NEWS
US/CHINA (BBG): Biden to Meet With Xi Jinping at 1900GMT/1400ET Wednesday: White House
US President Joe Biden will hold a bilateral meeting with China President Xi Jinping at 1900GMT/1400ET, according to the White House. Biden will hold a press conference after the meeting at 0015GMT/1915ET.
US (BBG): House Approves Spending Plan, Easing Risk of Government Shutdown
US House lawmakers overcame partisan animosity Tuesday to pass a temporary government funding bill that greatly lowers the risk of a shutdown even as it delays fights over Ukraine aid, border policies and deep cuts to federal programs. Democrats bailed out newly elected Speaker Mike Johnson, a Republican whose plan drew opposition from hardliners in his party because it doesn’t cut government spending or change border policies.
US/CHINA (WaPo): US And China Agree to Restart Climate Talks Amid Hopes of Wider Thaw
The United States and China, the world's two largest greenhouse gas emitters, have agreed to restart formal climate change talks that had been on hold for more than a year, in a breakthrough that could inject momentum into international climate negotiations that begin later this month in Dubai. The two countries said they would also step up coordination on curbing methane, a potent greenhouse gas, and work together to speed up a transition away from fossil fuels to renewable energy.
US/CHINA (BBG): US Federal Pension Fund to Exclude Hong Kong Investments
The main US federal government pension will exclude investments in Hong Kong, in addition to mainland China, from its $68 billion international fund, amid rising tensions between the world’s two largest economies. The $771 billion Federal Retirement Thrift Investment Board said it will switch the benchmark index for its international fund, effectively ridding exposure to Hong Kong, according to a statement on Nov. 14. It already avoids investments on the mainland.
ECB (BBG): ECB’s Centeno Sees ‘Anxiety’ Over Soft Landing in Euro Area
European Central Bank Governing Council member Mario Centeno said there are concerns over whether the euro-area economy will have a soft landing following a lack of growth in recent quarters. The ECB’s rate aggression has weighed on the bloc, which contracted in the third quarter and is expected to stagnate in the final three months of the year. Former ECB President Mario Draghi said last week that the euro area is “almost sure” to experience a recession by the end of 2023.
ECB (BBG): ECB Sends Stark Warning to Bank Executives: ESG Regulation
The European Central Bank wants finance executives to know they’ll be held to account for the industry’s continued failure to adequately manage climate and environmental risks. According to Frank Elderson, executive board member of the ECB, the ESG risk building in some bank books “increasingly calls into question the fitness and propriety” of the executives in charge.
EU (MNI): Brussels Cuts Growth Forecast; Inflation Seen Lower
The European Commission has revised growth down in its autumn forecasts but sees a gradual recovery in economic activity going forward, with inflation now seen modestly lower across 2025 compared to the previous projections. The latest forecasts, published Wednesday, put growth in 2023 at 0.6% for both the EU and euro area, 0.2 percentage points lower than the summer forecast.In the euro area, GDP growth is projected to be slightly lower, at 1.2% in 2024. In 2025 euro area growth is forecast to strengthen to 1.7% as inflation and the impact of higher rates subsides.
EU (MNI): GAC Gets Underway With Article 7 Procedures on Agenda
The General Affairs Council meeting of EU Affairs ministers is underway in Brussels with a number of significant issues on the agenda. These include state of Article 7(1) TEU infringement proceedings against Hungary and Poland, preparations for the Dec EUCO summit, and the Commission's 2024 work programme.
UK (MNI): Supreme Court Rules Against Gov't on Rwanda Deportation Case, Big Blow to PM
The UK Supreme Court has ruled against the gov't in its efforts to begin deportations of failed asylum seekers to Rwanda. While not market moving or relevant in itself, it deals a blow to the gov't and PM Rishi Sunak who is already facing a nascent rebellion on the right of his governing Conservative Party. The gov't argues that the deportation of failed asylum seekers to Rwanda is crucial for deterring small boat immigration. However, the Supreme Court's ruling puts paid to that, and will force either the jettisoning of the plan or a significant reworking of the legislation.
UK (PA): Sunak Says 'Fiscal Discipline' Will Remain Despite Meeting Inflation Goal
Rishi Sunak has indicated that further "hard decisions" on the economy and public finances would be needed despite claiming success in meeting his pledge to halve inflation. Consumer Prices Index inflation was 4.6% in October, down from 6.7% in September, according to data from the Office for National Statistics (ONS).The Prime Minister made halving inflation his top priority for 2023 in a major speech in January, when the rate was 10.7%.
GERMANY (MNI): German Court Rules Against EUR60bln Fund Transfer
In a blow to Olaf Scholz’s “traffic light” coalition government, Germany’s Constitutional Court on Wednesday struck down an attempt to transfer EUR 60 billion borrowed in response to the Covid-19 pandemic to a special fund seen as key to transforming the country’s economy. The decision to reallocate unused funds from the 2021 fiscal year to the Energy and Climate Fund, later renamed the Climate and Transformation Fund allowed policymakers to circumvent Germany’s so-called debt brake, which sets strict limits on government borrowing.
CHINA (BBG): China Property Slump Deepens as Beijing Mulls More Stimulus
The contraction in China’s home sales and property investment both deepened in October, a steeper downturn that may push the government to do more to shore up the struggling housing market. Investment in property development fell 9.3% in the first 10 months of 2023, compared with a 9.1% decline in January-September, data published Wednesday by the National Bureau of Statistics showed. Economists surveyed by Bloomberg had forecast it stabilizing at a drop of 9.1%.
CHINA (MNI): Economy Recovering But Challenges Remain - NBS
MNI (Beijing) China’s economy will continue its upward recovery into 2024, but external uncertainties and insufficient domestic demand will challenge policymakers, said Liu Aihua, spokesperson for the National Bureau of Statistics. Speaking at a press conference on Wednesday, Liu noted Q4 economic data will benefit from last year’s low base effect and policymakers will need more effort to sustain the economic recovery in future.
JAPAN (MNI): Japan Govt Official Warns of Outlook for Consumption
Japanese private consumption rebounded in Q3 from its second quarter drop, but consumption lacks strong momentum, while the private consumption environment remained weak, a senior official at the Cabinet Office warned on Wednesday. “Real wages remained in negative territory. The key point for private consumption is whether wages rise beyond price rises. In addition, consumer sentiment is marking time now on the back of high prices, although the sentiment has risen around mid-this year,” the official told reporters.
RBA (MNI): RBA Higher-For-Longer Shift Follows CPI Surprise - Ex Staff
The Reserve Bank of Australia has pivoted towards indicating that rates will stay higher for longer in order to bring inflation back to its 2-3% target after a period of what some ex-staffers described to MNI as confused communications as it calibrated policy to preserve gains in the labour market. Third-quarter inflation data caught the RBA by surprise, said Sean Langcake, head of macroeconomic forecasting at BIS Oxford Economics and a former RBA economist.
CORPORATE (BBG): Tencent Profit Beats Estimates in Defiance of China Downturn
Tencent Holdings Ltd.’s earnings beat estimates in another sign that Chinese consumers remain willing to spend on games and entertainment during a nationwide downturn. The WeChat operator reported growth across divisions from gaming and advertising to fintech, driving a 10% gain in revenue to 154.6 billion yuan ($21.4 billion) for the September quarter. Net income slid 9%, reflecting ramped-up spending on content, but still exceeded expectations at 36.2 billion yuan. Shares in Prosus NV, a proxy for Tencent as its largest shareholder, climbed more than 4.8% in Amsterdam.
DATA
UK DATA (MNI): UK Inflation in Rapid October Retreat
- UK OCTOBER INFLATION FALLS TO 4.7% Y/Y
- UK OCTOBER CORE INFLATION 5.7% Y/Y
- UK OCT OUTPUT PPI +0.1% M/M, -0.6% Y/Y
- UK OCT INPUT PPI +0.4% M/M, -2.6% Y/Y
UK inflation slowed markedly in October, the Office for National Statistics said Wednesday, with headline inflation dropping to 4.6% y/y, down from 6.7% in September. Core inflation also slowed, but at a gentler pace, dipping to 5.7% y/y. It was the biggest fall in annual headline CPI from one month to the next since April 1992 and the first time below 5% since October 2021. “Inflation fell substantially on the month as last year’s steep rise in energy costs has been followed by a small reduction in the energy price cap this year. Food prices were little changed on the month, after rising this time last year, while hotel prices fell, both helping to push inflation to its lowest rate for two years," ONS Chief Economist Grant Fitzner said.
EUROZONE SEP IP -1.1% M/M, -6.9% Y/Y (MNI)
FRANCE OCT HICP +0.2% M/M, +4.5% Y/Y (MNI)
FRANCE OCT CPI +0.1% M/M, +4% Y/Y (MNI)
CHINA DATA (MNI): China October Retail Sales Jump to Five-Month High
- CHINA OCT RETAIL SALES +7.6% Y/Y VS MEDIAN +7.0% Y/Y
- CHINA JAN-OCT RETAIL SALES +6.9% Y/Y VS JAN-SEP +6.8% Y/Y
- CHINA OCT INDUSTRIAL OUTPUT +4.6% Y/Y VS MEDIAN +4.5% Y/Y
- CHINA YTD FIXED-ASSET INVESTMENT +2.9% Y/Y VS MEDIAN +3.1% Y/Y
- CHINA OCT UNEMPLOYMENT RATE +5.0% VS SEP +5.0%
MNI (Beijing) China's consumption jumped more than expected to a five-month high in October amid a holiday boom, despite the ailing real-estate sector weighing on investment, data released by the National Bureau of Statistics on Wednesday showed. Retail sales increased by 7.6% y/y, outperforming expectations for 7.0% and accelerating from the previous 5.5%. Industrial production rose 4.6% y/y in October, up from September's 4.5% and beating the 4.5% forecast.
JAPAN DATA (MNI): Japan Q3 GDP Posts 1st Contraction in 3 Quarters
- JAPAN Q3 REAL GDP -0.5% Q/Q; MNI MEDIAN -0.1%
- JAPAN Q3 REAL GDP -2.1% ANNUALIZED; MNI MEDIAN -0.3%
- JAPAN Q3 CAPEX -0.6% Q/Q; -0.1 PP CONTRIBUTION
- JAPAN Q3 CONSUMPTION -0.0% Q/Q; -0.0 PP CONTRIBUTION
Japan's economy for the third quarter posted the first contraction in three quarters, falling 0.5% q/q or 2.1% annualised, in the wake of weak private consumption and capital investment, preliminary GDP data released by the Cabinet Office showed on Wednesday. The drop followed a Q2's revised 1.1% q/q rise, or an annualised revised 4.5%. The Q3 growth was weaker than the MNI median forecast that pointed to a drop of 0.1% q/q, or an annualised -0.3%.
AUSTRALIA DATA (MNI): Aussie Wages Grow in Q3
The Wage Price Index (WPI) rose 1.3% in the September quarter, and 4.0% y/y, the highest quarterly growth in the 26-year history of the index, according to seasonally adjusted data released today by the Australian Bureau of Statistics. “A combination of factors led to widespread increases in average hourly wages this quarter,” said Michelle Marquardt, head of prices statistics at the ABS. “In the private sector, higher growth was mainly driven by the Fair Work Commission’s annual wage review decision, the application of the Aged Care Work Value case, labour market pressure, and CPI rises being factored into wage and salary review decisions.
NEW ZEALAND DATA (MNI): Household Inflation Expectations Moderate, Good News for RBNZ
One-year household inflation expectations eased further in Q4, just as those for businesses did. The RBNZ said in a research report this year that the mean 1-year measure from households has the closest relationship with inflation. Simple correlations are over 80% with both headline and core. It moderated to 5.5% from 6% whereas the median was steady at 5%. The mean suggests that disinflation should continue in Q4 which is good news for the RBNZ. The next meeting is on November 29 and will include updated forecasts.
FOREX: CPI Rally Hits Reverse, GBP Softer as Inflation Misses
- Markets are in fade mode after yesterday's sharp US CPI-inspired EUR/USD rally. The pair is lower, putting the EUR softer against all others in G10, but is still holding ~150 pips of the Tuesday recovery toward 1.0900. This morning's fade off Tuesday's 1.0887 has helped alleviate pressure on the RSI, which was approaching technically overbought conditions through this close. This may allow for a short period of consolidation in the pair before any recovery resumes. 1.0862 and 1.0960 mark the key levels of resistance ahead.
- NZD is the best performer across G10, extending Tuesday's post CPI outperformance and putting NZD/USD comfortably north of the 100-dma. Strength in the pair faces its next test at 0.6056, the mid-October high and bull trigger. A solid rally in Chinese and Hong Kong equities (Hang Seng Index closed higher by 3.9%) has helped contribute to the risk-on backdrop, with more solid industrial metals prices also contributing.
- Lastly, GBP is seen soft on the back of a lower-than-expected CPI print for October. Not only did the headline miss consensus by 0.1ppts. but services inflation was more muted, allowing for markets to solidify expectations of rate cuts from the Bank of England by the midpoint of 2024. This has dragged GBP/JPY off yesterday's cycle high, making 187.01 the level to watch.
- US PPI data takes focus later today, with market looking for any further disinflationary signals after Tuesday's softer-than-expected CPI print. Retail sales for October also cross, with markets expecting the headline to drop to -0.3%, from +0.7% prior. Fed's Barr, Barkin and Jefferson are set to speak, although none appear to be addressing monetary policy directly. BoE's Haskel makes an appearance after the UK market close.
- Further out, the meeting in San Francisco between US President Biden and his Chinese counterpart Xi is set to culminate in a press conference at 2315GMT/1815ET.
EGBS: Off Session Highs But Remain Firmer
Core EGBs have drifted away from session highs but still sit a touch firmer in Wednesday trade.
- Bund futures are up 0.15 today at 131.03, with clustered resistance seen at 131.24/131.33. A modest bid seen after Germany's top court ruled against a key government fiscal policy was faded. 10Y Bund yields are down -0.9bp at 2.590%, around 2bps from the Sep 8 low of 2.569%. Schatz yields are down -0.8bp at 2.976%, while the impending 30Y supply will be weighing at the long end.
- Slightly lower-than-expected UK CPI did not discernibly spillover into EGBs and today's local data were not market movers. Comments from ECB's Centeno were in line with his dovish leanings, not adding much new to the policy debate. Additionally, the EC has revised down its forecasts for EU GDP growth in its latest forecast round.
- Periphery spreads are tighter to Bunds with Greece outperforming. The BTP/Bund spread briefly touched below the 180bps handle for the first time since September, currently trading 0.3bps tighter at 180.2bps.
- The remaining local calendar is light, with no scheduled ECB-speakers or data of note.
GILTS: Futures Back Below Unchanged After CPI Rally, Curve Steeper With DMO Syndication Eyed
Gilt futures fade further from best levels, after initial technical resistance levels were not breached across the core FI sphere, despite a softer than expected round of UK CPI data.
- The initial domestic UK CPI-induced richening/dovish repricing has been reversed across most of the UK FI space.
- That leaves the contract -12 at 96.63, 5 ticks off pullback lows and ~50 ticks shy of highs.
- Cash gilt yields are little changed to 3.5bp higher on the day, steepening, with 2s10s and 5s30s off their respective multi-week flats.
- SONIA futures are 1.5bp firmer to 3.0bp softer through the blues, with a light twist steepening bias now seen on the strip.
- BoE-dated OIS is back to little changed on the day. The strip prices a circa 80% chance of a 25bp cut through the end of the June ’24 MPC, after such an outcome was fully priced post-CPI. A full 25bp cut is more than fully discounted come the end of the August ’24 gathering. ~73bp of cuts are priced through ’24 on the whole.
- Comments from BoE’s Haskel headline the remainder of the domestic data docket today (due at 18:00 London, although the topic of investing in Britain may limit the scope for pertinent comments), while the syndication of the new 20-year 4.75% Oct-43 line is ongoing.
- The presence of that supply will be helping the steepening /keeping outright rallies in check.
EQUITIES: E-Mini S&P Extends Post-CPI Gains
A short-term bull cycle in Eurostoxx 50 futures remains intact and the contract traded higher Tuesday. Price has recently cleared resistance at both the 20- and 50-day EMAs - a bullish development. Note that yesterday’s gains resulted in a breach of resistance at 4256.00, the Oct 12 high. The focus is on 4329.80, a Fibonacci retracement. Initial support to watch is at 4176.00, the 20-day EMA. S&P e-minis maintain a firmer tone and the contract traded sharply higher yesterday, extending the current bull cycle. Resistance at 4422.00, a trendline drawn from the Jul 27 high, has been cleared. This reinforces bullish conditions and signals scope for gains towards 4552.38, a Fibonacci retracement. On the downside, initial firm support is seen at 4357.23, the 20-day EMA.
- Japan's NIKKEI closed higher by 823.77 pts or +2.52% at 33519.7 and the TOPIX ended 27.93 pts higher or +1.19% at 2373.22.
- Elsewhere, in China the SHANGHAI closed higher by 16.765 pts or +0.55% at 3072.835 and the HANG SENG ended 682.14 pts higher or +3.92% at 18079.
- Across Europe, Germany's DAX trades higher by 75.8 pts or +0.49% at 15690.99, FTSE 100 higher by 69.18 pts or +0.93% at 7509.8, CAC 40 up 44.15 pts or +0.61% at 7229.83 and Euro Stoxx 50 up 25.04 pts or +0.58% at 4316.76.
- Dow Jones mini up 58 pts or +0.17% at 34947, S&P 500 mini up 10.5 pts or +0.23% at 4521.5, NASDAQ mini up 59 pts or +0.37% at 15938.75.
COMMODITIES: Rally in Gold Tuesday Strengthens Bullish Trend Set-Up
A bearish theme in WTI futures remains in play following last week’s sharp sell-off and recent gains are considered corrective. The break on Nov 7 of support at $80.20, the Oct 6 low, highlights a stronger reversal and a continuation lower would pave the way for a move towards $74.26, the 76.4% retracement of the May 4 - Sep 28 bull run. Initial firm resistance has been defined at $83.60, the Nov 3 high. The recent pullback in Gold appears to be a correction and the trend remains bullish. Moving average studies are in a bull-mode set-up, highlighting a rising trend. A stronger resumption of gains would open $2022.20, May 15 high. The bull trigger is at $2009.4, the Oct 27 high. Note that support at the 50-day EMA, at $1939.4, has been pierced. A clear break of this average would undermine the bullish theme and expose $1908.3, Oct 16 low.
- WTI Crude down $0.36 or -0.46% at $77.76
- Natural Gas up $0.03 or +1.03% at $3.139
- Gold spot up $6.81 or +0.35% at $1971.05
- Copper up $1.1 or +0.3% at $369.1
- Silver up $0.22 or +0.96% at $23.3075
- Platinum up $2.53 or +0.28% at $892.06
| Date | GMT/Local | Impact | Flag | Country | Event |
| 15/11/2023 | 1000/1100 | ** |  | EU | Industrial Production |
| 15/11/2023 | 1000/1100 | * | | EU | Trade Balance |
| 15/11/2023 | 1000/1100 | | EU | European Commission Autumn Econ Forecasts | |
| 15/11/2023 | 1200/0700 | ** |  | US | MBA Weekly Applications Index |
| 15/11/2023 | 1330/0830 | ** |  | CA | Monthly Survey of Manufacturing |
| 15/11/2023 | 1330/0830 | ** | | CA | Wholesale Trade |
| 15/11/2023 | 1330/0830 | *** | | US | Retail Sales |
| 15/11/2023 | 1330/0830 | *** | | US | PPI |
| 15/11/2023 | 1330/0830 | ** | | US | Empire State Manufacturing Survey |
| 15/11/2023 | 1400/0900 | * | | CA | CREA Existing Home Sales |
| 15/11/2023 | 1430/0930 | | US | Fed Vice Chair Michael Barr | |
| 15/11/2023 | 1500/1000 | * | | US | Business Inventories |
| 15/11/2023 | 1530/1030 | ** | | US | DOE Weekly Crude Oil Stocks |
| 15/11/2023 | 1800/1800 |  | UK | BOE's Haskel speech at the Resolution foundation | |
| 15/11/2023 | 2030/1530 | | US | Richmond Fed's Tom Barkin | |
| 16/11/2023 | 0030/1130 | *** |  | AU | Labor Force Survey |
| 16/11/2023 | 1210/0710 | | US | Fed Vice Chair Michael Barr | |
| 16/11/2023 | 1315/0815 | ** | | CA | CMHC Housing Starts |
| 16/11/2023 | 1330/0830 | *** | | US | Jobless Claims |
| 16/11/2023 | 1330/0830 | ** | | US | WASDE Weekly Import/Export |
| 16/11/2023 | 1330/0830 | ** | | US | Import/Export Price Index |
| 16/11/2023 | 1330/0830 | ** | | US | Philadelphia Fed Manufacturing Index |
| 16/11/2023 | 1415/0915 | *** | | US | Industrial Production |
| 16/11/2023 | 1415/1515 | | EU | ECB's De Guindos participates in systemic risk board | |
| 16/11/2023 | 1425/0925 | | US | New York Fed's John Williams | |
| 16/11/2023 | 1430/0930 | | US | Cleveland Fed's Loretta Mester | |
| 16/11/2023 | 1500/1000 | ** | | US | NAHB Home Builder Index |
| 16/11/2023 | 1530/1030 | ** | | US | Natural Gas Stocks |
| 16/11/2023 | 1530/1030 | | US | Fed Governor Christopher Waller | |
| 16/11/2023 | 1535/1035 | | US | Fed Vice Chair Michael Barr | |
| 16/11/2023 | 1545/1545 | | UK | BOE's Ramsden remarks at the European Systemic Risk Board | |
| 16/11/2023 | 1600/1100 | ** | | US | Kansas City Fed Manufacturing Index |
| 16/11/2023 | 1700/1200 | | US | Fed Governor Lisa Cook | |
| 16/11/2023 | 2100/1600 | ** | | US | TICS |