MNI US OPEN: Stocks And Bonds Maintain Post-Powell Rally

NEWS

CHINA/EU (MNI): Ukraine, Economic Ties in Focus in Xi-Michel Meeting

MNI (London) - Finbarr Bermingham at SCMP sums up the +3hr meeting between Chinese President Xi Jinping and European Council President Charles Michel in Beijing: "Michel "underlined that EU counts on China, as a Permanent Member of UN Security Council to call on Russia to respect core principles of UN Charter, and contribute to ending Russia’s brutal destruction".

CHINA PRESS (MNI): China's Housing Market Seen to Rebound in Q2 2023 - Yicai

China's housing market could bottom out by the second quarter next year as potential homebuyers may enter the market as confidence is restored following recent support for the sector, Yicai.com reported citing a report by China Real Estate Information Corporation. Recent measures to restore developers' financing ability will ease their default risks and offset the downbeat expectations of the industry.

OIL (MNI): US Warns EU About Price Cap Sensitivity

The Biden administration warned EU delegates yesterday that lower price caps for Russian oil should be approached with caution. A US official said Urals prices in the $52/bbl range does not represent broader pricing. This is the level being quoted by price reporting agencies for Russian Urals. The US official said the Urals discount to benchmark Brent crude has recently been close to $23 a barrel, falling as low as $17 a barrel which brings the recent Ural price to around $62/bbl – in line with recent EU discussions.

JAPAN (MNI): BOJ Watching Real Estate, Bond Threat to Banks

Bank of Japan officials have grown more concerned that financial institutions will be hit harder by slower global growth and prolonged high U.S. interest rates, a shift in focus from worries about the pace of rate hikes highlighted in October’s Financial System Report, MNI understands.

AUSTRALIA (MNI): Aussie Capex Plans To Support Growth In 2023

The Reserve Bank of Australia's rate hiking campaign has failed to dampen corporate capital expenditure plans for 2023, offering support for the economy as household spending is expected to slow next year. While actual capex fell 0.6% q/q in the third quarter and will detract from third quarter GDP, the fourth estimate of 2022-2023 plans rose 5.6% to AUD155.7 billion. That's 5.6% higher than the third estimate and 12.4% higher than the fourth estimate for 2021-2022 at this time last year.

AUSTRALIA (MNI): Gas Producer Warns It Would Hold Back Investment with Price Cap

Woodside Energy has said that the government's proposed $11-13/GJ price cap on gas to control domestic power bills would result in it holding back its investment in the sector. The price level and the uncertainty these changes, even if temporary, would create make new investment uncompetitive.

DATA

EUROZONE DATA (MNI): Nov Manufacturing PMIs Edge Cautiously

• EUROZONE NOV FINAL MANUF. PMI 47.1 (FLSH 47.3); OCT 46.4
• GERMANY NOV FINAL MANUF. PMI 46.2 (FLSH 46.7); OCT 45.1
• FRANCE NOV FINAL MANUF. PMI 48.3 (FLSH 49.1); OCT 47.2
• SPAIN NOV MANUF. PMI 45.7 (FCST 46.0); OCT 44.7
• ITALY NOV MANUF. PMI 48.4 (FCST 47.0); OCT 46.5

Eurozone first (Spain and Italy) and final (France, Germany & EZ) prints for November PMIs were weaker than initial flash estimates, yet remain an improvement on October's two-and-a-half-year lows. All major eurozone economies again recorded values under 50, signalling three to five consecutive months of manufacturing contractions. Sharp falls in new orders spilled over into weak production levels as clients remain hesitant due to prevailing economic uncertainty.

EUROZONE DATA (MNI): Unemployment at Fresh Record Low

• EUROZONE OCT UNEMPLOYMENT 6.5% (FCST 6.6%); SEP 6.6%

Euro area unemployment edged down 0.1pp to 6.5% in October, a fresh euro-era low. This data adds confidence to the ECB's hiking cycle. Although a 50bp is now the more likely December outcome (due to the downside surprise in November inflation data), this employment print underscores that the labour market remains tight and robust, despite warning bells of a eurozone winter recession.

GERMANY OCT RETAIL SALES -2.8% M/M (FCST -0.5%); SEP +0.9% (MNI)
GERMANY OCT RETAIL SALES -5.0% Y/Y (FCST -2.9%); SEP -0.6% Y/Y (MNI)

UK (MNI): BOE DMP Survey Shows Inflation Concerns Receding From Peak, But Still High

The overall tone of the BOE Decision Market Panel survey for November is that inflation perceptions are coming down a little bit, as are expected wage growth numbers. However, they are not coming down anywhere near fast enough, and remain at very elevated levels so this will still be a concern to the MPC.

UK NOV FINAL MANUF. PMI 46.5 (FLSH 46.2); OCT 46.2 (MNI)

SWISS NOV RETAIL SALES -2.7% M/M, -2.5% Y/Y (MNI)
SWISS NOV CPI +0% M/M, +3% Y/Y (MNI)

CHINA NOV CAIXIN MANUFACTURING PMI 49.4 VS 49.2 IN OCT (MNI)

JAPAN (MNI): Japan's Q3 Capex Up Q/Q; GDP Seen Revised Higher

Japan's Q3 GDP is likely to be revised higher after combined capital investment by non-financial companies excluding software rose 2.7% q/q in the third quarter of 2022, up from 2.3% in Q2, a quarterly revised survey released by the Ministry of Finance Thursday showed. The MOF survey, based on the demand side, is the key to calculating Q3 GDP revisions, which are due Dec. 8, and indicated capex will be revised up from preliminary estimate of growth of 1.5%

FX SUMMARY: Dovish Powell Keeps the Lid on USD

• Although off its best levels, the Yen has continued to extend gains, with the Dollar down 1.26% at the time of typing, after being down 1.5% earlier.
• Lower US Yield and Risk on tone following a Dovish Powell yesterday has kept the pressure on the USD, but off its worst levels.
• Equities and Govies faded off their overnight and opening highs.
• This was more of an unwind during the morning European session.
• Worth keeping an eye on the Pound and Cable, testing the 200SMA at 1.2155, printed a 1.2155 so far today.
• AUDNZD is also trading at its lowest level since March after breaking through the initial support at 1.0743, printed a 1.0728 low, ahead of next support area at 1.0694.
• Looking ahead, US final Manufacturing PMI, US PCE core deflator, and ISM Manufacturing are the notable releases for this afternoon.
• Speakers are, Fed's Dobbeck, Logan, Bowman, Barr, and ECB Lane.

BOND SUMMARY: Core FI Higher as Markets Saw Powell's Speech as Dovish

• Core fixed income is higher this morning with Bunds and gilts having caught up with some of the late UST moves yesterday seen following Fed Chair Powell's speech. Markets read the speech as a dovish pivot and the risk of a 75bp hike in December was all but eliminated. But Powell also put more focus on the labor market, signalling for example that the FOMC will continue to see it as imbalanced until we start to see payrolls more sustainably around or below 100k - something that with lags to the data could still mean that we get another 50bp in February (which is no longer fully priced by markets).
• The European morning session has also seen some mixed final manufacturing PMI prints and the BOE DMP survey which suggested that firms may be less concerned about inflationary pressures than previously, but inflation expectations and wage growth expectations are being very slow to recede - which will be a concern to the MPC.
• Looking ahead with have US personal income /spending, PCE and weekly claims data ahead of the ISM manufacturing print. This will be closely watched after the big fall in yesterday's MNI Chicago Business Barometer.
• TY1 futures are up 0-15+ today at 113-31+ with 10y UST yields up 0.8bp at 3.615% and 2y yields up 2.0bp at 4.332%.
• Bund futures are up 1.26 today at 142.14 with 10y Bund yields down -9.3bp at 1.833% and Schatz yields down -7.8bp at 1.994%.
• Gilt futures are up 0.58 today at 105.57 with 10y yields down -4.5bp at 3.110% and 2y yields down -3.0bp at 3.227%.

EQUITIES: Equity Futures Rally to Cycle Highs Following Powell Speech

EUROSTOXX 50 futures trend conditions remain bullish and the contract has traded to a fresh cycle high. This maintains the uptrend that started in early October and confirms an extension of the price sequence of higher highs and higher lows. The recent break of 3810.00, Aug 17 high, also strengthens the case for bulls. The 4000.00 handle has been pierced, this opens 4049.50 next, the Feb 23 high. Initial firm support is at 3840, the Nov 17 low. S&P E-Minis remain in an uptrend and yesterday’s gains reinforce a bullish theme. The rally resulted in a break of initial resistance at 4050.75, the Nov 15 high. This confirms a resumption of the uptrend and marks an extension of the price sequence of higher highs and higher lows. Sights are on the 4100.00 level next. On the downside, key short-term support has been defined at 3912.50, the Nov 17 low.

• Japan's NIKKEI closed higher by 257.09 pts or +0.92% at 28226.08 and the TOPIX ended 0.89 pts higher or +0.04% at 1986.46.
• Elsewhere, in China the SHANGHAI closed higher by 14.136 pts or +0.45% at 3165.471 and the HANG SENG ended 139.21 pts higher or +0.75% at 18736.44.
• Across Europe, Germany's DAX trades higher by 88.48 pts or +0.61% at 14469.67, FTSE 100 higher by 8.7 pts or +0.11% at 7586.16, CAC 40 up 16.2 pts or +0.24% at 6748.07 and Euro Stoxx 50 up 22.55 pts or +0.57% at 3981.54.
• Dow Jones mini down 28 pts or -0.08% at 34552, S&P 500 mini up 0.75 pts or +0.02% at 4080, NASDAQ mini down 9.25 pts or -0.08% at 12030.

COMMODITIES: Gold Targets 1786.5 Bull Trigger

Trend conditions in WTI futures remain bearish and recent gains are still considered corrective. Monday’s move lower resulted in a break of the bear trigger at $74.96, Sep 28 low. This confirmed a resumption of the downtrend and has opened $73.38, a Fibonacci projection and the $70.00 psychological handle. Initial resistance is at $81.97, the 20-day EMA. Short-term trend conditions in Gold remain bullish and this week’s gains reinforce this condition. The yellow metal recently breached $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, the Aug 10 high. Moving average studies are in a bull mode position. The bull trigger is at $1786.5, the Nov 15 high. Initial firm support is seen at $1729.0, the Nov 23 low.

• WTI Crude up $0.07 or +0.09% at $80.34
• Natural Gas up $0.02 or +0.27% at $6.964
• Gold spot up $9.63 or +0.54% at $1777.81
• Copper up $1.3 or +0.35% at $375.5
• Silver down $0.06 or -0.26% at $22.1165
• Platinum up $2.87 or +0.28% at $1038.7