Rise and shine everyone.

Markets are pulling back across the globe this morning. China sold off on the news that President-elect Trump is reportedly picking anti-China candidates for his administration.

Germany is calling for the confidence vote in December, with the Federal Election in Feb. Amid this political uncertainty, and the political change in the US, the German ZEW Economic Sentiment Index dropped to 7.4. The EUR/USD fell to a one-year low.

All eyes remain on Bitcoin, which is also pulling back marginally this morning. However, the new narrative now is that funds are being rotated from AI plays to Bitcoin plays. Something to keep an eye on.

We have 5 Fed Speakers today ahead of tomorrow’s CPI report, along with the SLOOS report and a mix of earnings.

Inflation Stories - the UK and India

Markets in the UK are also not looking the brightest. Gilts sold off this morning after wage data was released. The Unemployment Rate increased to 4.3% from 4% while, average wages also surprised to the upside coming in at 4.3% from 3.9%. Wages have been an important determinant for the Bank of England, and a driving factor service inflation. This make the BoE’s path to cutting more challenging and we may see a slower pace.

India’s annual inflation rate surged to 6.21% in October 2024, up from 5.49% in September and exceeding market expectations of 5.81%. This rise marks the highest inflation level in over a year and deviates significantly from the Reserve Bank of India’s target range, which aims to keep inflation within 2 percentage points of 4%.

The Consumer Price Index (CPI) rose by 1.34% month-on-month. Food inflation rose sharply to 10.87% in October, up from 9.24% in September. Key contributors to food inflation:

• Vegetables: Prices increased by 42.18% (previously 35.99%).

• Oils and fats: Up to 9.51% from 2.47%.

• Meat and fish: Rose to 3.17% from 2.66%.

India is yet to start their easing cycle, despite the Fed’s rate cuts. This increases the interest differential between the two countries making it an even more challenging economic landscape. However, the surge in inflation doesn’t make way for the RBI to start cutting.

AI Developments - Amazon and Baidu

Amazon is set to introduce its latest AI chip, “Trainium 2,” developed by its chip division Annapurna Labs. This new chip aims to boost efficiency in Amazon’s data centers, helping it to reduce its reliance on Nvidia, a dominant force in AI processors. “Trainium 2” is part of Amazon’s line of AI training chips and is already being tested by companies like Anthropic, Databricks, and Deutsche Telekom.

Meanwhile, Baidu has launched AI-powered smart glasses that use its large language model, Ernie. These glasses offer features such as calorie tracking, music playback, and environmental analysis. Initially available only in China, Baidu’s launch positions the company to compete in the AI-integrated hardware market against other global tech giants, marking a strategic push into AI-driven consumer devices.

Chart of the Day

Today’s NFIB Small Business Optimism Index release showed a marked improvement to 93.7 in October 2024, the highest in three months, compared to 91.5 in September.

“With the election over, small business owners will begin to feel less uncertain about future business conditions. Although optimism is on the rise on Main Street, small business owners are still facing unprecedented economic adversity. Low sales, unfilled jobs openings, and ongoing inflationary pressures continue to challenge our Main Streets, but owners remain hopeful as they head toward the holiday season” - NFIB Chief Economist Bill Dunkelberg

Calendars

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