MNI ASIA OPEN: Germany To Suspend Debt Brake, Nagel Weary On Euro Economy

NEWS

SECURITY (MNI): Hamas Spokesperson Appears To Question Upcoming Pause In Fighting
The above Reuters comments come as Israel and Hamas prepare to observe a four-day pause in hostilities to facilitate the exchange of Israeli hostages held in Gaza and Palestinian prisoners detained in Israel. As it stands, the pause is expected to begin at 07:00 local time, with hostage and prisoner exchanges to follow. That pause could be extended if Hamas release additional hostages.

GERMANY (BBG): Germany to Suspend Borrowing Limit Again After Budget Shock
Germany will suspend a constitutional limit on net new borrowing for a fourth consecutive year after Chancellor Olaf Scholz’s government was forced into a radical budget overhaul by a ruling last week from the nation’s top court. The emergency move to lift the so-called “debt brake” will be part of a revised 2023 budget that Finance Minister Christian Lindner plans to present next week, a spokeswoman for his ministry said Thursday.

EU (MNI): Time To Debate End To PEPP Reinvestment-ECB's Wunsch
There are no good reasons for the European Central Bank's Governing Council to delay a discussion over ending reinvestments under its Pandemic Emergency Purchase Programme, Belgian National Bank head Pierre Wunsch said in an interview published on Thursday.

EU (MNI): Euro Economy Very Weak, Road to 2% 'Bumpy' - Nagel
Europe’s economy is experiencing a period of “pronounced weakness,” Bundesbank chief Joachim Nagel said in a speech Thursday, and the road to stable 2% inflation would be a “bumpy one with many ups and downs.” The pace of price increases is set to rise even if energy prices remain at their present level, he said, with the main effect on inflation of previous rate hikes expected to take hold in 2024.

EU (MNI): Not Issuing Digital Euro Costs Significant - Panetta
The costs of not issuing a digital euro would be “significant” for the Eurozone as it would bring considerable benefits to digital payments that wouldn’t be possible if large technology companies expand into digital finance without a public alternative, Bank of Italy Governor Fabio Panetta said Thursday.

GERMANY (MNI): German Banks Stable, But Rate Risks Remain - Buba
Germany’s financial system has so far coped well with higher interest rates and elevated levels of uncertainty, the Bundesbank said Thursday, but some effects remain unrealised, with structural change in the economy likely to add further credit risk.

UK (MNI): Some Help To BOE From UK Budget–OBR's Miles
The UK government’s fiscal package unveiled in its Autumn Statement this week will provide a modest, enduring boost to supply without adding to aggregate demand, helping the Bank of England at the margins, David Miles, former BOE Monetary Policy Committee member and now a top executive at official fiscal forecaster the Office for Budget Responsibility, told MNI.

CHINA (MNI): Yuan Looks Set To Rally Further - Policy Advisors
The yuan looks set to rally further thanks to U.S. dollar weakness and year-end demand for cash in China, while The People's Bank of China (PBOC) will continue to shore up the currency and react to firmer tone by narrowing the differential between its stronger daily fix and the market price, policy advisors and traders told MNI.

SWEDEN (MNI): RIKSBANK - Talks Tough On Hikes But Holds Steady
Sweden’s central bank left its policy rate on hold at 4.0% at its November meeting, suggesting its tightening cycle may be over, though Governor Erik Thedeen insisted it stood ready to hike again if inflation pressures returned.

AUSTRALIA (MNI): Ex RBA Board Member Argues For Real-Time Data
Central banks should focus more on real-time spending data during supply-side driven price shocks rather than relying so heavily on traditional consumer price indices, a former Reserve Bank of Australia board member working with the European Central Bank on better use of economic metrics told MNI.

OIL (BBG): OPEC+ Says Delayed Meeting Next Week Will Now Be Held Online
The delayed OPEC+ meeting next week will be held online instead of in-person as the cartel wrangles over production levels amid a slump in oil prices. Saudi Arabia and its allies are embroiled in a dispute over output quotas for African members. The disagreement has forced the group to push back its scheduled conference by several days to Nov. 30, sending crude plunging by as much as 4.9% to below $80 a barrel in London on Wednesday.

US (MNI): President Biden's Approval Rating Dips Below 39%, Near Record Lows
US President Joe Biden's approval rating has continued to drop amid blowback amongst progressive Democrats over his handling of the war between Israel and Hamas. According to FiveThirtyEight, Biden's approval rating of 38.9% is touching the lows he experienced in summer last year during the peak of concerns over energy prices and inflation.

US TSYS: TY Ebbs Lower With PMIs In Focus Tomorrow

• TYZ3 closed at 108-19 (-07) after lifting off an earlier 108-16 having been biased lower by EU FI price action. This includes the UK leading with a stronger than expected PMI (stronger Germany mostly offset by weaker France), headlines concerning the suspension of the German “debt brake” for 2023 and Dutch election results.
• It’s the turn of the US PMIs tomorrow with the November preliminary reports (mfg seen 49.9 after 50.0, services 50.3 after 50.6), in an otherwise light session post-Thanksgiving.
• Support is seen at 108-05 (50-day EMA) but the short-term trend structure remains bullish with resistance at 109-08+ (Nov 17 high).
• Volumes unsurprisingly remained low, chalking up 478k with a sizeable spread-related share.

EGBs-GILTS CASH CLOSE: Gilts Weaken Again As PMIs Surprise To Upside

Broadly stronger-than-expected flash November PMIs saw European core yields rise sharply Thursday, with Gilts underperforming.

• While German / Eurozone PMIs came in above consensus after France's below-expected numbers, the UK's comfortable beats (including an unexpectedly expansionary Services reading) was arguably the highlight and helped Gilts underperform, following Wednesday's larger-than-expected Gilt supply remit.
• Bund yields hit session highs in mid-afternoon after news emerged that the German government would indeed seek to suspend the "debt brake" for 2023 (later confirmed by the finance ministry).
• The Dutch short-end weakened on post-election result fiscal questions.
• UK yields rose by double digit basis points across the curve, moreso than Germany which saw bear steepening amid limited short-end moves.
• Periphery spreads widened modestly, with BTPs underperforming.
• Friday brings German GDP and IFO data, with a few ECB speakers including Lagarde.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1bps at 3.044%, 5-Yr is up 5.1bps at 2.596%, 10-Yr is up 5.9bps at 2.619%, and 30-Yr is up 5bps at 2.788%.
• UK: The 2-Yr yield is up 10.3bps at 4.716%, 5-Yr is up 11.1bps at 4.309%, 10-Yr is up 10.2bps at 4.257%, and 30-Yr is up 9.8bps at 4.723%.
• Italian BTP spread up 1.5bps at 177.1bps / Spanish up 1bps at 100.3bps

FOREX: GBP & NZD Consolidate Gains Amid Subdued Thanksgiving Trade

• GBP remains among the best performers in G10 approaching the APAC crossover, with solid November prelim PMI data largely responsible for the early strength. Both manufacturing and services PMIs came in ahead of forecast (manufacturing at 46.7 vs. Exp. 45.0, services at 50.5 vs. Exp. 49.5). GBP/USD rallied to touch 1.2564 in response. The move higher has moderated as the greenback recovered slightly throughout a subdued Thanksgiving holiday session.
• This week’s gains have resulted in a breach of 1.2506, the Nov 14 high. The break confirms a resumption of the uptrend and maintains a positive price sequence of higher highs and higher lows. Sights are on 1.2589, 50.0% of the Jul 14 - Oct 4 bear leg.
• AUD and NZD trade similarly strong, with the latter rising 0.4% on Thursday, thanks to the mild weakness across the USD. The USD Index is off yesterday's best levels after the 100-dma successfully contained prices and acted as strong resistance across Wednesday trade. Supportive China headlines also crossed, working in favour of risk assets as markets continue to bake in expectations of sizeable policy support for the property market and housing sector.
• AUD/USD continues to hold just below the 200-dma of 0.6587 - a level that held well earlier in the week. Clearance here would accelerate the bullish reversal off the October low, putting prices at levels last seen in early August.
• Friday’s docket will be headlined by German IFO, Canada retail sales and flash PMI’s for the US. ECB President Lagarde is also due to speak at Euro20+, in Frankfurt.

US STOCKS: S&P E-Mini Holds Bulk Of Yesterday's Move Nearer Key Resistance

• ESA dipped ahead of the early close for Thanksgiving to finish near unchanged on the day at 4569.50 (+0.05%), having kept to particularly narrow ranges after pushing higher yesterday .
• It sees very slight underperformance to Nasdaq (+0.1%) and Dow Jones (0.1%) e-minis, whilst outperform the Russell 2000 (-0.1%).
• ESA unsurprisingly hasn’t troubled technical levels, after yesterday’s high of 4580.50 marked a push closer to a key resistance at 4597.50 (Sep 1 high). Support meanwhile is seen at 4501.75 (Nov 16 low).
• North of the border, the TSX is currently holding onto to a 0.2% gain after rising shortly after the close. Industrials lead gains (0.55%), primarily courtesy of Canadian National Railway up 1.2%, whilst consumer staples lag (-0.9%).

Source: Bloomberg

COMMODITIES: Crude Weighed By OPEC+ Discord Whilst Gold Nudges Higher

• Crude remains weaker Thursday but has recouped much of the earlier losses after a delay in the OPEC+ meeting rattled markets this week. A strong US crude stock build reported this week has also weighed on the WTI-Brent spread.
• Nigeria and Angola are the main nations pushing for higher production quotas, disrupting normal OPEC+ meeting proceedings. Both nations are aiming to boost their production in the short term.
• Nigeria’s proposed 2024 target will reduce to 1.38mn bpd – from 1.74mn bpd previously but will rise to 1.58mn bpd if three independent consultancies can confirm its capacity to produce at this level.
• An Angolan official stated the country’s intent to remain in OPEC, somewhat settling the markets Thursday.
• Outwith the difficulties faced by OPEC to assuage African nation concerns, Saudi and Russia are expected to sustain or deepen cuts into 2024 when they meet November 30.
• WTI is -1.1% at $76.24 off a low of $75.30 but having remained easily within yesterday’s wide ranges. Resistance seen at $78.55 after which lies a key short-term $79.65 (Nov 14 high).
• Brent is -0.7% at $81.42 off a low of $80.19 but having also remained easily within yesterday’s wide ranges. Key short-term resistance seen at $83.97 (Nov 14 high).
• Gold is +0.1% at $1992.25, paring earlier gains with a modest intraday recovery in the USD index. Resistance remains at the bull trigger at $2009.4 (Nov 7/Oct 27 high) having come close in the prior two sessions.