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’S CENTRAL BANK VOWS LIQUIDITY HELP FOR DEBT-LADEN REGIONS - BBG
- BOJ’S UEDA: REAL WAGES DON’T HAVE TO BE UP WHEN SHIFTING POLICY - BBG
- ECB FOCUSED ON HOLDINGS RATES WHERE THEY ARE, LANE TELLS TV3 - BBG
- BOE MPC’S JOB DONE; 1ST CUT LATE 2024 - NIESR - MNI BRIEF
- US MONITORING 6 STATES INCLUDING CHINA FOR FX MANIPULATION - MNI
- NEW ZEALAND TWO-YEAR INFLATION EXPECTATIONS EASE TO TWO-YEAR LOW - BBG
Fig. 1: Japan Yields Continue To Correct Lower Off Recent Highs
Source: MNI - Market News/Bloomberg
U.K.
BOE (MNI BRIEF): The UK's National Institute of Economic and Social Research predicts that growth will stay sluggish in coming quarters and that the Bank of England has done its job in tightening policy to get inflation back on the path down towards the 2.0% inflation target, although its will be late 2025 before the target is hit.
EUROPE
ECB (BBG): The European Central Bank will hold interest rates where they are until it’s sure inflation is headed back to the 2% goal, Chief Economist Philip Lane told Latvia’s TV3.
ECB (BBG): The European Central Bank must be on high alert to factors that could keep inflation more elevated than predicted, Governing Council member Joachim Nagel said, singling out the labor market as a source of concern.
EU (ECONOMIST): On Wednesday the European Commission unveils its assessment of the reforms aspiring EU member states have undertaken to join the bloc. The most prominent candidate is Ukraine.
GERMANY (BBG): Chancellor Olaf Scholz’s governing Social Democrats (SPD) plan to introduce new taxes for Germany’s top earners and mega-rich, co-leader Lars Klingbeil told Stern magazine.
GERMANY (POLITICO): The Saxony-Anhalt state chapter of the far-right Alternative for Germany (AfD) party has been classified as a right-wing extremist group by state-level intelligence authorities tasked with surveilling anti-constitutional groups.
PORTUGAL (BBG): Portugal’s Antonio Costa unexpectedly ended his eight years as prime minister after revelations about an investigation into possible government corruption involving lithium and hydrogen projects.
U.S.
TRADE (RTRS): The Biden administration has suspended talks on some key digital trade aspects of its Indo-Pacific Economic Framework initiative, Democratic lawmakers said on Tuesday as negotiators from 14 countries race to finish some agreements ahead of a major Pacific Rim summit next week.
FISCAL (RTRS): Republicans who control the U.S. House of Representatives showed no sign on Tuesday of coalescing around a government funding plan to keep federal agencies open, just 10 days before Congress faces its next shutdown deadline.
POLITICS (RTRS): Democrats and abortion rights advocates notched a string of electoral victories on Tuesday, including in conservative Ohio and Kentucky, an early signal that reproductive rights remain a potent issue for Democrats ahead of the 2024 presidential race.
FX (MNI): No major trading partner of the United States is manipulating their currency to gain an unfair advantage, the Treasury said Tuesday, although it has placed six countries on its monitoring list including China, Germany, Malaysia, Singapore, Taiwan, and Vietnam.
US/CHINA (BBG): The US Treasury reiterated its call for greater transparency in how Beijing conducts its exchange-rate policy and said it was monitoring China alongside five other major trading partners over its currency practices. In its semiannual foreign-exchange report released Tuesday, the Treasury Department refrained from designating any trading partner as a foreign-exchange manipulator.
OTHER
G7 (BBG): Japan and the US said they would work for “humanitarian pauses” in Israel’s war with Hamas ahead of a gathering of Group of Seven foreign ministers in Tokyo that is expected to deliver a similar message.
SAUDI ARABIA (BBG): Saudi Arabia’s Minister of Investment Khalid Al-Falih said talks toward a normalization of ties with Israel remain on the table, though they have always been “contingent on a pathway to a peaceful resolution of the Palestinian question.”
OIL (BBG): Venezuela is set to sign a contract with Etablissements Maurel & Prom SA that will allow the French driller to triple production following the easing of US oil sanctions, according to people with knowledge of the situation.
JAPAN (BBG): Bank of Japan Governor Kazuo Ueda says real wages turning positive isn’t a required condition before the bank decides to change its yield curve control program and negative interest rate.
NEW ZEALAND (BBG): New Zealand two-year ahead inflation expectations eased to 2.76% in the fourth quarter from 2.83% in the third, according to survey of businesses published by Reserve Bank.
CHINA
POLICY (BBG): China will provide emergency funding to heavily indebted local governments as needed, central bank Governor Pan Gongsheng said — comments that underscore the importance authorities place on the problem.
CHINA/US (BBG): Chinese President Xi Jinping is set to be the guest of honor at a dinner with top US business executives when he visits San Francisco for the Asia-Pacific Economic Cooperation summit next week, according to people familiar with the matter.
COMMODITIES (BBG): Iron ore has reached “unreasonable” levels that are hurting Chinese steel mills, according to China Mineral Resources Group, the state-backed firm trying to boost Beijing’s sway over prices.
CHINA MARKETS
MNI: PBOC Injects Net CNY83 Bln Via OMO Weds; Rates Unchanged
The People's Bank of China (PBOC) conducted CNY474 billion via 7-day reverse repo on Wednesday, with the rate unchanged at 1.80%. The operation has led to a net injection of CNY83 billion after offsetting the maturity of CNY391 billion reverse repos today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8125% at 09:34 am local time from the close of 1.8376% on Tuesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 45 on Tuesday, compared with the close of 40 on Monday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
PBOC Yuan Parity Lower At 7.1773 Wednesday vs 7.1776 Tuesday.
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1773 on Wednesday, compared with 7.1776 set on Tuesday. The fixing was estimated at 7.2826 by Bloomberg survey today.
MARKET DATA
SOUTH KOREA SEP BOP GOODS BALANCE $7419.3MN; PRIOR 5205.8MN
SOUTH KOREA SEP BOP CURRENT ACCOUNT BALANCE $5420.7MN; PRIOR 4984.6MN
SOUTH KOREA OCT BANK LENDING TO HOUSEHOLDS KR1086.6T; PRIOR KR1079.8T
NEW ZEALAND 4Q 2YR INFLATION EXPECTATION 2.76%; PRIOR 2.83%
JAPAN SEP P LEADING INDEX CI 108.7; MEDIAN 108.8; PRIOR 109.2
JAPAN SEP P COINCIDENT INDEX 114.7; MEDIAN 114.7; PRIOR 114.6
MARKETS
US TSYS: Marginally Cheaper In Asia
TYZ3 deals at 108-00, -0-04, a 0-07+ range has been observed on volume of ~98k.
- Cash tsys sit ~1bp cheaper across the major benchmarks.
- Tsys have ticked lower, albeit in narrow ranges, on Wednesday as perhaps participants used yesterday's richening as an opportunity to close long positions/add fresh shorts.
- There was little in the way of meaningful macro news flow in Asia today. WTI briefly dealt below the $77 handle before paring losses.
- Eurozone Retail Sales and the final read of German CPI headline in Europe today. Further out we have US wholesale inventories and New York Fed President Williams speaks. The latest 10-Year Supply is due.
JGBS: Futures At Multi Week Highs, As Ueda States Domestic Wage-Inflation Cycle Still Weak
JGB futures remain on the front foot in afternoon trade. We were last near 144.64, +.30. Session highs rest at 144.67. These levels were last seen back on Oct 25. This has outperformed a slight offered tone in US futures, last (108-00, -03).
- Much of the macro focus today has been on BoJ Governor Ueda's appearance before parliament. Whilst the Governor stated the central bank didn't necessarily have to wait until real wages growth was positive (before exiting YCC and negative rates), the overall tone was still dovish.
- Critically, Ueda stated that the domestic wage-inflation remains weak and that the central bank remains some distance from hitting its 2% inflation target.
- In the cash JGB space, yields are lower across the curve. The 10yr slipping under 0.86% (-3bps). Yield losses have been larger across the 20-40yr tenors, down 4-5bps.
- For swaps, the 10yr is back close to 1.03%, albeit with more moderate yield losses compared to the JGB cash space.
AUSSIE BONDS: Richer On Wednesday, Docket Empty Tomorrow
ACGBs sit 6-10bps richer across the major benchmarks, light bull flattening is apparent. Aussie Bonds ticked away from early session highs however ranges remained narrow and ACGBs held richer.
- XM (+0.1050) and YM (0.08) have ticked higher today however we remain well within recent ranges.
- The 10 Year AU US Swap spread has been stable through today's again session and sits at +1bps.
- In Australia there was nothing in the way of market moving news flow, the local data docket was empty.
- Looking ahead tomorrow we have another empty data docket below the RBA's SoMP crosses on Friday.
NZGBS: Richer On Wednesday, Inflation Expectations Ease
NZGBs sit 5-11bps richer across the major benchmarks, the early gains held through the session and ranges remained narrow for the most part.
- 10 Year NZ US Swap Spread remains stable, we sit at 50bps which is well within recent ranges.
- RBNZ dated OIS are stable, pricing a terminal rate of ~5.50% in Feb 24 with ~40bps of cuts by Oct 24.
- The RBNZ’s measure of business inflation expectations points to a further moderation in CPI over the remainder of 2023. 1-year ahead eased to 3.6% for Q4 from 4.2%, the lowest since Q3 2021 and 1.5pp below the Q1 2023 peak.
- The 2-year ahead measure has naturally been running below the 1-year and posted its third straight quarter at 2.8%, within the RBNZ’s target band, but to two decimal places is the lowest since Q3 2021.
- Looking ahead, the local docket is empty tomorrow.
EQUITIES: Japan Banks Down Sharply, HK & China Markets Steady
Regional equity markets are mixed, although losses outweigh positive markets at this stage. Japan markets have been notable underperformers, with local bank shares down sharply. US futures sit a touch lower at this stage, although have traded tight ranges overall. Eminis were last near 4393 (-0.08%), while Nasdaq futures sit 0.11% weaker.
- Japan's Topix is off around 1.2% at this stage. The bank sub index dipped 5.5% at one stage, with limited prospects of a BoJ policy shift in the near term weighing on sentiment. The index is back to early September levels. The Nikkei 225 is off around 0.35% at this stage. Earlier Suzuki reported better than expected earning results.
- In Hong Kong and China markets, we are seeing a slight outperformance trend, although at the break the HSI and CSI 300 are only modestly in positive territory.
- Prospects for potentially improved US-China ties (ahead of Xi Jinping's Visit to the US next week) is cited as a potential positive, while comments from PBoC Governor Pan suggest support for property developers and indebted local government areas. This follows a meeting between regulators and property developers on Tuesday (see this BBG link). Note the CSI 300 real estate index is up 1.59% at the break.
- The ASX 200 is up modestly despite a softer commodity price backdrop in the energy space. Local bank stocks were higher.
- In SEA most markets are lows, with Singapore's STI down 1.4%.
FOREX: Narrow Ranges In Asia
There have been narrow ranges across G-10 FX in Asia today with little follow through on moves. In a data light session there was little meaningful macro newflow. WTI briefly dipped below the $77 handle, and US Tsy Yields were a touch higher.
- AUD/USD is a touch firmer however a narrow $0.6425/40 range has persisted for the most part. Despite yesterday's fall the short term bull cycle remains in play. Resistance comes in at $0.6523, Nov 6 high and key resistance. Support is at $0.6388 the 20-Day EMA.
- Kiwi is also marginally higher. There was little reaction to RBNZ's Q4 Inflation Expectations ticking lower to 2.76% from 2.83%.
- Yen is consolidating above the ¥150 handle. The latest pullback in USDJPY appears to be corrective. Resistance comes in at ¥151.72, Oct 31 high. Support is at ¥149.21 the low from 3 Nov.
- Elsewhere in G-10 there have been little moves of note, BBDXY is unchanged from opening levels.
- Eurozone Retail Sales and the final read of German CPI headline in Europe today.
OIL: Crude Remains Lacklustre, Fed’s Powell Speaks Later
Oil prices fell sharply on Tuesday to levels not seen since August and there has been no recovery during the APAC session today with Brent down 0.1% and WTI -0.3%. Prices fell sharply early in the session with WTI falling to $76.51/bbl and Brent to $81.26 but they are now at $77.15 and $81.57 respectively. The USD index is flat.
- The lacklustre performance was driven by continued US and China demand concerns and signs of increased supply from Russia and rising US inventories. But OPEC+ retains its positive demand outlook. The next meeting will be held over November 25/26 and an announcement on Saudi/Russian output cuts could be made then.
- The US EIA has revised down its 2024 Brent forecast by 1.8% to $93.24/bbl due to an expected increase in supply but demand should also be stronger. But gasoline consumption per person is expected to fall in 2024 to a 20-year low due to higher prices and cost of living pressures.
- WTI’s prompt spread has narrowed to only 11c, signalling less market optimism, according to Bloomberg.
- Bloomberg reported that US crude inventories rose 11.9mn barrels in the latest week, according to people familiar with the API data. Gasoline stocks fell 400k but distillate rose 1mn. The official EIA data won’t be published today but two weeks will be released on November 15.
- Later the Fed Chairman Powell delivers some opening remarks, which given recent FOMC members’ comments are likely to be monitored closely. Also The Fed’s Cook, Williams, Barr and Jefferson speak. BoE Governor Bailey and ECB’s Lane and Enria also appear. ECB President Lagarde is attending the Eurogroup meeting. There is little on the data front.
GOLD: Bullion Trending Lower As War Premium Unwinds, Fed’s Powell Speaks Later
Gold fell only 0.4% on Tuesday to $1969.40/oz despite hawkish Fed comments. Today it has continued the gradual move down falling another 0.1% to $1967.66 off the intraday high of $1971.07. Flight-to-quality flows following the October 7 Hamas attack continue to unwind while the conflict looks contained; bullion is down over a percent this week. The USD index is flat.
- The uptrend in gold remains intact and recent moves are seen as corrective. Prices have continued to trade above initial support of $1959.50, 20-day EMA, today. The bull trigger and initial resistance are at $2009.40.
- FOMC member Kashkari’s comments that it would be better to overtighten than not do enough and that inflation is yet to be contained and Bowman’s that she expects the Fed will have to hike again are likely to pressure gold. Later Fed Chairman Powell delivers some opening remarks, which given these comments are likely to be monitored closely.
- Also the Fed’s Cook, Williams, Barr and Jefferson speak. There are only US wholesale inventories on the data schedule.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 08/11/2023 | 0700/0800 | *** |  | DE | HICP (f) |
| 08/11/2023 | 0745/0845 | * |  | FR | Foreign Trade |
| 08/11/2023 | 0900/1000 | * |  | IT | Retail Sales |
| 08/11/2023 | 0900/1000 | ** |  | EU | ECB Consumer Expectations Survey |
| 08/11/2023 | 0930/0930 |  | UK | BOE's Bailey address at CB of Ireland | |
| 08/11/2023 | 1000/1100 | ** | | EU | Retail Sales |
| 08/11/2023 | 1000/1000 | * | | UK | Index Linked Gilt Outright Auction Result |
| 08/11/2023 | 1015/0515 |  | US | Fed Governor Lisa Cook | |
| 08/11/2023 | 1045/1145 | | EU | ECB's Lane Keynote speech in Latvia | |
| 08/11/2023 | 1200/0700 | ** | | US | MBA Weekly Applications Index |
| 08/11/2023 | 1330/0830 | * |  | CA | Building Permits |
| 08/11/2023 | 1415/0915 | | US | Fed Chair Jerome Powell | |
| 08/11/2023 | 1500/1000 | ** | | US | Wholesale Trade |
| 08/11/2023 | 1530/1030 | ** | | US | DOE Weekly Crude Oil Stocks |
| 08/11/2023 | 1800/1300 | ** | | US | US Note 10 Year Treasury Auction Result |
| 08/11/2023 | 1830/1330 | | CA | BOC minutes from last rate meeting | |
| 08/11/2023 | 1840/1340 | | US | New York Fed's John Williams | |
| 08/11/2023 | 1900/1400 | | US | Fed Vice Chair Michael Barr | |
| 08/11/2023 | 2145/1645 | | US | Fed Vice Chair Philip Jefferson |
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.