In focus today
- In the UK, September GDP data is released. Growth rates are low but close to potential, a challenging cocktail with inflation close to 4%.
- In Sweden, October inflation details are published this morning. Last week’s flash estimate saw yet another upside surprise, as CPIF overshot over forecast by a tenth and the Riksbank by 0.4 p.p. Core inflation rose as well, in contrast to expectations, which raises some questions regarding the Riksbank’s confidence in their current inflation assessment. As such, today’s details will prove an important input in assessing the ‘temporary nature’ of this inflation overshoot. For what it is worth, all ‘temporary surprises’ this year have been to the upside.
- Additionally, the Riksbank will publish their bi-annual Financial Stability Report. The first edition, from spring, highlighted the elevated political uncertainty abroad and the need for Swedish banks to have a more active liquidity management. On top of the usual comments regarding the resilience of households and the real estate sector, we are particularly keen to hear if the Riksbank has more to say on banks’ liquidity management.
- Overnight, China will release the monthly batch of data for retail sales, industrial production and indicators for the housing market. We expect to see a continued picture of a two-speed economy with robust manufacturing, partly driven by strong exports, while retail sales and housing data will likely continue to show weak domestic demand.
Economic and market news
What happened overnight
President Donald Trump signed legislation to end the 43-day government shutdown, the longest in US history, after the House of Representatives passed the funding package in a 222-209 vote. The deal extends federal funding through 30 January, allowing federal workers to return to their jobs as early as Thursday and restoring disrupted government services such as food assistance and air traffic control. However, the shutdown has caused lasting disruptions, with key economic data releases for October, such as employment and CPI reports, unlikely to be published. The funding package did not include healthcare subsidies, a contentious issue that will be revisited in December.
What happened yesterday
In the US, two Fed speakers were on the wire. Atlanta Fed President Bostic, who announced he will retire in February 2026, stated he favours keeping rates unchanged until there is clear evidence that inflation is returning to the 2% target, citing inflation as a greater risk than labour market signals. Bostic was not scheduled to become a voting member until 2027, so his decision to retire will not impact near-term monetary policy decisions. Meanwhile, New York Fed President John Williams discussed the Federal Reserve’s upcoming end to quantitative tightening on 1 December and signalled plans for gradual asset purchases to maintain ample reserves.
Furthermore, Anthropic announced a USD 50bn investment to build data centres in Texas and New York, with additional sites planned. Partnering with Fluidstack, the initiative aims to boost AI infrastructure and aligns with the Trump administration’s push to maintain American leadership in AI. The project is expected to create 800 permanent jobs and 2,400 construction jobs, further highlighting the rapid expansion of AI investment in the US.
In France, lawmakers voted to suspend President Macron’s contested pension reform, keeping the minimum retirement age at 62 years and nine months until after the 2027 elections. The suspension, secured through concessions to Socialist lawmakers, provides Prime Minister Lecornu’s government with a temporary reprieve as it struggles to pass next year’s budget in a hung parliament. However, the freeze, combined with other spending trade-offs, raises fresh concerns over the country’s ability to rein in its euro zone-high budget deficit.
In oil markets, OPEC’s latest report forecasts a small surplus of 20,000 bpd in 2026, revising its earlier predictions of a deficit. The shift reflects higher production from OPEC+ and non-OPEC+ producers, contrasting sharply with the IEA’s projection of a 4 million bpd surplus next year. Following the release, oil prices fell over 3% to USD 63 per barrel.
Equities: Equities moved higher again yesterday across regions, with fresh all-time highs set in several indices. Interestingly, the US was not leading this leg higher, Europe outperformed once again, as did several other regions. Also noteworthy, yesterday’s session did not feature a tech-led catch-up after the previous day’s tech underperformance. Instead, defensives continued to outperform, with healthcare once again the best-performing sector globally. To put that into context, global healthcare has now gained more than 15% over the past three months, outperforming the next best sector by over 5 percentage points despite an already strong equity tape. That fits perfectly with our call made during summer, both in terms of reasoning and performance pattern, and we are obviously quite pleased with how that thesis has played out. In Europe, banks were again the best-performing industry yesterday. Over the past 12 months, European banks are now up more than 77%. Despite the strong run, our conviction remains unchanged, the sector still I not expensive, and the fundamental drivers continue to align with our view. In the US yesterday, Dow +0.7%, S&P 500 +0.1%, Nasdaq -0.3%, Russell 2000 -0.3%. Asian equities trade higher this morning, and futures are modestly firmer in both Europe and the US.
FI and FX: Yields have edged marginally higher on the expected end to the US government shutdown. 10Y US Treasury yields continue to trade close to the 4.10 mark while the US swap curve has steepened slightly during the Asia-hours. In commodities oil prices traded heavy following remarks from OPEC that supplies had surpassed demand earlier than expected. This contributed to sending Brent crude down below USD 63/bbl and by extension EUR/NOK up in the high 11.60s. AUD is the big FX outperformer overnight following better-than-expected labour market figures. EUR/USD has been steady overnight after having risen close to 1.16 during yesterday’s US session. Finally, the JPY is under pressure with markets continuing to test the Japanese authorities’ preparedness to intervene in the market.
