MNI US OPEN - Final European PMIs Confirm Slight Easing in Manufacturing

NEWS

FED (BBG): Fed’s Barr Wants Banks Using Discount Window for Liquidity Needs

The Federal Reserve’s top bank watchdog wants lenders to be more comfortable turning to the central bank’s discount window. Michael Barr, the Fed’s vice chair for supervision, touted the backstop as an important tool for financial stability and monetary policy. In prepared remarks for a European Central Bank event on Friday, he said the lenders should use the window in good times and bad. “The ability to access funding at a predictable rate through the discount window should figure importantly into banks’ liquidity risk management plans under a range of scenarios,” he said.

US (BBG): DeSantis, Newsom Rally Bases in Debate With Eyes Toward Future

Governors Ron DeSantis of Florida and Gavin Newsom of California sparred over taxes, border security and energy, in a debate that unfolded as a sideshow to the 2024 presidential race — and perhaps a glimpse of the next one. The event — largely regarded as a political stunt — escalated a long-running feud between leaders of states at opposite ends of the nation’s partisan divide who’ve pined for a shot at the White House.

US/NORTH KOREA (BBG): US and Allies Impose New Sanctions on Old North Korean Foe

The US and three of its partners united to impose sanctions on North Korea for its spy satellite launch, with a primary target being an arms-trading company that has been subject to international punishment for more than a decade. Australia, Japan, South Korea and the US announced Friday Asia time sanctions against foreign-based agents of North Korea, many working in conjunction with a firm called Green Pine.

MNI EUROZONE INFLATION INSIGHT: November 2023

Eurozone flash inflation for November printed at an unrounded +2.41% (vs +2.7% cons; +2.90% prior), the first time the headline has been below 2.5% since July 2021. Core (ex-energy/food) was +3.57% (vs +3.9% cons; +4.18% prior) / -0.59% M/M (vs +0.22% prior). HICP came in below expectations for all 5 of the largest Eurozone economies, while the Eurozone-wide figures were below even the lowest analysts’ estimates (of 41 in the Bloomberg survey). The ECB's seasonally-adjusted figures showed sequential monthly headline HICP at -0.26% M/M, vs +0.06% prior - marking the first decline since May and the lowest reading since December 2022.

ISRAEL/HAMAS (MNI): Truce Ends, Conflict Resumes; Qatar Says Negotiations Ongoing

The temporary truce between Israel and Hamas that had been in place since 23 November has come to an end amid Hamas rockets fired into Israel and Israeli Defence Forces (IDF) resuming their aerial strikes and ground assault on Hamas in the Gaza Strip. Each side has accused the other of breaking the truce, Hamas claiming that Israel refused to send fuel to north Gaza under the terms of the agreement, while IDF spox Lt. Col. Peter Lerner said the the BBC that "Hamas did not stand to their word, of their agreement, to release all the women and children."

NETHERLANDS (MNI): NSC Pours Cold Water On Prospect Of Swift Deal w/PVV

Following the appointment of former Labour Party (PvdA) minister Ronald Plasterk as the second post-election scout, tasked with sounding out parties on policies and potential partners, the prospect of a swift deal in reaching a governing coalition (which were already slim) have narrowed further. Pieter Omtzigt, leader of the centrist, 'good governance' New Social Contract (NSC) stated earlier in the week that, "All in all, the NSC faction now sees no basis for starting negotiations with the Party for Freedom (PVV) about a majority government or a minority government,".

CHINA (BBG): China State-Owned Firm Bought A-share ETFs in Market: Report

An unidentified Chinese state institution bought exchange-traded funds whose underlying assets are A-shares issued by central state-owned enterprises in the domestic stock market Friday, China Securities Journal reports on its app. Transaction value of those ETFs rose sharply on Friday, according to the report It didn’t specify the value of ETFs the company has bought.

RBA (MNI): Hold Likely as Bank Awaits Fresh Data

The Reserve Bank of Australia will consider leaving the cash rate unchanged at 4.35% when it meets on Dec 5 as it awaits fresh data following an easing in the monthly inflation series, despite Governor Michele Bullock’s recent hawkish turn in the fight to pull CPI below the 2-3% target. While the RBA and Bullock have stressed the higher-for-longer narrative over the past month with the last Statement on Monetary Policy and meeting minutes following November’s hike preparing the market for a least one more increase, CPI ticked lower than expected in October, rising only 4.9% from the prior month’s 5.6%, while trimmed CPI increased 5.1%, down from September’s 5.5%.

INDIA (BBG): India Boosts Purchases of Cheaper Russia, Iraq Crude in November

India increased oil imports from Russia and Iraq last month as refiners maximized purchases of cheaper barrels to bolster margins and meet product demand, according to Kpler data. Cargoes from Russia climbed 9.7% from October to 1.74 million barrels a day, while shipments from Iraq surged 22% to 1.03 million barrels a day, the highest level since May last year, according to data from the marketing intelligence provider. Imports from third-largest supplier Saudi Arabia contracted 26.8% to 646,510 barrels a day.

ARGENTINA (BBG): Argentina Won’t Join BRICS Bloc Under Milei, Adviser Says

Argentina won’t join the China-led BRICS bloc during Javier Milei’s presidency, his incoming top diplomat said, underscoring the significant foreign policy shift his administration plans once in office. “We won’t go into the BRICS,” Diana Mondino, Milei’s pick for foreign affairs minister, wrote Thursday on X, the platform formerly known as Twitter. Speaking to journalists at an event earlier in Buenos Aires, Mondino cast doubt on the value of the group, which includes China and Brazil, Argentina’s top two commercial partners.

RBNZ (BBG): RBNZ Can’t Afford to Ignore Immigration Surge, Hawkesby Says

New Zealand’s central bank can’t afford to ignore a surge in immigration, even though it’s expected to subside next year, because inflation has been above target for so long, Deputy Governor Christian Hawkesby said. “When you’re an environment where inflation’s at target and inflation expectations are really well anchored, you’ve got the luxury to look through things and bide your time,” Hawkesby said in an interview Friday in Wellington. “When inflation’s above target, has been above target for a prolonged period and core inflation pressures are slow in terms of coming back to target, you don’t have that luxury.”

RUSSIA (MNI): Kremlin - 'We Know Sanctions Will Last For Years'; Affirms OPEC+ Support

Wires carrying comments from Kremlin spox Dmitri Peskov. On sanctions, claims that the "US is trying to break the entire [global] trade system in order to destroy the Russian economy." Comes after an FT article that quotes US Assistant Secretary of State for Energy Resources Geoffrey Pyatt stating that western sanctions on Russia must be maintained "for years to come." Peskov says that "We already knew that western sanctions will last for many years."

DATA

EUROZONE NOV FINAL MANUFACTURING PMI 44.2 (FLASH: 43.8) (MNI)

UK NOV FINAL MANUFACTURING PMI 47.2 (FLASH: 46.7) (MNI)

UK NOV. NATIONWIDE HOUSE PRICES FALL 2.0% Y/Y; EST. -2.3% (BBG)
UK NOV. NATIONWIDE HOUSE PRICES RISE 0.2% M/M; EST. -0.4% (BBG)

FRANCE NOV FINAL MANUFACTURING PMI 42.9 (FLASH: 42.6) (MNI)

GERMAN DATA (MNI): Final PMIs Confirm Slight Easing in Manufacturing Downturn

• GERMANY NOV FINAL MANUFACTURING PMI 42.6 (FLASH 42.3)

The German Final November manufacturing PMI was revised slightly higher from the flash release but remained clearly in contractionary territory at 42.6 (vs 42.3; 40.8 Oct). Overall, the survey points to the ongoing economic downturn slightly flattening out, with output and new orders posting the most moderate declines for six months.

ITALY DATA (MNI): Demand-Driven Declines in Employment Consistent With EC Survey

• ITALY NOV FINAL MANUFACTURING PMI 44.4 (FCAST: 45.2)

The Italian November manufacturing PMI came in below consensus in contrast to Spain, printing at 44.2 (vs 45.2 cons; 44.9 prior). Overall, the survey singalled demand weakness domestically and abroad which has pressured employment and inflation prospects. The fall in employment is consistent with the declines in expected employment in the EC's Business Survey, and the uptick in unemployment seen in October.

ITALY FINAL Q3 GDP 0.1 QQ, 0.1 YY (MNI)

SPAIN DATA (MNI): Manufacturing Remains in Contraction, Pressuring Employment and Prices

• SPAIN NOV FINAL MANUFACTURING PMI 46.3 (FCST: 45.5)

The Spanish November manufacturing PMI beat consensus but remained in contractionary territory at 46.3 (vs 45.5 cons; 45.1 prior). Overall, the survey points to further deterioration of economic activity, which is putting downward pressure on employment and prices.

SWISS Q3 GDP +0.3% Q/Q, +0.3% Y/Y (MNI)

CHINA DATA (MNI): Caixin Nov Manufacturing PMI Hits Three-Month High

• CHINA NOV CAIXIN MANUFACTURING PMI 50.7 VS 49.5 IN OCT

MNI (Beijing) China's Caixin manufacturing PMI rose by 1.2 points to register 50.7 in November from October, rising back to the expansionary zone above the breakeven 50 mark and hitting a three-month high, the financial publisher said Friday. The production sub-index turned from falling to rising above 50, while the new orders sub-index was in the expansionary range for four consecutive months and reached its highest level since July.

RATINGS: Friday’s Slate

Potential sovereign rating reviews of note scheduled for after hours on Friday include:

• Fitch on Greece (current rating: BB+; Outlook Stable), Ireland (current rating: AA-; Outlook Positive) & the United Kingdom (current rating: AA-; Outlook Negative)
• Moody’s on Finland (current rating: Aa1; Outlook Stable)
• S&P on France (current rating: AA; Outlook Negative), Lithuania (current rating: A+; Outlook Negative) & Poland (current rating: A-; Outlook Stable)
• DBRS Morningstar on Germany (current rating: AAA, Stable Trend) & Spain (current rating: A, Stable Trend)

FOREX: New Month, Same EUR Weakness

• The greenback sits lower, reversing only a small part of yesterday's sharp month-end rally. The USD Index was capped by the 200-dma (103.586) in Thursday trade, and prices hold below there across early Europe and into the NY crossover.
• The single currency also trades poorly, helping EUR/GBP extend the recent downtick to put the cross lower for a seventh consecutive session. The cross has now cleared three notable levels of support at 0.8650, 0.8640 and now 0.8616. Weakness coincides with the rising pricing for ECB rate cuts across 2024 this week, with the March meeting now seen as a 50/50 call for the first rate cut of the cycle. This week's soft CPI data continues to pervade, proving supportive of bond and equity prices and while EUR/GBP's remains weak, it is yet to reach technically oversold levels.
• Scandi currencies are the main beneficiaries, aided higher by strong stock markets with the EuroStoxx50 higher by 0.6% and US stock futures pointing to a modestly higher open to start December.
• Focus Friday rests on Fed's Powell, with the chair set to make one of the final appearances for the FOMC ahead of the pre-decision media blackout period set to kick in at the weekend. Powell appears twice, speaking at a fireside chat in Atlanta, Georgia, with text set to release ahead of a subsequent Q&A.
• The Canadian jobs report is also due, with markets expecting net change in employment to slow to +14.0k from +17.5k previously. ISM Manufacturing data for November is set to follow, closing off the week's economic schedule.

EGBS: Continued Dovish ECB Repricing Underpins Core/Semi-Core; Peripheries Tighten

Core/semi-core EGBs rally through Friday morning, largely driven by continued dovish repricing in Euro STIR markets.

• Bund futures are currently up 0.38 ticks today at 132.67 while OAT futures are up 0.42 ticks at 127.53.
• Other drivers for the move include German Finance Minister Lindner acknowledging that the country will make adjustments to the expenditure side of its ‘24 fiscal plans given the well-documented German court ruling. Weak manufacturing PMIs from Europe won't have hurt the bid, alongside a lack of extension in the truce between Israel-Hamas overnight.
• Cash curves are seen bull steepening, led by the short-end, with the German 2s10s up 2.1bp today at -34.5bp.
• Periphery spreads to Bunds narrow owing to the supportive overall risk backdrop, with the 10-Yr BTP/Bund spread 4.1bps tighter at 173.8bps.A reminder that Fitch updates Greece's sovereign rating after hours, where an upgrade would make Greek bonds eligible for most IG indices for the first time since the Euro sovereign debt crisis.
• The remainder of the docket sees scheduled comments from ECB's Lagarde at the Banking Supervision Forum and de Cos at a separate banking event. After hours yesterday, ECB's Nagel weighed in on the November inflation data with an expected hawkish lean.

GILTS: Off Lows, Curve Twist Steepens

The bond supportive factors that we have outlined elsewhere promoted a bounce from session lows in gilts.

• Bears couldn’t test technical support levels flagged elsewhere, with the contract last showing flat around the 96.70 area. Yesterday’s low was not breached early on.
• Cash gilt yields are 3bp lower to 1bp higher, twist steepening.
• The cross-market widening impulse for gilts has moderated from session extremes but is still evident in the 10+-Year zone (in terms of net change on the day).
• Spill over from a dovish repricing on the ECB-dated OIS stirp is aiding the front end.
• SONIA futures are flat to 3.5bp firmer across the curve, while BoE-dated OIS is flat to 2.5bp softer on the day.
• Final UK manufacturing PMI data was a touch firmer than flash (but still contractionary), while Nationwide house price data wasn’t quite as soft as expected (there was a modest M/M uptick).

EQUITIES: Current Consolidation in E-Mini S&P Seen as a Pause in Uptrend

A bullish theme in Eurostoxx 50 futures remains intact. The contract traded higher Thursday and breached 4387.00, the Nov 24 high. The break confirms a resumption of the uptrend and maintains the bullish price sequence of higher highs and higher lows. Note that moving average studies are in a bull-mode position signalling a rising cycle. The focus is on 4446.00, the Aug 10 high. Initial firm support to watch is at 4307.30, the 20-day EMA. A bullish theme in S&P e-minis remains intact and the current consolidation is seen as a pause in the uptrend. A strong rally on Nov 14 resulted in the break of a trendline drawn from the Jul 27 high. This breach and the subsequent rally, reinforces bullish conditions and opens 4597.50, the Sep 1 high. Moving average studies are in a bull-mode position highlighting an uptrend. Initial firm support is seen at 4490.76, the 20-day EMA.

• Japan's NIKKEI closed lower by 55.38 pts or -0.17% at 33431.51 and the TOPIX ended 7.59 pts higher or +0.32% at 2382.52.
• Elsewhere, in China the SHANGHAI closed higher by 1.963 pts or +0.06% at 3031.636 and the HANG SENG ended 212.58 pts lower or -1.25% at 16830.3.
• Across Europe, Germany's DAX trades higher by 133.54 pts or +0.82% at 16349.81, FTSE 100 higher by 57.97 pts or +0.78% at 7511.58, CAC 40 up 46.36 pts or +0.63% at 7357.13 and Euro Stoxx 50 up 34.93 pts or +0.8% at 4417.4.
• Dow Jones mini up 79 pts or +0.22% at 36089, S&P 500 mini up 6.5 pts or +0.14% at 4583, NASDAQ mini up 7.5 pts or +0.05% at 15993.25.

COMMODITIES: Yesterday's Move Lower Reinforces Bearish Theme in WTI Futures

The trend outlook in WTI futures is unchanged, it remains bearish and yesterday’s move lower reinforces this set-up. Resistance to watch is at $79.65, the Nov 14 high. A breach of this hurdle would strengthen any developing bullish threat and open $83.20, the Nov 3 high. On the downside, the bear trigger lies at $72.37, the Nov 16 low. Clearance of this level would confirm a resumption of the downtrend. The trend condition in Gold remains bullish and this week’s strong rally reinforces this set-up. The yellow metal has traded through resistance at $2009.4, the Nov 7 high. The clear break of this hurdle has confirmed a resumption of the uptrend and signals scope for an extension towards 2063.0, the May 4 high and a key resistance. Note the all-time high at $2070.4 (Mar 8 ‘22). Initial firm support is at $1994.0, the 20-day EMA.

• WTI Crude down $0.38 or -0.5% at $75.56
• Natural Gas down $0.02 or -0.82% at $2.778
• Gold spot up $10.65 or +0.52% at $2047.45
• Copper up $3.9 or +1.01% at $388.85
• Silver up $0.05 or +0.21% at $25.335
• Platinum up $7.95 or +0.86% at $937.75