US consumer sentiment dips in November

• The September US Job Openings and Labor Turnover Survey, or JOLTS report, released on Friday by the Labor Department, showed that the number of Americans voluntarily quitting their jobs rose to a record high, while job openings remained above pre-pandemic levels. Job openings, a measure of labor demand, edged down by 191,000 to 10.4mn on the last day of September, while hiring remained largely unchanged at 6.5mn in September. The number of job openings was little changed in all four regions with vacancies up the most in healthcare and social assistance, and state and local government. Quits rose by about 164,000 in September, lifting the total to a record high of 4.4mn. The quits rate is seen as a reliable measure of labor market confidence as workers generally leave when they are more secure in their ability to find a new job. There were 56,000 people who quit in the arts, entertainment and recreation industry while 47,000 left in the other services category. State and local government education recorded 30,000 departures. The data is a signal that businesses may have to continue to raise wages to attract workers.
• The University of Michigan's consumer sentiment survey index dropped to 66.8 in its preliminary November reading from October's final reading of 71.7. Consumers see inflation in the year ahead accelerating at a 4.9% pace, the fastest since 2008, though they continue to expect it to abate over the medium term, with the five-year outlook at 2.9%, the survey showed. The survey's consumer expectations index fell to 62.8 - the lowest since October 2013, from 67.9 in October. Its gauge of current conditions fell to 73.2, the lowest since August 2011, from 77.7.
• Euro zone inflation may fall more slowly than earlier thought, two ECB policymakers said on Friday, partly on persistent supply chain bottlenecks, but the European Central should not overreact by removing stimulus too quickly. The comments by Finnish central bank chief Olli Rehn and Lithuania's Gediminas Simkus both suggested that these inflationary pressures could last longer but maintained the ECB's view that the price surge is temporary, thus pushing back suggestions for policy tightening. Inflation reached above 4% last month, more than twice the ECB's 2% target, on soaring energy prices and industrial supply chain bottlenecks that are now proving to be bigger problems than thought even just a few weeks ago.
• The UN’s Cop 26 climate talks in Glasgow ended Saturday with a deal that for the first time targeted fossil fuels as the key driver of global warming, despite coal-reliant countries lobbing last-minute objections. The agreement won applause for keeping alive the hope of capping global warming at 1.5 degrees Celsius. India, backed by China and other coal-dependent developing nations, rejected a clause calling for the “phase out” of coal-fired power. However, the drama abated after a meeting between the envoys from China, India, the United States and European Union, the clause was amended to ask countries to “phase down” their coal use. The talks also led to a breakthrough in resolving rules for covering government-led markets for carbon offsets. The deal allows countries to partially meet their climate targets by buying offset credits representing emission cuts by others. The deal offered a promise to double adaptation finance by 2025 from 2019, as developing  countries argue rich nations, whose historical emissions are largely responsible for warming the planet, must finance their efforts both to transition away from fossil fuels and to adapt to new climate regulations.
• Japan’s economy contracted 3.0% y/y in July-September after a revised 1.5% y/y gain in the first quarter, preliminary GDP data showed this morning, this was compared with a median market forecast for a 0.8% y/y contraction. The weak GDP contrasts with better readings from other advanced economies such as the United States, which saw its economy expand 2.0% y/y in the Q3 on strong pent-up demand.  Japan’s GDP fell 0.8% q/q compared with market forecasts for a 0.2% q/q decline. Consumption fell 1.1% q/q in July-September a 0.9% q/q gain in April-June. Capital expenditure also decreased 3.8% q/q after rising a revised 2.2% q/q in the previous quarter. Exports lost 2.1% q/q in July-September from the previous quarter as trade was hit by the chip shortages and supply-chain constraints. Global supply disruptions and fresh COVID cases that hit business and consumer spending where key drivers behind the lower GDP print.
• CPI inflation in India picked up last month, driven by higher food and energy prices. The headline figure rose from 4.3% y/y in September to 4.5% in October, modestly higher than consensus projections of 4.4%. With inflation likely to pick up in the coming months, the RBI’s current commitment to accommodative monetary policy will be tested. Meanwhile, industrial production disappointed in October, expanding just 3.1% m/m. This was a marked slowdown from the upwardly revised (by 1bps) 12.0% in September, and missed consensus expectations of 4.8%. Indian industry has been affected by the supply chain and energy disruptions that have weighed on economic output around the world in recent months.
• Dubai plans to IPO Salik, its road toll system and part of the Roads and Transport Authority, on the local stock exchange according to a tweet by Maktoum bin Mohammed over the weekend. Earlier, he had indicated that 10 government related entities would be listed in a bid to boost liquidity on the local exchange and raise revenue. The utility firm Dubai Electricity and Water Authority has also been named as one of the firms to be listed.  
• Dubai World Central will reopen for passenger traffic in May 2022, after being closed for two years due to the pandemic.  Dubai Airports CEO Paul Griffiths said he expects the airline industry to have fully recovered from the pandemic by the start of 2025.  Dubai International airport will return to full capacity later this month with the reopening of concourse A.

No major economic data and events today

Fixed Income

• Yields on USTs picked up again last week, recovering the ground lost the previous week in the wake of the November Federal Reserve meeting. The 10-yr added 11bps to 1.5613% (although still off the pre-FOMC level of 1.6034%) while the 2-yr added 11.1bps to 0.5115%. The higher-than-anticipated inflation  print from the US last week contributed to the higher yields with the bulk of last week’s gains coming on Wednesday in the wake of the data release.
• Yields on UK gilts are also rising strongly once more following the dramatic post-MPC falls the previous week. Yields on the 2-yr added 11.7bps to 0.5170%, while the 10-yr added 6.8bps to 0.9110%. CPI inflation data is expected to show an acceleration in price growth when it is released on Wednesday.
• There are rates decisions expected from some key EM central banks this week. On Tuesday, the Hungarian central bank is expected to hike rates for a sixth consecutive time, from 1.8% to 2.1%. Then on Thursday South Africa’s SARB is projected to keep rates on hold at 3.5% while Turkey’s central bank is expected to implement another 100bps cut to the one-week repo, which would take it to 15.0%.

FX

• The dollar index closed up 0.9% last week, its biggest weekly gain since August. It closed at 95.128 despite a -0.1% drop on Friday as data showed weakening consumer sentiment in the US.  
• Amongst the majors, the Euro was one of the biggest contributors to the dollar’s gains over the week as it slipped -1.1% w/w to EUR 1.1445/USD. Expectations are that the ECB will ultimately prove more dovish than the Fed in the face of current inflationary pressures, while the rapid rise in Covid-19 case numbers in parts of the monetary bloc have also weighed on the single currency; the Netherlands has announced a partial lockdown, while Germany has cautioned it may follow suit as cases surge there.
• The Turkish lira fell -3.1% w/w last week, as concerns over high inflation and an apparent commitment to loosening monetary policy weighed on the currency. It fell through the 10.0 level for the first time during trading on Friday before modestly recouping losses to close at TRY 9.9992/USD, a ytd loss of -25.6%. The central bank is due to meet this week.

Equities

• Most global equity indices made some solid gains last week, with good earnings results and pushback from central bankers with regards the prospect of imminent tightening winning over stock market investors even in the face of high inflation readings. That being said, all three major US indices closed down over the week after the recent inflation print, despite gains on Friday. This contributed to the MSCI World Index closing down -0.3%. The S&P 500 lost -0.3% w/w, the Dow Jones -0.6% and the NASDAQ -0.7%.
• By contrast, the MSCI Emerging Markets index closed up 1.7% w/w. In India, both the Sensex and the Nifty added 1.0%, while the Shanghai Composite closed up 1.4% and the Hang Seng 1.8%. Elsewhere in Asia, Japan’s Nikkei closed flat.
• In Europe, the FTSE 100 lost -0.5% on Friday to fall from its 20-month high, but the index still ended the week 0.6% higher. The DAX gained -0.3% w/w and the CAC 0.7%, with both indices at record highs.

Commodities

• After some big moves in both directions over the course of the week, a drop on Friday saw oil prices end the week lower. WTI lost -0.6% to USD 80.79/b, while Brent futures lost -0.7% to USD 82.17/b. This still leaves prices up 66.5% and 58.6% respectively since the start of the year however.
• The intra-week moves were largely driven by the changing likelihood of US President Joe Biden deciding to release volumes from the Strategic Petroleum Reserve in order to help curb the recent price rises, given diplomatic efforts to encourage oil producing countries to pump more have so far failed. A suspension of US exports has also been mooted.

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