MNI US OPEN - China Restrictions Could Be Rolled Back As Soon As January

NEWS

CHINA (MNI): COVID Management Could be Downgraded to Category B as soon as January

MNI (London) - Reuters reports that China could downgrade COVID-19 management to Category B, from Category A as soon as January. 'Category B' management would mark a downgrade from the current level of management (Category A) which is infitting with measures surrounding highly infectious diseases such as bubonic plague and cholera. This isn't a new concept and had been floated by domestic press, but some more clarity on timing here.

CHINA (MNI): Shanghai To Remove COVID Testing Requirement From Some Public Venues

MNI (London) - Bloomberg reporting that from Tuesday, authorities in the city of Shanghai are scrapping requirements COVID-19 testing are more public venues, continuing the trend of a loosening of restrictions around the virus. Release from Shanghai authorities also confirms that the city, "...will retain regular nucleic acid testing sites for free testing services, but yellow health codes will not be issued to those who have no nucleic acid testing records within 7 days."

NORTH KOREA (MNI): N. Korea Fires Artillery Rounds into Inter-Korean Maritime Buffer Zones

North Korea fired shells into the maritime buffer zones established in the East and West Seat based on the 9/19 inter-Korean military accord, Yonhap News Agency reports citing South Korea's Joint Chiefs of Staff.

RIKSBANK (MNI): Minutes: Floden: "May Be Appropriate" to Stay on Hold at Next Meeting

"The forecast proposal in the draft report now indicates that the policy rate also needs to be raised at our next monetary policy meeting, in February next year, most probably by 0.25 percentage points. This is a forecast that I support, but I have pointed to a number of factors that indicate that monetary policy is beginning to have an effect and that therefore indicate that inflation may fall back towards the target without us having to raise the rate much more after today's increase.

OIL (MNI): EU Oil Ban on Russian Seaborne Crude Begins

Coinciding with the G7 oil price cap today is Europe’s long-awaited ban on Russian oil imports. EU countries will not be able to import Russian crude oil by ship, with the exception of Bulgaria, which has been given longer to comply. The ban is expected to result in a global reshuffling of crude flows as Russia targets further flows towards Asia, its key outlet since it has been hit by western sanctions this year.

AUSTRALIA (MNI): MNI RBA Preview - December 2022: 25bp Hike, Watch Forward Guidance

The RBA is widely expected to hike rates another 25bp at its December 6 meeting bringing the total tightening for the year to 300bp and the cash rate to 3.1%. This would be around the Board's estimate of neutral.

DATA

EUROZONE NOV SERVICES PMI 48.5 (FLSH 48.6); OCT 48.6 (MNI)
EUROZONE OCT RETAIL SALES -1.8% M/M, -2.7% Y/Y (MNI)

UK NOV SERVICES PMI 48.8 (= FLSH); OCT 48.8 (MNI)

GERMANY NOV SERVICES PMI 46.1 (FLSH 46.4); OCT 46.5 (MNI)

FRANCE NOV SERVICES PMI 49.3 (FLSH 49.4); OCT 51.7 (MNI)

ITALY NOV SERVICES PMI 49.5 (FCST 47.5); OCT 46.4 (MNI)

SPAIN NOV SERVICES PMI 51.2 (FCST 50.5); OCT 49.7 (MNI)

FX SUMMARY: China Reports Help Underpin Risk Sentiment

• Currency markets have adopted a generally risk-on tone, with focus on the growing possibility that Chinese authorities could roll back COVID restrictions at a faster pace than previously expected.
• Reports suggest COVID-19 management in China could be downgraded to Category B as soon as January. This would mark a downgrade from the current level of management (Category A) which is infitting with measures surrounding highly infectious diseases such as bubonic plague and cholera. This isn't a new concept and had been floated by domestic press, but some more clarity on timing has helped support risk.
• JPY is comfortably the poorest performer in G10, with the greenback similarly weak. China remains the driver here, with further evidence emerging of a rollback in COVID restrictions and a possible pivot in policy in the near future.
• Price action has put USD/CNH comfortably below 7.00 to hit 6.9373 - the lowest since mid-Sept - with the likes of iron ore, local equities and AUD also higher to reinforce the risk-on.
• AUDJPY has bounced well off the Friday low, and now faces 92.242 as near-term resistance ahead of the 200-dma at 92.9118.
• Focus turns to the ISM Services Index for November, seen slipping to 53.3 from 54.4 previously. Final durable goods orders number also cross. ECB's Wunsch is the sole speaker on the docket. The Fed have now entered their pre-decision media blackout period.

BOND SUMMARY: Looking Ahead to ISM Services

• Treasuries are lower this morning, having fallen in early Asian trading as local market participants reacted to Friday's US labour market data. Bunds started the morning moving lower (surpassing Friday's low) but have since changed direction and are now a little higher on the day. Gilts have seen the biggest moves of the day, with 10-year yields around 6bp lower as gilt futures have moved back to a little above Thursday's closing level (ignoring the volatility seen on Friday around payrolls).
• Looking ahead, the data highlight will be the US ISM services print at 10:00ET / 15:00GMT. We also have US factory orders and the final print of durable goods. This morning we have seen higher-than-expected Spanish and Italian service PMI prints while other final PMI prints have largely been in line with the flash estimates.
• TY1 futures are down -0-7+ today at 114-13+ with 10y UST yields up 2.6bp at 3.515% and 2y yields up 4.8bp at 4.321%.
• Bund futures are up 0.25 today at 142.14 with 10y Bund yields down -0.8bp at 1.843% and Schatz yields down -0.6bp at 2.045%.
• Gilt futures are up 0.80 today at 106.01 with 10y yields down -6.3bp at 3.085% and 2y yields down -5.4bp at 3.249%.

EQUITIES: Futures Conditions Remain Bullish After Trading To Cycle Highs Last Week

EUROSTOXX 50 futures trend conditions remain bullish and the contract traded to a fresh cycle high last Thursday. This maintains the uptrend that started in early October and confirms an extension of the price sequence of higher highs and higher lows. The recent break of 3810.00, Aug 17 high, also strengthens the case for bulls. Initial firm support is 3840, Nov 17 low. S&P E-Minis remain in an uptrend. Gains last week resulted in a break of resistance at 4050.75, the Nov 15 high. This confirms a resumption of the uptrend and marks an extension of the price sequence of higher highs and higher lows. Sights are on 4146.63, a Fibonacci retracement. On the downside, key short-term support has been defined at 3912.50, the Nov 17 low.

• Japan's NIKKEI closed higher by 42.5 pts or +0.15% at 27820.4 and the TOPIX ended 6.08 pts lower or -0.31% at 1947.9.
• Elsewhere, in China the SHANGHAI closed higher by 55.67 pts or +1.76% at 3211.814 and the HANG SENG ended 842.94 pts higher or +4.51% at 19518.29.
• Across Europe, Germany's DAX trades lower by 52.16 pts or -0.36% at 14503.25, FTSE 100 higher by 15.05 pts or +0.2% at 7568.41, CAC 40 down 11.63 pts or -0.17% at 6735.52 and Euro Stoxx 50 down 6.11 pts or -0.15% at 3976.23.
• Dow Jones mini down 104 pts or -0.3% at 34371, S&P 500 mini down 14.25 pts or -0.35% at 4063.75, NASDAQ mini down 29.5 pts or -0.25% at 11989.

COMMODITIES: Clear Break of 1807.9 Aug 10 High to Affirm Bullish Gold Trend

Trend conditions in WTI futures remain bearish and last week’s gains are considered corrective. The move lower on Nov 28 resulted in a break of $74.96, Sep 28 low. This confirmed a resumption of the downtrend, opening $73.38, a Fibonacci projection and the $70.00 psychological handle. MA studies are in a bear mode condition, highlighting the current trend direction. Resistance is at $83.66, the 50-day EMA. Short-term trend conditions in Gold remain bullish and last week’s gains reinforce this condition. Last Thursday’s rally resulted in a break of $1786.5, the Nov 15 high and a bull trigger, confirming a resumption of the uptrend. $1800.0 has also been cleared and sights are on resistance at $1807.9, the Aug 10 high (pierced earlier today). A clear break would be bullish. On the downside, key trend support has been defined at $1729.0, the Nov 23 low.

• WTI Crude up $1.38 or +1.73% at $81.08
• Natural Gas down $0.29 or -4.57% at $6.016
• Gold spot down $1 or -0.06% at $1797.6
• Copper up $0.25 or +0.06% at $387.25
• Silver down $0.09 or -0.37% at $23.0127
• Platinum up $2.94 or +0.29% at $1021.8