In focus today
In the UK, the monthly labour market report is released today. Payrolls have declined throughout the year, but the pace has been modest and not too worrying. Wage growth has been edging lower but remains elevated. After last week’s decision from the BoE to wait for more info before cutting rates further, we will look for signs on particularly easing wage pressures.
In Germany, the ZEW indicator will give the first hint of sentiment in November of the German economy. The assessment of the current situation has been declining in the past three months but is expected to show a small improvement. Expectations have remained at a decent level this year despite some volatility and consensus is looking for a marginal rise.
Economic and market news
What happened overnight
In the US, the Senate passed a bill on Monday to end the longest government shutdown in US history, with nearly all Republicans and eight Democrats supporting the deal. The bill restores funding for federal agencies, prevents additional layoffs until 30 January 2026, and funds the SNAP food aid programme through September 2026. However, the agreement does not guarantee an extension of ACA subsidies, with a vote on the issue scheduled for December. The bill now moves to the House for approval before heading to President Trump for his signature.
In markets, optimism over a potential end to the record-breaking US government shutdown supported risk sentiment on Monday, with stocks rebounding and Treasury yields rising. The S&P 500 rose 1.54%, while the Nasdaq jumped 2.27%, driven by strong performance in tech and airline stocks. However, health insurers declined after the Senate deal excluded an extension of ACA subsidies. Investors now anticipate the release of delayed economic data, which is expected to clarify growth prospects and guide the Fed’s December rate decision. Liquidity pressures in money markets are also likely to ease as the shutdown ends.
What happened yesterday
In the US, Federal Reserve Bank of St. Louis President Alberto Musalem (voter, hawkish) was on the wire and highlighted the resilience of the economy and inflation nearing 3%, slightly above the 2% target. He stressed the need for a cautious approach to monetary policy to ensure inflation is reduced.
In the euro area, the Sentix Investor Confidence indicator unexpectedly declined to -7.4 in November (cons: -4.0) from -5.4 last month. Sentix is the first indicator for confidence in November and suggests that sentiment has declined a bit in November although the level itself is quite similar to the past three months.
In Norway, core inflation surprised strongly to the upside at 3.4% y/y, expected 3.0%. Details revealed that the surprise stemmed mainly from higher imported inflation, contributing +0.3 pp. compared to expectations. As the NOK has remained fairly stable over the summer and global goods inflation remains muted, this looks a lot like price adjustments ahead of the upcoming Black week discounts. Unfortunately, we need to see at least the November figure to test our suspicion. The figure was higher than Norges Bank expected in the latest MPR and led to higher rates and a stronger NOK.
In Denmark, CPI inflation declined to 2.1% y/y in October from 2.3% in September, against our 2.2% expectation. Electricity prices increased by 15.9% on the back of reintroduction of winter tariffs but also higher spot prices. The pressure on food prices looks to decline somewhat with a 0.4% m/m decline. Seasonality would also suggest a small decline.
In Sweden, activity data for September showed continued strength in production and consumption. According to the monthly measures, Q3 concluded with robust growth rates, slightly exceeding our expectations. The September data confirmed the strong GDP flash for Q3 (1.1% q/q, 2.4% y/y) and suggests that the Swedish economy made significant progress in early autumn.
In Switzerland, reports suggest that the country is nearing an agreement with the US to secure a reduction in tariffs on its exports to 15%, down from the 39% levy imposed in August. According to sources, a deal could be finalised within two weeks, though talks remain ongoing. President Trump has confirmed efforts to lower tariffs to support Switzerland.
Equities: Global equities kicked off the week in a remarkably strong tone, led by significant cyclical outperformance and broad-based gains across indices. While headlines were quick to attribute the move to expectations of an imminent end to the US government shutdown, the real drivers run deeper. As we highlighted yesterday, this rally is not about the shutdown itself; it is about a supportive macro backdrop driven by three key factors: improving macro momentum, a strong earnings season, and a Federal Reserve on a path towards loosening monetary policy. That combination explains the magnitude of yesterday’s move after nearly a month of sideways drift in equities. The sector pattern was textbook: cyclicals, growth, and momentum stocks led the rally, while the only red spot on the screen was consumer staples.
This sends a clear message to investors: you need to decide whether you believe in the persistence of a solid macroeconomic and earnings environment. If you do, cyclicals and growth stocks are likely to continue to outperform, while defensives and low-beta sectors will lag. We are not at an inflection point that suggests a broad rotation; rather, it is a question of your macroeconomic outlook. And let’s be honest, much of the outlook depends on the US labour market. If you get the US labour market call right for the rest of the year, you are likely to have your overall asset allocation strategy right as well. In the US yesterday: Dow +0.8%, S&P 500 +1.5%, Nasdaq +2.3%, and Russell 2000 +0.9%. Asian equities are trading slightly in the red this morning, while European futures point higher, and US futures are hovering around unchanged.
FI and FX: Global yields continue to move marginally higher on rising optimism as to the near-term prospects for an end to the US government shutdown. Yesterday’s session marked an end to the last weeks’ steepening pressure on USD and EUR swap curves as the short end underperformed the long end, driving an inter-day flattening. The flattening pressure was the most pronounced in NOK rates, where higher-than-expected core inflation data sent 2Y swap rates 7bp higher returning the 2s10s curve slope to new lows around -14bp. In FX space moves have been more modest, although cyclically sensitive currencies such as ZAR, AUD, NOK and NZD have all outperformed.
