Sunset Market Commentary

Markets

Natural gas prices showed some of the larger daily moves today. They dropped below €30/MWh (Dutch TTF) for the first time since May 2024. Prices have been slowly grinding lower over the last couple of months on a combination of amongst others strong LNG imports and mild weather so far. But the trigger for today’s break originated from the US spearheading talks to end Russia’s war in Ukraine. It revived them with its 28-now-reduced-to-19-point peace plan and stability in the region could affect global supplies. The US is pushing for Ukraine to accept the deal and some senior officials have reported “meaningful progress” but some bullet points are (too?) hard to swallow for Ukraine, but also for the EU. These are mostly related to territorial concessions and a cap on Ukraine’s military size. In return, the US would offer security guarantees. President Trump had imposed a November 27 deadline for Ukraine to accept (or lose US military and intelligence support) but Secretary of State Rubio over the weekend clarified talks could go into next week. Oil prices also lose ground today but are off the intraday lows. Brent trades around $62.7/b. Movements in other corners of the market are limited. US Treasuries marginally outperform Bunds by shedding 1.2-2.8 bps in the 5-30yr bucket. US money markets crept a little bit further in the direction of a Fed rate cut next month. The market implied probability now stands at 72%. Fed governor Waller, still in the race to become the next chair, called for another reduction in an interview today, referring to weak labour market data. The flurry of economic releases that’ll come in after December 10 could make the decision for January trickier, Waller said. German yields trade flat on the day. Spreads vs swap narrow slightly, even in France where parlement rejected a first (partial) reading of the 2026 budget. Belgium outperforms a tad, the result of the government having agreed on a €9.2bn deficit-reducing multiannual budget through 2029. The European Commission warned last week that Belgium’s budget shortfall would rise from an expected -5.3% of GDP this year to -5.9% in 2027 in an unchanged-policy scenario. UK gilts hold their breath going into Wednesday’s release of the government’s Autumn Budget. Yields marginally ease at the long end of the curve. The euro is holding a minor upper hand in FX markets against most global peers. EUR/USD rises to 1.1532. The November lows just below 1.15 are still lurking though. EUR/GBP bounces back above 0.88. US stock markets kick off the holiday-shortened week in good spirits. The tech-heavy Nasdaq rises 1.5%. European equities limit gains to just 0.2%.

News & Views

Czech consumer confidence surged for a third consecutive month in November, from 107.4 to 111.7, its highest level since January 2019. Most consumers expected the overall economic situation in Czechia to improve over the next twelve months. The share of households expecting an improvement in their financial situation over the next twelve months increased compared to last month. At the same time, the share of respondents who assess their current financial situation as worse than in the previous twelve months decreased. The number of respondents who do not plan to make any major purchases in the next twelve months decreased slightly. Czech business confidence disappointed, falling from a more than 3-yr high at 103.4 to 99.9. On a sectoral level, confidence in the economy increased only in trade while declining in construction, industry, and to a lesser extent in selected service sectors. Weaker business sentiment carried the bigger weight in the composite confidence indicator, which corrected from the highest level since February 2008 (104) to 101.9. The Czech koruna strengthens today (EUR/CZK 24.15) with CE FX in general performing better against the background of Ukraine peace talks in Geneva.

Belgian business confidence rebounded slightly in November after a modest decline in October. Confidence improved in the business-related services sector (more positive assessment of current level of activity) and in manufacturing (significant improvement in demand expectations) while declining in building (drop in orders and reduced optimism about future demand) and trade (fear of significant drop in demand and in their orders to suppliers) sectors. Belgian consumer confidence, published last week, hit the highest level since October 2021.