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Tuesday, November 29, 2022

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Stock Rally Fizzles As Red Wave Downgraded To Red Ripple

Futures and yields are flat, both recovering from a dip earlier in the session, as investors kept an eye on midterm election results ahead of key inflation data later in the week. To the disappointment of bulls, a Red Wave failed to emerge in Congress as voters delivered a mixed verdict in elections shaped by inflation and split around social issues, with Republicans headed toward control of the US House, but by smaller margins than forecast, while the Senate majority remains a toss-up.

In the House, official results have Republicans on 196 and Democrats on 168. Projections from the New York Times (seats either already won by a party or projected to win) put the Republicans on 219 and Democrats on 207 with 9 seats viewed as “tossups”. In the Senate, official results have Republicans on 47 and Democrats on 48. Democrats won in PA (where a brain-damaged Fetterman managed to flip a critical seat which even liberal pollsters said was set to go to republican Challenger Dr. Oz ) and NH; GOP is leading in NV and WI; Democrats leading in AZ and GA. Three key battleground states which are yet to be called are Arizona, Nevada and Georgia. The Georgia seat could end up having to be decided via an election run-off which would be held on December 6th. As such, the outcome of the election might not be known for weeks.

“It is clear that any Republican majority is likely to be extremely narrow. From a market perspective, that would certainly be attractive,” said DWS Global Chief Investment Officer Bjoern Jesch. “On the one hand, this would remove corporate tax increases or other spending packages that would have threatened both houses if the Democrats marched through. On the other hand, the Republicans would probably be too divided to set their own strong accents in legislation.”

Back to markets, where Nasdaq 100 futures were down -0.5%, while S&P 500 futs slipped 0.4% at 7:30 am ET after fluctuating between gains and losses one day after stocks capped a three-day rally.

In premarket trading, News Corp. and Disney both tumbled at least 8% after posting disappointing results. A selloff in cryptocurrencies deepened, sending Bitcoin toward the biggest four-day slump since June. Oil slid on the now daily sluggish demand outlook from China. The dollar rose while yields were flat.  Affirm Holdings shares tumbled 16% as analysts said the buy-now-pay-later firm’s guidance cut and ongoing credit deterioration overshadowed a solid quarter. Meta Platforms Inc. gained after confirming job cuts of about 13% and let more than 11,000 of employees go. Here are some of the biggest US movers today:

  • Amyris shares slump 22% in US premarket trading after the chemical products distributor reported third-quarter revenue that missed the average analyst estimate. Piper Sandler said more clarity was given on the outlook, but thought there was still some uncertainty.
  • Axon Enterprise reported strong quarterly results and the outlook for the taser and body cameras maker remains strong, analysts say. Axon shares rose 7.7% in extended trading following the results.
  • CarGurus shares drop 22% in premarket trading after the car retailer reported weak 3Q results and gave disappointing guidance, with analysts unsure how long it will take the firm to fix the challenges it faces.
  • Keep an eye on News Corp (NWSA US) after the company reported first-quarter revenue that came ahead of Guggenheim’s estimates, though the broker notes management’s comments on headwinds stemming from factors such as exchange rates persisting into the next quarter.
  • Kroger stock gains 1.3% in premarket trading as Evercore ISI upgraded it to outperform, saying that risk/reward appears favorable with food inflation likely to stay higher for longer.
  • Shares in cryptocurrency- exposed companies dropped in US premarket trading as digital currencies extended their losses, with Binance’s potential takeover of troubled rival exchange FTX stoking worries over the fragility of the industry.Riot Blockchain (RIOT US) -3.8%, Marathon Digital (MARA US) -5%, MicroStrategy (MSTR US) -7%, Coinbase (COIN US) -5%
  • Tesla shares rise as much as 1.9% in US premarket trading following three days of losses and lowest level since June 2021; CEO Elon Musk sold $3.95 billion of shares in the electric-vehicle maker.
  • Upstart slumps about 26% in US premarket trading and is set to hit the lowest level since its IPO in 2020. The AI lending platform’s 3Q results are well below expectations as it deals with significant pressure on its core business from a weakening macro backdrop, analysts say.

Investors had hoped for a Republican “Red Wave” in Congress, with the best outcome seen as GOP control of both the House of Representatives and Senate. Optimism for shares has been helped by a history of robust performance following midterm results. Stocks have tended to flourish during times when government is constrained and polls suggest Republicans could make gains, placing a check on Democratic policies. But voters – and the USPS – delivered a mixed verdict, with Republicans heading for control of the House by smaller margins than forecast and the race for Senate still wide open. The final outcome may not be known for days or even weeks if the results are as close as polls have suggested and if losers challenge results.

“The Republican aim of controlling both houses hangs by a thread,” Chris Beauchamp, the chief markets analyst at IG Group in London, wrote in a note. “A divided House might mean the partisan battles over spending and the debt ceiling are not quite as dramatic or vitriolic, but this is unlikely to brighten the policy outlook markedly. Instead, the focus will likely return to the Federal Reserve and the US economy.”

That left Thursday’s inflation report the next catalyst for markets. Economists are expecting the figures to show consumer prices cooled slightly compared with the previous month. The data could provide crucial clues on how the Federal Reserve is likely to proceed with tightening monetary policy.

“Tension is high and investors won’t want to be burnt by jumping the wrong way ahead of that inflation data, because in the past expectation has proved a little off the mark,” said Danni Hewson, a financial analyst at AJ Bell.

In Europe, the equity benchmark fell for the first time in four days, dragged by tech, real estate, travel- and automotive-industry shares. Euro Stoxx 50 falls 0.7%. IBEX is flat but outperforms peers, DAX lags, dropping 0.8%.  Here are some of the biggest European movers today:

  • Vantage Towers shares jump as much as 11% after Vodafone said in a statement that it will deconsolidate its 81.7% interest in the tower business by creating a joint venture with KKR and Global Infrastructure Partners to hold the stake.
  • Smiths Group rises as much as 5.4%, hitting the highest since Feb. 2020, with analysts saying the industrial group delivered a strong start to its fiscal year.
  • Recordati shares rise as much as 4.8%, hitting the highest since Sept. 19 and extending gains after its results in the prior session, as Banca Akros upgrades its rating on the drugmaker.
  • Scor shares reversed earlier declines on the back of its third quarterly loss in a row and climbed as much as 4.5%, as analysts focused on their deep value and noted that a cost- cutting plan marked a pivotal moment for the French reinsurer.
  • Commerzbank shares decline despite the German lender delivering a beat on its quarterly earnings, with Deutsche Bank flagging what looks like conservative guidance for 2024. Shares fall as much as 7.6%.
  • Evotec falls as much as 12%, the most in three months, after analysts said the German biotech missed quarterly estimates, with investments in the Just-Evotec Biologics arm hurting profits.
  • ITV shares drop as much as 6.6% after the broadcaster said rising costs will be an issue in 2023. Barclays notes this is the first time ITV has mentioned that inflation may hit its costs and earnings. While 3Q results largely met expectations, analysts say the 4Q advertising outlook fell short amid growing economic uncertainty.
  • Marks & Spencer falls as much as 7%, the most since Sep. 29, after the UK retailer’s trading update is seen as offering little reassurance in the face of demand headwinds and cost inflation.

Earlier in the session, Asian shares were little changed after three straight gains of more than 1%, as a rally in tech stocks offset losses in Chinese shares and investor worries about US midterm election results. The MSCI Asia Pacific Index was up 0.01% as of 6:04 p.m. in Singapore, with chipmakers TSMC and Samsung Electronics among the biggest boosters, while Chinese internet names fell amid concerns over Singles Day sales.   With Republicans headed toward control over the US House of Representatives — albeit by a smaller margin than forecast –some investors say it portends difficulty in passing legislation during a trying economic period, while others see political gridlock as preserving status quo. “This could be a dysfunctional political situation at a time of economic crisis,” said Gary Dugan, chief executive officer at the Global CIO Office. However, there may be some positive impact on Asia stocks if the dollar tops out, he added.

Meanwhile, tech shares extended a rebound on cheaper valuations, boosting benchmarks in Taiwan and South Korea. Key gauges in China and Hong Kong, however, dropped for a second straight day after a recent rebound. The decliners were influenced as Chinese producer prices fell into deflation for the first time in nearly two years amid lockdowns and new Covid cases in Beijing jumped. While Asia’s benchmark index has rebounded more than 7% from a recent trough, all eyes are on US consumer price inflation data due Thursday for a sense of the Federal Reserve’s next policy step. Growing lockdowns in China are also weighing on sentiment. “We don’t think the worst is over for Asian equities even though the markets have bounced back about 7% from the late October bottom and flows have picked up,” said Manishi Raychaudhuri, a strategist at BNP Paribas. “The Fed’s hawkish stance on inflation shall sustain till there are clear signs of core inflation peaking out.”

Japanese stocks fells: the Topix dropped 0.4% to 1,949.49 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 0.6% to 27,716.43. Nintendo contributed the most to the Topix’s loss, decreasing 7.1%. Out of 2,165 stocks in the index, 1,020 rose and 1,022 fell, while 123 were unchanged.

In India, stocks fell from their near-record levels as investors booked profits in recent outperformers such as ICICI Bank and Hindustan Unilever. Stocks across Asia were mixed as investors await midterm poll results in the US.  The S&P BSE Sensex fell 0.3% to 61,033.55 in Mumbai, while the NSE Nifty 50 Index eased by an equal margin. Both indexes still trade about 1% short of their record levels seen in October last year.  Fifteen of BSE Ltd.’s 19 sector sub-gauges dropped, led by consumer durable companies as trading resumed after a holiday on Tuesday. Tata Motors, the owner of Jaguar Land Rover, reported smaller-than-expected loss for September quarter, adding to Indian companies’ stronger show for the earnings season. Of the 44 Nifty firms that have announced results so far, 31 have met or beaten analysts’ estimates, while 10 missed. ICICI Bank contributed the most to the Sensex’s decline, decreasing 0.6%. Out of 30 shares in the index, 8 rose and 22 fell.

Australian stocks rallied for a 4th day: the S&P/ASX 200 index rose 0.6% to close at 6,999.30, boosted by gains in mining and real estate shares. A gauge of mining shares hit the highest since Aug. 26 after metal prices increased. Shares of gold miners, including St Barbara, were the benchmark’s best performers after the metal advanced on a slide in the US dollar.  In New Zealand, the S&P/NZX 50 index was little changed at 11,143.48.

In FX, the Bloomberg Dollar Index rebounded and the greenback rose versus all of its Group-of-10 peers as risk assets turned lower. One-day hedging costs rallied across the major currencies, modestly higher than what the roll suggested, as focus shifts to Thursday’s US inflation report. Risk sensitive currencies, such as the kiwi and pound fell by around 1% against the greenback. The euro fell, but remained above parity.

  • The pound plunged by as much as 1.1% after three days of gains, while gilts twist flattened. Bank of England monetary policy committee members Jon Cunliffe and Jonathan Haskel are due to speak later, a day after Chief Economist Huw Pill suggested that the stimulus program through the pandemic was a mistake and contributed to inflation
  • Australian sovereign bonds extended opening gains after data showed that China’s producer prices fell into deflation for the first time in nearly two years. The producer price index declined 1.3% in October from a year earlier after gaining 0.9% the previous month
  • Japanese government bonds rose after a solid sale of 30-year bonds alleviated concerns about demand for super-long debt. The yen was steady

In rates, Treasuries were mixed with the curve flatter, pivoting around a little-changed 10-year sector. Bunds outperform, bull-flattening sharply, while stocks hover near top of Tuesday’s range. US yields richer by nearly 2bp across long-end of the curve and cheaper by ~1bp across front-end, leaving 2s10s, 5s30s spreads flatter by 1bp and 2bp on the day, while 10-year at around 4.125% is little changed from Tuesday’s close. Bunds outperform by 4.5bp in the 10-year sector, gilts by 1.2bp. Focal points of US session focus include 10-year note auction and a couple of Fed speakers ahead of Thursday’s inflation data: the US auction cycle resumes with $35b 10-year at 1pm, followed by $21b 30-year Thursday; Tuesday’s 3-year note sale was strong, drawing a yield 1.2bp below the WI at the bidding deadline.  Two-year German and Italian government bond yields inched up while falling further out. One trader has placed a large bet using options on German 10-year futures, targeting the yield to fall to 1.55% for maximum profit, down from about 2.25% currently

In commodities, WTI drifts lower to trade near $88. WTI and Brent futures are softer intraday as the Dollar claws back some recently lost ground and sentiment remain tilted to the downside, while China’s COVID situation remains an overhang for the complex. Spot gold fell roughly $7 to trade near $1,705/oz, swayed from gains to losses after testing resistance at its 100 DMA (1,715/oz) in early European hours, before a turn in risk sentiment spurred the Dollar and hit the yellow metal. Base metals are pressured by the downbeat risk tone and the firmer Dollar, but 3M LME copper holds onto a USD 8,000/t handle after testing USD 8,100/t to the upside overnight.

Cryptocurrencies slipped further as Binance’s potential takeover of embattled rival exchange FTX.com highlighted how strains in the digital-asset industry are buffeting some of its top players. Bitcoin traded as much as 7.7% lower.

To the day ahead now, and although investors will be digesting the midterm results, there are a few central bank speakers to look out for as well, including the Fed’s Williams and Barkin, the ECB’s Elderson, and the BoE’s Haskel and Cunliffe.

Market Snapshot

  • S&P 500 futures down 0.4% to 3,820.50
  • STOXX Europe 600 down 0.8% to 418.34
  • MXAP up 0.2% to 144.17
  • MXAPJ up 0.5% to 464.43
  • Nikkei down 0.6% to 27,716.43
  • Topix down 0.4% to 1,949.49
  • Hang Seng Index down 1.2% to 16,358.52
  • Shanghai Composite down 0.5% to 3,048.17
  • Sensex down 0.2% to 61,067.52
  • Australia S&P/ASX 200 up 0.6% to 6,999.30
  • Kospi up 1.1% to 2,424.41
  • German 10Y yield down 0.9% to 2.26%
  • Euro down 0.2% tp $1.0051
  • Brent Futures down 0.7% to $94.71/bbl
  • Gold spot down 0.3% to $1,707.98
  • U.S. Dollar Index up 0.1% to 109.79

Top Overnight News from Bloomberg

  • US voters delivered a mixed verdict in elections shaped by inflation and splits around social issues, with Republicans headed toward control of the US House, but by smaller margins than forecast
  • Consumers’ expectations for inflation over the next 12 months rose to 5.1% in September from 5% in August, European Central Bank says in statement summarizing the results of its monthly survey
  • Euro-area wage growth has jumped, with most occupations seeing raises of at least 3%, according to an analysis of job ads that also suggests the pace of increases may be flattening
  • Two key indicators of Chinese interbank borrowing costs have hit a three-month high, as the nation’s central bank faces a crucial decision on what to do with a massive amount of policy loans due next week
  • Hungary’s annual price growth increased by a full percentage point in October to 21.1%, data published Wednesday showed. The nation is closing in on the three Baltic states that have the fastest inflation in the EU

A more detailed summary of global markets courtesy of Newsquawk

Asia-Pac stocks traded cautiously and US equity futures were indecisive as attention focused on the trickling results from the US Midterm Elections where a red wave has so far not yet materialised although Republicans are in a strong position to take control of the House, while the Senate race is still widely viewed as a toss-up. ASX 200 was led higher by strength in the mining-related sectors although upside was capped as financials are subdued following results from National Australia Bank which posted an increase in FY profit but warned of a significant slowdown in lending growth for the current fiscal year. Nikkei 225 faded its initial gains with price action lacklustre amid a slew of earnings and despite Japan’s Cabinet approving a JPY 29.1tln extra budget to fund the stimulus package. Hang Seng and Shanghai Comp swung between gains and losses with early strength in property names after China’s state planner asked large banks to step up lending for manufacturing infrastructure and developers, with China to provide initial support of around CNY 250bln in bond financing to private firms, although COVID-related headwinds persisted following a further increase in China’s daily infections and participants also reflected on the mixed-to-soft inflation data. Chinese developers jumped the most in eight months as a regulator expanded financing support for the sector.

Top Asian News

  • China’s Guangzhou reportedly locked down a second district due to coronavirus. However, it was separately reported that China lifted the lockdown in the area around Foxconn’s Apple (AAPL) iPhone plant as planned, according to Bloomberg.
  • China’s Guangzhou locks down another district amid COVID, according to Bloomberg.
  • China reported 1,346 (prev. 890) new coronavirus cases in the mainland for November 8th, 1,294 (prev. 843) new local cases and 6,989 (prev. 6,801) new asymptomatic cases, according to Reuters.
  • US President Biden will highlight a commitment to rules-based international order in the South China Sea during the ASEAN summit and will talk about the need for peace and stability throughout the Indo-Pacific region and across the Taiwan Strait, according to a senior administration official cited by Reuters.
  • RBA’s Bullock reiterated that further rate hikes will be needed. Wage growth is a bit stronger than thought three months ago. Good reason to think approaching peak of the inflation cycle, via Reuters.

In Europe, major bourses hold a downside bias after seeing some choppiness at the cash open and following a somewhat mixed APAC handover. Sectors are all in the red with a clear defensive bias as Telecoms, Utilities, Healthcare, Food & Beverages post the shallowest losses, whilst Tech, Travel & Leisure, Real Estate and Retail reside at the other end of the spectrum. US equity futures traded sideways on either side of breakeven overnight and in early European hours but have since drifted under the overnight lows.

Top European News

  • UK PM Sunak could raise the top rate of income tax, according to The Telegraph. Options being discussed include raising the 45% top rate, or lowering the GBP 150k annual income threshold at which it kicks in.
  • UK Chancellor Hunt is set to scrap former PM Truss’ plan for investment zones, according to FT.
  • EU is mulling Eurobonds for Ukraine fund, Politico reported – will propose a new EU instrument to finance EUR 18bln.
  • ECB Says 12-Month Consumer Inflation Expectations Rose Slightly
  • Adidas Cuts Margin Forecast After Ending Yeezy Partnership
  • M&S Falls Amid Concerns Over Demand, Cost Inflation For Retail
  • Top Sunak Ally Williamson Resigns Amid Bullying Allegations
  • Commerzbank’s New Targets Disappoint Investors as Charges Mount

FX

  • DXY attempted to stop the rot and nurse some losses awaiting the remaining and potentially game-changing Midterm Election results, with the index now on either side of 110.00.
  • The NZD and GBP underperform and more ground than other majors as the Buck bounced, with nothing obvious in terms of negative NZ or UK factors.
  • Traditional havens JPY and CHF are off best levels, but retained a safety premium as the rout in crypto currencies raged on and the ripples reverberated across to stocks.

Fixed Income

  • US Treasuries are braced for the long bond sale that wraps up this week’s rather mixed Quarterly Refunding.
  • Gilts remain in the green having digested an average Green offering.
  • Bunds saw a lack of positive reaction despite a very well received 2032 German auction.

Commodities

  • WTI and Brent futures are softer intraday as the Dollar claws back some recently lost ground and sentiment remain tilted to the downside, whilst China’s COVID situation remains an overhang for the complex.
  • US Energy Inventory Data (bbls): Crude +5.6mln (exp. +1.4mln), Cushing -1.8mln, Gasoline +2.6mln (exp. -1.1mln), and Distillate -1.8mln (exp. -0.9mln).
  • IEA’s Birol said OPEC+ might need to rethink its output cut decision, according to Bloomberg
  • Spot gold swayed from gains to losses after testing resistance at its 100 DMA (1,715/oz) in early European hours, before a turn in risk sentiment spurred the Dollar and hit the yellow metal
  • Base metals are pressured by the downbeat risk tone and the firmer Dollar, but 3M LME copper holds onto a USD 8,000/t handle after testing USD 8,100/t to the upside overnight.

Geopolitics

  • North Korea fired a missile, according to South Korean military; could be a ballistic missile, according to Japanese Coast Guard; projectile has fallen outside of Japan’s EEZ.
  • German cabinet has agreed to block the prospective Chinese takeover of Elmos chip factory and ERS electronics, according to government sources cited by Reuters.

US Event Calendar

  • 07:00: Nov. MBA Mortgage Applications, prior -0.5%
  • 10:00: Sept. Wholesale Trade Sales MoM, est. 0.5%, prior 0.1%
  • 10:00: Sept. Wholesale Inventories MoM, est. 0.8%, prior 0.8%

Central Banks

  • 03:00: Fed’s Williams Discuss Risk and Uncertainty at Event in Zurich
  • 11:00: Fed’s Barkin Discusses the Economic Outlook
  • 20:00: Fed’s Kashkari Discusses Inflation and the Economy

DB’s Jim Reid concludes the overnight wrap

As has been anticipated, it will take a few days to unpack the full results of the US midterms. What is clear at this hour though is that neither major party is running away with the election in a ‘wave’ and it appears that Republicans are still on track to achieve a majority in the House of Representatives, a combo that should put a pin in any new fiscal stimulus for the next few years. The New York Times model is currently showing that the Senate will likely finish with 50 seats each. So overall maybe Democrats slightly outperforming but it’s not too far away from expectations. The mix also seems to not be surprising markets too much, as S&P 500 futures (-0.07%) are oscillating between gains and losses as we go to press. Our US team will be hosting a webinar later today to unpack the implications with the link to register here.

As we awaited the results of the midterm elections, risk assets continued to put in a decent performance yesterday, with the S&P 500 (+0.56%) advancing for a 3rd consecutive session. A reminder that if history’s any guide that could prove to be just the start however, since in all 19 post-war midterm elections, the S&P 500 has closed above its levels on the day of the election after a year. We highlighted this a couple of months ago and in yesterday’s CoTD we showed how the 3 quarters from midterms have been the top 3 quarters for the S&P 500 since 1949 across the 4 year presidential cycle. However as I’ve eluded for a while, although I’ve thought midterms would be a short-term positive catalyst I suspect we won’t see this record spell stretch into a 20th successive positive outcome 12 months on. I’m going to take a stab at why we should ignore history today in my CoTD.

Back to yesterday and gains were pretty broad-based for a relatively modest index-level increase, with over 70% of the index moving higher on the day, and only the consumer discretionary sector in the red (-0.30%) on the day thanks to Tesla’s (-2.93%) decline. The Nasdaq flitted around zero, trading as much as +1.70% higher and -0.87% lower before splitting the difference to finish up +0.49%. After the close, Mark Zuckerberg confirmed that layoffs would start at Meta tomorrow, which won’t help tech sentiment. The sentiment wasn’t any better following Disney’s after-hours earnings, which came in below consensus and had the company ready to find “meaningful efficiencies” in light of rising costs. Disney’s shares were -6.83% lower after the close.

The S&P 500 had a bit of a wild swing after Europe went home moving from +1.35% to -0.55% in the space of an hour before closing higher (+0.56%) as Bitcoin (long time no mention) plunged to $17,187 having been as high as $20,655 as European equity markets closed. It bounced back into the close and is at similar levels as we type this morning at $18,430. Crypto exchange FTX.com had been suffering from a liquidity crunch before rival Binance agreed to buy it yesterday and the associated story created a fair amount of noise, some of it creeping into equities. This morning in Asia there are a few concerns the deal isn’t binding so one to keep an eye on. Before the late US vol, the STOXX 600 (+0.78%) hit its highest level in nearly two months, whilst the DAX (+1.15%) hit its highest level in nearly three months.

For sovereign bonds, the main focus is still on tomorrow’s US CPI report, but there was a decent rally ahead of that as investors modestly dialled back their expectations of future central bank rate hikes. For instance, the futures-implied rate for the Fed in December 2023 came down -6.1bps to 4.80%, having traded as high as 4.88% earlier in the European morning. In turn, that prompted a rally in Treasuries across the curve, with the 10yr yield down -9.0bps on the day to 4.12%, with roughly half of the decline in real yields, which fell -5.2bps. In the meantime, the 2s10s yield curve flattened -1.7bps to -53.1bps, remaining just above its post-1982 closing low of -57.3bps from last week. Meanwhile, in Asia, 2 and 10yr yields are back up a basis point.

Over in Europe, there was a similar sovereign bond rally, with yields on 10yr bunds (-6.3bps), OATs (-6.6bps) and gilts (-9.0bps) all lower on the day. At the front end however, UK gilts underperformed, with the 2yr yield up +5.3bps after BoE chief economist Pill said that “there is more to come” on rates following their 75bp hike last week. Overnight index swaps are currently pricing a nearly even split between a 50bps or 75bps hike at the next meeting in December.

This morning in Asia, equities are mostly trading lower led by the Hang Seng (-1.52%) with the CSI (-0.75%), the Shanghai Composite (-0.35%) and the Nikkei (-0.54%) all trading in negative territory. Elsewhere, the KOSPI (+1.00%) is bucking the trend.

We’ve had softer price data coming out of China as the nation’s producer price index (-1.3% y/y) in October fell for the first time in two years, down from +0.9% growth in September as strict Covid restrictions coupled with a sluggish property sector amid global recession risks dented the economy. Meanwhile, consumer inflation in October (+2.1% y/y) moderated from September’s 29-month high of +2.8% (v/s +2.4% expected) pointing towards underlying domestic price pressures remaining modest.

Staying on China, the Chinese yuan extended its decline for a third day, weakening past the 7.25 level against the dollar after the data. The subdued inflation figures suggests that the PBOC policy divergence against its global peers will continue.

There wasn’t much in the way of data releases yesterday, with Euro Area retail sales growing by +0.4% in September, in line with expectations. That said, there was a positive revision to August which showed that retail sales were unchanged, as opposed to the -0.3% contraction previously released. Otherwise in the US, the NFIB’s small business optimism index for October fell for the first time since June, coming in at 91.3 (vs. 91.4 expected).

To the day ahead now, and although investors will be digesting the midterm results, there are a few central bank speakers to look out for as well, including the Fed’s Williams and Barkin, the ECB’s Elderson, and the BoE’s Haskel and Cunliffe.

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