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Activity data recently often were second tier for trading. The focus was on inflation. Even so, divergence between Europe and the US yesterday was striking. German Ifo confidence painted a less upbeat picture on the outlook for Europe’s largest economy as businesses turn more cautious both on current assessment and on expectations. The new corona wave complicates a recovery that was already hampered by supply issues, especially for services. US data held up much better. US jobless claims (199 000 from 270 000) dropped to the lowest since 1969. Even if statistical issues were at work, it suggests ongoing improvement in the labour market. A smaller than expected trade deficit supports Q4 GDP growth. Durable goods orders were more mixed, but October spending and income data also suggested a solid start to Q4 even as prices accelerated further (core PCE deflator 4.1%, headline 5.0%). The minutes of the US early November Fed meeting confirmed recent Fed speak. Several Fed members were open to a faster reduction of asset purchases and earlier rate hikes if inflation continued to run higher. A curve flattening trend was already in place before the publication of the minutes. The 2-y yield touched a post-covid top at 0.65%. In a daily perspective, the 2-y rose +2.6 bps but LT yields turned south with the 10-y and 30-y declining 3.1 bps & 6.3 bps respectively! European bonds entered calmer waters after recent corona-related swings. German yields changed less than 1.5 bps across the curve. The script for the dollar and especially for EUR/USD didn’t change. DXY came within reach of the 97 mark. USD/JPY tested the March 2017 top (115.51). EUR/USD filled bids below 1.12. European equities closed mixed. The release of strategic reserves by the US and other countries didn’t impress markets. Brent Oli returned north of $52 p/b.

Today trading volumes will be thin as US markets are closed for Thanksgiving. Asian equities are trading mixed to modestly higher. The dollar rally is taking a breather. The eco calendar is meagre, but several ECB members will speak (Villeroy, Elderson, Schnabel). Also keep and eye at the Riksbank policy decision. In Hungary, it will be interesting to see whether the MNB will already use the flexibility of the 1-week depo rate to address persistent forint weakness. For EUR/USD, 1.1168 (June 2020 correction low) is intermediate support ahead of the 1.1040 area. The EMU 10-y swap tries to break out the 0.10%/0.22% ST range. A topside break would indicated resilience despite recent Covid headlines. The German 10-y yield is challenging similar resistance near -0.22%. EUR/GBP recently several times attacked the 0.8385 area, but a break didn’t succeed despite persistent euro weakness.

News headlines

South Korea’s central bank as expected hiked its main policy rate by 25 bps to 1%. All but one of the members voted in favour of higher rates to counter rising inflation and financial imbalances. Governor Lee said the current level is still accommodative, suggesting further tightening is still possible. It revised up the inflation outlook to 2.3% for this year and 2% for 2022. Unlike for this meeting however, Lee didn’t drop a hint for a specific timing for the next hike, saying it will depend on the economy. A few elements cloud the outlook though. Daily Covid cases surged to a new record this month after loosening restrictions. As Lee steps down in March 2022, he may opt to stand pat and leave further policy changes to his successor. Presidential elections are also scheduled for March as president Moon Jae-in’s term ends in May.

The EU agreed to delay new rules for the €53tn settled securities market after continued resistance from regulators and traders. Under the new regime, the EU would make buy-ins mandatory instead of voluntarily. Buy-ins protect a buyer in a deal if it fails because the seller did not deliver (on time) by letting the buyer appoint an agent. That agent then purchases securities from the open market, ensuring the buyer’s position is the same in case the original trade took place. It is the seller that has to cover any additional costs. Industry groups including ESMA and some finance ministries said firms were unprepared for the rules while warning that it would drive up costs and undermine competitiveness. They also said it could wipe out the economics associated with hundreds of smaller, illiquid trades.

Daily Pivots: (S1) 1.2641; (P) 1.2675; (R1) 1.2700; More...

Intraday bias in USD/CAD is turned neutral with current retreat. Further rise is expected as long as 1.2491 support holds. Above 1.2743 will resume the rise from 1.2286 to retest 1.2894/2947 resistance zone. However, break of 1.2491 will indicate that such rise has completed, and turn bias back to the downside for 1.2286 support.

In the bigger picture, medium term outlook is neutral for now. The pair drew support from 1.2061 cluster and rebounded. Yet, upside was limited below 38.2% retracement of 1.4667 to 1.2005 at 1.3022. On the upside, firm break of 1.3022 should affirm the case of medium term bullish reversal. However, break of 1.2286 will turn focus back to 1.2005 low again.

Daily Pivots: (S1) 0.7176; (P) 0.7202; (R1) 0.7220; More...

AUD/USD's fall is still in progress and intraday bias remains on the downside for 0.7169 support first. Decisive break there will affirm the case that larger decline from 0.8006 is resuming. Next target is 0.7105 support for confirmation. On the upside, break of 0.7272 minor resistance will turn intraday bias neutral and bring consolidations first, before staging another fall.

In the bigger picture, with 0.6991 cluster support (38.2% retracement of 0.5506 to 0.8006 at 0.7051) intact, we're seeing price action from 0.8006 as a correction only. That is, up trend from 0.5506 low would resume after the correction completes. In that case, main focus will be 0.8135 key resistance (2018 high). Sustained break there will carry larger bullish implications. However, sustained break of 0.6991 will argue that the whole medium term trend has indeed reversed.

Daily Pivots: (S1) 1.1172; (P) 1.1213; (R1) 1.1241; More...

Intraday bias in EUR/USD stays on the downside at this point. Current down trend from 1.2348 should target 161.8% projection of 1.1908 to 1.1523 from 1.1691 at 1.1068 next. On the upside, break of 1.1373 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, there are various ways of interpreting the fall from 1.2348 (2021 high). It could be a correction to rise from 1.0635 (2020 low), the fourth leg of a sideway pattern from 1.0339 (2017 low), or resuming long term down trend. In any case, outlook will now stay bearish as long as 1.1703 support turned resistance holds. Sustained break of 61.8% retracement of 1.0635 to 1.2348 at 1.1289 would pave the way back to 1.0635.

Daily Pivots: (S1) 1.3299; (P) 1.3345; (R1) 1.3373; More...

Intraday bias in GBP/USD remains on the downside at this point. Current down trend from 1.4248 should target 1.3164 fibonacci level next. On the upside, break of 1.3512 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, the structure of the fall from 1.4248 suggests that it's a correction to the up trend from 1.1409 (2020 low) only. While deeper fall cannot be ruled out yet, downside should be contained by 38.2% retracement of 1.1409 to 1.4248 at 1.3164, at least on first attempt, to bring rebound. On the upside, firm break of 1.4376 key resistance (2018 high) will add to the case of long term bullish reversal. However, sustained trading below 1.3164 will revive some medium term bearishness and target 61.8% retracement at 1.2493.

Daily Pivots: (S1) 0.9321; (P) 0.9348; (R1) 0.9367; More....

USD/CHF failed to sustain above 0.9367 resistance and retreated after forming a temporary top at 0.9372. Intraday bias is turned neutral first. Another rise will remain in favor as long as 0.9248 support holds. Above 0.9372 will target 0.9471 key resistance next. Decisive break there will carry larger bullish implications. However, break of 0.9248 will turn bias back to the downside for 0.9084 support instead.

In the bigger picture, as long as 0.9471 resistance holds, larger down trend from 1.0237 (2018 high) could still extend through 0.8756 low. However, sustained break of 0.9471 will revive the case of medium term bullish reversal. In this case, we'd assess the change of retesting 1.0342 high at a later stage, by looking at the upside momentum first.

Technical analysis

The RSI is above level 50 and headed downwards.

The Stochastics left the overbought zone and headed downwards to level 50.

Most likely scenario – SELL

Target prices: 1,790.84 1,786.19

Alternative scenario – BUY

Target prices: 1,795.12 1,802.14

Key levels

Support 1,790.84 1,786.19

Resistance 1,795.12 1,802.14

The latest news from Adidas is shaking the crypto headlines since Adidas Originals tweeted that they partner up with Coinbase to accept payments in cryptocurrencies. This is actually a proof of an increased adoption of the cryptocurrencies by traditional companies.

Buying Adidas sneakers in Bitcoin makes Bitcoin way more liquid and actionable than just a pure speculative tool, but the Coinbase news is ‘probably nothing’ compared to the side news that Adidas is also partnering up with the metaverse platform called The Sandbox to develop the ‘adiVerse’, and that’s something big.

That’s something big because it is also a hint of what’s about to hit the fan in a couple of months in the NFT space: the Adidas sneakers and other branded virtual clothes, shoes and objects.

In fact, these brands, and these companies which are normally not in the tech and even less in the crypto space will be gradually adopting their offer to a life on a metaverse, and they will be selling virtual clothes, and virtual sneakers and other objects to increase their brand awareness on the virtual space and their revenue.

NFTs: The future of online ads?

As such, companies from tech to non-tech are now digesting the fact that the virtual presence is important, and it will probably be the future of the digital ads business. It will be cooler, more futuristic, and catchier (!) to sell Adidas sneakers to avatars on a virtual SandBox or Facebook platform, than just putting online ads on people’s Facebook timelines.

We will probably see a faster race to who will dress the avatars and who will fill up the virtual spaces with virtual objects from traditional companies. Nike for example has launched CryptoKicks already in 2019. You would be surprised to see by how much companies are getting involved in the meta-craziness. Mark Zuckerberg just unleashed a beast when he concretized the idea of metaverse a couple of weeks ago, and here we go, EA games is planning to launch NFTs, Universal Music will throw a Bored Ape virtual music band and you can attend the Bored Ape virtual concerts wearing Adidas sneakers. But first, you need to buy them! What a business plan!

So, NFTs are about to become the next advertisement tool and the potential is huge because the digital ads market is huge! And the change is happening, and it is happening now.

As a result, the companies are now rushing to the NFTs, and it is way more significant than your neighbour Jerry rushing to these new-age, ultra-volatile digital assets to become rich in a fast fashion.

Whether the news could help Adidas stop the heavy bleeding on its shares is yet to be seen, but, at this point, I believe the companies who allow the transaction of NFTs should see an increased appetite from investors, and Coinbase which is preparing to launch an NFT platform could be in a good place to catch the first volumes.

Fed minutes said out loud what everyone thought quietly

In traditional markets, the market mood is rather ok-ish after the FOMC minutes, although Federal Reserve (Fed) minutes showed that the US policymakers are now considering a faster QE taper and an earlier interest rate hike if inflation continues running higher. And the minutes was of a meeting that happened before the US released its latest CPI figure, which soared above the 6%, to a three-decade high. At this point, it makes sense to expect an earlier, and maybe a steeper rate normalization from the Fed. The US 2-year yield continues pushing higher on rising expectation of a tighter Fed policy, but appetite in US equities is not much hit. Nasdaq, which is supposed to be the most sensitive to higher rates closed yesterday’s session higher than the other major US indices, while gold slipped below the $1800 per ounce as the rising yields increase the opportunity cost of holding the non-interest-bearing gold, at a time when the risk rally promises bigger returns to investors who invest in, well, risky assets.

Market movers today

• The key event today is the Riksbank meeting where we expect the Riksbank to put in a hiking bias at the very end of the repo path in Q4 2024 while keeping the balance sheet steady next year.
• Today we get German consumer confidence data in the morning and ECB minutes in the afternoon.
• Otherwise, expect thin trading as the US is on Thanksgiving holiday.

The 60 second overview

New German government found: Yesterday, the traffic light German coalition government with the SPD, Green and FDP was agreed. As expected SPD's Scholz will take the Chancellor post. While the near-term challenge for the incoming government will be to contain the spreading of the Covid virus, the green and a 'decade of investments' is in focus in the agreement. The Liberal party's Lindner (FDP) will take the finance ministry, which is important for markets. That said, the government programme is more focused on principles rather than rules, which will give leeway both domestically, but also in Europe, where the government is set to 'develop the rules further'. SPD is also set to nominate the next Bundesbank President as Jens Weidmann will be stepping down by the end of the year.

Bias to faster US monetary policy normalisation: The minutes of the last Fed meeting did not reveal much news. A lot of discussions about inflation, where "some" participants preferred a somewhat faster pace of reductions than was agreed (perhaps tapering by USD20bn instead of the USD15bn), but we already know that more members are now moving in the direction of wanting a faster pace. Meanwhile, the core PCE inflation rate (Fed's preferred inflation measure) increased to 4.1% in October, compared with 3.7% in September. In addition, long-term inflation measures (5-10 years) increased slightly to 3% in October.

Strong US macro data: Yesterday we got relatively strong US data. Initial jobless claims below 200.000 for the first time since the pandemic, while continued claims were marginally lower (still slightly above 2m). Real GDP growth in Q3 was revised marginally lower to 2.1%, although private consumption was marginally higher. Core capex orders in October were strong growing 0.6% m/m while September revised up to 1.3% from 0.8%). USD strengthened on the back of the numbers.

Equities: A roller-coaster ride yesterday as investors were challenged by the question of whether renewed macro acceleration will result in overheating and ultimately make monetary policy makers tighten earlier and faster. At the end of the day, the optimism took over and equities ended higher. In the US, stocks were lifted by tech and growth sectors while defensive led the markets in Europe. Dow -0.02%, S&P 500 +0.3%, Nasdaq +0.4% and Russell 2000 +0.2%. Asian markets are mostly higher this morning and the same goes for European and US futures.

FI: After the spike up in yields during the first two days of this week, movements yesterday were modest with 10Y Germany dropping 1bp during the session. However, the widening between Germany and other EU government bonds such as Italy continued.

FX: EUR/USD went briefly below 1.12 yesterday, pulled lower by strong US data and speculations of more restrictions across Europe. EUR/GBP is still trading plus/minus 0.84. Today's Riksbank meeting is a potential market mover for EUR/SEK.

Credit: Credit markets continued to sell off yesterday with iTraxx Xover and Main 2.3bp and 0.6bp wider, respectively. HY bonds widened 4bp and IG almost 2bp.

Nordic macro

The event in Sweden today is the Riksbank policy announcement; what to expect? Firstly, we expect that the repo rate path will be extended by a quarter to Q4-2024 and that the Riksbank puts in a hiking bias at the far end of the forecast. A hiking bias earlier would be a hawkish sign. Secondly, news on QE: We believe that the message of keeping the balance sheet steady next year will be maintained, i.e. maturing assets will be re-invested. Still, this means an end to net QE. Finally, keep an eye on wordings regarding the inflation outlook. So far, the message has been similar to e.g. ECB; the current high inflation is driven mainly by energy and is likely to be transitory. We expect this to be the narrative this time around to but anything that sounds like higher uncertainty would probably trigger a market response.

In Denmark, the government plans to tighten corona restrictions further starting Monday, by requiring persons to wear face masks when travelling on public transport and shopping. However, according to our latest spending data, Danes did not cut back on restaurant spending last week despite the re-introduction of the need to show a negative test or vaccination certification when going to public places.

General trend

• US equity FUTs trade modestly higher.
• Nikkei rebounds after lagging during prior session.
• Hang Seng ended morning trading slightly higher (+0.1%); Property developer Kaisa Group gains [resumed trading after extended trading halt, announced debt exchange offer]; Evergrande shareholder said to sell shares.
• HK Casino cos. have been supported by broker comments; China and Hong Kong officials to hold travel talks on Thurs (Nov 25).
• Shanghai Composite has traded slightly lower.
• S&P ASX 200 traded slightly higher [Resources index rose, Financials and Energy indices declined].
• Japan again sells 40-year JGBs at multi-year low BTC.
• China’s Commerce Ministry (MOFCOM) sometimes holds weekly news conferences on Thurs.

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened +0.1%.
• (NZ) Reserve Bank of New Zealand (RBNZ) Gov Orr: Reiterates no regrets on loose policy, we did what was needed, but now it is time to remove stimulus; Economy is running above potential growth rate - post rate decision interview.
• EML.AU Notes Central Bank of Ireland update, PFS card services Ireland got a correspondence; CBI will permit unit to sign new customers and launch new programs while staying within material growth restrictions.
• (AU) AUSTRALIA Q3 PRIVATE CAPITAL EXPENDITURE Q/Q: -2.2% V -2.0%E.

Japan

• Nikkei 225 opened +0.6%.
• (JP) Japan Govt expected to issue additional ¥22T in extra spending in the FY21/22 extra budget [in line]; To fund spending with ¥36T to fund stimulus to soften blow from coronavirus.
• 8303.JP To withdraw poison pill defense against SBI Holdings; Oasis and Japan Deposit Insurance Corp said to have voted against the takeover defense - Japanese press.
• (JP) Japan considering offering a ¥5,000 inbound travel subsidy - Japan press.
• (JP) Japan Chief Cabinet Sec Matsuno: Will decide on Beijing Olympics (political boycott) at an appropriate time.
• JGB (JP) Japan MoF sells ¥600B v ¥600B indicated in 0.70% 40-year JGBs, Yield at lowest accepted price 0.7250%% v 0.7700% prior, bid to cover: 2.37x v 2.53x prior (Multi year low).
• (JP) Japan Sept Final Leading Index CI: 100.9 v 99.7 prelim; Coincident Index: 88.7 v 87.5 prelim.

Korea

• Kospi opened +0.1%.
• (KR) BANK OF KOREA (BOK) RAISES 7-DAY REPO RATE 25BPS TO 1.00%; AS EXPECTED; Decision was NOT unanimous (1 member Joo Sang-Yong dissenter, wanted to hold rates).
• (KR) BOK updates staff projections: Maintains 2021, 2022 GDP outlook, gives initial 2023 at 2.5%; Raises 2021 CPI to 2.3% (prior 2.1%; 2022 2.0% (prior 1.5%), initial 2023 CPI 1.7%.
• (KR) Bank of Korea (BOK) Gov Lee: To reduce accommodation in line with economic flow; policy interest rate is still accommodative, despite last increase; Difficult to say definitively when a rate hike will come again, current policy rate below neutral interest rate, Should not rule out rate hike in Q1 2022 – post rate decision press conf.

China/Hong Kong

• Hang Seng opened +0.1%; Shanghai Composite opened 0.0%.
• (CN) China State Planner (NDRC): Expects coal storage at power plants to hit historical highs by end of Nov.
• (CN) China Govt said to have asked insurance companies to fix problems found in a comprehensive risk check in H1, in order to prevent any risks – Press.
• (CN) China CSRC (securities regulator) Official Shen: In open talks with US authorities to resolve delisting threat, support Chinese companies selecting Hong Kong or other places for IPOs.
• (CN) China PBOC sets Yuan reference rate: 6.3980 v 6.3903 prior.
• (CN) China PBOC Open Market Operation (OMO): Sells CNY100B in 7-day reverse repos v CNY100B prior; Net inject CNY50B v Net inject CNY50B prior.
• (CN) China to use more fiscal policy support to help growth [in line]; domestic economy is expected to have stable start in 2022 amid fiscal support; cites analysts - China Securities Journal.
• 700.HK China Industry Ministry (MIIT) said to have freezed all Tencent apps from releasing and updating on data privacy concerns - press.

Other

• (MX) Mexico Central Bank (BANXICO) Gov Nominee Rodriguez: Will combat inflation and not touch international reserves – tweet.
• (TW) Taiwan said to consider a cut on commodity tariffs to slow inflation - Press.

North America

• (US) US President Biden had a colonoscopy last week, a polyp was removed during the colonoscopy which is said to be benign and slow-growing; polyp is also thought to be precancerous lesion for which no further action is required at the current time - financial press.
• (CA) Canada Trade Min: Extremely disappointed that US has decided to increase Softwood Lumber duties to 17.9% on most producers in Canada.

Europe

• (EU) ECB’s Schnabel (Germany): Inflation will start to slowly normalize starting in January; Does not see serious risk of stagflation (US session).

Levels as of 00:15ET

• Hang Seng -0.1%; Shanghai Composite -0.2%; Kospi -0.4%; Nikkei225 +0.8%; ASX 200 +0.1%.
• Equity Futures: S&P500 +0.3%; Nasdaq100 +0.2%, Dax +0.3%; FTSE100 +0.2%.
• EUR 1.1219-1.1198; JPY 115.46-115.31; AUD 0.7210-0.7192; NZD 0.6894-0.6866.
• Commodity Futures: Gold +0.5% at $1,792/oz; Crude Oil -0.1% at $78.31/brl; Copper -0.3% at $4.46/lb.