Breakfast Bites - European Monetary Aggregates Continue to Contract

Rise and shine everyone!

Plenty of data today from across the world. For the US we have the Home Price Indices, Conference Board Consumer Confidence, 7Y note auction and plenty of Fed Speakers.

US Equity Futures are mostly lower after closing slightly lower yesterday. Bond yields are muted alongside the US Dollar Index, with the Yield Curve steady at -0.48%. Gold is slightly higher and Oil is recovering after news of OPEC+ seeking further production cuts floats around. Bitcoin is lower but still holding above $37k.

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Asia and Australia

• Asian equities finished mixed Tuesday. Technology stocks weighed on the Hang Seng while mainland China benchmarks rose slightly. Gains for Australia and Taiwan, South Korea higher as battery companies rose. India flat despite Adani stocks rally, Southeast Asia was mixed, Japan's indices fell as the yen gathered strength.

• Australian October retail sales surprisingly fell by 0.2% on a monthly basis, contrary to the anticipated 0.1% rise and following a 0.9% gain in the previous month, according to preliminary data. Marking the first drop in retail activity since June, this downturn reflects a shift in consumer behavior, with shoppers reducing their discretionary spending and waiting for Black Friday sales events.

• Adani group stocks surged Tuesday after India's Supreme Court late Friday concluded its hearing into plunge in group stocks earlier this year, reserving judgement on batch of petitions connected to market regulator's probe. India's Securities and Exchange Board told court it would not seek additional time to complete investigation.

• Chinese banks are estimated to reserve $89B for bad loans in the property sector next year. This comes amid a push from the PBOC to provide further support to the sector by pressing banks to lower their lending rates. Alongside losses hitting the bottom line, Chinese banks will now have to content with lower profitability on new loans given out to the already ailing sector.

• New Zealand’s rate decision is tomorrow (8pm ET for the US). Consensus estimates expect rates to remain unchanged at 5.5%, given that inflation has come down faster than expected.

• South Korea’s consumer confidence is gradually forming a trend downwards. While still not at alarming levels, consumers are worried about near-term living standards and expenses.

Europe, Middle East, Africa

• European equity markets lower. Decliners are Health cAre (-1.2%); Personal and Household (-1.2%) and Food & Beverages (-1.0%). UK’s FTSE lower as well.

• German GfK consumer confidence showed a slight improvement but, still remains very much in negative territory at -27.8 from -28.3.

• Eurozone M3 money supply growth continues to contract, down 1.0% y/y in October versus 0.9% consensus and prior 1.2% fall. Three-month average showed 1.2% drop. Narrower M1 reading, which focuses on deposits, showed 10% fall versus 9.9% drop.

• Annual rate of credit to euro area residents down 0.5%, unchanged from prior. The slowdown in credit growth is an effective way to measure transmission of monetary policy, which seems to be working as intended.

  • Loans to private sector up 0.4% from 0.2%.

  • Loans to businesses -0.3% from 0.2% gain last month.

  • Loans to households 0.6% down from 0.8%

The Americas

• New home sales came in at 679K vs. 723K est. Months' supply is now 7.8 vs. 6.9 prior. Median home price continues to drop coming in at $403k vs. $487k prior. This is yet more evidence of softening in the US housing market. The shortage in supply has kept prices high for a while now. The other issue is obviously people not wanting to move out from existing homes because the alternative is too expensive. For now though, these are signs of moderation.

• Bond Auctions Yesterday - The 2Y auction results were actually weaker than the 5Y auction results. This should come as a surprise as most MMFs are still buying at the shorter end. Plus with the anticipation of Fed cuts on the horizon, the 2Y should’ve done better.

Chart of the Day: No one knows!

Two interesting charts from BoFA - the first (left) shows the dispersion in 12m Real GDP Forecasts at a 40-year high and the second (right) shows economists have been underestimating US payrolls for 15 of the last 18 months.

This cycle has been very confusing for most and even the best, wisest and most experienced market forecast has gotten more wrong than they’ve gotten right. In 2022, I said this period in time will be one for the history books - I will probably get that right!

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics; Briefing.com)

Economic

Earnings