MNI US OPEN - Lane Sees EZ Inflation Close to Peak

NEWS

EUROPE (MNI): EZ Inflation 'Likely Close to Peak' - ECB's Lane

Headline inflation in the eurozone is likely close to a peak, although the high point may have been in November or come in early 2023, European Central Bank chief economist Philip Lane said in an interview published Tuesday. "The main uncertainty is that we’ve seen so much volatility in gas prices," Lane told Milano Finanza, add that "given the significant increase in prices, I don’t rule out some extra inflation early next year."

EUROPE (MNI): Financing, Energy, Labour Hitting EZ Firms - ECB

Business activity among euro area firms continues to improve, but increased materials, energy and labour costs are dampening profitability, the European Central Bank reported on Tuesday, with access to external funding expected to deteriorate despite banks’ current willingness to lend.

HUNGARY/EU (BBG): EU Delays Hungary Funds Decision to Weigh Rule-of-Law Concerns

European Union member states pushed back a final decision on nearly $8 billion of funding for Hungary to weigh recommendations to freeze the money due to graft and rule-of-law concerns under Prime Minister Viktor Orban. Finance ministers meeting in Brussels on Tuesday took the issue off their formal agenda, according to an EU official. A decision is due by Dec. 19.

GERMANY (MNI): Constitutional Court Dismisses Challenge to NextGenEU Funds

As was widely expected, the German Constitutional Court has dismissed two cases regarding the Bundestag's approval of EUR750bn in COVID-19 recovery funding deemed 'Next Generation EU'. The Court often has cases brought to it regarding EU funding and programmes. The petitioners - former Alternative for Germany head Bernd Lucke and former BDI head Heinrich Weiss - sought to have the court strike down NextGenEU due to its permitting of the EU taking on joint debt to fund the programme.

RUSSIA (BBG): Russia Says Strikes Aim to Crush Ukraine Military Potential: IFX

Russia launches massive missile strikes on various facilities in Ukraine to crush its military potential, Russian Defense Minister Sergei Shoigu says, according to Interfax. Russian armed forces target military administration system, defense-industrial complex enterprises, related facilities.

AUSTRALIA (MNI): RBA Hikes By 25bps, February Increase on Radar

The Reserve Bank of Australia could increase rates again in February before pausing after it failed to deliver the overtly dovish tweak to guidance some had expected as it hiked by 25bps to a 10-year high on Tuesday. With two months until its Feb 7 meeting, the RBA afforded itself some policy flexibility by stating it remained data dependent and wasn't on a "preset course" as it raised rates to 3.1%, capping a run of eight consecutive hikes that have delivered 300bps of tightening since May.

JAPAN (MNI): Premature to Review Policy Framework - BOJ's Kuroda

Bank of Japan Governor Haruhiko Kuroda said on Tuesday that it was premature for the BOJ to review its policy framework as the 2% price target hadn’t been achieved. However, Kuroda told lawmakers that “if the achievement of 2% price target closes, the BOJ will send necessary information” with regard to an exit strategy.

DATA

EUROZONE NOV CONSTRUCTION PMI 43.6; OCT 44.9 (MNI)

GERMANY OCT FACTORY ORDERS +0.8% M/M (MNI)

UK NOV CONSTRUCTION PMI 50.4 (FCST 52.0); OCT 53.2 (MNI)
UK BRC NOV BY VALUE SHOP SALES LFL +4.1% YY, TOTAL +4.2% YY (MNI)

JAPAN OCT HOUSEHOLD SPENDING +1.2% Y/Y; SEP +2.3% (MNI)

FX SUMMARY: CAD Replaces JPY as Poorest Performer in G10

• CAD has taken the place of the JPY as the session's poorest performer, slipping ahead of the Bank of Canada rate decision due on Wednesday. The Bank are expected to raise rates by a further 50bps to 4.25% at tomorrow's decision, but markets are instead focusing on the weaker oil price and more negative risk backdrop, as US futures point to no real relief rally for equities after yesterday's sharp decline.
• The corrective rally in USD/JPY extended overnight, putting the pair at 137.42 before fading slightly into NY hours. Any extension higher would open 139.68, the 20-day EMA. This average is seen as the first key short-term resistance. On the downside, the bear trigger is 133.63, the Dec 2 low.
• Little option influence at current JPY prices for today's cut, with few nearby expiries to drag spot in either direction - nonetheless, the pipeline for this week is tilted higher, with between $8 - 9bln notional due to roll off between Y140.00 and Y143.00 into Friday's 10am NY cut that may be exerting an influence.
• Risk reversals look to have bottomed out, supporting a corrective bump higher in spot for now, with the 1m contract rising well above the intervention-inspired lows this year in September and October.
• AUD outperforms following the RBA rate decision, at which the bank raised rates alongside expectations but also signaled further tightening is to come in 2023.
• There are no central bank speakers due Tuesday, with only tier 2 data on the docket, as US and Canadian trade balance data cross ahead of the Wall Street opening bell.

BOND SUMMARY: Bunds Higher After Initial Weakness

• After reaching their lowest level of the month following German factory orders data this morning, Bund futures have reversed course and are now around 60 ticks off their intraday lows, back within yesterday's trading range. Gilts and Treasuries are little changed on the day.
• We have seen the first of two gilt auctions and a Schatz auction this morning. This afternoon's BOE Financial Stability Portfolio sales will only see linkers on offer due to the DMO's long-dated conventional gilt auction.
• TY1 futures are up 0-5+ today at 114-01 with 10y UST yields down -0.2bp at 3.574% and 2y yields down -2.1bp at 4.368%.
• Bund futures are up 0.23 today at 142.00 with 10y Bund yields down -1.4bp at 1.863% and Schatz yields unch at 2.057%.
• Gilt futures are up 0.09 today at 106.22 with 10y yields down -0.5bp at 3.094% and 2y yields down -4.8bp at 3.234%.

EQUITIES: Recent Pullback in Equity Futures Looks Corrective

EUROSTOXX 50 futures trend conditions remain bullish and S/T pullbacks are considered corrective - for now. Recent high prints mark an extension of the uptrend that started in early October and confirms a continuation of the price sequence of higher highs and higher lows. The recent break of 3810.00, Aug 17 high, also strengthens the case for bulls. The focus is on 4049.50, Feb 23 high (cont). Initial firm to watch support is 3840, Nov 17 low. S&P E-Minis remain in an uptrend and short-term pull backs are considered corrective - for now. Gains last week resulted in a break of resistance at 4050.75, the Nov 15 high. This confirms a resumption of the uptrend and marks an extension of the price sequence of higher highs and higher lows. Sights are on 4146.63, a Fibonacci retracement. On the downside, key short-term support has been defined at 3912.50, the Nov 17 low.

• Japan's NIKKEI closed higher by 65.47 pts or +0.24% at 27885.87 and the TOPIX ended 2.32 pts higher or +0.12% at 1950.22.
• Elsewhere, in China the SHANGHAI closed higher by 0.719 pts or +0.02% at 3212.533 and the HANG SENG ended 77.11 pts lower or -0.4% at 19441.18.
• Across Europe, Germany's DAX trades lower by 21.53 pts or -0.15% at 14424.81, FTSE 100 lower by 17.86 pts or -0.24% at 7550.24, CAC 40 down 16.5 pts or -0.25% at 6680.46 and Euro Stoxx 50 down 8.48 pts or -0.21% at 3948.05.
• Dow Jones mini up 58 pts or +0.17% at 34046, S&P 500 mini up 8.25 pts or +0.21% at 4011.75, NASDAQ mini up 30.5 pts or +0.26% at 11836.5.

COMMODITIES: Monday Dip Highlights Bearish WTI Theme

Trend conditions in WTI futures remain bearish and yesterday’s move lower highlights this theme. The sell-off on Nov 28, resulted in a break of $74.96, Sep 28 low. This confirmed a resumption of the downtrend, opening $73.38, a Fibonacci projection and the $70.00 psychological handle. Moving average studies are in a bear mode condition, highlighting the current trend direction. Resistance is at $83.40, the 50-day EMA. Trend conditions in Gold remain bullish and yesterday’s retracement - for now - appears to be a correction. Last week’s gains reinforce a bullish theme and price has breached $1786.5, Nov 15 high and a bull trigger, confirming a resumption of the uptrend. $1800.0 has also been cleared and sights are on resistance at $1807.9, Aug 10 high (pierced yesterday). A clear break would be bullish. Key trend support has been defined at $1729.0, the Nov 23 low.

• WTI Crude up $0.42 or +0.55% at $77.42
• Natural Gas down $0.05 or -0.95% at $5.525
• Gold spot up $3 or +0.17% at $1771.99
• Copper up $1.95 or +0.51% at $381.55
• Silver up $0.2 or +0.88% at $22.457
• Platinum down $5.02 or -0.5% at $996.63