Sunset Market Commentary

Markets

The US Treasury market counted down to today’s US October PPI data with some trepidation. In a three-day rout (bond market closed on Wednesday for Veterans Day), US yields added 19 bps (30-yr) to 37 bps (2-yr) so far this week as hawkish Fed comments and sticky (core) CPI caused a huge hawkish repositioning. Technical factors (US 10-yr yield testing lower bound of upward trend channel) and rebounding energy prices lifted the longer end (to a lesser extent). A huge sigh of relief followed when PPI printed at (or even slightly below) consensus estimates. Headline PPI rose by 0.3% M/M (vs 0.4% expected) with the annual number ticking up from 6.3% to 6.5% (instead of 6.6%). Core PPI rose as forecast by 0.3% M/M to stay steady at 5% Y/Y. US (front-end) Treasuries erased most of intraday losses following the PPI figures with daily changes across the curve currently ranging between -1.2 (2-yr) and +4 bps (30-yr). The dollar nevertheless holds its preferential status on FX markets with EUR/USD currently changing hands around 1.1050. Stock markets are currently going nowhere.

Next Monday, Fed Chairman Warsh gives opening remarks at the Fed’s Productivity and Jobs task conference hosted by the SF Fed. He will also moderate two panels and participate in a fireside chat. It’s the first such conference to gather input from technology executives, economists, business leaders and policy leaders to inform the specific task force. Recall that Fed Chair Warsh at his first (June) press conference announced the creation of five monetary task forces with each of them having a mandate. The one on productivity and jobs needs to assess the effects of new general-purpose technologies, including AI/SI on productivity, employment and monetary policy. The Fed’s other task forces are on communications (review how the Fed communicates policy deliberations and decisions under uncertainty), balance sheet policy (examine the costs, benefits and institutional implications of the Fed’s balance-sheet regime), data sources (improve the quality and the timeliness of economic information used by policymakers) and inflation frameworks (revisit how the Fed understands and responds to inflation drivers). None of these other four task forces have communicated or hosted a similar event so far. Public conclusions are expected by year-end. On Tuesday, attention turns to US retail sales, the EC’s autumn economic forecasts, Nvidia earnings and UK labour market data. The latter kick off the monthly UK data release with CPI figures on Wednesday and retail sales on Friday. It could be a big week for UK assets in general with a BoE governor Bailey speech on Wednesday and the EU-UK Summit on Friday as well. FOMC Minutes of the September policy meeting and public appearances by ECB President Lagarde (Wednesday, Thursday and Friday) are other highlights in next week’s busy week.

News & Views

The Polish economy grew 0.8% in Q3, decelerating from an upwardly revised 1.1% the quarter before, preliminary estimates showed today. The annualized pace eased from 4.1% to 3.5%, the slowest since June 2025 but nevertheless among the fastest still within the EU. Details will be available with the November 30 update but some point out that higher fuel prices and inflation in general are weighing on consumer demand. Headline CPI was confirmed at 3.5%, the top of the central bank’s 2.5% +/- 1ppt, in the final reading published today as well. The Polish central bank (NBP) in the policy meeting earlier this month turned more hawkish with significant upward revisions to inflation for next year (4.2% vs 2.7%). Several policymakers including governor Glapinski said that a rate increase from the current 3.75% is likely with early 2027 emerging as the preferred period. Polish money markets are currently positioned for around three by mid-2027.

Data from the International Energy Agency (IEA) showed that oil supplies outstripped consumption by almost 2mln barrels a day last month. It also revised September data, flipping a slim deficit into a 600k b/d surplus, marking it the first excess supply since the war erupted in the Middle East. The IEA said the oil market is showing tentative signs of rebalancing, expecting the surplus to stick in the fourth quarter of this year and throughout next year. The turnaround since September was underpinned by a surge in shipments from the Gulf while producers elsewhere also pumped more. Falling demand is also responsible with the IEA forecasting consumption to fall by 2.7mn b/d this year. That should then rebound again by 2mn next year.