Markets:

November reflation trades eased today ahead of the long weekend in the US (Veterans’ Day on Monday) and in absence of eco data/events. Investors conclude that the only thing missing for a de-escalation of the US-Sino trade war is a time and a location for US President Trump and his Chinese counterpart Xi Jinping to sign off on the phase one trade accord. Reflationary spirits can therefore remain with us as eco data don’t deteriorate and with central bank providing necessary breathing space. European equity indices are slight off recent highs, while core bonds yields cling to impressive gains since mid-October. US yields rise by 0.3 bps (2-yr) to 1.7 bps (10-yr). The US 10-yr yield is testing the upper bound of the 1.42%-1.94% trading range for a second session straight. Changes on the German yield curve vary between +0.3 bps (2-yr) and -2.1 bps (30-yr). Trading on FX markets somewhat remarkably showed more USD strength with EUR/USD currently changing hands around 1.1027, coming from a 1.1050 open. USD/JPY is testing 109.32 resistance. Steering away from the low 109-area would improve the technical picture in this currency pair. UK markets showed little enthusiasm today. EUR/GBP sits tight in the low 0.86-area. Focus turns to the key UK eco numbers next week with Q3 GDP on Monday, labour market numbers on Tuesday, inflation figures on Wednesday and retail sales on Friday. Other things to look out for next week are Fed Chair Powell’s testimony in Congress, German GDP figures and October US retail sales.

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The Canadian job report fell below expectations in October. Employment fell with 1.8k jobs while markets anticipated a 15k increase. The decline is the result of less full time employment (-16.1k) while part time employment rose 14.3k. That said, this month’s disappointing figure comes after a strong September and a solid 2019 overall. The unemployment and participation rate stabilized at 5.5%, 65.7% respectively. Wage growth hovers near cycle highs (4.4% y/y). Losses for the Canadian loonie are limited (USD/CAD 1.322).

The European Banking Authority said volume of non-performing loans across EU banks has fallen by half from 1 150 billion euros in June 2015 – or 6% of total loans – to €636 billion in June of this year or 3%. Italy printed the biggest drop, some €145 billion less NPL’s over the four year period. The EBA said the decline was related to regulatory measures and a boost from economic growth and low interest rates.

Belgium formally arrested Catalan leaders Puig and Comin following the reactivation by Spain of an European arrest warrant. Puig and Comin were sought by Spain for their involvement in an illegal referendum and declaration of independence for Catalonia in 2017. Former leader Puigdemont will already appear before a Belgian court on December 16.

Rating agency Moody’s cut the outlook on India’s Baa2 rating from stable to negative. Moody’s rating is still one notch higher than at S&P and Fitch. The decision reflects increasing risks of a prolonged slowdown and rising debt. The Indian rupee lost some ground with USD/INR rising to 71.28.

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