Itrax Xover News Today

Cautionary tone by Fed speakers. On Friday, some FOMC participants cautioned against declaring victory over inflation despite the recent positive signals. Collins (non-voter) noted that she has seen less progress on non-shelter services inflation and that additional rate hikes cannot yet be taken off the table. Goolsbee (voter) underscored that taming inflation remains the Fed's key focus over growth or the labour market. Daly (non-voter) emphasized that the Fed 'needs patience' a...

Equities: Equities continued higher yesterday but lost some steam during the afternoon. Yields continue to govern the direction of equities, and it was after yields began to rise that equities retreated. Europe rose a mild 0.4% and US 0.2%. Cyclicals beat defensives and value made a revenge vs growth. Staples and banks were in the top yesterday while utilities declined a little after the surge earlier this week. US futures are a tad lower this morning.

Today's US data is not the kind that usually moves markets a lot: industrial production, NAHB housing market index and Philly Fed index for November.

Yesterday's, US October CPI surprised to the downside both in headline (+0.04% m/m SA; consensus +0.1%, Sep +0.40%) and core (+0.23% m/m SA; consensus +0.3%; Sep +0.32%) terms. Shelter accounted for the majority of the downtick in core inflation, but promisingly for the Fed, price pressures in the broader services sector also appeared to moderate.

US CPI for October is the highlight of this week in terms of data releases. We expect headline at 0.1 m/m and core at 0.3% m/m in line with consensus but with uncertainty coming from the auto worker's strike which might have temporarily raised car prices, as well as from technical factors related to the calculation of health insurance premiums. If there is an upside surprise related to those issues, the market should see through it.

US CPI will be the main focus today. We forecast both headline and core CPI below consensus expectations at +0.2% in m/m SA terms (consensus 0.3%). The energy price contribution remains positive and used car prices have edged slightly higher lately, but the shelter component continues to put downward pressure on inflation figures. Gradually cooling wage growth points towards further easing in core services CPI excl. shelter as well, which remains the key point of focus for the Fed.

Natural gas prices rose further yesterday, while oil prices stabilised. Multiple shocks have hit the natural gas market. Israel shut down part of its production and exports following the outbreak of the war with Hamas. Finland is investigating a leak on gas pipeline that may be due to external drone damage. Weather has turned colder in Northern Europe increasing heating demand. Finally, there is a risk of new strikes among LNG workers in Australia. The 1M TTF future rose close to EUR50/MWh yeste...

Risk sentiment improved overnight as dovish comments from Fed members fuelled a strong rally in US bonds in Asia after the US market was closed overnight. Fed Vice Chair Philip Jefferson said Monday officials could "proceed carefully" following the recent rise in Treasury yields. Fed member Lorie Logan from Fed Bank of Dallas stated the surge in long-term rates may mean less need for further tightening. Also risk markets calmed down from the initial uncertainty in the Middle East as th...

A busy week starts off with inflation data from the Nordics. In Norway, strong wage growth continues to support broader inflation pressures, and we expect August core inflation to tick slightly higher to 6.6% y/y (from 6.4%). In Denmark, inflation likely remained more muted, we think headline prices rose 3.0% y/y in August.

Today, we get the final German inflation figures. This will hold more information on what lies behind the still quite sticky core inflation in August. In Sweden, we get lots of interesting data with GDP, production value indicator, and consumption indicator.