MNI US OPEN - Tax Cuts Eyed in UK Autumn Budget Statement

NEWS

MNI UK ISSUANCE DEEP DIVE: Autumn Statement Preview and FQ4 Outlook

In this note we outline the main measures that are expected to be under consideration for the Autumn Statement, expectations for revisions to the gilt remit, the wider political implications and outline our expectations for which gilts will be on offer in FQ4 (January to March). The median expectation of the 10 sell-side summaries that we have compiled looks for gilt issuance in 2023/24 to be cut from GBP237.8bln to GBP220.0bln. We look at the implications for the maturity breakdown and bills. We also include updated tables including all gilts in issue, how much is owned by the BOE, an auction calendar and data on BOE gilt sales.

UK (The Times): Jeremy Hunt to Cut National Insurance

Jeremy Hunt will use his autumn statement today to cut national insurance for 28 million people and announce permanent tax cuts for businesses to “get Britain growing”. The chancellor will also confirm significant increases in benefits and the state pension under plans he describes as a rejection of “big government, big spending and high tax”. Members of the cabinet have arrived at No 10 for a meeting in which they are expected to discuss Hunt’s measures.

US (BBG): DeSantis Wins Endorsement of Prominent Iowa Evangelical Leader

Florida Governor Ron DeSantis secured the endorsement of influential Iowa conservative Bob Vander Plaats, a boost to his bid to upset former President Donald Trump in the early voting state. Vander Plaats formally backed DeSantis on Tuesday, saying in an interview on Fox News that he was “thrilled” to throw his “personal endorsement and support” behind the Republican presidential hopeful. “We need to find somebody who can win in 2024,” he added, calling DeSantis a “bold and courageous leader.”

US (BBG): US Forces Conducted Strikes Against Two Facilities in Iraq

US Central Command forces conducted strikes against two facilities in Iraq on Nov. 22 morning, it says in a post on X, formerly known as Twitter. Says strikes were in direct response to attacks against US and Coalition forces by Iran and Iran-backed groups. Includes the one in Iraq on Nov. 21 involving “close-range ballistic missiles.”

ECB (MNI): Euro Area Economy 'Under Strain' - ECB's De Guindos

Higher interest rates and inflation, weak growth and geopolitical uncertainty are set to test the resilience of households, firms and governments in the coming months, according to the latest ECB's latest Financial Stability Outlook, with the full impact of tighter financial conditions on the euro area economy yet to be felt. Euro area banks have seen improved profitability from rising interest rates, with some monetary policymakers favouring a reduction in the amount of money the ECB pays to remunerate excess cash reserves, the report notes.

ECB (MNI): Eurozone Risks Recession, ECB Says

A eurozone recession remains possible "as an already weak economic outlook deteriorates," the European Central Bank said in its Financial Stability Review on Wednesday. Downward revisions to forecasts and negative economic surprises confirm a weak economic outlook with "substantial downside risks," the report said. The September round of ECB/Eurosystem staff macroeconomic projections have been revised downwards for several quarters in a row, together with other official and private sector forecasts, it noted.

ECB (MNI): Fiscal Rules Delays a Risk to Eurozone Bonds - ECB

Risks remain elevated of further stress in eurozone bond markets despite an easing over the summer months, the ECB's Financial Stability Review said on Wednesday, pointing to concerns including the risk that EU member states fail to reach agreement on fiscal rule reform. The euro area budget deficit "is projected to decline over the coming years" as the fiscal stance tightens but ongoing negotiations on fiscal rules are inducing significant uncertainty, the report said, adding that tensions could appear especially if market participants perceive budget planning in some countries to be detrimental to longer-term debt sustainability.

ISRAEL (MNI): Deal Reached on Hostage Release, Ceasefire to Start Within 24hrs

Qatari negotiators have confirmed the long-speculated deal that will see a four-day ceasefire come into effect in Gaza within the next 24 hours. The deal sees Hamas release 50 Israeli hostages taken in the 7 Oct attacks in exchange for Israel releasing 150 Palestinian prisoners that it holds. The deal will also see another day added to the ceasefire for each 10 additional hostages released. Qatari PM Mohammed bin Abdulrahman bin Jassim Al Thani stated that the deal would prove a "comprehensive and sustainable agreement" that would allow both Israel and Hamas to "put an end to the war and the bloodshed".

CHINA (RTRS): China Government Advisers Call for Steady Growth Target in 2024, More Stimulus

Chinese government advisers will recommend economic growth targets for next year ranging from 4.5% to 5.5% to an annual policymakers' meeting, as Beijing seeks to create jobs and keep long-term development goals on track. Five of the seven advisers who spoke with Reuters said they favoured a target of around 5%, matching this year's goal. One adviser will propose a 4.5% target, while the other suggested a 5.0-5.5% range.

CHINA (BBG): China Puts Country Garden on Draft List of Builders to Support

Country Garden Holdings Co. and Sino-Ocean Group have been included on China’s draft list of 50 developers eligible for a range of financing support, according to people familiar with the matter, signaling a pivot by Beijing to help some of the nation’s most distressed builders. CIFI Holdings Group Co., another builder that has missed debt payments, was also included on the so-called white list, the people said, asking not to be identified because the matter is private.

CHINA (BBG): China May Cut Required Reserve Ratio Before Year End: Sec. News

China may use monetary measures including RRR cut to coordinate with recent fiscal policies in order to strengthen economic recovery, Shanghai Securities News reports on front page, citing unidentified analysts. RRR cut is likely to be made before end of year to cushion liquidity shock under the large government debt supply, including the 1 trillion yuan additional sovereign notes

CHINA (MNI): Reduce Energy Use Over Consumption - Ex Minister

MNI (Beijing) China must ensure the reduction of energy use among petrochemical and non-ferrous industries takes precedence over lowering total consumption, according to Miao Wei, former head at the Ministry of Industry and Information Technology (MIIT). Speaking at the Sina 2024 Economic and Financial Annual Conference, Miao said commentators have often incorrectly labelled these sectors as sunset industries, but their upgrade will benefit the wider manufacturing sector.

JAPAN (MNI): Japan Govt Cuts Overall Economy, Capital Investment

Japan’s government lowered its main economic assessment from the previous month in November, the first downward revision since January 2023 and also decreased its assessment on capital investment for the first time in 23 months, the Cabinet Office said on Wednesday. The monthly economic report said the Japanese economy is recovering at a moderate pace, “although it recently appears to be pausing in part.” It also said that business fixed investment “appears to be pausing for picking up.”

JAPAN (BBG): BOJ Pulls Back From Risk Asset Buying in Sign of Normalization

The Bank of Japan is on track for zero purchases of real estate investment trusts this year and its smallest annual haul of exchange-traded funds since 2010 as it continues to stealthily tiptoe in the direction of more conventional policy. The central bank has yet to step into the J-REIT market this year as of Nov. 21, after purchases every year since 2010 to help lower risks in the property market. Separately, the BOJ has bought ETFs, another risk asset, just three times so far this year as the stock market soared to a 33-year high.

RBA (BBG): Australia’s Inflation Challenge More ‘Homegrown,’ RBA Says

Australia’s remaining inflation challenge is “increasingly homegrown and demand driven” compared with earlier supply-side disruptions, with implications for policy, Reserve Bank Governor Michele Bullock said. “If inflation is simply the product of global supply disruptions or other price rises” then the appropriate interest-rate response would be limited, she said in a speech to economists on Wednesday evening. “However, a more substantial monetary policy tightening is the right response to inflation that results from aggregate demand exceeding the economy’s potential to meet that demand.”

RBA (MNI): RBA's Bullock Lays Out Further Reforms

Reserve Bank of Australia board members will attend “policy issues” sessions 10 days before each decision-making meeting, which will also increase in length and depth, Governor Michele Bullock said on Wednesday. Speaking at an industry event in Sydney, Bullock noted the longer board meetings will allow RBA staff to deliver more involved presentations on the economy and markets. “This will mean that the Board spends around 3.5 hours discussing these issues – about twice as much as now,” she said, according to the text of prepared remarks.

BOK (MNI): Further Pause at 3.5% Expected; Policy in Focus

The Bank of Korea monetary policy board will consider holding its policy rate unchanged at 3.50% at its Nov 30 meeting for the seventh straight session, as concern over the slower economy grows and despite still strong inflation, observers tell MNI. The market will watch closely how Governor Rhee Chang-yong communicates the BOK's outlook on future monetary policy, however, near-term rate cuts remain unlikely, they said.

S. KOREA (BBG): S.Korea Approves Motion to Partly Ban Inter-Korea Accord: Yonhap

South Korea’s Cabinet approved a proposal to partially suspend a 2018 inter-Korean military accord after North Korea launched a spy satellite, Yonhap News says. President Yoon Suk Yeol, currently in UK for a state visit, also approved the partial stoppage of the agreement, Yonhap separately said. Earlier Cabinet approval was made in an extraordinary Cabinet meeting presided over by Prime Minister Han Duck-soo.

FOREX: Pullback in USD Index Hits Pause, GBP in Focus Ahead of Autumn Statement

• The USD sits steadier against all others in G10, putting pause to the pullback in the USD Index that persisted into the Monday close. The USD Index has steadied around the 200-dma at 103.621, which may signal a near-term pause ahead of any resumption of the downtrend off the October high.
• JPY is the poorest performer ahead of the Wednesday crossover, helping EUR/JPY snap a four session losing streak. Modest weakness in the JPY comes despite the Bank of Japan cutting the size of their longer-end bond buying Rinban operation, which resulted in a slightly steeper local curve. GBP/JPY trades back above 186.50, with 187.16 the first intraday resistance ahead of 187.39, the 76.4% retracement of the pullback from the cycle high posted on Nov14.
• GBP likely to be a focus going forward, with the UK Chancellor's Autumn Statement set to be delivered from approximately 1230GMT/0730ET. Chancellor Hunt is seen detailing a cut to business taxes and national insurance, with many watching for any clues on the timing of a potential general election in 2024. GBP/USD trades just below the week's highs of 1.2559, with the short-term outlook seen positive on the break of the 1.2504 100-dma.
• Today sees the early release of the weekly jobless claims data due to the Thanksgiving holidays that kick off tomorrow. The release of the final November UMich sentiment survey also crosses - which markets may be wary of considering the considerable upside revision for inflation expectations at the October release. The speaker schedule is busier, with ECB's Centeno, Nagel set to speak as well as BoC's Macklem.

EGBS: Mixed Price Action Though Bunds Trade Within Yesterday's Range

EGBs see mixed price action early Wednesday, though Bund futures trade within yesterday's range.

• Global core FI was pressured by a weak BoJ Rinban operation and Israeli cabinet approval of an Israel/Hamas hostage deal overnight, before Bund/OAT futures found support as European desks filtered in (potentially on the back of German fiscal headlines r.e. reinstating the 2024 debt brake late Tuesday and expectations for lower Gilt issuance in the UK Autumn Statement later today).
• An additional bout of weakness came following hawkish comments from RBA Governor Bullock and financial stability concerns from today's ECB review, before price action reversed.
• The short-term tone in Bund futures remains firm, though a break of the Nov 7/13 low of 129.35 would highlight a possible reversal. Today's 15Y supply represents 13.7k Bund equivalent, so is not expected to weigh significantly. Core/semi-core yields are -1bps lower to +2bps higher at typing.
• Periphery spreads to Bunds are marginally tighter this morning. BTPs came under some pressure following headlines from the ECB's Financial Stability Review and ahead of today's exchange auction, but are off intraday lows.
• Today's local docket is light, with ECB's Centeno (presenting Portugal's Financial Stability Report) and Nagel (panel at Osservatorio Permanente Giovani-Editori) not expected to be market movers. Flash Eurozone consumer confidence at 1500GMT provides the data highlight.

GILTS: Holding Cheaper, Autumn Statement Nears

Gilt futures continue to hold shy of settlement levels, with wider core global FI swings (covered elsewhere) and pre-Autumn Statement adjustments moves at the fore thus far.

• That leaves futures -30 or so, just above 97.00. Bulls remain in short-term technical control, with well-defined technical parameters remaining untouched for now.
• Cash gilt yields are 0.5-3.5bp firmer on the day, with a bear flattening impulse seen.
• SONIA futures are flat to 8.5bp lower through the blues, with the late reds and early greens coming under the most pressure. The bulk of that move came late on Tuesday as core global FI markets came under pressure into the gilt close.
• Liquid BoE-dated OIS contracts run little changed to ~4bp firmer on the day.
• We have covered the latest rounds of press leaks/speculation re: the impending Autumn statement elsewhere (largely centred on promoting business investment and a national insurance cut for individuals, with expectations for an income tax cut in a pre-election Spring Budget). Our full preview of the event, including gilt remit expectations, can be found here.

EQUITIES: Eurostoxx 50 Futures Remain Close to its Recent Cycle Highs

A short-term bull cycle in Eurostoxx 50 futures remains intact and the contract is holding on to its recent gains. Price has recently cleared resistance at both the 20- and 50-day EMAs - a bullish development and activity remains above these averages. Note that resistance at 4256.00, the Oct 12 high, has also been cleared, reinforcing the bullish theme. The focus is on 4388.00, the Aug 30 high. Initial firm support to watch is at 4239.80, the 20-day EMA. S&P e-minis traded higher Monday, starting the week on a bullish note and confirming an extension of the recovery that started Oct 27. The trend direction remains up. Recent gains have resulted in the break of a trendline drawn from the Jul 27 high. This reinforces bullish conditions and signals scope for a climb towards 4597.50, the Sep 1 high. On the downside, initial firm support is seen at 4428.70, the 20-day EMA.

• Japan's NIKKEI closed higher by 97.69 pts or +0.29% at 33451.83 and the TOPIX ended 10.4 pts higher or +0.44% at 2378.19.
• Elsewhere, in China the SHANGHAI closed lower by 24.322 pts or -0.79% at 3043.611 and the HANG SENG ended 0.71 pts higher or +0% at 17734.6.
• Across Europe, Germany's DAX trades higher by 49.72 pts or +0.31% at 15950.36, FTSE 100 higher by 3.56 pts or +0.05% at 7485.93, CAC 40 up 25.07 pts or +0.35% at 7254.28 and Euro Stoxx 50 up 10.93 pts or +0.25% at 4342.84.
• Dow Jones mini up 22 pts or +0.06% at 35169, S&P 500 mini down 0.25 pts or -0.01% at 4551.25, NASDAQ mini down 15 pts or -0.09% at 15975.5.

COMMODITIES: Gold Targets Key Short-Term Resistance at $2009.4

A bearish theme in WTI futures remains in play and the latest recovery appears to be a correction. The break lower last week marked an extension of the downtrend that started late September and has maintained a price sequence of lower lows and lower highs. Moving average studies are in a bear-mode position, highlighting bearish sentiment. The focus is on $70.96, a Fibonacci retracement. Key resistance is at $79.65, the Nov 14 high. The trend condition in Gold remains bullish and this week’s gains reinforce this condition. The move higher signals scope for a test of key short-term resistance at $2009.4, the Nov 7 high. Clearance of this hurdle would confirm a resumption of the uptrend and pave the way for a climb towards $2022.2, the May 15 high. Key support has been defined at $1931.7, the Nov 13 low. A break would signal a potential reversal.

• WTI Crude down $0.35 or -0.45% at $77.57
• Natural Gas up $0.01 or +0.18% at $2.85
• Gold spot up $4.62 or +0.23% at $2003.22
• Copper down $3.05 or -0.79% at $381.6
• Silver up $0.12 or +0.51% at $23.889
• Platinum up $0.57 or +0.06% at $938.88