MNI US Open: Risk Appetite Dips With Fiscal Risks Eyed

EXECUTIVE SUMMARY:

• MNI CHINA LIQUIDITY INDEX: CONDITIONS EASE ON PBOC INJECTIONS
• CHANCELLOR SUNAK TO DELIVER U.K. BUDGET STATEMENT TODAY
• DEMOCRATS UNVEIL BILLIONAIRES TAX AIMED AT ANNUAL ASSET GAINS
• RBA LIKELY TO STICK WITH RATE PATH AFTER CPI SURGE (MNI INSIGHT)
• GERMANY CUTS 2021 GROWTH FORECAST, RAISES OUTLOOK FOR 2022

Fig. 1: Gilts Yields Lower Pre-Budget

Source: BBG, MNI

NEWS:

MNI CHINA LIQUIDITY INDEX: Conditions in China's interbank eased in late October, soothed by the People's Bank of China's recent fund injections, the latest MNI Liquidity Conditions Index shows. The Liquidity Condition Index eased to 35.7 in October, falling from September's 13-month peak of 79.6, with 57.1% of the traders reporting improved condition. The higher the index reading, the tighter liquidity appears to survey participants. For full article contact sales@marketnews.com

U.K. BUDGET: Political and market focus on Chancellor of the Exchequer Rishi Sunak as he delivers the budget statement in the House of Commons later today. Sunak is presently briefing Cabinet colleagues on the budget, and is set to be on his feet in the Commons at around 1240BST (0740ET, 1340CET) following prime minister's questions. The speech is expected to end at around 1330BST (0830ET, 1430CET). This is being billed as Sunak's first 'real budget', with his statements in the springs of 2020 and 2021 entirely dominated by the pandemic and short-term efforts to keep the economy afloat. This will be the first UK budget since 2019 with a more long-term view. Much to the chagrin of House of Commons speaker Sir Lindsay Hoyle, several of the more headline-grabbing details from the budget have already been leaked to the press. These include an increase to the national living wage (the UK's minimum wage), rising transport spending outside London, and more funding for boosting skills. Sky News estimates that at least 15 budget measures have already been released before Sunak gets to his feet.

U.K. BUDGET (BBG): The U.K. is expected to trim gilt sales this fiscal year by about a tenth from its most recent target, after the government undershot borrowing forecasts. The Debt Management Office will reduce bond issuance to 219.6 billion pounds ($302 billion), according to the median estimate in a Bloomberg survey of analysts at 13 primary dealers. That's a 33-billion-pound cut from a projection of 252.6 billion pounds in April, and down from the government's initial estimate of 295.9 billion pounds in March. Analyst forecasts for full-year issuance range from as low as 200 billion pounds to as much as 232.6 billion pounds.

U.S. FISCAL (BBG): Senate Democrats released the details of a proposed levy on billionaires, a new and logistically risky approach to taxation that lawmakers hope will help fund President Joe Biden's social spending aimed at low- and middle-income Americans. The plan, sponsored by Senate Finance Committee Chairman Ron Wyden, is the result of weeks of negotiations among Democrats about how to find ways to raise taxes on the wealthy that nearly every member of the party can support. Wyden is betting that fellow lawmakers -- and voters -- will broadly back a plan that would shift more of the tax burden to the very wealthiest.

CHINA PROPERTY (RTRS): Some Chinese property developers have voiced their intention to the regulators to extend their offshore bond maturities or undertake a debt restructuring, two sources with knowledge of the matter said, as a growing number of defaults hits the sector. The developers proposed the ideas at a meeting jointly held by the National Development and Reform Commission (NDRC) and the State Administration for Foreign Exchange (SAFE) on Tuesday, said the sources. It was not immediately clear which developers raised those proposals, and what decision the regulators would settle on.

RBA (MNI INSIGHT): Australian inflation data moved into the Reserve Bank of Australia's target range, but MNI understands that this is unlikely to change the central bank's view on the timing of any interest rate hike two years down the line. For full article contact sales@marketnews.com

GERMANY (BBG): Germany expects growth this year to be significantly weaker than predicted, as the lingering effects of the pandemic and a supply squeeze hinder a revival of Europe's biggest economy.The cut in the 2021 outlook to 2.6% -- compared with a prediction of 3.5% published at the end of April -- reflects a scarcity in some raw materials and rising energy prices, particularly for gas, Economy Minister Peter Altmaier said Wednesday in an interview with ARD television.The government expects a "boom" to take effect only next year, and has raised its forecast for 2022 GDP growth to above 4% from 3.6%, added Altmaier.

CHINA - U.S. (BBG): China rebuked U.S. efforts to boost Taiwan's participation in UN organizations, saying the self-ruled island has "no right" to join the world body a half century after it was booted out. "The United Nations is an international governmental organization composed of sovereign states," Ma Xiaoguang, a spokesman for the Taiwan Affairs Office in Beijing, told a regular news briefing Wednesday. "Taiwan is a part of China. The People's Republic of China is the sole legal government representing the whole of China. Taiwan has no right to join the United Nations."

CHINA / COAL (BBG): China plans to limit the price miners sell thermal coal for as it seeks to ease a power crunch that's prompted electricity rationing and even caused a blackout in a major city last month. Beijing aims to cap the price of its most-popular 5,500-NAR grade coal at 440 yuan ($69) a ton at the pithead, according to people familiar with the situation, who asked not to be identified as they aren't authorized to speak publicly. That price, which includes taxes, is a target rate, and there will be an absolute ceiling at 528 yuan, the people said.

PBOC (MNI INTERVIEW): A financing facility on an "impressive scale" for moves lowering carbon emissions is likely to be unveiled soon by the People's Bank of China as part of a green financing packageto support the country's carbon neutrality efforts, Ma Jun, a senior green finance policy advisor to the central bank, told MNI. For full article contact sales@marketnews.com

PORTUGAL (AP): Portugal's parliament was poised to reject Wednesday the minority Socialist government's proposed state budget for 2022, a move that would likely trigger a snap election and put a brake on the country's post-pandemic recovery plans.The moderate Socialists were deserted by their hard-left allies from the Communist Party and the Left Bloc who have helped shore up the government's power over the past six years by voting for its policies or abstaining.Prime Minister António Costa said he wouldn't quit even if he was defeated."The government's duty, my duty, is not to walk away when things become difficult," Costa told lawmakers. "We have to face up to difficulties."

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