Rise and shine everyone.

Happy Friday. Today, the focus for the US will be retail sales data. After yesterday’s discussion by Fed Chair Powell about slowing down the pace of cuts, this data will be crucial to determine whether we will actually see another cut in December. A strong print could deter the Fed from cutting.

The probability of a cut is already lower, according to CME FedWatch.

Other news dominating the headlines have been Trump’s picks for his next administration. Many of them have been controversial, and it remains to be seen how many of them actually get confirmed. The Trump Trades have been pulling back over the last couple of days and part of the reason is perhaps the idea of stagflation sinking in. The market is gradually adjusting to the idea of what higher inflation and a slower pace of cuts could mean for companies.

Japan sees upside; Hikes may be on the cards

Japan’s three major banks exceeded expectations in their H1 earnings, reporting a combined net income of ¥2.55 trillion ($16.7 billion), compared to ¥2.0 trillion estimates. Individually, Mitsubishi UFJ achieved ¥1.26 trillion, Sumitomo Mitsui ¥725 billion, and Mizuho ¥566 billion, though still lower than last year’s record ¥3.1 trillion. Following the results, Mizuho and Mitsubishi UFJ shares rose by 5%, while Sumitomo Mitsui saw a modest 0.3% gain.

In macroeconomic updates, Japan’s Q3 GDP grew by 0.3%, ending two consecutive quarters of year-over-year declines. Meanwhile, USD/JPY breached the 156 level in early trading before retreating slightly after announcements that BOJ Governor Ueda would speak on November 18th. Officials voiced concerns about sharp, one-sided FX moves, contributing to the pullback. Speculation of a potential BOJ rate hike in December increased, with pricing in swaps rising from a 32% to a 52% probability. The 5-year JGB yield rose further post-auction, adding 1.7bps to reach 0.713%.

China - Housing under pressure but spending improves

China’s latest economic data revealed a mixed picture for October. Home prices fell in 67 of 70 cities, with Shanghai being the only city to show a marginal increase. Industrial production was broadly in line with forecasts but showed notable increases in chip production (+11.8% y/y) and auto production (+4.8% y/y), raising global concerns about overproduction.

Retail sales were a highlight, climbing close to the 5% mark and beating expectations by 1%. Earlier policy measures have likely been effective in stabilizing domestic demand and anticipate sustained near-term growth.

Additionally, the People’s Bank of China (PBOC) executed a record net cash injection of nearly CNY 1 trillion in today’s open market operations, surpassing the prior record of CNY 733 billion in October 2023. The PBOC attributed the move to counteracting maturing loans and tax payment pressures.

Charts of the Day - BofA’s Flow Show

We broke quite a few records in the last couple of weeks. BofA’s flow show has some great charts.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)