MNI US OPEN - German Regional CPIs Slow Faster Than Forecast

NEWS

US (BBG): House Prepares to Drop China Investment Curbs From Defense Bill

Congressional negotiators on Tuesday were poised to abandon plans to use the annual defense policy bill to tighten controls on US investment in Chinese technology, according to people familiar with the discussions. House Financial Services Chairman Patrick McHenry is effectively blocking a measure that would require firms to notify the government about certain investments in China and other countries of concern, according to the people. The amendment aligns with an executive order by President Joe Biden to curb spending on high-tech sectors in the world’s second-largest economy.

ECB (BBG): ECB’s Stournaras Pushes Back Against Rate-Cut Bets: Politico

European Central Bank Governing Council member Yannis Stournaras cautioned against premature bets on when interest-rates will be lowered, saying he only expects such a move in the middle of next year. “The current numbers betting on April seem a bit optimistic,” the Greek policymaker told Politico in an interview. Stournaras also said an early end to PEPP reinvestments “would break a commitment — that could affect our credibility and, therefore, the effectiveness of our policies.”

ECB (BBG): ECB Faces Battle Over Bank Payouts as Top Watchdog Enria Departs

Several bank regulators dissatisfied with the European Central Bank’s tough stance on shareholder payouts are getting ready to push for a relaxation, arguing it’s partly to blame for the poor valuations of the region’s lenders. The officials, who sit on the ECB’s Supervisory Board and have long disagreed with the line taken by Chair Andrea Enria, want to lower the capital bar that individual banks have to meet for payouts and scrap a time-consuming approval process for share buybacks, according to people familiar with the matter.

BOE (BBG): BOE Not Ready to Discuss Rate Cuts, Bailey Tells Daily Focus

Bank of England Governor Andrew Bailey continued to push back against expectations of an interest rate cut in the coming months during a trip to Stoke-On-Trent. Bailey said in an interview with Staffordshire’s Daily Focus newspaper that the central bank would “do what it takes” to get inflation to the 2% target, but that the journey down now from 4.6% could be slow. “We are not in a place now where we can discuss cutting interest rates – that is not happening,” Bailey said in the article published Wednesday, adding that he expects inflation to be a little below 4% by the end of the first quarter of 2024.

UK (BBG): OECD Says Rising Taxes to Squeeze UK Living Standards for Longer

Rising taxes mean UK households face several more years of falling living standards even though inflation is coming down, the Organisation for Economic Cooperation and Development said. The Paris-based institute said in its biannual economic outlook that real wages will “finally grow” as pay outstrips prices, but “higher fiscal pressure will reduce household disposable income.”

GERMANY (BBG): German Fiscal Chaos Risks Slowing Economic Rebound, OECD Says

Germany’s budget chaos is threatening to hold back the economy if uncertainty around the funding of climate and digitalization projects persists, according to the OECD. “Continuing political uncertainty related to the financing of support policies for firms and workers during the green transition could weigh on investment and private consumption,” the Paris-based institute said Wednesday in its latest outlook. “If more fiscal tightening is needed to sustain the spending plans of extra-budgetary funds, GDP growth and inflation will be lower,” it said.

GLOBAL (MNI): OECD Sees Weakest Growth Outside of Pandemic Since 2008

The OECD says global economic growth in 2024 will be the weakest since the 2008 financial crisis, except for the start of the pandemic, while stubborn core inflation means central banks will hold interest rates until the second half of next year. "We are projecting a soft landing for advanced economies, but this is far from guaranteed" the Paris-based group's chief economist Clare Lombardelli wrote to introduce the report. "Risks to the near-term global outlook remain tilted to the downside."

NATO (MNI): Foreign Ministers Meeting to End w/Ukraine Council; Sweden Accession 'Within Weeks'

The two-day NATO Foreign Ministers' meeting concludes in Brussels today with the Ukraine-NATO Council meeting, with Ukrainian Foreign Minister Dmytro Kuleba in attendance. At the meeting, Kuleba has come out strongly, claiming that the EU has delivered about 300k of the 1mn shells it promised to Ukraine. There remains significant concern in Kyiv that Western attention has been diverted to the Israel-Hamas war, and that European nations and the US are becoming more disinclined to provide masses of military and financial support as the war against Russia's invasion drags on.

ISRAEL/HAMAS (BBG): Israel-Hamas Truce Enters Final Day as Talks Drag Over Extension

As the truce between Israel and Hamas enters its final 24 hours, negotiators from Qatar, Egypt and the US are pressing for an extension to try to secure the release of additional captives and avert a resumption of a war that erupted almost two months ago. Just hours after Hamas turned over 12 more hostages — 10 Israelis and two Thai citizens — to the Red Cross, US President Joe Biden called for an end to the fighting and stepped up criticism of the group, which has been designated as a terrorist organization by the US and European Union, saying it feared nothing more than Israelis and Palestinians living side-by-side in peace.

BOJ (BBG): BOJ Board Member Signals Waiting for Longer Before Policy Move

Bank of Japan Board Member Seiji Adachi indicated his preference to wait at least until April to confirm a wage-inflation cycle is in place, in what appeared to be an attempt to cool market speculation over an early policy normalization move. “There seems to be emerging views that the bank is laying the groundwork for an exit, after October’s move to add flexibility to the BOJ’s yield curve control,” Adachi said in a speech to local business leaders Wednesday in Ehime, western Japan.

CHINA (MNI): China Should Buoy Growth to Woo Hesitant FDI - Advisors

MNI (Beijing) Warmer China-U.S. relations will not reverse the decline of foreign direct investment anytime soon, particularly in technology, and mainland authorities should pursue pro-growth policies to attract hesitant offshore capital especially as interest-rate spreads between the yuan and dollar remain wide, advisors told MNI. Direct investment liabilities – a broad measure of FDI – reached minus USD11.8 billion in Q3, the metric's first-ever quarterly deficit, data published by the State Administration of Foreign Exchange showed in November.

RBNZ (MNI): RBNZ Holds at 5.5%, Adjusts Peak OCR, CPI Calls

The Reserve Bank of New Zealand Monetary Policy Committee held the Official Cash Rate at 5.5% on Wednesday and slightly adjusted the pace it expects inflation to fall, while increasing its outlook for the OCR’s peak. Within its updated November Monetary Policy Statement, the RBNZ now expects annual CPI to fall to 2.9% by the September 2024 quarter, up from the previous 2.7% forecast made in August. The RBNZ targets inflation between 1-3%. The Reserve also expects the OCR to peak at 5.7% in the June 2024 quarter, up from 5.6% in the March 2024 quarter.

RUSSIA (MNI): Polish Military Advisors to Finnish Border May be Seen as Threat - Kremlin

Wires carrying comments from Kremlin spox Dmitri Peskov regarding the situation on the Russo-Finnish border. On report that Poland could send military advisors to help reinforce the Finnish border, Peskov states that 'Such moves can stoke tensions', and that, 'Finland should realise that Russia may regard such steps as a threat'. The heightened tensions relate to an increase in the number of migrants seeking to cross the border from Russia to Finland in recent weeks. Usually these crossings would see relatively few seeking to enter, but in November hundreds have sought to cross into Finland.

DATA

GERMANY NRW NOV CPI -0.3% M/M, +3% Y/Y (MNI)
GERMANY BAVARIA NOV CPI -0.4% M/M, +2.8% Y/Y (MNI)
GERMANY SAXONY NOV CPI -0.3% M/M, +3.9% Y/Y (BBG)
GERMANY BRANDENBURG NOV CPI +0.3% M/M, +4.1% Y/Y (BBG)
GERMANY HESSE NOV -0.4% M/M, +2.9% Y/Y (BBG)

SPAIN DATA (MNI): Unexpected Deceleration in Inflation With Sharp Slowdown in Core

• SPAIN NOV FLASH HICP -0.6% M/M, +3.2% Y/Y
• SPAIN NOV FLASH CPI -0.4% M/M, +3.2% Y/Y
• SPAIN NOV FLASH CORE CPI +4.5% Y/Y

Spanish November flash HICP came in clearly below consensus estimates at 3.2% Y/Y (vs 3.7% cons; 3.5% prior) and -0.6% M/M (vs -0.1% cons; 0.3% prior) including below the lowest analyst estimate (3.4%). The national CPI was also lower than consensus at 3.2% Y/Y (vs 3.6% cons; 3.5% prior). On a monthly basis, CPI was -0.4% M/M (vs 0.1% cons; 0.3% prior). Core CPI decelerated a further seven-tenths to 4.5% Y/Y (vs 5.0% cons; 5.2% prior) after coming down six-tenths last month.

UK OCT M4 MONEY SUPPLY +0.3% M/M, -3.8% Y/Y (MNI)
UK BOE OCT MORTGAGE APPROVALS 47,383 (MNI)
UK BOE OCT CONSUMER CREDIT GBP1.29 BLN (MNI)
UK BOE OCT SECURED LENDING GBP-0.05 BLN (MNI)

ITALY NOV CONSUMER CONFIDENCE 103.6 (MNI)
ITALY NOV BUSINESS CONFIDENCE 103.4 (MNI)

SWEDEN Q3 GDP -1.4% Y/Y (MNI)

MNI CHINA LIQUIDITY INDEX: Economic Outlook Dips in November

• NOV CHINA LIQUIDITY INDEX 56.4

MNI (Beijing) The MNI China Economy Condition Index dipped to 60.3 in November from October’s seven-month high of 69.2, with traders highlighting an uncertain outlook as retail sales improve but investment remains weak. Some 20.5% of participants perceived economic conditions to be worsening, up from 17.9% the previous month, after retail sales growth hit a five-month high 7.6% y/y in October, but growth in fixed-asset investment slowed to 2.9% growth year-to-date versus the same months of 2022, the lowest since December 2020 and down from 3.1% during January-September.

AUSTRALIA DATA (MNI): Aussie Monthly CPI Falls to 4.9%

The monthly Consumer Price Index rose 4.9% y/y in October from 5.6% the prior month, while trimmed CPI increased 5.1%, down from September’s 5.5%, data from the Australian Bureau of Statistics (ABS) showed Wednesday. The most significant contributors to the October annual increase were housing (6.1%), food and non-alcoholic beverages (5.3%) and transport (5.9%).

FOREX: EUR Fades Off Highs as Regional CPIs Slow Faster Than Forecast

• EUR/USD trades in decent volumes to pull lower off another higher high overnight. Today's reversal off the best levels is - at present - no risk to the broader uptrend after yesterday's break and show above 1.10. The Waller-inspired rally helped trigger a fifth session of higher highs overnight, and today's move lower is likely corrective in nature. This has kept the RSI from erring into overbought territory.
• EUR futures volumes sit around 50% ahead of average for this time of day - thanks to a sharp spike in activity that coincided with the soft Spanish CPI print.
• Largely due to the waning EUR, the USD Index is in positive territory, and a close at current or higher levels would prompt the first daily close in the green since Thursday last week. Despite the recovery off the November low, the USD Index remains in a short-term corrective cycle lower, with the 200-dma still a way above at 103.601.
• NZD is the firmest currency across G10, after the RBNZ rate decision kept headline policy unchanged, but signaled strongly that further hikes will follow in 2024 should CPI remain stubbornly high in the interim. NZD/USD is off the overnight high of 0.6208, but the uptrend remains intact. Further strength would open 0.6274 ahead.
• Prelim German CPI data takes focus later today, with regional CPI prints so far this morning supportive of consensus that looks for headline to slow to -0.1% from 0.0% and 3.5% from 3.8% Y/Y. US trade balance and secondary US GDP data is set to follow, as well as appearances from Fed's Mester, BoE's Bailey & Hauser.

EGBS: Firmer on Positive Inflation Data; Peripheries Tighter

Core/semi-core EGBs are off the day's best levels, but remain firmer on the day on the back of soft EZ inflation indications and dovish Fed-Speak yesterday.

• November flash inflation estimates from German states and Spain have pointed to a downside risk to the current Eurozone HICP consensus (at 2.7% Y/Y, released tomorrow @ 1000GMT). Yesterday's impetus came as Fed Governor Waller - an influential member of the FOMC - brought up the idea of US rate cuts in the coming months to maintain the level of real rates.
• Bund and OAT futures are both up around 40-50 ticks at typing, while the German 2s10s curve lightly bull steepens as 10-Year Bund supply would have limited the downside in yields. The OAT curve is seen bull flattening, with the 2s10s curve down -2.4bp today at -24.9bp.
• Peripheries outperform in line with the positive risk sentiment across markets, with the 10-Year BTP/Bund spread tightening 3.1bps to 172.4bps. The final 5/10-Year BTP auction of the year will have weighed in the lead up, but demand metrics came out reasonably strong with a decent auction price vs the pre-auction mid. News that the EC has approved Italy’s E16.5bln NGEU payout will have also been supportive.
• The remainder of today's docket sees the German national CPI print at 1300GMT, with no ECB speakers currently scheduled.

GILTS: Futures Mid-Range, Wider Core FI Rally Supports, Bailey Stresses Higher for Longer Again

Gilt futures sit mid-range, last +25 around 97.10.

• Cash gilt yields are 3-7bp lower on the day, with 5s leading.
• Wider core global FI swings have been the dominant factor for gilts since the open, with the late NY/Asia-Pac extension higher adding support, before the wider rally stalled.
• Familiar comments from BoE Governor Bailey re: the need for higher for longer rates added a domestic cap for the rally.
• Elsewhere, we saw another weak round of demand at the latest 2-year 3.50% Oct-25 gilt auction (see more on that here). This helped 2-year gilt yields away from session lows.
• SONIA futures last show flat to 8.5bp firmer, with the reds/greens leading the bid as the space looks to wider core global FI, as opposed to BoE speak, for direction.
• BoE-dated OIS shows flat to 5.5bp softer through ’24 MPC meetings.
• Terminal policy rate pricing now sits 5bp above prevailing SONIA levels. Beyond there, a 25bp cut is more than fully discounted through the August ’24 MPC, with ~71bp of cuts showing through ’24 on the whole. The space doesn’t challenge recent dovish extremes.
• Further comments from Bailey and outgoing BoE markets team head Hauser (unlikely to be market pertinent given the setting of the address) are due later today.

EQUITIES: Pullback in Eurostoxx 50 Futures Considered Corrective

A bullish theme in Eurostoxx 50 futures remains intact and the latest pullback appears to be a correction. The short-term trend condition is overbought and a move lower would allow this overbought reading to unwind. Moving average studies are in a bull-mode position signalling a rising cycle and the potential for a continuation higher. A resumption of gains would open 4388.00, the Aug 30 high. Initial firm support to watch is at 4290.00, the 20-day EMA. A bullish theme in S&P e-minis remains intact and the contract is holding on to its recent gains. A strong rally on Nov 14 resulted in the break of a trendline drawn from the Jul 27 high. This breach reinforces bullish conditions and signals scope for a climb towards 4597.50, the Sep 1 high. Moving average studies are in a bull-mode position highlighting an uptrend. On the downside, initial firm support is seen at 4473.54, the 20-day EMA.

• Japan's NIKKEI closed lower by 87.17 pts or -0.26% at 33321.22 and the TOPIX ended 12.21 pts lower or -0.51% at 2364.5.
• Elsewhere, in China the SHANGHAI closed lower by 16.866 pts or -0.56% at 3021.688 and the HANG SENG ended 360.7 pts lower or -2.08% at 16993.44.
• Across Europe, Germany's DAX trades higher by 169.87 pts or +1.06% at 16163.64, FTSE 100 lower by 14.31 pts or -0.19% at 7440.79, CAC 40 up 36.3 pts or +0.5% at 7286.43 and Euro Stoxx 50 up 29.08 pts or +0.67% at 4377.1.
• Dow Jones mini up 90 pts or +0.25% at 35535, S&P 500 mini up 12.5 pts or +0.27% at 4575.5, NASDAQ mini up 54.75 pts or +0.34% at 16103.25.

COMMODITIES: Strong Rally in Gold This Week Reinforces Bullish Set-Up

The trend outlook in WTI futures is unchanged and remains bearish. Attention is on support at $72.37, the Nov 16 low. A break of this level would confirm a resumption of the downtrend that started late September and maintain a price sequence of lower lows and lower highs. Moving average studies are in a bear-mode position, highlighting a downtrend. Key resistance is unchanged at $79.65, the Nov 14 high. 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 $1983.8, the 20-day EMA.

• WTI Crude up $0.79 or +1.03% at $77.19
• Natural Gas down $0.05 or -1.62% at $2.792
• Gold spot down $1.92 or -0.09% at $2039.05
• Copper up $0.45 or +0.12% at $384.1
• Silver down $0.09 or -0.35% at $24.9375
• Platinum down $4.91 or -0.52% at $939.87