Markets
European markets weren’t really heading anywhere until ABC News reported on Ukraine agreeing to terms of a peace deal according to a US official: “The Ukrainians have agreed to the peace deal. There are some minor details to be sorted out”. Headlines followed talks between the US and Ukraine in Geneva this weekend and between the US and Russia currently in Abu Dhabi. Ukrainian president Zelenskiy later indicated that peace plan talks with the US are continuing, implicitly ruling out any deal. Also from the Russian side, there’s no confirmation whatsoever over agreement on the current 19-point US-Ukrainian solution. Markets nevertheless loved to err on the positive side following the headlines, pushing the EuroStoxx 50 currently 0.7% higher. The dollar lost a few ticks with the trade-weighted greenback switching sides around the 100-barrier after testing 100.25 resistance earlier this morning. EUR/USD tries to make way above 1.1550. CE currencies spiked higher with EUR/HUF for example moving to 381 for the first time since January 2024 and EUR/PLN testing the downside of the narrow sideways trading range in place since April at 4.22. Brent crude prices dipped from $63/b to $62 and the Dutch TTF gas contract holds below €30/MWh.
Attention switched to US eco data following the Ukrainian intermezzo with delayed September US retail sales and produces prices. Data for both reports were gathered before the start of the US government shutdown, but not yet processed. The former disappointed (mainly pullback in categories with strong Summer spending) while the latter printed near consensus. Headline retail sales growth slowed from 0.6% M/M in August (strong back-to-school shopping season) to 0.2% in September (vs +0.4% expected). Core retail sales, excluding auto and gas, disappointed at 0.1% (vs +0.3% consensus) with the retail sales control group – core sales also excluding food services and building materials and a proxy for consumption in GDP calculations – even falling by 0.1% M/M (vs +0.3% forecast). Despite the lower September numbers, real consumer spending was robust over Q3, expected at 3.2% annualized (vs +2.5% Q/Qa in Q2). Producer prices increased by 0.3% M/M with the annual number stabilizing at 2.7% Y/Y. Core PPI was more modest at 0.1% M/M and 2.6% Y/Y (from 2.9% Y/Y). US Treasury yields showed some volatility around the release but are virtually flat on the day. After a two-day rebound, a lot of attention goes to US stock markets today with the main question being whether they can escape a more profound setback and sliding into a sell-on-upticks pattern. The Nasdaq is currently 1% lower with Nvidia leading the pack on news that Meta Platforms is in discussions to use Google chips in data centers in 2027 which might challenge Nvidia’s dominant market position for inference chips.
News & Views
The November Distributive Trades survey of the Confederation of British Industry (CBI) showed a further deterioration both for reported sales and sentiment in the retail sector as the country prepares for the announcement of the new budget tomorrow. The subindex of retailing volumes declined from -27 to -32. Sales for this time of the year dropped (-20 from -15). The total distribution volumes index also fell from -30 to -35. On a positive note, expected retail sales volumes for next month improved slightly from -39 to -34. In a separate quarterly survey, business reported sentiment in the sector to have declined from -10 in August to -35 in November, the lowest level since Q3 2008. The quarterly survey also showed that uncertainty dampens both reported (-19 from -14) and expected (-23 from -19) employment. Investment intentions stay at a low -42. Retail price indicators eased slightly from previous quarter.
Polish retail sales rose by 6.7% M/M and 5.4% Y/Y in real terms in October, beating consensus. YTD sales were 4.3% higher compared to the same period last year. Both sales in a monthly and a yearly perspective showed significant rises across several categories. Other October data were a bit mixed yesterday with gross wages rising a softer than expected 1.3% M/M and 6.6% Y/Y. Employment also declined slightly (-0.1% M/M and -0.8% Y/Y). At the same industrial output data were solid (5.4% M/M and 3.2% Y/Y). Polish yields over the previous days declined substantially further (2-y swap -15 bps since last Thursday) as markets ponder the chances of additional easing at the December meeting or early next year. The NBP cut its policy rate early November by 25 bps to 4.25%.
