MNI US OPEN - UK Economy Flatlines in Q3 as Growth Stalls

NEWS

US (BBG): Biden, Xi Draw Business to APEC With Trade, Investment on Agenda

US officials are aiming for the Asia-Pacific Economic Cooperation summit to be a signature moment in President Joe Biden’s efforts to strengthen economic ties in the region and manage the relationship with China. Next week’s long-awaited gathering in San Francisco of leaders from the 21-member forum marks the first time the US has hosted the event in 12 years and will see the first conversation in a year between Biden and his Chinese counterpart Xi Jinping on the sidelines of the summit.

US (WaPo): Senate Democrat Joe Manchin Says He Will Not Seek Reelection

Sen. Joe Manchin III announced Thursday he would not seek reelection in 2024, setting back Democrats' plans to hold onto their Senate majority in 2024 and raising their fears that he could get involved in the presidential race as a third-party candidate. "After months of deliberation and long conversations with my family, I believe in my heart of hearts that I have accomplished what I set out to do for West Virginia," Manchin said in a video posted to X. "I have made one of the toughest decisions of my life and decided that I will not be running for reelection to the United States Senate."

UK (MNI): Rising UK Real Wages a Boost to GDP - ONS's Fitzner

The UK's flat growth in Q3 was in line with most of its G7 peers and output looks set to remain in a narrow channel for the foreseeable future, Grant Fitzner, chief economist at the Office for National Statistics said Friday. The data was a little above City expectations, but in line with Bank of England recent forecasts. GDP was flat in the 3 months to September -- modestly negative to 2 decimal places -- and there seem to be little in the way of future growth drivers that would break a pattern of quarterly outcomes in a range either side of unchanged, Fitzner said.

UK (MNI): BOE Sets Out Bank Test Geo-Political Shock Scenario

The Bank of England has published the details of its system wide exploratory scenario (SWES), outlining the first 10 days of a geo-political shock, which sees a sharp deterioration in the economic outlook and asset prices taking a faster and more sustained hit than in either the Covid March 2020 dash-for-cash or the September/October 2022 Liability Driven Investment shock. The Bank's aim is to assess the responses of non-bank financial institutions and banks to the SWES to see how the former's liquidity needs would change and whether banks would continue to intermediate.

GERMANY (MNI): Electricity Tax Cuts Not as Large as Headline Number Suggests

The German government came to an agreement on electricity subsidies yesterday. However, this will not directly impact CPI as the measures are solely targeted towards non-consumers. The electricity tax for 2024 and 2025 for the manufacturing industry will be lowered from E0.01537 / kWh to E0.0005 / kWh (which is the EU-minimum). Additionally, prior programs for relief for energy intensive firms were extended. Chancellor Scholz said that the size of the total programme will be E12bln in 2024 alone.

PORTUGAL (MNI): First Poll Post-Costa Resignation Shows Slump in PS Support

On the evening of 9 Nov, President Marcelo Rebelo de Sousa confirmed he would take the requisite steps to dissolve the Assembly of the Republic (parliament), ushering in snap elections, following the resignation of PM Antonio Costa amid a corruption probe. The president confirmed previous reports that the election would not be imminent. Instead, he will delay the posting of the decree in the Diaria de Republica until after 29 Nov. This will ensure that parliament passes the 2024 budget and requisite measures related to the EU's Recovery and Resilience Facility.

CHINA (BBG): China’s Deflation Pressures Are ‘Temporary,’ PBOC Adviser Says

Signs of deflation in China are only transitory, an adviser to the country’s central bank said despite a worsening drop of consumer prices. “On the issue of deflation, we can only say that China is seeing a little bit of signs of that, and I think it’s temporary,” said Wang Yiming, a member of the People’s Bank of China’s monetary policy committee, at the Caixin summit in Beijing on Friday. “It’s not yet deflation in a strict sense.”

CHINA (MNI): China Needs to Make Delisting Companies Easier - Advisors

MNI (Beijing) Chinese authorities need to make it easier to delist underperforming companies and improve corporate governance if an official drive to boost the valuation of the country’s long-stagnant stock market is to succeed, policy advisors and economists told MNI.

CHINA (MNI): Short-Term China Gov Debt Needed for Monetary Moves

MNI (Beijing) China's government should issue more short-term debt in a bid to align with the need of financial markets as debt issuance will increasingly impact monetary policy operations, Li Yang, chairman of National Institutions of Finance and Development said Friday during 2023 China Financial Street Forum.

CHINA (MNI): China Should Combine Fiscal Stimulus With Reforms

MNI (Beijing) China should increase its fiscal efforts including raising the budget deficit-to-GDP ratio in 2024 to stabilise the economy in the short-term, although it must step up structural reforms to unleash medium- and long-term momentum, Wang Yiming, the People’s Bank of China Monetary Policy Committee member, said Friday.

CHINA (MNI): China Still Has Huge Potential for Growth

MNI (Beijing) China still has huge potential for economic growth as it still has a late-mover advantage, continuous reforms are needed to for greatest benefit , said Zhang Junkuo, former deputy director of the Development Research Center of the State Council. “The current weak recovery cannot simply be attributed to a decline in growth potential,” said Zhang, speaking at the 14th Caixin Summit in Beijing on Friday.

CHINA (MNI): China 2024 Crude Oil Imports to Grow Marginally

MNI (Beijing) China’s demand for crude oil imports will increase marginally in 2024 from this year’s 11 million bpd as economic growth firms and the government adds infrastructure stimulus, but this poses little significant upside risk to world oil prices, a leading China energy expert has told MNI.

JAPAN (BBG): Kishida’s Cabinet Approves $87bln Extra Budget as Support Sags

Japan’s cabinet approved a ¥13.2 trillion ($87.2 billion) extra budget to support Prime Minister Fumio Kishida’s latest economic package amid an ongoing decline in support for his administration. To fund the larger-than-expected package, Japan will issue an additional ¥8.9 trillion in bonds, according to plans approved by the cabinet Friday. The government is also set to partly cover the extra budget costs with a surplus from the previous year and some extra tax revenues.

RBA (BBG): RBA Sees Elevated Inflation as Resilient Economy Aids Jobs

Australia’s central bank expects inflation will only return to the top of its 2-3% target by end-2025 and that a stronger economy will support employment, underscoring this week’s decision to resume raising interest rates. The Reserve Bank sees headline inflation at 4% by mid-2024 versus 3.5% forecast three months earlier, and economic growth at 1.75% from 1.25% previously, according to its quarterly Statement on Monetary Policy released Friday.

DATA

UK DATA (MNI): UK Economy Flatlines in Q3 as Growth Stalls

• UK Q3 GDP -0.0% Q/Q, % +0.6Y/Y
• UK SEP GDP +0.2% M/M, +0% 3MM, +0.7% 3M Y/Y

The UK saw no growth in the third quarter as the latest official data confirmed the Bank of England's anaemic outlook for the economy, a release by the Office for National Statistics showed Friday. GDP was a rounded 0.0% in Q3, the ONS said, although to two decimal points, growth was -0.03%, near-identical to the BOE's Q3 forecast of -0.02%. Year-on-year, GDP growth slowed to 0.6%. Growth in September was 0.2%, above expected and helping keep the economy from a wider Q3 slowdown. The services sector slowed modestly in the quarter, weighing on growth, but a more upbeat construction sector was a bright spot.

UK SEP IND PROD +0.1% M/M, +1.5% Y/Y (MNI)
UK SEP SERVICES INDEX +0.2% M/M, -0.1% 3MM (MNI)
UK SEP MANUF OUTPUT +0.1% M/M, +3% Y/Y (MNI)
UK SEP TRADE BALANCE GBP -1.57BN (MNI)

ITALY SEP IP +0% M/M, -2% Y/Y (MNI)

NORWAY DATA (MNI): October CPI Firmer Than Expected, In Line with Norges Bank Forecast

• NORWAY OCT CPI +1% M/M, +4% Y/Y
• NORWAY OCT CORE CPI +0.6% M/M, +6% Y/Y

Norway October CPI-ATE came in line with the Norges Bank September forecast of 6.0% Y/Y after undershooting central bank expectations by -0.4pp in September. CPI-ATE came in at 6.0% Y/Y (vs 5.6% Y/Y cons; 5.7% prior) and 0.6% M/M (vs 0.3% cons; 0.4% prior). Headline CPI was 4.0% Y/Y (vs 3.5% cons) and 1.0% M/M (vs 0.5% cons). In unrounded terms, CPI-ATE was 5.97% Y/Y and 0.63% M/M.

SWEDEN DATA (MNI): Monthly Indicators Show Further Consumption Weakness

Swedish September consumption/production indicators provided more evidence of a deteriorating consumer demand outlook. The prints provide more context re the September monthly GDP indicator, which printed at -0.5% M/M (vs a downwardly revised -0.5% prior) and -3.0% Y/Y (vs 0.1% prior). Household consumption fell -0.5% M/M, -0.7% Y/Y, while August figures were revised lower to +0.4% M/M and +0.3% Y/Y.

RATINGS: Friday’s Ratings Slate

Rating reviews of note scheduled for after hours on Friday include:

• Fitch on Italy (current rating: BBB; Outlook Stable) & Poland (current rating: A-; Outlook Stable)
• Moody’s on Croatia (current rating: Baa2; Outlook Stable) & Lithuania (current rating: A2; Outlook Stable)
• DBRS Morningstar on the European Union (current rating: AAA, Stable Trend), Luxembourg (current rating: AAA, Stable Trend) & Poland (current rating: A, Stable Trend)

FOREX: NOK on Top as CPI-ATE Re-Accelerates, Raising Likelihood of Dec Hike

• NOK comfortably outperforms, rising against all others in G10 and working against the weakness in the currency across the first half of the week. EUR/NOK has reversed off the week's highs of 12.0062 on the back of the higher-than-expected inflation release that put CPI-ATE - the key input for Norges Bank policymaking - back to 6.0% vs. Exp. 5.6%. On the margins, the inflation release should work in favour of a 25bps rate hike from the Norges Bank at the December meeting, a view that's become more popular among sell-side analysts.
• Elsewhere, the USD Index is respecting recent ranges, with the 50-dma providing a solid short-term anchor at 105.854. Resultingly, EUR/USD holds close to the week's lower levels, with 1.0656 and 1.0623 marking the next downside levels.
• AUD is the poorest performer, with risk proxies and high beta currencies slipping alongside weaker core equity markets. US futures are indicating a mixed open on Wall Street Friday, led lower by tech names.
• Preliminary UMich sentiment data takes focus Friday, with markets expecting the uptick in the one-year ahead inflation expectation evident in the October read to moderate back down to 4.0%. The central bank speaker slate should prove to be of more interest., as ECB's Lagarde and Nagel make appearances as well as Fed's Logan, Bostic and Daly.

EGBS: Remain Softer Following Yesterday's US Moves

Core EGBs remain softer with curves bear steepening following events in the US post-close, with futures sitting close to intraday lows at typing.

• Catalysts in the US were the weak 30Y auction and hawkishly perceived remarks from Fed Chair Powell (though, as MNI noted at the time, Powell's remarks were broadly in line with the latest FOMC presser). Domestic headline flow has been light otherwise with little on the data docket.
• Bund futures are down -0.84 today at 129.60 with 10y Bund yields up 8.4bp at 2.729% and Schatz yields up 4.7bp at 3.048%. OATs sit similarly at mid-long tenors but 2Y yields are only up 3.0bps at present.
• In the periphery space, spreads to Bunds are a touch tighter. The 10-Yr BTP/Bund spread is currently 1.0bps tighter at 185.4bps. This morning saw Italian supply, industrial production data and news that the ECB have accepted Scope Ratings in the Eurosystem framework - none of which weighed significantly on BTPs.
• ECB-speak once again highlights the agenda today, with Lagarde speaking at 1230 GMT and Nagel at 1520GMT.

GILTS: Remaining Under Pressure, Curve Steeper

Gilt futures extended the early sell off to print as low as 94.80, with spill over from weakness in U.S. Tsys and EGBs the most obvious drivers in early Friday trade. A light uptick in oil may also be providing some pressure.

• Futures traded as low as 94.80 before moving back to around 94.85, ~130 ticks off yesterday’s multi-week high and -70 or so on the day last.
• Technically, the contract still maintains a short-term bullish tone. Firm support to watch is 92.63, the Nov 1 low, while initial support is seen at 94.03, the 50-day EMA.
• Cash gilt yields run 1.5-7.0bp higher as the curve steepens, with 2s10s and 5s30s ticking away from month-to-date lows.
• SONIA futures last show +1.0 to -8.5 through the blues, twist steepening, but sitting a touch above worst levels of the day.
• BoE-dated OIS shows flat to 5.5bp firmer across the liquid contracts.
• As we have noted on several occasions, domestic data failed to provide any tangible impetus for the space.
• Expect wider market inputs to remain at the fore given the lack of slated UK event risk evident ahead of the weekend.

EQUITIES: E-Mini S&P Close to Recent Lows Following Thursday's Late Sell-Off

A short-term bull cycle in Eurostoxx 50 futures remains intact and the contract traded higher Thursday, resuming the current uptrend. Price has recently traded through resistance at both the 20- and 50-day EMAs. The clear break of the 50-day EMA, at 4185.90, 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. S&P e-minis maintains a firmer short-term tone and the contract is trading higher today. The latest recovery still appears to be a correction, however, price has cleared the 20- and 50-day EMAs. The break of the 50-day average - a key short-term pivot level - has strengthened bullish conditions. Sights are on 4430.50, the Oct 12 high and 4435.50, trendline resistance drawn from the Jul 27 high. Key support and the bear trigger is at 4122.25, the Oct 27 low.

• Japan's NIKKEI closed lower by 78.35 pts or -0.24% at 32568.11 and the TOPIX ended 1.6 pts higher or +0.07% at 2336.72.
• Elsewhere, in China the SHANGHAI closed lower by 14.309 pts or -0.47% at 3038.97 and the HANG SENG ended 308.03 pts lower or -1.76% at 17203.26.
• Across Europe, Germany's DAX trades lower by 101.37 pts or -0.66% at 15251.56, FTSE 100 lower by 68.82 pts or -0.92% at 7386.85, CAC 40 down 60.65 pts or -0.85% at 7053.01 and Euro Stoxx 50 down 29.82 pts or -0.71% at 4199.38.
• Dow Jones mini up 51 pts or +0.15% at 33994, S&P 500 mini down 0 pts or 0% at 4362.25, NASDAQ mini down 35 pts or -0.23% at 15220.75.

COMMODITIES: Bearish Theme in WTI Futures Remains in Play

A bearish theme in WTI futures remains in play and the contract has traded sharply lower this week. The move down has resulted in a break of support at $80.20, the Oct 6 low. The breach highlights a stronger short-term 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 remains bullish. Moving average studies are in a bull-mode set-up, highlighting a rising trend. A resumption of gains would open $2022.20 next, the May 15 high. Initial firm pivot support lies at $1938.1, the 50-day EMA. Clearance of this level is required to signal a short-term top and the potential for a deeper retracement.

• WTI Crude up $0.66 or +0.87% at $76.41
• Natural Gas up $0 or +0.07% at $3.039
• Gold spot down $4.05 or -0.21% at $1954.86
• Copper down $2.35 or -0.65% at $361.75
• Silver down $0.05 or -0.23% at $22.59
• Platinum down $6.78 or -0.79% at $855.79