In focus today
In Sweden, the Riksbank will release the semi-annual Business Survey at 9.30 CET. While often overlooked by markets, the survey has historically been a key input for the Riksbank’s monetary policy deliberations. We expect it to align with the view of the Riksbank’s main scenario at this juncture, with a still weak but gradually recovering economy. Given persistently high inflation, we are paying particular attention to the quantitative measures on expected price changes. The May 2025 report showed that companies selling to households planned to raise prices over the next 12 months, reflecting higher purchasing costs and their inability to fully offset previous cost increases.
Economic and market news
What happened overnight
The US and Japan have signed a framework agreement aimed at securing supply chains for critical minerals and rare earths, reducing dependence on China. In a statement, the White House emphasised that the deal seeks to enhance the resilience and security of critical mineral and rare earth supply chains for both nations.
What happened yesterday
In the euro area, bank lending continued to grow in September, with loans to non-financial corporations increasing by 2.9% y/y. The credit impulse, which correlates more closely with GDP growth, remained stable at 0.3% of GDP, indicating that lower policy rates are still supporting the economy. This suggests euro area GDP likely grew in Q3, albeit at a slower pace than in the first half of the year. We expect Thursday’s GDP data to confirm a modest 0.1% q/q growth for Q3.
The German Ifo indicator rose slightly more than expected in October, rising to 88.4 from 87.7. However, the current situation assessment declined unexpectedly to 85.3 – the lowest since February – pointing to ongoing economic challenges. In contrast, expectations rose sharply to 91.6 from 89.8, signalling optimism. While Ifo’s current situation assessment remains weaker than the recent uptick in PMIs, the rebound in expectations and stronger PMIs suggest a gradual recovery in the German economy over the coming year.
Equities: Equities were on a steady grind higher through yesterday’s session. S&P 500 ended 1.2% higher, Nasdaq 1.9% and Russel 2000 0.3% higher, driven by (yet again) tech and cyclical stocks. Qualcomm announced that they will start shipping their new AI chip next year and led the rally. Overnight, Asian markets are somewhat mixed with Nikkei down 0.4% and Shenzen 300 up 0.2%.
FI and FX: USD continued to weaken overnight, with EURUSD moving towards 1.1670 and USDJPY dropping below 152 as a readout from Scott Bessent’s meeting with Japan’s Katayama indicated that BoJ policy and exchange rate volatility were discussed, serving as a reminder that the US administration prefers a weaker dollar. US yields fell from late afternoon and the 10y UST is now back just below 4%. We expect the Fed to announce an end to QT in Treasuries at Wednesday’s meeting, and as a rate cut of 25bp is widely expected, this could be a bigger market mover in our view. With cuts fully priced for both October and December, we think near-term risks for the USD remain asymmetrically tilted to the upside. EURSEK remains at the lower end of the recent 10.90-11.10 range and EURNOK has been mostly sideways since Friday afternoon in a 11.62-11.66 range.
