EXECUTIVE SUMMARY
- PUTIN UPDATES NUCLEAR TEXT, RETALIATION IF RUSSIA HIT BY LR MISSILES
- UKRAINE MAKES 1ST ATACMS STRIKE ON RUSSIA
- US PUSHES FOR ISRAEL-HEZBOLLAH TRUCE WITH ENVOY VISIT TO BEIRUT
- ECB’S PANETTA WANTS RATES AT NEUTRAL, FORWARD GUIDANCE
Figure 1: Contributions (ppt) to Eurozone HICP Y/Y
Source: MNI/Eurostat
NEWS
RUSSIA/UKRAINE (MNI): Ukrainian Media - Ukraine Makes 1st ATACMS Strike on Russia
Ukrainian outlet Censor.net is reporting that Ukraine's armed forces have made their first long-range ATACMS missile strike inside Russia since US President Joe Biden approved their use against the territory of the Russian Federation. The report claims that an arsenal near to the city of Karachev in the Bryansk region was hit. There has been no official comment from Ukrainian armed forces on the claim. RBC Ukraine reports comments from an unnamed military source: "Indeed, ATACMS was used for the first time to strike the territory of the Russian Federation. The strike was carried out on a facility in the Bryansk region, it was successfully destroyed,"
RUSSIA/UKRAINE (MNI): Putin Updates Nuclear Text, Retaliation if Russia Hit by LR Missiles
State-run media reports that President Vladimir Putin has confirmed an update to the country's 'nuclear doctrine', the parameters by which the use of nuclear weapons is dictated. The decree means "the category of states and military alliances subject to nuclear deterrence has been expanded. The list of military threats for the neutralization of which such actions are needed has been supplemented."
This is not the first time that Russia has updated its nuclear doctrine in the 1,000 days of the war to date. It is also not the first time it has threatened Ukraine's allies as they increase support for Kyiv. As such it is difficult to tell where the 'red line' for Putin is in terms of retaliation. What can be said is that the use of long-range missiles on Russia increases the prospect of a direct retaliation against NATO or a tactical nuclear strike on Ukraine, both of which would alter the fundamentals of the war significantly.
US/MIDEAST (BBG): US Pushes for Israel-Hezbollah Truce With Envoy Visit to Beirut
One of Joe Biden’s main Middle East envoys landed in Beirut on Tuesday morning, as the US steps up efforts to clinch a cease-fire between Lebanese militant group Hezbollah and Israel. Amos Hochstein, who handles Israel-Hezbollah affairs for the White House, will discuss a US-drafted proposal to end the war between the two sides. He’s expected to meet Lebanon’s Prime Minister Najib Mikati and the speaker of parliament, Nabih Berri, who acts as an interlocutor between the West and Hezbollah, considered a terrorist group by the US and many other countries. His visit comes after Lebanese officials signaled they were broadly behind the plan, though they’ve said there are still sticking points.
ECB (MNI): ECB Panetta Wants Rates at Neutral, Forward Guidance
The ECB should lower interest rates to neutral “or even into expansionary territory if necessary” as restrictive monetary conditions are no longer necessary across the euro area with inflation close to target and domestic demand stagnant, Bank of Italy Governo Fabio Panetta said Tuesday. The current situation allows to return to a normal and more forward looking monetary policy, " in line with our medium-term orientation”, he said, noting that the ECB has entered in a new phase leaving behind the “exceptional circumstances of the past two years” that forced central banks to give less weight to forecasts and to live day-by-day or meeting-by-meeting.
BOE (MNI): Mann Seems Very Far Away From Voting to Cut Any Time Soon
Mann says she's is concerned about inflation lasting for longer (that's not a surprise). She said that she takes into account inflation expectations. And she took into account 2 aspects of the Budget - stating that it was front loaded and geographically dispersed across the country. But that to realise the price expectations going forward - those are inconsistent with the 2% target. Taylor says the key to him is the labour market. What does gradual mean to me? Aligned to the market which implies about 100bp over the next year.
RIKSBANK (MNI): Breman Strikes Similar Tone to November Meeting Minutes
Key excerpts from Riksbank First Deputy Governor Breman's speech at Varberg's savings bank. Very much in line with her comments in the November meeting minutes last week: "It is important that the Swedish economy recovers soon because it creates resilience in a troubled environment and contributes to continued low and stable inflation in Sweden." Adds that "Trade barriers usually lead to higher inflation and poorer growth for small export-dependent countries. But the effects on inflation are complex and we
will need to analyze trade policy and its effects on an ongoing basis"
CHINA (MNI): China to Enhance Policy Support in 2025: NDRC
MNI (Beijing) China will use macroeconomic policy to support growth strongly next year, said Li Chao, National Development and Reform Commission spokesperson at a briefing Tuesday, adding the country had a rich reserve of tools to conduct precise and counter-cyclical adjustments. He said 2025 marked the conclusion of the 14th Five-Year Plan, with a series of major strategic tasks, significant reform initiatives, and major projects already being fully implemented. Solid domestic demand exists as every one percentage point increase in urbanisation can generate about CNY1 trillion in new investment demand and over CNY200 billion in consumption, Li continued.
CHINA (BBG): China’s Chip Advances Stall as US Curbs Hit Huawei AI Product
Huawei Technologies Co.’s ambitions to create more powerful chips for AI and smartphones have hit major snags because of US sanctions, stalling a major Chinese effort to match American technology. Huawei is designing its next two Ascend processors, its answer to Nvidia Corp.’s dominant accelerators, around the same 7-nanometer architecture that’s been mainstream for years, people familiar with the matter said. That’s because US-led restrictions prevent Huawei’s chipmaking partners from procuring state-of-the-art extreme ultraviolet lithography systems from ASML Holding NV.
CHINA/AUSTRALIA (BBG): China, Australia Relations Have Seen ‘Twists and Turns,’ Xi Says
Improved relations between China and Australia must be maintained with “great care” after a decade of “twists and turns,” Chinese President Xi Jinping said before meeting with Prime Minister Anthony Albanese on the sidelines of the G-20. Xi praised the turnaround in ties, saying his nation was ready to import more “high-quality” products from Australia while encouraging greater Chinese business investment.
RBA (MNI): RBA Board Considers Easing Scenarios - Minutes
The Reserve Bank of Australia board discussed a range of future scenarios that could force an adjustment to the 4.35% cash rate at the November meeting, but a cut would follow “more than one good quarterly inflation outcome,” the published minutes showed Tuesday. The board reiterated its low tolerance for further bouts of high inflation, but considered scenarios that could see CPI fall faster than expected.
DATA
EUROZONE DATA (MNI): EZ Final HICP Broadly In-Line with Flash
- EUROZONE OCT FINAL HICP +0.3% M/M, +2% Y/Y
- EUROZONE OCT FINAL CORE HICP +0.2% M/M, +2.7% Y/Y
Eurozone October Final HICP was in-line with flash at 2.00% Y/Y (vs 2.00% flash, 1.74% prior) and 0.3% M/M non-seasonally adjusted (vs 0.34% flash, -0.09% prior). Core inflation (ex energy, food, alcohol & tobacco) also saw little revision at 2.69% Y/Y (vs 2.68% flash, 2.67% prior) and 0.25% M/M (vs 0.23% flash, 0.07% prior). The final reading reaffirms the stickiness seen in the flash services inflation print, with services contribution broadly unchanged at 1.77ppts (vs 1.76 ppts in September) and the Y/Y figure rising to 3.95% Y/Y (vs 3.92% flash, 3.92% prior).
NEW ZEALAND DATA (MNI): Household Inflation Expectations Running Ahead of Businesses
The RBNZ's household inflation expectations for Q4 were released today and provided a mixed picture. The median perception of current inflation remained elevated at 6.0%, while 1-year out eased 0.5pp to 3%, the top of the RBNZ's target band. Expectations 2- and 5-years ahead were stable at 3.0%. The 1-year mean was found by the central bank to have a high correlation with underlying inflation, but this measure was sticky at 4.1% and is well above 1-year business inflation expectations at 2.1%.
FOREX: JPY Adopts Haven Status as Russia-West Tensions Ratchet Higher
- JPY is comfortably the outperformer in G10 FX, with the currency re-adopting a safe haven status amid an upturn in geopolitical risk and escalated tensions between Russia and the West. The Kremlin have formally approved a further tweak to their nuclear doctrine, allowing for use of nuclear weaponry in the case of long-range missiles used to strike inside Russian territory. The new doctrine was tested almost immediately, as the Ukrainian military confirmed a strike on a warehouse in a military facility in Karachev, Russia - reportedly using US-supplied ATACMS weapons.
- A bout of EUR sales came alongside the Ukraine headlines - prompting EUR/USD to hit new lows and show through the 1.0550 level. EUR/CHF came under pressure in tandem, through the October lows to pierce the mid-September support of 0.9307 - thereby exposing 0.9211.
- EUR/JPY's risk-off triggered slide made light work of yesterday's lows on the Russia headlines, putting the cross at the lowest level since mid-October. The Oct21 low provides first support here at the Y162.00 handle, which coincides with the 38.2% retracement for the recovery off the post-intervention low - making support crowded at current prices. GBP/JPY has traded through the 50-dma for the first time since September, looking to 192.28 as next major support.
- Focus for the session ahead turns to US housing starts and building permits data for October as well as the Canadian CPI print. The speaker slate is considerably quieter relative to yesterday, with just Fed's Schmid on the docket to speak on the economic and monetary policy.
EGBS: Bund Futures Fade From Russia/Ukraine-Inspired Highs
The rally in core EGBs extended on an escalation of Russia/Ukraine tensions this morning, but futures have since moved away from intraday highs.
- Bund futures reached a high of 132.99 after RBC-Ukraine reported the first Ukrainian ATACMS strike within Russia (with Russia having approved an updated nuclear doctrine ~45 mins beforehand).
- However, Bund futures have since fallen back to 132.55, still +61 ticks today.
- German cash yields are 5.5-7.5bps lower across the curve, while swap spreads have widened. The 10-year BTP/Bund spread has widened 3.5bps to 123bps.
- The ECB’s Panetta called for the ECB to remove its tightening bias, in line with his dovish stance.
- Eurozone final headline and core October inflation confirmed flash estimates at 2.0% Y/Y and 2.7% respectively.
- The EU’s dual tranche syndication looks to be a little smaller than we had expected, with E7bln being tapped across the two lines on offer (MNI had expected E8-9bln).
GILTS: Ukraine War-Driven Rally Fades a Little, Curve Flatter
The latest escalation in the Russian-Ukraine war (the first Ukrainian ATACMS strike within Russia) has driven a rally in core global FI markets, although the move has faded from highs.
- Gilt futures last +51 at 94.25 vs. highs of 94.64.
- Initial resistance at the 20-day EMA (94.55) was pierced, key resistance at the November 1 high (94.73) remains untouched.
- Yields 2-5bp lower, curve bull flattens.
- 2s10s and 5s30s comfortably within multi-week ranges.
- Gilt/Bunds ~2bp wider at ~211bp, gilts lag Bunds owing to relative sensitivity to the Russia-Ukraine war. Spread cycle closing highs (215.8bp) intact.
- There was a 0.6bp tail at this morning’s 3.75% Jan-38 gilt auction, with the low price below pre-auction mids. There wasn’t much of a tangible market reaction. The results were likely deemed somewhat acceptable given the ~7bp rally into the offering.
- SONIA futures tracking swings in wider core global FI, last 0.25-6.0 firmer.
- BoE-dated OIS little changed to 3bp more dovish on the day, fully discounting the next cut through March and showing 69bp of cuts through ’25.
- The latest TSC hearing is ongoing, with BoE’s Bailey, Lombardelli, Mann & Taylor in attendance.
- UK CPI data presents the next key risk event on the local calendar (due 07:00 Wednesday), expect our full preview later today.
BoE Meeting | SONIA BoE-Dated OIS (%) | Current Effective SONIA Rate (bp) |
Dec-24 | 4.677 | -2.3 |
Feb-25 | 4.501 | -19.9 |
Mar-25 | 4.420 | -28.0 |
May-25 | 4.274 | -42.6 |
Jun-25 | 4.220 | -48.0 |
Aug-25 | 4.138 | -56.2 |
Sep-25 | 4.097 | -60.3 |
Nov-25 | 4.040 | -66.0 |
Dec-25 | 4.013 | -68.7 |
EQUITIES: Eurostoxx 50 Futures Reapproach Recent Lows, Bearish Theme Intact
Despite recent gains, a bearish condition in Eurostoxx 50 futures remains intact. The move lower last week marked a resumption of the downtrend that started Sep 30. Price has breached 4746.94, 61.8% of the Aug 5 - Sep 30 bull cycle. This exposes 4662.12, the 76.4% retracement point. Initial firm resistance has been defined at 4961.00, Nov 6 high, where a break would highlight a reversal. First resistance is at 4857.19, the 20-day EMA. The latest move lower in the S&P E-Minis contract appears corrective. Medium-term trend signals such as moving average studies, continue to highlight a dominant uptrend. The contract has traded through the 20-day EMA. The next key support to monitor is 5830.35, the 50-day EMA. A clear break of this level would signal scope for a deeper retracement. A resumption of gains would refocus attention on the bull trigger at 6053.25, Nov 11 high.
- Japan's NIKKEI closed higher by 193.58 pts or +0.51% at 38414.43 and the TOPIX ended 18.27 pts higher or +0.68% at 2710.03.
- Elsewhere, in China the SHANGHAI closed higher by 22.161 pts or +0.67% at 3346.01 and the HANG SENG ended 87.06 pts higher or +0.44% at 19663.67.
- Across Europe, Germany's DAX trades lower by 226.8 pts or -1.18% at 18961.25, FTSE 100 lower by 31.86 pts or -0.39% at 8077.41, CAC 40 down 92.51 pts or -1.27% at 7184.13 and Euro Stoxx 50 down 63.31 pts or -1.32% at 4725.55.
- Dow Jones mini down 241 pts or -0.55% at 43300, S&P 500 mini down 28.25 pts or -0.48% at 5891.75, NASDAQ mini down 94 pts or -0.46% at 20541.75.
Time: 09:50 GMT
COMMODITIES: Long-Term Trend Condition in Gold Unchanged and Bullish
A bearish theme in WTI futures remains intact and the move lower from the Nov 7 high has reinforced current conditions. Attention is on $65.74, the Oct 1 low, and $63.90, the Sep 10 low and key support. For bulls, a clear reversal to the upside would instead refocus attention on the key short-term resistance at $77.04, the Oct 8 high. Clearance of this level would resume the recent uptrend. Initial firm resistance is $72.41, the Nov 7 high. The long-term trend condition in Gold is unchanged, it remains bullish and the latest move down is considered corrective. The bear phase has resulted in a breach of the 20- and 50-day EMAs, and the metal is trading closer to its recent lows. The breach of the EMAs signals scope for a deeper retracement and sights are on $2511.1 next, the Sep 18 low. Firm resistance is seen at $2653.3, the 20-day EMA.
- WTI Crude down $0.35 or -0.51% at $68.8
- Natural Gas down $0 or -0.1% at $2.972
- Gold spot up $18.4 or +0.7% at $2631.84
- Copper down $0.9 or -0.22% at $416.55
- Silver up $0.22 or +0.69% at $31.4048
- Platinum down $3.94 or -0.41% at $964.07
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 19/11/2024 | 1330/0830 | *** |  CA | CPI |
| 19/11/2024 | 1330/0830 | *** |  US | Housing Starts |
| 19/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 19/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 19/11/2024 | 1810/1310 | US | Kansas City Fed's Jeff Schmid | |
| 20/11/2024 | 2350/0850 | ** |  JP | Trade |
| 20/11/2024 | 0001/0001 | * |  GB | Brightmine pay deals for whole economy |
| 20/11/2024 | 0700/0800 | ** |  DE | PPI |
| 20/11/2024 | 0700/0700 | *** | GB | Consumer inflation report |
| 20/11/2024 | 0700/0700 | *** | GB | Producer Prices |
| 20/11/2024 | 1000/1100 | ** |  EU | Construction Production |
| 20/11/2024 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 20/11/2024 | 1300/1400 | EU | ECB's Lagarde address on financial stability | |
| 20/11/2024 | 1500/1000 | US | Fed Vice Chair Michael Barr | |
| 20/11/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 20/11/2024 | 1600/1600 | GB | BOE's Ramsden speech on monetary policy | |
| 20/11/2024 | 1600/1100 | US | Fed Governor Lisa Cook | |
| 20/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 20/11/2024 | 1715/1215 | US | Fed Governor Michelle Bowman | |
| 20/11/2024 | 1800/1900 | EU | ECB's De Guindos speech on financial stability | |
| 20/11/2024 | 1800/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 20/11/2024 | 2100/1600 | US | Boston Fed's Susan Collins |