Futures Rise As Dollar Slides, Ending 8-Week Winning Streak

US equity futures gained for the second day ahead of a shortened trading session after the Thanksgiving holiday, with Treasuries also rising and the dollar slipping amid mounting (if naive) speculation that president-elect Donald Trump will temper his most extreme trade policies drove the dollar to its biggest weekly loss in three months. As of 8:00am ET, S&P 500 and Nasdaq 100 futures both rose 0.2%, pointing to modest gains in Friday’s post-holiday trading session on Wall Street. The 10-year Treasury yield fell four basis points to 4.22%, the lowest in more than a month, as cash trading resumed after the Thanksgiving holiday. The Bloomberg Dollar Spot Index fell 0.2%, ending an 8 week winning streak and heading for its biggest weekly loss in three months. Oil prices oil prices reverse an earlier loss and trade near session highs with WTI now at $69.20, while gold adds $25 to $2660. Bitcoin rises above $96,000. There is nothing on today’s macro calendar.

In premarket trading, US semiconductor equipment makers climb after Bloomberg reported that additional US curbs on sales of chip technology to China may stop short of some stricter measures previously considered. Applied Materials shares rise 2.8% and Lam Research climb 3.3% in premarket trading. KLA is also gaining. Japanese and European chip-related stocks mostly gained on Thursday, when the US was closed. Some other notable movers:

• Applied Therapeutics (APLT) shares sink 73% after the biopharmaceutical company’s new drug application for govorestat, a galactosemia treatment, was rejected by the US FDA. RBC Capital Markets downgraded the stock to sector perform from outperform, saying the rejection was disappointing.
• Voyager Therapeutics (VYGR) rise 9% after Wedbush analyst Yun Zhong upgraded and assumed the coverage of the biotech firm, giving it an outperform rating while citing additional value of the drug developer’s programs.

Trump’s pick for his Treasury secretary has fueled optimism that tariffs will be measured, boosting US stocks and bonds, and sapping dollar strength. The Bloomberg Dollar Spot Index extended a weekly decline to more than 1%, snapping eight weeks of gains. The S&P 500 has already risen 5% in November, on course for its best month since February, and its best year this century…

… as investors plowed $141 billion into US equities, the heaviest inflows for a four-week period on record, according to EPFR data. A handful of tech titans have led 26% year-to-date gains in US stocks on the prospect of Federal Reserve rate cuts while the American economy continues to chalk up growth.

“We were talking day in and day out about trade tensions in 2019. What happened? The Nasdaq was on a tear. What mattered was the Fed was making a U-turn, real rates went down, and that drove equities,” Max Kettner, multi-asset chief strategist at HSBC Holdings Plc, said in an interview with Bloomberg TV. “That’s very similar to now — this is still a cutting cycle. It’s a fantastic set-up.”

European stocks were little changed, although miners including Anglo American Plc outperformed, boosted by optimism that China will adopt further measures to stimulate its economy. The Stoxx 600 rose 0.1% as telecoms and utilities sectors were the biggest laggards. Miners outperform, gaining on the back of strong iron ore prices that received a boost from new China stimulus hopes. Here are the most notable movers:

• Anglo American shares rise as much as 3.3% after Jefferies upgraded the mining firm to buy from hold, citing that shares are trading at a discount and its mergers and acquisitions potential.
• FLSmidth and Aalberts shares gain after both stocks were double-upgraded at Bank of America to buy in a review of the European industrials sector.
• Delivery Hero shares gain as much as 1.6% after the food delivery firm set the price for its Middle Eastern unit’s initial public offering at the top of the range.
• Spire Healthcare shares jump as much as 10% after Economic Times reported that Narayana Health is in talks with some Spire shareholders about buying a controlling stake.
• Elior and Accor shares rise as both stocks are upgraded to overweight at JPMorgan in a review of the broker’s leisure coverage.
• Norma shares surge as much as 23%, the most on record, after its management board announced plans to initiate a sale process for the global business activities of its Water Management unit.
• L’Oreal shares fall as much as 1.1% as Deutsche Bank cuts its price target on the cosmetics maker to a Street low.
• Telefonica and Santander shares fall, leading losses among Brazil-exposed Spanish companies fall after the Brazilian real tumbled to record lows.
• Swiss Life shares fall as much as 1.5% after ZKB cut its rating on the Swiss insurer to market perform from overweight after a “massive outperformance” in share price.
• Bank Pekao shares drop as much as 2.5%, after a report that it may buy a 31.9% stake in Alior Bank from PZU. Such a purchase would be detrimental for Pekao’s dividend potential, analysts say.
• Elia shares climbs 3% after the Belgian electricity company upgraded some of its earnings guidance for the full year.
• Enea shares drops as much as 5.7% as Poland’s 3rd-largest utility plans significant increase in spending in its new strategy for 2025-2035.

Earlier in the session, Asian stocks also edged higher as gauges in China rallied on expectations of greater economic support at a key policy meeting in December. The MSCI Asia Pacific Index rose as much as 0.6%. Speculation that authorities will release further stimulus is growing ahead of the Central Economic Work Conference, where the nation’s top leaders will lay out economic priorities for the coming year. Indian stocks also rose. Elsewhere, Korea’s Kospi Index fell 2% after the central bank’s surprise interest-rate cut on Thursday spurred concerns about economic growth. Japanese benchmarks also dropped as the yen strengthened on stronger-than-expected inflation reading out of Tokyo.

“The market is evaluating the CPI data as making the possibility of a BOJ rate hike in December slightly higher than before,” pushing up the yen and weighing on export-oriented stocks, said Tomo Kinoshita, global market strategist at Invesco Asset Management.

In FX, the Bloomberg Dollar Spot Index fell 0.2%, heading for its biggest weekly loss in three months.  The yen tops the G-10 FX leader board, rising 1% against the greenback and pulling USD/JPY down to around 150 after Tokyo inflation rose more than expected.

In rates, Treasury yields also declined at the start of a shortened US trading session that includes month-end index rebalancing at 1 p.m. New York time, estimated to extend its duration by 0.11 year. Yields are 3bp-6bp lower across the curve, 5- to 30-year at weekly lows, 10-year at 4.21%; 10- and 30-year fell below 200-day average levels for first time since late October. The US treasury market is headed for a monthly gain as benchmark yields have retreated from multimonth highs reached in the days following the US presidential election on Nov. 5; market-implied odds of a Federal Reserve interest-rate cut in December have rebounded to nearly 60%. As US markets reopen after Thursday’s holiday, yields also are lower in most euro-zone bond markets for second-straight day. German 10-year bonds hold higher after euro-area inflation rose in line with forecasts although shorter-dated maturities underperform. French bond spreads widen slightly after far-right leader Le Pen gave PM Barnier until Monday to accede to her budget demands before she decides whether to topple the government.

In commodities, oil prices reverse an earlier loss and trade near session highs with WTI now at $69.20, while gold adds $25 to $2660. Bitcoin rises above $96,000.

Friday’s early close times include Sifma’s recommendation of a 2 p.m. halt for trading of USD-denominated cash bonds, while Bloomberg index pricing is slated for 1 p.m. (vs 4 p.m. normally), aligning with early close for US stocks. Looking at today’s calendar, there is are no US economic data or speeches by Fed officials are scheduled, and no new corporate bond offerings are expected

Market Snapshot

• S&P 500 futures up 0.3% to 6,033.00
• STOXX Europe 600 down 0.1% to 506.73
• MXAP up 0.2% to 183.45
• MXAPJ little changed at 576.49
• Nikkei down 0.4% to 38,208.03
• Topix down 0.2% to 2,680.71
• Hang Seng Index up 0.3% to 19,423.61
• Shanghai Composite up 0.9% to 3,326.46
• Sensex up 1.0% to 79,862.53
• Australia S&P/ASX 200 little changed at 8,436.23
• Kospi down 1.9% to 2,455.91
• German 10Y yield little changed at 2.12%
• Euro up 0.1% to $1.0567
• Brent Futures down 0.5% to $72.89/bbl
• Gold spot up 0.8% to $2,660.17
• US Dollar Index down 0.13% to 105.91

Top Overnight News

• Mexico’s president spoke to Trump Wed afternoon, and both characterized the conversation as positive, suggesting a significant easing in tensions just days after Trump’s tariff threat (Trump used words like “wonderful” and “productive” to describe the talk). NYT
• Canada’s government is to bolster its investment in border security after Donald Trump threatened to impose steep tariffs over illegal immigration and drug smuggling across the US-Canada frontier. FT
• Trump could name a tough enforcer, Gail Slater, to lead the DOJ’s antitrust team, the latest indication that the incoming administration might not be as aggressive with its approach to deregulation as some hope. FT
• Japan’s Tokyo CPI for Nov spikes to +2.6% on a headline basis (up from +1.8% in Oct and above the Street’s +2.2% forecast) while the core number ticked up to +1.9% (vs. +1.8% in Oct and inline w/the Street). RTRS
• South Korea’s central bank surprised markets Wed evening with a 25bp rate cut (the expectation was it would leave rates unchanged) and lowered its growth outlook for the country. WSJ
• China has purged a senior admiral in the latest example of an anticorruption campaign being carried out in the country’s military. WSJ
• China’s bond market grapples with signs of “Japanification” as entrenched deflation sparks concerns about an extended period of tepid growth. FT
• Eurozone’s Nov CPI is inline w/the Street on a headline basis at +2.3% (up from +2% in Oct) while core runs a bit cooler than anticipated at +2.7% (flat vs. Oct and below vs. the Street’s +2.8% forecast). BBG
• ECB’s Lagarde urges the EU to negotiate w/the incoming Trump administration over tariffs rather than engage in a destructive trade war. FT

Thanksgiving News Recap

• OPEC+ reportedly discussing delaying oil output hike for Q1 2025, is to hold further talks on policy in coming days after delaying the meeting, according to Reuters citing sources. Prior to this, the meeting was delayed to the 5th from the 1st of December.
• RBA Governor Bullock says policy needs to remain restrictive. Expects it will take a little longer for inflation to settle at target in Australia. At present, we judge that conditions in the labour market remain tighter than what would be consistent with low and stable inflation.
• ECB’s Knot says they must take a close look at supply shocks to the economy and react forcefully if there is a risk of expectations de-anchoring.
• ECB’s Villeroy says negative rates should remain in the ECB’s toolkit. Interest rates should clearly go to the neutral rate, would not exclude going below neutral rate in the future.
• ECB’s Wunsch in an interview with Nikkei says he sees the possibility of continuing to cut rates in a gradual manner; would not send good signal to accelerate pace of rate cuts.
• French Finance Minister Armand reaffirms France may make concession on electricity taxes to avoid any ensuing “storm” that could hit financial markets; says better to have a modified budget than no budget. Just prior to this remark the French 10yr yield briefly matched its Greek counterpart

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed albeit with a slightly positive bias in the absence of a lead from Wall Street owing to the Thanksgiving Day holiday and as participants digested a slew of data releases into month-end. ASX 200 was lacklustre amid weakness in defensives, finance and tech with the latter not helped after the Australian Senate passed the social media ban for under-16s, while ANZ Bank also pushed back its forecast for the first RBA rate cut to May next year from February and only sees two 25bp cuts vs a prior view of three cuts. Nikkei 225 mildly declined with headwinds from recent currency strength after firmer-than-expected Tokyo inflation, while participants also digested the latest Industrial Production and Retail Sales figures which both fell short of estimates. Hang Seng and Shanghai Comp were underpinned despite the lack of obvious catalysts and shrugged off the PBoC’s net daily liquidity drain, while participants await tomorrow’s official PMI data in which the headline Manufacturing PMI is expected to show a further improvement.

Top Asian News

• China’s Finance Ministry said tariffs imposed by China on some US goods will continue to be exempted until 28th February 2025.
• Australian Treasurer Chalmers said RBA reforms are expected to apply after the February meeting.
• RBNZ Deputy Governor Hawkesby said they clearly signalled another 50bps cut in February and the New Zealand economy is turning a corner.
• Japan FX intervention amounted to 0 from Oct 30 – Nov 27.
• German Foreign Minister will visit China from Dec 2-3rd, according to China’s Foreign Ministry.

European bourses trade around the unchanged mark, Stoxx 600 U/C; specifics light aside from Flash EZ HICP. Sectors mostly in the red with Autos & Parts lagging to end a bruising week. Basic Resources bucks the trend given metals and Anglo American (+3.4%) amid speculation in the FT that BHP could come back with a fresh bid. Stateside, futures firmer ES +0.3% with the RTY +0.9% outperforming. Specifics light and the docket sparse on a limited post-Thanksgiving session, as such the macro narrative may not change significantly. MSFT -0.5% after the FTC launched an antitrust investigation while unconfirmed reports indicate MSTR +4.5% could join the Nasdaq 100.

Top European News

• German government plans about EUR 2bln in new chip subsidies, according to Bloomberg.
• ECB announces changes to the Eurosystem collateral framework to foster greater harmonization.
• BoE says the CCyB is held at 2%.

FX

• USD was knocked lower by the stronger JPY. Today’s US macro narrative is likely to remain unaltered due to the early close. DXY has been as low as 105.61 with the next potential level of support via the 12th low @ 105.48.
• EUR trivially firmer vs. the USD. Headline EZ inflation in-line, super-core a touch softer than Exp. ECB pricing was little changed; 25bps seen at 84% for Dec. EUR/USD went as high as 1.0597 in early trade before running out of steam ahead of the 1.06 mark.
• JPY leading on account of firmer Tokyo inflation metrics. BoJ Dec hike priced at 56%. USD/JPY briefly crossed below 150 for the first time since October 21st with a session low @ 149.55.
• GBP briefly made its way back onto a 1.27 handle vs. the USD; UK macro drivers light. Cable has been as high as 1.2749 with the next upside target coming via the 13th November peak @ 1.2769.
• NZD outpacing its antipodean peer; has been gaining since RBNZ on Wednesday. NZD/USD has moved back onto a 0.59 handle and above its 21DMA @ 0.5909. AUD/USD is holding above the 0.65 mark.

Fixed Income

• Benchmarks generally firmer with specifics outside the EZ light and expected to be limited ahead given the partial post-Thanksgiving closures. Stateside, cash trade has resumed but, unsurprisingly, is limited with yields softer across the curve and a modest flattening bias in play.
• Bunds firmer by around 15 ticks, unreactive to Flash EZ HICP which printed broadly as expected while the super core and services Y/Y came in slightly cooler; pricing points to an 85% chance of a 25bps Dec. cut.
• OATs in focus, though the OAT-Bund yield spread remains shy of the 90bps multi-year peak from earlier in the week. As it stands, we are largely waiting for a decision from Le Pen on French budget as a whole.
• A morning of gains for Gilts which opened in the green and extended to a 96.10 peak shortly after with specifics light and fundamentals behind the move limited. Thereafter, Gilts settled slightly but have since surpassed the above peak by six ticks.

Commodities

• Crude benchmarks are diverging, on account of the lack of settlement due to Thanksgiving. Specifics today have been somewhat light in European hours, with the docket ahead also limited.
• For the most part, we are awaiting updates on OPEC+ and the Lebanon ceasefire. Benchmarks towards the lower-end of c. USD 1/bbl parameters but, as has been the case throughout all of the week, remain in proximity to familiar ranges.
• Spot gold is in the green, benefitted this morning on overnight punchy geopolitical rhetoric around the ceasefire and as the USD was under pressure.
• Base metals firmer but with action modest, as has been the case for much of the week. Chinese PMIs on the weekend the next major catalyst.

Geopolitics: Middle East

• Israeli PM Netanyahu said he asked the army to prepare for a strong war in Lebanon if it violates the agreement, according to Al Arabiya. It was also reported that Israel’s Chief of Staff said they must implement the agreement strongly so that residents of the north can return to their homes, while IDF said they detected suspicious operations that posed a threat to Israel on the part of Hezbollah in what is considered a violation of the ceasefire.
• Israeli military said Lebanese residents are forbidden to move south to a line of several southern villages, according to Reuters.
• Iran informed the IAEA it intends to feed uranium feedstock into the eight IR-6 centrifuge cascades recently installed at Fordow to enrich to up to 5% purity, while the agency shared with Iran the changes required to the intensity of inspection activities following the commission of those cascades. Furthermore, IAEA verified that Iran had completed the installation of the last two IR-2M centrifuge cascades in a batch of 18 at its underground Natanz plant and intends to install one cascade of up to 1,152 IR-6 centrifuges at Natanz PFEP to enrich up to 5% purity, according to the IAEA report seen by Reuters.
• Senior Iranian official says Tehran expects “tough and serious” talks with E3 in Geneva.

Geopolitics: Other

• Russian air defences downed 30 Ukrainian drones in the southern Rostov region with some damage on the ground reported, according to the regional Governor.
• Ukrainian President Zelensky said Russian President Putin’s promotion of the Oreshnik missile shows he does not want to end the war or allow others to try, while he added that Putin’s actions are intended to boost tension and disrupt moves by Trump on the war after his inauguration.
• US President Biden said on Thursday that Russia’s overnight aerial attack against Ukraine was outrageous and that Russian attacks serve as a reminder of the urgency and importance of supporting Ukrainian people in their defence, according to Reuters.
• Russian Defence Ministry said Defence Minister Belousov is visiting North Korea, according to agencies cited by Reuters.
• Chinese and Russian militaries conducted a ninth joint strategic air patrol in relevant airspace over the Sea of Japan on Friday, according to Chinese state media.
• Eleven Chinese and Russian military aircraft intruded South Korea’s air defence zone and South Korea launched air force jets in a tactical manoeuvre against the intrusion, according to Yonhap.

US Event Calendar

• Nothing scheduled

DB’s Jim Reid concludes the overnight wrap

Morning from Amsterdam and welcome to Black Friday, although I can’t help think Black Friday starts in July these days! Whilst US markets were closed for the Thanksgiving holiday, there was still plenty happening over the last 24 hours, with European markets bouncing back after their recent slide. Several factors were supportive, including some lower-than-expected inflation numbers out of Germany, which led to growing confidence that the ECB would keep cutting rates. Moreover, there were also promising signs on the French budget situation, as the government sounded open to concessions in order to pass the bill, so that helped French assets to recover too. Overall, that meant it was a fairly positive day, with the STOXX 600 up +0.46%, whilst 10yr bund yields (-3.4bps) fell to an 8-week low.

In terms of the French situation, the day had started off pretty negatively, as yields on 10yr French debt briefly exceeded the 10yr Greek yield for the first time on record. But they then started to recover, as Finance minister Antoine Armand sounded open to concessions possibly in order to avoid the government being toppled. He said that “it’s better to work on a budget that is not exactly the same, otherwise we leap into the unknown.” Later in the day, Prime Minister Barnier then said that he wouldn’t raise taxes on electricity, which is something that Marine Le Pen’ had criticised. So that was seen as positive for the chances that the government would survive, and the Franco-German 10yr spread ended the day down -4.1bps at 82bps. Even so, Marine Le Pen’s National Rally have made further budget demands, so the situation is far from resolved just yet.

The bond rally then got further support from the latest German inflation data, which surprised on the downside of consensus. That showed HICP inflation remaining at +2.4% in November (vs. +2.6% expected), so that was seen as positive for the prospects of ECB rate cuts and investors dialled up the likelihood of a 50bp ECB rate in December, with the probability moving up from 15% on Wednesday to 18% by the close yesterday. Moreover, there were also comments from the ECB’s Villeroy that sounded open to a larger 50bp cut at the December meeting. He said that “Optionality should remain open on the size of the cut”, so clearly not ruling out a larger move. And in turn, that helped sovereign bond yields move lower across the continent, with those on 10yr bunds (-3.4bps) and BTPs (-6.3bps) both falling back.

This backdrop was also supportive for equities across Europe, with all the major indices moving higher on the day. By the close, the STOXX 600 was up +0.46%, with tech stocks leading the way. Germany’s DAX (+0.85%) was another outperformer, whilst other indices including France’s CAC 40 (+0.51%) and Italy’s FTSE MIB (+0.51%) posted a solid advance of their own. By contrast, the main underperformer was the UK’s FTSE 100 (+0.08%). Meanwhile in the US, markets were closed for the day, but equity futures were consistently positive throughout the European session as well.

Asian equity markets are seeing reasonable divergence with the KOSPI (-1.24%) the biggest underperformer led by declines in large-cap tech companies following yesterday’s surprise 25bps rate cut by the BOK as the economy stalled and inflation slowed more rapidly than policymakers predicted. Meanwhile, the Nikkei (-0.44%) is also trading lower after Yen strength on strong inflation data. Chinese stocks are outperforming with the CSI (+2.01%) leading gains followed by the Shanghai Composite (+1.59%) and the CSI (+1.29%) after China extended tariff waivers on some US goods, indicating that China likely isn’t ready to escalate ahead of Trump. S&P 500 (+0.31%) and NASDAQ 100 (+0.54%) futures are higher and 10yr US yields are around -3bps lower after reopening post the holiday.

Early morning data showed that Tokyo inflation accelerated more than expected in November, rising +2.6% y/y (v/s +2.2% expected), picking up sharply from the +1.8% seen last month. At the same time, core CPI climbed +2.2% from a year earlier (+2.0% expected) in November, as against a +1.8% increase last month, largely on a winding down of energy subsidies. Core-core was in line at 1.9% which is the most important for the BoJ but the firmer slant to the overall data increases the chances of a hike in December.

Following the data release, the yen appreciated +1.05%, to trade at 149.97 against the dollar, hitting its strongest level in 5 weeks. Separate data showed Japanese retail sales rose +1.6% in October YoY, missing expectations for growth of +2.0%, up from an upwardly revised +0.7% gain in September.

Looking at yesterday’s other data, the European Commission’s economic sentiment indicator remained broadly stagnant at 95.8 in November (vs. 95.2 expected), remaining in a similar zone where it’s spent the entirety of 2024. We also had the Euro Area M3 money supply data for October, which showed a pickup to +3.4% year-on-year as expected, the highest since December 2022.

To the day ahead now, and data releases include the Euro Area flash CPI release for November, UK mortgage approvals for October, German unemployment for November and retail sales for October, and Canada’s Q3 GDP. From central banks, we’ll get the Bank of England’s Financial Stability Review, and also hear from ECB Vice President de Guindos and the ECB’s Nagel. Finally, a general election is being held in Ireland.