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Notes/observations
-Central Bank speakers continue to paint picture of holding rates at current level for as long as needed, pushing back against market expectations for rate cuts. Fed Chair Powell expected to speak later.
-China Oct CPI declined MoM and YoY, lower than consensus.
-Nvidia slightly higher in premarket after planning to release three new AI chips for China, announcement as soon as Nov 16th.
–EU Earnings Recap: Hapag-Lloyd (shipping) narrows FY expectations to lower end of expectations due to oversupply in shipping industry; ArcelorMittal (steel) Q3 cautious outlook despite beat; Schneider Electric (industrial) mid to long term targets seen as strong; Taylor Wimpey (homebuilder) confident for FY23 amidst weakening macro for UK.
-Asia closed mixed with Nikkei225 out-performing at +1.6%. EU indices are +0.0-0.6%. US futures are -0.1% to +0.1%. Gold -0.2%, DXY 0.0%; Commodity: Brent +0.9%, WTI +0.9%, TTF +4.3%; Crypto: BTC +0.9%, ETH +1.5%.
Asia
– China Oct CPI M/M: -0.1% v +0.2% prior; Y/Y:-0.2% v -0.1%e; PPI Y/Y: -2.6% v -2.7%e.
– Japan Sept Current Account Balance:¥2.7T v ¥2.978Te; Trade Balance (BoP basis): ¥341.2B v ¥244.5Be.
– BOJ Nov Summary of Opinions noted that the decision to increase the flexibility in the conduct of yield curve control would lead to improving its resilience through reducing the chance of speculative moves. Needed to continue with framework of YCC and negative rate policy, at least as long as it is necessary for maintaining the price stability target of 2 percent in a stable manner; still some distance to 2% price target.
– BOJ Gov Ueda reiterated that was vital to confirm virtuous wage-inflation cycle; spring wage talks would be key. Reiterated that certainty of achieving price target was not yet high enough.
Europe
– UK Oct RICS House Price Balance: -63% v -67% prior.
Americas
– Fed’s Harker (voter) reiterated now was time to take stock of past rate hikes’ impact. Next Fed rate choice could go ‘either way’ depending on the data.
– House Speaker Johnson stated that he would decide within the next two days on a path to avert a potential government shutdown.
– Bank of Canada (BOC) Oct Summary of Deliberations: Persistence in core inflation, elevated inflation expectations and wage growth could indicate high inflation becoming entrenched. Agreed to revisit need for rate hike at future decisions with benefit of additional data;- Striking actors said to have reached a tentative labor agreement with Hollywood studios.
Speakers/fixed income/FX/commodities/erratum
Equities
Indices [Stoxx600 +0.14% at 444.70, FTSE -0.05% at 7,398.22, DAX +0.26% at 15,268.65, CAC-40 +0.46% at 7,066.45, IBEX-35 +0.55% at 9,334.87, FTSE MIB +0.53% at 28,585.00, SMI +0.60% at 10,658.90, S&P 500 Futures +0.07%].
Market focal points/key themes: European indices open mixed but took on a positive bias after the first hours of trading; sector trending higher include industrials and financials; while sectors weighted to the downside include consumer discretionary and technology; reportedly DP World considering offer for HK Cargo; earnings expected in the upcoming US session include Li Auto, Becton Dickinson, Brookfield and Johnson Controls.
Equities
– Consumer discretionary: Flutter Entertainment [FLTR.UK] -10.5% (earnings), Domino’s Pizza Group [DOM.UK] -7.5% (trading update), Wizz Air [WIZZ.UK] -6.0% (earnings; outlook).
– Materials: ArcelorMittal [MT.NL] -1.5% (earnings).
– Healthcare: Astrazeneca [AZN.UK] +3.0% (earnings; licenses novel agent for the treatment of cardiometabolic conditions and obesity), Merck KGaA [MRK.DE] +4.5% (earnings).
– Industrials: Airbus [AIR.FR] -2.0% (earnings), Henkel [HEN3.DE] +3.5% (earnings), Schneider Electric [SU.FR] +5.5% (CMD), Rheinmetall [RHM.DE] +1.5% (earnings).
– Technology: Adyen [ADYEN.NL] +29.5% (prelim results).
– Telecom: Deutsche Telekom [DTE.DE] +1.0% (earnings).
Speakers
– ECB Economic Bulletin noted that it was determined to ensure that inflation returned to its 2% medium-term target in a timely manner. Most measures of underlying inflation continued to decline. At the same time, domestic price pressures were still strong, reflecting also the growing importance of rising wages. Euro area economy remained wea.
– ECB’s De Guindos (Spain) stated that it needed to be prudent and cautious over risks on inflation. Too early to discuss potential rate cuts. Growth looking more negative than previously forecasted.
– ECB’s Villeroy (France) reiterated view that inflation was clearly trending downward.
– BoE’s Pill (Chief Economist) stated that did not need to raise rates to bear down on inflation. Assume rates would stay restrictive for extensive period of time to bring inflation to 2% target.
– Germany Fin Min Lindner noted that a Franco-German initiative could lead to EU fiscal deal. Much more optimistic on fiscal deal consensus in 2023. Deal now about numbers and not only instruments.
– Sweden Central Bank (Riksbank) Financial Stability Report noted that the financial system was well functioning and risks were elevated. Higher interest rates was challenging highly indebted companies and households. Property companies needed to reduce financial risks.
– BOJ Gov Ueda noted that Unwinding ultra-loose policy is a serious challenge; It’s too early to determine what specifically would be done when normalize policy stance. Would proceed carefully with raising interest rates to avoid bond market volatility and any adverse impact on financial institutions. Very interested in Spring wage talks for next year and noted that wage growth needed to be a bit higher than 2%. Reiterated FX should reflect fundamentals.
– Czech Fin Min Stanjura noted that the pain of austerity was worth it. Budget deficit cut to reduce 2024 GDP between 0.4-0.5% but help bring inflation to target.
– Hungary Econ Min Nagy cut the 2023 GDP outlook from 0.0% to range between -1.0% to 0.0%. Noted that had exited inflation shock and now must focus on growth. Saw 2024 CPI forecast at 5.0-6.0%. Only obstacle to recovery is the central bank.
– Philippines Central Bank (BSP) reiterated its stance that risk to inflation outlook continued to lean towards the upside.
– Fitch affirmed Australia sovereign rating at AAA; outlook stable.
Currencies/fixed income
– USD holding onto recent gains as central bank speak continued to be the focus. Session saw comments from BOJ Gov Ueda; BOE chief economist Pill and several ECB members.
– Overall price action was lackluster with major pairs contained in tight ranges.
– Global bond yields were higher with US 10-year around 4.55%; European Yield also higher by 3bps in the session.
Economic data
– (NO) Norway Q3 Average Monthly Earnings Y/Y: 6.4% v 5.2% prior.
– (DK) Denmark Sept Current Account Balance (DKK): 10.7B v 21.1B prior; Trade Balance (ex-shipping): 3.0B v 10.6B prior.
– (FR) France Q3 Preliminary Wages Q/Q: 0.5% v 1.0% prior.
– (ZA) South Africa Sept Total Mining Production M/M: -0.3% v -0.6%e; Y/Y: -1.9% v -2.4%e; Gold Production Y/Y: -0.1% v +0.5% prior; Platinum Production Y/Y: % v 2.6% prior.
– (HU) Hungary Oct YTD Budget Balance (HUF): -3.488T v -3.265T prior.
Fixed income issuance
– (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in Bills; 12-month Bills; Avg Yield: 3.860% v 3.942% prior; Bid-to-cover: 1.33x v 1.45x prior.
Looking ahead
– 05:25 (EU) Daily ECB Liquidity Stats.
– 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.
– 06:00 (IE) Ireland Oct CPI M/M: No est v 0.1% prior; Y/Y: No est v 6.4% prior.
– 06:00 (IE) Ireland Oct CPI EU Harmonized M/M: No est v 0.1% prior; Y/Y (final): No est v 3.6% prelim.
– 06:00 (PT) Portugal Sept Trade Balance: No est v -€2.4B prior.
– 06:00 (IL) Israel Oct Consumer Confidence: No est v 79 prior.
– 06:00 (ZA) South Africa Sept Manufacturing Production M/M: 0.1%e v 0.5% prior; Y/Y: -2.5%e v +1.6% prior.
– 06:00 (RO) Romania to sell RON600M indicated in 7.20% Oct 2033 bonds.
– 07:00 (BR) Brazil CONAB Crop Report.
– 07:00 (MX) Mexico Oct CPI M/M: 0.4%e v 0.4% prior; Y/Y: 4.3%e v 4.5% prior.
– 07:00 (MX) Mexico Oct CPI Core M/M: 0.4%e v 0.4% prior; Y/Y: 5.5%e v 5.8% prior.
– 08:00 (UK) Daily Baltic Dry Bulk Index.
– 08:30 (US) Initial Jobless Claims: 218Ke v 217K prior; Continuing Claims: 1.82Me v 1.818M prior.
– 08:30 (UR) Ukraine Oct CPI M/M: No est v 0.5% prior; Y/Y: 6.0%e v 7.1% prior.
– 08:30 (US) Weekly USDA Net Export Sales.
– 09:00 (PL) Poland Central Bank (NBP) Gov post rate decision press conference.
– 10:30 (US) Weekly EIA Natural Gas Inventories.
– 11:30 (US) Treasury to sell 4-week and 8-week Bills.
– 12:00 (US) WASDE Crop Report.
– 12:00 (CH) SNB Moser.
– 12:00 (US) Fed’s Paese.
– 12:15 (CH) SNB Vice President Schlegel.
– 12:30 (EU) ECB chief Lagarde.
– 13:00 (US) Treasury to sell 30-Year Bonds.
– 13:15 (US) Tsy Sec Yellen meets with China VP.
– 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 11.25%.
– 14:00 (US) Fed Chair Powell.
– 16:30 (NZ) New Zealand Oct Manufacturing PMI: No est v 45.3 prior.
– 18:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to cut Reference Rate by 25bps to 7.00%.
– 18:50 (JP) Japan Oct M2 Money Supply Y/Y: No est v 2.4% prior; M3 Money Supply Y/Y: No est v 1.8% prior.
– 19:30 (AU) Australia Central Bank (RBA) Statement on Monetary Policy (SOMP).
– 21:35 (CN) China to sell 30-year Upsized Bond.
– 21:35 (CN) China to sell 6-month Bills.
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