MNI US OPEN - Nagel Retains Hawkish Tone, Defers Rate Cut Talk

NEWS

ECB (MNI): Inflation To Climb Above 3% Then Fall Back - Nagel
Eurozone headline inflation will return to a level above 3% with the ECB “still a considerable distance” away from its target level, Bundesbank president Joachim Nagel said in a speech Tuesday. “We expect a bumpy road ahead, with ups and downs in inflation over the near future,” Nagel said. “In October, the inflation rate was slightly below 3% for the first time since July 2021. But we will see a return of numbers with a three before the decimal point. This is largely the result of a base effect.”

GERMANY (BBG): Scholz Pledges Budget Ruling Won’t Halt German Transformation
German Chancellor Olaf Scholz promised that his government will forge ahead with investments needed to modernize the economy and maintain international competitiveness even after this month’s court ruling upended its budget planning. The Constitutional Court judgment means Scholz’s ruling alliance has to move tens of billions of euros in special funds into the regular federal budget. That will drastically limit its room for maneuver and potentially threatens projects ranging from greening manufacturing to building out solar energy and expanding battery and semiconductor production.

BOE (BBG): UK Inflation Is Becoming More Home-Grown, BOE’s Ramsden Says
UK inflation is becoming more “home-grown” and will be “challenging to squeeze out of the system,” according to Bank of England Deputy Governor Dave Ramsden. Speaking in a Bloomberg TV interview from Hong Kong, Ramsden said monetary policy would have to stay “restrictive for an extended period of time” in order to get inflation back down from 4.6% to the 2% target. That’s despite BOE forecasts which show a bleak growth outlook for the economy, with the 50-50 chance that it will dip into a recession.

NATO (MNI): Foreign Mins Meeting To Start w/Focus On Level Of Ukraine Support
The NATO foreign ministers' meeting - the first since the NATO summit in Vilnius in July - gets underway in Brussels with Secretary-General Jens Stoltenberg's doorstep comments at 1100CET (0500ET, 1000GMT). Foreign ministers from NATO members will deliver doorstep comments throughout the morning. Stoltenberg then delivers presser alongside US Secretary of Defence Lloyd Austin III at 1300CET, followed by opening remarks at the North Atlantic Council meeting 30 mins later. End of day presser at 1630CET.

ISRAEL (The Times): Hamas frees 11 hostages as truce extended by two days
Eleven Israelis were freed by Hamas and 33 Palestinians released from prison as the fragile truce in Gaza was extended by two days. Their release came just hours before the deadline for the original four-day ceasefire was set to end. The Israelis were all either women or children and arrived back in Israel just before midnight local time.

NORWAY (MNI): Q4 Regional Network Growth Figures Show Divergence Across Industries
Norges Bank have released expected growth figures from their Q4 regional network survey "due to the publication in error of some preliminary data from this round in the slides accompanying the Governor's speech Monetary policy in the face of cost shocks". At face value, the initial results suggest continued outperformance of the oil sector as in the Q3 report, while construction and retail trade contacts expect declines in growth in both Q4 2023 and Q1 2024. The release date for the full report and data is 7 December.

RBA (MNI): Challenge To Reduce Domestic Inflation, Demand Resilience Surprised
RBA's Bullock reiterated many of her previous comments from this month and so she didn't alter the view that stronger-than-expected demand and inflation may mean further tightening depending on the outlook. She said that the main challenge for the RBA going forward will be to reduce domestic inflationary pressures. Bullock said that more resilient demand had led to second round effects from increased costs related to supply shocks on domestic inflation. Robust demand has enabled businesses to maintain their profit margins and thus pass on higher costs.

MNI RBNZ Preview - November 2023: Economy Developing Broadly As Expected
We expect the RBNZ to leave rates at 5.5%, where they have been since May, at its final meeting for 2023. Bloomberg consensus is unanimous at 5.5%. As a result, the focus will be on the accompanying updated forecasts, statement and press conference.
In terms of projections, there are likely to be some near-term revisions with the medium-term little changed, which is the time horizon that the MPC focuses on. As the economy is evolving broadly as the RBNZ expected, the OCR forecast is likely to be little changed and headline CPI inflation still return to target in Q3 2024. See full preview here: https://roar-assets-auto.rbl.ms/files/58209/MNI%20RBNZ%20Preview%20November%202023.pdf

CHINA (MNI): PBOC To Keep Monetary Policy Accommodative
The People’s Bank of China will keep monetary policy accommodative to support the economy, as focus shifts to improving economic structure and forming new growth drivers, said PBOC Governor Pan Gongsheng in a keynote speech at the HKMA-BIS High-Level Conference on Tuesday, according to a statement on the central bank website.

TAIWAN (BBG): Taiwan Cuts 2023 Growth Outlook to Lowest Since Financial Crisis
Taiwan cut its growth forecast for this year to the slowest pace since the global financial crisis in a setback to the ruling Democratic Progressive Party ahead of January elections. The economy will likely expand 1.42% in 2023, the statistics bureau said in a statement Tuesday. That would be the weakest annual growth since 2009, and compared with an August projection of 1.6%. Gross domestic product is set to grow 3.35% in 2024, up slightly from an earlier forecast of 3.32%.

JAPAN (MNI): BOJ’s JGB Unrealised Loss Rises To JPY10.5 Trln
The Bank of Japan posted JPY10.5 trillion of unrealised losses from its Japanese government bond portfolio for the April-September period Tuesday, up from JPY157.1 billion at the end of March. The BOJ reported unrealised losses of JPY874.9 billion over same period last year, the first time since it launched unconventional monetary easing in April 2013.

DATA

MNI: FRANCE NOV CONSUMER SENTIMENT 87

MNI: UK NOV BRC SHOP PRICES +0% M/M, +4.3% Y/Y

MNI BRIEF: Japan's Oct Trimmed Mean Rises 3.0% Vs. Sept 3.4%
Japan's trimmed mean measure of underlying inflation rose 3.0% in October, slowing from a record high of 3.4% y/y in September, showing pass-through of cost increases slowed as the import prices fell for the seventh straight month, data released by the Bank of Japan on Tuesday showed. Data released Friday showed Japan's annual core consumer inflation rate rose 2.9% y/y in October, up from September's 2.8%, the 19th straight month above the 2% target and the first acceleration in four months.

MNI BRIEF: Aussie Retail Sales Fall In October
Australian retail turnover fell 0.2% in October from September’s 0.9% increase and August’s 0.2% gain, according to figures released today by the Australian Bureau of Statistics today. All retail categories suffered except food, which increased 0.5%. “It looks like consumers hit the pause button on some discretionary spending in October, likely waiting to take advantage of discounts during Black Friday sales events in November,” said Ben Dorber, head of retail statistics at the ABS. “This is a pattern we have seen develop in recent years as Black Friday sales grow in popularity.”

FOREX: USD Index Off Lows, But Corrective Pullback Could Persist

• The USD Index is just off lows, but remains in close proximity to multi-month lows posted in overnight Asia-Pac trade at 103.074. This keeps the USD pullback intact ahead of month-end, with first key support at 102.546 the next downside target: the 61.8% retracement of the uptrend drawn off the July low. To the upside, any extended recovery will have to top the 200-dma of 103.612.
• The JPY is modestly outperforming, higher against most others amid generally softer global equity markets. The e-mini S&P saw weakness overnight to trade 4550.50 alongside the European open. Moves are contained at present, however, keeping the equity uptrend intact headed into month-end.
• Oil and commodity-tied currencies are seen firmer, helped by WTI and Brent crude futures inching off pre-OPEC meeting lows. Resultingly, AUD and CAD are firmer and toward the top of the G10 table. AUD/USD printed a new cycle high Tuesday at 0.6632, making for a clean break of the 200-dma resistance after the close above on Monday.
• Focus Tuesday turns to the US consumer confidence release for November and the Richmond Fed Manufacturing Index. Fedspeak picks up after the Thanksgiving break, with Goolsbee, Waller, Bowman, Barr, and Paese all set to appear. Outside of the Fed, ECB's Lagarde, Lane and BoE's Haskel make appearances.

EGBS: Two Way Flows Seen Tuesday; Periphery Spreads Widen

Core/semi-core EGBs currently sit mixed following two-way flows through this morning. After starting the day firmer alongside global core FI markets, Bund and OAT futures reversed course toward intraday lows before stabilising.

• Typically hawkish comments from ECB’s Nagel seemed to have a little more impact than they would normally given the dovish repricing that had been seen early this week.
• Bund futures are currently up 0.08 ticks today at 131.40 with 10y Bund yields up 0.3bp at 2.550% and Schatz yields down -0.9bp at 2.972%. The German cash curve is seen lightly twist steepening on the 10s, while OAT yields are flat to 2bp higher across the board.
• Euro area money supply for October was the data highlight this morning but had little meaningful market impact. Y/Y M3 growth came in a touch below consensus at -1.0% Y/Y and while household lending growth was revised lower to 0.6% Y/Y vs the prelim of 0.8%.
• Peripheries are generally seen underperforming, with spreads to Bunds tighter. The 10-Yr BTP/Bund spread is 5.1bps wider at 178.5bps, continuing the widening momentum seen following Lagarde's comments yesterday re: discussing PEPP reinvestments in the "not too distant future".
• The remainder of today's calendar is light, with Lagarde delivering a pre-recorded message at the European Financial Reporting Advisory Group Conference at 1600GMT. ECB's Lane also speaks after hours in a seminar on macroeconomic policy.

GILTS: Soft Oct-53 Auction Facilitates Light Steepening Of Curve After Early Two-Way Flow

Early flow was generally guided by that seen in wider fixed income markets, with yield support levels in Bunds and typically hawkish communique from the head of the German Bundesbank helping cap the early broad bid in core global FI markets.

• A near 18-month low for the rate of inflation lodged in the BRC shop price index will have provided some domestic support at the gilt open, while comments from BoE Deputy Governor Ramsden re: a more homegrown element to inflation and a reiteration of the Bank’s higher for longer mantra probably factored in to limiting the early bid.
• Gilt futures show just above worst levels of the day, -10 or so, after printing above yesterday’s high early on.
• Cash gilts yields are flat to 2.5bp higher on the day. The presence of GBP2.75bn of 3.75% Oct-53 supply provided a modest steepening impulse during early trade. That extended post-auction, given a relatively weak round of demand metrics (more on that here).
• SONIA futures have traded either side of unchanged on the day, tracking gilts/wider bonds, last showing flat to -1.5bp.
• BoE-dated OIS contracts are little changed to 1bp softer on the day through ’24 MPC meetings.
• Comments from BoE hawk Haskel headline the domestic docket during the remainder of today’s session.

EQUITIES: Bullish Theme Across Equity Futures Persists Into December

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. A bullish theme in Eurostoxx 50 futures remains intact and the contract is trading closer to its recent highs. Moving average studies are in a bull-mode position signalling a rising cycle and the potential for a continuation higher.

• Japan's NIKKEI closed lower by 39.28 pts or -0.12% at 33408.39 and the TOPIX ended 5.05 pts lower or -0.21% at 2376.71.
• Elsewhere, in China the SHANGHAI closed higher by 6.854 pts or +0.23% at 3038.554 and the HANG SENG ended 170.92 pts lower or -0.98% at 17354.14.
• Across Europe, Germany's DAX trades lower by 38.6 pts or -0.24% at 15929.43, FTSE 100 lower by 42.89 pts or -0.57% at 7419.51, CAC 40 down 46.34 pts or -0.64% at 7222.54 and Euro Stoxx 50 down 23.15 pts or -0.53% at 4332.46.
• Dow Jones mini down 26 pts or -0.07% at 35347, S&P 500 mini down 4.5 pts or -0.1% at 4553.75, NASDAQ mini down 30.25 pts or -0.19% at 15975.5.

COMMODITIES: Trend Outlook in WTI Remains Bearish Into OPEC

The trend condition in Gold remains bullish and last week’s gains reinforce this set-up. The yellow metal has started this week on a bullish note and traded through resistance at $2009.4, the Nov 7 high. A clear break of this hurdle would confirm a resumption of the uptrend. The trend outlook in WTI futures is unchanged and remains bearish. Attention is on support at $72.37, the Nov 16 low. A break would confirm a resumption of the downtrend that started late September and maintain a price sequence of lower lows and lower highs.

• WTI Crude up $0.7 or +0.94% at $75.54
• Natural Gas down $0 or -0.07% at $2.792
• Gold spot up $1.86 or +0.09% at $2015.53
• Copper down $0.1 or -0.03% at $379.8
• Silver up $0.01 or +0.02% at $24.6505
• Platinum up $3.38 or +0.37% at $925.94