MNI US OPEN - Russia Doubles Down on Supply Threat as Price Cap Looms

NEWS

US (MNI): Inflation Is Far from Healthy Turning Point, Daly Says

Federal Reserve President Mary Daly said Monday the battle against rapid inflation is far from done and she's willing to hike the policy interest rate past 5% if needed. "We need to focus on really getting the job done," she told reporters after a speech. “It is way too early to call a turning point on inflation.” Any weakness in headline inflation based on gasoline prices could be misleading and core indexes of goods and services prices are a better guide, she said.

OIL/RUSSIA (MNI): Russia Will Not Supply Oil to Those Supporting Cap - Novak

Russia does not plan to supply oil or petroleum products to countries that will introduce the price cap according to Deputy Prime Minister Alexander Novak. "Russia confirms its status of a reliable energy supplier on the global market and the market status of our relations with partners. In this regard we do not plan to supply oil and petroleum products to countries that will use the price cap principle, with further refocusing of supplies to market-orienting partners or with the production reduction," Novak said.

CHINA (MNI): China Should Aim For 5% Growth In 2023

China should set its 2023 growth target at around 5%, which would match the country's potential growth level, support employment, prevent risks and boost market confidence, 21st Century Business Herald reported citing Zhu Baoliang, chief economist of the State Information Center.

CHINA (MNI): Yuan Increasingly Viewed as a "Safe Haven" - PBOC Official

The yuan will continue to be resilient during the current U.S. dollar appreciation cycle, and is increasingly considered a "safe haven", Pan Gongsheng, Vice Governor of People's Bank of China and director of the State Administration of Foreign Exchange, told the 2022 Financial Street Forum annual meeting on Monday.

AUSTRALIA (MNI): RBA's Lowe Says Narrow Inflation Targeting Getting Harder

Reserve Bank of Australia Governor Philip Lowe warned of more variability in prices triggered by supply-side challenges and pointed to the increasing difficulty of targeting a narrow range of inflation in a speech on Tuesday. Two weeks from the RBA's final meeting for the year, Lowe said the central bank expects to increase interest rates over "the period ahead", though it was prepared to revert back to 50bp hikes or pause depending on economic data.

SOUTH KOREA (MNI): Downshifting To 25bp Hike as Growth Slows

The Bank of Korea is expected to downshift to a 25bp hike at Thursday's meeting as policymakers consider the impact of slower growth and moderating inflation after October's decision to tighten by 50bp triggered dissent among some board members.

DATA

UK OCT PSNCR GBP9.73 BN (MNI)
UK OCT PSNB GBP+12.73 BN (MNI)
UK OCT CGNCR GBP8.55 BN (MNI)
UK OCT PSNB-X GBP+13.55 BN (MNI)

JAPAN (MNI): Japan's Trimmed Mean Hits Record 2.7% in Oct

Japan’s trimmed mean measure of underlying inflation rose 2.7% y/y in October, a fresh record high pace as pass-through of cost increases continued, data released by the Bank of Japan on Tuesday showed. The trimmed mean accelerated from the previous high of 2% in September and comes after data released on Friday showed Japan's annual core consumer inflation rate quickened to 3.6% y/y in October, up from September’s 3% print and the highest level since February 1982.

AUSTRALIA DATA (MNI): SEEK Job Ads Normalising But Well Above Pre-Covid Levels

SEEK job ads fell 3.7% m/m in October, the fifth consecutive monthly fall but the index remains elevated standing 44.7% higher than October 2019. The annual decline of 0.9% is not a true picture of vacancy developments due to the 12.2%m/m increase in the index in October 2021. The data were impacted by some special factors but it appears that labour demand is slowing as the labour market is at capacity and the economic outlook darkens.

FX SUMMARY: USD Index Falters, Led Lower by USD/CNH

• The USD Index sits slightly softer, partially erasing the Monday strength as the currency recouples with the US yield curve. 10y yields sit lower by close to 4bps, keeping yields close to yesterday's lows of 3.758%.
• NZD is on the front foot, with markets again posturing ahead of the RBNZ decision on Wednesday. The bank are expected to raise rates by a further 75bps to 4.25%.
• USD/CNH backtracked in early European / late Asia-Pac hours, putting the pair back below the 50-dma in a move that may raise suspicion of official intervention in the currency. No specific headline trigger or newsflow to prompt the move, with USD/CNH now partially erasing the uptick posted early Monday. Any break below 7.1136 opens losses toward 7.1031, the 50% retracement for the Nov 14 - Nov 21 upleg.
• Canadian retail sales, Eurozone consumer confidence and Richmond Fed Manufacturing Index make up the data calendar, with speakers from central banks including Fed's Mester, George and Bullard as well as BoC's Rogers and testimony from the UK Chancellor Jeremy Hunt.

BOND SUMMARY: Looking Ahead to Fed Speeches

• Core fixed income has traded within yesterday's ranges in the European morning session, albeit with the German curve steepening (and other curves remaining unchanged on the day).
• Later today we will see European consumer confidence data and the Richmond Fed manufacturing index.
• However, more important will be a number of Fed speakers: Mester , George and Bullard are all due on the docket.
• TY1 futures are up 0-6 today at 112-16 with 10y UST yields down -3.9bp at 3.791% and 2y yields down -4.0bp at 4.495%.
• Bund futures are down -0.22 today at 140.20 with 10y Bund yields up 1.2bp at 2.001% and Schatz yields up 2.9bp at 2.077%.
• Gilt futures are down -0.06 today at 106.19 with 10y yields up 0.9bp at 3.189% and 2y yields up 1.0bp at 3.161%.

EQUITIES: Equity Futures Consolidate Close to Recent Highs

A bullish EUROSTOXX 50 futures outlook remains intact and the contract is holding on to its recent gains. 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. Price is consolidating and a bull flag has appeared on the daily chart - a continuation pattern. Recent gains resulted in a break of 3928.00, the Nov 1 high. This has established a positive price sequence of higher highs and higher lows on the daily scale. The focus is on 4100.00 next. Initial firm support lies at 3865.69, the 50-day EMA.

• Japan's NIKKEI closed higher by 170.95 pts or +0.61% at 28115.74 and the TOPIX ended 22.18 pts higher or +1.12% at 1994.75.
• Elsewhere, in China the SHANGHAI closed higher by 3.899 pts or +0.13% at 3088.943 and the HANG SENG ended 231.5 pts lower or -1.31% at 17424.41.
• Across Europe, Germany's DAX trades higher by 58.64 pts or +0.41% at 14438.82, FTSE 100 higher by 59.54 pts or +0.81% at 7436.13, CAC 40 up 14.05 pts or +0.21% at 6648.5 and Euro Stoxx 50 up 12.87 pts or +0.33% at 3922.15.
• Dow Jones mini down 7 pts or -0.02% at 33729, S&P 500 mini down 2.75 pts or -0.07% at 3955.25, NASDAQ mini down 18.5 pts or -0.16% at 11569.75.

COMMODITIES: WTI Pares Losses Yesterday Following Sharp Sell-Off

WTI futures sold off sharply Monday before retracing its losses. 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 Friday. $79.11, 76.4% of the Sep 28 - Nov 7 bull phase has also been cleared. Attention is on $74.96, the Sep 28 low and the next key support. Initial firm resistance is seen at $85.38, 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 up $0.45 or +0.56% at $80.37
• Natural Gas down $0.27 or -4.03% at $6.501
• Gold spot up $8.78 or +0.51% at $1746.94
• Copper up $2.55 or +0.71% at $359.9
• Silver up $0.36 or +1.7% at $21.2062
• Platinum up $10.78 or +1.09% at $995.71