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Free AccessMNI EUROPEAN OPEN: Japan CPI Picks Up, But Still Below Expectations
EXECUTIVE SUMMARY
- SHORT TRUCE BETWEEN ISRAEL AND HAMAS GOES INTO EFFECT IN GAZA - BBG
- GERMANY’S HABECK CALLS FOR RADICAL REFORM OF BORROWING LIMIT - BBG
- SOLID WAGE DATA NEEDED BEFORE BOJ APRIL EXIT TALK - MNI
- JAPAN OCT CORE CPI RISES 2.9% VS. SEPT’S 2.8%
- CHINA FOOD COMMODITY IMPORT DEMAND HAS PEAKED - MNI
- NEW ZEALAND COALITION GOVERNMENT PONDERS DEEPER REFORMS TO RBNZ - BBG
Fig. 1: Japan CPI - Mixed Trends In October
Source: MNI - Market News/Bloomberg
U.K.
BOE (FT): The Bank of England cannot afford to relent in its battle against high inflation just because it sees signs of weakening economic activity, its chief economist told the Financial Times.
MORTGAGES (BBG): Falling house prices could worsen the crunch facing households when they come to refinance their fixed-rate mortgage deals, according to research from the Bank of England.
CONSUMER CONFIDENCE (BBG): UK consumer confidence rebounded in November, with households more willing to splash out on major purchases ahead of Christmas, a survey found. GfK Ltd. said its measure of sentiment increased 6 points to minus 24, the sharpest rise since April. It followed a 9-point fall in October and exceeded the modest improvement forecast by economists.
EUROPE
GERMANY (BBG): German Economy Minister Robert Habeck said that his country’s constitutional limit on net new borrowing weakens its economy and called for radical reform.
GERMANY (RTRS): German trade union Verdi has called on members to go on strike at five Amazon (AMZN.O) distribution centres across Germany on Black Friday, it said in a statement on Thursday.
ECB: (BBG): The European Central Bank won’t increase borrowing costs again, unless there is an unexpected event, according to Governing Council member Francois Villeroy de Galhau.
ECB (MNI BRIEF): There are no good reasons for the European Central Bank's Governing Council to delay a discussion over ending reinvestments under its Pandemic Emergency Purchase Programme, Belgian National Bank head Pierre Wunsch said in an interview published on Thursday.
FRENCH/CHINA (RTRS): French Foreign Minister Catherine Colonna is set to meet the Chinese leadership in Beijing on Friday as she seeks to soothe ties after the launch of a European Union anti-subsidy probe backed by Paris into Chinese-made electric vehicles.
EUROPE (BBG): The European Commission will lay out a €584 billion ($637 billion) plan to overhaul the region’s power grids so they’re ready to handle the expected influx of electricity from renewable sources.
FINLAND/RUSSIA (BBG): Finland’s government will close its one remaining crossing point with Russia if its neighbor continues with a hybrid operation to push asylum seekers across the demarcation, Interior Minister Mari Rantanen said.
U.S.
US/CHINA (BBG): The US will continue to work with allies to counter Beijing’s growing maritime capabilities, Washington’s new chief of naval operations said. The Indo-Pacific region “remains America’s foremost priority,” Admiral Lisa Franchetti said at an online briefing Friday from South Korea as she wrapped up a weeklong visit to the region.
OTHER
ISRAEL/HAMAS (BBG): The first truce since the war between Israel and Hamas erupted last month went into effect on Friday morning.
JAPAN (MNI): The Bank of Japan will likely not obtain sufficient data on wage increases, particularly at smaller firms, needed to alter its easy policy settings before April, making an earlier adjustment unlikely, MNI understands.
JAPAN (MNI BRIEF): The y/y rise of Japan's annual core consumer inflation rate accelerated to 2.9% in October from September’s 2.8%, above the Bank of Japan’s 2% target for the 19th consecutive month, data released by the Ministry of Internal Affairs and Communications showed on Friday.
TAIWAN (BBG): Taiwan’s opposition presidential candidates engaged in a public mud-slinging match on live television, shattering the prospects of a China-friendly unity ticket in a moment likely to be remembered as one of the most farcical in the island’s political history.
NEW ZEALAND (BBG): New Zealand’s new government will seek advice on whether to undertake deeper reforms at the central bank in addition to returning it to a single mandate focused only on inflation.
CHINA
FOOD COMMODITIES (MNI): China’s import volumes of key food commodities such as soy, maize and wheat have likely peaked as the country seeks to increase domestic output on national security grounds, local analysts told MNI.
HOUSING (SECURITIES DAILY/BBG): Shenzhen’s recent lowering of the down-payment ratio for second homes paves the way for Shanghai and Beijing to follow, Securities Daily reports, citing Yan Yuejin, research director at E-house China Research and Development Institute.
PROPERTY FINANCE (SHANGHAI SECURITIES NEWS/BBG): Private developers face bigger challenges than state-owned companies and need stronger financing support but some financial institutions tend to avoid lending to them, Shanghai Securities News says in a commentary.
HEALTH (BBG): Chinese health authorities told the World Health Organization that the source of an outbreak of respiratory diseases among children are known pathogens, after reports about a surge in illness sparked concerns that a novel virus may have been the cause.
CHINA MARKETS
PBOC Injects Net CNY312 Bln Fri; Rates Unchanged
The People's Bank of China (PBOC) conducted CNY519 billion via 7-day reverse repo on Thursday, with the rate unchanged at 1.80%. The operation has led to a net injection of CNY142 billion after offsetting the maturity of CNY377 billion reverse repos today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.9260% at 09:56 am local time from the close of 2.0378% on Wednesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 47 on Wednesday, compared with the close of 55 on Tuesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
PBOC Yuan Parity Lower At 7.1151 Friday vs 7.1212 Thursday
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1151 on Friday, compared with 7.1212 set on Thursday. The fixing was estimated at 7.1428 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND 3Q RETAIL SALES EX- INFLATION Q/Q 0.0%; MEDIAN -0.7%; PRIOR -0.9%
JAPAN OCT NATIONAL CPI Y/Y 3.3%; MEDIAN 3.4%; PRIOR 3.0%
JAPAN OCT NATIONAL CPI EX FRESH FOOD Y/Y 2.9%; MEDIAN 3.0%; PRIOR 2.8%
JAPAN OCT NATIONAL CPI EX FRESH FOOD, ENERGY Y/Y 4.0%; MEDIAN 4.1%; PRIOR 4.2%
JAPAN NOV P JIBUN BANK PMI MFG 48.1; PRIOR 48.7
JAPAN NOV P JIBUN BANK PMI SERVICES 51.7; PRIOR 51.6
JAPAN NOV P JIBUN BANK PMI COMPOSITE 50.0; PRIOR 50.5
JAPAN SEP F LEADING INDEX CI 108.9; PRIOR 108.7
JAPAN SEP F COINCIDENT INDEX 114.7; PRIOR 114.7
UK GFK CONSUMER CONFIDENCE -24; MEDIAN -28; PRIOR -30
MARKETS
US TSYS: Narrow Ranges, TY Breaches Thursdays Low
TYZ3 deals at 108-17, -0-09, a 0-05+ range has been observed on volume of ~102k.
- Cash tsys sit 4-5bps cheaper across the major benchmarks, the belly is leading the cheaps.
- Tsys have ticked lower through today's session, albeit in a narrow range. There was little meaningful macro news flow as Tsys reopened after light holiday trade on Thursday. The downtick was seen alongside a light bid in the USD and pressure on regional equities.
- TY has breached Thursday's lows before marginally paring gains. The short-term structure in TY remains bullish, resistance comes in at 109-08+ the Nov 17 high. The 50-Day EMA (108-05) provides support.
- The highlight flow wise was a block seller (2k lots) in UXY.
- The docket is light in Europe today, further out we have flash S&P Global PMIs.
JGBS: Futures Consolidate After Earlier Drop, 40yr Supply On Tap Next Week
Post the lunch time break, JGB futures have largely tracked sideways. We were last at 145.74, -.32, which is slightly above session lows of 145.66. Highs were near the open, coming in at 146.03.
- This mirrors US Tsy futures to a large extent, with TYZ briefly breaching Thursday lows before consolidating (last 108-16+ -09+).
- Earlier the data front delivered slightly weaker than expected Oct CPI, but with firmer m/m core trends. The manufacturing PMI softened further to 48.1, but the services PMI painted a more upbeat picture (51.7).
- In the cash JGB space, the benchmark 10yr sits slightly below session highs in yield terms, last at 0.77% (+4.5bps). Earlier lows in the week were sub 0.70%. The 20yr yield is near 1.49%, also down slightly from session highs.
- In the swap space, the 10yr is near 0.98%, +5bps.
- Next week the data calendar has retail sales, and jobless rate figures as the main focus points. Q3 Capex is also out. There is BoJ speak on Wednesday and Thursday.
- On the supply front, we have a 40yr bond sale on Tuesday.
AUSSIE BONDS: Cheaper, Curve Steepens on Friday
ACGBs sit 4-7bps cheaper across the major benchmarks, light bear steepening is apparent.
- XM (-0.075) and YM (-0.06) have ticked lower through todays session dealing in narrow ranges for the most part.
- RBA dated futures price a terminal rate of 4.50% in June 24 with ~15bps of cuts by Dec 24.
- There was little in the way of meaningful domestic news flow, ACGBs ticked lower in narrow ranges today alongside Global FI. There was no headline driver and the move was seen alongside a light bid in the USD and pressure on regional equities.
- Looking ahead next week we have Oct CPI provides the highlight; a downtick in CPI to 5.2% Y/Y is expected, the prior read was 5.6% Y/Y.
NZGBs: Tick Lower Through Asia, RBNZ Due Next Week
NZGBs have ticked lower through today's Asian session, however ranges have been narrow and there has not yet been much follow through on the move lower. NZGBs sit 2-6bps cheaper across the major benchmarks, light bear steepening is apparent.
- Pressure has been seen alongside an uptick in the USD and lower regional equities are weighing on sentiment.
- 10-Year NZ US Swaps are stable and well within recent ranges, last printing at +55bps.
- With next week's RBNZ Meeting in view; OIS remain stable, pricing no change in the OCR next week with ~40bps of cuts by Oct 24.
- A reminder that the NZ Government Coalition will look to narrow the RBNZ's remit to focus on price stability (BBG). PM-Elect Luxon noted that his first economic job is to get inflation controlled.
- Looking ahead, the aforementioned RBNZ monetary policy decision headlines next week's docket. Also due next week are October Building Permits, November ANZ Business Survey and Consumer Confidence.
FOREX: Greenback Marginally Firmer, Moves Limited In Asia
There have been narrow ranges across G-10 FX on Friday, with little follow through on moves thus far. In the cross asset space WTI is down ~0.8% as discord within OPEC+ forced the group to delay an upcoming meeting. US Cash Tsys have reopened after being closed for Thanksgiving and are 4-6bps firmer. BBDXY is marginally firmer.
- AUD/USD is little changed from opening levels last printing at $0.6565/70. Technically the trend needle points north, resistance comes in at $0.6589 high from Nov 21. Support is at $0.6453, low from Nov 17.
- Kiwi is a touch higher however NZD/USD has observed a $0.6045/55 range in Asia. On the wires early in the session Q3 Retail Sales ex Inflation printed at 0.0% Q/Q, the prior read was revised a tick higher to -0.9% Q/Q. A fall of 0.7% had been expected.
- Yen is marginally firmer, USD/JPY is down ~0.1% however we remain comfortably above the ¥149 handle. The pair looked through this morning's mixed CPI and PMI report's. Resistance comes in at ¥150.00, the 20-Day EMA, and support is at ¥147.15, low from Nov 21.
- Elsewhere in G-10 CAD is down ~0.1% and EUR and GBP are little changed.
- The docket is light in Europe today, further out we have flash US S&P Global PMIs.
EQUITIES: HK/China Soften, Mixed Trends Elsewhere
On balance, regional equities are lower in first part of Friday trade. Hong Kong and China markets are weaker, unwinding some of the optimism seen around policy support for the property sector in recent sessions. US futures are a touch higher, but have tracked tight ranges overall. Eminis were last near 4570, while Nasdaq futures were around 16062.
- US yield have pushed higher as cash markets have re-opened following the Thanksgiving holiday, but this looks to be largely catch up with higher EU yields from Thursday (as Germany looks to suspend its debt brake). This hasn't impacted sentiment too negatively though in the equity space.
- At the break, the HSI is off 1.38%, while the China CSI 300 index is down 0.53%. A Bloomberg gauge of China property developers is down around 1% at this stage, after rallying around 15% in the first 4 sessions of this week. Banks are also under pressure amid concerns around unsecured loans to developers (see this BBG link for more details).
- Earnings headwinds in Hong Kong is the other factor cited, with some disappointment around Q3 outcomes (see SCMP here).
- Elsewhere, Japan markets have returned, with the Topix up around 0.65% at this stage. The ASX 200 has also crept higher, +0.25%.
- Most other markets are weaker at this stage, although losses aren't large. The Kospi is down 0.50%, while The Taiex is close to flat.
- In SEA, only the Philippines is marginally higher at this stage.
OIL: Higher For The Week, All Eyes On Nov 30 Opec Meeting
Brent sits unchanged versus end Thursday levels, last near $81.40/bbl. Earlier highs were just above $81.80/bbl. The benchmark hasn't been back above $82/bbl, since Wednesday's plunge on headlines around the delay of the OPEC+ meeting. At this stage Brent is around 1% higher for the week, which would be its first gain in 5 weeks. WTI is tracking near $76.50/bbl in recent dealings, following a similar trajectory to Brent (+0.80% higher for the week).
- Focus remains on the Nov 30 OPEC+ meeting. An Angolan official stated the country’s intent to remain in OPEC, somewhat settling the markets Thursday.
- Still, Nigeria and Angola are the main nations pushing for higher production quotas, disrupting normal OPEC+ meeting proceedings. Both nations are aiming to boost their production in the short term.
- Saudi and Russia are expected to sustain or deepen cuts into 2024 when they meet November 30.
- In terms of levels, key short-term resistance for Brent is seen at $83.97 (Nov 14 high). For WTI, resistance is seen at $78.55 after which lies a key short-term $79.65 (Nov 14 high).
GOLD: Tracking Sideways, Up For The Week, But Resistance Still Evident Above $2000
Gold has largely drifted sideways in the first part of Friday dealing. The precious metal was last near $1992, little changed from Thursday closing levels. We sit higher for the week at this stage ($1980.82 last week's closing level), but Gold has been within fairly tight ranges over recent sessions.
- Resistance is evident on moves above $2000. The bull trigger at $2009.4 (Nov 7/Oct 27 high) having come close in earlier sessions this week.
- Dips sub $1990 have been supported on the downside. Note the 20-day EMA sits back near $1973.
- The firmer core yield backdrop hasn't impacted sentiment much, although the USD is only marginally above recent lows, a gold support point in the past week.
UP TODAY (TIMES GMT/LOCAL)
Date | GMT/Local | Impact | Flag | Country | Event |
24/11/2023 | 0700/0800 | *** | ![]() | DE | GDP (f) |
24/11/2023 | 0700/0800 | ** | ![]() | SE | PPI |
24/11/2023 | 0800/0900 | ** | ![]() | ES | PPI |
24/11/2023 | 0900/1000 | *** | ![]() | DE | IFO Business Climate Index |
24/11/2023 | 1000/1100 | ![]() | EU | ECB's Lagarde participates in "Europe in the Future" event | |
24/11/2023 | 1300/1400 | ![]() | EU | ECB's De Guindos remarks and Q&A | |
24/11/2023 | 1330/0830 | ** | ![]() | CA | Retail Trade |
24/11/2023 | 1330/0830 | ** | ![]() | US | WASDE Weekly Import/Export |
24/11/2023 | 1400/1500 | ** | ![]() | BE | BNB Business Sentiment |
24/11/2023 | 1445/0945 | *** | ![]() | US | IHS Markit Manufacturing Index (flash) |
24/11/2023 | 1445/0945 | *** | ![]() | US | S&P Global Services Index (flash) |
24/11/2023 | 1600/1100 | ![]() | CA | Finance Dept monthly Fiscal Monitor (expected) |
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.