MNI US OPEN: A Rare Downside Miss For Euro Inflation

NEWS

US/EU (MNI): EU Seeks Exemptions from IRA as Macron Lands in US - The National

Sunniva Rose at The National summarises issues in EU-US relations as French President Emmanuel Macron arrives in Washington, D.C. ahead of state visit: “...relations aren't in a good shape - and a big reason for this is the Inflation Reduction Act. The EU is divided between an aggressive anti-IRA camp led by France, and other countries that are laying low in fear of triggering a trade war.”

CHINA/RUSSIA (MNI): Joint Air Patrols Signal Deepening Moscow-Beijing Military Axis

The Russian Foreign Ministry has confirmed that Russian and Chinese bombers carried out joint air patrols over the Sea of Japan and the East China Sea earlier today. Reports are that for the first time during joint patrols, Russian plans landed at a Chinese airfield, and vice versa.

CHINA (MNI): Wires-Beijing Relaxes Community COVID Testing Rules For Some

Wires are reporting that authorities in the Chinese capita, Beijing, have stated that community testing for COVID-19 can be dropped for those not needing to venture outside. This comes a day after officials in the city of Guangzhou, "announced late on Tuesday they would allow close contacts of COVID cases to quarantine at home rather than being forced to go to shelters", according to Reuters.

CHINA (MNI): Private Property Developers, SOEs to Gain from Refinancing Rules

China's move to lift a ban on equity refinancing for listed real estate firms will help ease developers' cash flow pressures without increasing their debt burden, with high-quality leading private developers and state-owned developers capable of mergers and acquisitions likely to be the main beneficiaries, 21^st Century Business Herald reported citing Chen Mengjie, analyst of Yuekai Securities.

HONG KONG (MNI): Hong Kong Dollar Speculators Will Fail - HKMA CEO

Hedge fund speculators do not understand how Hong Kong’s currency board system works and will lose money trying to break the peg, Hong Kong Monetary Authority chief executive Eddie Yue told a Legislative Council panel on Wednesday. His comments follow prominent U.S. hedge fund managers disclosing large notional short positions against the Hong Kong dollar in recent weeks. The Hong Kong dollar is pegged in a tight range to the U.S. dollar.

AUSTRALIA (MNI): Aussie CPI Cools, But RBA On Track For 25bp

The Reserve Bank of Australia is unlikely to be swayed from hiking rates another 25bp at Tuesday's final meeting of the year, despite a slowing in the year-on-year pace of inflation to 6.9% in October, according to Australian Bureau of Statistics data released Wednesday.

NEW ZEALAND (MNI): RBNZ Backs Inflation Target in Remit Review

The Reserve Bank of New Zealand has recommended that its remit continue to be based on a flexible inflation targeting framework, as it opened a second consultation on possible changes to its remit. The RBNZ said in the consultation paper that retaining the 1-3% inflation target, with a focus on the 2% midpoint, strikes a good balance between the costs and benefits of positive inflation, adding that the Consumer Price Index is the "most suitable" price measure for the inflation target. It said the inflation targeting framework was "well understood and credible".

DATA

EUROZONE DATA (MNI): HICP Slows to 10.0% in Downside Surprise

• EUROZONE NOV FLASH CPI -0.1% M/M (FCST +0.2%); OCT +1.5% M/M
• EUROZONE NOV FLASH CPI +10.0% Y/Y (FCST +10.4); OCT +10.6% Y/Y
• EUROZONE NOV FLASH CORE CPI 0.0% M/M, +5.0% Y/Y (= FCST); OCT +5.0% Y/Y

Eurozone inflation saw a downside surprise in the November flash, deflating by -0.1% m/m and cooling by 0.6pp to +10.0% y/y in the headline print. Despite improvements in headline inflation, core CPI held steady at +5.0% y/y as anticipated. Prices stalled on the month at 0.0%. Inflation has as such come off its October record high, supported by the -1.9% m/m fall in energy prices. This left annualised energy inflation 6.6pp lower at +34.9% y/y.

GERMANY NOV UE RATE (SA) 5.6% (FCST 5.5%); OCT 5.5% (MNI)
GERMANY NOV UE TOTAL (SA) 2.538MN; OCT 2.521MN (MNI)
GERMANY NOV UE NET CHANGE (SA) +17K (FCST +13.5K); OCT +9Kr (MNI)
GERMANY NOV JOB VACANCIES (SA) -7K; OCT -17K (MNI)

FRANCE NOV HICP +0.5% M/M, +7.1% Y/Y (MNI)
FRANCE OCT CONSUMER SPENDING -2.8% M/M, -5.9% Y/Y (MNI)
FRANCE OCT PPI -0.1% M/M, +24.7% Y/Y (MNI)
FRANCE Q3 GDP FINAL +0.2% Q/Q, +1.0% Y/Y (= FLASH) (MNI)

ITALY NOV FLASH HICP +0.6% M/M, +12.5% Y/Y (MNI)
ITALY FINAL 3Q22 GDP +2.6% Y/Y (= FLASH); Q2 +5.0%r Y/Y (MNI)
ITALY FINAL 3Q22 GDP +0.5% Q/Q (= FLASH); Q2 +1.1%Q/Q (MNI)

UK NOV BRC SHOP PRICES +0.9% M/M, +7.4% Y/Y (MNI)

SWISS KOF NOV ECONOMIC BAROMETER 89.5 (MNI)

CHINA DATA (MNI): China's Nov Manufacturing PMI Falls To 7-Month Low

• CHINA NOV MANUFACTURING PMI 48 VS 49.2 IN OCT

China's Purchasing Managers' Index (PMI) slid to a seven-month low of 48 in November and deeper into the contractionary zone below 50, as renewed outbreaks of Covid-19 disrupted factory activity, data from the National Bureau of Statistics on Wednesday showed. The decline from 49.2 in October came as the production and new orders sub-indices fell by 1.8 and 1.7 points from October to 47.8 and 46.4, respectively. New export orders sub-index also fell by 0.9 to 46.7 on declining external demand.

MNI NOV CHINA LIQUIDITY CONDITIONS INDEX 69.1 VS 46.9 OCT (MNI)

JAPAN Q3 FACTORY OUTPUT +5.8% Q/Q VS. -2.7% IN Q2 (MNI)
JAPAN OCT INDUSTRIAL OUTPUT -2.6% M/M; SEP -1.7% (MNI)

AUSTRALIA OCT BUILDING APPROVALS -6% M/M, -6.4% Y/Y (MNI)

FX SUMMARY: USD Remains in the Red in Early Trade

• The USD trades in the red in G10s, besides the Yen, which trades circa flat against the Dollar.
• USD moved to session low against CNY, CNH, SGD, CHF, MYR, INR, NOK.
• And saw some continuation going through against the EUR, GBP, SEK, CAD, CNY, HKD, MYR, ILS, AUD, NZD, CNH.
• Initial move happened at 08.30GMT, as Equities pushed to session high, but have since faded of their highs, providing a respite for the USD.
• Notable moves were in Asia FX, with CNY and CNH extending gains vs the Greenback.
• CNY is now up 1.02% and CNH 0.84% against the USD, initially a function of the USD weakness, but the currencies are extending on the latest China Covid test headline "Beijing to allow some residents to skip mass Covid test".
• USDCNH and USDCNY are at their lowest level since 16th Nov.
• USDCNY sees small support at 7.0700.
• The EU CPI came below expectations, but still at the 10% mark.
• While French and Italian CPIs came above expectations.
• Look for potential Month End flow, with some desk favouring USD weakness into it.
• Looking ahead, US ADP, Wholesale Inventories, JOLTS are the notable releases. US GDP and Core PCE are second readings.
• Speakers include Fed Bowman, Cook, but more eyes on Fed Powell.

BOND SUMMARY: European Inflation the Focus Ahead of Powell and a Slew of US Data

• Inflation has been the main theme of the morning session once again, with the release of a one tenth higher-than-expected French HICP print setting the tone this morning. Bunds then drifted a big higher ahead of the Italian and pan-Eurozone prints which were released simultaneously at 10:00GMT / 5:00ET. They showed a higher Italian print but softer Eurozone print, although core CPI was in line with expectations at 5.0%Y/Y. This was enough for Bund futures to move lower again - but not hitting the intraday lows seen after the French HICP print.
• Even so, we have seen Schatz yields move almost 7bp higher on the day with the German curve bear flattening. Gilts have followed to a smaller extent while US Treasuries have seen even smaller moves.
• It's a busy day for US data with ADP employment due at 8:15ET, the second print of Q3 GDP due for release at 8:30ET, the MNI Chicago Business Barometer at 9:45ET and JOLTs data at 10:00ET.
• This data is all ahead of a speech from Fed Chair Powell on the economic outlook and labour market. This will be closely watched ahead of the December FOMC meeting. We will also hear today from Fed's Bowman and Cook. And the Beige Book will be released at 14:00ET.
• TY1 futures are up 0-2+ today at 113-02 with 10y UST yields down -1.4bp at 3.732% and 2y yields down -0.3bp at 4.474%.
• Bund futures are down -0.63 today at 140.75 with 10y Bund yields up 3.5bp at 1.953% and Schatz yields up 6.7bp at 2.111%.
• Gilt futures are down -0.43 today at 105.47 with 10y yields up 3.1bp at 3.126% and 2y yields up 1.8bp at 3.226%.

EQUITIES: Bullish Eurostoxx Futures Trade Close to Recent Highs

The EUROSTOXX 50 futures trend condition remains bullish and the contract is trading closer to its recent highs. Recent trend highs maintain the recovery that started in early October and confirm an extension of the bullish price sequence of higher highs and higher lows. The recent break of 3810.00, Aug 17 high, also strengthened the case for bulls. The focus is on the 4000.00 psychological handle. Initial firm support is at 3840, the Nov 17 low. The S&P E-Minis outlook remains bullish despite the latest retracement - the move lower is considered corrective. Recent consolidation in the daily chart appears to be a flag formation. If correct, this is a bullish continuation pattern. The contract has recently breached 3928.00, Nov 1 high, establishing a positive price sequence of higher highs and higher lows. The focus is on 4100.00 next. Support to watch lies at 3887.16, the 50-day EMA.

• Japan's NIKKEI closed lower by 58.85 pts or -0.21% at 27968.99 and the TOPIX ended 7.4 pts lower or -0.37% at 1985.57.
• Elsewhere, in China the SHANGHAI closed higher by 1.587 pts or +0.05% at 3151.335 and the HANG SENG ended 392.55 pts higher or +2.16% at 18597.23.
• Across Europe, Germany's DAX trades higher by 81.37 pts or +0.57% at 14442.77, FTSE 100 higher by 20.02 pts or +0.27% at 7535.36, CAC 40 up 30.97 pts or +0.46% at 6704.62 and Euro Stoxx 50 up 20.03 pts or +0.51% at 3957.05.
• Dow Jones mini up 43 pts or +0.13% at 33898, S&P 500 mini up 6.75 pts or +0.17% at 3968.5, NASDAQ mini up 27.75 pts or +0.24% at 11552.5.

COMMODITIES: Recent WTI Futures Gains Corrective, Trend Conditions Still Bearish

Trend conditions in WTI futures remain bearish and recent gains are considered corrective. Monday’s move lower resulted in a break of the bear trigger at $74.96, Sep 28 low. This confirms a resumption of the downtrend and has opened $73.38, a Fibonacci projection and the $70.00 psychological handle. Initial resistance is at $79.90, last Friday’s high. Short-term trend conditions in Gold remain bullish. The yellow metal recently breached $1729.5, the Oct 4 high. This has strengthened a bullish theme and signals scope for $1800.0 and a key resistance at $1807.9, the Aug 10 high. Moving average studies are in a bull mode position. The bull trigger is at $1786.5, the Nov 15 high. Initial firm support is seen at $1702.3, the Nov 9 low. First support to watch is at the 20-day EMA that intersects at $1732.2.

• WTI Crude up $0.51 or +0.65% at $78.61
• Natural Gas down $0.06 or -0.76% at $7.175
• Gold spot up $5.46 or +0.31% at $1755.69
• Copper up $0.25 or +0.07% at $363.95
• Silver up $0.08 or +0.39% at $21.3425
• Platinum up $6.69 or +0.67% at $1011.8