MNI US OPEN - PBoC Cuts RRR to Stave Off Property Slowdown

NEWS

CHINA (MNI): PBOC: China Cuts RRR by 25bps, As Expected
PBOC confirms they are to cut the reserve requirement ratio by 25bps, with the change effective from December 5th. The bank confirm they are step up the implementation of prudent monetary policy. Not too outside of expectations here - speculation/expectations circulated this week surrounding a potential RRR cut after Wednesday's State Council meeting guided towards such a move. With this easing step, analysts cited in Chinese media estimate a release of approx CNY500 billion in medium and long-term funds, which should send an easing signal and reduce capital costs and drive down banks' December quotations on the 5-year Loan Prime Rate they price mortgages on.

ECB (BBG): ECB’s Main Risk Is Stopping Rate Increases Too Soon, Muller Says
European Central Bank Governing Council member Madis Muller warned that the main risk in the battle with record inflation is halting increases in interest rates too early. Pledging that the ECB would break the “backbone” of the unprecedented upswing in euro-zone prices, Muller said officials will do “everything in our capability” to get a grip on inflation, with hikes in borrowing costs remaining “our main tool.”

EU-US (MNI): Trade Ministers Meet To Discuss US Inflation Reduction Act
European Union trade ministers are meeting this morning in Brussels for a Foreign Affairs Council meeting in its trade format. The most prominent topic being trade relations with the US - particularly in the context of the Inflation Reduction Act coming into force on 1 Jan. EU and member states have raised concerns about the IRA significantly damaging EU export opportunities and industries.

JAPAN (MNI): BOJ Needs More Flexibility As Easing Maintained
The next Bank of Japan governor should implement a policy framework that maintains current easy policy but provides greater medium to longer-term flexibility ahead of an eventual exit from easy policy, former officials told MNI.

DATA

NEW ZEALAND (MNI): RBNZ Hikes Justified as Q3 Retail Sales Rebound
The Reserve Bank of New Zealand sent a clear message this week over its determination to cool spending, but a rebound in 3Q retail sales showed its aggressive rate hikes are yet to sting New Zealanders' hip pockets. Third quarter retail sales increased 0.4% q/q, slightly missing estimates for a 0.5% y/y increase, but an improvement on the 2.2% decline in the Q2, data released earlier by Stats NZ showed. However, the faster growth in sales values compared to volumes showed much of the rise was due to rising prices. Spending at department stores and on apparel posted the strongest gains, while spending on electrical and electronic goods fell 14.5% q/q.

JAPAN (MNI): Japan's Nov Tokyo CPI Hits 3.6%; Highest Since 1982
Tokyo's core inflation rate accelerated to 3.6% y/y in November, up from 3.4% y/y in October, indicating that the nationwide core CPI will likely rise to near 4% in November from 3.6% in October, data from the Ministry of Internal Affairs and Communications showed on Friday.

FOREX: China's RRR Cut Leaves Little Dent in CNH

• JPY is the poorest performer in G10 in early Friday trade, helping snap the losses posted in USD/JPY since the mid-week high at 142.24. For now, the pair oscillates just below the Thursday best of 139.64 and a break above opens the 100-dma at 141.18.
• EUR is trading more favourably after several sessions of losses against GBP. This has prompted a small bounce in EUR/GBP off the Thursday 0.8572 low, but recoveries remain shallow for now. The single currency saw some support off headlines from ECB's Muller, who raised the biggest risk to the ECB being a premature end to the tightening cycle.
• Elsewhere, the Chinese central bank cut the RRR policy rate by 25bps, largely as expected. The rate cut prompted a minor move higher for USD/CNH, but price action was largely contained as the move was inline with expectations.
• Markets see an early close for the US, with Thanksgiving celebrations extending into the end of the week. As a result, there are no notable data releases, keeping focus on a speech by ECB's Visco at 1415GMT / 0915ET.

BONDS: Some German Inversion Reversion Eyeing More Hawkish ECB

Global core FI has been under pressure through the European morning, with Bunds underperforming Gilts and Treasuries.

• EGBs have weakened as ECB hike pricing has edged higher, with both the terminal and Dec hiking rates up 3bp implied with Muller comments leaning hawkish this morning (following on from Schnabel likewise Thursday).
• Some of the German curve flattening this week has reversed, with bear steepening early on this morning.
• The PBOC cut the RRR rate by 25bps in a highly anticipated move, little reac.
• An appearance by ECB's Visco is all that remains between now and the weekend, with a bare data slate today in the US, and no supply and no speakers. Reminder that it's an early close for most US markets.

Latest levels:

• Dec 10-Yr futures (TY) down 2/32 at 112-28.5 (L: 112-27.5 / H: 113-15)
• Dec Bund futures (RX) down 105 ticks at 141.09 (L: 141.01 / H: 142.03)
• Dec Gilt futures (G) down 70 ticks at 107.22 (L: 107.15 / H: 107.66)
• Dec BTP futures (IK) down 87 ticks at 120.51 (L: 120.39 / H: 121.21)
• Italy / German 10-Yr spread 0.7bps wider at 183.1bps

EQUITIES: Stocks Hold Close to Week's Best Amid Holiday-Thinned conditions

The S&P E-Minis outlook remains bullish and the latest climb reinforces this theme. Furthermore, recent consolidation in the daily chart appears to be a flag formation - a bullish continuation pattern. A bullish EUROSTOXX 50 futures outlook remains intact and the contract traded higher Thursday. This maintains the recovery that started in early October and marks an extension of the bullish price sequence of higher highs and higher lows.

• Japan's NIKKEI closed lower by 100.06 pts or -0.35% at 28283.03 and the TOPIX ended 0.8 pts lower or -0.04% at 2018.
• In China the SHANGHAI COMP closed higher by 12.383 pts or +0.4% at 3101.693 and the HANG SENG ended 87.32 pts lower or -0.49% at 17573.58.
• Across Europe, Germany's DAX trades lower by 16.5 pts or -0.11% at 14523.13, FTSE 100 higher by 14.61 pts or +0.2% at 7481.01, CAC 40 down 7.18 pts or -0.11% at 6700.39 and Euro Stoxx 50 down 3 pts or -0.08% at 3959.29.
• Dow Jones mini up 35 pts or +0.1% at 34248, S&P 500 mini up 7 pts or +0.17% at 4040, up 21 pts or +0.18% at 11882.75.

COMMODITIES: Gold Remains Bullish, While Oil Outlook Fractures

Short-term trend conditions in Gold remain bullish. Recent gains resulted in the break of $1729.5, the Oct 4 high. This has strengthened a bullish theme and signals scope for $1800.0 and a key resistance at $1807.9, Aug 10 high. WTI futures sold off sharply Wednesday. A bearish theme remains in place following recent weakness and an extension of the reversal from $92.53, Nov 7 high. Support at $80.49, Oct 18 low and a bear trigger, was cleared on Nov 18.

• WTI Crude up $1.59 or +2.04% at $79.2
• Natural Gas down $0.17 or -2.35% at $7.101
• Gold spot down $5.66 or -0.32% at $1753.39
• Copper up $6.55 or +1.81% at $367.65
• Silver down $0.26 or -1.2% at $21.352
• Platinum down $7.45 or -0.75% at $988.38