Good morning and Happy Thanksgiving! The market landscape has shown little change since last week, with equities holding onto recent gains and consolidating in this low-liquidity, shortened week. Rates have undergone a significant move lower following the FED's pivot narrative. However, long-term consumer inflation expectations in the U.S. are slowly rising, reaching 3.2% in the Michigan survey, indicating a potential entrenchment of inflation expectations in society.
Conversely, Europe is beginning to experience product deflation in some consumer categories. If the energy situation improves, there's a possibility of CPI printing around zero in the next six months, which could simplify the task for the ECB. Italy received a positive credit rating upgrade from Fitch and the GE/Italy spread closed sharply lower to 170bp, as the nation's credit rating was pulled back from the brink of junk status. While Italy's debt remains high and the deficit is expected to remain above 3%, I still find attractive relative opportunities in the credit space.
In terms of political events, right-wing parties gaining power globally, such as Milei in Argentina and PVV Wilders in Holland, are noteworthy. I am not overly surprised by these results as they are linked to the ongoing de-globalization and Europe's grappling with the immigration crisis.
In corporate news, the past week saw significant events. NVDA posted stellar results that were met with a bit of skepticism, as the exposure to China via Singapore exports is increasing despite the sales ban and the absolute amount of sales growth is unsustainable beyond two years. But the company is simply a beast in capturing the technological new waves in their making. Bayer faced a substantial stock decline due to a promising drug loss and the reopening of ongoing U.S. lawsuits against its pesticide business. Deere issued an expected profit warning, and the U.S. retail sector presented mixed results, with major players like WMT, VFC, HD, and LOW offering below-expectation guidance, while specialty players like GAP, ANF, and ROST defied this trend.
Alexandros Tavlaridis