MNI US OPEN - Dollar Dominant Ahead of CB Deluge

NEWS

ECB (MNI): MNI ECB Preview: December 2022 - Too Close to Call

While we initially expected the ECB to deliver another 75bp hike in December – and had euro area inflation surprised higher again this would have remained our assumption - our conviction has since ebbed. Uncertainty over whether inflation has peaked, how far the ECB will go when it unveils the ‘key principles’ for APP reduction, and shifting sentiment among both doves and hawks within the GC, make the decision between hiking 50bp and 75bp much more finely balanced.

BOE (MNI): MNI BoE Preview: December 2022 - 4-way Split with 50bp Hike

The MNI Markets team (along with 20/22 analyst previews we have read) expects a 50bp hike at this week’s MPC meeting. Assuming the 50bp hike is delivered, the breakdown of the vote and the forward guidance will arguably be the biggest drivers of markets moves.

NORGES BANK (MNI): Norges Bank Hikes 25bps, Envisages One More Hike

The Norges Bank hiked its benchmark policy rate by 25 basis points to 2.75% Thursday and indicated that it expected one more 25 bps hike, which will likely come in the first quarter of next year. "If the economy evolves as anticipated, the policy rate will be around 3 percent next year," Governor Ida Wolden Bache said.

SNB (MNI): SNB Hikes By 50bps, Raises 2025 Inflation Forecast

The Swiss National Bank raised policy rate by 0.5% to 1.0% at its December monetary assessment Thursday, as expected with sight deposits above the tiering threshold remunerated at 0.5%. Annual inflation is conditionally forecast to be at 2.9% for 2022, 2.4% for 2023, 1.8% for 2024 and 2.1% for 2025, the end of the forecast horizon. Further rate hikes “cannot be ruled out,” the SNB said in a statement, while it remains willing to be active in the foreign exchange market “as necessary.”

COMMODITIES (BBG): Goldman Sees Commodities Soaring in 2023 as Shortages Bite

Commodities will be the best-performing asset class once again in 2023, handing investors returns of more than 40%, according to Goldman Sachs Group Inc. The Wall Street bank said that while the first quarter may be “bumpy” due to economic weakness in the US and China, scarcities of raw materials from oil to natural gas and metals will boost prices after that.

EUROPEAN COUNCIL (MNI): US IRA, Ukraine Aid, EP Scandal in Focus at EUCO Summit

EU member state leaders are arriving in Brussels for the final EUCO summit of 2022 with a number of major issues on the agenda that could see sparks fly between the attendees. The EU's response to the US Inflation Reduction Act (IRA) is coalescing, but still as yet uncodified.

EU/RUSSIA (MNI): No Agreement on New Russia Sanctions - RTRS-EU Diplos

Reuters reporting that EU member states have failed to agree on a ninth package of sanctions against Russia, with permanent representatives stating that, "Poland and a number of others still have objections".

JAPAN/CHINA (BBG): Japan to Call China ‘Unprecedented’ Challenge in Security Shift

Japan will describe China as an “unprecedented strategic challenge” in a new national security policy set to be approved as early this week, according to a draft seen by Bloomberg. The new strategy, expected to get the green light from Prime Minister Fumio Kishida’s cabinet when it meets Friday, amounts to an unprecedented overhaul of the country’s security and defense policy.

CHINA (MNI): China's Property Financing Plans Confront Collateral Test

MNI (Beijing) - Beijing's plans to revive the property sector by easing financing rules is being undermined by weak sales that have diminished the value of developers' collateral needed to access finance, raising pressure on local governments to deliver more policy support to boost transactions, advisers and analysts told MNI.

HONG KONG (MNI): HKMA Hikes Base Rate 50bp; Tracks Fed

Hong Kong’s Base Rate was increased 50bp to 4.75%, the highest rate since January 2008, according to the Hong Kong Monetary Authority (HKMA) on Thursday. The rate hike followed the Federal Reserve's decision to lift U.S. interest rates by the same amount on Wednesday. It was the seventh hike this year. The HKMA mirrors U.S. monetary policy moves to maintain its Linked Exchange Rate System that pegs the Hong Kong dollar to the U.S. dollar.

TAIWAN (MNI): Taiwan Hikes Base Rate 12.5bp To Highest Since 2015

MNI (Beijing) - Taiwan’s policy interest rate was raised 12.5bp to 1.75% on Thursday, the highest level since September 2015, according to the Central Bank of the Republic of China (Taiwan).The rate hike will help to curb domestic inflation expectations and promote price stability as Taiwan's unemployment rate has fallen and private consumption has rebounded, boosted by the lifting of covid restrictions. However, policymakers forecast declining exports due to weak external demand, the Bank said in a statement posted online.

DATA

FRANCE DATA (MNI): Core CPI Accelerates in November

FRANCE NOV CPI +0.3% M/M, +6.2% Y/Y
FRANCE NOV HICP +0.4% M/M, +7.1% Y/Y
FRANCE DEC MANUF SENTIMENT AT 101

November final CPI data confirmed that French inflation was steady at +7.1% y/y, on par with the October peak. Prices rose by a downwardly revised +0.5% m/m, slowing from the +1.2% m/m jump recorded in October. Food and energy prices continued to be the main drivers of inflation. Food CPI quickened by 0.1pp to +12.1% y/y, whilst energy prices inflation eased by 0.7pp to +18.4% y/y.

CHINA (MNI): China Nov Retail Sales, Output Fall To 6-Month Lows

• CHINA NOV RETAIL SALES -5.9% Y/Y VS MEDIAN -3.6% Y/Y: NBS
• CHINA JAN-NOV RETAIL SALES -0.1% Y/Y VS JAN-OCT +0.6% Y/Y
• CHINA NOV INDUSTRIAL OUTPUT +2.2% Y/Y VS MEDIAN +3.8% Y/Y: NBS
• CHINA NOV UNEMPLOYMENT RATE +5.7% VS OCT +5.5%

MNI (Beijing) - China's consumption unexpectedly fell further in November amid renewed Covid-19 outbreaks, while industrial production and investment weakened more than expected due to Covid control measures, data released by the National Bureau of Statistics on Thursday showed.

JAPAN (MNI): Japan's Nov Exports Rise For 21st Consecutive Month

• JAPAN NOV EXPORTS +20.0% Y/Y; OCT +25.3%
• JAPAN NOV IMPORTS +30.3% Y/Y; OCT +53.5%

November exports data lent support to the Bank of Japan's view that exports are on an upward trend thanks to the easing of supply-side constraints, but officials are worried about the impact of slowing global growth in the first quarter of 2023.

JAPAN (MNI): Japan's Nov Real Export Index Drops 0.04% M/M

The Bank of Japan's real export index, calculated using Ministry of Finance trade data, fell 0.04% m/m in November for the first drop in three months following a revised rise of 1.4% in October. The figures were calculated by MNI based on BOJ data and confirmed by bank officials. The BOJ will release details of the index on Tuesday. Average real export index for the October-November period rose 2.2% from the previous quarter.

AUSTRALIA (MNI): RBA Hike In Play On November Jobs Surge

• AUSTRALIA NOV UNEMPLOYMENT RATE +3.4%
• AUSTRALIA NOV LABOR PARTICIPATION RATE +66.8%
• AUSTRALIA NOV EMPLOYED PERSONS CHANGE 64K

Stronger-than-expected November labour force data has underscored the tightness in Australia's job market and supports the case for a further 25bp hike at the Reserve Bank of Australia's February meeting. The RBA has expressed concerns that the tight labour market could lead to significant increases in wages, which could feed into a wages-prices spiral.

NEW ZEALAND (MNI): NZ Q3 GDP Up 2% Q/Q; Beats RBNZ's November Forecast

New Zealand's economy grew at 2% q/q pace in the third quarter, though a dip in private consumption hints at softer growth ahead after 400bp of cumulative rate hikes by the Reserve Bank of New Zealand.

FX SUMMARY: Dollar Dominant as Markets Work Through Central Bank Deluge

• Yesterday's Fed decision continues to work its way through market prices, with the greenback on top and rising against all others in G10. The hawkish interpretation of yesterday's decision is similarly hitting equities from the open, adding an anchor to high beta currencies including AUD, NZD and NOK ahead of the NY crossover.
• Central bank decisions from Switzerland and Norway left little mark on markets this morning, with decisions largely going alongside expectations.
• The SNB raised rates by 50bps and downgraded the front-end of their inflation forecast - putting downward pressure on peak rate expectations for H1 2023.
• In Norway, a 25bps rate rise was accompanied by a lower terminal rate, and suggested the bank are nearing the peak of their tightening cycle.
• Focus turns to decisions from the BoE and ECB, both of which are expected to tighten policy today. Data due later today includes weekly jobless claims numbers as well as the November US retail sales release.

BOND SUMMARY: Gilts Outperform Ahead of Central Bank Decisions

• EGBs and Bund drifted lower on the Bund cash open, following car sales in Europe rising 17% in November.
• Markets have since reversed course, and have bounced off their session lows.
• Not really seen a clear driver for the push back higher in Bund, given that the Euribor strip remains in the red.
• Looks like Gilt is helping underpin Europe.
• Seems that some desk are positioning for a Dovish BoE, given that Gilt is up 83 ticks and the SONIA strip is in the green.
• Peripheral spreads are mixed against the German 10yr, Italy is 3.9bps wider, while Greece is 3.4bps tighter.
• The SNB hiked its rate by 50bps to 1% as expected, and Norges Bank by 25bps to 2.75%, also as expected.
• US Treasuries are trading within their overnight ranges, and in the green across the longer end.
• The pull back in Bund, as reversed some of the Tnote/Bund tightening, with the US/German spread sitting 1.5bp wider at the time of typing.
• Looking ahead, the only notable data left for the session is the US Retail Sales, but before the release, the main focus will be on the BoE and ECB rate decisions, when 50bps hike is expected by both CBs.
• ECB Lagarde will hold her press conference, while for the UK, there is no press conference in a non-MPR month.

EQUITIES: Equity Futures Dip Lower Following Turbulent Post-Fed Price Action

The EUROSTOXX 50 futures climb on Tuesday, resulted in a print above resistance at 4021.00, Dec 1 high. Despite having since pulled back, the move reinforces bullish conditions and a clear breach of 4021.00 would confirm a resumption of the uptrend and open 4049.50, the Feb 23 high (cont). Key short-term support has been defined at 3903.00, the Dec 8 low, where a break would instead highlight a possible short-term reversal. A strong rally in the S&P E-Minis Tuesday saw price trade above 4142.50, Dec 1 high. The contract failed to hold onto the highs of the day and pulled back sharply. Despite the move lower, the outlook is bullish and Tuesday’s high maintains the bullish sequence of higher highs and higher lows. A resumption of gains would open 4194.25, the Sep 13 high. Key support is at 3945.75, the Dec 7 low. This is just below the 50-day EMA, at 3960.81.

• Japan's NIKKEI closed lower by 104.51 pts or -0.37% at 28051.7 and the TOPIX ended 3.52 pts lower or -0.18% at 1973.9.
• Elsewhere, in China the SHANGHAI closed lower by 7.877 pts or -0.25% at 3168.648 and the HANG SENG ended 304.86 pts lower or -1.55% at 19368.59.
• Across Europe, Germany's DAX trades lower by 149.89 pts or -1.04% at 14306.07, FTSE 100 lower by 48.17 pts or -0.64% at 7445.85, CAC 40 down 80.39 pts or -1.19% at 6648.91 and Euro Stoxx 50 down 47.07 pts or -1.18% at 3927.59.
• Dow Jones mini down 274 pts or -0.81% at 33726, S&P 500 mini down 42 pts or -1.05% at 3957.5, NASDAQ mini down 155.25 pts or -1.32% at 11599.5.

COMMODITIES: Gold Drops to Week-Low After Hawkish Fed Statement

Trend conditions in WTI futures remain bearish. However, the current bullish corrective cycle remains in play and the contract traded higher yesterday. Price is testing the 20-day EMA, at $77.50. A clear break of this hurdle would signal scope for an extension and open $81.01, the 50-day EMA. On the downside, a reversal lower would refocus attention of the bear trigger which lies at $70.08, the Dec 9 low. Trend conditions in Gold remain bullish and Tuesday’s gains have reinforced this condition. The yellow metal traded through resistance at 1810.0 on Tuesday, the Dec 5 high, to confirm a resumption of the uptrend. This maintains the current bullish price sequence of higher highs and higher lows and signals scope for a climb towards $1842.7, a Fibonacci retracement. On the downside, support to watch lies at $1765.9, the Dec 5 low.

• WTI Crude down $0.58 or -0.75% at $76.7
• Natural Gas up $0.07 or +1.06% at $6.498
• Gold spot down $28.94 or -1.6% at $1778.1
• Copper down $7.35 or -1.9% at $380.35
• Silver down $0.85 or -3.54% at $23.0992
• Platinum down $22.31 or -2.16% at $1009.89