MNI ASIA OPEN - OPEC+ Supply Cuts To Total Over Two Million B/D

NEWS

US (MNI): Restrictive Stance For Quite Some Time - Fed's Williams
New York Fed President John Williams on Thursday said he expects interest rates tor remain restrictive for "quite some time," but also left open the potential for further hikes if inflation comes in hotter than expected.

US (MNI): Daly Says Fed Must Not Prematurely Declare Victory
San Francisco Fed President Mary Daly said the central bank has policy in a "very good place" right now as it has time to assess data to better understand what is happening in the economy and how inflation is progressing, but she is not thinking about rate cuts at all right now.

US (MNI): Fed Could Cut By Spring As Real Rates Rise - Former IMF Economist
A steady decline in U.S. inflation is jacking up real borrowing costs in a way that could force the Federal Reserve to start cutting interest rates by spring, former IMF economist Brett House told MNI.

OIL (MNI): OPEC+ Supply Cuts To Total 2.2M b/d
OPEC has announced additional voluntary cuts following today’s meeting, with a total reduction of 2.2m b/d, OPEC said in a statement. The cuts are as follows: Saudi Arabia (1m b/d); Iraq (223k b/d); United Arab Emirates (163k b/d); Kuwait (135k b/d); Kazakhstan (82k b/d); Algeria (51k b/d); and Oman (42k b/d). Russia will cut crude exports by 300k b/d and products by 200k b/d from a baseline of the average export levels of the months of May and June of 2023. Crude markets reversed earlier gains following the OPEC headlines and promptly extended declines to around 3% on the day before stabilising.

US (MNI): US: Govs. DeSantis & Newsom To Face Off In Televised Debate
Governors Ron DeSantis (R-FL) and Gavin Newsom (D-CA) will face off in a 90min televised debate at 2100ET (1800PT, 1100JST), with the former in particular looking to bolster his standing with voters. Hosts Fox News are billing the event as "The Great Red vs. Blue State Debate", with DeSantis running for the Republican presidential nomination on a social conservative 'anti-woke' platform, while Newsom is seen by some as a potential candidate for the Democratic nomination should President Joe Biden not run in 2024.

ECB (MNI): Inflation Move Good News, But Risks Remain - Nagel
The slowdown of inflation in September and October, followed by November’s headline inflation print of 2.4% in the eurozone and 2.3% in Germany is “encouraging,” Bundesbank president Joachim Nagel said in a speech Thursday, but uncertainty over the outlook remains “high,” with risks “pointing upwards” due to geopolitical uncertainty and strong wage dynamics.

UK (MNI): BOE Appointments Need More Transparency - Bridges
A reformed process of appointing members to the Bank of England’s Monetary Policy Committee should be more transparent, but not so transparent as to deter applicants, Lords Economic Affairs Committee chair Lord Bridges told MNI, stressing that it was crucial to ensure greater diversity of thinking among policymakers while steering clear of the dangers of politicisation.

GLOBAL (MNI): Central Banks Need Humble Approach After Covid Errors: G30
Central banks must learn painful lessons from errors made through the pandemic and return to basic economic stabilization to avoid domination by governments or financial markets, a G30 group of former officials said in a report Thursday.

EU (MNI): EU Budget Commissioner: Fiscal Rules Deal Closer
A deal on EU fiscal rules is “not so far away”, EU Budget Commissioner Johannes Hahn said Thursday, noting that the EC’s proposal for reform which was issued in April was “something that could be supported” by all countries.

ECB (MNI): Sharp Balance Sheet Cut Not Justified - BOI Panetta
A sharp contraction of the European Central Bank’s balance sheet “after the already rapid one of recent months” would have an additional restrictive impact on the economy not justified by the inflation outlook, new Bank of Italy’s Governor Fabio Panetta said in a speech Thursday.

BOE (MNI): MNI POLICY - Bernanke Review Looks At BOE Rate Path, Scenarios
Recommendations for the Bank of England to publish a projection of its future rate path, and for it to put more resources into producing alternative economic scenarios are both under consideration by former Federal Reserve chief Ben Bernanke in his review of the BOE’s forecasting, MNI understands.

DATA

US DATA: Core PCE and Supercore Trends Resume Moderation

• Core PCE was slightly softer than expected in October at 0.16% M/M (cons 0.2) after an upward revised 0.315% M/M (initial 0.30%).
• Notably, yesterday's downward revision to Q3 turned out to be backloaded in the quarter, largest in Jul and then also in Aug.
• The three-month run rate inched a tenth down to 2.4% annualized, still above the 1.9% from Aug, although the six-month rate at 2.5% slowed to its lowest since Feb'21.
• PCE core services ex-housing 0.148% M/M after an upward revised 0.447% M/M (initial 0.42).
• The three-month run rate eased back to 2.8% annualized, below the 2.9% in Aug for its lowest since Dec'20.

US DATA: Consumption Boost From Savings Rate Decline Fading

• Personal spending and income growth was as expected in nominal terms in October, with spending rising 0.22% M/M (cons 0.2) and incomes 0.25% M/M (cons 0.2). Goods spending (-0.2%) mirrored the weakness seen in retail sales, with services (+0.4%) more resilient.
• Real spending was more mixed relative to consensus, rising 0.17% M/M (cons 0.1) but after a downward revised 0.34% M/M (prior rounded to 0.4). There was a less clear cut split between goods and services here, goods rising 0.1% vs services 0.2% M/M.
• It leaves overall real consumption running at a still strong 3.0% annualized on a 3M/3M basis (following 3.6% in Q3), although the latest trend is softer at 2.1% annualized on a three-month basis.
• Back in nominal terms, disposable income increased 0.3% M/M after 0.4% M/M. It's helped see a stabilization in the saving ratio at 3.9% (from 3.8% in Sep) after a sharp run down in Q3 helped fuel strong consumption growth, which in turn had reversed the build in savings rates in Q2 that came along with the consumption soft patch (when it increased 0.8% annualized).

• Initial jobless claims increased to a seasonally adjusted 218k (cons 218k) in the week to Nov 25 after a slightly upward revised 211k (initial 209k).
• Continuing claims were far more notable, rising to a seasonally adjusted 1927k (cons 1865k) in the week to Nov 18, a payrolls reference period, from 1841k (initial 1840k).
• At face value it's an ominous figure, the highest since Nov'21 and suggestive of slower hiring.
• However, this 86k increase in the SA figure came despite a 98k decrease in the NSA data. That's notable as the average for the same week in 'normal' years (which we define as 2016-19 and 2022) was a 1k increase.
• We've previously published the below chart and last week mentioned how the surprising decline in continuing claims had been helped by the most favorable adjustment (i.e. pushing claims lower) of the year. This week, the same process has seen us having to double the scale for the most unfavorable adjustment .

MNI NOV CHICAGO BUSINESS BAROMETER 55.8 VS OCT 44.0
MNI CHICAGO: NOV PRICES PAID 59.9 VS OCT 60.1
MNI CHICAGO: NOV PRODUCTION 62.4 VS OCT 46.5
MNI CHICAGO: NOV EMPLOYMENT 53.9 VS OCT 50.2

US NAR OCT PENDING HOME SALES -1.5% MOM; -8.5% YOY

**CANADA Q3 ANNUALIZED GDP -1.1% VS +0.2% EXPECTED
**CANADA Q2 ANNUALIZED GDP REVISED TO +1.4% FROM -0.2%
** CANADIAN SEPT GDP +0.1% VS 0% EXPECTED
**CANADA FLASH OCT GDP +0.2%, LED BY RESOURCES, RETAIL

US TSYS: Bear Steeper With Powell In Focus Tomorrow Before FOMC Blackout

• Cash Tsys sit 5.5-8.5bp cheaper on the day, led by 10s but with the very long end lately extending session lows. It’s a move that reverses yesterday’s rally after yesterday's month-to-date (and for 2s, multi-month) lows in yields.
• There has been a deluge of data today, none of it providing enough of a catalyst to promote an extension of the recent large rally. For instance, core PCE was close to expected at 0.16% M/M but the distribution of known Q3 downward revisions were about as hawkish as they could have been and continuing claims appeared to have a significant seasonal adjustment skew that makes the underlying data less worrisome than headlines suggest. It was then followed by a much stronger than expected MNI Chicago PMI.
• Long positioning, both in terms of recent biases on the SOFR strip and in Tsys had narrowed the scope for fresh capital to be put to work and Williams (permanent voter) and Daly (’24 voter) offered some pushback against rate cut excitement after Waller’s dovish musings on Tuesday.
• TYH4 at 109-28 sits off the day’s low of 109-23+, for a sizeable retracement off yesterday’s high of 110-15+ to dent the extension of the bullish theme. It’s doesn’t yet trouble support at 109-05+ (Nov 28 low).
• Near-term FOMC pricing is similar to pre-data levels, with a first cut priced for the May FOMC and close to 50/50 it comes in March instead. After that it builds to a cumulative 112bp of cuts through 2024 vs 121bp shortly ahead of the data as implied rates slipped pre-release.
• Tomorrow sees initial data focus on ISM manufacturing, of added note after today’s Chicago PMI strength and other manufacturing surveys also pointing to some upside risk, before Fed Chair Powell headlines the docket in a fireside chat at 1100ET including text. The FOMC media blackout begins Friday midnight ET.

FX: EURUSD Slides Back Below 1.0900 Amid Soft CPI & Recovering Greenback

• Higher US yields have contributed to a rebound for the USD index on Thursday. Softer headline US data was brushed aside with some firmer underlying details supporting the greenback. An additional bout of USD weakness around the month-end fix also proved short lived with the DXY close to session highs approaching the APAC crossover, up 0.75% on the session.
• EURUSD hovers right at session lows as the single currency continues to be one of the worst performers in G10. The euro was initially undermined this morning by a series of lower-than-expected CPI prints from France and the Netherlands - releases which spelled downside risks vs consensus for the Eurozone CPI Estimate, which also came in below surveyed median forecasts.
• The trend outlook in EURUSD remains bullish and the pullback from yesterday’s high is likely a correction. Note that the trend condition is overbought and a corrective pullback would allow this set-up to unwind. Initial support to watch is 1.0852, the Nov 22 low.
• USDJPY had a volatile session with an impressive 166-pip range. An initial blip lower on the US data could only take the pair down to 147.24, well shy of the overnight lows and the powerful turnaround saw the recovery extend to as high as 148.51. The aforementioned greenback weakness around the WMR fix saw another dip to 147.72 before the pair recaptured the 148 handle approaching the close.
• Elsewhere, the Swiss Franc extended on Wednesday’s advance, with another sizeable slide in EUR/CHF through the WMR fix, with no headlines or data to trigger the move in CHF specifically, leaving the move likely a result of month-end flow - nonetheless the EUR/CHF slippage puts the cross further through support of the 50- and 100-dmas of 0.9599 and 0.9592 and is narrowing the gap with key support and the bear trigger of 0.9417.
• Worth noting CHF implied vols are bid, with spot volatility likely feeding into the gauges. The 2w implied EUR/CHF contract is particularly firm, with the contract capturing both the ECB and SNB decisions on December 14th.
• Final Eurozone manufacturing PMI data are unlikely to move the dial, and greater focused will be placed on the US ISM Manufacturing PMI to round off the week. Worth noting ECB’s Lagarde is also due to speak at the ECB Forum on Banking Supervision, in Frankfurt.

EQUITIES: Megacaps Weigh Heavily But Nasdaq Still Gains ~10% In Nov

• The S&P e-mini was lifted slightly off lows of 4544.75 but remains underwater today, with a headwind from higher Treasury yields following US data and Fedspeak from Daly and Williams.
• The day’s earlier gains to 4578.25 struggled to get close to yesterday’s high of 4597-00 that stopped fractionally short of key resistance at 4597.50 (Sep 1 high).
• The S&P e-mini tracking at -0.1% heavily outperforms the Nasdaq 100 (-0.8%), whilst underperforming the Dow (+0.9%) and Russel (+0.3%). Nasdaq monthly gains are trimmed to just under 10% vs 8% for the S&P 500.
• In cash space, multiple major names are under pressure today, with Nvidia (-3.2%), Alphabet (-2.7%), Meta (-2.7%), Tesla (-2.1%), Amazon (-1.3%) and Microsoft (-0.8%) all seeing heavy declines.
• Within the S&P 500, those names see communication services lag heavily (-1.6%), followed by consumer discretionary (-0.8%) and tech (-0.6%), whilst health care, industrials and materials all lead (+0.8%).

COMMODITIES: Crude Futures Reverse Lower Following OPEC+ Meeting Announcements

• Crude is set for an intra-day decline, as the market met OPEC’s announced output cuts of 2.2m b/d with scepticism. Crude regained some ground after further details of the cuts were revealed, but it remains lower on the day. The resumption of loadings from Black Sea Ports have added some further downside.
• WTI futures are down 2.2% at 76.14$/bbl with the trend outlook unchanged and remaining bearish. On the downside, the bear trigger lies at $72.37, the Nov 16 low. Clearance of this level would resume the downtrend.
• For NatGas, Henry Hub down marginally on the day, as a larger than expected US inventory build has added further downside. However, prices have regained ground from their intraday low of $2.767/MMBtu.
• In precious metals, the firmer greenback weighed on spot gold, which has fallen 0.44%. However, spot silver continues its impressive run higher, continuing to trade at the best levels since May.