MNI US OPEN - De Guindos Reiterates ECB Poised For Further Tightening

NEWS

ECB (MNI): de Guindos: We Have No Choice but to Act, 50bp Hikes May Be Norm in Near-Term

Key snippets from a Le Monde Interview: "First, increases of 50 basis points may become the new norm in the near term. Second, we should expect to raise interest rates at this pace for a period of time. And third, our interest rates will then enter into restrictive territory. The steps we have taken so far are going to have an impact on inflation, but we still need to do more."

US/UKRAINE (BBG): Biden Tells Zelenskiy US to Back Ukraine ‘As Long As It Takes’

President Joe Biden promised Volodymyr Zelenskiy unwavering US support as Ukraine’s effort to beat back Russia’s invasion nears its 11th month even as support from Republicans poised to take control of the House wanes.

CHINA (BBG): China to Cut Quarantine for Overseas Travelers From Next Month

China plans to cut quarantine requirements for overseas travelers in January, according to people familiar with the matter, as the country dismantles the last vestiges of its Covid Zero policy. Officials are considering a “0+3” policy, where the requirement to spend time in a quarantine hotel or isolation facility would be scrapped, and arrivals into the country instead subject to three days of monitoring, one of the people said, asking not to be identified as the discussions are not public.

CHINA (BBG): China State Council, PBOC Vow to Boost Growth, Property

Chinese authorities ramped up their calls to prioritize growth next year and help the property sector recover from its worst slump on record, in further signs the economy will be top of mind in 2023.

CHINA (MNI): China's Deficit to Exceed 3% As Debt Grows to Lift Growth

China is expected to increase its budget deficit-to-GDP ratio above its 3% "red line" next year, as the central government issues more Treasury bonds to support domestic demand and lift growth at a time when debt-burdened local governments are constrained in their ability to add leverage, advisers told MNI.

CHINA (MNI): PBOC Rate Cuts Needed as Leverage Set to Rise

The People's Bank of China should cut its policy rates to lower the cost of new government borrowing needed to fund additional spending, with an increase in China's macro-leverage ratio justified by the need to support annual GDP growth of 5-5.5% in 2023, a senior policy adviser told MNI.

CHINA PRESS (MNI): China's Real Estate Market Headed for Soft Landing - Adviser

China's real estate market is expected to have a soft landing following recent policies supporting financing, with rates of decline in home starts and construction slowing, Yicai.com reported citing Sheng Songcheng, former director of the surveys and statistics department at the People's Bank of China.

JAPAN (MNI): Weak Yen Concerns Behind BOJ's Shock Yield Shift

Concerns the yen would weaken as commodity prices rally on hopes for a Chinese economic recovery next year fed into the Bank of Japan's decision to lift the upper band on its 10-year yield target, MNI understands.

DATA

UK DATA (MNI): UK GDP Revised Lower as Electricity Output Slows

• UK Q3 GDP -0.3% Q/Q, +1.9% Y/Y

UK GDP was revised lower as with manufacturing and electricity generation notably weaker than previously estimated, the ONS said Thursday. A slowdown in demand for energy from both households and businesses as prices spiked higher since the start of the Ukraine war were seen as a key driver of the fall in electricity demand and subsequent sharp fall in output and the revised data will be seen by the BoE that households have reined back on spending quicker than perhaps believed.

UK Q3 CURR ACC BALANCE -GBP19.4 BN (Q2 -GBP33.8BN) (MNI)

SWEDEN NOV RETAIL SALES -6.3% Y/Y (MNI)

FX SUMMARY: USD Within Range of Multi-Month Lows

• The greenback sits lower ahead of the Thursday US open, with the USD Index through to new weekly lows to narrow the gap with 103.448, a key support. A break south of here opens the lowest levels for the USD since June.
• Macro drivers and newsflow has been expectedly muted so far Thursday, with ECB's de Guindos repeating the well worn line that ECB hikes are likely to be maintained at 50bps steps for the near future. GBP has carried through a part of the Wednesday weakness, boosting EUR/GBP north of Gbp0.88 for the first time since mid-November.
• Stronger oil markets are aiding commodity-tied currencies, with NOK the strongest performer in G10 at pixel time. This keeps USD/NOK within range of the mid-December multi-month lows at 9.6982. Weakness through here would be a bearish break and extend losses below the 9.8123 200-dma.
• Data and macro releases later today provide the last look at the US economy for 2022, with Tertiary Q3 US GDP due as well as weekly jobless claims.

BOND SUMMARY: Continued Divergence Between Europe and the US

• A mixed morning session for EGBs and Bund, on quite low liquidity.
• Bund initially tested resistance at 136.17, printed a 136.20 high, but has reversed gains with UK Gilt leading to the downside.
• Gilt falls to session low, helping Bund lower.
• Technical outlook remains bearish for the UK contract, and a clear break through the figure, will open to initial support at 100.68 Low Dec 20.
• Peripheral spread in Europe are mostly a touch tighter besides Spain, that trades 1.4bp wider against the German 10yr.
• For the US, there's continued divergence between Treasuries and EGBs, as investors favour more aggressive hikes by the ECB vs the Fed.
• Most notable move is in the Tnote/Bund spread, which is trading at its tightest level since October 2020.
• Support is seen at the 13/10/20 low, at 128.28bps, for the Tnote/Bund spread.
• Looking ahead, US, GDP and Core PCE will be 3rd readings.
• For supply, US sells $19bn of 5yr TIPS reopening later today.

EQUITIES: E-Mini S&P Targets 3946.36 50-Day EMA to Signal Stronger Recovery

EUROSTOXX 50 futures have recovered from recent lows and the contract is trading higher today. Price has arrived at the 20-day EMA, at 3886.10 - a key short-term resistance. A clear breach of this hurdle would suggest potential for a stronger recovery. Gains are considered corrective - for now. A reversal lower and a break of 3753.00, the Dec 20 low, would confirm a resumption of the recent downtrend. The bull trigger is at 4043.00, Dec 13 high. S&P E-Minis trend signals are bearish and this week’s low print reinforces this condition. The contract has recovered from its recent lows. The move higher is considered corrective and attention is on 3946.36, the 50-day EMA. A clear break of this hurdle is required to suggest potential for a stronger recovery. On the downside, a reversal lower and a break of 3803.50, the Dec 20 low, would confirm a resumption of the downtrend.

• Japan's NIKKEI closed higher by 120.15 pts or +0.46% at 26507.87 and the TOPIX ended 14.85 pts higher or +0.78% at 1908.17.
• Elsewhere, in China the SHANGHAI closed lower by 13.979 pts or -0.46% at 3054.431 and the HANG SENG ended 518.73 pts higher or +2.71% at 19679.22.
• Across Europe, Germany's DAX trades higher by 46.81 pts or +0.33% at 14144.57, FTSE 100 higher by 38.51 pts or +0.51% at 7528.66, CAC 40 up 26.24 pts or +0.4% at 6601.62 and Euro Stoxx 50 up 11.57 pts or +0.3% at 3883.42.
• Dow Jones mini up 42 pts or +0.13% at 33605, S&P 500 mini up 6.5 pts or +0.17% at 3912.5, NASDAQ mini up 24.25 pts or +0.21% at 11360.75.

COMMODITIES: Gold Remains Above 1810.0, Targets 1842.7 Retracement Next

Trend conditions in WTI futures remain bearish. However, recent gains have highlighted a bullish corrective cycle and this has resulted in break of the 20-day EMA, at $76.94. The move above this hurdle signals scope for an extension towards $79.73, the 50-day EMA and a key resistance. On the downside, a stronger reversal lower would refocus attention on the bear trigger which lies at $70.31, the Dec 9 low. Trend conditions in Gold remain bullish and the recent move lower is considered corrective. Key short-term support to watch is $1765.9, Dec 5 low. The yellow metal breached $1810.0 last week, Dec 5 high, to resume the uptrend. This maintains the positive price sequence of higher highs and higher lows and opens $1842.7, a Fibonacci retracement. On the downside, a break of $1765.9 would signal scope for a deeper pullback.

• WTI Crude up $0.81 or +1.03% at $78.83
• Natural Gas up $0.1 or +1.78% at $5.451
• Gold spot up $1.89 or +0.1% at $1817.26
• Copper up $0.3 or +0.08% at $381.1
• Silver down $0.12 or -0.51% at $23.8755
• Platinum up $2.21 or +0.22% at $1005.09