MNI US OPEN - Lane Sees Smaller Hikes Up For Debate

NEWS

ECB (MNI): ECB To Consider Smaller December Hike - Lane

The European Central Bank will consider reducing its pace of rate increases at its Dec 15 meeting, but it is too early to say when its hiking cycle will pause, as policymakers weigh signs that bank lending conditions are already tightening against accelerating wage inflation, chief economist Philip Lane told MNI.

See full text of interview with ECB Chief Economist Philip Lane here

ECB (MNI): ECB Has Done Enough for Collateral Squeeze - Lane

European Central Bank moves including its decision earlier this month to raise the limit on its securities lending against cash to EUR250 billion make further measures to ease a potential year-end collateral squeeze unnecessary, ECB chief economist Philip Lane told MNI.

GLOBAL (BBG): Goldman Sachs Strategists Say Bear Market Will Last in 2023

Equity investors hoping for a better year in 2023 will be disappointed, according to Goldman Sachs Group Inc. strategists, who said the bear market phase is not over yet. “The conditions that are typically consistent with an equity trough have not yet been reached,” strategists including Peter Oppenheimer and Sharon Bell wrote in a note on Monday.

US/CHINA (BBG): US, China Defense Chiefs Likely to Meet as Ties Stabilize

The US and Chinese defense chiefs are likely to meet for their first talks since Beijing suspended dialog with Washington over House Speaker Nancy Pelosi’s August visit to Taiwan -- the latest sign that ties between the two nations are stabilizing.

CHINA (BBG): Covid Zero Returns to Chinese City Rumored to Be Reopening

A city near Beijing that was rumored to be a test case for China dispensing with all virus restrictions has suspended schools, locked down universities and asked residents to stay at home for five days, a potential sign officials are reverting to tighter Covid Zero curbs as cases multiply.

CHINA (MNI): China Must Keep Reforming to Lure Big Business

China has been left more reliant on large global businesses for direct foreign investment as strict Covid rules have alienated small and medium-sized firms, with prospective investors keen for Beijing to provide greater access and policy clarity, British Chamber of Commerce China managing director Steven Lynch told MNI.

CHINA (MNI): China's Nov Loan Prime Rate Unchanged

China's reference lending rate remained unchanged on Monday, which was in line with market expectations as the central bank kept a key policy rate steady last Tuesday. The Loan Prime Rate, based on the rate of People's Bank of China's Medium-term Lending Facility and quotes submitted by 18 banks, remains at 3.65% for the one-year maturity and 4.3% for over-five-years, according to a statement on the PBOC's website.

JAPAN (MNI): BOJ’s 2% Target Isn’t “Appropriate” - Yamamoto

The Bank of Japan’s 2% inflation target isn’t appropriate, and the next governor should assess whether it should be changed as the easy money policies deployed to achieve it have delayed structural reforms needed to boost productivity and wages, former BOJ executive director Kenzo Yamamoto told MNI.

NEW ZEALAND (MNI): 75bp On Table, Higher Peak Rate Seen

The Reserve Bank of New Zealand will consider raising the intensity of its tightening campaign with a 75bp hike at its Nov 23 meeting as it struggles to rein in inflation, with policymakers set to unveil a higher forecast for the peak of interest rates in the accompanying Monetary Policy Statement.

DATA

GERMANY PPI 34.5% Y/Y (EXP: 42.1%); PRIOR 45.8% (BBG)

GERMANY PPI -4.2% M/M (EXP: 0.6%); PRIOR 2.3% (BBG)

FX SUMMARY: ECB's Lane Adds Extra Weight to EUR

• The single currency started the session poorly, and weakened further upon release of an MNI interview with ECB's Lane. Lane flagged that the ECB will consider a slower pace of tightening at the December meeting, with the governing council weighing signs that bank lending conditions are already tightening against accelerating wage inflation.
• EUR/USD traded a low at 1.0226 Monday, narrowing the gap with support at 1.0193 - the 38.2% retracement for the November upleg.
• Risk sentiment has suffered from the off, with equity futures lower on both sides of the pond. Moves follow the deterioration in China's COVID backdrop as a number of regional governments reintroduced mobility restrictions after infections rose at the fastest rate since April.
• JPY is the poorest performer in G10, with USD/JPY boosted by the firmer Dollar Index and putting the pair above the previously well-held 100-dma resistance of 141.03. 142.48 marks the next upside level, the November 11th high.
• Datapoints are few and far between Monday, with just the Chicago Fed National Activity Index on the docket. ECB's Holzmann, Centeno and Nagel speak, as well as Fed's Daly.

BOND SUMMARY: Curves Mixed To Start The Week

Global bonds are weaker to start Monday, with a risk-off atmosphere not providing much support or indeed direction across curves (Germany bear steepening, UK bear flattening, US pretty steady).

• MNI's interview with ECB Chief Econ Lane out earlier had multiple highlights: sees GC considering reducing the pace of hikes at the Dec meeting; thinks enough has been done already to relieve collateral shortages.
• With US holidays looming at the end of the week, and the Dec/Mar roll just beyond that, much of the futures activity early has been spread-related.
• Quiet US data (Chicago Fed Nat'l Activity Index at 0830ET) and central bank (SF Fed's Daly at 1300ET) slate ahead, with European speakers still plentiful (ECB's Vasle, Holzmann, Simkus, Centeno, Nagel all on the agenda).

Latest levels:

• Dec US 10-Yr futures (TY) down 4.5/32 at 112-05 (L: 112-04 / H: 112-17.5)
• Dec Bund futures (RX) down 31 ticks at 139.87 (L: 139.55 / H: 140.53)
• Dec Gilt futures (G) down 24 ticks at 105.46 (L: 105.21 / H: 105.93)
• Dec BTP futures (IK) down 76 ticks at 118.48 (L: 118.42 / H: 119.49)
• Italy / German 10-Yr spread flat at 188.4bps

EQUITIES: Equity Futures Maintain Bullish Tone

A bullish EUROSTOXX 50 futures outlook remains intact and price is trading just below its recent highs. Resistance at 3810.00, the Aug 17 high and an important bull trigger, has recently been breached, strengthening the case for bulls Furthermore, moving average studies remain in a bull mode set-up, highlighting positive market sentiment. The focus is on 3944.00, Mar 29 high on the continuation chart. Initial firm support lies at 3697.00, the Nov 10 low. The short-term outlook in S&P E-Minis remains bullish and a pullback would be considered corrective. A bullish theme follows recent strong gains that resulted in a break of 3928.00, the Nov 1 high. This strengthens a short-term current condition and price has established a sequence of higher highs and higher lows on the daily scale. The focus is on 4100.00 next. On the downside, key short-term support is at 3704.25, the Nov 3 low.

COMMODITIES: Gold Pullback Considered Corrective

WTI futures remain bearish and the contract traded lower again Friday. This confirms an extension of the reversal from $93.74, Nov 7 high. Support at $81.30, Oct 18 low and a bear trigger, was cleared Friday. $79.96, 76.4% of the Sep 26 - Nov 7 bull phase has also been breached. Attention turns to $75.70, the Sep 26 low and the next key support. Initial firm resistance is seen at $86.54, the 50-day EMA. Short-term trend conditions in Gold remain bullish and the latest pullback is considered corrective. Recent gains resulted in the break of $1729.5, the Oct 4 high. This strengthens the current bullish theme and signals scope for $1800.0 and a key resistance at $1807.9, Aug 10 high. On the downside, initial firm support is seen at $1702.3, the Nov 9 low. The bull trigger is at $1786.5, the Nov 15 high.

• WTI Crude down $0.58 or -0.72% at $79.5
• Natural Gas down $0.02 or -0.32% at $6.277
• Gold spot down $8.66 or -0.49% at $1741.22
• Copper down $1.9 or -0.52% at $363.3
• Silver down $0.21 or -0.99% at $20.7705
• Platinum down $9.17 or -0.93% at $971.78