Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY
- CHINA OCTOBER RETAIL SALES JUMP TO FIVE-MONTH HIGH - MNI BRIEF
- CHINA C.BANK BOOSTS LIQUIDITY INJECTION THROUGH POLICY LOAN, RATE UNCHANGED - RTRS
- JAPAN GOVT OFFICIAL WARNS OF OUTLOOK FOR CONSUMPTION - MNI
- JAPAN Q3 GDP POSTS 1ST CONTRACTION IN 3 QUARTERS - MNI BRIEF
- RBA HIGHER-FOR-LONGER SHIFT FOLLOWS CPI SURPRISE- EX STAFF MNI
- AUSSIE WAGES GROW IN Q3 - MNI BRIEF
Fig. 1: US Equity Futures, Nasdaq Closing In On 2023 Highs
Source: MNI - Market News/Bloomberg
EUROPE
ECB (BBG): The European Central Bank is confident inflation will return toward its 2% target by 2025 after raising interest rates at a record pace, Bank of France Governor Francois Villeroy de Galhau said.
COMMODITIES (BBG): EU parliament and member states reached a deal on a regulation to track and reduce methane emissions in the energy sector, according to a post on X from the Spanish Presidency of the Council of the EU.
ESG (BBG): The European Central Bank wants finance executives to know they’ll be held to account for the industry’s continued failure to adequately manage climate and environmental risks.
HUNGARY (POLITCO): “Hungary should stop relying on ‘war criminal’ Putin for gas, EU energy chief warns” – Politico ‘Even Hungary knows that by continuing this activity, they grant Russia the right to manipulate their market,’ Energy Commissioner Kadri Simson said at a POLITICO event.
FRANCE (POLITCO): France unveiled a new electricity pricing mechanism on Tuesday, hoping to defuse months of tension over energy subsidies with Brussels and its neighbors.
GERMANY (Der Spiegel): In the case of electricity, it is a quarter, and in the case of gas, as much as 40 percent: many basic suppliers are reducing their tariffs. According to a new comparison, if you really want to save money, you still have to switch to other providers.
SPAIN (POLITICO): Catalan separatist MEPs Carles Puigdemont and Toni Comín accused Spain’s General Council of the Judiciary of violating “basic standards of the rule of law” in a letter sent to European Commission Vice President and Values and Transparency Commissioner Věra Jourová on Monday.
U.S.
FISCAL (RTRS): The U.S. House of Representatives on Tuesday passed a temporary spending bill that would avert a government shutdown, as wide swaths of lawmakers from both parties showed support for the legislation.
US/CHINA (BBG): The US and China, the world’s biggest polluters, vowed to step up joint action to tackle climate change in a revival of collaboration that’s likely to offer crucial momentum for UN talks in Dubai opening later this month.
US/CHINA (RTRS): Chinese companies are buying up U.S. chipmaking equipment to make advanced semiconductors, despite a raft of new export curbs aimed at thwarting advances in the country's semiconductor industry, a report said on Tuesday.
US/ISRAEL(BBG): The White House is getting increasingly frustrated with Israel’s conduct of the war against Hamas as the civilian death toll mounts and the administration’s calls go unheeded, widening a rift between the close allies.
US/ISRAEL (BBG): The Pentagon has quietly ramped up military aid to Israel, delivering on requests that include more laser-guided missiles for its Apache gunship fleet, as well as 155mm shells, night-vision devices, bunker-buster munitions and new army vehicles, according to an internal Defense Department list.
OTHER
ISRAEL (BBG): Israeli forces entered Gaza’s Shifa hospital compound as part of a “precise and targeted operation” against Hamas. The US earlier said it has intelligence confirming Israel’s assertion that Hamas and other Iran-backed militant groups are using hospitals, including Shifa, to conceal and support their operations.
JAPAN (MNI): Japanese private consumption rebounded in Q3 from its second quarter drop, but consumption lacks strong momentum, while the private consumption environment remained weak, a senior official at the Cabinet Office warned on Wednesday.
JAPAN (MNI BRIEF): Japan's economy for the third quarter posted the first contraction in three quarters, falling 0.5% q/q or 2.1% annualised, in the wake of weak private consumption and capital investment, preliminary GDP data released by the Cabinet Office showed on Wednesday.
AUSTRALIA (MNI): The Reserve Bank of Australia has pivoted towards indicating that rates will stay higher for longer in order to bring inflation back to its 2-3% target after a period of what some ex-staffers described to MNI as confused communications as it calibrated policy to preserve gains in the labour market.
AUSTRALIA (MNI BRIEF): The Wage Price Index (WPI) rose 1.3% in the September quarter, and 4.0% y/y, the highest quarterly growth in the 26-year history of the index, according to seasonally adjusted data released today by the Australian Bureau of Statistics.
CHINA
POLICY (RTRS): China's central bank ramped up liquidity injection but kept the interest rate unchanged when rolling over maturing medium-term policy loans on Wednesday, matching market expectations.
ECONOMY (MNI BRIEF): China's consumption jumped more than expected to a five-month high in October amid a holiday boom, despite the ailing real-estate sector weighing on investment, data released by the National Bureau of Statistics on Wednesday showed.
CAPITAL MARKETS (BBG): Chinese regulators have told securities firms to stop expanding their over-the-counter derivatives operations involving individual stocks, limiting a profitable business for the brokerage industry and dealing another setback to hedge funds that deploy long-short strategies.
FDI (21st Century Business Herald): The decrease in foreign direct investment should not be simply interpreted as growing disinvestment, as it is also affected by declining profits of foreign industrial enterprises and changing exchange rate spreads, 21st Century Business Herald reported citing experts.
DEPOSIT RATES (Shanghai Securities News): Commercial banks will lower deposit interest rates further as the reductions on existing housing mortgage rates pressure profit margins, said Ming Ming, chief economist at CITIC Securities. Ming estimates major banks may play a leading role in cutting the pricing level of long-term deposits and a 10-30bp cut will help lower the average deposit cost by about 2-4bp.
CHINA MARKETS
MNI: PBOC Injects Net CNY621 Bln Weds; Rates Unchanged
The People's Bank of China (PBOC) conducted CNY1.45 trillion via 1-year MLF and CNY495 billion via 7-day reverse repo on Wednesday, with the rate unchanged at 2.50% and 1.80%, respectively. The CNY600 billion MLF net injection marks the biggest volume since Dec 2016. The operation has led to a net injection of CNY621 billion after offsetting the maturity of CNY850 billion MLF and CNY474 billion reverse repos today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8227% at 09:42 am local time from the close of 2.0414% on Tuesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 42 on Tuesday, compared with the close of 41 on Monday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
PBOC Yuan Parity Lower At 7.1752 Wednesday vs 7.1768 Tuesday
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1752 on Wednesday, compared with 7.1768 set on Tuesday. The fixing was estimated at 7.2452 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND OCT CARD SPENDING RETAIL M/M -0.7%; PRIOR -0.8%
NEW ZEALAND OCT CARD SPENDING TOTAL M/M -0.3%; PRIOR -0.2%
NEW ZEALAND SEP NET MIGRATION 7510; PRIOR 12350
JAPAN Q3 GDP ANNUALISED Q/Q -2.1%; MEDIAN -0.4%; PRIOR 4.5%
JAPAN Q3 GDP Q/Q -0.5%; MEDIAN -0.1%; PRIOR 1.1%
JAPAN Q3 GDP NOMINAL Q/Q 0.0%; MEDIAN 0.6%; PRIOR 2.5%
JAPAN Q3 GDP DEFLATOR Y/Y 5.1%; MEDIAN 4.8%; PRIOR 3.5%
JAPAN Q3 GDP PRIVATE CONSUMPTION Q/Q 0.0%; MEDIAN 0.3%; PRIOR -0.9%
JAPAN Q3 GDP BUSINESS SPENDING Q/Q -0.6%; MEDIAN 0.1%; PRIOR -1.0%
JAPAN Q3 INVENTORY CONTRIBUTION % GDP -0.3%; MEDIAN -0.1%; PRIOR -0.1%
JAPAN Q3 NET EXPORTS CONTRIBUTION % GDP -0.1%; MEDIAN -0.1%; PRIOR 1.8%
JAPAN SEP F IP M/M 0.5%; PRIOR 0.2%
JAPAN SEP F IP Y/Y -4.4%; PRIOR -4.6%
JAPAN SEP CAPACITY UTILIZATION M/M 0.4%; PRIOR 0.5%
AUSTRALIA Q3 WAGE PRICE INDEX Q/Q 1.3%; MEDIAN 1.3%; PRIOR 0.9%
AUSTRALIA Q3 WAGE PRICE INDEX Y/Y 4.0%; MEDIAN 3.9%; PRIOR 3.6%
CHINA NOV 15 1YR MLF RATE 2.50%; MEDIAN 2.50%; PRIOR 2.50%
CHINA NOV 15 1YR MLF VOLUME 1450BN; MEDIAN 950bn YUAN; PRIOR 789BN YUAN
CHINA OCT IP Y/Y 4.6%; MEDIAN 4.5%; PRIOR 4.5%
CHINA OCT RETAIL SALES Y/Y 7.6%; MEDIAN 7.0%; PRIOR 5.0%
CHINA OCT FIXED ASSET EX RURAL YTD Y/Y 2.9%; MEDIAN 3.1%; PRIOR 3.1%
CHINA OCT PROPERTY INVESTMENT YTD Y/Y -9.3%; MEDIAN -9.1%; PRIOR -9.1%
CHINA OCT RESIDENTIAL PROPERTY SALES YTD Y/Y -3.7%; PRIOR -3.2%
CHINA OCT SURVEYED JOBLESS RATE 5.0%; MEDIAN 5.0%; PRIOR 5.0%
MARKETS
US TSYS: Marginally Richer In Asia
TYZ3 deals at 108-28+, -0-00+, a 0-07 range has been observed on volume of ~120k.
- Cash tsys sit 1-2bps richer across the major benchmarks, light bull flattening is apparent.
- Tsys have dealt in narrow ranges for the most part in Asia today, the space mostly looked through Japanese and Australian data releases as moves had little follow through.
- Post-CPI highs remain intact for TY. The next target for bulls is 109-20, high from Sep 19. Support comes in at 107-00, low from Nov 13.
- UK CPI provides the highlight in Europe today. Further out we have retail sales, business inventories, PPI and Empire manufacturing. Fedspeak from VC Barr is also due.
JGBS: 10yr JGB Yield Dips Sub 50-day EMA Before Recovering, Futures Off Highs
JGB futures sit off session highs. We were last 145.38, +.76. Earlier highs were at 145.55, which was just shy of mid October highs at 145.63.
- There doesn't appear any macro link to the pause in the uptrend, while US Tsy futures are just off session highs (last 108-28+). Earlier we had positive momentum buoyed by the Q3 miss amid weaker domestic demand.
- These moves have seen JGB yields pare losses. The 10yr yield sits back at 0.79%, up from lows near 0.77% earlier. The is close to the simple 50-day EMA, which we have been below since early July this year. We are still 5-8bps lower in yield terms across the 4-40yr tenors.
- It has been a similar story in the swap space, albeit with lower outright moves. The 10yr swap last near 0.96%.
- On the data front tomorrow, Oct trade figures, core machine orders are due, while weekly investment figures are also out.
- On the supply side, 1yr notes will be sold.
AUSSIE BONDS: Marginally Extend Early Gains, Oct Employment Due Tomorrow
ACGBs sit 11-14bps richer across the major benchmarks, the belly is marginally outperforming. XM (+0.1500) and YM (+0.120) have ticked higher through the session.
- The early bid seen after the post-CPI richening in Tsys spillover into the wider space held through the session with ACGBs ticking marginally higher in the afternoon.
- RBA dated futures are steady, a terminal rate of 4.45% is seen in June 24 with ~15bps of cuts by Dec 24.
- There was little reaction to the Australian Q3 Wage Price Index which came in at expectations (1.3% Q/Q).
- Due tomorrow is the October Labour Market Report, the headline unemployment rate is expected to tick higher to 3.7% from 3.6%.
NZGBs: Hold Early Gains
NZGBs have held their early gains through Wednesdays dealing and sit 9-16bps richer across the major benchmarks, the belly leads the bid.
- Spillover from Tuesday's US Tsys rally in lieu of a softer than forecast October CPI print supported the space this morning and the impact lingered through today's session.
- 10 Year NZ US Swap spreads sit at +55bps, we had been as wide as +70bps in the aftermath of the US CPI print.
- RBNZ dated OIS now price a terminal rate of 5.55% in Feb 24 with ~20bps of cuts by Oct24.
- On the wires early in the session Card Spending fell in October 0.3% M/M, the prior read was revised downwards to 0.2% M/M. Net Migration in September was 7,510, the August number was revised higher to 12,350.
- Looking ahead the docket is light tomorrow with just Oct House Sales and Non-Resident Bond Holdings due.
EQUITIES: Asia Pac Markets All Higher, Nasdaq Futures Closing In On 2023 Highs
Regional equities are a sea of green, post strong US gains in cash trading on Tuesday, as the US CPI miss buoyed risk appetite. Higher beta plays are outperforming in terms of Hong Kong and South Korea. US futures are tracking higher, Eminis last near 4521, +0.22%, not quite above Tuesday highs. Nasdaq futures are +0.28% (moving above Tuesday highs) and within striking distance of 2023 highs just above 16000.
- US yields have tracked down modestly further, following sharp post CPI losses on Tuesday. Market speculation of an end to the US tightening cycle buoying the risk mood.
- The HSI is up 2.83% at the break, with broad based gains. The HSTECH index up 3%, while the mainland properties index is up over 4.25%. Reports from BBG late yesterday of fresh support into China urban redevelopment and affordable housing aiding sentiment.
- Still, the mainland CSI 300 real estate index is only 0.30% higher at the break, the aggregate index 0.67% firmer. Earlier we had a steady 1yr MLF rate but a net 600bn yuan injection (the biggest since Dec 2016). October activity data was mixed, retail sales beating on the upside, but property headwinds weighing on investment.
- Headlines from BBG have also crossed the regulators will cap the OTC derivatives business for securities firms (see this link).
- South Korean markets are up over 2%, the Taiex is +1%. Japan's Nikkei 225 is +2.35% in latest dealings, shrugging off the disappointing Q3 GDP data earlier.
- In SEA, Thailand and Indonesia markets are up over 1.5%. Other markets are up less than 1% at this stage.
FOREX: Dollar Marginally Extends Post-CPI Losses
The Greenback has been pressured through the Asian session, BBDXY has breached its post-CPI lows and is down ~0.1%. However ranges across G-10 do remain narrow. US Tsys Yields are a touch softer and e-minis are up ~0.2%. The PBOC injected the largest amount of cash since 2016 to the banking system which also aided sentiment.
- Kiwi is the strongest performer in the G-10 space, NZD/USD is up ~0.3% and sits at its highest level since 11 Oct. Bulls now look to target the 200-Day EMA ($0.6565).
- AUD/USD pared early losses and sits a touch above the $0.65 handle. Q3 WPI came in as expected and there was little reaction in FX markets. Technically the bull cycle is still in play, resistance comes in at $0.6522 high from Aug 30 and $0.6582 50.0% retracement of Jul 13 - Oct 26 bear leg. Support is at $0.6339 low from Nov 10.
- Yen is marginally pressured after Japan's flash Q3 GDP print was softer than forecast. USD/JPY has trimmed some of yesterday's losses and is up ~0.1% at ¥152.55/60.
- Elsewhere in G-10 the broader USD move has been reflected, most majors are marginally firmer.
- The UK CPI print provides the highlight in Europe today.
OIL: Crude Higher But Demand Outlook Dampening The Market
Oil prices are slightly higher today boosted by slightly-better-than expected China activity data, although the property sector remains weak. Brent is 0.3% higher at $82.69/bbl, but off the intraday high of $82.79. WTI is up 0.2% to $78.42 after a high of $78.54. The USD index is down 0.1%.
- The upside to oil prices from the expectations that the Fed is done following the lower US inflation data was limited by the IEA saying that the market in Q4 won’t be as tight as expected especially due to increased supply. This was less optimistic than the OPEC monthly report on Monday.
- CBA expects Brent to average $85/bbl in Q4 and then $75 by Q2 2024 with the moderation driven by weaker demand.
- Bloomberg reported that US crude stocks rose 1.335mn in the latest week, according to people familiar with the API data. 2 weeks of official EIA inventory data are published later today, which will be key to the supply outlook.
- China’s refined output is down 3% on the September record but volumes are still up about 9% y/y, according to Bloomberg. China is the largest global crude importer but refining margins have been squeezed. Oil demand also fell 2.4% in October due to a weak recovery in air passenger transport and stabilising inventories.
- Later the Fed’s Barr and Barkin speak plus there is US October retail sales, the control group is expected to rise 0.2% m/m, and PPI data. There are also UK CPI/PPI and euro area IP.
GOLD: Bullion Holds Onto Post-CPI Gains, US Retail Sales Later
Gold prices are 0.1% higher during today’s APAC session after rising 0.8% on Tuesday following lower-than-expected US CPI data that resulted in the market pricing in the end of the tightening cycle and more rate cuts for 2024. Bullion is trading around $1966.85/oz, close to the intraday high but still below yesterday’s $1970.94. The USD rose early in the session but is now 0.1% lower.
- Gold prices remain below resistance at $1978.40, November 7 high, as the flight-to-quality war risk premium was unwinding prior to the US inflation data.
- ANZ believes that the lower US CPI read and the subsequent increase in Fed easing expectations may result in increased investment demand for gold. They also think that increased occurrences of global tensions will create structural geopolitical demand for bullion, including from central banks.
- Later the Fed’s Barr and Barkin speak plus there is US October retail sales, the control group is expected to rise 0.2% m/m, and PPI data. There are also UK CPI/PPI and euro area IP.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 15/11/2023 | 0700/0700 | *** |  | UK | Consumer inflation report |
| 15/11/2023 | 0700/0700 | *** | | UK | Producer Prices |
| 15/11/2023 | 0745/0845 | *** |  | FR | HICP (f) |
| 15/11/2023 | 0900/1000 | ** |  | IT | Italy Final HICP |
| 15/11/2023 | 1000/1100 | ** |  | EU | Industrial Production |
| 15/11/2023 | 1000/1100 | * | | EU | Trade Balance |
| 15/11/2023 | 1000/1100 | | EU | European Commission Autumn Econ Forecasts | |
| 15/11/2023 | 1200/0700 | ** |  | US | MBA Weekly Applications Index |
| 15/11/2023 | 1330/0830 | ** |  | CA | Monthly Survey of Manufacturing |
| 15/11/2023 | 1330/0830 | ** | | CA | Wholesale Trade |
| 15/11/2023 | 1330/0830 | *** | | US | Retail Sales |
| 15/11/2023 | 1330/0830 | *** | | US | PPI |
| 15/11/2023 | 1330/0830 | ** | | US | Empire State Manufacturing Survey |
| 15/11/2023 | 1400/0900 | * | | CA | CREA Existing Home Sales |
| 15/11/2023 | 1430/0930 | | US | Fed Vice Chair Michael Barr | |
| 15/11/2023 | 1500/1000 | * | | US | Business Inventories |
| 15/11/2023 | 1530/1030 | ** | | US | DOE Weekly Crude Oil Stocks |
| 15/11/2023 | 1800/1800 | | UK | BOE's Haskel speech at the Resolution foundation | |
| 15/11/2023 | 2030/1530 | | US | Richmond Fed's Tom Barkin |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.