MNI ASIA OPEN: Zhengzhou Lifts Mobility Controls, OPEC+ Leans To Flat Production

NEWS

North America

US (BBG): Amazon Seizes Sales Opportunity With $8.25 Billion of Bonds
Amazon.com Inc., the world’s second-largest company by revenue, is selling $8.25 billion of investment-grade bonds before any potential increase in inflation worries reduces investors’ craving for highly rated debt. The online retailer is one of 11 companies in a busy bond market on Tuesday ahead of anticipated volatility. Federal Reserve Chairman Jerome Powell is scheduled to speak Wednesday, with key inflation data to follow Thursday and the monthly US employment report on Friday.

US (MNI): US Wage Pressures Likely To Be Longer Lasting
The U.S. is likely to see continued strong wage pressures even if an economic slowdown raises unemployment over the next year, barring a recovery in labor force participation closer to pre-Covid levels, Yale University professor and visiting scholar at the Federal Reserve Bank of Philadelphia Giuseppe Moscarini told MNI.

US (BBG): House Plans to Move Fast to Avert Rail Strike Despite Objections
The House plans to take up legislation on Wednesday to prevent a strike by freight-rail workers, and prospects were brightening for quick action in the Senate despite resistance from a few Republicans and progressive Democrats.

CANADA (MNI): Q3 GDP Doubles Forecasts With 2.9% Annualized Gain
Canada's economy continued to outperform in the third quarter as GDP grew at a 2.9% annualized pace led by exports and government spending, while a flash estimate signaled output stalled at the start of the fourth quarter. The quarterly GDP gain beat the central bank's forecast and the market consensus for growth around 1.5%.

Europe

HUNGARY (MNI): EC To Approve Hungary NGEU Plan, Keep Funds Frozen
The European Commission is expected to approve Hungary’s EUR5.8 billion NextGenerationEU plan Wednesday but also maintain its proposal to European leaders to freeze EUR7.5 billion of the country’s cohesion funds, MNI understands. The plan contains 27 milestones, the highest in any NGEU plan, all of which Hungary will need to meet before it can request funding under the plan.

UK (MNI): Signs Recruitment Pressures Easing - Bailey
Bank of England Governor Andrew Bailey told the House of Lords Economic Affairs Committee that "our expectation is there will be more to do" on rate hikes but that he saw signs of labour market pressures easing.

ITALY (MNI): Italy Seeks To Cover EUR6.2 Bln Shortfall In Budget Plan
The Italian government is looking at cutting some spending or raising taxes in order to cover a EUR6.2 billion shortfall in its draft 2023 budget plans, two officials working in the budget told MNI.

SWEDEN (MNI): Sweden Financial Regulator Sees Stability Risks Up
Sweden's financial regulator highlights rising financial stability risks, notably in real estate, and falling household consumption. Sweden is seeing increasingly elevated financial stability risks, Sweden's financial regulator Finansinspektionen (FI), highlights in its latest report, as rising debt interest costs feed through to lower household demand and overly leveraged commercial real estate companies need to lower debt levels as property prices decline.

Asia

CHINA (BBG): IMF May Cut China Growth Forecast on Covid, Property, Chief Says
The International Monetary Fund may have to trim its forecast for China’s economic growth as Covid-19 related restrictions and difficulties in the property sector weigh on prospects. The Washington-based crisis lender sees Chinese gross domestic product expanding 3.2% this year and 4.4% in 2023.

CHINA (BBG): Chinese City Hosting Key IPhone Plant Lifts Covid Lockdown
The central Chinese city of Zhengzhou, home of Apple Inc.’s largest manufacturing site, is lifting a lockdown on its main urban areas after five days. As of Nov. 30, Zhengzhou will remove so-called mobility controls -- a euphemism for lockdown -- and replace them with normal Covid-combating measures, according to a post on the local government’s official WeChat account.

CHINA (MNI): China To Vaccinate Elderly, Refine Covid Measures
China's health authorities will fast-track the vaccination of the elderly and implement more precise measures to control outbreaks, officials said at a National Health Commission press conference on Tuesday. Pandemic control measures must not be inflexible nor variable at different levels, and must be pertinent to specific needs, officials said. Infections should be treated in a scientific manner and authorities will resolve the reasonable demands of the masses, officials said.

JAPAN (MNI): BOJ Maintains JGB Buying Scale in December
The Bank of Japan said on Tuesday that December's purchases of Japanese government bonds will maintain the frequency and the scale seen in November amid ongoing concern over higher bond yields. The BOJ also said it will continue to buy the cheapest JGBs at a fixed-rate of 0.25% for the time being, and also eased the conditions of the Securities Lending Facility for the cheapest-to-deliver issues.

Global

OIL (WSJ): OPEC+ Leans Toward Maintaining Flat Production, Delegates Say
OPEC and other big oil producers are likely to decide to keep output levels flat at their meeting Sunday, the group's delegates said, amid mounting concerns over returning Covid-related lockdowns in China and lingering uncertainty over Russia's ability to pump.

DATA

US NOV. CONSUMER CONFIDENCE AT 100.2; EST. 100.0 - bbg

MNI:US SEP FHFA HPI SA +0.1% V -0.7% AUG; +11.0% Y/Y
MNI: US Q3 FHFA HPI Q/Q SA +0.1% V +12.4% Q3 2021
SEPT. S&P CORELOGIC CS 20-CITY ADJUSTED INDEX FELL 1.2% M/M; EST. -1.2 - bbg

MNI: US REDBOOK: NOV STORE SALES +8.1% V YR AGO MO

MNI: CANADA Q3 GDP +2.9% ANNUALIZED VS +1.5% EXPECTED
* CANADA NOMINAL Q3 GDP -0.7% QOQ AS PRICE INDEX -1.4%
* CANADIAN SEPT GDP +0.1%, MATCHING EXPECTATIONS
* CANADA FLASH GDP LITTLE CHANGED IN OCTOBER, STATSCAN SAYS
* STATSCAN REVISES AUG GDP TO +0.3% FROM +0.1%

MNI: GERMANY NOV (P) CPI -0.5% M/M (= MNI PROJ); OCT +0.9% M/M

US TSYS: Resumption of Selling Pressure With Powell Eyed Tomorrow

• Treasuries have more than unwound an early rally on spillover from softer than expected German regional CPI inflation, reversing as the harmonised measure was more stubborn than the national CPI equivalent suggested. This was followed by heavier corporate issuance, the highlight being Amazon kicking off a five-part dollar bond sale, which helped set the trend for the much of the session, a few gyrations aside.
• Treasuries see an extension of selling pressure late on, with cash yields 3.5-8bps higher on the day, with the long end leading the move cheaper.
• TYH3 sits at 112-30 (-9+ ticks on the day) having touched new session lows of 112-28 to come close to testing support at the 50-day EMA of 112-24.
• A return to a heavier docket tomorrow, headlined by Powell but also with GDP, ADP, JOLTS and MNI Chicago PMI plus additional Fedspeak from Governors Bowman and Cook.

FOREX: CNH Advances Following Covid Press Conference, Greenback Recovers

• The offshore Yuan looks set to post strong 1.5% gains on Tuesday as China's health authorities announced that the country will fast-track the vaccination of the elderly and implement more precise measures to control outbreaks. Furthermore, officials said they will resolve the reasonable demands of the masses, underpinning the Yuan’s strength throughout the trading session.
• With a slight downtick in Covid cases and no escalation in social unrest USDCNH has erased the previous two sessions advance and now narrows the gap with last weeks lows around 7.12.
• Initially, the more optimistic risk backdrop weighed on the greenback and high beta plays across G10 such as AUD, NZD and NOK led the moves higher.
• However, as global equity indices continued their grind lower amid a grind higher in core yields, the greenback steadily gained through US trade and is clocking at best levels approaching the APAC crossover.
• The price action has weighed on the single currency with some below estimate German CPI reads also providing a marginal headwind for the Euro. EURUSD’s weak close Monday is a potential bearish development that points to a possible top. In pattern terms, Monday is a shooting star candle - a reversal signal. An extension lower would expose key support at 1.0223, Nov 21 low. Clearance of this level would confirm a reversal and signal scope for a deeper pullback. A break of 1.0497, yesterday’s high, is required to resume recent bullish price action.
• Particular weakness was seen in the likes of CAD (-0.67%) and CHF (-0.51%), that had failed to capitalise on the early bout of greenback pessimism.
• Chinese Manufacturing and non-manu PMIs overnight before the key Eurozone CPI and core CPI Flash Estimates ahead of the Dec 15 ECB meeting.
• In the US, second reading of GDP follows ADP employment as well as JOLTS job openings. Fed Chair Powell is due to speak about the economic outlook, inflation, and the labor market at the Brooking Institution.

FX OPTION EXPIRY

Tomorrow's notable expiries:
EURUSD 1.02bn at 1.0300.
GBPUSD ~1bn at 1.2050.
USDCNY 1.37bn at 7.20.

• EURUSD: 1.0250 (493mln), 1.0300 (1.02bn), 1.0331 (291mln), 1.0340 (201mln), 1.0350 (403mln), 1.0370 (466mln), 1.0380 (364mln), 1.0405 (215mln), 1.0425 (308mln), 1.0500 (855mln).
• GBPUSD: 1.2050 (941mln).
• USDJPY: 137.25 (805mln), 138.50 (379mln), 139 (295mln).
• USDCAD: 1.3510 (356mln).
• AUDUSD: 0.6700 (215mln), 0.6735 (658mln), 0.6775 (331mln).
• USDCNY: 7.1815 (300mln), 7.20 (1.37bn).

EGBs-GILTS CASH CLOSE: Early Inflation Relief Rally Fades

Core Europe FI strengthened Tuesday, with Bunds outperforming Gilts, and some bull steepening in both the German and UK curves.

• The German short end rallied early on softer-than-expected German state and Spanish inflation data diminishing ECB hike expectations (50bp is back to being the base case for Dec's meeting, with 75% implied probability).
• Gains partially reversed in the afternoon. There was a negative reaction to the German HICP print which didn't confirm the weakness in State CPI, with heavy US corporate supply also weighing.
• Wednesday's focus will be the Eurozone Nov flash inflation print.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 8.7bps at 2.106%, 5-Yr is down 8.5bps at 1.925%, 10-Yr is down 7bps at 1.922%, and 30-Yr is down 7bps at 1.822%.
• UK: The 2-Yr yield is down 3.4bps at 3.253%, 5-Yr is down 4.4bps at 3.224%, 10-Yr is down 2.6bps at 3.1%, and 30-Yr is down 0.4bps at 3.358%.
• Italian BTP spread down 2.3bps at 189.9bps / Greek up 1bps at 224bps

US OPTIONS: Upside And Downside In SOFR

Tuesday's US rates / bond options flow included:

• 0QF3 95.62p, traded 14 in 40k, on Block buyer.
• EDJ3 95.50c sold at 8 in 2k
• SFRF3 95.18/95.06/94.93p fly, bought for 1.25 in 1k
• SFRU3 97.25/98.50cs, bought for 4 in 15k (block)
• TYF3 110.00/109.00ps, bought for 4 in 10k

EU OPTIONS: Mixed Spread Trades Tuesday

Tuesday's Europe rates / bond options flow included:

• OEG3 117/114ps 1x2, bought for 25 in 2.5k
• RXF3 140.5/142cs, sold at 69.5 in 2.2k
• ERZ2 97.75/97.625ps 1x1.5, bought for 2.25 in 5k
• ERZ2 98.00/98.12cs, bought for half in 5k

STOCKS: Off Session Lows But Still Weary Ahead Of Powell Tomorrow

• ESA hit session lows of 3941.25 (-0.7%) after the largest sell program of the day (1111 names) before pulling back to 3955 at typing (-0.3%).
• Apple has weighed today, falling more than 2.5% to its lowest since Nov 9/10, seemingly on unconfirmed reports on lower than expected iPhone shipments.
• Headlines a short time before that China’s Zhengzhou city (iPhone City) will return to normal Covid control measures Nov 30 provided no notable boost.
• The move lower has brought support at 3928.73 (20-day EMA) closer to play, clearance of which would open stronger support at 3887.17 (50-day EMA).

COMMODITIES: Oil Buoyed By Hopes Of Looser China Covid Curbs

• Crude oil has on balance pushed higher today, buoyed by optimism that China will relax some Covid restrictions before pulling back on reports that OPEC+ will on Sunday keep to its current output levels after agreeing to a 2mbpd cut in October as opposed to any further cuts.
• There was some late confusion on headlines that Iraq saying OPEC+ plans to cut output by 2mbpd this month but prices have largely unwound the subsequent small rise with no further context for the headline. In other news, the White House is looking for a “consistent” $70/bbl oil price to fill the SPR.
• WTI is +1.6% at $78.45, sitting close to resistance at $79.9 (Nov 25 high).
• Brent is +0.3% at $83.4, with an earlier session high of $86.00 coming closer to resistance at $86.87 (Nov 25 high).
• Gold is +0.5% at $1749.5, with trend conditions remaining bullish but not materially progress made towards the bull trigger at $1786.5 (Nov 15 high).