MNI US OPEN - Israel-Hamas Cease-Fire Holds

NEWS

US/CHINA (BBG): US Navy Chief Aims to Deter China With Indo-Pacific Allies

The US will continue to work with allies to counter Beijing’s growing maritime capabilities, Washington’s new chief of naval operations said. The Indo-Pacific region “remains America’s foremost priority,” Admiral Lisa Franchetti said at an online briefing Friday from South Korea as she wrapped up a weeklong visit to the region. “By operating together, continuing to build our interoperability through exercise, training and planning, the United States and all of its allies and partners will continue to deter China and other potential adversaries around the world,” she said.

ISRAEL/HAMAS (WSJ): Israel-Hamas Cease-Fire Holds Ahead of Hostage and Prisoner Swap

A pause in fighting appeared to hold Friday in the Gaza Strip between Israel and Hamas as both sides anticipated an exchange later in the day of more than a dozen Israeli hostages for Palestinian prisoners. An initial group of 13 hostages, all women and children held by Hamas, are expected to be freed around 4 p.m. local time Friday as long as a temporary truce holds. A group of Palestinian prisoners, also women and children, are set to be released in return.

ECB (BBG): Lagarde Says ECB Can Now Observe Impact of All Its Rate Hikes

The European Central Bank is now at a point where it can pause and assess the impact of its tightening, according to President Christine Lagarde. “We have already done a lot,” Lagarde said. “Given the amount of ammunition we have used, we can observe very attentively the components of our lives like salaries, profits, like fiscal, like geopolitical developments and certainly the way in which our ammunition is impacting our economic life to decide how long we have to stay there and what decision we have to make — up or down.”

ECB (BBG): ECB’s Holzmann Says Equal Probability of Hike or Cut in 2Q24

European Central Bank Governing Council Member Robert Holzmann says there’s equal probability of a rate hike or cut in the second quarter of 2024, according to interview with Die Presse newspaper in Vienna. “For me, the probability that interest rates will rise again is no less likely than that there will be a reduction:” Holzmann. Holzmann says inflation remains high, despite moderation in recent months.

BOE (FT): BOE’s Pill Says UK Price Pressures Are Stubbornly High

The Bank of England will persist in its battle against high inflation, its chief economist Huw Pill tells Financial Times in an interview. Warns of “stubbornly high” price pressures in the UK economy. Slower growth in activity and employment is more supply-driven than demand-driven. Monetary policy committee seeks to deliver the monetary policy through time that will ensure a return to 2% inflation target. Says services price inflation and pay growth remain at “very elevated levels.”

UK (The Times): Autumn Statement Brings Tories Four-Point Bump in Polls

The Conservatives have recorded their highest poll rating since September as voters broadly welcomed the tax-cutting measures in Jeremy Hunt’s autumn statement. YouGov polling for The Times, carried out after the chancellor’s statement on Wednesday, found Tory support had increased by four points in a week to 25 per cent. It is the highest rating since mid-September and only three points below Sunak’s highest-ever rating last April.

NETHERLANDS (MNI): VVD Will Not Join Coalition, But Could Support PVV-Led Gov't

Justice Minister and leader of the centre-right People's Party for Freedom and Democracy (VVD) Dilan Yesilgz-Zegerius has stated that her party will not join the next governing coalition, but that it could prop-up a gov't led by the right-wing nationalist Party for Freedom (PVV) in a confidence-and-supply agreement. Yesilgz-Zegerius was speaking on her way into the House of Representatives, where Geert Wilders, as leader of the party that won most seats in the 22 Nov election, is set to appoint a scout who will have two weeks to sound out potential coalition partners.

MNI RIKSBANK REVIEW - NOVEMBER 2023: Attempted Hawkish Hold

The Riksbank held rates steady at 4.00%, contrary to the majority of analyst (and MNI’s) expectations of a 25bp hike. The policy statement and press conference attempted to convey the message that the policy rate could be raised further should the inflation outlook deteriorate. However, the MNI Markets Team – alongside all the analyst reviews we have seen – do not believe a further hike is likely given today’s decision.

CHINA (BBG): China Seen Holding Key Rate Until 2024, Economists Say

China will likely wait until early next year to cut policy rates to support the economy, though other forms of easing before the end of 2023 via trims to shorter-term rates or reserve ratios are still in the cards. That’s according to the latest Bloomberg survey of economists, in which respondents said they see the rate on China’s one-year medium-term lending facility staying put at 2.5% by the end of the year, compared with the previous median estimate of a five basis point trim.

CHINA (BBG): China Plans to Buy Pork for Reserves Again to Stimulate Prices

China will again purchase pork from local producers and traders for the nation’s reserves to try and boost ailing hog prices, as concerns mount over deflationary pressure on the world’s second-largest economy. Beijing has already conducted two rounds of pork buying for its stockpiles this year to try and stabilize the market. Hog prices jumped in July after a previous announcement by the National Development and Reform Commission for more purchases, before prices started trending lower again from early August.

CHINA (MNI): China Food Commodity Import Demand Has Peaked

MNI (Beijing) China’s import volumes of key food commodities such as soy, maize and wheat have likely peaked as the country seeks to increase domestic output on national security grounds, local analysts told MNI. Soy imports – used mainly as animal feed – will hit 100 million tonnes by year end but may decline slightly next year given government plans to reduce the pig breeding herd from the current 42.1 million sows to 41 million due to overcapacity, said Darin Frederichs, co-founder of Shanghai-based agriculture research firm Sitonia Consulting.

CHINA (MNI): Belt and Road to Promote Economic Integration

MNI (Beijing) China’s Belt and Road Initiative will promote better trade and financial integration during the next phase of the project, according to Zhou Zhongguo, deputy director at the Ministry of Commerce. Zhou, speaking at a press conference on Friday, said China saw great potential developing trade in services amongst its 'circle of friends', and would work to deepen cooperation on green infrastructure and energy.

BOJ (MNI): Solid Wage Data Needed Before BOJ April Exit Talk

The Bank of Japan will likely not obtain sufficient data on wage increases, particularly at smaller firms, needed to alter its easy policy settings before April, making an earlier adjustment unlikely, MNI understands. BOJ officials will formulate a rough idea on wages, including smaller firms, when the government releases its wages survey due mid-March, but they are preparing the market now for an easy policy exit in April should the data show a strengthening virtuous wage-price cycle.

RBNZ (MNI): MPC to Consider Pause as Inflation Falls

The Reserve Bank of New Zealand will consider holding its Official Cash Rate at 5.5% at its Nov 29 meeting, its last for 2023, and could pull forward its peak-rate forecasts within November's Monetary Policy Statement as inflation falls faster than expected. The Monetary Policy Committee's previous statement, in August, predicted the cash rate would peak at 5.6% by the March 2024 quarter with first rate cuts not expected until Q4, however, Q3 inflation has printed more softly than expected, while the labour market has weakened.

DATA

UK DATA (MNI): Confused UK Consumer Seeks Christmas Cheer - GFK

• UK NOV GFK CONSUMER CONFIDENCE INDEX -24

UK consumer confidence bounced back in November, recovering losses seen the previous month, but the volatility in recent readings suggests a country unsure of its economic outlook the head of a leading survey said Thursday. "Recent ups and downs in confidence underline the confusion consumers have at the moment, unable to gauge from one month to the next just what the outlook is," Gfk's Client Strategy Director Joe Staton told MNI in an interview.

GERMAN DATA (MNI): GDP Details Show Soft Consumption and External Sector Dynamics

German Final Q3 GDP was unrevised as expected at a seasonally adjusted -0.1% Q/Q (+0.1% Q2), and -0.8% Y/Y (-0.4% prior). The final release includes a breakdown of GDP components that is unavailable in the initial print, and it showed that private consumption and inventories were the most significant drags in the quarter, as household savings remained elevated.

GERMANY NOV IFO BUSINESS CLIMATE INDEX 87.3 (MNI)
GERMANY NOV IFO EXPECTATIONS 85.2 (MNI)
GERMANY NOV IFO CURRENT COND 89.4 (MNI)

JAPAN DATA (MNI): Japan Oct Core CPI Rises 2.9% vs. Sept's 2.8%

• JAPAN OCT CORE CPI +2.9% Y/Y; SEPT +2.8%
• JAPAN OCT CORE-CORE CPI +4.0% Y/Y; SEPT +4.2%
• JAPAN OCT CPI ENERGY COST -8.7% Y/Y; SEPT -11.7%
• JAPAN OCT CPI FOOD EX-PERISHABLES +7.6% Y/Y; SEPT +8.8%

The y/y rise of Japan's annual core consumer inflation rate accelerated to 2.9% in October from September’s 2.8%, above the Bank of Japan’s 2% target for the 19th consecutive month, data released by the Ministry of Internal Affairs and Communications showed on Friday. The underlying inflation rate measured by the core-core CPI (excluding fresh food and energy) rose 4.0% y/y in October, slowing from September's 4.2% for the second straight deceleration.

FOREX: EUR/GBP Flirting With Key Support

• Currency markets and asset markets in general are sanguine and rangebound early Friday, with the USD Index in minor negative territory to start the day.
• AUD, NZD are very modestly firmer, but any gains are anchored by a soft session for Chinese equities, as profit-taking pushed indices lower after property support speculation news earlier in the week.
• EUR/GBP sits toward the bottom-end of the week's range, with the cross narrowing in on key support levels at both 0.8687 as well as 0.8681, marking the 50- and 200-dmas respectively. The former has held as support on several occasions in the past few months, meaning bears could become more confident on a break of the mark to expose 0.8650 and below over the medium-term.
• It's likely to be a second quiet session for US assets, with an early US close as the Thanksgiving break extends into the weekend. There are sporadic data releases, with Canadian retail sales and prelim S&P PMI data for November on the docket. The central bank speaker slate consists of ECB's de Guindos and de Cos both appearing at S'Agaro conference in Spain.

BONDS: Cheaper Again, But Off Worst Levels

Asian impulses and hawkish reiterations from ECB’s Holzmann & BoE’s Pill helped core global FI lower early on Friday.

• Modest misses were seen in the German ifo data, although the President of the body noted that the German economy has probably moved beyond the depths of the economic downturn, while expressing worry re: the fiscal situation.
• Recent comments from ECB President Lagarde reiterated the degree of caution that the ECB holds re: further immediate progress on inflation, alongside a re-flagging of the distance already travelled on that front.
• EUR 5y5y inflation swaps have extended their bounce from recent multi-month lows, which will have provided some background pressure for bonds.
• Bund futures found a bit of a base around intermediate support before recovering from lows.
• The contract last shows -30, at 130.25, ~15 off the low of its ~50 tick range. German benchmark yields are 2-3bp firmer on the day, light bear steepening seen.
• EGB spreads to Bunds are typically a touch tighter.
• Gilts have breached another technical support level, although the move ran out of steam before bears could get anywhere near a key support zone (94.84/58, the 50-day EMA /Nov 13 low). The contract last prints -55 around 95.40, ~35 ticks off lows.
• Cash gilt yields sit 0.5-4.0bp higher on the day, with the curve bear steepening. SONIA futures and BoE-dated OIS have seen some hawkish moves post-Pill, but haven’t tested yesterday’s extremes.
• ECB speak from de Guindos and de Cos is due later in the day, with the highlight from a Thanksgiving-thinned/curtailed session set to come in the form of the flash U.S. S&P Global PMI readings.

EQUITIES: E-Mini S&P Steadies Close to Cycle Highs

A short-term bull cycle in Eurostoxx 50 futures remains intact and the contract is holding on to this week’s highs. Moving average studies are in a bull-mode position signalling a rising cycle and the potential for a continuation higher. The recent breach of resistance at 4256.00, the Oct 12 high, reinforced the bullish theme. The focus is on 4388.00, the Aug 30 high. Initial firm support to watch is at 4263.00, the 20-day EMA. A bullish theme in S&P e-minis remains intact. Recent gains have 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 4441.90, the 20-day EMA.

• Japan's NIKKEI closed higher by 173.7 pts or +0.52% at 33625.53 and the TOPIX ended 12.75 pts higher or +0.54% at 2390.94.
• Elsewhere, in China the SHANGHAI closed lower by 20.884 pts or -0.68% at 3040.972 and the HANG SENG ended 351.42 pts lower or -1.96% at 17559.42.
• Across Europe, Germany's DAX trades higher by 9.61 pts or +0.06% at 16003.68, FTSE 100 lower by 25.75 pts or -0.34% at 7457.83, CAC 40 up 5.12 pts or +0.07% at 7283.4 and Euro Stoxx 50 up 3.36 pts or +0.08% at 4364.6.
• Dow Jones mini up 61 pts or +0.17% at 35379, S&P 500 mini up 5.25 pts or +0.11% at 4572.5, NASDAQ mini up 16 pts or +0.1% at 16065.

COMMODITIES: Bullish Gold Trades Shy of Key Resistance at $2009.4

A bearish theme in WTI futures remains in play and recent gains are considered corrective. The break lower last week marked an extension of the downtrend that started late September and this has maintained a price sequence of lower lows and lower highs. Moving average studies are in a bear-mode position, highlighting a downtrend. The focus is on $70.96, a Fibonacci retracement. Key resistance is unchanged at $79.65, Nov 14 high. The trend condition in Gold remains bullish and this week’s gains reinforce this condition. The latest recovery signals scope for a test of key short-term resistance at $2009.4, the Nov 7 high. Clearance of this hurdle would confirm a resumption of the uptrend and pave the way for a climb towards $2022.2, the May 15 high. Key support has been defined at $1931.7, the Nov 13 low. A break would signal a potential reversal.

• WTI Crude down $0.4 or -0.52% at $76.69
• Natural Gas down $0.01 or -0.41% at $2.884
• Gold spot up $1.52 or +0.08% at $1993.79
• Copper up $0.35 or +0.09% at $381.2
• Silver up $0.01 or +0.05% at $23.6925
• Platinum up $3.46 or +0.38% at $922.07