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
- BUNDESBANK CHIEF CALLS ON BERLIN TO CREATE BUDGET CLARITY SOON - BBG
- SUNAK SAYS CLAIMS UK HEADING FOR AUSTERITY ‘SIMPLY UNFOUNDED’ - BBG
- ISRAEL, HAMAS LOOK TO EXTEND TRUCE AFTER MORE HOSTAGES ARE FREED - BBG
- PM KISHIDA APPROVAL RATING DROPS TO NEW LOW - PRESS - MNI BRIEF
- JAPAN OCT SERVICES PPI RISES 2.3% VS. SEPT’S 2.0% - MNI BRIEF
- AUSTRALIA NAMES EX-BOE OFFICIAL AS RESERVE BANK DEPUTY GOVERNOR - BBG
Fig. 1: Gold Versus BBDXY USD Index (Inverted)
Source: MNI - Market News/Bloomberg
U.K.
FISCAL (BBG): Rishi Sunak denied his economic plans are about to deliver a fresh bout of UK austerity, even as the official fiscal watchdog warned his tax-cutting strategy assumes a significant squeeze on stretched public services.
BOE (BBG): British lawmakers should review the role and operation of the Bank of England every five years as part of reforms to improve accountability at the central bank and make it “work better” after a string of “errors” that let inflation surge.
EUROPE
FISCAL (BBG): Bundesbank President Joachim Nagel called on the German government to resolve the situation on the budget as soon as possible. “Berlin needs to create clarity for the current 2023 budget and for 2024,” Nagel said at a German central bank youth event in Frankfurt on Saturday. “The latest reports provide hope that this could still be doable this year.”
UKRAINE (RTRS): Ukraine's capital suffered what officials said was Russia's largest drone attack of the war on Saturday, leaving five people wounded as the rumble of air defences and explosions woke residents at sunrise after a week of intensifying attacks.
ITALY (MNI BRIEF): Italy's deal with the European Commission to overhaul its plan for NextGenerationEU spending will make it easy for the country to meet reform and investment targets needed for the fifth payment tranche before the Dec 31 deadline, European Affairs Minister Raffaele Fitto told a news conference on Friday.
ECB (MNI BRIEF): Eurozone bank lending is surprising European Central Bank policymakers by “falling faster than we expected” as the economy heads into a possible mild recession, Bank of Spain Governor Pablo Hernandez de Cos told an event on Friday.
U.S.
MIDEAST (BBG): President Joe Biden said he hopes to extend the pause in the Israeli-Hamas war beyond the original four-day deal to facilitate more hostage releases, saying the safe return of 4-year-old American girl shows that the cease-fire brokered by the US and Qatar is working.
MIDEAST (RTRS): A U.S. Navy warship responded to a distress call from a commercial tanker in the Gulf of Aden that had been seized by armed individuals and is now safe, U.S. officials said on Sunday.
OTHER
MIDEAST (BBG): Israel and Hamas signaled that a temporary cease-fire in Gaza could be extended beyond Monday to allow for the release of more hostages and prisoners.
JAPAN (MNI BRIEF): The approval rating of Japanese Prime Minister Fumio Kishida's cabinet plunged to a new low at 30%, slipping 3 percentage points from October, in the latest poll by Nikkei and TV Tokyo, the Nikkei reported on Monday.
JAPAN (MNI BRIEF): Japan's services producer price index rose 2.3% y/y in October, marking the 32nd straight rise and accelerating from September's revised 2.0%, showing that pass-through of cost increases continued in services, preliminary data released by the Bank of Japan on Monday showed.
AUSTRALIA (BBG): Australia’s government announced former Bank of England official Andrew Hauser will be the new deputy governor of the Reserve Bank, in the latest installment of a major shake-up at the institution. Hauser, who was appointed to a five-year term as the RBA’s No. 2 official, will start his new role as soon as possible, according to a statement from Treasurer Jim Chalmers on Monday.
HONG KONG (BBG): A gauge of bank funding costs in Hong Kong jumped to the highest in 16 years, as year-end demand for cash exacerbates an already-tight liquidity environment.
CHINA
BANKING (BBG): Chinese authorities said they recently opened criminal investigations into the money management business of Zhongzhi Enterprise Group Co., days after the embattled shadow banking giant revealed a shortfall of $36.4 billion in its balance sheet.
LIQUIDITY (Shanghai Securities News/BBG): China’s central bank is expected to inject more liquidity into the interbank market around the end of the month as almost 2.2t yuan of reverse repo agreements mature this week, the Shanghai Securities News reports, citing analysts.
ECONOMY (CSJ/BBG): China can sustain its recovery in 2024 as the economy becomes more resilient and there’s still room for more expansive fiscal policy, China Securities Journal reports, citing economists.
PORK (NDRC): China will implement a new batch of central pork reserve purchases by year end to promote a reasonable recovery in pig prices following excessive declines in the average pig-to-grain price ratio, according to the National Development and Reform Commission. Data from the Ministry of Agriculture showed pork prices in November decreased 1.3% m/m and 39.7% y/y.
VISAS (FM): Citizens from six countries including France, Germany, and Italy will no longer need a visa to visit China, according to Mao Ning, Foreign Ministry spokesperson. Authorities will allow two weeks visa-free travel to China as they seek to boost foreign exchanges and open to the outside world, Mao added.
PROFITS (RTRS): Profits at China's industrial firms extended gains for a third month in October, adding to signs of a stabilising economy following a run of mostly upbeat data suggesting Beijing's support measures have helped bolster a tentative comeback.
HEALTH (BBG): China said a surge in mycoplasma-caused pneumonia in children shows signs of ebbing, but warned that other respiratory illnesses are likely to hit the broader population hard during the mainland’s first winter after Covid restrictions.
CHINA MARKETS
PBOC Injects Net CNY296 Bln Mon; Rates Unchanged
The People's Bank of China (PBOC) conducted CNY501 billion via 7-day reverse repo on Monday, with the rate unchanged at 1.80%. The operation has led to a net injection of CNY296 billion after offsetting the maturity of CNY205 billion reverse repos today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8858% at 09:27 am local time from the close of 2.1805% on Friday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 45 on Friday, compared with the close of 47 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
PBOC Yuan Parity Higher At 7.1159 Monday vs 7.1151 Friday
The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1159 on Monday, compared with 7.1151 set on Friday. The fixing was estimated at 7.1465 by Bloomberg survey today.
MARKET DATA
JAPAN OCT PPI SERVICES Y/Y 2.3%; MEDIAN 2.1%; PRIOR 2.0%
CHINA OCT INDUSTRIAL PROFITS Y/Y 2.7%; PRIOR 11.9%
MARKETS
US TSYS: Marginally Cheaper, Ranges Narrow In Asia
TYZ3 deals at 108-08+, -0-03, a 0-07+ range has been observed on volume of ~195k.
- Cash tsys sit 2-3bps cheaper across the major benchmarks, the belly is marginally leading the cheaps.
- Tsys ticked lower in early trade, there was no overt macro driver as perhaps the possibility of an extended truce between Hamas and Israel weighed.
- Support was seen as WTI ticked away from session highs and tsys recovered to hold cheaper dealing in a narrow range for the most part. WTI sits ~1% lower.
- There is a thin docket in Europe today, further out we have New Home Sales, Dallas Fed Mfg Activity and latest 2- and 5-Year supply.
JGBS: Futures Remain Off Highs, But Little Follow Through To The Downside, 40yr Supply Tomorrow
JGB futures have largely been range bound in post lunch time trade. We were last 145.64, -.02. We sit close to the mid point recent ranges, lows for the session at 145.53, while end last week levels were at 145.73.
- Spill over from US Tsy futures has been evident, which after breaking lower in earlier trade we sit a touch higher in recent dealings (last 108-10+).
- The slightly stronger than expected services PPI from earlier didn't shift sentiment, while we await to see if Ueda's scheduled appearance before parliament delivers any fresh insights.
- In the cash JGB space, we are higher in yield terms, although more so at the back end of the curve. The 10yr is above 0.78%, down from session highs (0.785%). The 20-40yr tenors are holding yield gains better (1.5-3bps higher). The 20yr was last above 1.51%.
- It is a similar story in the swap space, with the 10yr back above 0.99%.
- Note tomorrow we have 40yr supply on tap.
AUSSIE BONDS: Slightly Softer, Ranges Narrow, Bullock Due Tomorrow
ACGBs sit ~1bp cheaper across the major benchmarks, holding cheaper after early spillover from Friday's cheapening in Tsys. Narrow ranges were observed for the most part as the move lower didn't follow through.
- XM (-0.015) and YM (-0.02) are both marginally lower however both remain well within recent ranges.
- The Australian government will introduce legislation to facilitate the revamp of the RBA this week (BBG). Included in the bill is mandating that the RBA’s overarching objective is to “promote the economic prosperity and welfare of the people of Australia, both now and into the future”. The Federal Treasurers power to overrule monetary policy decisions will be repealed.
- RBA dated futures are steady pricing a terminal rate of ~4.50% in Jun 24 with ~20bps of cuts by Dec 24.
- Looking ahead, RBA Governor Bullock is participating in a panel in Hong Kong tomorrow. We also have October Retail Sales on the docket.
NZGBS: Tick Lower Through Monday's Session
NZGBs have ticked lower through Monday's session however ranges remained narrow in the space, and sit 1-3 bps cheaper across the major benchmarks. Light bear steepening has been observed.
- Pressure was seen on the space as regional equities ticked lower alongside US equity futures and the USD firmed as the PBoC vowed to boost bond issuance by private firms, and also support M&A's, IPOs of private sector firms.
- 10 Year NZ US swaps spreads remain stable and sit at +52bps.
- With Wednesday's RBNZ meeting in view OIS price no change in the OCR with ~40bps of cuts by October 2024.
- PM Luxon noted that he is concerned at the risk of recent fiscal deterioration.
- Looking ahead, the data docket is empty tomorrow. The aforementioned RBNZ meeting is the next event of note in NZ.
FOREX: Yen Firms In Asia
The Yen is the strongest performer in the G-10 space at the margins in Asia today. Mont-end Exporter demand for the Yen has added support in Asia today (BBG). Elsewhere risk off flows have escalated through the session, AUD and NZD are lower, as are US Equity Futures and Regional equities. BBDXY is flat and WTI is down ~1%.
- USD/JPY is down ~0.3% and is testing the ¥149 handle as we approach the European open, support is at ¥147.15 low from Nov 21. Resistance comes in at ¥149.96, the 20-Day EMA.
- AUD/USD is down ~0.2%, the pair briefly dealt above Friday's high before waning risk sentiment saw a fall of ~0.4% from peak to trough. Technically the trend needle points north, resistance comes in at Friday's high ($0.6591) then $0.6656, 61.8% retracement of Jul-Oct bear leg. Support is at $0.6475 the 20-Day EMA.
- Kiwi is also softer however ranges have been narrow for the most part. NZD/USD is consolidating above the 200-Day EMA ($0.6062).
- Elsewhere in G-10 NOK is ~0.2% firmer however liquidity is generally poor in Asia.
- There is a thin docket in Europe today.
EQUITIES: Sentiment Softens, China Property Losses Weigh
Regional equity sentiment has generally deteriorated as Monday's Asia session has progressed. Hong Kong and China related bourses have been the weakest performers, further unwinding some of the recent gains seen. US equity futures are mostly lower. Eminis sit near session lows, off around 0.30%, last at 4555. Nasdaq futures are down more, off 0.45%. US yields are higher across the curve, ahead of key US data this week, including PCE figures. This may be tempering US futures sentiment at the margin.
- For China/HK stocks renewed weakness in property stocks is evident. The CSI 300 real estate index is off 3.0% at the break, the headline CSI 300 is down 1.2%, and back sub 3500 in index terms. For HK, the HSI is down nearly 1% at the break.
- Earlier we had headlines from the PBoC pledging financial support for the private sector. The central bank stated it will encourage banks not to cut loans for private companies that are facing temporary difficulties. This may be weighing on broader sentiment, with the financials index down 1.63%.
- China industrial profits were +2.7% y/y in Oct, positive but well off recent highs (17.2% in August). China President XI is scheduled to visit Shanghai tomorrow, including the futures exchange.
- Elsewhere, Japan markets are off 0.35% for the Topix, -0.50% for the Nikkei. The yen is firmer, +0.35% and back sub 149.00, which may be weighing.
- The Kospi is -0.15%, unwinding earlier gains. The Taiex is down nearly 0.50%.
- In SEA, most markets are weaker, but the JCI in Indonesia and the Philippines bourse are higher.
OIL: Crude Falls As Risk Sentiment Declines
Oil prices continued to trade lower during the APAC session as risk appetite deteriorated and the market focuses on Thursday’s delayed OPEC+ meeting. After falling around 2% on Friday, crude is down around a percent today with Brent falling below $80 and is currently around $79.82/bbl and WTI below $75 to $74.73. The USD index is flat.
- Softer-than-expected industrial profits in China pointed to demand continuing to struggle there and as a result the data weighed on equities and commodities.
- The OPEC+ meeting was delayed from Sunday to Thursday due to a dispute over output quotas. A Bloomberg survey showed that about half of analysts believe that measures to reduce supply further will be announced following the meeting.
- The IEA expects that there will be a crude surplus in 2024. The increase in non-OPEC production and some countries being flexible around their quotas make the task of tightening the market more difficult. Futures contracts are in a bearish pattern.
- Shipping risks in the Middle East remain high with reports of a chemical tanker being boarded by Houthi rebels yesterday.
- Later US new home sales and Dallas Fed index are released. ECB President Lagarde makes introductory comments at the European Parliament.
GOLD: Consolidates After Earlier Break Higher
After spiking to fresh highs above $2018, gold has largely consolidated as the Monday Asia Pac session has progressed. We were last near $2011.5, up over 0.50% on closing levels from Friday (near $2001).
- The earlier break puts gold back to fresh highs last seen in May. Highs back in early May were near $2063, although be mindful of round figure resistance at $2050. On the downside, note the 20-EMA sits back near $1977.40.
- The catalyst for today's move may have been partly technical, particularly as we broke above recent highs near $2010, which held in late October.
- Broader USD sentiment has clearly softened, although if anything, gold's move today appeared to weigh on the USD rather than the other way around.
- Elsewhere, equity sentiment has been softer, offsetting the tick higher in US yields.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 27/11/2023 | 1100/1100 | ** |  | UK | CBI Distributive Trades |
| 27/11/2023 | 1400/1500 |  | EU | ECB's Lagarde statement at ECON hearing | |
| 27/11/2023 | 1500/1000 | *** |  | US | New Home Sales |
| 27/11/2023 | 1530/1030 | ** | | US | Dallas Fed manufacturing survey |
| 27/11/2023 | 1530/1530 | | UK | DMO Quarterly Investor/GEMM Consultation Meetings | |
| 27/11/2023 | 1630/1130 | * | | US | US Treasury Auction Result for 2 Year Note |
| 27/11/2023 | 1630/1130 | * | | US | US Treasury Auction Result for 26 Week Bill |
| 27/11/2023 | 1800/1300 | * | | US | US Treasury Auction Result for 13 Week Bill |
| 27/11/2023 | 1800/1300 | * | | US | US Treasury Auction Result for 5 Year Note |
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.