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Free AccessMNI US OPEN: EUR higher as Knot sounds hawkish
EXECUTIVE SUMMARY:
- COVID MATTERS DOMINATE MARKETS
- ECB’S KNOT SAYS INFLATION RISK TILTED TO UPSIDE
- EU SET TO RESUME OIL CAP DISCUSSIONS
Figure 1: Uncertainty Around the Chinese Reopening Weigh in on WTI Crude Oil Futures ($/bbl)
NEWS
CHINA (MNI): Protests Against Ongoing Harsh Covid Measures Spread
Protests against harsh Covid restrictions have spread to more cities in China as they continued for a second night. Many on the streets are calling for President Xi's resignation, as the zero-Covid policy is apparently his construct, which is very surprising and extremely unusual. The USD has strengthened in the wake of the unrest.
CHINA (MNI): China’s Retail Spending to Grow 5% As 2023 Rebound Eyed
China’s retail sales could grow 5-6% in 2023 as Covid controls are eased, though renewed outbreaks in some of the country’s largest cities could delay reopening and weigh on Q4 sales, advisers told MNI. The optimistic outlook for a rebound in consumer spending depends on fully implementing the “20 measures” outlined by the central government in early November as it seeks more targeted and less disruptive approaches to managing Covid, advisers said.
EU (BBG): ECB’s Knot Says Inflation Risks Tilted Entirely to the Upside
European Central Bank Governing Council member Klaas Knot said risks to the outlook for consumer prices are still skewed to the upside, despite the euro area facing a recession. “In our projections, we do assume that inflation will come back to values close to 2% in the course of 2024,” the hawkish Dutch central bank chief said Monday in Paris. “But it is also fair to say that the risks to that projection are entirely tilted to the upside.”
OIL (MNI): EU Set to Resume Oil Cap Discussions
EU discussions on the Russian oil cap are set to resume again this week. The meeting set for Friday night to try and finalise a deal was cancelled due to “not enough convergence of views” according to EU officials. The diplomats also ruled out any further meetings over the weekend. The discussions have failed to reach consensus on the actual cap level which was originally touted at the $65-70/bbl level, which a number of EU nations have blasted as too high.
AUSTRALIA (MNI): Labor Administration Secures Third Term in Victoria State Election
The centre-left Australian Labor Party (ALP) and state Premier Dan Andrews have secured a third consecutive term in office in the regional election held in Victoria on 27 November. With 68.5% of the votes counted, the ALP have secured at least 51 of the 88 seats in the Victorian Legislative Assembly. The win will come as a boost to not only the ALP in Victoria, but Australian Prime Minister Anthony Albanese, who has now seen his party win control of the regional gov't of South Australia and retain power in its Victoria stronghold since he was elected PM in May.
AUSTRALIA (MNI): RBA's Lowe Flags Wages Risk In Inflation Fight
Returning inflation back to target required wages not accelerating much more, Reserve Bank of Australia Governor Philip Lowe said Monday, as he apologised to homeowners who took out loans believing rates would remain low until 2024. Speaking before the Senate Economics Committee, Lowe was pressed on his views about the interplay between wages and inflation after last week being criticised for saying it was "best to avoid" rising wages to compensate for elevated inflation.
DATA
AUSTRALIA DATA (MNI): Retail Sales Weaken As Rates And Inflation Bite
- AUSTRALIA OCT RETAIL SALES -0.2% M/M
Retail sales in October unexpectedly fell 0.2% m/m after rising 0.6% in August and September. Consensus expected retail spending to rise 0.5%. It is a very early indication that the RBA pivot in October was justified. Future increments are likely to remain at 25bp.
This was the first fall this year as post-Covid pent up demand has been worked through and while one month doesn't make a trend, this is the first indication that higher interest rates and cost of living are beginning to impact household spending. The weakness in retail sales was broad based with only food retailing posting an increase, which reflected continued elevated high food prices. Department stores were especially weak falling 2.4% m/m.
FX SUMMARY: JPY and EUR outperforms
- The USD benefit from safer haven demand overnight and in early European trade, as Equities gaped lower overnight, on China concerns.
- The standout is the Yen, with the latter up 1.09% so far today, on safer haven interest.
- The USD is now more mixed in G10 at the time of typing, albeit mostly in the red, still holding some gains against the AUD, CAD and NZD.
- The EUR is performing well so far today, in the green against all G10, besides the Yen.
- The currency leads versus the AUD, up 1.37% on the session.
- EURAUD sees 1.56508, the November high, as the initial resistance.
- EURUSD tested immediate resistance 1.0479 High Nov 15, printing a 1.0482 high at the time of typing.
- Looking ahead, there's no tier 1 data today, but some speakers are scheduled, including ECB Knot, Lagarde, Nagel, US Fed Williams, Bullard.
- ALL EYES are on the data releases this week, with EU prelim CPIs and US NFP/AHE to end the week.
BOND SUMMARY: Bunds Underperform in Risk-Off Markets
- Early strength in core fixed income has been partially reversed for Treasuries and gilts and fully reversed for Bunds.
- There has been a general risk-off feel to markets this morning following more protests in China but some hawkish comments from ECB's Knot have helped the Euribor strip underperform (and this has translated up the German curve to see Bunds underperform in core FI space too).
- There is little on the calendar today with more focus on the big data ahead this week, headlined by Eurozone inflation prints, the US ISM and payrolls.
- TY1 futures are up 0-7+ today at 113-08+ with 10y UST yields down -1.6bp at 3.666% and 2y yields down -1.1bp at 4.445%.
- Bund futures are up 0.04 today at 140.53 with 10y Bund yields down -0.2bp at 1.969% and Schatz yields down -0.5bp at 2.130%.
- Gilt futures are up 0.36 today at 105.72 with 10y yields down -3.1bp at 3.086% and 2y yields up 1.0bp at 3.261%.
EQUITIES: Equity Futures Dip From Recent Highs
A bullish EUROSTOXX 50 futures outlook remains intact and the contract is trading closer to its recent highs. Last week’s gains maintains the recovery that started in early October and confirms an extension of the bullish price sequence of higher highs and higher lows. The recent break of resistance at 3810.00, Aug 17 high, also strengthened the case for bulls. The focus is on the 4000.00 psychological handle. Initial firm support is at 3840, Nov 17 low. The S&P E-Minis outlook remains bullish and last week’s gains have reinforced this theme. Furthermore, recent consolidation in the daily chart appears to be a flag formation - a bullish continuation pattern. The contract has recently breached 3928.00, Nov 1 high, establishing a positive price sequence of higher highs and higher lows. The focus is on 4100.00 next. Initial firm support lies at 3883.77, the 50-day EMA.
- Japan's NIKKEI closed lower by 120.2 pts or -0.43% at 28162.83 and the TOPIX ended 13.69 pts lower or -0.68% at 2004.31.
- Elsewhere, in China the SHANGHAI closed lower by 23.144 pts or -0.75% at 3078.549 and the HANG SENG ended 275.64 pts lower or -1.57% at 17297.94.
- Across Europe, Germany's DAX trades lower by 31 pts or -0.21% at 14510.63, FTSE 100 lower by 33.4 pts or -0.45% at 7453.19, CAC 40 down 20.41 pts or -0.3% at 6692.07 and Euro Stoxx 50 down 5.75 pts or -0.15% at 3956.66.
- Dow Jones mini down 85 pts or -0.25% at 34273, S&P 500 mini down 16.5 pts or -0.41% at 4016.25, NASDAQ mini down 61 pts or -0.52% at 11721.5.
COMMODITIES: Gold Price Action Remains Bullish, Breaks Through Friday High
WTI futures have started the week on a bearish note. Today’s sell-off has resulted in a break of key support and the bear trigger at $74.96, the Sep 28 low. This confirms a resumption of the broader downtrend and has opened $73.38, a Fibonacci projection and the $70.00 psychological handle. Moving average studies are in a bear mode condition, highlighting the current trend direction. Initial resistance is at $79.90, Friday’s high. Short-term trend conditions in Gold remain bullish and the latest pullback is considered corrective. Recent gains resulted in the break of $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, Aug 10 high. The bull trigger is at $1786.5, the Nov 15 high. Initial firm support is seen at $1702.3, the Nov 9 low. First support to watch is at the 20-day EMA that intersects at $1729.2.
- WTI Crude down $2.39 or -3.13% at $73.85
- Natural Gas down $0.31 or -4.47% at $6.71
- Gold spot up $6.99 or +0.4% at $1759.31
- Copper down $2.8 or -0.77% at $359.6
- Silver down $0.2 or -0.93% at $21.4529
- Platinum up $7.27 or +0.74% at $990.38
Date | GMT/Local | Impact | Flag | Country | Event |
28/11/2022 | 0900/1000 | ** | ![]() | EU | M3 |
28/11/2022 | 1100/1100 | ** | ![]() | UK | CBI Distributive Trades |
28/11/2022 | 1330/0830 | * | ![]() | CA | Current account |
28/11/2022 | 1400/1500 | ![]() | EU | ECB Lagarde Intro at ECON Hearing | |
28/11/2022 | 1530/1030 | ** | ![]() | US | Dallas Fed manufacturing survey |
28/11/2022 | 1530/1530 | ![]() | UK | DMO Q1 Consultation Meetings | |
28/11/2022 | 1630/1130 | * | ![]() | US | US Treasury Auction Result for 26 Week Bill |
28/11/2022 | 1630/1130 | * | ![]() | US | US Treasury Auction Result for 13 Week Bill |
28/11/2022 | 1700/1200 | ![]() | US | New York Fed's John Williams | |
29/11/2022 | 2350/0850 | * | ![]() | JP | Retail sales (p) |
29/11/2022 | 2350/0850 | * | ![]() | JP | labor forcer survey |
29/11/2022 | 0530/0630 | *** | ![]() | DE | North Rhine Westphalia CPI |
29/11/2022 | 0700/0800 | *** | ![]() | SE | GDP |
29/11/2022 | 0700/0800 | ** | ![]() | SE | Retail Sales |
29/11/2022 | 0800/0900 | *** | ![]() | CH | GDP |
29/11/2022 | 0800/0900 | *** | ![]() | ES | HICP (p) |
29/11/2022 | 0800/0900 | ** | ![]() | SE | Economic Tendency Indicator |
29/11/2022 | 0810/0910 | ![]() | EU | ECB de Guindos Opens Encuentro Financiero Event | |
29/11/2022 | 0900/1000 | *** | ![]() | DE | Hesse CPI |
29/11/2022 | 0900/1000 | *** | ![]() | DE | Bavaria CPI |
29/11/2022 | 0930/0930 | ** | ![]() | UK | BOE Lending to Individuals |
29/11/2022 | 0930/0930 | ** | ![]() | UK | BOE M4 |
29/11/2022 | 1000/1100 | *** | ![]() | DE | Saxony CPI |
29/11/2022 | 1000/1100 | ** | ![]() | EU | Economic Sentiment Indicator |
29/11/2022 | 1000/1100 | ** | ![]() | IT | PPI |
29/11/2022 | 1235/1235 | ![]() | UK | BOE Mann Panels The Conference Board Conference | |
29/11/2022 | 1300/1400 | *** | ![]() | DE | HICP (p) |
29/11/2022 | 1330/0830 | *** | ![]() | CA | CA GDP by Industry and GDP Canadian Economic Accounts Combined |
29/11/2022 | 1330/1430 | ![]() | EU | ECB Schnabel Speech at Frankfurter Konjunkturgespraech | |
29/11/2022 | 1355/0855 | ** | ![]() | US | Redbook Retail Sales Index |
29/11/2022 | 1400/0900 | ** | ![]() | US | S&P Case-Shiller Home Price Index |
29/11/2022 | 1400/0900 | ** | ![]() | US | FHFA Home Price Index |
29/11/2022 | 1400/0900 | ** | ![]() | US | FHFA Quarterly Price Index |
29/11/2022 | 1500/1500 | ![]() | UK | BOE Bailey at Lords Economic Affairs Committee | |
29/11/2022 | 1500/1000 | *** | ![]() | US | Conference Board Consumer Confidence |
29/11/2022 | 1630/1130 | ** | ![]() | US | US Treasury Auction Result for 52 Week Bill |
30/11/2022 | 2350/0850 | ** | ![]() | JP | Industrial production |
To read the full story
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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.