Awaiting US Oct CPI print

Notes/Observations

- Divergent Euro Zone inflation as Norway Oct CPI came in record high at 7.5% YoY, raising the risk of Norges Bank continuing to hike interest rates into 2023. Conversely, Czech Oct CPI eases from recent 24-year highs, following 3rd straight pause from Czech Central Bank last week.

- Crypto continues its capitulation following news overnight that Binance is pulling out of FTX acquisition after conducting due diligence.

- Some risk aversion sentiment creeping back in as fears over rising Chinese Covid-19 cases and fears of US upside surprise in CPI later.

- Major week catalyst US Oct CPI expected to continue moving away for 4th straight YoY decline, from 40-year highs but remain elevated; Question remains on when Fed will ease on the pace of rate hikes (**Note: Core rate seen as key factor).

- US Mid-Term results continue to flow in as US Senate control to be decided via runoff election in Georgia on Dec 6th.

- Asia closed lower with Hang Seng underperforming at -1.70%. EU indices are mixed with CAC40 -0.5% underperforming. US futures are +0.3%. Gold -0.3%, DXY +0.2%; Commodity: Brent -0.3%, WTI -0.5%, UK Nat Gas -1.4%; Crypto: BTC -5.6%, ETH -0.9%.

Asia

- BOJ Gov Kuroda testimony in Parliament and reiterated overall assessment that domestic economy is picking up but uncertainties remain extremely high; Need to maintain 2% CPI target. Stressed that key points for any exit from policy would be pace of rate hikes and balance sheet adjustments.

- RBA Bullock testified in Parliament that rates might need to go a little higher but getting closer to the point where might be able to pause and take a look.

Ukraine conflict

- Russia Defense Min Shoigu announced he was ordering the retreat of Russian forces from city of Kherson in South Ukraine.

- US Joint Chief of Staff Gen Miley said to have estimated that Russia and Ukraine had both have had 100K killed or injured in the Ukraine war with another 40k civilian losses.

Europe

- UK Chancellor of the Exchequer (Fin Min) Hunt said to be looking to cut surcharge on UK bank profits to 3% from 8% in order to shield them from most of a corporate tax increase.

Americas

- Fed's Kashkari noted that CPI was not being driving by wages but caused by supply chain challenges, At some point, dual mandates would come into tension but we were a long way from that point.

- Fed's Evans (non-voter) was worried that much higher rates risk the Fed's jobs mandate; Saw benefits to adjusting the pace of Fed moves soon.

- Fed's Barkin (non-voter): Fed was doing what was necessary to get inflation to 2% target. Could not let inflation fester or expectations rise.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.19% at 7,276.20, FTSE -0.27% at 7,276.20, DAX -0.21% at 7,280.70, CAC-40 -0.48% at 6,399.50, IBEX-35 -0.24% at 8,020.72, FTSE MIB +0.26% at 23,842.00, SMI -0.28% at 10,874.30, S&P 500 Futures +0.27%].

Market Focal Points/Key Themes: European indices open lower across the board and remained under pressure through the early part of the session; better performing indices include utilities and financials; sectors leaning lower include real estate and energy; oil & gas subsector under pressure as Brent approaches $92/bbl; focus on upcoming US CPI data; earnings expected in the upcoming US session include NICE, Beckton Dickenson, Tapestry and Brookfield Asset Management.

Equities

- Consumer discretionary: Delivery Hero [DHER.DE] +8% (earnings; outlook adjustment).

- Energy: Engie [ENGI.FR] +5% (earnings).

- Materials: ArcelorMittal [MT.NL] -1% (earnings).

- Financials: Allianz SE [ALV.DE] +2.5% (earnings), Credit Agricole [ACA.FR] -5% (earnings).

- Healthcare: Astrazeneca [AZN.UK] +1.5% (earnings), Merck KGaa [MRK.DE] -3% (earnings).

- Industrials: Continental [CON.DE] +3.5% (earnings).

- Utilities: RWE [RWE.DE] +2.5% (earnings).

- Telecom: Telecom Italia [TIT.IT] +4% (earnings), Deutsche Telekom [DTE.DE] -2.5% (earnings).

Speakers

- ECB Economic Bulletin noted that the General Council had made substantial progress in withdrawing monetary policy accommodation. Inflation remained far too high and would stay above the target for an extended period. Economic activity in the euro area would likely to have slowed significantly in the third.

- ECB raised the amount of bonds national central banks could lend against cash on Repo from €150B to €250B to support market functioning around year-end.

- German HDE Retail Association noted that both consumers and businesses were facing a difficult Christmas shopping season in light of double-digit inflation and high energy prices. Sales were only growing through inflation-driven price increases. Saw sales rising by 5.4% in nominal terms in Nov/Dec period and -4.0% on a price adjusted basis.

- Russia Central Bank (CBR) Gov Nabiullina stated that it was currently in a neutral monetary policy stage.

- Japan BOJ Gov Kuroda reiterated stance that recent one-sided and rapid weakening of the yen is undesirable for the economy (comments after meeting PM Kishida).

- China Foreign Min spokesperson Zhao Lijian reiterated stance that Taiwan issue was a core interest of China. US needed to stop weaponizing trade issues and take real steps to defend the role of the market economy. China did take proposal of potential Biden-Xi meeting at the Indonesia G20 seriously.

Currencies/fixed income

- USD holding steady ahead of the Oct CPI reading. Dealers noted that inflation data to date had indicated that the Fed still needed to tighten policy further (backed up by recent Fed speak). Today’s number expected to shed some light on how successful the Fed aggressive tightening had been in containing inflation. Greenback slightly supported due to some risk aversion sentiment creeping back in as fears over rising Chinese Covid-19 cases.

- Norway Oct CPI reading raised the risk of Norges Bank continuing to raise interest rates into 2023.

Economic data

- (NL) Netherlands Sept Manufacturing Production M/M: +0.5% v -1.7% prior; Y/Y: 4.6% v 5.4% prior; Industrial Sales Y/Y: 19.6% v 27.5% prior.

- (JP) Japan Oct Preliminary Machine Tool Orders Y/Y: -5.4% v +4.3% prior.

- (FI) Finland Sept Industrial Production M/M: 1.3% v 0.6% prior; Y/Y: 4.0% v 2.5% prior.

- (NO) Norway Oct CPI M/M: +0.3% v -0.2%e; Y/Y: 7.5% v 7.1%e (highest annual pace on record).

- (NO) Norway Oct CPI Underlying M/M: 0.3% v 0.2%e; Y/Y: 5.9% v 5.5%e.

- (NO) Norway Oct PPI (including oil) M/M: -16.5% v -7.2% prior; Y/Y: 19.8% v 52.4% prior.

- (DK) Denmark Oct CPI M/M: 1.0% v 1.3% prior; Y/Y: 10.1% v 10.0% prior.

- (DK) Denmark Oct CPI EU Harmonized MoM: 1.3% v 1.5% prior; YoY: 11.4% v 11.1% prior.

- (TR) Turkey Aug Unemployment Rate: 10.1% v 9.8% prior.

- (FR) France Q3 Preliminary Wages Q/Q: 0.9% v 1.2%e.

- (AT) Austria Sept Industrial Production M/M: -1.6% v +4.2% prior; Y/Y: 6.9% v 9.4% prior.

- (CZ) Czech Oct CPI M/M: -1.4% v +0.9%e; Y/Y: 15.1% v 17.9%e.

- (CZ) Czech Sept Export Price Index Y/Y: 14.3% v 16.1% prior; Import Price Index Y/Y: 20.0% v 24.0% prior.

- (IT) Italy Sept Industrial Production M/M: -1.8% v -1.5%e; Y/Y: -0.5% v +1.0%e; Industrial Production NSA (unadj) Y/Y: -0.5% v +2.8% prior.

- (IT) Bank of Italy (BOI) Banks and Money Monthly Statistics: Oct Gross Non-performing Loans (NPLs): €34.9B v €35.3B prior.

- (ZA) South Africa Sept Total Mining Production M/M: +0.1% v -0.5%e; Y/Y: -4.5% v -4.1%e; Gold Production Y/Y: -12.4% v -17.1% prior; Platinum Production Y/Y: -1.1% v -12.9% prior.

- (GR) Greece Oct CPI Y/Y: 9.1% v 12.0% prior; CPI EU Harmonized Y/Y: 9.5% v 12.1% prior.

- (GR) Greece Sept Industrial Production Y/Y: -1.1% v +3.9% prior.

Fixed income issuance

- (UK) DMO sold £3.5B in 4.125% Jan 2027 Gilts; Avg Yield: 3.626% v 4.800% prior; bid-to-cover: 2.30x v 2.08x prior; Tail: 0.4bps v 0.8bps prior.

- (SE) Sweden sold total SEK500M vs. SEK500M indicated in 2027 and 2030 I/L Bonds.

- (IT) Italy Debt Agency (Tesoro) sold €5.5B vs. €5.5B indicated in 12-month Bills; Avg Yield: 2.690% v 2.532% prior; Bid-to-cover: 1.50x v 1.40x prior.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 06:00 (IE) Ireland Oct CPI M/M: No est v 0.0% prior; Y/Y: No est v 8.2% prior.

- 06:00 (IE) Ireland Oct EU Harmonized (final reading) M/M: No est v % prelim; Y/Y: No est v 9.5% prelim.

- 06:00 (IL) Israel Oct Consumer Confidence: No est v 70 prior.

- 06:00 (ZA) South Africa Sept Manufacturing Production M/M: 0.0%e v 2.1% prior; Y/Y: 2.4%e v 1.4% prior.

- 06:00 (RO) Romania to sell combined RON800M in 2025 and 2032 bonds.

- 06:30 (CL) Chile Central Bank Economists Survey.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IS) Iceland Oct Unemployment Rate: No est v 2.8% prior.

- 07:00 (BR) Brazil Oct IBGE Inflation IPCA M/M: +0.5%e v -0.3% prior; Y/Y: 6.4%e v 7.2% prior.

- 07:30 (CH) SNB's Maechler.

- 07:00 (CZ) Czech Central Bank to comment on CPI data.

- 08:00 (PL) Poland Central Bank Oct Minutes (2 decisions ago).

- 08:00 (RU) Russia Gold and Forex Reserve w/e Nov 4th: No est v $550.1B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (DE) ECB's Schnabel (Germany) members Kazimir (Slovenia) and Vasle (Slovenia).

- 08:00 (UK) BOE's Ramsden.

- 08:30 (US) Oct CPI M/M: 0.6%e v 0.4% prior; Y/Y: 7.9%e v 8.2% prior.

- 08:30 (US) Oct CPI (ex-food/energy) M/M: 0.5%e v 0.6% prior; Y/Y: 6.5%e v 6.6% prior.

- 08:30 (US) Oct CPI Index NSA: 298.488e v 296.808 prior; CPI Core (seasonally adj): 300.094e v 298.660 prior.

- 08:30 (US) Oct Real Avg Hourly Earning Y/Y: No est v -3.0% prior; Real Avg Weekly Earnings Y/Y: No est v -3.8% prior.

- 08:30 (US) Initial Jobless Claims: 220Ke v 217K prior; Continuing Claims: 1.49Me v 1.49M prior.

- 08:30 (UR) Ukraine Oct CPI M/M: 1.9%e v 1.9% prior; Y/Y: 25.7%e v 24.6% prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:35 (US) Fed’s Logan.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:30 (US) Fed’s Mester.

- 13:00 (US) Treasury to sell 30-Year Bonds.

- 13:30 (US) Fed’s George.

- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to raise Overnight Rate by 75bps to 10.00%.

- 14:00 (US) Oct Monthly Budget Statement: -$92.5Be v -$429.7B prior.

- 14:00 (AR) Argentina Sept Wages M/M: No est v 6.5% prior.

- (MX) Mexico Oct ANTAD Same-Store Sales Y/Y: No est v 8.2% prior.

- (MX) Mexico Oct Nominal Wages: No est v 8.2% prior.

- 16:30 (NZ) New Zealand Oct Manufacturing PMI: No est v 52.0 prior.

- 16:45 (NZ) New Zealand Oct Food Prices M/M: No est v 0.4% prior.

- 18:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to raise Reference Rate by 25bps to 7.25%.

- 18:50 (JP) Japan Oct PPI (CGPI) M/M: 0.7%e v 0.7% prior; Y/Y: 8.8%e v 9.7% prior.

- 21:30 (KR) South Korea to sell KRW200B in 50-Year Bonds.

- 21:35 (CN) China to sell 3-month and 6-month Bills.

- 23:00 (MY) Malaysia Q3 GDP Q/Q: 0.8%e v +3.5% prior; Y/Y: 12.4%e v 8.9% prior.

- 23:00 (MY) Malaysia Q3 Current Account (MYR): No est v 4.4B prior.

- 22:30 (JP) Japan to sell 3-Month Bills.