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 Covid Shift Expands as Shanghai, Hangzhou Ease Rules- BBG (BBG)
- China Economists Call for Easing of Covid Curbs to Boost Growth - BBG
- Manufacturing orders from China down 40% in unrelenting demand collapse (CNBC)
- Summers Says Fed Will Need to Hike Rates More Than Market Thinks (BBG)
- OPEC+ keeps steady policy amid weakening economy, Russian oil cap - (Rtrs)
- G7 coalition agrees $60 per barrel price cap for Russian oil - Rtrs
- UK Faces Recession and Lost Decade Without Growth Plan, CBI Says (BBG)
Fig. 1: USD/CNH & BBDXY Trends
Source: MNI - Market News/Bloomberg
UK
Politics: Starmer Makes Pitch for Power With Labour Soaring in UK Polls (BBG)
Economy: Britain Is Near Bottom of the Heap for Economic Growth Potential (BBG)
Economy: UK Faces Recession and Lost Decade Without Growth Plan, CBI Says (BBG)
EUROPE
Ukraine: US Says No Sign Putin Wants Meaningful Talks (BBG)
ECB: ECB’s Villeroy Wants 50 Basis-Point Hike to Fight Inflation (BBG)
RATINGS: S&P Outlook Tweak For France Headlined On Friday
- Rating reviews of note from after hours on Friday included:
- • Fitch affirmed {EU} the European Financial Stability Facility at AA
- • Fitch affirmed {EU} the European Stability Mechanism at AAA; Outlook Stable
- • Fitch affirmed {LN} Lithuania at A; Outlook Stable
- • Fitch affirmed {SP} Spain at A-; Outlook Stable
- • Moody's affirmed {FR} France at Aa2; Outlook Stable
- • S&P affirmed {FR} France at AA; Outlook revised to Negative
- • S&P affirmed {LN} Lithuania at A+; Outlook revised to Negative from Stable
- • DBRS Morningstar confirmed {GE} Germany at AAA, Stable Trend
U.S.
FED: Summers Says Fed Will Need to Hike Rates More Than Market Thinks (BBG)
ECONOMY: Manufacturing orders from China down 40% in unrelenting demand collapse (CNBC)
OTHER
OIL: Report of ‘Secret’ Saudi Oil Production Deal Probed by House GOP (BBG)
OIL: OPEC+ keeps steady policy amid weakening economy, Russian oil cap - (Rtrs)
OIL: G7 coalition agrees $60 per barrel price cap for Russian oil - (Rtrs)
OIL: Russia says it won't accept oil price cap and is preparing response - (Rtrs)
RBA: Australia Set to Raise Rates as Tightening Cycle Approaches End (BBG)
RBNZ: RBNZ’s Conway Reiterates Preference for Monthly Inflation Report - (BBG)
SWISS: Credit Suisse’s Investment Bank Spinoff Attracts Saudi Crown Prince (WSJ)
SOUTH KOREA: 'We are not your enemy', say South Korean truckers striking for minimum wage protections (RTRS)
SOUTH AFRICA: Ramaphosa Readies Scandal Defense Before Key ANC Meeting - (BBG)
CHINA
CORONAVIRUS: Major cities including Shanghai and Hangzhou have relaxed travel restrictions by removing the requirement for a negative Covid test result to take public transportation, Yicai.com reported. (MNI)
CORONAVIRUS: Beijing, Shenzhen loosen more COVID curbs as China fine-tunes policy (RTRS)
CORONAVIRUS: Shanghai Eases Covid Curbs as China’s Policy Shift Expands - (BBG)
CORONAVIRUS: China’s Covid Shift Expands as Shanghai, Hangzhou Ease Rules- (BBG)
ECONOMY: China Economists Call for Easing of Covid Curbs to Boost Growth - (BBG)
PBoC: China PBOC to Reduce OMOs to Avoid Liquidity Excess:Sec. Journal (BBG)
ECONOMY: CHINA PRESS : Banks In Guangzhou Allow Homeowners To Delay Mortgage Repayment (MNI)
CHINA MARKETS
PBOC NET DRAINS CNY53 BILLION VIA OMOS MONDAY
The People's Bank of China (PBOC) on Monday injected CNY2 billion via 7-day reverse repos with the rates unchanged at 2.00%. The operation has led to a net drain of CNY53 billion after offsetting the maturity of CNY55 billion reverse 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 1.7364% at 9:39 am local time from the close of 1.6189% on Friday.
- The CFETS-NEX money-market sentiment index closed at 44 on Friday vs 45 on Thursday.
PBOC SETS YUAN CENTRAL PARITY AT 7.0384 MON VS 7.0542 FRI
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0384 on Monday, compared with 7.0542 set on Friday.
OVERNIGHT DATA
SOUTH KOREA NOV. FOREIGN EXCHANGE RESERVES $416.1B; OCT $414.01BN
JIBUN BANK JAPAN NOV. SERVICES PMI 50.3; 50.0 PRELIMINARY
JIBUN BANK JAPAN NOV. COMPOSITE PMI 48.9; 48.9 PRELIMINARY
NZ NOV. COMMODITY EXPORT PRICES FALL 3.9% M/M: ANZ; OCT -3.4% M/M
AUSTRALIAN NOV INFLATION GAUGE 5.9% Y/Y; OCT 5.2%
AUSTRALIA 3Q COMPANY PROFITS FALL 12.4% Q/Q; MEDIAN -0.3%; Q2 7.8%
AUSTRALIA 3Q INVENTORIES RISE 1.7% Q/Q; MEDIAN +1.0%; Q2 0.5%
CHINA NOV. CAIXIN SERVICES PMI 46.7; MEDIAN 48.0; OCT 48.4
CHINA NOV. CAIXIN COMPOSITE PMI 47.0; OCT 48.3
MARKETS
US TSYS: Moderately Cheaper In Asian Trade
MNI (Sydney) - TYH3 deals at 114-13+, just off the base of its narrow 0-06+ range, on a volume of ~70k. Cash tsys run 3-5bps cheaper across the curve with the belly leading the weakness.
- Cash tsys opened trading 3-5bps cheaper across the major cash benchmarks as local participants reacted to Friday's US employment data and the reopening news from China over the weekend.
- Tsys space looked through a rally in Hong Kong equities and a softer than expected Caixin PMI print in China allowing the early cheapening to persist.
- Looking ahead Italian, French, German, UK and Eurozone PMI will cross in London hours. Meanwhile NY hours will see US data releases including PMI, Factory Orders, Durable Good Orders and ISM Services Index. The Fed is now in its policy blackout period.
EQUITIES: China Re-Opening Theme Dominates, Mixed Trends Elsewhere
MNI (Sydney) - China/HK equities continue to rally, after a number of China cities eased covid-related curbs further over the weekend. This is keeping enthusiasm for the re-opening trade firm. However, elsewhere sentiment is more mixed in the region, while US futures sit modestly lower for the session (-0.15%/-0.20%).
- The HSI is up a further 3.50% so far, while the tech sub index is up a further 6.60%. This follows a strong gain from the Golden Dragon Index in US trading on Friday. Gaming stocks in Macau have also done well, while property related plays are higher to.
- The beta of mainland stocks remains lower, but the CSI 300 is still up 1.73%, while the composite index has gained 1.56%. The property sub-index is outperforming, +2.55% at this stage.
- Elsewhere tech sensitive markets like the Kospi are lower, -0.15/0.20%, while the Taiex is modestly positive at this stage. The Nikkei 225 is around flat at the time of writing.
- The ASX 200 is outperforming, up 0.50% at this stage, led by resource related names, as we see further gains in commodity prices, led by optimism around the China growth outlook.
OIL: Prices Higher On China Hopes, Steady OPEC+ Output, More Sanctions On Russia
MNI (Australia) - Oil prices have risen today by around 1% after falling during NY trading on Friday. WTI is now over the $80 mark at around $80.80/bbl after reaching a high of $81.84 earlier and Brent is about $86.50 after a high of $87.60. Better global growth sentiment driven by moves from China towards reopening has put downward pressure on the USD (-0.4%) and boosted commodities.
- WTI oil prices are now just above the 10-day simple MA. Bearish activity would resume at $73.60. Key resistance is at $89.35, 50-day EMA, and a clear break would change the trend.
- OPEC+ confirmed its previously announced output cut of 2mbd at its meeting on the weekend but didn’t increase it as markets had feared earlier last week.
- The G7 oil price cap of $60/bbl on Russian crude comes into effect today, as well as an EU ban on most imports by sea. The impact of these measures on global supply is uncertain. Russia has said it won’t sell to the countries that have signed up for the cap plus there are large consumers such as China and India that are likely to continue buying Russian oil.
- Tonight the November PMIs in Europe and the US are released and the US ISM services index prints.
GOLD: Gold Prices Move Higher As USD Weakens On Better Global Outlook
MNI (Australia) - Gold prices have rallied today to $1808.60, up 0.6% from Friday’s NY close. It reached an intraday high of $1808.77 in recent trading, the highest since early July. Gold has bounced on the weaker USD (-0.4%), which has trended down on news of China easing some Covid-related restrictions.
- Gold broke through the bull trigger of $1786.50 last Thursday, confirming the recommencement of the upward trend. Today it broke through resistance at $1807.90, the August 10 high. Key trend support is at $1729, the November 23 low.
- Bullion fell on the robust US labour market report on Friday but did recover some of its losses by the close.
- Tonight the November PMIs in Europe and the US are released and the US ISM services index prints.
FOREX: USD Starts The Week On The Back Foot
MNI (Australia) The USD starts the week on the backfoot, despite a firmer US Tsy yield back drop. The BBDXY is back sub 1252.00, -0.40% for the session. Majors have taken their cue from USD/CNH moves, which is more than 1% below NY closing levels, on further lowered Covid restrictions announced over the weekend. This has buoyed commodities, while equities paint a more mixed picture.
- USD/JPY has been the exception in terms of USD weakness. This pair currently sits around 134.30/35, little changed for the session. We are off earlier highs but have seen little follow through to the downside. Japan data and BoJ talk did little to shift the needle.
- The A$ has performed strongly, up 0.75% to 0.6840/45. The better commodity price backdrop, particularly for copper and iron ore, has helped drive the outperformance trend. Weaker Q3 company profits data was largely ignored by the market. We do get the RBA meeting tomorrow, where slightly less than 25bps is priced in for the outcome.
- NZD/USD recovered from earlier losses, also ignoring generally poorer data. The pair is back to 0.6440, +0.60% for the session. The pair is now eyeing mid-August highs close to 0.6470.
- EUR and GBP are both around 0.50% firmer against the USD, while NOK has slightly outperformed, up 0.60% to 9.7200, with higher oil prices helping.
- Looking ahead Italian, French, German, UK and Eurozone PMI will cross in London hours. Meanwhile NY hours will see US data releases including PMI, Factory Orders, Durable Good Orders and ISM Services Index. The Fed is now in its policy blackout period.
UP TODAY (Times GMT/Local)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 05/12/2022 | 2200/0900 | * |  | AU | IHS Markit Final Australia Services PMI |
| 05/12/2022 | 0030/0930 | ** |  | JP | IHS Markit Final Japan Services PMI |
| 05/12/2022 | 0145/0945 | ** |  | CN | IHS Markit Final China Services PMI |
| 05/12/2022 | 0145/0245 |  | EU | ECB Lagarde at Central Bank Governors IMF Seminar | |
| 05/12/2022 | 0700/0200 | * |  | TR | Turkey CPI |
| 05/12/2022 | 0815/0915 | ** |  | ES | IHS Markit Services PMI (f) |
| 05/12/2022 | 0845/0945 | ** |  | IT | IHS Markit Services PMI (f) |
| 05/12/2022 | 0850/0950 | ** |  | FR | IHS Markit Services PMI (f) |
| 05/12/2022 | 0855/0955 | ** |  | DE | IHS Markit Services PMI (f) |
| 05/12/2022 | 0900/1000 | ** | | EU | IHS Markit Services PMI (f) |
| 05/12/2022 | 0930/1030 | * | | EU | Sentix Economic Index |
| 05/12/2022 | 0930/0930 | ** |  | UK | IHS Markit/CIPS Services PMI (Final) |
| 05/12/2022 | 1000/1100 | ** | | EU | retail sales |
| 05/12/2022 | - | | EU | ECB Panetta at Eurogroup Meeting | |
| 05/12/2022 | 1330/0830 | * |  | CA | Building Permits |
| 05/12/2022 | 1445/0945 | *** |  | US | IHS Markit Services Index (final) |
| 05/12/2022 | 1500/1000 | *** | | US | ISM Non-Manufacturing Index |
| 05/12/2022 | 1500/1000 | ** | | US | factory new orders |
| 05/12/2022 | 1630/1130 | * | | US | US Treasury Auction Result for 26 Week Bill |
| 05/12/2022 | 1630/1130 | * | | US | US Treasury Auction Result for 13 Week Bill |
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.