MNI US OPEN - Sanguine Start for Greenback, With CB Comms in Focus

NEWS

EU (BBG): Lagarde Says Rates to Rise More, May Need to Become Restrictive

European Central Bank President Christine Lagarde said interest rates may need to be lifted to levels that restrict economic expansion in order to drive down inflation that’s rocketed to more than five times the official target. Lagarde said Friday that the “risk of a recession” has increased, but that a downturn on its own won’t be sufficient to tame soaring prices.

UK (MNI): UK Confidence Up, But Remains Depressed - GFK

UK consumer confidence edged higher in November, but it was more an expression of hope that the economic outlook might avoid further deterioration than a pointer to a sharp upturn in coming months, Joe Staton, the head of GFK's Client Strategy told MNI Thursday.

N. KOREA (MNI): Japan Says N. Korean Rocket Seemingly Landed in Its EEZ

An apparent ICBM fired by North Korea appears to have fallen into the sea to the west of Hokkaido and inside Japan's exclusive economic zone, Prime Minister Fumio Kishida told reporters in Thailand. The Japanese Prime Minister deemed the launch "unacceptable" and said that Tokyo has lodged a firm protest against North Korea, which continues provocative actions at an "unprecedented pace."

NATURAL GAS (MNI): Swedish Investigations Says Nord Stream Explosion Was ‘Sabotage’

The blasts that hit the Nord Stream 1 and 2 gas pipelines were caused by sabotage, Mats Ljungqvist, a Swedish prosecutor said. Investigation on the site showed traces of explosives and several foreign objects, he said. The statement did not include information as to how the explosives got there or who might be responsible.

CHINA (MNI): China Should Set 2023 Growth Target Above 5%

China should target growth of no less than 5% in 2023 and aim to shake off Covid impacts in H1 next year with pro-growth measures and reforms, as persistently lower growth could threaten the achievement of the country's 2035 goal, said Liu Shijin, deputy director of the Economic Affairs Committee, Chinese People’s Political Consultative Conference at a forum on Friday.

JAPAN (MNI): BOJ's Kuroda Eyes 3% Wage Hikes to Hit 2% Target

Bank of Japan Governor Haruhiko Kuroda said on Friday that it is necessary for wages to continuously rise about 3% to achieve the bank's 2% price target in a stable and sustainable manner.

JAPAN (MNI): BOJ Policy Not Intended to Support Govt Financing

Bank of Japan Governor Haruhiko Kuroda said on Friday that the BOJ's easy policy is aimed at achieving the price stability, not aimed at supporting the government’s financing. Kuroda told lawmakers that Japan’s economy is on a post-Covid recovery path and there are high uncertainties about the outlook for economy, Kuroda said.

DATA

UK (MNI): UK Retail Sales Rally After Sept State Funeral Hit

UK OCT RETAIL SALES +0.6% M/M, -6.1% Y/Y
UK OCT RETAIL SALES EX-FUEL +0.3% M/M, -6.7% Y/Y
UK NOV GFK CONSUMER CONFIDENCE INDEX -44

UK retail sales rose in October, recovering from the weak sales seen in September when many retailers closed or operated differently on the extra bank holiday for the late Queen’s funeral, the Office for National Statistics said Friday. Overall retail sales rose 0.6% month-on-month, recovering from a 1.5% fall seen last month, but fell 6.1% year-on-year. Compared with February 2020, sales are still 0.6% lower overall. “Looking at the broader picture, retail sales continue their downward trend seen since summer 2021 and are below where they were pre-pandemic,” Darren Morgan, ONS director of economic statistics said.

SWEDEN OCT UNEMPLOYMENT 7.1%

NORWAY SEP MAINLAND GDP +0.4% M/M, AGG GDP +0.5% M/M

JAPAN (MNI): Japan's Oct Core CPI Rises 3.6%; Highest Since 1982

• JAPAN OCT CORE CPI +3.6% Y/Y; SEP +3.0%
• JAPAN OCT CORE-CORE CPI +2.5% Y/Y; SEP +1.8%
• JAPAN OCT CPI FOOD EX-PERISHABLES +5.9% Y/Y; SEP +4.6%
• JAPAN OCT CPI ENERGY COST +15.9% Y/Y; SEP +16.9%

Japan's annual core consumer inflation rate accelerated to 3.6% y/y in October, rising at the fastest pace since February 1982, data released by the Ministry of Internal Affairs and Communications Friday showed. The quickening from September's 3% pace was expected by Bank of Japan officials, with core CPI expected to rise further as companies pass on cost increases and as the yen weakens.

The underlying inflation rate measured by the core-core CPI (excluding fresh food and energy) rose 2.5% y/y in October, up from September’s 1.8%. The October rise was caused by high energy and food excluding perishables.

FX SUMMARY: Greenback Softer Ahead of NY, But Yield Gains Could Limit Downside

• The greenback is offered early Friday, with EUR/USD and GBP/USD through the overnight lows and Thursday's best levels under pressure ahead of the NY crossover. US yields are inching higher, with the 10y showing back above 3.80% - which could limit the USD's weakness headed into the crossover.
• AUD and NZD are among the strongest in G10, gaining alongside European equity markets and ahead of the November RBNZ decision next week, at which the bank are seen raising rates a further 75bps.
• GBP is also trading well, with GBP/USD reversing the entirety of the post-budget losses, aided by better-than-expected retail sales which rose 0.6% on the month to bounce off September weakness.
• US data quietens down Friday, with just existing home sales and the October leading index on the docket. ECB's Nagel & Knot, BoE's Mann & Haskel and Fed's Collins make up the speaker slate.

BOND SUMMARY: Gilts Underperforming, EGBs Eyeing TLTROS

Core FI is under a bit of pressure early Friday, with equities on the front foot and the dollar a little weaker.

• Gilts are underperforming global peers, with bear flattening in the UK curve following Thursday's budget announcement and stronger-than-expected retail sales data earlier today. BoE's Haskel speaks after the cash close.
• Most attention this morning is on the announcement of early TLTRO repayments by European banks, due at 1205CET/1105GMT/0605ET. Total size repaid today is seen at E600bln but estimates vary widely.
• ECB hike pricing a little firmer; Lagarde reiterated "expect to raise raise rates further".
• The US curve is a little flatter with the belly underperforming, though 2s10s are off the lows. In today's session we get existing home sales data and commentary from FOMC's Collins.

Latest levels:

• Dec 10-Yr futures (TY) down 8/32 at 112-12 (L: 112-06.5 / H: 112-25.5)
• Dec Bund futures (RX) down 56 ticks at 139.45 (L: 139.17 / H: 140.5)
• Dec Gilt futures (G) down 75 ticks at 105.35 (L: 105 / H: 106.15)
• Dec BTP futures (IK) down 29 ticks at 118.08 (L: 117.48 / H: 118.99)
• Italy / German 10-Yr spread 0.1bps tighter at 191.6bps

EQUITIES: Thursday Futures Pullback Considered Corrective

• A bullish EUROSTOXX 50 futures outlook remains intact and price is consolidating at its recent highs. Resistance at 3810.00, the Aug 17 high and an important bull trigger, has recently been breached. Moving average studies remain in a bull mode set-up and this highlights 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.
• S&P E-Minis traded lower Thursday. The short-term outlook remains bullish and a pullback is considered corrective. A bullish theme follows recent strong gains that resulted in a break of 3928.00, the Nov 1 high. This strengthens a short-term bullish condition and price has established a sequence of higher highs and higher lows on the daily scale. The focus is on 4100.00 next. On the downside, key short-term support is at 3704.25, the Nov 3 low.

• Japan's NIKKEI closed lower by 30.8 pts or -0.11% at 27899.77 and the TOPIX ended 0.75 pts higher or +0.04% at 1967.03.
• Elsewhere, in China the SHANGHAI closed lower by 18.192 pts or -0.58% at 3097.243 and the HANG SENG ended 53.12 pts lower or -0.29% at 17992.54.
• Across Europe, Germany's DAX trades higher by 135.01 pts or +0.95% at 14315.29, FTSE 100 higher by 44.28 pts or +0.6% at 7361.68, CAC 40 up 62.37 pts or +0.95% at 6611.12 and Euro Stoxx 50 up 40.11 pts or +1.03% at 3896.67.
• Dow Jones mini up 66 pts or +0.2% at 33515, S&P 500 mini up 12.5 pts or +0.32% at 3949, NASDAQ mini up 43 pts or +0.37% at 11690.25.

COMMODITIES: WTI Trades Sharply Lower Thursday, Falls to One-Month Low

• WTI futures traded sharply lower Thursday, reinforcing bearish conditions and signalling scope for a continuation near-term. Attention is on the next key support at $81.30, the Oct 18 low and a bear trigger. A break would strengthen the bearish theme and open $79.96, a Fibonacci retracement. Further out, this would also signal scope for weakness towards $75.70, the Sep 26 low. Initial resistance is seen at $86.80, the 50-day EMA.
• Short-term trend conditions in Gold remain bullish. Recent gains have resulted in the break of a number of important resistance points. The yellow metal has cleared $1729.5, the Oct 4 high. This strengthens the current bullish theme and opens the $1800.0 handle 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.

• WTI Crude up $0.41 or +0.5% at $81.71
• Natural Gas down $0.18 or -2.86% at $6.185
• Gold spot up $5.93 or +0.34% at $1763.36
• Copper down $2.7 or -0.73% at $369.15
• Silver up $0.3 or +1.42% at $21.1329
• Platinum up $3.04 or +0.31% at $982.81