Interesting set up ahead of BoJ meeting/Earnings commentary still sounds like a mixed bag economy

The yen is bouncing, getting back to the 150 level after Tokyo reported a quicker than expected October CPI figure (which leads the national number) which raises the chances that maybe we do get another shift in policy next week from the Bank of Japan. Headline inflation was higher by 3.3% y/o/y which was well more than the estimate of up 2.8% even with government subsidies. The core/core rate jumped 3.8% y/o/y vs 3.7% in the month before and one tenth above the forecast with services rising at the fastest rate since 1994 not including value added tax hikes. 

JGB yields were little changed but the 10 yr inflation breakeven rose 1.7 bps to 1.29%, the highest since 2014. We continue to be long and bullish of Japanese stocks and believe the BoJ will get rid of NIRP either next week or the meeting after which should help the yen. 

Japanese 10 yr Inflation Breakeven

In Europe, Spain reported Q3 GDP that was in line with expectations if we include the Q2 revision. It grew 1.8% y/o/y and will be one of the better performers in the region with more of a reliance on services when compared to Germany. 

Italy said its economic sentiment index for October fell 1 pt m/o/m to the weakest level since April 2021 with consumer confidence at the lowest since January. European bonds are bouncing with yields lower and the euro little changed. The Italian 10 yr yield in particular is down 11 bps this week after jumping by 25 bps in the week before. The Italian stock market, its FTSE MIB, is one of the best performers in the world this year, higher by 16% ytd. 

Let's go over some earnings reports and the macro still sounds very much a mixed bag, notwithstanding the Q3 GDP print.