Breakfast Bites - Fed, Bank of England, Norges Bank all hold rates; Brazil cuts

Rise and shine everyone.

The big news everyone is waiting for today is Apple’s earnings after the close. Expectations are muted but with the market trending higher, even a miss may not have a dire effect.

No surprises from the Fed yesterday and while Fed Chair Powell leaned somewhat hawkish, the consensus is largely that the Fed is done raising rates.

But, a surprise from Brazil with a 50bps rate cut bringing down the Selic rate to 12.25%. This is an interesting move at a time when inflation seems to be resurging and emerging markets are considering to hold rates steady.

Norges Bank (Norway) this morning held rates steady at 4.25% leaving the door open for a hike in December.

The Bank of England also holds rates at 5.25%, as expected.

US Equity Futures are trading higher this morning, in continuation of yesterday’s positive price action. The Quarterly Refunding Announcement from the US Treasury showed that issuances at the long end are going to be less that expected. They said they will offer $112B in Treasury securities, up from $103B in the prior quarter, but a bit below some estimates for ~$114B.

Lower supply = higher price = lower rates. The long end of the curve did pull back quite a bit on this news yesterday, and continues to trade lower this morning.

In keeping with Fed day, Gold pulled back heavily yesterday but is trading higher this morning at $1996/oz. Oil remains below $82/bbl and Bitcoin made a fresh high past $35,300. The US Dollar Index has pulled back marginally but still trades above 106.

Asia and Australia

• Asian equities ended mostly higher Thursday. Gains strongest in tech-dominated South Korea and Taiwan, Japan also higher for a third straight day. Australia higher, New Zealand surged. Greater China mixed as mainland bourses fell, Hong Kong held on to gains but was well off its peak. Southeast Asia and India all higher.

• Japan cabinet set to approve $112B stimulus package today. Key feature is the temporary tax cut starting as early as June 2024, including an income tax cut of JPY300K per person and resident tax rebate of JPY10K. Low-income households exempt from residential taxes will receive JPY70K. Stimulus also includes extension of gasoline/electricity/gas subsidies until April 2024.

• PBOC report on loans of financial institutions showed China's outstanding amount of loans to property sector fell CNY100B from a year earlier to CNY53.19T ($7.3T) by end-September, a first y/y decline on record since data became available in 2005. The 0.2% y/y drop contrasts with 10.9% growth seen in overall loans.

• Bank Negara Malaysia (BNM) kept its benchmark interest rate unchanged at 3.0% Thursday.

• South Korea October inflation rose 3.8% y/y for third consecutive monthly gain and versus expectations of 3.6%. On m/m basis, prices rose 0.3% versus September's 0.6% but above market forecasts for 0.15%. Core inflation at 3.6% versus 3.8% in September. This adds to the dilemma on whether the BoK should start easing or not. They have been on hold with rates since January 2023.

Europe, Middle East, Africa

• European equity markets sharply higher following a positive close on Wednesday.

• German unemployment rose more than forecast in October with number of people out of work increased by 30K to 2.678M versus consensus for 15K rise and prior 10K gain. The unemployment rate rose to 5.8% from 5.7%.

• Ireland October Unemployment Rate came in higher at 4.8% vs consensus 4.2% and prior 4.7%

• Novo Nordisk reports Q3 EPS DKK5.00 vs consensus DKK4.78. Revenue DKK58.73B vs consensus DKK57.81BOzempic sales came in lighter than expected at DKK23.91B vs consensus DKK24.12B, while Wegovy revenue outperformed at DKK9.65B vs consensus DKK7.75B. Reconfirmed guidance of 32-38% sales growth and 40-46% operating profit growth.

The Americas

• A host of data released yesterday for the US:

  • Oct US Challenger planned job cuts 36,836 vs 47,457 in Sep

  • Sep US JOLTS 9,553K job openings; Aug figure was revised to 9,497K from 9,610K; Quits rate remained stable at 2.3%.

  • Oct US ISM Manufacturing 46.7 vs. consensus 49.0; New Orders down to 45.5 vs. 49.2

  • Oct US ADP Employment +113K vs. consensus +143K

• The Atlanta Fed revised the GDP growth estimates for Q4, 2023 to 1.2% on November 1, down from 2.3% on October 27.

Chart of the Day: EM local currency bonds (in white) are riskier than US Treasuries (in blue) so they should have a higher rate. The gap between Emerging Market local currency bond yields and US Treasury bond yields have closed erasing any premium that EMs should provide. This can’t continue.

Calendars

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