Inflation in India rises in October

Turkey’s current account recorded a surplus of USD 2.99bn in September, down from USD 4.85bn a month earlier. The goods balance recorded a deficit of USD 3.1bn in October, marginally higher than a month earlier while on services Turkey recorded a wide surplus. Net portfolio inflows printed at USD 370m in September while net FDI hit almost USD 650m.

Inflation in India spiked higher to 6.21% in October, up from 5.49% a month earlier. Food prices rose nearly 11% in October while clothing and housing costs were both up almost 3% y/y. Gains in fuel prices were more modest at 1.6% y/y. The October inflation print was the fastest in the last 14 months and was well above median estimates for inflation. The hotter than expected inflation print will push back against expectations for the Reserve Bank of India to ease rates imminently. Elsewhere in India, industrial production increased by 3.1% y/y in September, an improvement on month earlier and better than market expectations.

The unemployment rate in the UK rose to 4.3% in the three months ending September, up from 4% in the prior three-month period and ahead of market expectations. Over the same period 220k employees were added on to payrolls while the October estimate showed a drop of 5k workers. Wage pressures remain elevated, however, with average weekly earnings ex-bonuses up 4.8% y/y, marginally lower than the 4.9% estimated for a month earlier.

Germany’s ZEW index of investor expectations deteriorated in November to 7.4, down from 13.1 a month earlier and missing expectations. The assessment of current conditions also deteriorated to -91.4 from -86.9 a month earlier. Germany is poised to hold early elections in February next year which has been cited as a chance to turn sentiment more positive with greater policy certainty.

Household inflation expectations assessed by the New York Fed fell to 2.87% in October, down from 3% in the prior month. The year-ahead inflation expectations was the lowest level since 2020.

Today’s Economic Data and Events

• 17:30 US CPI m/m Oct: forecast 0.2%
• 17:30 US CPI y/y Oct: forecast 2.6%

Fixed Income

• Yields on US Treasuries pulled higher yesterday as markets continue to price in a higher inflation outlook post US election. Yields on the 2yr UST added almost 9bps to 4.3401% while the 10yr yield rose 12bps to 4.4275%. The 2s10s curve steepened by about 3bps to slightly more than 8bps. Markets are now pricing in less than a 60% chance of another 25bps cut to the Fed Funds rate in December and less than three cuts in total by the end of 2025.
• Bond markets generally closed weaker overnight with high yield and emerging market bonds softer. GCC credit was also sold off overnight.

FX

• The US dollar gained ground for a third day running overnight with EURUSD down 0.3% at 1.0623 while GBPUSD fell by 0.9% to 1.2748 even as robust wage data from the UK suggested the Bank of England would be in no rush to cut rates. USDJPY added 0.6%, taking the pair to 154.61.
• Commodity currencies also closed softer. USDCAD added 0.1% to 1.3944 while AUDUSD was down 0.6% at 0.6533.

Equities

• Equity markets retrenched some of their recent gains overnight. The Dow Jones fell 0.9% while the S&P was lower by 0.3%. The NASDAQ fared slightly better, keeping its losses to just 0.09%. European markets also dipped with the EuroStoxx index down 2.2% and the FTSE off by 1.2%.
• In the UAE the DFM gained by 1.1% overnight while the ADX settled near flat. The Tadawul was lower by 0.5%.

Commodities

• Oil prices were little changed after heavier selling earlier in the week. Brent futures closed marginally higher at USD 71.89/b and WTI added about 0.1% to close at USD 68.12/b.
• OPEC revised its demand growth estimate for 2024 to 1.8m b/d in its November monthly oil market report. That compares with 1.9m b/d a month earlier and is a significant drop from demand growth estimates of 2.2m b/d estimated as recently as July. For 2025, OPEC is expected demand growth of 1.5m b/d, down from 1.6m b/d a month ago. For non-OPEC supply, OPEC estimates that supply growth will be strong at 2.5m b/d or more for both 2024 and 2025.
• Saudi Arabia will run an auction of 2.5m tonnes of carbon credits according to press reports citing the Regional Voluntary Carbon Market Co. The credits are sourced from 17 countries will have participation of more than 20 different firms.