MNI US OPEN - CPI Possibly Pivotal

NEWS

US (MNI): Can Cars Drive A Core CPI Slowdown?

Core CPI inflation is seen slowing slightly to 0.5% M/M in October after surprise persistence at 0.58% in Sept. The analyst survey is skewed slightly lower although the Cleveland Fed Nowcast implies upside risk.

US (MNI): Talk of Pivot ‘Entirely Premature’ - Fed's Kashkari

It’s far too soon for the Federal Reserve to contemplate the monetary policy “pivot” that markets have been yearning for because inflation is far too high while unemployment is at historic lows, Minneapolis Fed President Neel Kashkari said Wednesday. “Any talk of a pivot is entirely premature,” he said during a Q&A at the regional central bank he leads.

US (MNI): US CPI Rent Costs to Gain Momentum - Fed Economist

The boost to CPI inflation from housing is likely to accelerate further before reversing course even though the rental market from which such measures are computed has started to soften, Cleveland Fed economist Randal Verbrugge told MNI.

US (BBG): Biden Vows to Stand Firm with Xi as Breakthrough Remains Elusive

US President Joe Biden vowed to make no “fundamental concessions” in his first in-person summit with China’s Xi Jinping, reinforcing already low expectations for any major breakthrough in strained ties between the world’s two largest economies.

EU (MNI): ECB In Lending Ops Boost to Ease Collateral Stress

The European Central Bank has boosted its limit for securities lending to EUR250 billion from the previous EUR150 billion, with the change effective immediately. The move is precautionary and aimed at easing year-end collateral scarcity.

UKRAINE/RUSSIA (The Times): Russia’s Kherson ‘Withdrawal’ May Be A Trap, Kyiv Warns

Kyiv has warned that the withdrawal of Russian forces from Kherson could be a ruse designed to engage Ukrainian forces in urban combat. Military intelligence has warned that Moscow could be trying to lure the Ukrainian army into a trap and that Russian soldiers were dressing as civilians and taking up positions in private homes.

CHINA (BBG): China Stocks Slide as Covid Curbs Temper Reopening Hopes

Chinese stocks dropped as the nation increased Covid restrictions in some of its biggest cities, dampening hopes of a reopening that triggered a rally earlier this month. The market surge that began last week with wild rumors over China’s potential Covid Zero exit is fading as health officials stick to the stringent policy amid rising virus cases.

JAPAN (MNI): BOJ to Discuss Exit If 2% Target Sustained - Kuroda

Bank of Japan Governor Haruhiko Kuroda said on Thursday that policymakers will discuss an exit strategy from easy policy and communicate it to market participants if they see the achievement of 2% price target in a stable and sustainable manner accompanied with wage hikes. He said it was premature to concretely show how to proceed with an exit strategy, saying that now wasn't the time for the BOJ to discuss an exit from its easy policy, which includes yield curve control.

AUSTRALIA (MNI): RBNZ Should Have Tightened Earlier - Bank Review

The Reserve Bank of New Zealand policy approach during the pandemic was "largely warranted" but it should have tightened policy earlier in 2021 to head off inflation, according to an internal review of policy making over the past five years released Thursday.

DATA

ITALY DATA (MNI): Weak IP Prints Add to EZ Woes

• ITALY SEP SA IND OUTPUT -1.8% M/M (FCST -1.5%); AUG +2.3% M/M
• ITALY SEP IND OUTPUT WDA -0.5% Y/Y(FCST +1.0); AUG +2.9% Y/Y

Italian industrial production contracted more sharply than anticipated in September, falling by -1.8% m./m and -0.5% y/y following robust growth in August. Capital and consumer goods production was largely flat, whilst intermediate and energy goods contracted by -2.7% m/m and -1.8% m/m. Italian industry is anticipated to be a downward pull on growth into year-end, in line with the PMI sliding further into contractive territory since July. Weak demand is feeding into sharp declines in output and new orders, leaving outlooks remaining gloomy.

NORWAY OCT CPI +0.3% M/M, +7.5% Y/Y (MNI)
NORWAY OCT CORE CPI +0.3% M/M, +5.9% Y/Y (MNI)

CHINA END-OCT M2 +11.8% Y/Y VS MEDIAN +12.0% Y/Y (MNI)

CHINA (MNI): New CNY Loans at Lowest Since 2017

China's aggregate financing data comes in well below expectations at 907.9bln vs. Exp. 1.6bln, with New CNY Loans at 615.2bln vs. Exp. 800bln. That's a significant miss for Aggregate financing and new CNY loans data, with Aggregate financing below even the lowest submitted estimate on BBG. Aggregate financing now the second-lowest since early 2020 while new CNY loans the lowest since late 2017

FX SUMMARY: Greenback Firmer, But Within Recent Ranges, Ahead of Critical Inflation Release

• The greenback is among the strongest currencies in G10 ahead of the CPI release later today, with markets pre-positioning and gearing for the inflation data later today.
• The single currency is softer, with the EUR lower against all others as equities remain soft. European indices are off 0.1 - 0.3%, extending the softer stocks theme after the negative Wall Street close on Wednesday.
• The EUR weakness has prompted EUR/GBP to reverse the entirety of the Wednesday gains and keep prices within range of first support at the 0.8685 50-day EMA.
• Focus rests on the US inflation release due Thursday, with markets expecting CPI to have slowed to 7.9% on the year and 0.6% M/M.
• The release is seen as pivotal for the Fed's decision-making process headed into December, with a number of FOMC members already seeing an imminent slowdown in the pace of tightening from December onwards.
• Weekly jobless claims data is also due as well as the Banxico rate decision.

BOND SUMMARY: Curves Flatten After ECB Makes More Collateral Available; US CPI Due Later

• There has been a bear flattening of core FI curves this morning, led by the ECB's announcement that it would increase the securities lending limit to E250bln with an ECB spokesman telling MNI the move would "support market functioning and provide an efficient backstop for the euro area repo markets in particular over the year-end." With collateral shortages most acute at the short-end, Schatz asset swap spreads have tightened over 2bp today to 76.6bp at writing (after hitting a low of 75.4bp this morning). This is notably off the 115+bp spreads we had seen in mid-October. Bund asset swap spreads have also tightened but to a smaller extent. This has led to the prices of shorter-term government debt falling and hence flattening the curve.
• Looking ahead, the main focus of the day will be the release of US inflation data at 13:30GMT / 8:30ET. Core CPI inflation is seen slowing slightly to 0.5% M/M in October after surprise persistence at 0.58% in Sept. The analyst survey is skewed slightly lower although the Cleveland Fed Nowcast implies upside risk. A similar 0.1-0.2pt beat to last month could see a delay in the Fed’s anticipated downshift to 50bp hikes into 2023 or augur a longer string of hikes, either way pushing the terminal rate higher still and driving a sharp flattening in the Treasury curve. For the full MNI CPI Preview click here.
• There are a large number of speakers due up today. We will hear from the Fed's Harker, Logan, Daly, Mester and George as well as the ECB's de Cos, Schnabel, Kazimir and Vasle and BOE's Ramsden.
• TY1 futures are up 0-3+ today at 110-14 with 10y UST yields up 2.4bp at 4.112% and 2y yields up 4.3bp at 4.626%.
• Bund futures are down -0.14 today at 138.06 with 10y Bund yields up 2.4bp at 2.191% and Schatz yields up 4.5bp at 2.146%.
• Gilt futures are down -0.47 today at 102.84 with 10y yields up 5.0bp at 3.499% and 2y yields up 5.8bp at 3.251%.

EQUITIES: S&P E-Minis Pullback From Week Highs, Eurostoxx Futures Remain Bullish

A bullish EUROSTOXX 50 futures outlook remains intact and the contract is trading closer to its recent highs. The break to fresh short-term trend highs this week confirms a resumption of the bull cycle that started Oct 3. This paves the way for continued gains above the 3700.00 level. The next key resistance is at 3810.00, the Aug 17 high. Firm support is seen at the 50-day EMA. S&P E-Minis traded lower Wednesday. The contract is trading above 3704.25, Nov 3 low. A breach of this level would expose the key short-term support at 3641.50, the Oct 21 low, where a break would signal scope for a continuation lower. For bulls, a stronger reversal higher and more importantly a breach of 3928.00, the Nov 1 high, is required to confirm a resumption of the recent bull theme. This would open 3981.25, the Sep 14 high.

• Japan's NIKKEI closed lower by 270.33 pts or -0.98% at 27446.1 and the TOPIX ended 12.83 pts lower or -0.66% at 1936.66.
• Elsewhere, in China the SHANGHAI closed lower by 12.035 pts or -0.39% at 3036.132 and the HANG SENG ended 277.48 pts lower or -1.7% at 16081.04.
• Across Europe, Germany's DAX trades lower by 10.83 pts or -0.08% at 13648.11, FTSE 100 higher by 0.97 pts or +0.01% at 7297.2, CAC 40 down 12.69 pts or -0.2% at 6417.97 and Euro Stoxx 50 down 6.1 pts or -0.16% at 3721.18.
• Dow Jones mini up 91 pts or +0.28% at 32613, S&P 500 mini up 12 pts or +0.32% at 3767, NASDAQ mini up 46.5 pts or +0.43% at 10875.75.

COMMODITIES: Fourth Session of Lower Lows for WTI

The latest pullback in WTI futures undermines the recent bullish theme and suggests scope for a continuation lower near-term. A bearish shooting star candle Monday was followed by a bearish engulfing candle formation on Tuesday. These patterns highlight a short-term reversal. A continuation lower would open $81.30, the Oct 18 low. On the upside, key short-term resistance has been defined at $93.74, the Nov 7 high. Gold found support Tuesday and is holding on to this week’s gains. This week’s rally confirms an extension of the bounce from $1616.7, the Nov 3 low. The yellow metal is trading above both the 20- and 50-day EMAs and attention turns to resistance at $1729.5, the Oct 4 high and a bull trigger. A break of this hurdle would strengthen bullish conditions. On the downside, support is at $1667.0, the 20-day EMA.

• WTI Crude down $0.33 or -0.38% at $85.56
• Natural Gas down $0.05 or -0.85% at $5.834
• Gold spot up $0.74 or +0.04% at $1707.83
• Copper down $2.25 or -0.61% at $368
• Silver up $0.02 or +0.08% at $21.0807
• Platinum up $2.1 or +0.21% at $992.35