Futures Hit 51st Record High Of 2024 As Trump Trades Storm Higher

The post-Trump rally has returned full force, and US equity futures are sharply higher and well above 6,000 in what should be a light volume day with bonds closed due to the Veteran's Day holiday. As of 8:00am ET, the breakdown is as follow: S&P futures 0.46bps, which hit their 50th all time high for 2024 on Friday; NDX +38bps; RTY +146bps; Crude -222bps; Bitcoin +290bps and at a record over $82,000 with global markets trading broadly higher as they continue to digest US election results + FOMC cut last week. R2K the standout and remains in focus, up over 8.5% last week for its best week since March of 2020. S&P + NDX both closed the week at ATHs. As JPM writes in its market intel note, the Trump Trade has potential to strengthen; TSLA is +7% pre-mkt as small caps outperform by ~1%-pt. The balance of Mag7 are weaker as are Semis, Financials continue to be bid up in what is a new regime. While US bond markets were shut for a holiday (although futures indicate a roughly 5bps rise in yields), the dollar rallied 0.3% against a basket of currencies, adding to a six-week winning streak as both EUR and JPY come from sale. Dollar strength appear to be weighing on commodities as China stimulus once again disappoints and is sold; gold reversed an earlier gain to trade at session lows of $2,660. Meanwhile, Trump and Elon Musk are making demands of the next Senate Republican leader, including allowing the President-elect to make recess appointments without Senate approval. No US data or Fed speakers scheduled for the session.

In premarket trading, the biggest gainer of the day was Tesla which rose as much as 7.3%. Its valuation surpassed $1 trillion on Friday, on a view that a Trump presidency will be a positive for Elon Musk’s company. Crypto-linked stocks also gained in premarket trading as Bitcoin rallied past $82,000 for the first time on the prospect of a Republican-led Congress with pro-crypto lawmakers (Riot Platforms (RIOT US) +14%, MARA Holdings (MARA US) +19%, Bit Digital (BTBT US) +21%, Coinbase (COIN US) +16%, Hut 8 Mining ADRs (HUT US) +12%, MicroStrategy (MSTR US) +11%, Robinhood Markets (HOOD US) +10%). Here are some notable premarket movers: 

• Cabot (CBT US) shares fall 1% after the carbon black company was downgraded to underweight from neutral at JPMorgan.
• Celanese (CE US) shares slip 0.7% after the specialty materials company was cut to underperform from market perform at BMO Capital Markets, which said there were “too many risks ahead for too little reward.”
• Cisco Systems (CSCO US) shares rise 1.9% as JPMorgan lifted the maker of computer networking equipment to overweight from neutral, citing recovery in networking and further valuation headroom.

“Between now and the end of the year, I can easily see how the US market particularly will continue to be strong on hopes that everything Trump has said will come to pass, particularly when it gets confirmed that he got a clean sweep,” said Nick Clay, portfolio manager at Redwheel.

While it feels like the year is largely over and it's all autopilot until 2025, the wait is now on for the next slug of inflation data due Wednesday for clues on the Federal Reserve’s interest-rate trajectory, with annual price growth seen to have quickened slightly to 2.6% in October. Traders will also listen out for Fed policymakers’ speeches after Minneapolis Fed President Neel Kashkari indicated on weekend that rates could ease less than previously expected due to the strong economy (amazing how that happened just days after Trump won).

In Europe,the Estoxx 50 advanced 1.2% on the day, with construction, chemical and industrial shares leading gains. While Trump’s pledge to impose hefty tariffs on trade partners has weighed heavily on European shares, the Stoxx 600 index rebounded after three weeks of declines. The gauge added 0.9%, with all industry groups in the index climbing, as the mood was lifted by a slew of robust company earnings, including German tiremaker Continental AG and insurance firm Hannover Re. Here are the biggest movers Monday:

• Continental rises as much as 9.3%, the most since July, after the German firm reported third quarter Ebit that beat estimates. Bernstein says the beat is due to strength in the tire division
• Croda rises as much as 5.5% as the chemicals company reconfirms full-year guidance amid stable demand and cost efficiency measures. Analysts point to life sciences as a stand-out performer
• Swiss Re shares rise as much as 4.7% to their highest level since 2002, after a double upgrade from UBS, which says the stock is now its preferred European reinsurer instead of Munich Re
• Hannover Re shares advanced as much as 4.3% as the German reinsurer raised its 2024 profit target and forecast net income for 2025 of about EU2.4 billion
• Ceres Power rallies as much as 11% on Monday, snapping a run of five straight declines, as Jefferies upgrades to buy on growing market awareness of the company’s technology
• Cellnex shares rise as much as 2.3% after the tower operator said it’s in talks with credit rating agencies to assess whether it can start returning capital to shareholders next year
• Pantheon Resources shares jump as much as 18% to touch 4-1/2-month highs, after the oil and gas company began drilling the Megrez-1 well in the Ahpun field in Alaska
• Leonardo rises as much as 5.2%, to highest since Sept. 2000, after both Bernstein and Mediobanca boost their price targets on the Italian defense company to a new Street-high of €30
• NatWest rises as much as 2.1% after the bank bought £1b of its own shares from the UK government, as part of the directed buyback program. Shore Capital says this came sooner than expected
• Lem Holding tumbles as much as 21%, to the lowest level since March 2020, after the Swiss electrical components maker posted underwhelming first-half results and issued a weak outlook

Earlier, Asian equities fell by the most in a month as Beijing’s latest economic measures disappointed the market, and soft China inflation data signaled that recent efforts to spur economic growth have not been enough. China’s CSI 300 benchmark fell as much as 1.4%, before erasing losses to close with modest gains. Oil pared losses to trade flat after China’s latest efforts disappointed markets. The MSCI Asia Pacific Index fell as much as 1.3% before trimming some losses, with Samsung Electronics among the biggest drags alongside Chinese megacaps Tencent and Meituan. Most key gauges in the region were in the red, with the Hang Seng Index falling 1.5%. South Korea’s Kospi fell more than 1%, while Japanese shares closed little changed. While stocks in Hong Kong slid, those on the mainland recovered a 1.4% drop to close the day higher. The mixed reactions underscore investor confusion over Beijing’s stimulus announcement, which stopped short of providing new plans to rev up its consumption or the property sector. China unveiled a 10 trillion yuan ($1.4 trillion) program Friday to refinance “hidden” local debt. Figures released over the weekend showed anemic consumer inflation in October while producer prices continued falling, indicating government stimulus has been insufficient to pull the economy out of deflation

“The latest debt swap provides temporary relief to local government finances, benefiting sectors like real estate and banking,” said Billy Leung, an investment strategist at Global X ETFs. “However, the swap’s limited scale and lack of consumer-focused stimulus leave broader markets cautious. Note that there are still concerns on tariff pressures and domestic monetary easing efforts which could have execution challenges.”

In FX, the Bloomberg Dollar Spot Index rises 0.4% and remains near best levels of the day into early US session, while the euro fell to its lowest versus the dollar since June 27 amid broad dollar strength with the yen leading losses (EUR/USD dropped 0.3% to 1.0682, down a second day). USD/JPY rallies 0.8% to 153.85 with US Treasury futures under pressure

In rates, treasury futures opened down in Asia and have broadly held losses, leaving the 10-year tenor lower by around 9 ticks on the day. There is no cash Treasuries trading due to a US holiday, but the drop in futures points to a 10-year yield that’s roughly 5 basis points higher than Friday’s closing levels.

US 10-year note futures sit around the 110-00 level, down around 9 ticks on the day. Further out, ultra-long bond futures are down around 12 ticks, implying a bear-steepening move in cash yields. In Europe, Bunds - which are open - advance with German yields richer by as much as 3.5bp across long-end of the curve, with the impact of potential German elections on the country’s debt brake and future issuance unclear. Back in the US, the treasury auction slate resumes Nov. 20 with 20-year bond sale; 2-, 5- and 7-year note auctions are scheduled week commencing Nov. 25.

In commodities, oil prices decline, with WTI falling 1.5% to $69.30 a barrel. Spot gold drops $15 to $2,670/oz. Iron ore declined toward $100 a ton.

Looking at today's calendar, no Fed members scheduled to speak on Monday, and US data slate is empty as it is Veteran's day, and bond markets are closed. This week’s data includes CPI, PPI, Empire manufacturing, retail sales and industrial production.

Market Snapshot

• S&P 500 futures up 0.3% to 6,042.50
• STOXX Europe 600 up 1.0% to 511.49
• MXAP down 0.9% to 187.81
• MXAPJ down 0.9% to 596.07
• Nikkei little changed at 39,533.32
• Topix little changed at 2,739.68
• Hang Seng Index down 1.5% to 20,426.93
• Shanghai Composite up 0.5% to 3,470.07
• Sensex little changed at 79,507.60
• Australia S&P/ASX 200 down 0.3% to 8,266.22
• Kospi down 1.2% to 2,531.66
• German 10Y yield down 5.2 bps at 2.32%
• Euro down 0.4% to $1.0672
• Brent Futures down 0.8% to $73.26/bbl
• Gold spot down 0.7% to $2,666.45
• US Dollar Index up 0.38% to 105.40

Top Overnight News

• China’s trade surplus in on pace to hit ~$1T this year, a dynamic that will create huge trade tensions between Beijing and other countries, especially the Trump-led White House. BBG
• China disinflation/deflation deepens in Oct, w/the CPI coming in +0.3% (down from +0.4% in Sept and below the Street’s +0.4% forecast) and PPI at -2.9% (down from -2.8% in Sept and below the Street’s -2.5% forecast). SCMP
• China’s credit expansion slowed more than expected in October, as a surge in government bond sales far exceeded growth in lending during a traditionally slow month for financing activity: BBG
• Bank of Japan board members discussed the need for caution on raising its benchmark rate and offered no clear hint of a move next month, a summary of opinions from its October policy meeting showed. BBG
• Taiwan is considering large US defense purchases as an overture to the incoming Trump administration, the FT reported. BBG
• Israel Defense Minister Israel Katz said on Sunday that his country has defeated Hezbollah and that eliminating its leader Hassan Nasrallah was the crowning achievement. Reuters
• TSMC was told by the US to halt shipments of some advanced chips to China starting today. Reuters, BBG
• Powell is prepared for a legal battle if Trump attempts to hire him before the end of his term. WSJ
• Citigroup’s CEO Jane Fraser expects a significant easing in bank regulations in a Trump administration. BBG
• Bitcoin rallied past $82,000 for the first time, boosted by Donald Trump’s embrace of digital assets and the prospect of pro-crypto lawmakers in Congress. It won’t be long before attention shifts toward call-option buyers’ hopes for the token to top $100,000, MLIV said. BBG
• Fed’s Kashkari (2026 voter) said if growth and productivity are strong, the Fed may not cut as much, while he reiterated that housing inflation will take a while to come down all the way and they have made progress but want to get the job done on inflation. Kashkari also stated that the Fed wants to have confidence inflation will go all the way back to 2% and need to see more evidence before deciding on another cut.
• Edison Research projected Republicans won another seat in the US House bringing their total to 213, while Democrats have 204 seats with 218 needed for control.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks began the week mostly subdued amid China-related headwinds following the recent fiscal stimulus disappointment and softer-than-expected Chinese inflation data from over the weekend. ASX 200 was dragged lower by weakness in the commodity and consumer-related sectors. Nikkei 225 traded indecisively but with the initial downside cushioned alongside currency weakness. Hang Seng and Shanghai Comp were pressured with underperformance in Hong Kong amid losses in property and tech although some chipmakers were boosted after the US ordered TSMC to halt shipments to China of chips used in AI applications. Elsewhere, the mainland traded cautiously after last Friday's announcement of fiscal measures disappointed those hoping for a more forceful stimulus in the aftermath of the Trump election victory, while Chinese CPI and PPI data were softer-than-expected and showed a worsening of the factory-gate deflation

Top Asian News

• China's Finance Ministry frontloads part of 2025's central Govt. fiscal funds for affordable housing, renovation of villages, towns and residential quarters
• Ishiba will continue to be the Japanese PM, after receiving 221/465 lower house votes
• China International Import Expo saw a 2% Y/Y increase in intended transaction value to USD 80bln.
• China and Peru will sign a deal to strengthen a Free Trade Agreement with the improved FTA to increase commerce by at least 50%, while President Xi is to travel to Peru with 400 business people interested in investing in infrastructure and technology.
• TSMC (2330 TT) was ordered by the US to stop shipments to China of advanced chips used for AI applications.
• BoJ Summary of Opinions from the October meeting noted a member said no change to the BoJ's stance it will adjust the degree of monetary support if its economic and price forecasts are met and a member said they must remain vigilant regarding the overseas economic outlook and market movements. There was also the opinion that risk of a US hard landing is subsiding but it cannot yet be said with certainty that markets are stabilising, while it was noted that the BoJ must communicate clearly that it will continue to raise the policy rate if its economic and price forecasts are met. Furthermore, a member said the BoJ must take time and move cautiously in raising rates and a member also stated that Japan is not in a phase where it needs massive monetary support, so the BoJ can consider additional rate hikes after pausing temporarily to gauge US economic developments.

European bourses, Stoxx 600 (+1%) opened on a strong footing and continued to climb higher into the morning; some of the upside has since subsided, with indices now traversing best levels. European sectors hold a strong positive bias, with only Basic Resources sitting ever-so-slightly in negative territory. The sector is weighed on by slight losses in metals prices, given the continued disappointing inflation metrics out of China. Construction & Materials tops the pile, joined by Insurance and then Chemicals thereafter. US Equity Futures (ES +0.3%, NQ +0.3% RTY +1.2%) are entirely in the green, with very clear outperformance in the economy-linked RTY, with the “Trump Trade” very much still in action.

Top European News

• UK Chancellor Reeves will set out the government’s plans to stimulate economic growth through the principles of stability, investment and reform, as well as hail the benefits of free trade amid impending US protectionism during her first Mansion House address on Thursday, according to FT.
• UK HMRC is set to return GBP 700mln to top UK companies after the UK won an appeal against a Brussels state aid clampdown which had forced London to collect tax against its wishes, according to FT.
• German Chancellor Scholz said he wouldn't have a problem with a vote of confidence before Christmas and that there is a good chance he will win another mandate to form another government, according to CGTN Europe.
• ECB's Holzmann said a rate cut is possible in December as things look at the moment and there is nothing at the moment that would argue against that but that does not mean it will automatically happen, while he added they do not have the latest forecasts and data which they will get in December and will decide on that basis.
• Fitch affirmed Spain at A-; Outlook revised to Positive from Stable, while it affirmed Poland at A; Outlook Stable and affirmed Lithuania at A; Outlook Stable. It was also reported that Moody’s upgraded Croatia to A3; Outlook changed to Stable from Positive.
• EU sees little chance of a quick China deal to avoid EV tariffs, via Bloomberg

FX

• DXY has started the week off on the front foot as markets continue to digest the likely impact of a Trump Presidency and a potential Republican sweep. DXY has extended above Friday's peak at 105.20 but is yet to reclaim the post-election peak at 105.44.
• EUR has extended on Friday's losses with EUR/USD slipping further onto a 1.06 handle. Absent an improvement in the Eurozone outlook, the pair could end up testing its YTD low from 16th April at 1.0601.
• GBP is softer vs. the USD but to a lesser extent than most peers with EUR/GBP hitting a fresh YTD low at 0.8282. Cable is tucked within Friday's 1.2884-1.2989 range.
• JPY is the notable laggard across the majors with the ongoing reasssessment of the relative Fed vs. BoJ policy paths continuing to guide the pair. The latest BoJ summary of opinions has been noted as a potential source of weakness for the JPY with the account continuing to highlight a lack of urgency for immediate hikes. USD/JPY has been as high as 153.85.
• Antipodeans are both flat vs. the broadly stronger USD with some support garnered from the positive risk tone.
• PBoC set USD/CNY mid-point at 7.1786 vs exp. 7.1813 (prev. 7.1433).
• SNB Vice Chairman Martin said the central bank has made absolutely no commitment to future interest rate cuts and the next rate decision will depend on the assessment in December. Martin said the Franc is attractive as a safe haven and due to low Swiss inflation, while he added it is expected to appreciate in nominal terms in the future but real appreciation of the currency has been limited.

Fixed Income

• A firmer start to the week with Bunds taking some reprieve on murmurings that the German no-confidence motion could occur sooner than thought, while such a motion will likely snuff out the traffic light coalition, at least it resolves the uncertainty. Hit a 132.59 peak early doors before stabilising around 20 ticks off this but has since inched back up to a fresh 132.61 high.
• USTs are slightly softer, paring some of the gains seen on Thursday/Friday which were largely a rebound from Trump-induced pressure on Wednesday. Note, conditions today are thin with the calendar sparse and Veteran’s Day meaning cash trade is closed. Currently pivoting the 110-00 figure, a move lower has support between 109-30 to 109-07 from last week.
• Gilts were initially flat, but have been inching higher in recent trade, in-fitting with peers. Attention this week is on a speech from BoE’s Bailey, remarks which will be judged to see if the hawkish bias from last week. Currently, towards the upper-end of 94.00-94.43 parameters.

Crude

• Crude was initially firmer on the session but only modestly so. Focus on geopols, with the main update overnight being Qatar announcing that mediation efforts between Israel and Hamas are on hold. Thereafter, commentary via Al Arabiya that Hezbollah says there are negotiations to stop the war sparked marked pressure; Brent'Jan slumped to session lows of USD 72.79/bbl, but is just off worst levels.
• Spot gold is pressured, weighed on by the stronger USD and soft performance of China overnight as the region reacted to the lack of major stimulus in Friday’s session.
• Base metals are hampered by the stronger Dollar, the lack of China stimulus and disappointing CPI data from the region overnight weighing on metals generally. 3M LME Copper below the USD 9.5k handle.
• BSEE estimated that approximately 27.59% of the current daily oil production and 16.67% of the current daily natural gas production in the Gulf of Mexico has been shut-in due to Tropical Storm Rafael. It was later reported that Chevron (CVX) began to redeploy personnel and restore output at its Gulf of Mexico platforms that was shut-in due to Rafael.
• Saudi crude oil supply to China set to fall 36.5mln barrels in December, according to Reuters citing sources. Two other North Asian refiners to receive full Saudi crude allocation for December

Geopolitics: Middle East

• Hezbollah says there are negotiations to stop the war, according to Al Arabiya.
• Israeli Foreign Minister says "We are ready to end the war when our objectives are achieved"; there is progress on Lebanon ceasefire talks, working with the Americans on this. No decision on the issue of annexing areas of the West Bank. The main challenge will be to enforce what is agreed. "The war is not over yet". Hezbollah's capabilities are severely reduced, majority of missile capacity is destroyed. Pushes back on the prospect of a Palestinian state, does not believe this is realistic. Israel has responded positively to Gaza ceasefire proposals, Hamas has refused to move forward. Trump has made it clear he understands the danger of Iran's nuclear ambitions
• Israel called upon Israelis not to attend cultural and sports events abroad in the week ahead, according to a statement from the PM’s office.
• Israeli media reported sirens heard in central Israel and the Israeli army reported interception of a missile approaching Israel coming from Yemen, according to Sky News Arabia.
• Israel conducted a strike on a residential building near Damascus which resulted in casualties, according to the Syrian state news agency.
• US National Security Adviser Sullivan said the US will make a judgement this week about the progress Israel made over the Blinken/Austin letter on humanitarian aid to Gaza. Sullivan also stated that President Biden will go through the top US foreign policy and domestic issues with President-elect Trump on Wednesday and Biden will make the case to Congress that they need ongoing resources for Ukraine beyond the end of his term.
• Qatar’s Foreign Ministry said its mediation efforts between Israel and Hamas are currently on hold and reports it is withdrawing from the Gaza ceasefire mediation are not accurate, while it said it will resume mediating in ceasefire talks when there is enough seriousness to end the brutal war.
• Iranian Foreign Minister Araqchi said a new scenario was fabricated after the US charged an Iranian man in the plot to kill President-elect Trump, while he said Iran is not after nuclear weapons and confidence building is needed from both sides.
• IRGC's Khatam al-Anbiya Headquarters deputy commander said Iran provides Hezbollah with ammunition and is not afraid of declaring it, while he added that Hezbollah has also publicly announced its affiliation with Iran, according to Iran International English.
• IAEA Director General Grossi will travel to Tehran this week for high-level meetings with the Iranian government.
• Iran announced the death of 5 security forces in an armed attack on the Pakistani border, according to Al Arabiya.
• Iraqi armed factions announce attack on a "vital target" in southern Israel with marches, according to Sky News Arabia.
• US-British aggression was reported on Yemen's capital Sanaa and the Amran governorate, according to Al Masirah TV.
• Two personnel from Saudi-led coalition forces were killed in an attack by a Yemeni Defence Ministry employee in Yemen’s Seiyun.

Geopolitices: Other

• Russia's Kremlin reports that rumors of a Putin/Trump call were false - there was no call.
• US President-elect Trump spoke on the phone with Russian President Putin on Thursday and discussed the war in Ukraine, while Trump urged Putin not to escalate the war in Ukraine, according to The Washington Post.
• Russian Foreign Ministry said on Saturday that there are no grounds for talking about resuming dialogue with the US on strategic stability and arms, while it added that US President-elect Trump’s promises to resolve the crisis in Ukraine fast are nothing more than rhetoric.
• Russia and Ukraine launched their biggest drone attacks on each other since the start of the conflict, with several people injured in the tensions, according to LBC.
• Russian President Putin signed the law on ratification of the strategic partnership with North Korea, according to TASS.
• Ukrainian top military commander Syrski told a senior US general of reports regarding North Korean troops preparing to take part in combat alongside Russian forces, as well as noted that the front-line situation remains difficult and is showing signs of escalation.
• Ukrainian drones hit a chemical producer in Russia’s Tula region overnight.
• Chinese President Xi signed an order of regulations to guarantee military equipment, effective from December 1st.
• China’s Foreign Ministry said China firmly opposes the Philippines’ Marine Zones Act which severely infringes on China’s territorial sovereignty and maritime rights in the South China Sea, while China’s Coast Guard said the Philippines has frequently sent military police, civilian vessels and aircraft to intrude into the air and sea space near Huangyan Island, which is also known as Scarborough Shoal.
• Philippines aims to buy a US missile launcher in a move likely to anger China, according to FT.

US Event Calendar

• Nothing scheduled/Veteran's Day

DB's Jim Reid concludes the overnight wrap

Although it’s Veterans' Day today, with US bond markets closed (equities open), it's another important week with US CPI (Wednesday) the focal point. US data may not be as heavily scrutinised as usual at the moment as with the Trump victory, the market might conclude that there may be changes in animal spirits in the near-term and policy in the medium-term. On this, any clues on Trump's appointments may be market moving. Case in point the Dollar's rise immediately after the FT reported late Friday afternoon UK time that Robert Lighthizer would be asked to be the US Trade Representative in the new administration. Given how central he's been to Trump's views on trade it was surprising that the market was surprised. However there has been no confirmation of this appointment and other wires have suggested no such approach has been made.

Having said that US data might not be the most important events of the week, outside of CPI the US highlights are the Fed's senior loan officers survey (SLOOS) tomorrow, PPI on Thursday and retail sales, on Friday. There are a lot of Fed speakers so their view of policy post the election will be interesting after Powell navigated this uncertainty well last week. Powell himself speaks again on Thursday. Internationally the key events will be UK employment and the German ZEW tomorrow, Japanese and Eurozone GDP alongside the ECB account of the October meeting on Thursday, and China's main monthly data dump on Friday. See the full week ahead in the day-by-day calendar at the end as usual.

In terms of US CPI, our economists (see "October CPI preview & webinar registration"), suggest that softer energy prices should lead headline CPI (+0.20% forecast vs. +0.18% previously) to be weaker than core (+0.26% vs. +0.31%) leading to a YoY rate that picks up a tenth in the headline to 2.5% but with core staying steady at 3.3% even if the 6-month rate would dip a tenth to 2.5%. Remember though that in the last several years the second half has been more seasonally favourable to inflation so it's possible we're coming towards the end of that help.

For context, and due to the election result, our economists are leaning towards core PCE inflation being upgraded from 2.2% in 2025 to around 2.5% and by around 0.5pp to 2.5% in 2026 as tariffs kick in. For growth the 2025 upgrade is likely to be from 2.2% to 2.5-2.75% but with 2026 downgraded a few tenths to 2% as tariffs offset the fiscal boosts. So the outlook becomes more complicated from here with most uncertainty around how aggressive the tariff regime will be. See Post election: Fiscal fuel trumps trade tensions for Fed for more on this and FOMC recap: Don't hurry, Fed happy for the Fed implications where our economists believing now that the Fed may not be able to cut below 4%. Back in mid-September Dec 2025 Fed futures contracts were pricing in 2.78% so this is yet another example (around the 8th time) in this cycle where the market has got far, far too optimistic in terms of how much the Fed will be able to cut rates. For completeness, a reminder that our European economists have reacted to the US election result by taking their terminal ECB forecast to 1.5% (from 2%) due to the impact of the likely new trade policy.

Asian equity markets are mostly trading lower this morning after Beijing’s latest stimulus measures largely underwhelmed, and the release of weak inflation data over the weekend. Across the region, the Hang Seng (-1.65%) is the biggest underperformer, after initially sliding almost -3.0%. The Shanghai Composite (+0.25%) has just nudged into positive territory as I type though after a weak morning session. Elsewhere, the KOSPI (-0.87%) is trading noticeably lower, while the Nikkei is fairly flat. S&P 500 (+0.18%) and NASDAQ 100 (+0.25%) futures continue to rise.

Back to China, at the very end of last week the National People’s Congress announced a debt swap program worth about 10 trillion yuan ($1.4 trillion) to improve local government finances. However, the stimulus package disappointed market expectations as it lacked direct fiscal stimulus and targeted measures to improve the housing market. Our China economist reviewed the package and suggests that the government clearly believes the current measures will help them hit their 5% growth target for 2024 without needing to go further at the moment. He also believes they are keeping some powder dry for the imposition of tariffs in 2025 and beyond. So perhaps we'll see more targeted measures at the NPC next March.

Over the weekend, the Chinese inflation rate rose +0.3% year-over-year in October, missing expectations of a +0.4% increase and lower than the +0.4% gain seen in September. Inflation fell for the second straight month, dropping to its lowest in four months. Meanwhile, the PPI slipped by -2.9% year-over-year in October, marking the 25th consecutive month of decline, after a -2.8% drop in September and worse than the -2.5% decline forecast by Bloomberg.

Looking back at last week, US assets performed incredibly strongly after Trump’s win. Indeed, the S&P 500 was up +4.66% (+0.38% Friday), which is its best weekly performance of 2024 so far. Moreover, the gains mean the index has now surpassed its previous peak, with Friday marking its 50th record high of 2024. The gains were led by the more cyclical sectors, with consumer discretionary stocks posting a +7.62% advance last week, whilst the KBW Banks Index was up +8.42% (+0.31% Friday).

That rally was evident among other asset classes. In credit, US IG spreads tightened by -9bps (-1bps Friday) to 74bps, which is its tightest level since 1998. And HY spreads moved -19bps tighter (-11bps Friday) to 256bps, their tightest since 2007. Even sovereign bonds recovered their losses from earlier in the week, with the 10yr Treasury yield down -8.0bps (-2.3bps Friday), despite a +16.1bps surge on Wednesday after the election result became apparent. The front-end did see a modest sell-off, with the 2yr yield up +4.6bps last week (+5.5bps Friday). 2s10s is back to 5bps having been as steep as 22bps in late September.

Outside the US, there was a more mixed performance, with European assets struggling by comparison. For instance, the STOXX 600 fell -0.84% (-0.65% Friday), posting a third consecutive weekly decline. And there was a big underperformance for the STOXX 600 Automobiles & Parts Index given the prospect of higher tariffs, which fell -3.56% (-1.35% Friday). In the bond space, 10yr bunds were down by -3.9bps (-7.9bps Friday). That said, even as European assets struggled, there was a much better performance in Asia, where the Nikkei rose +3.80% last week (+0.30% Friday), whilst the Shanghai Comp was up +5.51% (-0.53% Friday).

Other notable moves included the euro (-1.07%) falling to its weakest against the dollar since June at 1.0718, while Bitcoin posted new record highs, rising to $76,450 on Friday. It's traded as high as $81,832 this morning after a further surge over the weekend. In commodities, Brent crude was +1.05% higher over the week to $73.87/bbl, despite a -2.33% retreat on Friday that in part followed an underwhelming fiscal announcement out of China.