MNI ASIA OPEN - Case For ECB Rate Slowdown Growing

NEWS

Europe
EUROPE (MNI): Donohoe Set For Re-election As Eurogroup President
Irish Finance Minister Paschal Donohoe looks set to be re-elected President of the Eurogroup on December 5, with no challenge appearing for the position. The application period for the post of Eurogroup President ended today, with Donohoe being the only minister to submit an application. Donohoe will stay in the role for a further 2.5 years if re-elected by euro zone finance ministers.

ECB (MNI): Case For Rate Slowdown Growing - ECB GovCo Accounts
Upside risks to the inflation outlook and downside risks to growth dominated October’s ECB Governing Council monetary policy meeting, the official account shows, amid increasing focus on fiscal policy’s contribution to upward price pressure and against a background of continued high levels of uncertainty caused by the war in Ukraine.

ECB (MNI): ECB Must Act Quickly To Tame Inflation - Schnabel
Monetary policy must remain firmly focused on getting inflation down to 2% “as quickly as possible,” ECB Executive Board member Isabel Schnabel said in a speech Thursday, adding that markets’ expectations of a change in direction and un-targeted fiscal policy have made doing so more difficult, increasing the likelihood of persistence high inflation.

ECB (MNI): Ex ECB's Gerlach Sees Possible Rates/QT Tradeoff
Hawkish European Central Bank policymakers could agree to hike interest rates by 50 basis points on Dec 15 rather than make a third consecutive 75-point increase in return for an earlier-than-anticipated start to running off bonds from the ECB’s balance sheet, former Central Bank of Ireland deputy governor Stefan Gerlach told MNI.

ECB (MNI): Energy, Fiscal Making ECB's Life Harder - DNB Knot
Soaring increases in energy prices caused by the war in Ukraine have made it hard to keep inflation in check Dutch central bank governor Klaas Knot told MPs on Thursday, with upwards wage pressures and expansive fiscal policy creating additional challenges.

EUROPE/RUSSIA (MNI): EU Ministers Aim For Dec 13 Deal On Gas Cap
European Union energy ministers have deferred agreement on joint procurement, new rules to accelerate deployment of solar and wind energy and its controversial gas price cap until December 13, an EU source told MNI.

SWEDEN (MNI): 75bps Hike As Rate Peak Nears
Sweden’s Riksbank delivered a widely-expected 75-basis-point hike on Thursday, lifting the policy rate to 2.5% after its November meeting but signalling that it was nearing the peak in this tightening cycle. The Monetary Policy Report’s projection showed the policy rate hitting a peak of 2.84% by the third quarter of next year, with the board stating that the next hike was likely to come early next year, suggesting an increase of at least 25bps at the February meeting. At that point there would only be 25bps more to come.

North America
CANADA (MNI): Canada Wage Gains Edge Towards Record High- CFIB
Canadian firms expect near-record wage inflation over the coming year even as their expectations for their own prices and consumer price inflation have slipped, according to a survey Thursday from one of the country's biggest industry groups.

Asia/Antipodeans
RBNZ (MNI): MPC Ups Ante in War on Inflation
Data flow in the lead-up to the RBNZ’s final monetary policy review of 2022 fuelled expectations that the Reserve Bank would take more drastic measures to contain price pressures as its inflation-fighting credibility is at stake. The RBNZ raised the Official Cash Rate by a record 75bp and clearly communicated that it intends to continue aggressive monetary tightening.

China (BBG): Freeport Agrees Copper Treatment Feeds in China At Six-Year High
Freeport-McMoRan has agreed to annual copper-concentrate supply agreements with Chinese smelters, with treatment and refining charges set at $88/ton, 8.8 cents/pound, according to people familiar with the matter.

US TSYS: TYZ2 Consolidates Post-Data/FOMC Climb

• TYZ2 sees a Thanksgiving early close 11 ticks higher at 113-09+ although ran a very narrow range of 113-09+-113-15 through US hours on unsurprisingly slim volumes.
• The day’s gains were seen earlier in London hours before plateauing with a beat for the German Ifo survey.
• In clearing resistance at 113-11 (Nov 16 high), it has opened the key 113-30 (Oct 4 high) but is yet to make inroads. Tomorrow’s docket is suitably quiet post-Thanksgiving, with a return of Fedspeak on Monday and an eye on Powell for Wednesday.

FOREX: JPY Remains On Top In Subdued Thanksgiving Session

• Risk continues to be trade in a buoyant fashion following yesterday’s weaker US data and confirmation that the Fed sees the pace of hikes slowing, with a 50bp move seeming very likely in December. The greenback maintains its short-term downward bias, and most G10 ranges have remained modest during the US Thanksgiving session.
• The Japanese Yen leads the G10 FX pack, with Tokyo returning from a mid-week holiday and USDJPY (-0.82%) extending below initial support at 139.64, the Nov 18 low. A substantial break now turns the focus to 137.68, Nov 15 low and a bear trigger.
• Despite a relatively small decline for the USD index (-0.18%), there has been broad based greenback losses once more. The likes of GBP, AUD and NZD have all advanced just shy of half a percent.
• Furthermore, echoing the moves from yesterday, the Chinese Yuan is underperforming as advisers and analysts told MNI that the People’s Bank of China is expected to cut banks’ reserve requirement ratio in coming days as fresh Covid outbreaks fuel concerns about the sluggish economic recovery.
• Additionally, both CAD and EUR remain close to unchanged, with the latter straddling either side of the 1.0400 mark after failing 30 pips shy of important resistance at 1.0479, the Nov 15 high and the bull trigger.
• New Zealand retail sales cross in early APAC trade, marking the highlight of a very empty Friday data calendar. Final readings of German and Mexican GDP are the only data points of note.

EGBs-GILTS CASH CLOSE: Gilts Underperform Inverting Bunds

Bunds enjoyed another constructive session Thursday while Gilts weakened, with trade on the quiet side amid a US holiday.

• Despite an above-expected IFO, German curve inversion once again caught the eye as growth concerns persisted: with the short end relatively anchored, multiple spread segments of the curve hit fresh closing lows for the cycle.
• Plenty of central bank communications: ECB Oct meeting minutes met expectations that 50bp hike at the Dec meeting was more likely than 75, though Schnabel said room for a slowdown in hike pace is limited.
• Among other BoE speakers, Ramsden delivered dovish-tilting comments, though terminal hike pricing firmed overall on the session and the short end underperformed on the UK curve.
• With a risk-on cross-asset theme, periphery EGB spreads tightened.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.8bps at 2.113%, 5-Yr is down 7bps at 1.896%, 10-Yr is down 8bps at 1.85%, and 30-Yr is down 8.3bps at 1.793%.
• UK: The 2-Yr yield is up 7.9bps at 3.209%, 5-Yr is up 3.6bps at 3.22%, 10-Yr is up 2.7bps at 3.038%, and 30-Yr is up 7.9bps at 3.275%.
• Italian BTP spread down 5.3bps at 182.4bps / Greek down 3bps at 223bps

STOCKS: North American Equities Nudge Higher On Rates Rally, Weaker USD

• US equity futures nudged higher today as Tsy futures rallied and the US dollar slipped further.
• The S&P e-mini closed 0.3% higher to put it between 0.4% for the Nasdaq and 0.2% for Dow Jones, building on larger gains in the prior two days for a more than 2% climb since Monday’s close for ESA.
• North of the border, TSX60 futures trade a similar 0.4% higher, also up nearly 2% since Monday’s close. Gains on the day in cash trading have been led by real estate and materials whilst losses have been concentrated in consumer staples and utilities.

COMMODITIES: Crude Oil Sideways, EU Nations Remain Divided On Price Cap

• Crude oil has moved sideways through the session in holiday trade, consolidating yesterday’s slide on China Covid fears and relaxations on the proposed Russia price cap that reduced fears of tighter supply.
• On the latter, EU nations remain divided on setting a price cap with that $65-70/bbl criticized for not being harsh enough, with six nations reported to oppose the current price cap levels. Putin says a price cap will have "serious consequences" for the global energy market.
• Separately, Venezuela’s government and opposition will resume political talks after more than a year in Mexico, potentially paving the way to lift crude oil sanctions.
• WTI is +0.01% at $77.95, with resistance at $82.43 (Nov 18 high) and key medium-term support at $74.96 (Sep 28 low).
• Brent is -0.1% at $85.34 with resistance at $90.63 (Nov 18 high) and support at $82.31 (Nov 21 low).
• Gold is +0.3% at $1754.34 with the US dollar fading, nudging slowly towards resistance at the bull trigger at $1786.5 (Nov 15 high).

BELGIUM DATA: BNB Business Sentiment Bottoming Out

BELGIUM NOV BNB BUSINESS SENTIMENT -16.6 (FCST -14.3); OCT -15.5

• Belgian business confidence fell for the seventh consecutive month in November.
• Steep drop-offs in services, manufacturing and trade new orders due to weak demand saw muted production in November. This theme has been echoed across French, Italian and German indexes.
• Yet sentiment is looking less pessimistic going forward. Despite remaining negative, demand forecasts improved marginally for all industries except for services.
• Price movements remained clouded.
• The quarterly BNB credit conditions index signalled a notable tightening, as economic outlooks remain muted and the ECB continued to hike interest rates against a backdrop of soaring eurozone inflation.

CANADA DATA: Job Vacancies To Unemployed Bounce Back To Cycle Highs

• The ratio of Canadian job vacancies to unemployed bounced back to joint highs of 1:1 in September according to today’s SEPH report [first chart].
• It reverses a decline since those highs from May/June, suggesting a slower cooling in labour demand than first thought.
• It helps support the more recent bounce in employment in October along with continued skilled and non-skilled job shortages weighing on business activity [second chart].
• Methodological differences and limited history make it hard to compare with the JOLTS equivalent in the US, although the relative increase since late 2020 suggests a frothier vacancies market in the US which still sits closer to 2:1, just one reason for a higher terminal rate.

CANADA DATA: Fixed Weight Wage Growth Surprisingly Cooled In September

• Payrolls employment rose 85.3k in September, broadly supporting the recent uptick in the more timely labour report for October, which jumped from 21k in Sep to 108k in Oct.
• As always with the SEPH report, the wage component is more interesting. Here, fixed weight wage growth, which better adjusts for compositional changes, continued to moderate to 3.4% Y/Y, the softest since Feb as it fell from 4.2% in Aug and a peak 5.4% in April.
• There’s the usual issue with time lags, but it contrasts with the latest acceleration in employee wage growth in the October labour report to recent highs of 5.6% Y/Y or 5.3% Y/Y on a full-time basis.
• It should see wage growth in next Friday’s labour report for November watched particularly closely, the last of the major releases before the BoC on Dec 7.