the leading data turns sufficiently down, the NBER will make a recession announcement in due course. But we are unlikely to hear from them for a while yet.

Apple’s multi-billion dollar European Union tax dispute has become a major risk once again. The EU’s top court said the company’s previous victory against Brussels in a 13-billion-euro ($14-billion) tax case should be scrapped. The tax investigation comes after tax arrangements between Apple and Ireland – allowed the company to pay limited to zero corporate tax for over a decade. 

On Thursday, Giovanni Pitruzzella, advocate general for the EU Court of Justice (CJEU), said the EU’s second-highest court’s (the General Court) previous ruling, throwing out the EU’s order for Apple to pay $14 billion in back taxes to Ireland, “should be set aside.” 

Financial Times pointed out the opinion of the advocate general is non-binding but influential in terms of final judgments issued by CJEU. 

The tax case against Apple was first initiated in 2016 following a two-year investigation by Margrethe Vestager of the European Commission, who announced at the time: “Ireland granted illegal tax benefits to Apple.” The EU’s 2016 decision said Apple took advantage of two Irish tax laws that lowered its tax liability to as low as 0.005% in 2014. 

In 2020, the General Court sided with Apple, ruling that regulators failed to meet legal standards to show Apple benefited from an unfair advantage in Ireland. 

But it was today’s opinion issued by Pitruzzella that said the lower court had “committed a series of errors in law” and “failed to assess correctly the substance and consequences of certain methodological errors.” As a result, he said the court needed “to carry out a new assessment.”

With that being said, Apple’s EU tax risk becomes a major problem (again). However, Apple shares are flat in premarket trading – as investors currently ignore the emergence of the tax issue.  

Apple responded to Pitruzzella’s opinion by telling AFP News, “The General Court’s ruling was very clear that Apple received no selective advantage and no state aid, and we believe that should be upheld.” 

Irish Finance Minister Michael McGrath released a statement that said Dublin had done nothing wrong:

“It has always been, and remains, Ireland’s position that the correct amount of Irish tax was paid and that Ireland provided no state aid to Apple. We now await the judgment of the Court of Justice of the European Union on this matter.” 

While the 2020 ruling sure seemed like Apple would get back its $15 billion sitting in escrow, Pitruzzella’s opinion now suggests otherwise. 

CJEU is expected to release a new ruling on the tax dispute sometime next year. 

By Teeuwe Mevissen, Senior Macro Strategist at Rabobank

Most of us probably remember the silly joke that was often performed at the school yard when someone would shout ‘high five’ and put his/her hand up high, inviting the other to give a high five. It was then proceeded with saying ‘five low’ and extending your hand to invite the other to give a five low but then the hand is quickly pulled back so that the other slaps in thin air while getting the message that this person was too slow. It makes today’s author of the Global Daily think of current interest rate markets, which have shown large swings recently. The main reason for those swings is that market participants seem to wonder whether the current Fed funds rate – which hoovers around the level of 5.3% – is seen as too high or actually too low. And, following this question, whether the Fed might be too slow with either raising or lowering interest rates going forward.

Since the last meeting in which the Fed kept the target range for the Federal funds rate unchanged, longer yields have been taking a nose dive bringing the 10-year yield on US government bonds from a level of nearly 5% towards the level of 4.53% which we see on our screens right now. However, markets yesterday seemed less sure about the Fed’s future path. Miraculously, sentiment today seems to be more in line with the conclusion that, indeed, the Fed might actually have reached its peak. The regular reader of the Global Daily knows that this is also our expectation. Therefore, stocks rose in the US while treasuries remained steady. Stocks are also rising in Europe this morning. China’s picture was more mixed with mild gains for mainland indices but some losses in Hong Kong.

One of the likely reasons is that yesterday the news came in that (net) flows of FDI towards China turned negative for the first time since 1998. This seems to be one of the clearest signs yet that Western companies are implementing the ‘China plus one’ strategy, which stands for a policy that looks for investments in other countries than China to set up production facilities. This in order to mitigate potential risks that might arise from increasing geopolitical tensions and as such, protecting their supply chains. Indeed this is a continuation of a trend we flagged earlier during the spring this year in a publication which one can find here. As such the impact and process of de-risking seems to become more and more entrenched. All in all net FDI came in at minus $11.8 billion meaning that FDI entering China was $11.8 billion lower then what China invested outside of its borders.

Meanwhile, looking at the global economy as a whole, risks continue to be on the downside. With ongoing geopolitical tensions and two major conflicts, risks that energy or food prices might rise again are significant. The recent attack by the US on a weapons depot in Syria that is controlled by Iran’s Islamic Revolutionary Guard Corps is just one of the examples that there are still ample of possibilities that could escalate the current conflict into a broader regional conflict. On a more positive note, Saudi Arabia said that while peace talks with Israel are on hold, they are “contingent on a pathway to peaceful resolution of the Palestinian question that was on the table and remains on the table”.

Regarding geopolitics we will have to wait until next week to see if there is reason to believe that things can be improved significantly. On the November 14 Biden will visit San Francisco for Asia-Pacific Economic Cooperation Leaders’ meeting and will meet with Xi Jinping on the 15th on the sidelines of the summit to discuss a wide range of topics. This is the first meeting between both leaders since November 22 last year during the G20 summit in Bali. While expectations remain low, there is a chance that communication lines between both militaries could be re-established. That would reduce the chance of unexpected incidents turning into a crisis. Previously this was impossible since former minister of Defence general Li Shangfu was on the US sanctions list and as such refused to engage with his US counterpart Lloyd Austin.

Rep. Marjorie Taylor Greene (R-GA) has filed an impeachment resolution against DHS Secretary Alejandro Mayorkas for “high crimes and misdemeanors” over the Biden administration’s failure to stop a flood of immigrants from illegally entering the United States.

“Rather than adhering to an oath he took to defend and secure our country and uphold the Constitution when he was sworn in as Secretary of Homeland Security, Alejandro Nicholas Mayorkas has engaged in a pattern of conduct that is incompatible with the laws of the United States…“

MTG’s resolution goes on to cite Article II of the Constitution, which requires that “the Executive branch, which today includes the Secretary of Homeland Security, ensure the laws passed by Congress and signed into law by the President are faithfully executed,” as well as the Secure Fence Act of 2006, which requires that the Secretary of Homeland Security “maintain operational control over the entire international land and maritime borders of the United States.”

“In his willful admittance of border crossers, terrorists, human traffickers, drugs, and other contraband, Alejandro Nicholas Mayorkas has failed to maintain operational control of the border, thereby violating the Secure Fence Act of 2006.”

She also cited reports showing that more than 10 million illegal immigrants have entered the United States during Mayorkas’ tenure, including “terrorists, human traffickers, drugs, and other contraband.”

Watch:

Marjorie Taylor Greene introduces a resolution to impeach Mayorkas for high crimes and misdemeanors pic.twitter.com/eqvCp03hh8

— Acyn (@Acyn) November 9, 2023

As the Washington Examiner notes, “The 10 million number referenced in the resolution combines 8 million encounters at the southern border with another 1.8 million “gotaways,” or immigrants who managed to evade U.S. border officials and remain in the country to this day. The remaining number of immigrants includes individuals from Iran, Afghanistan, Syria, Egypt, Turkey, and other countries.”

She also accuses Mayorkas of failing to stop the flow of fentanyl into the United States via the southern border – noting that Customs and Border Patrol has seized approximately 11,200 pounds of the drug during 2021, and another 14,700 in 2022.

“Over 70,000 Americans died from fentanyl in fiscal year 2022,” reads the resolution. “Fentanyl is now the number one killer of Americans between the ages of 18 and 45. Fentanyl kills approximately 300 Americans a day. This is the amount of fentanyl that has been seized at the border, yet 300 Americans are still being killed by fentanyl poisoning every day. The amount of unseized fentanyl has not even been taken into account.”

Mayorkas impeachment resolu… by Cami Mondeaux

Deflationary pressures intensified in China in October as year-over-year Consumer Price inflation turned negative once again as food prices plunged (especially pork). Additionally, Producer Price deflation widened slightly in October in year-over-year terms due to lower prices of crude oil and nonferrous metals.

Specifically, consumer prices fell 0.2% YoY after hovering near zero in the previous two months (below expectations of 0.0%) and producer prices fell for a 13th straight month, dropping 2.6% (worse than the 2.5% YoY drop in September).

Source: Bloomberg

While non-food inflation was flat at +0.7% YoY in October, with increasing fuel costs offset by falling core goods and services prices, food inflation tumbled to -4.0% YoY in October from -3.2% YoY in September.

On major food items, inflation in pork prices fell to -30.1% YoY in October from -22.0% YoY in September, while inflation in fresh vegetables rose to -3.8% YoY in October from -6.4% YoY in September.

NBS commented that food prices fell sequentially on good weather conditions and moderated demand after the Golden week holiday in early October.

The price of pork in China, which is the world’s largest producer and consumer, has long followed a boom-and-bust cycle as smaller farmers pile into the market in response to rising demand. That leads to oversupply and triggers sharp price falls, forcing the same farmers to retreat.

Live hog futures traded on China’s Dalian Commodity Exchange have dropped about 15 per cent since the start of October, reflecting a sharp deterioration in expectations for nationwide pork prices. Wholesale pork prices in China are down more than 40 per cent from a year ago.

Pork prices began to rebound in July – partly in response to government-led buying – only to fall back again as large listed hog farmers, including Muyuan and New Hope, opted not to cut capacity despite broader weakness in demand.

“Part of the problem is that a lot of these big companies have on some level accepted the boom-and-bust cycle,” Darin Friedrichs, director of market research at Sitonia Consulting in Shanghai, said.

“And they think they’re better at playing it than their competitors.”

As The FT reports, China continues to experience deflation as other major economies continue to grapple with ‘high’ inflation…

Rob Carnell, economist at ING, disputed that China was suffering from deflation, which he defined as not just a decline in consumer prices but also in the prices of “real and financial assets and wages”.

“What China has right now is a low rate of underlying inflation, which reflects the fact that domestic demand is fairly weak,” he said.

“What we are seeing today is mainly the result of a supply excess, rather than a collapse in demand.”

Most notably, this report undermines a recent assessment by the PBOC that prices would rebound from the summer’s rough patch, prompting calls for more ‘measures’ to counter this deflationary pressure (because there’s nothing that citizens hate more than paying less for things).

While the latest inflation data could make markets more cautious about China’s growth recovery, it also fuels hopes for additional policy support, said Xiaojia Zhi, head of research at Credit Agricole CIB. This includes a further cut to the reserve requirement ratio, she said, a view also shared by other economists.

“Combating persistent disinflation amid weak demand remains a challenge for Chinese policymakers,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Ltd.

“An appropriate policy mix and more supportive measure are needed to prevent the economy from a downward drift in inflation expectations that could threaten business confidence and household spending.”

But, as Goldman Sachs said in an analyst note that China’s headline CPI should rise gradually in the coming months, although “persistent pork prices deflation is likely to slow the pace”.

PBOC to China’s citizens: squeal, little piggy!

Authored by Ryan Morgan via The Epoch Times,

The U.S. Attorney’s Office for the District of Massachusetts has announced the arrests of two men and one woman suspected of operating a multi-state prostitution ring whose alleged client list includes elected officials, military officers, and executives at technology and pharmaceutical firms.

On Wednesday, acting U.S. Attorney Joshua Levy announced the arrests of Han Lee, a 41-year-old woman from Cambridge, Massachusetts; James Lee, a 68-year-old man from Torrance, California; and Junmyung Lee, a 30-year-old man from Dedham, Massachusetts, on suspicion of operating multiple brothels in Massachusetts and Virginia.

Federal investigators allege these three individuals operated a pair of websites that advertised professional photography appointments at high-end apartments rented by the three defendants. Investigators believe these photography sessions provided a front service, and the designated properties provided a controlled location at which women hired by the three defendants could transact the illicit sex services.

Mr. Levy’s office claims it has identified “a wide array of buyers” of this alleged prostitution ring’s services. Mr. Levy did not name any of the suspected clients in a Wednesday press briefing, but a Nov. 6 affidavit described a list that includes elected politicians, professors, lawyers, doctors, accountants, scientists, and executives for technology and pharmaceutical companies, along with other business executives. Boston-based Department of Homeland Security Agent Zachary A. Mitlitsky, who swore on behalf of the affidavit, said the client list also includes military officers and government contractors who possess security clearances.

Mr. Mitlitsky stressed in the affidavit that the professions he identified did not provide an exhaustive list of this prostitution ring’s clientele and that potentially hundreds of clients may yet be identified.

“Pick a profession, they’re probably represented in this case,” Mr. Levy told CNN.

The arrests of the three suspected brothel operators followed a multiyear investigation that involved the DHS and multiple local Massachusetts police departments. Prosecutors also received assistance from the U.S. Postal Service and the Department of Justice’s Criminal Division.

According to Mr. Mitlitsky’s affidavit, law enforcement officers were able to interview 20 of the suspected clients during a multiyear investigation, and these clients described arranging meetings at various locations for commercial sex services. The suspected meet-up points included several locations in Dedham, Cambridge and Watertown, Massachusetts. Investigators identified two more suspected brothel locations in Fairfax and Tyson, Virginia, both located a short distance from Washington.

Mr. Mitlitsky said he wasn’t refusing to identify the suspected clients to protect their anonymity but rather because the investigation into this prostitution ring is “active and ongoing.”

Prosecutors say the three accused brothel operators charged clients anywhere from $350 to upwards of $600 per hour depending on the sex services they were selling. These three defendants allegedly concealed the proceeds of the illicit services using money orders in values under the amount that would typically trigger reporting and identification requirements.

“There were several instances in which the total amount of money orders purchased on a single day (when combining transactions at different agent locations) did exceed $3,000, and sometimes even exceeded $10,000, thus indicating an intent to structure the money order purchases to conceal or disguise the activity,” Mr. Mitlitsky said in the Nov. 6 affidavit.

On May 26, 2023, alone, investigators identified 19 money orders purchased that day for a total of $12,200. They believe these money orders were used to cover rent payments on four suspected brothel locations rented by the defendants.

The three defendants are charged with conspiracy to coerce and entice others to travel to engage in illegal sexual activity. If convicted, they each face up to 20 years in prison, three years of supervised release, and a fine of up to $250,000.

Why does this keep happening! https://t.co/Iw5lbtNxHS

— Jack Poso 🇺🇸 (@JackPosobiec) November 9, 2023

The number of Americans filing for jobless benefits for the first time last week slipped to 217k (from an upwardly revised 220k), hovering near YTD lows and showing absolutely no signs at all of any labor market stress…

Source: Bloomberg

Oregon saw the biggest decline in claims while California and New York saw the biggest rise…

But, for the sixth straight week, continuing jobless claims increased, rising to 1.834mm Americans – the most since early April 2023…

Source: Bloomberg

And it’s going to get worse, as Goldman reminds us that ongoing seasonal distortions have increasingly weighed on the level of continuing claims over the last six months, and we now expect that the reversal of those distortions could exert a cumulative boost of 375k to the level of continuing claims between now and March.

We’re gonna need more seasonal adjustments.

S&P 500 futures edged higher on Thursday after notching an eight-day streak of gains, and setting up the benchmark index for its longest winning streak since 2004, as investors monitored bond yields, corporate earnings and the price of oil. Treasuries fell and the dollar rose ahead of more speeches by central bank officials including more remarks by Fed chair Powell. After a listless overnight session, as of 7:45am S&P futures were up 0.1% and Nasdaq was down by a similar amount. Elsewhere, Europe’s Stoxx 600 index rose 0.6%, Asian stocks closed green, oil hovered near a three-month low after plunging almost 7% over the previous two sessions, yields on 10-year Treasuries held below 4.5%, the dollar gained and bitcoin was set to rise above $37,000, an 18 month high.

While the rapid momentum has fizzled out, the S&P 500 has inched higher every day this week and if the index closes up for another day, it would be the 9th day in a row stocks have risen (alternatively the VIX is now also down for 9 straight days). As DB’s Jim Reid notes this morning, although a 9-day run has happened 31 times in the last 95 years it actually hasn’t happened since 2004. And If we end the week with 2 more up days, the 10-day run will be the first since 1995, even though they’ve happened every 6.3 years on average over the last 95 years.

In summary, in the last 95 years:

• An 8-day winning streak has happened 63 times (average c. every 1.5 years)
• A 9-day streak has happened 31 times (average c. every 3.1 years)
• A 10-day streak has happened 15 times (average c. every 6.3 years)
• An 11-day streak has happened 8 times (average c. every 11.9 years)
• A 12-day streak has happened 5 times (average c. every 19 years)
• A 13-day streak has happened 1 time (average c. every 95 years)
• A 14-day streak has happened 1 time (average c. every 95 years)

In premarket trading, Walt Disney gained 4% after profit beat estimates. Arm Holdings Plc sank 4.7% after the chip designer issued a disappointing sales forecast as the company is pressured by a weak smartphone market and uncertainties surrounding new licensing deals. Cryptocurrency-linked stocks rose as Bitcoin extends gains for a fourth consecutive session to touch its highest level since May 2022. The recent rally is led by expectations of an approval for exchange traded funds to invest in the largest crypto token. Coinbase +4.2%, Riot Platforms +6.3%, Marathon Digital +10%, Hut 8 Mining +8.9%. Disney shares gained 3.8% after the media company reported better-than-expected 4Q adjusted earnings and a strong read on subscribers for its streaming-video service. The company also said it plans to resume paying a dividend for the first time since the pandemic. Here are the other notable premarket movers:

• Affirm Holdings shares rally 14% after the buy-now-pay-later (BNPL) company posted first-quarter revenue that was ahead of consensus. The firm forecast revenue for the second quarter of $495 million to $520 million, compared to analyst estimates for $505.9 million.
• Bill Holdings shares tumble 8.8% as Bloomberg News reports that the company, which provides financial-automation software to small and mid-size businesses, is in advanced talks to acquire the digital payment tools provider Melio Payments.
• Cardlytics shares sink 35% after the digital advertising company gave a fourth-quarter outlook that fell short of consensus and reported revenue for the third quarter that missed the average analyst estimate.
• Lyft shares fall 1.7% after the ride-hailing company gave a lackluster revenue outlook for the holiday period, overshadowing the company’s third-quarter revenue beat.
• Tesla shares fall 1.7% as HSBC initiated coverage on the electric-vehicle maker’s stock with a recommendation of reduce, citing the timing of delivery as its primary concern.

In global equity markets, the recent upswing is down to conviction that the Federal Reserve and other policy makers are done hiking interest rates, even as officials caution that they won’t be quick to cut. European Central Bank Vice President Luis de Guindos told Slovenia’s Finance newspaper that any talk of lowering borrowing costs in the coming months is too early. Fed Chair Jerome Powell will speak at the IMF’s annual research conference and ECB President Christine Lagarde is also scheduled to deliver remarks later today.

“Markets are listening to central bankers, but they’re also taking on board recent data and are becoming more confident that further hikes are off the table,” said James Rossiter, head of global macro strategy at TD Securities.

It’s not just stocks: rates traders are also betting that the steepest global tightening cycle in a generation is over. Swaps signal the average cash rate for developed economies will be steady over the coming six months, the first time in two years that they’re not pricing in a hike over that time frame, according to data compiled by Bloomberg. The Bank of England Chief Economist Huw Pill reinforced that view on Thursday, saying the BOE doesn’t need to raise rates further because policy is already restrictive enough. UK markets are pricing in three quarter-point rate cuts, starting in August next year.

European markets extended gains, with the Stoxx 600 adding 0.6% with chemical, industrial and real estate shares leading gains.  Sentiment was boosted by a 32% surge in shares of Adyen NV, a Dutch payments processor that competes with PayPal Holdings Inc. The company unveiled growth targets and a pathway to achieving them, a key sign that it’s intent on winning back investor confidence. Here are the most notable European movers:

• Adyen shares soar as much as 37% in Amsterdam, the biggest gain since June 2018. The payment firm’s 3Q sales were much better than expected and its new medium-term goals appear more realistic and credible, according to analysts
• AstraZeneca shares rise as much as 4.2%, after the pharmaceuticals company reported better-than-expected earnings in the third quarter, raised its profit outlook for the year and clinched a deal to develop a drug targeting patients with diabetes and obesity
• Deutsche Telekom shares gain as much as 1.6% to the highest level since May, after the telecom operator reported estimate-beating results in Europe. Operational metrics in home market of Germany were seen as strong by analysts as pricing pressure eases
• Auto Trader shares gains as much as 7.7%, the most since March 2022, with analysts flagging a revenue beat at the automotive marketplace operator’s first-half results
• Henkel shares gain as much as 4% in Frankfurt after the German consumer-products group reported third-quarter organic sales growth that was higher than consensus expectations
• Nexi shares soar as much as 11% and are the best performers in the Stoxx Europe 600 Index after the Italian payments specialist reported broadly in-line third-quarter results and reaffirmed its full-year guidance
• Airbus shares fall as much as 3.1% after it reported third-quarter results below expectations due to a charge related to satellite development programs, but analysts say they do see some signs of positives for the planemaker
• Coloplast falls as much as 6.4%, the most since Aug. 17, after the Danish ostomy and continence care firm’s 2024 guidance fell short of expectations, with Bernstein flagging continued struggles with profitability as a key negative
• KBC shares fell as much as 5.8%, to the lowest in year, after the Belgian bank cut its net interest income forecast for the full year, a move which analysts said would hurt its valuation moving forward
• Flutter shares dive as much as 12%, the steepest one-day drop since March 2022, after the gambling firm reported 3Q earnings that failed to impress. Though analysts made note of a soft quarter, the stock remains a highlight among gambling firms at Goodbody and Morgan Stanley
• ArcelorMittal falls as much as 2% after the world’s top steelmaker outside China reported a drop in third-quarter profit as steel prices declined in key markets due to weaker demand
• B&M European Value Retail shares drop as much as 7.3%, after the discount retailer reported third-quarter adjusted Ebitda that missed estimates. RBC Capital Markets said the guidance was a “touch below” consensus and noted a slow start to the third quarter

Asia’s stocks also closed higher Thursday following a two-day decline, with Japan helping to lead gains. The MSCI Asia Pacific Index rose as much as 0.4%, with Toyota, Samsung and Nintendo among the biggest boosts. Shares in Vietnam, Singapore, Australia and South Korea also advanced. Key gauges in Hong Kong declined after data showed that Chinese consumer prices fell more than expected in October — mainland benchmarks were little changed.

• Hang Seng and Shanghai Comp were mixed with Mainland China flat/firmer whilst the latest Chinese inflation metrics painted a picture of a fragile economy as the nation fell back into deflation. Hong Kong underperformed as the Property sector dragged the index lower.
• Japan’s Nikkei 225 was firmer from the start as the recent JPY weakness lent exporters a hand and the index eventually topped 32,500.
• Australia’s ASX 200 saw its upside supported by Health and Financials, with the latter as NAB rose post-earnings, although the IT and Energy sectors lagged.
• India stocks fell amid weakness in technology and consumer staple companies. Reliance Industries declines most in two weeks. The S&P BSE Sensex fell 0.2% to 64,832.20 in Mumbai, while the NSE Nifty 50 Index declined 0.3% to 19,395.30.

In FX, the Bloomberg Dollar Spot Index rises for a fourth day, adding 0.1%. The euro and the Swiss franc are the weakest of the G-10 currencies. The Kiwi is the strongest.

In rates, treasuries dropped, led by the long-end and partially unwinding the effect on 2s10s and 5s30s of Wednesday’s curve-flattening rally ahead of the Treasury’s 30-year bond auction later on Thursday. US 10-year yields rise 4bps to 4.54%. Traders are also watching for comments from Fed Chair Powell at an IMF event. Bunds and gilts are on the back foot as well. UK bonds were weighed down by comments from Bank of England chief economist Pill who seemed to recalibrate his dovish language from earlier in the week.

In commodities, oil prices finally advanced, with WTI rising 0.9% to trade near $76. Spot gold falls 0.2%.

Bitcoin rose sharply again, rising as high as $37,000. Among other news, the SEC has reportedly opened talks with Grayscale Investments on the details of the company’s application to convert its trust product GBTC to a spot Bitcoin (BTC) ETF, according to CoinDesk citing sources.

To the day ahead now, there is an array of central bank speakers, including Bostic (9:30am), Barkin (11am), Paese (12pm) and Powell (2pm), who participates in a panel discussion on monetary policy challenges in a global economy at the IMF’s annual research conference (text and Q&A expected). US economic data scheduled for the session includes initial jobless claims at 8:30am New York time.

Market Snapshot

• S&P 500 futures little changed at 4,402.00
• MXAP up 0.4% to 157.17
• MXAPJ little changed at 491.91
• Nikkei up 1.5% to 32,646.46
• Topix up 1.3% to 2,335.12
• Hang Seng Index down 0.3% to 17,511.29
• Shanghai Composite little changed at 3,053.28
• Sensex down 0.2% to 64,813.78
• Australia S&P/ASX 200 up 0.3% to 7,014.90
• Kospi up 0.2% to 2,427.08
• STOXX Europe 600 up 0.3% to 445.46
• German 10Y yield little changed at 2.64%
• Euro little changed at $1.0702
• Brent Futures up 1.0% to $80.33/bbl
• Gold spot down 0.2% to $1,946.91
• U.S. Dollar Index little changed at 105.55

Top Overnight News

• China’s CPI fell back into deflation territory in Oct (-0.2% vs. the Street -0.1% and vs. 0.0% in Sept) while PPI deflation deepened to -2.6% (vs. -2.6% in Sept and vs. the Street -2.7%). FT  
• Cloud Software Group, which owns enterprise-software brand Citrix, is ceasing business transactions in China, becoming the latest U.S. company to pull back from China. In an email to clients and partners on Monday seen by The Wall Street Journal, Cloud Software Group said it has made the decision to cease all new commercial transactions in China, including Hong Kong, on Dec. 3. It cited rising costs in the market. WSJ
• White House hopes to announce a new commitment from China to stem the flow of fentanyl into the US along w/a resumption of military communication following the Biden-Xi summit. NBC News
• BOJ’s Ueda says the central bank will be careful when raising rates to avoid creating volatility (he added that while some progress is happening toward achieving the desired level of inflation, “there’s still some distance to cover”). FT
• Mario Draghi has delivered a downbeat view of EU economic growth, forecasting a recession by the end of this year, as he warned that the European project’s long-term survival depends on urgent political integration. FT
• US strikes Iranian weapons facility in Syria in retaliation for attacks against American forces in the region by Tehran-backed proxies. WaPo
• America’s long streak of population growth is expected to come to an end. Census Bureau projections released Thursday show that, under the most likely scenario, the U.S. will stop growing by 2080 and shrink slightly by 2100. Slowing growth would produce a peak U.S. population of almost 370 million before an ebb to 366 million in the final years of the century, according to the bureau. WSJ
• Hollywood actors and studios reached a tentative deal to end a 118-day strike. The contract — worth over $1 billion — includes unprecedented restrictions on the use of AI and the first-ever performance-based bonuses, the actors’ union said. BBG
• Apple risks having to pay a €13 billion ($14 billion) tax bill to Ireland after an adviser to the European Union’s top court said the iPhone maker’s victory in an earlier challenge should be thrown out. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mostly firmer following a similar lead from Wall Street with most major APAC markets in the green although Chinese markets saw more of a muted performance. ASX 200 saw its upside supported by Health and Financials, with the latter as NAB rose post-earnings, although the IT and Energy sectors lagged. Nikkei 225 was firmer from the start as the recent JPY weakness lent exporters a hand and the index eventually topped 32,500. Hang Seng and Shanghai Comp were mixed with Mainland China flat/firmer whilst the latest Chinese inflation metrics painted a picture of a fragile economy as the nation fell back into deflation. Hong Kong underperformed as the Property sector dragged the index lower.

Top Asian News

• Japan’s Government will seek JPY 2tln (USD 13.2bln) in budget funding to support chip production and advances in generative AI technology, including more aid for Taiwan Semiconductor Manufacturing Co. (TSM), according to Nikkei.
• BoJ Oct Summary of Opinions: one member said must patiently maintain monetary easing; One member said that given extremely high uncertainty and must take steps to make YCC operation more flexible. Click here for the detailed headline.
• BoJ Governor Ueda reiterates that firms becoming more active in raising prices and wages than before, according to Reuters.
• Ex-BoJ executive Maeda said the BoJ may end the negative interest rate policy in January and keep raising short-term rates in stages, according to Reuters.
• PBoC injected CNY 202bln via 7-day reverse repos with the rate at 1.80% for a CNY 8bln net daily injection.
• RBI Governor Das said India’s current account deficit remains eminently manageable, and they have bolstered FX reserves to deal with potential eventualities.
• BoJ’s Ueda cautions that unwinding ultra-loose policy is a serious challenge, adding that the BoJ will move carefully on raising interest rates, via FT. On commitment to quantitative/qualitative easing until inflation target is attained says: “We are making progress towards achieving this same goal, but there’s still some distance to cover before we can scrap the forward guidance,”. In the scenario of an overshoot in inflation, believe we will be able to deal with it by lifting rates. Rate of growth of wages, around 2%, will need to continue and at a slightly higher rate. Yet to decide what order they would terminate the measures which are in place.
• Japan lobby head urges BoJ to normalise policy to live with interest rates; the leader said the BoJ should unwind its easing programmes to live with interest rates although it may take a year to exit monetary stimulus.

European bourses are in the green with newsflow relatively limited and the tone gradually improving throughout the session, Euro Stoxx 50 +0.8%. Action which follows a more mixed APAC handover, where China and Hong Kong underperformed on inflation data and the property sector respectively. Sectors are primarily in the green, with Industrials outperforming after Schneider Electric though Airbus’ update has capped gains. At the other end of the spectrum, Travel & Leisure is in the red after Flutter Entertainment’s report. Stateside, futures are making their way into the green as we near the commencement of US cash trade, ES +0.2%; with action for much of the session near-unchanged and tentative/rangebound. EU court advisor has backed the EU’s USD 14bln tax order to Apple (AAPL); advisor agrees with the Commission’s view that the General Court erred when the case against Apple was thrown out, proposes the case is referred back for a new decision. Nvidia (NVDA) is reportedly planning to unveil three new chips for China, via Star Market Daily citing sources; to be announced as soon as November 16th

Top European News

• BoE’s Pill assumes rates are to stay restrictive for an extensive period. Inflation remains much too high. No grounds for complacency when it comes to inflation. Do not need to raise rates to bear down on inflation. Need a persistent level of restrictive monetary policy for an extended period. If the economic situation changes, will need to change policy. BoE does not make promises when it comes to interest rates. Slowing growth does not appear to be lowering inflation or firms pricing power.
• The German Government reached an agreement on electricity price support for the industry, via Handelsblatt citing sources; agreement for five years, relief will amount to over EUR 10bln in the coming year alone.

FX

• Buck back on recovery track after midweek time out as Treasury yields rebound and curve re-steepens, DXY towards top end of 105.67-46 band.
• Yen losing ground sub-151.00 vs Dollar as BoJ Governor Ueda continues to bang the dovish drum.
• Euro capped by heavy 1.0700+ option expiry interest against the Greenback, and Franc underpinned by expiries above 0.9000.
• Pound propped around 1.2300 and 0.8700 vs Euro after BoE’s Pill pushes the case for a prolonged period of restrictive policy.
• Kiwi elevated ahead of NZ manufacturing PMI, as NZD/USD grips 0.5900 handle and AUD/NZD slips under 1.0800.
• PBoC set USD/CNY mid-point at 7.1772 vs exp. 7.2723 (prev. 7.1773)

Fixed Income

• Debt futures regress after upside extension and curves flip a bit from bull-flattening.
• Bunds fade closer to 131.00 within a 130.93-39 range, Gilts retreat from 96.14 to 95.35.
• T-note towards the base of 108-04/17 band as 10 year yield fails to hold below 4.5% ahead of US jobless claims, long bond auction and more Fed speak.

Commodities

• Crude benchmarks are firmer on the session though the magnitude of the move pales in comparison to the downside seen WTD and since the middle of October when the Israel-Hamas geopolitical premium peaked, so far at least.
• As it stands, WTI Dec’23 and Brent Jan’24 are posting upside of just under USD 1/bbl on the session; but, have only been able to recover to around the mid-point of Wednesday’s USD 74.91-77.53/bbl parameters in WTI at best.
• Metals are modestly softer but with action relatively contained as the USD inches higher and the overall risk tone remains firmer in Europe but much more tentative thus far stateside.
• Chinese importers bought at least five more US soybean cargoes on Wednesday for Dec-Mar shipment, according to Reuters citing traders.
• China Commerce Ministry said China is to re-investigate anti-dumping duties case on stainless steel billets and stainless steel hot-rolled sheets and coils imported from the EU, Japan, South Korea, and Indonesia, according to Reuters.
• China Vice Premier Ding will increase coal, natural gas production and actively expand imports of resources to ensure stable energy supply this winter.

Geopolitics

• US military forces confirm it conducted a self-defence strike on a facility in eastern Syria, according to the Pentagon; the strike is a response to attacks against US personnel in Iraq and Syria by IRGC-Quds Force affiliates.
• Two marches attack on the Silk base in Iraq and sirens sound at the US embassy [in Iraq]”, according to Sky News Arabia.
• Hamas is reportedly discussing the possible release of a few hostages in exchange for a brief pause in fighting, officials said via NYT.
• Vice chairman of China’s Central Military Commission, in a meeting with Russian President Putin, said “China is ready to work with Russia to jointly safeguard the two countries’ interests and safeguard global and regional prosperity and stability”, according to Global Times.
• Germany will send four fighter jets to Romania to support NATO’s air policing mission from the end of November, according to Reuters sources.

US Event Calendar

• 08:30: Oct. Continuing Claims, est. 1.82m, prior 1.82m
• 08:30: Nov. Initial Jobless Claims, est. 218,000, prior 217,000

Central Bank Speakers

• 09:30: Fed’s Bostic and Barkin Speak on Survey Data
• 11:00: Fed’s Barkin Discusses Fed Policy, US Economy outlook
• 12:00: Fed’s Paese Speaks About the Economy and Monetary Policy
• 14:00: Fed’s Powell Speaks on Panel at IMF Conference

DB’s Jim Reid concludes the overnight wrap

The bond rally continued over the last 24 hours, with long-end yields falling to their lowest level in weeks as investors grew more confident that inflation was set to fall back and that central banks were now finished with their rate hikes. In part, that was driven by another round of oil price declines, with Brent crude closing beneath $80/bbl for the first time since July, whilst WTI closed beneath $76/bbl. And even though risk assets lost some of their recent momentum given the concerns about economic demand, the S&P 500 (+0.10%) still managed to post an 8th consecutive gain for the first time since late-2021. In fact, if we manage to get a 9th consecutive advance today, that would make it the longest run of gains since 2004, although futures for the S&P 500 are slightly negative overnight, with a -0.03% decline .

For Treasuries, there was a sizeable rally at the long-end of the curve, with yields falling to their lowest levels in some time. Most notably, the 10yr yield fell back -7.4bps to a 6-week low of 4.49%, marking the first time it’s closed below 4.5% since the Friday after the September FOMC meeting. That rally had been underway early in the session, but there was a further advance thanks to a mixed $40bn 10yr auction, with a positive reaction to the market’s ability to digest increased issuance volumes. The 30yr yield was down by a larger -11.1bps to 4.61% ahead of the 30yr auction today. That’s a sizeable decline from their recent levels, as it was only on Tuesday of last week that the 30yr yield closed at 5.09%.

Those moves come as there are already signs that this decline is filtering through to the real economy, with data from the Mortgage Bankers Association showing that the average 30yr fixed mortgage rate was down -25bps to 7.61% over the week ending November 3. That’s the biggest weekly decline since July 2022, as well as the third-biggest weekly decline since the GFC. And in turn, it helped the index of mortgage applications for home purchase rise from its lowest level since 1995 the previous week.

Over in Europe it was much the same story, with yields on 10yr bunds (-4.3bps), OATs (-5.0bps) and BTPs (-6.7bps) all moving lower. Inflation expectations drove the decline, with the 10yr German breakeven down -2.6bps to 2.12%, which is its lowest closing level since January. And that was evident across the wider Euro Area too, with the 5y5y forward inflation swap (-1.0bps) falling to its lowest in nearly six months, at 2.43% .

The main catalyst for that decline in inflation expectations was the sharp move lower in commodity prices. In particular, energy prices fell across the board, with Brent crude oil (-2.54%) down to $79.54/bbl, and WTI (-2.64%) down to $75.33/bbl. That’s come as investors have become increasingly concerned about economic demand, not least after several weaker-than-expected data releases since the start of the month. And the moves were evident across several different commodities, with European natural gas down -1.93%, copper down -1.11% and gold down -0.52% .

Central bankers themselves provided little direction for yesterday’s moves. We did hear from Fed Chair Powell, although he didn’t discuss the outlook for Fed policy, so attention will now turn to his appearance later today, where he’s speaking on a panel at an IMF conference. When it came to the ECB, we did hear from Bundesbank President Nagel, who said that “I don’t like this discussion going on about when will be the point you lower interest rates”. That was echoed by the Central Bank of Ireland’s Governor Makhlouf, who said that it was “far too early in my view to start talking about when we’ll start reducing or cutting rates”. Furthermore, despite the moves lower in market-based inflation expectations, the ECB’s latest Consumer Expectations Survey found that in September, median inflation expectations at the 1yr horizon were up half a point to 4.0%, which is their highest level since April. Looking further out at the 3yr horizon, they were unchanged at 2.5%.

Equities lost momentum but still managed to continue their recent advance, with the S&P 500 (+0.10%) extending its run to 8 consecutive gains, the longest since November 2021. Furthermore, the VIX index of volatility was down for an 8th consecutive session as well (-0.4pts to 14.5), which was its longest run of declines since 2015. However, this equity advance was a narrow one as 55% of S&P stocks actually fell on the day, with energy stocks and other defensive sectors among the worst performers. Indeed, other indices struggled including the Dow Jones (-0.12%) and the Russell 2000 (-1.10%), with the latter falling back for a 3rd consecutive day, bringing its decline for the week so far to -2.65%. On the other hand, megacap tech stocks outperformed with the FANG+ Index up +0.47%. Over in Europe, there was also a relatively stronger performance, with the STOXX 600 (+0.28%) bouncing back from its losses on Monday and Tuesday, whilst the DAX was also up +0.51% .

Overnight in Asia , we’ve seen a mixed performance for the major equity indices. Some have seen decent advances, with the Nikkei up +1.52%, and the KOSPI up +0.53%. However, the Shanghai Comp (+0.03%) and the CSI 300 (-0.01%) have seen little movement, and the Hang Seng (-0.25%) has lost ground. That comes as data from China showed that consumer prices were down -0.2% year-on-year in October (vs. -0.1% expected), whilst producer prices were down -2.6% (vs. -2.7% expected) .

To the day ahead now, and there’s several central bank speakers to hear from, including Fed Chair Powell, the Fed’s Bostic, Barkin and Paese, ECB President Lagarde, the ECB’s Villeroy and Lane, as well as the BoE’s Pill. In addition, the ECB will publish their Economic Bulletin, and on the data side, we’ve got the US weekly jobless claims coming out. Otherwise, there’s a 30yr US Treasury auction taking place.

Apple co-founder Steve Wozniak was admitted to a hospital in Mexico City after attending the World Business Forum. Reports from Mexican media suggest Wozniak may have experienced a stroke, whereas TMZ speculates the illness could be a less severe case of vertigo.

CNN cited an unnamed source who said Wozniak fainted before he was scheduled to present between 4:20 p.m. and 5:20 p.m. on Wednesday. 

Wozniak, or “Woz” as he’s known, is 73 and is one of the geniuses behind Apple I and Apple II computers. 

TMZ spoke with a person with direct knowledge and said Woz told his wife he was “feeling strange” at the conference. He then started showing symptoms that alarmed his wife, who said he needed to go to the hospital. 

Mexico’s Reforma newspaper said Woz was “admitted to the ABC Hospital in Mexico City for a stroke.” However, TMZ reported he might have experienced “what appears to be vertigo.” 

Reforma has indicated that Woz remains in the hospital but is in stable condition and is receiving top-notch medical care.

Although Russia’s economy has not collapsed under Western sanctions, the European Union is preparing to unveil another round of sanctions, focusing on Moscow’s diamond exports, potentially as early as next week. 

At the G7 foreign ministers’ meeting in Japan, EU’s top diplomat, Josep Borrell, told the Financial Times that the EU has secured enough backing from G7 countries on the new ban, as well as support from Belgium – one of the world’s leading diamond traders. 

“In order for [EU] member states to be unanimous for the ban on diamond trade, some were requesting that the G7 were giving, let’s say, political coverage,” said Borrell.

He added: “Well, this has been done and the co-ordination has worked and we will be able to put the package of sanctions in front of [foreign ministers on Monday. “

Borrell said the foreign ministers of Canada, France, Germany, Italy, Japan, the UK, and the US have agreed to “reduce the revenues Russia extracts from exports” and cited “non-industrial diamonds, including those mined.”

There was chatter among G7 leaders in May about restricting the Russian diamond trade, as well as in September when Belgian officials told reporters the new trade restriction would go into effect on Jan. 1. 

Last year, Russian mining giant Alrosa PJSC’s diamonds were still flowing onto global markets despite the US Department of the Treasury’s Office of Foreign Assets Control hitting the company with sanctions. 

Before the Russian invasion of Ukraine, Anglo American Plc’s De Beers and Alrosa PJSC accounted for nearly 60% of all rough diamond sales worldwide, with De Beers accounting for 33% and Alrosa for 24%.

De Beers recently said the diamond industry supports the West’s efforts against Russia:

“The question is how we can do this collectively and effectively so that all parts of the industry – large and small – are represented.” 

The challenging part will be getting India, the mecca of diamond cutting and polishing, on board with trade restrictions. 

According to trade data, Russia is the largest producer of rough diamonds, exporting more than $4 billion. 

This comes when lab-grown diamonds are flooding the market, and consumer luxury demand is waning, resulting in a crash in diamond prices. 

De Beers reported today that October’s diamond sale was only $80 million – compared with the same month last year of $454 million. Last month’s sale was the worst since the early days of the pandemic. 

Should the EU proceed with sanctions on Russian diamonds, they could transform rough diamond supply chains worldwide overnight.