MNI US OPEN - Bonds Bid, Dollar Dented as Fed Terminal Pricing Recedes

NEWS

G20 (MNI): Most G20 Leaders Agree to Condemn Russia for War in Ukraine: BBG

Most of the G20 leaders gathered for a summit in Bali will condemn Russia's invasion of Ukraine, Bloomberg reports citing a draft joint statement from the meeting. The document reportedly says that "most members strongly condemned the war in Ukraine and stressed it is causing immense human suffering and exacerbating existing fragilities in the global economy - constraining growth, increasing inflation, disrupting supply chains, heightening energy and food insecurity, and elevating financial stability risks."

OIL (BBG): Oil Markets Face Strain with Stockpiles at 18-Year Low, IEA Says

Oil inventories in developed nations have sunk to the lowest since 2004, leaving global markets vulnerable as sanctions on Russian exports take effect, according to the International Energy Agency. Supplies of diesel fuel, used in trucks, are “exceptionally tight” and prices may need to climb further in order to rein in demand, the Paris-based agency said in its monthly report.

JAPAN/SOUTH KOREA (MNI): Japan, S. Korea Struggle to Resolve Historical Disputes

While Japan and South Korea have tightened their security cooperation amid the shared North Korea threat, they continue to struggle to make progress on bilateral disputes surrounding wartime forced labour, Jiji reports.

CHINA (MNI): Trade Lifts Use of Yuan as Reserve Currency

The growth of China’s yuan as a reserve currency is being driven by its use in a developing industrial chain based on cheap Russian raw materials and southeast Asian labour, as the yuan will not be completely convertible for the foreseeable future, one of the country’s most prominent experts on the subject told MNI.

CHINA (MNI): China Seeks Stable Relations with US - Wang

The US and China should seek to understand each other's domestic and foreign policies, strategic intentions, and establish a tone of dialogue rather than confrontation, China's Minister of Foreign Affairs Wang Yi said at a press conference, where he outlined details of the meeting between President Xi Jinping and President Joe Biden in Bali.

CHINA (MNI): China to Boost Support for Economy Amid Covid - NBS

China will strengthen policy support to bolster domestic demand and stabilise employment as growth is pressured by the global slowdown and measures to control renewed Covid outbreaks, said National Bureau of Statistics spokesman Fu Linghui in a briefing on Tuesday.

AUSTRALIA (MNI): Further Rate Hikes Ahead, Expect 25bp As Consistency Important To RBA

The RBA meeting minutes contained the same key points that were in the statement and speeches by Governor Lowe and Deputy Governor Bullock since November 1. It does give some colour as to the discussion ahead of the 25bp move. Again, the RBA states that it expects to increase rates further to balance supply and demand and to return inflation to target but that it is on a narrow, uncertain path.

DATA

EUROZONE 2022 Q3 2ND FLASH +0.2% Q/Q; +2.1% Y/Y (= FLASH) (MNI)

GERMANY NOV ZEW SURVEY EXPECTATIONS -36.7 (FCST -51.0); OCT -59.2 (MNI)
GERMANY NOV ZEW CURRENT CONDITIONS -64.5 (MNI)

FRANCE OCT CPI +1% M/M, +6.2% Y/Y (MNI)
FRANCE OCT HICP +1.2% M/M, +7.1% Y/Y (MNI)

SPAIN OCT HICP +0.1% M/M, +7.3% Y/Y (MNI)

SWEDEN OCT CPIF +9.3% Y/Y (MNI)

UK (MNI): Labour Market Strong, But Signs Of Weakening

• UK SEP ILO UNEMPLOYMENT RATE +3.6%
• UK OCT CLAIMANT RATE +3.9%
• UK SEP AVE WEEKLY EARNINGS +6% YY
• UK OCTOBER PAYROLLS +74,000 to 29.8 MILLION - ONS/HMRC

UK unemployment rose in the three months to September, the Office for National Statistics said Tuesday, with the ILO rate rising to 3.6% from 3.5% in August. The increase was driven in part by participation rates, but also by a single month increase to 3.8% in September, a spokesperson for the stats office said.

CHINA OCT UNEMPLOYMENT RATE +5.5% VS SEP +5.5% (MNI)
CHINA OCT INDUSTRIAL OUTPUT +5.0% Y/Y VS MEDIAN +5.2% Y/Y (MNI)
CHINA JAN-OCT INDUSTRIAL OUTPUT +4.0% Y/Y VS JAN-SEP +3.9% Y/Y (MNI)
CHINA OCT RETAIL SALES -0.5% Y/Y VS MEDIAN +0.7% Y/Y (MNI)

JAPAN Q3 REAL GDP -0.3% Q/Q; MNI MEDIAN +0.3% (MNI)
JAPAN Q3 REAL GDP -1.2% ANNUALIZED; MNI MEDIAN +1.2% (MNI)
JAPAN Q3 CAPEX +1.5% Q/Q; +0.2 PP CONTRIBUTION (MNI)
JAPAN Q3 PRIVATE CONSUMPTION +0.3% Q/Q; +0.1 PP CONTRIBUTION (MNI)

FX SUMMARY: EUR/USD Nearing 200-dma Last Crossed in 2021

• The greenback is fading early Tuesday, prompting EUR/USD to print a fourth session of higher highs and narrow the gap with the next key upside level at 1.0429 - the 200-dma. The pair hasn't traded above this level consistently since May 2021.
• Markets continue to take recent Fed communications into balance, with WSJ's Nick Timiraos citing Brainard in writing this morning that the Fed are likely to slow their tightening pace in December - the so-called 'policy pivot' that markets have been on the lookout for over the past few months.
• As a result, growth proxies are outperforming early Tuesday, with AUD and NZD among the session's best performers. CHF and JPY are trading more moderately given the upside in US equity futures, with the e-mini S&P higher by 0.7% at typing.
• US Empire Manufacturing and PPI for October are the data highlights Tuesday, with Canadian manufacturing sales also due. The Fed speaker slate picks up, with commentary from Fed's Harker and Cook on the docket.

BOND SUMMARY: Tsy Futures Eye Post-CPI Highs

Global core FI is stronger across geographies and curves early Tuesday, with the USD under a little pressure, and terminal Fed funds expectations pulling back a little.

• Against that backdrop, US Tsy futures are nearing the post-CPI, pre-Veterans Day highs (112-19 the level to watch for TYZ2).
• Bunds and Gilts are strnger, but periphery EGBs are outperforming in Europe (10Y BTP spreads to Bunds are testing 200bp again).
• While data hasn't hugely moved markets, there has been plenty: UK wage data impressed; CPIs in the Eurozone were finals, EU GDP was in-line, and German ZEW improved strongly.
• Main focus for the rest of the session is on US PPI, which while unlikely to have much impact, will be eyed for further pipeline inflation pressures. Empire State Manufacturing also worth watching.
• ECB speakers later include Holzmann and Elderson; Fed speakers: Harker, Cook, and Barr.

Latest levels:

• Dec 10-Yr US futures (TY) up 12/32 at 112-16 (L: 112-00.5 / H: 112-16.5)
• Dec Bund futures (RX) up 66 ticks at 139.2 (L: 138.38 / H: 139.3)
• Dec Gilt futures (G) up 12 ticks at 104.44 (L: 104.04 / H: 104.73)
• Italy / German 10-Yr spread 4.3bps tighter at 199.1bps

EQUITIES: Eurostoxx Futures Target March Highs

A bullish EUROSTOXX 50 futures outlook remains intact following last week’s strong gains and the contract is trading at its recent highs. Price has cleared resistance at 3810.00, Aug 17 high and an important bull trigger. Moving average studies are in a bull mode set-up and this highlights the current positive market sentiment. The focus is on 3944.00, the Mar 29 high on the continuation chart. Initial firm support lies at Thursday's 3697.00 low. S&P E-Minis remains bullish and the contract is holding on to its recent gains. Price rallied sharply higher last week and cleared resistance at 3928.00, Nov 1 high. The break strengthens a short-term bullish condition and price has established a sequence of higher highs and higher lows on the daily scale. This opens 4023.44 next, a Fibonacci retracement. On the downside, key short-term support has been defined at 3704.25, the Nov 3 low.

• Japan's NIKKEI closed higher by 26.7 pts or +0.1% at 27990.17 and the TOPIX ended 7.32 pts higher or +0.37% at 1964.22.
• Elsewhere, in China the SHANGHAI closed higher by 50.677 pts or +1.64% at 3134.078 and the HANG SENG ended 723.41 pts higher or +4.11% at 18343.12.
• Across Europe, Germany's DAX trades higher by 10.27 pts or +0.07% at 14323.35, FTSE 100 lower by 0.99 pts or -0.01% at 7383.83, CAC 40 up 20.35 pts or +0.31% at 6629.52 and Euro Stoxx 50 up 12.63 pts or +0.32% at 3900.14.
• Dow Jones mini up 148 pts or +0.44% at 33707, S&P 500 mini up 23 pts or +0.58% at 3989, NASDAQ mini up 101.25 pts or +0.86% at 11835.75.

COMMODITIES: Gold Prints Seventh Consecutive Higher High

The pullback in WTI futures early last week continues to highlight a bearish threat. A bearish shooting star candle on Nov 7 was followed by a bearish engulfing candle the following day - a strong bear signal. Yesterday’s move lower reinforces this theme. A continuation lower would open $81.30, Oct 18 low. On the upside, key short-term resistance is at $93.74, Nov 7 high. Gold rallied sharply higher last week and remains bullish this week. Last week’s gains resulted in the break of a number of important resistance points. The yellow metal has cleared $1729.5, the Oct 4 high. This strengthens the current bullish theme and paves the way for an extension towards the $1800.0 handle and resistance at $1807.9, the Aug 10 high. On the downside, initial firm support is seen at $1702.3, the Nov 9 low.

• WTI Crude down $0.58 or -0.68% at $85.27
• Natural Gas up $0.13 or +2.12% at $6.057
• Gold spot up $4.62 or +0.26% at $1775.61
• Copper up $3.2 or +0.84% at $385.95
• Silver up $0.05 or +0.25% at $21.9951
• Platinum up $6.52 or +0.64% at $1028.33