MNI EUROPEAN OPEN: China Inflation Beats, U.S. CPI Up Next

EXECUTIVE SUMMARY

• BIDEN-XI VIRTUAL MEETING PLANNED FOR AS SOON AS NEXT WEEK (RTRS SOURCE)
• U.S. EXTENDS BAN ON SECURITIES INVESTMENTS IN COMPANIES LINKED TO CHINA MILITARY (RTRS)
• XI: CHINA IS READY TO WORK WITH U.S. TO MANAGE DIFFERENCES (RTRS)
• FEDERAL RESERVE'S BULLARD EXPECTS TWO RATE HIKES NEXT YEAR (CNBC)
• COVENEY: BRITAIN ASKING EU TO 'DELIVER THE IMPOSSIBLE' ON NI PROTOCOL CHANGES (IRISH TIMES)
• NO SIGN OF MISSED EVERGRANDE COUPON PAYMENTS AS GRACE PERIOD END NEARS

Fig. 1: China CPI Y/Y (%) vs. China PPI Y/Y (%)

Source: MNI - Market News/Bloomberg

UK

BREXIT: The British government has been asking the European Union to "deliver the impossible" when it comes to changes to the Northern Ireland protocol, Minister for Foreign Affairs Simon Coveney has said. There was now a "very serious risk" that the British government would choose to trigger Article 16, effectively suspending the operation of the Northern Ireland protocol agreed in Brexit talks, Mr Coveney said. The decision, expected in the coming weeks, would likely lead to a major flashpoint in the British government's relationship with both Dublin and Brussels. (Irish Times)

ECONOMY: Consumers should expect steep price increases after Christmas, according to one of the UK's most senior retail executives. Kate Nicholls, the chief executive of UK Hospitality, an industry group representing businesses around the country, said that some of the association's members, which include restaurants, hotels, and bars, expected to raise prices three times before April 2022. An inability to raise prices ahead of Christmas would lead to inflationary pressure that would directly translate into higher prices, said Ms Nicholls, speaking at the Environment, Food and Rural Affairs Committee. (Sky)

EUROPE

ECB: The European Central Bank would risk exacerbating inequality if it were to raise interest rates before ceasing asset purchases, according to Executive Board member Isabel Schnabel. Such a scenario is one example of how considerations of the broader impact of monetary policy should feature in decision-making, Schnabel told a conference Tuesday organized by the U.S. Federal Reserve. She highlighted the risk that higher rates could disproportionately benefit richer people because of the assets they hold. "One reason for ending net asset purchases before raising policy rates has to do with the potentially adverse distributional consequences of reversing the order," Schnabel said. (BBG)

FRANCE: French President Emmanuel Macron said on Tuesday that those aged 65 and older will need to present proof of a COVID-19 booster shot from mid-December for health passes that give access to restaurants, trains and planes to remain valid. (RTRS)

FRANCE: Macron defended stricter conditions being introduced for unemployment benefits and declared that he would continue next year with controversial reforms to France's costly, complicated and unequal pensions systems. He did not shy away from insisting that this would mean increasing the retirement age. "Work is our compass," he said. "It's through work that we can preserve our social model." (FT)

GREECE: Greece on Tuesday hit a record high in new COVID-19 cases for a second day running, with the government ruling out a lockdown or school closures but warning that it might need to mobilize private doctors in badly hit areas. (AP)

IRELAND: Ireland faces "short- to medium-term risk to electricity security of supply," Prime Minister Micheal Martin told lawmakers in parliament in Dublin. There is "potential for some electricity customers to lose power in 2021, 2022 winters" if action is not taken. Government taking "necessary action" to maintain supply "for the coming winter and the years ahead." (BBG)

SNB: The Swiss National Bank stands ready to intervene in the currency markets if the outcome of the U.S. election triggers a rush into the safe haven currency, a member of the central bank's governing board said on Monday. Andrea Maechler declined to comment on the outcome of the election or how it would affect the Swiss franc or financial markets. But "the uncertainties are large," she said in an interview with Swiss TV to be broadcast on Monday evening. "What I can say is just like with the Brexit vote, we are ready," Maechler said. "My team is prepared and the Swiss National Bank will be there, if necessary, to intervene to stabilize the currency markets." (RTRS)

U.S.

FED: San Francisco Federal Reserve Bank President Mary Daly on Tuesday said it will be mid-2022 before there is clarity on the true state of the labor market and the outlook for inflation, urging policy patience in the meantime. "It's going to take time to know" whether the job market is tight, as many employers say, or has room to expand by bringing people back into the workforce, Daly told a National Association of Business Economists virtual meeting. (RTRS)

FED: Minneapolis Federal Reserve Bank President Neel Kashkari on Tuesday said he expects more clarity on the economic outlook by the time the Fed ends its bond-buying program in mid-2022, and is keeping an "open mind" on the timing of any rate hikes to follow. (RTRS)

FED: St. Louis Federal Reserve President James Bullard told CNBC that he's currently expecting the U.S. central bank to hike its benchmark rate twice in 2022, after it's finished with winding down its bond-buying program. Bullard added the caveat that his viewpoint was based on current economic data and that his prediction could change as time progresses. "What we can do is assess the situation next spring and see where we're at, and at that point we can make a decision about raising the policy rate," Bullard told CNBC's Julianna Tatelbaum in an interview recorded Tuesday at the UBS European Conference. (CNBC)

FED: Treasury Secretary Janet Yellen repeated her view that elevated U.S. inflation won't persist beyond next year and said the Federal Reserve will act if needed to prevent a rerun of 1970s-style price rises. "I'd expect price increases to level off, and we'll go back to inflation that's closer to the 2% that we consider normal" as the pandemic fades, Yellen said in an interview that aired Tuesday on National Public Radio's "Marketplace" show. The Treasury chief said that an end to the pandemic would allow more people to return to work, and with consumer demand returning to normal patterns, that will relieve pressure from wages and goods prices. (BBG)

ECONOMY: President Joe Biden spoke with the chief executive officers of Walmart Inc., United Parcel Service Inc., FedEx Corp. and Target Corp. on Tuesday to discuss easing supply chain bottlenecks, according to a White House official. Biden and the executives -- Walmart's Doug McMillon, UPS's Carol B. Tome, Fred Smith of FedEx and Target's Brian Cornell -- talked about potential moves to speed up deliveries and lower prices, the official said, without elaborating. The executives told the president that store shelves will be well stocked for the holiday season, the official said. Biden has been under pressure to clear supply-chain logjams and ease inflationary pressures as consumers begin their holiday shopping. (BBG)

FISCAL: Treasury Secretary Janet Yellen says President Joe Biden's economic policies, if fully enacted by Congress, will prove historic for its spending on infrastructure, child care and the environment, alongside its domestic and international tax changes. "Any one of these measures would reorient our medium- to long-term economic outlook in much more positive direction, but together they do something far more transformative," Yellen says in the text of a speech she's scheduled to deliver Tues. to a University of Nevada-Las Vegas conference. (BBG)

CORONAVIRUS: Pfizer said Tuesday it asked the Food and Drug Administration to authorize booster shots of its Covid-19 vaccine for all Americans age 18 and older, a move that would significantly increase the number of people eligible to get the extra shots. A third dose of the vaccine, which was developed with German partner BioNTech, has already been authorized by the FDA for elderly people and at-risk adults six months after they complete their primary series of shots. (CNBC)

CORONAVIRUS: Parents of Miami-Dade County public school students can opt out of the district's mask mandate, the Miami Herald reported, citing Superintendent Alberto Carvalho. The eased protocols are due to the plummeting number of cases, hospitalizations and deaths in South Florida since the delta variant caused a spike in infections over the summer, the newspaper said. (BBG)

CORONAVIRUS: Stepping up the rate of vaccinations and boosters can help avoid a holiday surge in new cases that have dropped to a plateau of about 70,000 a day, White House medical adviser Anthony Fauci said. While hospitalizations and deaths have fallen in the U.S., it's far too early to pull back on mitigation measures such as mask-wearing, Fauci said in an interview on Bloomberg Television's "Balance of Power with David Westin." "If we get the overwhelming proportion of unvaccinated people vaccinated, and we get those who are vaccinated and eligible to get a booster," Fauci said, "we can go a long way to preventing a new surge as we go into the winter." (BBG)

BONDS: U.S. high-yield bond sales reached an annual record of $432.4 billion on Tuesday as companies rush to lock in low coupons while they still can. Cheap funding costs have unleashed a prolonged pile-on of debt issuance, and borrowers have been hurrying to take advantage of the opportunity before the Federal Reserve eventually raises interest rates. That could come sooner than expected amid inflation pressures, though Federal Reserve Chair Jerome Powell is still preaching patience as of last week. This dash has taken 2021's issuance beyond 2020's high mark $431.8 billion, which topped a prior record set in 2012, according to data compiled by Bloomberg. (BBG)

EQUITIES: Apple Inc. failed to persuade a federal judge to push back a December deadline to change the lucrative business model for its App Store while the iPhone maker's legal fight with Epic Games Inc. is appealed. Unless the iPhone maker wins a reprieve from an appeals court, it will soon have to start allowing developers to steer customers to payment methods outside the App Store, an overhaul the judge ordered in September that could cost the tech giant a few billion dollars annually. (BBG)

OTHER

GLOBAL TRADE: The Biden administration outlined several initiatives on Tuesday aimed at addressing immediate supply chain challenges and other disruptions affecting global commerce. Several senior administration officials, who spoke on the condition of anonymity in order to share details of the proposed plans, said the administration will begin work within the next 60 days with the U.S. Army Corps of Engineers on $4 billion worth of construction work at coastal ports, inland waterways as well as other corps-eligible facilities. The plan will also identify and prioritize $3.4 billion in upgrades to obsolete inspection facilities that will make international trade more efficient through the northern and southern borders, a senior administration official said. (CNBC)

GLOBAL TRADE: U.S. Commerce Secretary Gina Raimondo said on Monday she was confident semiconductor chip manufacturers and other companies in the supply chain would voluntarily submit data to the department ahead of today's deadline. (RTRS)

GLOBAL TRADE: U.S. President Joe Biden is planning to host an in-person meeting with the leaders of Mexico and Canada on Nov. 18, the first of its kind in more than five years, a source in Ottawa said on Tuesday. (RTRS)

U.S./CHINA: A virtual meeting planned between U.S. President Joe Biden and Chinese leader Xi Jinping will be held as soon as next week, a person briefed on the matter told Reuters. (RTRS)

U.S./CHINA: The United States will continue a Trump-era ban on U.S. investments in Chinese companies that Washington says are owned or controlled by the Chinese military, President Joe Biden said on Tuesday. (RTRS)

U.S./CHINA: China stands ready to work with the United States to properly manage differences, President Xi Jinping has said, according to a statement posted on the website of his country's U.S. embassy.

U.S./CHINA/TAIWAN: China's military said on Tuesday it had conducted a combat readiness patrol in the direction of the Taiwan Strait, after its defence ministry condemned a visit to Taiwan by a U.S. congressional delegation it said had arrived on a military aircraft. The patrol was aimed at the "seriously wrong" words and actions of "relevant countries" on the Taiwan issue and the activities of pro-independence forces in Taiwan, a Chinese military spokesperson said in a statement. (RTRS)

JAPAN: Japan's ruling Liberal Democratic Party and its coalition partner Komeito have agreed to set an income cap on the eligibility of 100,000 worth of cash and voucher handouts to those aged 18 and younger, Kyodo reports, citing an unidentified person. Finance Minister Shunichi Suzuki said earlier that the parties were discussing whether to limit handouts to households whose individual earnings is less that 9.6m yen/year. (BBG)

JAPAN: Japan's ruling Liberal Democratic Party and its coalition partner Komeito are making final arrangements to pay up to 20,000 yen worth of points to "My Number" national ID card holders, Jiji reports, without attribution. Parties plan to deliver the points, which can be used to make purchases, in stages. (BBG)

JAPAN: Japan's Prime Minister Fumio Kishida will be re-appointed during the special session of the Diet today. All ministers are expected to keep their portfolios, while former Education Minister Yoshimasa Hayashi is set to become Foreign Minister. Kishida has doubled as Foreign Minister since the recent resignation of Toshimitsu Motegi, who took the role of ruling Liberal Democratic Party Secretary General. Kishida is also expected to tap former Defence Minister and China critic Gen Nakatani as his special advisor on human rights issues. The special parliamentary session will last for three days, with Prime Minister Kishida set to unveil the details of the government's planned Covid-19 measures on Friday. (MNI)

AUSTRALIA: Payroll jobs rose by 1.3% in the fortnight to 16 October 2021, following a fall of 0.5% in the previous fortnight. Payroll jobs increased through the first half of October, as lockdowns and other restrictions eased - particularly in New South Wales (up 3.5%), the Australian Capital Territory (up 2.4%) and Victoria (up 0.8%). During the latest fortnight there were noticeable differences in week-to-week changes, which reflected changes in lockdown conditions and seasonal changes around the end of the school holidays. The latest week of data, which ended on 16 October, coincided with lockdowns and other restrictions starting to ease in New South Wales and the Australian Capital Territory, with payroll jobs increasing by 2.2% and 1.6% over that week. The week-to-week data also shows some businesses preparing for reopening, beyond the increases we would normally expect to see after the school holidays. This was seen in the week to 9 October in New South Wales and the Australian Capital Territory, and in Victoria in the week to 16 October. (ABS)

BRAZIL: Brazil's lower house approved in a second round on Tuesday a bill that would remove court-ordered payment rules known as "precatorios" from the spending cap. House voted 323 in favor, 172 against. Lawmakers rejected a series of proposed amendments. After Tuesday night's vote, the bill moves to the Senate to be voted on in two rounds. (BBG)

BRAZIL: Brazil's health regulator and Pfizer met to discuss the use of the company's Covid-19 vaccine in children ages 5 to 11 years old, the regulator said in a statement. Vaccine dose for children 5 to 11 years old will be smaller than for children over 12 due to a new formulation, Pfizer told regulator. Pfizer has indicated to the regulatory agency that its request for authorization of the use of its vaccine in this age group will be filed shortly, without giving a specific date. (BBG)

OIL: The U.S. Energy Information Administration on Tuesday cut its 2022 world oil demand growth forecast by 130,000 barrels per day to 3.35 million bpd. In its monthly forecast, the agency raised its oil demand growth estimate for 2021 by 60,000 bpd to 5.11 million bpd. (RTRS)

OIL: The Biden administration reviewed the EIA forecast and welcomes news of moderating prices, according to a White House official. White House will continue to monitor and take steps that are needed. U.S. is engaging with countries, entities like OPEC+ on increasing supply. White House is looking at all the tools, remains concerned about the impact of high energy prices on consumers. White House has nothing to announce on potential SPR release. (BBG)

OIL: The White House pledged to discuss a key pipeline that carries Canadian crude through Michigan with the northern neighbour, stressing the U.S. isn't considering a shutdown of the conduit the state's governor wants shuttered. (RTRS)

OIL: Russia expects to produce about 560m metric tons of crude oil a year in 2023 and 2024, Kommersant reports, citing an interview with Energy Minister Nikolay Shulginov. Russia needs to boost competitiveness of its energy resources, the minister told the newspaper. "We need to monetize our resources," he said as quoted. "It's too early to talk about the end of oil era". (BBG)

CHINA

PBOC: The People's Bank of China's new lending tool formulated to boost bank lending to carbon reduction efforts may lead to as much as CNY3 trillion additional green lending next year, and help boost overall social financing, the 21st Century Business Herald reported citing Dai Zhifeng, research head of Zhongtai Securities. The central bank didn't fix a scale, leaving the upper limit open, the newspaper said. As intended, the PBOC will provide 60% of the principal while commercial banks provide the remaining 40% when lending to green projects, an arrangement that both utilizes banks' capital and encourages prudence, the newspaper said citing Zeng Gang, deputy director of the National Institution for Finance & Development. (MNI)

PBOC: The PBOC is likely to continue raising the scale of reverse repurchase agreements through the year end to meet rising liquidity demand, extending the steady increase seen this month, the Economic Information Daily reported citing analysts. The central bank on Tuesday conducted CNY100 billion RR via open market operations, increasing from earlier daily scales such as CNY10 billion and CNY50 billion. The issuances of local government bonds are expected to be completed this month, pressuring liquidity, while MLFs totaling CNY1 trillion are also set to mature, the newspaper said. Policymakers will likely resist the use of cutting banks' reserve ratios and rates as they balance short and long-term economic goals, the newspaper said citing analyst Wang Yifeng of Everbright Securities. China will likely maintain prudent monetary policies next year and facilitate structural changes such as increased lending to SMEs and green industries, as well as staying on guard for changes in U.S. asset rates of returns and global capital movement, the newspaper said. (MNI)

PROPERTY: Relevant policies for real estate enterprises to issue domestic bonds may be loosened, with developers expected to kick off issuance in the interbank market in the near future, the official Shenzhen-based Securities Times says in a front-page report, citing unidentified bond market sources. The convening of the symposium this week means that authorities may ease the control on bond issuance by developers. Bond issuance to banks and other institutional investors will prevent further deterioration in the finance of domestic developers. (BBG)

CREDIT: Foreign investors, including Goldman Sachs, are buying Chinese developers' dollar bonds at cheap prices at a time when frequent defaults on these bonds by cash-strapped developers caused widespread panic, the PBOC-run newspaper Financial News reported on its WeChat account. The prices on some developers' dollar bonds have rebounded after they bought back some to shore up confidence, the newspaper said. The financing conditions of developers have mostly normalized with real estate loans surging in October by as much as CNY200 billion from September, the newspaper said. (MNI)

CREDIT: Fantasia Holdings Group Co., the property developer whose surprise bond default last month helped heighten market concerns about Chinese real estate, said some lenders were asking for loans to be repaid early. The company's stock, which resumed trading after being halted since late September, plunged 37% Wednesday in Hong Kong to 36 Hong Kong cents a share, the equivalent of about 5 U.S. cents. That put the stock on course for its lowest close in its 12-year history, according to FactSet. (Dow Jones)

EVERGRANDE: China Evergrande New Vehicle Group enters agreement to place 174.8m new shares at HK$2.86 apiece in a top-up placement, according to a statement to Hong Kong stock exchange; Stock falls 1.4% in Hong Kong premarket. Offer price represents about 20% discount to last close of HK$3.57 in Hong Kong. Placement shares represent 1.76% of enlarged issued share capital. Proceeds will be used for R&D and production of its new energy vehicles, paving the groundwork for putting them into production. (BBG)

OVERNIGHT DATA

CHINA OCT CPI +1.5% Y/Y; MEDIAN +1.4%; SEP +0.7%
CHINA OCT PPI +13.5% Y/Y; MEDIAN +12.3%; SEP +10.7%

JAPAN OCT, P MACHINE TOOL ORDERS +81.5% Y/Y; SEP +71.9%

JAPAN OCT MONEY STOCK M2 +4.2% Y/Y; MEDIAN +4.0%; SEP +4.2%
JAPAN OCT MONEY STOCK M3 +3.7% Y/Y; MEDIAN +3.7%; SEP +3.8%

AUSTRALIA NOV WESTPAC CONSUMER CONFIDENCE 105.3; OCT 104.6
AUSTRALIA NOV WESTPAC CONSUMER CONFIDENCE +0.6% M/M; OCT -1.5%

While the movement in the Index is hardly noteworthy there are a number of intriguing aspects of the survey that provide us with useful evidence of how the economy is evolving as we emerge out of COVID. These include insights into spending patterns; the labour market; the impact of a changing interest rate scene; industry developments; and housing. Firstly, the level of the Index is almost identical to the level just over a year ago in October 2020 (105.0) and has remained steady over the last two months despite both Sydney and Melbourne having moved out of their hard 'delta' lockdowns since September. In contrast, the Index had surged 32% over the two months to October 2020 as the nation heaved a sigh of relief that Victoria's 'second wave' COVID outbreak was finally coming under control and that other states had successfully avoided a return bout. That was a time when respondents were still very uncertain about the outlook and the risks associated with COVID. In recent months the success of vaccination rollouts has underpinned a confident consumer despite being in lockdown. This is best demonstrated by the confidence level of the 7.8% of respondents who do not plan to get vaccinated with their confidence level at a disturbing 73.8 compared to confidence amongst the fully vaccinated at 106.5. Confidence levels around the states are largely unchanged from the October survey with only NSW, up 4.4% to 107.9, showing a clear positive response to reopening news. (Westpac)

NEW ZEALAND NOV, P ANZ BUSINESS CONFIDENCE -18.1; OCT -13.4
NEW ZEALAND NOV, P ANZ ACTIVITY OUTLOOK 15.6; OCT 21.7

The preliminary ANZ Business Outlook data for November saw nearly all forward-looking activity indicators ease. Business confidence fell 5points and own activity expectations were down 6 points. Investment intentions fell 2 points, while employment intentions bucked the trend and rose 5 points. Expected profitability fell 3 points with a net 9% of firms expecting lower profits ahead. That is likely related to extreme cost pressures, with a net 89% of firms reporting higher costs, up 2, while only a net 65% are intending to raise their prices (which, while a lot smaller than the proportion of firms experiencing higher costs, is historically exceptionally high). Capacity utilisation –the single best GDP indicator in the survey – fell 6 points to 15%.A net 10% of Auckland/Waikato businesses reported lower activity than a year ago, while a net 14% outside of these areas reported higher activity. A net 10% of firms are reporting higher employment than a year ago (2% in Auckland/Waikato, 15% elsewhere). Auckland/Waikato firms had lower own activity expectations, capacity utilisation and export intentions than elsewhere, but higher (though still net negative) business confidence and profit expectations, and employment intentions continue to holdup well. As previously noted, the questions about expectation are in change terms, ie comparing to today, and Auckland/Waikato firms are looking forward to easing restrictions while most of the rest of the country is waiting for the COVID hammer to fall. The baseline is therefore not the same, and the numbers aren't really comparable in an absolute sense. Overall, the survey shows an understandable wariness as we move into a COVID-endemic world. The one certainty is that costs are through the roof. (ANZ)

SOUTH KOREA OCT UNEMPLOYMENT RATE +3.2%; MEDIAN +3.1%; SEP +3.0%

SOUTH KOREA OCT BANK LENDING TO HOUSEHOLDS TOTAL KRW1,057.9TN; SEP KRW1,052.7TN

CHINA MARKETS

PBOC NET INJECTS CNY50BN VIA OMOS WEDNESDAY

The People's Bank of China (PBOC) injected CNY100 billion via 7-day reverse repos with the rates unchanged at 2.2% on Wednesday. The operation led to a net injection of CNY50 billion after offsetting the maturity of CNY50 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 2.2000% at 09:25 am local time from the close of 2.1819% on Tuesday.
• The CFETS-NEX money-market sentiment index closed at 40 on Tuesday vs 53 on Monday.

CHINA SETS YUAN CENTRAL PARITY AT 6.3948 WEDS VS 6.3903

The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 6.3948 on Tuesday, compared with the 6.3903 set on Tuesday.

MARKETS