MNI US OPEN - UK Cabinet Reshuffle Underway, Home Secretary Sacked

NEWS

US/CHINA (BBG): China Weighs Ending Freeze on Boeing With 737 Max Deal in US

Boeing Co. may finally see a sales breakthrough for its 737 Max aircraft in China when presidents Joe Biden and Xi Jinping meet this week, ending a long commercial freeze in a critical overseas market for the US planemaker. The Chinese government is considering unveiling a commitment for Boeing’s 737 jetliner during the APEC Summit in San Francisco, as a signal of a recent thaw between the two nations, said people familiar with the matter who aren’t authorized to speak publicly. Terms of a potential agreement are still under discussion, and could change or fall apart before the heads of state meet on Wednesday, they cautioned.

US (BBG): Senator Tim Scott Drops Out of Republican Presidential Race

South Carolina Senator Tim Scott is ending his presidential campaign, a long-shot bid to offer an alternative to Republican standard-bearer Donald Trump that drew the interest of prominent Wall Street executives. “If you ever want to love your country more, run for president,” Scott said on Fox News’s Sunday Night in America with Trey Gowdy. “Traveling this country, meeting people, it’s been one of the most fantastic experiences of my entire life. I love America more today than I did on May 22. But when I go back to Iowa it will not be as a presidential candidate. I am suspending my campaign.”

ECB (BBG): Euro-Zone Inflation May Temporarily Rebound, Guindos Says

European Central Bank Vice President Luis de Guindos warned that consumer-price growth may pick up again temporarily, though its prevailing direction is downwards. Speaking to the Frankfurt Euro Finance Week on Monday, he said that the euro-zone economy will stay subdued for now though it should then strengthen again, while there are signs that the labor market is starting to weaken.

ECB (MNI): Higher-For-Longer Rates to Weigh on Risky Assets

The rising prospect of higher for longer rates “has started to weigh on riskier asset valuations in recent months,” European Central Bank vice-president Luis de Guindos said in a speech on Monday. Higher-than-expected inflation or lower growth could trigger market volatility and risk premia, “increasing the likelihood of credit events materialising,” he said at an event in Frankfurt.

ECB (MNI): ECB to Include CPI Expectations in SAFE Survey

The European Central Bank hopes to publish a new series of questions about firms’ expectations for consumer price inflation as part of its Survey on the Access to Finance of Enterprises next year, and to increase the frequency of SAFE to quarterly from twice a year, ECB senior lead economist Annalisa Ferrando told MNI. A quarterly SAFE will better coordinate it with the ECB’s Bank Lending Survey, Ferrando said in an MNI podcast together with fellow senior lead economist Petra Kohler-Ulbrich.

UK (MNI): Cleverly Home Sec w/Former PM Cameron Set to Return to Frontline Politics

Office of PM Rishi Sunak has confirmed that James Cleverly has been appointed as Home Secretary following the sacking of Suella Braverman earlier on today. This leaves the position of Foreign Secretary open, with The Telegraph reporting that former Prime Minister David Cameron is to be appointed to the position in a highly unexpected development. Cameron, who served as PM from 2010-16 and resigned in the wake of the UK's vote to leave the European Union after his backing for the Remain campaign, has not held a role in frontline politics since then and does not even sit in the legislature. His appointment to Cabinet will likely see him appointed to the upper chamber of the UK parliament, the House of Lords.

ITALY (BBG): Moody’s Decision on Junk Rating This Week Has Italy on Edge

A possible downgrade of Italy to junk this week would be hugely symbolic, potentially consequential — and very controversial. The unprecedented branding of a Group of Seven economy as a “substantial credit risk” could be delivered by Moody’s Investors Service, whose Baa3 rating for the country is at the lowest rung of investment grade, with a negative outlook. Any announcement on Friday would be its first assessment since Prime Minister Giorgia Meloni’s coalition adopted a looser fiscal stance in September.

CHINA (BBG): China Set to Add Liquidity Support to Stave Off Cash Squeeze

China will probably add more cash into the financial system this week as the largest amount of policy loans in a year come due. Some market watchers also expect a near-term reduction in banks’ reserve requirement ratio. The People’s Bank of China will offer 950 billion yuan ($130 billion) through the medium-term lending facility Wednesday, according to the median estimate of 10 analysts in a Bloomberg survey. That would exceed the 850 billion yuan maturing this month. Most economists expect the one-year policy interest rate to remain unchanged at 2.5%.

JAPAN (BBG): Sudden Currency Moves Are Undesirable - FinMin Suzuki

Japan’s finance minister Shunichi Suzuki tells reporters that currency moves should be determined by market fundamentals, and sudden moves are undesirable. Will monitor markets closely with a sense of urgency to see if there are sudden moves, and will respond as needed. Suzuki declines to comment on current FX levels after yen breached new year-to-date lows against the dollar.

JAPAN (BBG): Japan State Minister Resigns Over Tax Scandal in Blow For PM

A state minister at Japan’s Finance Ministry submitted his resignation over his company’s failure to pay taxes, adding to Prime Minister Fumio Kishida’s woes as his support rates tumble to their lowest since he took office. Kenji Kanda, a lawmaker in Kishida’s long-ruling Liberal Democratic Party and himself a certified tax accountant, resigned Monday after acknowledging a company he runs had failed to pay taxes and had been punished by having assets seized.

RBA (MNI): Local Services Fueling Inflation - RBA's Kohler

Rapid growth of domestic market services prices will continue to fuel Australian inflation, which will fall slower than initially expected, according to Marion Kohler, assistant governor at the Reserve Bank of Australia. Speaking at an industry conference in Sydney, Kohler noted the Reserve’s recent review of its forecasts had caught the RBA by surprise. “This annual exercise is always revealing, but the biggest lesson is usually that humility is important when forecasting,” she said.

DATA

CHINA OCT TSF CNY1.85 TRLN VS MEDIAN CNY1.95 TRLN (MNI)
CHINA OCT NEW LOANS CNY738.4 BLN VS MEDIAN CNY660 BLN (MNI)
CHINA END-OCT M2 +10.3% Y/Y VS MEDIAN +10.3%; END-SEP +10.3% Y/Y (MNI)
CHINA END-OCT M1 +1.9% Y/Y VS +2.1% Y/Y END-SEP (MNI)
CHINA END-OCT M0 +10.2% Y/Y VS +10.7% Y/Y END-SEP (MNI)

JAPAN DATA (MNI): Japan Oct CGPI Rise Slows to +0.8% vs. Sept +2.2%

• JAPAN OCT CORP GOODS PRICE INDEX +0.8% Y/Y; SEPT REV
• JAPAN OCT CORP GOODS PRICE INDEX -0.4% M/M; SEPT REV -0.2%

The y/y rise in Japan's corporate goods price index slowed to 0.8% in October from September’s revised 2.2%, the 10th straight monthly deceleration, indicating that upstream prices continued to fall, Bank of Japan data showed on Monday. However, pass-through of downstream cost increases continued, slowing the pace of the consumer price index's fall. Several BOJ board members have judged CPI is stronger than expected.

AUSTRALIA DATA (MNI): CBA Spending Data Signals Contraction in October Retail Sales

CBA's household spending insights indicator fell 1% m/m in October after posting four consecutive monthly rises. It is now 2% higher than a year ago after an upwardly-revised 3.6% in September. The series has been revised due to some compositional changes. It has a high correlation with the ABS retail sales data and so October may also show a fall when it is released on November 28.CBA is forecasting a 0.6% m/m drop. The November rate hike is likely to weigh on spending going into 2024.

RATINGS: U.S. Outlook Revision to Negative at Moody’s Headlined on Friday

Rating reviews of note released after hours on Friday include:

• Fitch affirmed Italy at BBB; Outlook Stable
• Fitch affirmed Poland at A-; Outlook Stable
• Moody's affirmed Croatia at Baa2, outlook changed to positive from stable
• Moody's affirmed the United States of America at Aaa, outlook changed to negative from stable
• DBRS Morningstar confirmed the European Union at AAA, Stable Trend
• DBRS Morningstar confirmed Luxembourg at AAA, Stable Trend
• DBRS Morningstar confirmed Poland at A, Stable Trend

FOREX: New Highs for USD/JPY, But Suzuki Won't Be Drawn on Rates

• JPY has started the week on the back foot, slipping against most others in G10 to keep USD/JPY at new cycle highs, touching 151.86 headed into the European morning. The moves were shortly followed by a reiteration of the Japanese authorities' stance on the currency, as Suzuki stressed that while he cannot comment on currency levels, the Japanese finance ministry will monitor markets and respond with a sense of urgency, with market prices needing to be set by fundamentals, rather than speculation.
• The USD is more mixed, sitting mid-table headed into the NY crossover, with the 50-dma in the USD Index remaining a solid anchor for prices. Short-term trends remain pointed higher for the greenback, however prices are still below pre-NFP levels.
• AUD is modestly the best performer, aided by positive equity markets across European cash markets, however US futures point to a more modest open at the US opening bell later today. NOK sits at the other end of the G10 table, as markets partially reverse the sharp post-inflation strength seen on Friday.
• The Monday session sees a light schedule, with focus and risk events back-loaded later in the week, with US, UK and Eurozone inflation updates due. Speakers today include newest addition to the BoE MPC Breeden as well as Mann and Fed's Cook.

EGBS: Flat/Slightly Firmer With Curves Flattening

EGBs sit slightly flat to slightly firmer on Monday with Bund, OAT and periphery curves flattening.

• Local headline flow has been light otherwise, with news of the Cabinet Reshuffle in the UK not spilling over notably into the EGB space. Comments from ECB's de Guindos this morning have reiterated previous rhetoric from Lagarde r.e. policy rates staying sufficiently restrictive for as long as necessary.
• Bund futures are broadly flat today at 129.81 having previously found some resistance at 130.13. Technical studies remain bullish following the recent breach of a key resistance at 130.20, the Oct 12 high and a bull trigger. Current volumes are the lowest in the past 5 sessions.
• 10Y Bund yields down are -0.5bp at 2.711%, while Schatz underperforms the curve with yields up 1.8bp at 3.076% (potentially owing to ECB cut pricing being incrementally pared back in recent sessions).
• Periphery spreads sit tighter to Bunds. Italy outperforms after Fitch affirmed their rating at BBB (Outlook stable) after hours on Friday - easing market concerns r.e. Moody's review this Friday. The 10-Yr BTP/Bund spread is currently 3.1bps tighter at 182.4bps.
• Today's agenda is thin in the Euro area, with no ECB-speak nor data currently scheduled. EZ GDP/employment data will be of some residual interest tomorrow but US CPI will be at the forefront of market attention.

GILTS: Bounce From Lows, Wider Market Swings and Reduced Gilt Issuance Requirement Eyed

Gilt participants seem happy to track wider core global FI moves to start the week.

• Political matters have dominated on the UK headline front, with the latest UK cabinet reshuffle coming on the back of the removal of Suella Braverman from the post of Home Secretary.
• Elsewhere, a soft Rightmove house price index reading and sell-side speculation/estimates surrounding a reduction in gilt issuance needs in next week’s Budget (which may be aiding gilts) have garnered attention.
• Gilt futures have bounced from worst levels after a brief and limited showing through Friday’s base.
• Gilt futures last +5, 50 ticks off session lows and a little under 10 ticks shy of recovery highs.
• Cash gilt yields are 1.5-3.0bp lower across the curve.
• SONIA futures now operate -0.25 to +1.5 through the blues, after tracking swings in gilts.
• BoE-dated OIS is little changed to ~3bp softer across the major contracts.
• A quick reminder that the BoE will sell gilts in the short maturity bucket today.
• Elsewhere, the previously outlined rounds of BoE speak provide the local points of interest, with tier 1 data (CPI, labour market report and retail sales) scheduled through the remainder of the week.

EQUITIES: E-Mini S&P Trades Close to Trendline Resistance

A short-term bull cycle in Eurostoxx 50 futures remains intact and the contract is holding on to its recent gains. Price has recently traded through resistance at both the 20- and 50-day EMAs. The clear break of the 50-day EMA, at 4186.70, signals scope for a stronger bull cycle and opens 4256.00, the Oct 12 high. On the downside, key support and the bear trigger lies at 4001.0, the Oct 27 low. Initial support is at 4153.90, the 20-day EMA. S&P e-minis maintain a firmer short-term tone and the contract traded to a fresh short-term high on Friday. This reinforces bullish conditions and has also resulted in a test of trendline resistance at 4428.75. The trendline is drawn from the Jul 27 high and a clear break of it would strengthen current bullish conditions. This would open 4470.18, a Fibonacci retracement. Initial firm support lies at 4332.18, the 20-day EMA.

• Japan's NIKKEI closed higher by 17 pts or +0.05% at 32585.11 and the TOPIX ended 0.1 pts lower or 0% at 2336.62.
• Elsewhere, in China the SHANGHAI closed higher by 7.563 pts or +0.25% at 3046.533 and the HANG SENG ended 222.95 pts higher or +1.3% at 17426.21.
• Across Europe, Germany's DAX trades higher by 86.42 pts or +0.57% at 15320.07, FTSE 100 higher by 55.81 pts or +0.76% at 7415.95, CAC 40 up 51.57 pts or +0.73% at 7096.61 and Euro Stoxx 50 up 34.31 pts or +0.82% at 4231.67.
• Dow Jones mini down 11 pts or -0.03% at 34327, S&P 500 mini down 9.5 pts or -0.21% at 4421, NASDAQ mini down 50.25 pts or -0.32% at 15545.5.

COMMODITIES: Gold Remains Within Close Proximity to Support at 50-Day EMA

A bearish theme in WTI futures remains in play following last week’s sharp sell-off. The recent move down has resulted in a break of support at $80.20, the Oct 6 low. The breach highlights a stronger reversal and a continuation lower would pave the way for a move towards $74.26, the 76.4% retracement of the May 4 - Sep 28 bull run. On the upside, initial firm resistance has been defined at $83.60. The latest pullback in Gold appears to be a correction - for now - and the trend condition is bullish. MA studies are in a bull-mode set-up, highlighting a rising trend. A resumption of gains would open $2022.20, the May 15 high. The bull trigger is at $2009.4, the Oct 27 high. Note that support at the 50-day EMA, at $1938.1, has been pierced. A clear break of this average would undermine the bullish theme and expose $1908.3, the Oct 16 low.

• WTI Crude down $0.08 or -0.1% at $77.2
• Natural Gas up $0.15 or +4.98% at $3.184
• Gold spot down $0.98 or -0.05% at $1939.24
• Copper up $4.35 or +1.21% at $363.15
• Silver down $0.15 or -0.69% at $22.117
• Platinum up $6.03 or +0.71% at $851.84