MNI EUROPEAN OPEN: Omicron & Yuan Matters Continue To Dominate Headlines

EXECUTIVE SUMMARY

• OMICRON FOUR TIMES MORE TRANSMISSIBLE THAN DELTA IN JAPAN STUDY (BBG)
• PFIZER WILL KNOW SHOT’S EFFICACY AGAINST OMICRON BY YEAR-END (BBG)
• SOUTH AFRICA EXCESS DEATHS JUMP (BBG)
• UK ACTIVATES COVID PLAN B, CALLS FOR FRESH FISCAL SUPPORT IN SOME QUARTERS
• ANALYSTS SEE FURTHER YUAN STRENGTH IN SHORT TERM (CSJ)
• RBA’S HARPER SEES ECONOMY RUNNING HOT WITHOUT RUNAWAY INFLATION (BBG)

Fig. 1: USD/CNY Vs. Differential Between USD/CNY Mid-Point Fixing & BBG Survey Estimate (negative number = weaker than expected fixing for CNY i.e. USD/CNY fixes above BBG survey estimate)

Source: MNI - Market News/Bloomberg

UK

CORONAVIRUS: People in England are preparing for more restrictions on daily life after the PM approved his Covid Plan B to limit the spread of Omicron. The new rules, some of which start on Friday, include masks in most public places, Covid passes for some venues and work from home guidance. But Boris Johnson faces a mounting backlash to the plans from his own MPs. One senior Conservative MP heckled Health Secretary Sajid Javid in the Commons, shouting for him to "resign". (BBC)

CORONAVIRUS: A U.K. trial testing the effectiveness of antiviral Covid-19 drugs in broad populations has started recruiting those infected with the virus, as the government looks for ways to keep people out of hospitals in the face of new variants. The study -- run by researchers from the University of Oxford and the National Institute for Health Research -- is looking to enroll as many as 10,600 volunteers, according to a statement from the partners Wednesday. The trial will start by assessing Merck & Co.’s molnupiravir, which has already been authorized for use by the U.K. drugs regulator. People across the U.K. will be able to join the study if they are aged 50 and over or between 18 to 49 years with either underlying health conditions or if they have had Covid-19 for less than five days. All participants must have a positive PCR test within the last seven days. (BBG)

BOE: The Bank of England will wait until early next year before raising borrowing costs, later than previously expected, as it awaits further information on the economic impact of the new Omicron coronavirus variant, a Reuters poll found. In a November poll a slim majority of economists expected a rise from 0.10% to 0.25% on Dec. 16. But since then policymaker Michael Saunders, who voted for an interest rate hike last month, said he wanted more details about the new variant before deciding how to vote this month. (RTRS)

FISCAL: U.K. business groups called for government support after Prime Minister Boris Johnson announced restrictions to curb the spread of the omicron variant, which Bloomberg Economics estimates could cost the economy as much as 2 billion pounds ($2.6 billion) a month. In remarks following Johnson’s televised address to the nation, business groups said the measures, which include advice to work from home, would deal a blow to the U.K.’s fragile economic recovery from lockdowns. The Trades Union Congress said the Treasury should revive the furlough program to support workers in affected sectors. The night-time industries lobby said Johnson threw businesses in the struggling sector under the bus by introducing mandatory vaccine checks in large venues. (BBG)

ECONOMY: U.K. employers increased starting salaries at a record pace in November amid an “unsustainable” shortage of workers, according to a survey published Thursday. The report by the Recruitment and Employment Confederation and KPMG painted a picture of firms once again struggling to fill vacancies and being forced to boost compensation to attract workers. The acute tightness of the labor market is a key concern at the Bank of England, where policy makers had appeared on course to raise interest rates next week until a new strain of coronavirus took hold. They are now expected to refrain until February to assess the impact of the omicron outbreak. (BBG)

BREXIT: Temporary border control posts monitoring goods coming into Northern Ireland "would not be able to cope" if grace periods for checking certain products ended. That is according to a senior director at Warrenpoint Harbour in County Down. The requirement for checks is a result of the part of the Brexit deal relating to Northern Ireland, known as the protocol. The protocol keeps Northern Ireland in the EU's single market for goods. Since 1 January, when it came into effect, goods arriving into Northern Ireland from the rest of the UK have been subject to checks and controls. Temporary border control posts were set up at Northern Ireland ports to carry out those checks. However, grace periods mean checks on medicines and chilled meats have been delayed. (BBC)

POLITICS: The Metropolitan Police says it is not investigating allegations No 10 staff broke Covid rules in December of last year due to "an absence of evidence". A video obtained by ITV shows No 10 aides joking about holding a Christmas party amid lockdown restrictions. Following an angry backlash, the PM's former spokeswoman, who appears in the clip, stepped down from her role. Labour has urged the police to pursue an investigation "without fear or favour". Shadow health secretary Wes Streeting said it was "simply implausible for the police to argue there is no evidence parties took place", adding: "We have all seen the video involving No 10 staff referring to the party on 18 December." Boris Johnson has apologised for the clip of Downing Street staff and has asked senior civil servant Simon Case to carry out an inquiry into whether rules had been broken. (BBC)

U.S.

FISCAL: The federal government likely ran a budget deficit of $193 billion in November, up from $145 billion in the same month last year, the Congressional Budget Office estimated Wednesday. The Treasury Department will release the official deficit data on Friday. The U.S. budget deficit hit $2.8 trillion in fiscal year 2021, the second highest on record. The CBO projects the 2022 deficit will narrow to $1.2 billion, in part because the federal government is no longer providing emergency pandemic assistance. For instance, outlays for unemployment compensation fell by $21 billion compared with the same month last year, the CBO said. Cecilia Rouse, chair of the White House council of economic advisers. said Tuesday that the slowdown in government spending will result in an 8.5% contraction in "the fiscal impulse" on the economy in 2022, one of the biggest drops since World War II. (Dow Jones)

CORONAVIRUS: The Democratic-controlled U.S. Senate on Wednesday approved a Republican measure that would overturn President Joe Biden's COVID-19 vaccine or test mandate for private businesses, with two Democrats joining Republicans to back the initiative. The vote sends the legislation on to the House of Representatives, where it faces an uncertain future. (RTRS)

CORONAVIRUS: New Jersey Governor Phil Murphy said the state is seeing a post-Thanksgiving spike in coronavirus cases and hospitalizations. With only 34% of residents having received a booster shot, the state will open new mass vaccination sites and encourage places to administer shots to walk-ins, he said at briefing. New Jersey’s seven-day positivity rate is 9.6%, with the rate of transmission currently at 1.36, meaning the virus is spreading.

MARKETS: JPMorgan Chase & Co.’s investment bankers are poised for another bumper quarter. Fees from advising on mergers and underwriting stocks and bonds could be up about 35% in the fourth quarter from a year earlier, JPMorgan Co-President Daniel Pinto said Wednesday at the Goldman Sachs U.S. Financial Services Conference. That jump would make this quarter one of the best ever for the firm’s investment bankers in a year of record dealmaking. The investment-banking pipeline “looks quite strong into next year across M&A, debt and equity,” Pinto said. “How is it going to play out? Difficult to know, because I think it will be very linked to the path of interest rates. So we have a smooth path of normalization of interest rates, most likely that pipeline will be executed and probably we’ll have a good year in banking. If there is a very volatile and very disruptive increase in interest rates, probably a couple of markets will suffer and it will be more difficult.” (BBG)

MARKETS: Citigroup Inc. is seeing the end of the pandemic-induced trading craziness. Fourth-quarter trading revenue will likely be “flat to modestly down” from the $3.41 billion Citigroup collected in the same period in 2019, Chief Financial Officer Mark Mason said. That compares with the $3.9 billion haul the bank turned in just one year ago, when the pandemic spurred volatility across markets. “We’re seeing the normalization that we were expecting in fixed-income play-through, we’re also seeing pressure from just the trading environment,” Mason said Wednesday at an investor conference. “But that’s being offset in part by some of the strong equities performance that continues.” (BBG)

LIBOR: The U.S. House approved legislation designed to protect trillions of dollars of assets from chaos when Libor expires, in one of the final key steps aimed at guaranteeing an orderly transition from the discredited benchmark. By a vote of 415-9, House lawmakers on Wednesday backed provisions to switch the most troublesome contracts, including mortgages, business and student loans, to a replacement benchmark in an effort to prevent a flood of litigation when dollar Libor retires. The bill will now head to the Senate. Bankers, investors and regulators see such proposals as crucial to ensuring that a large swath of the U.S. financial system isn’t disrupted. The move follows similar legislation in New York state to protect Wall Street that passed in March, and a regulatory decision to extend key dollar Libors until mid-2023 to allow trillions of dollars of contracts to die off naturally. (BBG)

OTHER

GLOBAL TRADE: U.S. Republican Senator John Cornyn says bill boosting the U.S. semiconductor industry could pass in February. “I wish it was sooner but I think that’s probably the next most likely opportunity,” Cornyn says, adding bill is supported by the administration and both parties. (BBG)

GLOBAL TRADE: A U.S. trade agency is recommending that President Joe Biden should extend Trump-era tariffs on imported solar components. The U.S. International Trade Commission is recommending a four-year extension of the solar tariff, with annual declines of .25% starting in February. The recommendation comes weeks after determining that solar imports remain a threat to U.S. manufacturers. Biden is expected to make a final decision before the four-year tariff is scheduled to expire in February and is under no obligation to follow the ITC’s recommendation. (BBG)

GLOBAL TRADE: Britain's trade minister, Anne-Marie Trevelyan, said on Wednesday she discussed with U.S. Commerce Secretary Gina Raimondo finding a path in early 2022 for the two countries to work on the issue of steel and aluminum tariffs. Trevelyan also said in a statement she invited Raimondo to London in January. (RTRS)

U.S./CHINA: The U.S. House of Representatives passed legislation on Wednesday to ban imports from China’s Xinjiang region over concerns about forced labor, one of three measures backed overwhelmingly as Washington continues its pushback against Beijing's treatment of its Uyghur Muslim minority. (RTRS)

U.S./CHINA/TAIWAN: A top American defense official said strengthening Taiwan’s ability to defend itself is an “urgent task” for the U.S. as China engages in destabilizing and “intentionally provocative” actions toward the self-governing island. Taiwan should work to defend itself using “credible, resilient, mobile, distributed and cost-effective” asymmetric capabilities, Assistant Secretary of Defense Ely Ratner told the Senate Foreign Relations Committee on Wednesday. (BBG)

CANADA/CHINA: Prime Minister Justin Trudeau announced today that Canada will launch a diplomatic boycott of the upcoming 2022 Winter Olympic Games in Beijing. No federal government officials will attend the games. Canadian athletes will still be allowed to compete. The U.S., U.K. and Australia already have announced they won't send official delegations to the games — a collective attempt to send a message to China that its human rights abuses have not gone unnoticed. Speaking to reporters on Parliament Hill, Trudeau said the government is "extremely concerned" by the "repeated human rights violations carried out by the Chinese government." He said Canada will show its displeasure with the communist regime by withholding the delegates that normally would attend high-profile events like the opening and closing ceremonies. Asked if he was anticipating any blowback from Beijing for snubbing China as it prepares to host the world, Trudeau said "this should not come as a surprise" to the regime. (CBC)

CORONAVIRUS: The omicron variant of Covid-19 is 4.2 times more transmissible in its early stage than delta, according to a study by a Japanese scientist who advises the country’s health ministry, a finding likely to confirm fears about the new strain’s contagiousness. Hiroshi Nishiura, a professor of health and environmental sciences at Kyoto University who specializes in mathematical modeling of infectious diseases, analyzed genome data available through Nov. 26 in South Africans in Gauteng province. (BBG)

CORONAVIRUS: The World Health Organization on Wednesday said the highly mutated omicron variant of Covid-19 could change the course of the pandemic. The exact impact is “still difficult to know,” WHO Director General Tedros Adhanom Ghebreyesus said at a media briefing from the group’s Geneva headquarters. Scientists across the world are scrambling to determine just how contagious and lethal the mutated virus has become. “Certain features of omicron, including its global spread and large number of mutations, suggest it could have a major impact on the course of the pandemic,” Tedros said. Genetic changes to the virus affect its virulence and indicate it could be considerably more infectious than previous strains, according to WHO. (CNBC)

CORONAVIRUS: Pfizer Inc. will have data telling how well its vaccine prevents infections with the omicron variant before the end of the year, Chief Executive Officer Albert Bourla said. The company is looking to data on the vaccine’s performance from health providers and other sources to give a clearer picture of effectiveness, Bourla said Wednesday in an interview on Bloomberg Television’s “Balance of Power With David Westin.” “What I really think will be the final verdict will be the real-world data,” he said. “We are expecting to see those toward the end of the year.” (BBG)

CORONAVIRUS: China’s Sinovac Biotech Ltd, whose coronavirus vaccine is the most widely-used globally with 2.3 billion doses shipped out, said it’s testing its inactivated shot against omicron in a number of laboratory studies but that any results would take time. (BBG)

JAPAN: Japan's ruling party on Thursday approved a plan that steered clear of major new taxes on carbon and capital gains, in a sign Prime Minister Fumio Kishida may struggle to win consensus on contentious issues like climate change and wealth distribution. Japan will swiftly consider steps on capital gains tax from derivative trading to avoid tax evasion, a final draft annual tax reform plan for the next fiscal year obtained by Reuters showed. The draft plan, which was set for formal approval by the LDP and its coalition ally Komeito on Friday, also called for "technical consideration" of policy mix to achieve carbon neutrality. "There's no big game changer in next year's tax reform plan," said Takuya Hoshino, senior economist at Dai-ichi Life Research Institute. (RTRS)

RBA: Australia’s economy can run hot while dodging the runaway inflation that’s plaguing much of the world, said Reserve Bank board member Ian Harper, signaling monetary policy will stay ultra-loose for some time yet. Harper cited Australia’s relatively resilient workforce participation during the pandemic, in contrast with trends seen overseas such as mass resignations and people quitting the labor force. He said that was a key reason why Australian unemployment will take time to fall to levels needed to spark strong wages growth and subsequent price pressures. “With a strong recovery in labor force participation, the likelihood of there being a breakout in wages is very low,” Harper, who’s also dean of the Melbourne Business School, said in an interview. “What’s been amazing is that even with the borders closed we can run this economy quite strongly without producing inflation.” (BBG)

AUSTRALIA: The omicron outbreak in Australia is growing. New South Wales state confirmed three people were infected with omicron on a party cruise on Sydney harbor, bringing the number of locally acquired cases to 29. The state expects that number to grow as officials race to contact and test about 140 people who were aboard. Including international arrivals who were infected overseas or on the flight into Australia, the state has found 42 cases of the variant, none of whom have been admitted to hospital for treatment, health officials said in a statement Wednesday. Meantime, Victoria state authorities suspect at least two people in Melbourne have omicron. The source of infection is under investigation as the cases aren’t linked to international travel. (BBG)

AUSTRALIA: Australia’s Queensland state has fully vaccinated 80% of its population that are eligible for the jab, a key threshold to reopen its borders with the nation’s two biggest states. The state will reopen to fully vaccinated travelers from New South Wales, Victoria and the Australian Capital Territory from Monday. (BBG)

AUSTRALIA: The sharp rebound in payroll jobs following the end of COVID-19 lockdowns in the nation’s major states slowed in early November. But economists are still expecting a solid drop in the unemployment rate when the full labour force report for November is released next week. The Australian Bureau of Statistics said payroll jobs rose by 0.2 per cent in the fortnight to November 13 after jumping 1.5 per cent in the previous two weeks. However, National Australia Bank economist Tapas Strickland said payroll jobs have now surged 4.2 per cent from a trough in late August, recovering the declines associated with the lockdowns seen in NSW, Victoria and the ACT. “With payroll jobs well above pre-lockdown levels it is clear the labour market has bounced back sharply,” he said. (AAP)

AUSTRALIA: The latest SEEK employment report notes that “November saw a second consecutive month of record-breaking job ad numbers, with 1.1% more ads than in October, particularly in the Hospitality & Tourism, Trades & Services and Healthcare & Medical industries. When compared to November 2020, which recorded job ads at pre-pandemic levels for the first time that year, job ads have grown 50% Y/Y and 51.8% compared to November 2019. “Even a nominal 1.1% increase in job ads speaks volumes about the state of the market, with the lead-up to Christmas traditionally a time where businesses scale back on talent hiring. Instead, we had more job ads on our site than ever before. While not all states and territories experienced an increase in job ads from October to November, demand across the nation remains higher than pre-pandemic levels. Applications per job ad continued to decline this month, down 9.4% on October, demonstrating that while hirers are bucking the usual Christmas slowdown trend, talent may be holding off until the new year. We are also still seeing interest from candidates monitoring the market, indicated by traffic volume to the site remaining steady month to month, however applications per job ad are low and decreasing, which is not unusual for this time of year as people tend to halt their transition aspirations leading into Christmas. The new year traditionally brings an uplift in candidates applying for new jobs and with SEEK research showing that 31% of Australians are looking to change jobs in the next six months, we would expect to see an increase in applications in early 2022. A decline in job ads was recorded only in New South Wales and the Australian Capital Territory, however job ads in both areas are still higher than pre-pandemic levels and both have seen their highest number of job ads in 2021.” (MNI)

NEW ZEALAND: After finding their feet in October, SEEK job ads took a clear step forward in November. Their 5.1% gain was the best monthly move since May, and set annual growth at a solid 35.4%. Compared to November 2019 – a valid pre-COVID point in time – the latest job ad numbers (seasonally adjusted) stood 28.9% taller. The movement in November’s job ads once again bore some resemblance to COVID-19 management settings during the month. For example, having been supressed the most over September and October, jobs ads in Auckland logged an 8.1% increase for November. This was as the region’s COVID setting was altered to allow much more retail activity to occur. Around the same time, Waikato and Northland were wholly returned to level 2 (from 3), with the latter region’s job ads enlarging 17%. (BNZ)

RBNZ: The RBNZ warned Finance Minister Grant Robertson in August that if home-loan interest rates rose to 6% then about half of recent first-home buyers would struggle to service their loans, NBR reports, citing a briefing note from Deputy Governor Geoff Bascand. Investors, and to a lesser extent existing owner-occupiers, would also face serviceability stress at these levels but have higher equity buffers and are less likely to enter negative equity, Bascand said in the paper. (BBG)

BOK: The Bank of Korea said the emergence of the omicron variant has made the outlook for growth and inflation less certain, while acknowledging there hasn’t been enough time to quantify its impact. “It’s still too early to say how the variant will affect the BOK’s forecasts, but the central bank will be closely monitoring” developments, Deputy Governor Park Jong-seok said in a press briefing Thursday as the bank released its quarterly monetary policy report. Park’s tone was less upbeat than the BOK’s report itself, which said the bank expects “relatively strong” momentum in consumption through the first half of 2022 as pent-up demand is unleashed and the service sector benefits from people gradually adapting to living with the virus. (BBG)

BOK: Bank of Korea Governor Lee Ju-yeol will hold a press conference on inflation target system operation at 2pm local time on Dec. 16, the central bank says in text message. (BBG)

BOC: Prime Minister Justin Trudeau affirmed his government would renew the Bank of Canada’s mandate, without specifying any details or timing of the new agreement. “Yes, we will renew the mandate of the Bank of Canada. But we will also continue to step up with record investments in housing,” Trudeau said Wednesday in the legislature. Comment was in response to a yes or no question from the Conservatives on whether the government would renew the central bank’s existing mandate, which targets 2% inflation. The current five-year mandate is up for renewal by the end of this year. (BBG)

TURKEY: Turkey will extend tax advantage on lira deposit accounts until end of March from end of 2021, Turkey’s President Recep Tayyip Erdogan says in televized presser following a cabinet meeting in Ankara. Erdogan urges Turks to invest their foreign currency and gold savings in economy, which he says will help make Turkey among the top 10 economies in the world. Turkey will advance its production capacity and support employment with “low rates, balanced FX levels.” Turkey will not tolerate those who raise prices at levels that cannot be explained by the increase in input costs and FX surge, he says. Free-market economy doesn’t constitute “normlessness,” Erdogan says. (BBG)

MEXICO: Mexico’s financial system, including its banking sector, has remained solid and resilient despite the effects of the pandemic, Banco de Mexico Governor Alejandro Diaz de Leon said at a press briefing on Wednesday, after the release of a financial stability report. (BBG)

MEXICO: Mexico’s monetary policy is still in an accommodative terrain and must respond decisively to inflationary pressures, Banxico board member Irene Espinosa said a week before the central bank meets to decide on interest rates. “We are still on accommodative ground,” Espinosa said in a Banorte podcast interview published on Wednesday. “Our monetary policy must respond decisively to inflation levels, to the persistence of inflation and to the signals that we are already seeing in terms of the impact on expectations.” (BBG)

BRAZIL: Brazil’s central bank delivered its second straight interest rate hike of 150 basis points and pledged that the world’s most aggressive tightening cycle won’t end until rising inflation estimates return to target. The bank on Wednesday lifted the Selic to 9.25% and anticipated another hike of the same size in February, leading economists to estimate the rate may reach as much as 12% early next year. Policy makers have now raised borrowing costs by 725 basis since March, the most among major global economies. “It is appropriate to advance the process of monetary tightening significantly into the restrictive territory,” the central bank wrote in a statement accompanying its decision, citing an increase in its own inflation projections and risks of higher market forecasts in the long-term. “The committee will persist in its strategy until the disinflation process and the expectation anchoring around its targets consolidate.” (BBG)

RUSSIA: German Chancellor Olaf Scholz said a Russian invasion of Ukraine would trigger reprisals, the latest warning to President Vladimir Putin from Western leaders, though he declined to specify if halting the Nord Stream 2 gas pipeline would be part of any response. An attack would be a “very dramatic violation of the rules which would have very different consequences,” he said in an interview with ZDF television on Wednesday, responding to a question about whether Germany would stop the contested gas link with Russia. Scholz was sworn in earlier Wednesday as chancellor. (BBG)

BRAZIL: Brazil’s Senate approved on Wednesday a bill that modernizes the country’s foreign exchange market, paving the way for individuals to be allowed to open bank accounts in foreign currencies. The text, which condenses scattered legislation and updates regulations that, in some cases, were more than 100 years old, was a priority of central bank head Roberto Campos Neto. It’s been pending in congress since 2019, and is expected to now be signed into law by President Jair Bolsonaro. The new rules reconcile discrepancies in the way foreign and domestic capital is treated legally, bringing Brazil in line with recommendations of the Organization for Economic Co-operation and Development. The changes will “reduce barriers that complicate exports, imports, productive investments and the free movement of capital,” said the bill’s rapporteur, Senator Carlos Viana. (BBG)

RUSSIA: Joe Biden has made a significant diplomatic concession to Moscow designed to prevent an invasion of Ukraine, signalling he wants to convene meetings between Nato allies and Russia to discuss Vladimir Putin’s grievances with the transatlantic security pact. Speaking on Wednesday, a day after he held a bilateral call with Russia’s leader, the US president said he hoped to announce high-level talks by Friday “to discuss the future of Russia’s concerns relative to Nato writ large”. The talks would explore “whether or not we can work out any accommodation as it relates to bringing down the temperature along the eastern front”, Biden added. The US president said he hoped the participants would include not just Washington and Moscow but also “at least four of our major Nato allies”, although he declined to name the specific countries. (FT)

SOUTH AFRICA: South African excess deaths, a measure of mortality above a historical average, almost doubled in the week ending Nov. 28 from the preceding seven-day period as a new coronavirus variant spread across the country. During the period 2,076 more people died than would normally be expected, the South African Medical Research Council said in a report on Wednesday. That compares with 1,091 the week earlier. (BBG)

IRAN: U.S. Special Envoy for Iran Rob Malley plans to travel to Vienna over the weekend for fresh talks on reviving Iran's 2015 nuclear deal with major powers, U.S. State Department spokesperson Ned Price said on Wednesday. (RTRS)

IRAN: U.S. and Israeli defense chiefs are expected on Thursday to discuss possible military exercises that would prepare for a worst-case scenario to destroy Iran's nuclear facilities should diplomacy fail and if their nations' leaders request it, a senior U.S. official told Reuters. The scheduled U.S. talks with visiting Israeli Defence Minister Benny Gantz follow an Oct. 25 briefing by Pentagon leaders to White House national security adviser Jake Sullivan on the full set of military options available to ensure that Iran would not be able to produce a nuclear weapon, the official said on Wednesday, speaking on condition of anonymity. Iran denies seeking nuclear weapons, saying it wants to master nuclear technology for peaceful purposes. The U.S.-Israeli preparations, which have not been previously reported, underscore Western concern about difficult nuclear talks with Iran that President Joe Biden had hoped would revive a 2015 nuclear deal abandoned by his predecessor Donald Trump. But U.S. and European officials have voiced dismay after talks last week at sweeping demands by Iran's new, hardline government, heightening suspicions in the West that Iran is playing for time while advancing its nuclear program. The U.S. official declined to offer details on the potential military exercises. (RTRS)

OIL: Attempts to cut investment in oil and gas to combat climate change are "midguided," OPEC Secretary General Mohammad Barkindo told an energy conference on Wednesday, arguing that producers have a critical role to play during the transition to cleaner fuels. (RTRS)

CHINA

PBOC: The People’s Bank of China has never been politically independent like a Western central bank, but it has nonetheless enjoyed a special status in the nation’s economic hierarchy. Now, President Xi Jinping’s shake-up of China’s financial sector is stripping that away. Earlier this week, pressured by senior leaders worried about plunging economic growth, the PBOC said it would ease banks’ reserve requirements, effectively making more cash available for bank lending. The move went against policy signals it had sent weeks earlier and came as the central bank and other financial institutions came under scrutiny by Beijing, part of Mr. Xi’s effort to curb capitalist forces in the economy. (WSJ)

PBOC: The People’s Bank of China is likely to cut reserve requirement ratios or even interest rates in the first half of next year, tilting monetary policy looser to help stabilize growth as signaled by the Politburo meeting this week, 21st Century Business Herald reported citing analysts. Currently, GDP growth is below the potential growth rate with inflation concerns eased, so stimulating demand is a necessary, the newspaper said citing Zhang Jiqiang, deputy research head of Huatai Securities. But the PBOC may not want to send too strong a loosening signal, and it may take time to cut interest rates before the U.S. enters an interest rate hike cycle in H2 2022, the newspaper said citing Zhang. (MNI)

YUAN: The Chinese currency is likely to continue its appreciation against the U.S. dollar over the short term due to China’s strong exports, fund inflows and stable monetary policy, China Securities Journal says in a front-page report, citing analysts. But the currency’s trend of two-way fluctuation remains unchanged. Note: China’s other two leading securities newspapers, Shanghai Securities News and Securities Times, also ran front-page reports about yuan’s exchange rate Thursday after the currency climbed to the highest against the greenback since May 2018. The yuan is expected to see wide fluctuation around equilibrium level after reaching a three and a half year high against the dollar: Shanghai Securities News cites analysts as saying. Securities Times quotes analysts as warning against yuan’s depreciation risks , with likely divergence of U.S. and China’s monetary policies next year as a reason for yuan weakening. (BBG)

YUAN: The Chinese yuan, currently trading at a three-year high, may begin to lose steam from February through Q2, due to slowing exports, easing of domestic monetary policy and the expected strengthening of the U.S. dollar, the Securities Times reported citing analysts from CICC. Yuan may fluctuate around 6.6 on the dollar, supported by foreign investors’ demand for Chinese Government Bonds and possible economic rebound in H2 2022, the newspaper said. Though the yuan closed at 6.3535 against the dollar on Wednesday, the turning point is taking shape with the Federal Reserve tightening its monetary policy, the newspaper said. (MNI)

INFLATION: China’s consumer prices are likely to show moderate increase next year, offering some space for monetary policy moves, China Securities Journal reported citing analysts. Higher production costs will be further reflected in the prices of consumer purchases while the price of pork, a major staple, also rises, the newspaper said citing Li Xuesong, a researcher at the Chinese Academy of Social Sciences. The gain in CPI is likely to remain moderate as consumption remains constrained by the pandemic, Li added. PPI is likely to moderate due to the decline in commodity prices and the high comparison base, said the journal. (MNI)

KAISA: A group of Kaisa Group Holdings Ltd. bondholders is close to signing non-disclosure agreements with the developer in a 1638 HK Equity move that would pave the way for discussions around a potential Graphic Dashboard» financing deal for the beleaguered firm, according to people with knowledge of the matter. The creditor group is being advised by Lazard Ltd. An announcement about the agreements could come as early as Thursday morning in Hong Kong, one of the people said. Lazard is seeking more bondholders to join the group. A representative for Kaisa didn’t immediately respond to a request for comment placed outside of normal business hours. (BBG)

CORONAVIRUS: China reported 73 domestic Covid infections on Thursday, including 13 asymptomatic, as a new cluster is on the rise in eastern Chinese province Zhejiang. Infections have been found at three cities in the province. The emergence of new clusters have prompted local health authorities, including that of Shanghai, to ask companies and organizations to avoid holding annual gatherings and parties marking the new year and in the run-up to the Chinese New Year starting February next year. (BBG)

OVERNIGHT DATA

CHINA NOV CPI +2.3% Y/Y; MEDIAN +2.5%; OCT +1.5%
CHINA NOV PPI +12.9% Y/Y; MEDIAN +12.1%; OCT +13.5%

JAPAN Q4 BSI LARGE ALL INDUSTRY 9.6; MEDIAN 5.0; Q3 3.3
JAPAN Q4 BSI LARGE M'FING 7.9; Q3 7.0

JAPAN NOV, P MACHINE TOOL ORDERS +64.0% Y/Y; OCT +81.5%

JAPAN NOV MONEY STOCK M2 +4.0% Y/Y; MEDIAN +4.1%; OCT +4.2%
JAPAN NOV MONEY STOCK M3 +3.6% Y/Y; MEDIAN +3.7%; OCT +3.7%

JAPAN NOV TOKYO AVG OFFICE VACANCIES 6.35; OCT 6.47

NEW ZEALAND Q3 M'FING ACTIVITY -2.2% Q/Q; Q2 +3.7%
NEW ZEALAND Q3 M'FING ACTIVITY VOLUME -6.4% Q/Q; Q2 -0.4%

NEW ZEALAND NOV ANZ TRUCKOMETER HEAVY +4.6% M/M; OCT +1.0%

November was another messy month for traffic, but with restrictions easing overall, traffic bounced. The Light Traffic Index jumped 10.6%, while the Heavy Traffic Index rose 4.6%. Heavy traffic is not far off pre-Delta levels but light traffic has a way to go yet. (ANZ)

UK NOV RICS HOUSE PRICE BALANCE 71%; MEDIAN 70%; OCT 71%

CHINA MARKETS

PBOC INJECTS CNY10BN VIA OMOS, LIQUIDITY UNCHANGED

The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Thursday. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos today, according to Wind Information.

• The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
• The 7-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.2133% at 09:40 am local time from the close of 2.2046% on Wednesday.
• The CFETS-NEX money-market sentiment index closed at 45 on Wednesday vs 44 on Tuesday.

PBOC SETS YUAN CENTRAL PARITY AT 6.3498 THURS VS 6.3677

The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.3498 on Thursday, compared with 6.3677 set on Wednesday, marking the lowest parity since May 15, 2018.

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