In focus today
In the euro area, focus turns to the final services and composite PMI data for November. The final manufacturing PMI on Monday came in at 49.6 like the flash release of 49.7, so we expect the final composite PMI to be almost as the flash release.
In Switzerland, November inflation is released this morning at 8:30 CET. Deflationary concerns have recently resurfaced in Switzerland, but the bar remains high for a cut into negative territory by the SNB. We expect no further cuts and would expect the first course of action to be FX intervention.
In the afternoon, both ISM Services index and the ADP private sector employment report for November are due for release from the US. For the former, the flash PMI released earlier signalled steady activity growth. For the latter, the weekly employment estimates have signalled weakening growth momentum around late October and early November, and hence consensus expects muted growth at only +10k.
This morning, we have published our Nordic Outlook – Cruising at modest speed, 3 December, with new economic forecasts globally and for the Nordic countries. In the Nordics, we have upgraded the outlook for growth in Sweden and now expect a rate hike in late 2026 and one more in 2027. Danish GDP is also upgraded, but that is more of a technical change. In Norway, we expect growth and inflation to decline, and a string of rate cuts. Finnish growth has disappointed but there are signs of a modest turnaround. For the major economies, we maintain our view of a stable euro area, the US converging to structural levels of growth and inflation amid high uncertainty, and China continuing with strong export growth but struggling to raise domestic demand growth.
Economic and market news
What happened overnight
In China, RatingDog services PMI fell to 52.1 in November (prev: 52.6), marking the slowest pace of expansion since June. Growth in new orders softened despite a rebound in export business amid easing US-China trade tensions. Employment continued to decline for the fourth consecutive month, while rising input costs pressured profit margins. Business sentiment weakened further, reflecting the broader challenges facing the services sector.
What happened yesterday
In the euro area, November inflation came in slightly higher than expected at 2.2% y/y (cons: 2.1% y/y) from 2.1% y/y in October. It was a “low” 2.2% at 2.15%, so a very minor upside surprise. Core inflation remained unchanged at 2.4% y/y as expected due to services inflation rising to 3.5% y/y from 3.4% y/y and goods inflation falling slightly. The momentum in services inflation was similar to recent months, so the uptick is mainly due to base effects and thereby not particularly hawkish.
The EU has agreed on a deal to phase out all imports of Russian gas by 2027, aiming to fully end reliance on its former main energy supplier.
In Denmark, Nationalbanken’s press release on the November FX reserve revealed that they did not intervene in the foreign exchange market in November, in line with our expectations. November marks the 34th consecutive month without interventions.
In geopolitics, President Vladimir Putin held a five-hour meeting at the Kremlin with US President Donald Trump’s envoys, Steve Witkoff and Jared Kushner, to discuss a possible peace deal to end the war in Ukraine. While the Kremlin described the talks as constructive, no compromises were reached, particularly on territorial issues, and details remain undisclosed. Concerns persist among European powers and Ukraine over the potential for US concessions to Russia.
Equities: Global equities traded broadly higher yesterday. The cyclical bid remained dominant, most notably in the US, where defensive sectors were lower and small-cap underperformed with large-cap growth regained some momentum. But the real story was the continued strength in cyclicals. European banks delivered yet another strong session following the euro-area inflation data, which in effect validated the ECB’s comfortable policy stance. Banks continue to benefit from this backdrop, and the sector’s 12-month performance stands at +77%, far ahead of the next-best of the 25 STOXX 600 industry, Capital Goods (+34%). Even that 34% looks modest compared with the bank rally, which has been exceptional both on relative and absolute terms. In the US yesterday Dow +0.4%, S&P 500 +0.3%, Nasdaq +0.6%, Russell 2000 -0.2%. Overnight, Asia traded higher as Japan retraced part of Monday’s declines. US and European equity futures are marginally in the green this morning.
FI and FX: After an eventful start to the week, yesterday proved quieter for fixed income markets. Rates edged marginally lower in a reversal of Monday’s move with US swap rates ending the day 2bp lower across the curve and similarly, European swap rates 1bp lower across the curve. However, movements in the very front end have gained traction with short-term repo rates in the euro area rising over month-end with GC repo rates rising roughly 4bp. Today, focus turns to auctions in Norway and Denmark. JPY eased off recent highs with USD/JPY breaking back below 156. EUR/USD regained some tailwind back to the 1.1650 mark.
 from 2.1% y/y in October. It was a "low" 2.2% at 2.15%, so a very minor upside surprise. Core inflation remained unchanged at 2.4% y/y as expected due to services inflation rising to 3.5% y/y from 3.4% y/y and goods inflation falling slightly. The momentum in services inflation was similar to recent months, so the uptick is mainly due to base effects and thereby not particularly hawkish.){kind=link}