EUROPEAN INFLATION: German State-Level Details: Firmer Services May Be Temporary
Looking a bit closer at this morning's German state level October CPI data, energy appears to have moved marginally further into deflationary territory, while services inflation, contrary to the limited views we've seen on the category, seems to have accelerated a little. Having said that, some individual states' data questions the persistence of that services firmness - a hypothesis which we've also raised following earlier Spanish and Belgian data. This means that current potential upward risks to the 3.2% Y/Y analyst consensus for Eurozone October services HICP may be less relevant in terms of the ECB's reaction function.
- Specifically, we see services inflation around 3.5% Y/Y in October, which would represent an acceleration from September's 3.4% and be the highest rate in the category since April.
- Looking at the services-heavy subcategories, trends vs September seem mixed: We see healthcare around 2.8% Y/Y (2.9% Sep), communication around 0.0% (-0.3% Sep), recreation and culture around 1.9% Y/Y (1.6% Sep), education around 4.8% (5.1% Sep), and restaurants and hotels around 3.4-3.5% Y/Y (3.7% Sep).
- The mixed-weighting transport category meanwhile will likely come in around 2.6% Y/Y in October, an acceleration from September's 2.4%. However, individual states' data points towards strength in (volatile) airfares this time - meaning some of the acceleration here has the potential to reverse in November, taking away from its significance for the ECB's reaction function.
- Elsewhere, we see food inflation materially lower than before, at around 2.0-2.1% Y/Y (Belgium also saw a material deceleration here earlier, 2.9% Sep), while the categories associated with 'core goods' (Clothing and footwear as well as Furnishings and Household Equipment) seem to have only have seen limited directional moves this time.
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US: MNI POLITICAL RISK - Democrats Dig In As Govt Shutdown Looms
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- President Donald Trump departs the White House at 08:00 ET 13:00 BST for Quantico, Virginia, where he will deliver remarks at an unusual assembly of senior US military officials at 09:00 ET 14:00 BST. Trump will return to the White House to deliver an announcement at 11:00 ET 16:00 BST and then sign Executive Orders at 15:00 ET 20:00 BST.
- A meeting between Trump and Congressional leaders did little to slow the government from barrelling towards a shutdown at midnight tonight. Democrats have dug in, framing the standoff as a struggle over healthcare. We have a rundown of the consquences of a shutdown and the routes out of a shutdown, inside.
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- Trump announced yesterday at a joint White House press conference alongside Israeli Prime Minister Benjamin Netanyahu that Israel has accepted a 20-point plan to end the war in Gaza. While the plan has the backing of Israel, including hardline members of Netanyahu’s coalition, and a broad cross-section of Arab and regional powers, Hamas’ response is uncertain.
- The US is considering Ukrainian President Volodymyr Zelensky’s request for Tomahawk cruise missiles.
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- Poll of the Day: American support for Israel has undergone a 'seismic reversal'.
Full Article: US DAILY BRIEF
EGB FUNDING UPDATE: Portugal confirms no auctions likely in Q4
- Portugal has confirmed that it has completed its 2025 funding needs and that there is no further bond issuance planned for the year. However, "IGCP may still consider outright or exchange/buyback auctions in order to ensure the efficient functioning of the market, sustain investor engagement along the different segments of the curve, and promote liquidity across the PGB curve."
- MNI would be surprised if we don't see at least one exchange auction in the quarter.
- "Net issuance of Treasury Bills will decrease from the 3rd quarter estimate of EUR 4.6 billion to a projected amount of net issuance of EUR 2.7 billion in 2025."
- There will be just one bill auction date (19 November) with E1.00-1.25bln (combined) of the 6-month May 22, 2026 BT on offer alongside the new 12-month Nov 20, 2026 BT.
BONDS: Firmer As Crude Softens On Latest OPEC+ Headlines
Weakness in crude oil futures, after a delegate told BBG that OPEC+ is set to discuss fast tracking a ~500K bpd/month increase in crude production across 3 months (totaling ~1.66mln bpd), provides support to wider core global FI markets in recent trade. With Bunds unreactive to the German national CPI data, which delivered the upside surprises that we flagged on the back of the regional level data.
