Lackluster session ahead of various emerging market rate decisions this week

Notes/Observations

- Quiet EU macro news session, with EU Commission delaying decision on whether to freeze Hungary’s €7.5B funds.

- Optimistic economic data in a backdrop of recession fears after UK Nov Construction PMI and Germany Oct Factory Orders beat estimates. South Africa Q3 GDP heavily beat also.

- Asia closed mixed KOSPI underperforming at -1.1%. EU indices are -0.1% to -0.4%. US futures are +0.2%. Gold +0.1%, DXY -0.1%; Commodity: Brent -0.3%, WTI -0.5%, UK Nat Gas +1.4%; Crypto: BTC -2.0%, ETH -3.1%.

Asia

- RBA raised Cash Rate Target by 25bps to 3.10% (as expected). Statement noted that rate hikes had been needed to quell CPI. Reiterated forward guidance that expects to increase rates over period ahead but not on any preset course with interest rates.

- Australia Q3 Current Account (A$): -2.3B v +6.0Be [first deficit in 14 quarters.

- Japan Oct Household Spending Y/Y: +1.2% v 0.9%e (2nd consecutive increase).

- BOJ Gov Kuroda stated that it was too early to discuss policy framework. Reiterated stance that would still take time to hit BOJ inflation target (**Reminder: On Dec 1st BOJ's Naoki Tamura (new member) stated that BOJ should conduct a review of its monetary policy framework).

- Columbia University professor Takatoshi Ito: Technical tweak might be needed for inflation target; BOJ inflation target could be met in 2023.

- University of Tokyo Professor Hoshi: BOJ might abandon its 10-year bond yield cap as early as next year on growing prospects that inflation and wages would overshoot expectations.

Americas

- US Senator Shelby (R-AL): Democrats and Republicans were not far apart on an omnibus spending package; ~$25B apart on non-defense spending.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 -0.23% at 440.46, FTSE -0.19% at 7,553.30, DAX -0.02% at 14,445.15, CAC-40 -0.19% at 6,684.01, IBEX-35 -0.40% at 8,336.81, FTSE MIB -0.21% at 24,497.00, SMI -0.28% at 11,163.50, S&P 500 Futures +0.05%].

Market Focal Points/Key Themes: European indices open mixed with a bias to the downside and slid into the red as the session wore on; better performing sectors include health care and industrials; sectors leading the way lower include energy and financials; oil & gas subsector under pressure following drop in crude prices yesterday; Colliers acquires stake in BelSquare; reportedly SKF looking to sell its aerospace business; reportedly Vodafone halts sale of Spanish fiber network; earnings expected in the upcoming US session include Conn’s, AutoZone, and a trading update from Glencore.

Equities

- Consumer discretionary: Ashtead [AHT.UK] +2.5% (earnings; raises outlook), Puma [PUM.DE] +1.5% (Porsche to replace Puma in DAX index), Marston's [MARS.UK] +1% (earnings).

- Financials: Talanx [TLX.DE] +2% (CMD).

- Healthcare: Fresenius Medical [FME.DE] -1.5% (CEO exit), Eckert & Ziegler [EUZ.DE] -2% (alleged placement).

- Industrials: Aeroport de Paris [ADP.FR] -12% (placement).

- Technology: Gooch & Housego [GHH.UK] -14% (earnings).

Speakers

- ECB's Lane (Ireland, chief economist) stated had confidence that near peak in inflation but more hikes were needed. Inflation peak mighty have been reached or to come in early 2023; bulk of work had been done. ECB did expect 2nd round effects of inflation.

- ECB's Herodotou (Cyprus) reiterated Council view that there would be another hike in rates but added that ECB was very near neutral zone.

- Italy Stats Agency (Istat) Economic Forecast raised its 2022 GDP growth forecast from 2.8% to 3.9% while cutting the 2023 GDP growth outlook from 1.9% to 0.4%.

- EU Finance Ministers (EcoFin) said to delay EU Commission's decision to freeze €7.5B in Hungarian funds.

- German Constitutional Court said to dismiss challenge to €750B EU Recovery Fund.

- Russia Dep PM Novak reiterated that country might reduce oil production, but not by much. Russia was doing everything to stabilize the situation and sell its oil at levels seen so far in 2022; Novak said Russian mechanism of banning sales of oil subject to Western price cap should start working before end-2022.

Currencies/fixed income

- USD saw a rebound on Monday after US data suggested that the services sector of the economy remained resilient. Dealers noted that there remained a potential that the Fed rates could peak at a higher level.

- EUR/USD back below the 1.05 level. ECB member Lane noted that it might have seen peak inflation thus dampening any aggressive expectations of a 75bps ECB rate hike next week.

- USD/JPY reproaching 137 area after hitting 5-month lows on Monday below the 134 handle.

Economic data

- (DE) Germany Oct Factory Orders M/M: 0.8% v 0.1%e; Y/Y: -3.2% v -4.7%e.

- (AT) Austria Nov Wholesale Price Index M/M: -3.0% v +3.1% prior; Y/Y: 16.5% v 21.2% prior.

- (CZ) Czech Oct Retail Sales (ex-auto) Y/Y: -9.4% v -6.5%e.

- (TW) Taiwan Nov CPI Y/Y: 2.4% v 2.5%e; CPI Core Y/Y: 2.9% v 2.6%e; WPI Y/Y: 9.1% v 10.5%e.

- (DE) Germany Nov Construction PMI: 41.5 v 43.8 prior (lowest since Feb 2021).

- (NO) Norway Nov Region Output Survey (past 3-months): 0.27 v 0.43 prior; Output Survey (next 6-months: -0.57 v -0.16 prior.

- (UK) Nov Construction PMI: 50.4 v 52.0e (3rd straight expansion).

- (ZA) South Africa Q3 GDP Q/Q: 1.6% v 0.4%e; Y/Y: 4.1% v 2.8%e.

Fixed income issuance

- (ID) Indonesia sold total IDR15.5T vs. IDR15.0T target in bills and bonds.

- (ZA) South Africa sold total ZAR3.9B vs. ZAR3.9B indicated in 2031, 2032 and 2035 bonds.

- (UK) DMO sold £3.25B in 4.125% Jan 2027 Gilts; Avg Yield: 3.472% v 3.626% prior; bid-to-cover: 2.20x v 2.30x prior; Tail: 0.5bps v 0.4bps prior.

Looking ahead

- (UR) Ukraine Nov Official Reserve Assets: No est v $25.2B prior.

- (MX) Mexico Banamex Survey of Economists.

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

- 05:15 (CH) Switzerland to sell 3-month Bills; Avg Yield: % v 0.491% prior; Bid-to-cover: x v 3.18x prior.

- 05:30 (DE) Germany to sell €5.0B 2.2% Dec 2024 Schatz.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.6B in 3-month bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:30 (TR) Turkey Nov Real Effective Exchange Rate (REER): No est v 55.70 prior.

- 06:30(UK) DMO to sell £2.25B in 1.125% Jan 2039 Gilts.

- 06:30 (EU) ESM to sell €1.1B in 3-month Bills.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 07:00 (CL) Chile Oct Nominal Wage Y/Y: No est v 11.2% prior.

- 07:00 (MX) Mexico Sept Gross Fixed Investment: 5.5%e v 6.5% prior.

- 07:00 (MX) Mexico Nov Vehicle Production: No est v 278.5K prior; Vehicle Exports: No est v 267.9K prior.

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

- 08:30 (US) Oct Trade Balance: -80.0Be v -$73.3B prior.

- 08:30 (CA) Canada Oct Int’l Merchandise Trade (CAD): 0.9Be v 1.1B prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (EU) Weekly ECB Forex Reserves.

- 10:00 (CA) Canada Nov Ivey Purchasing Managers Index: No est v 50.1 prior.

- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills.

- 16:00 (CL) Chile Central Bank (BCCH) Interest Rate Decision: Expected to leave Overnight Rate Target at 11.25%.

- 16:30 (US) Weekly API Oil Inventories.

- 19:30 (AU) Australia Q3 GDP Q/Q: 0.7%e v 0.9% prior; Y/Y: 6.3%e v 3.6% prior.

- 20:00 (PH) Philippines Oct Unemployment Rate: No est v 5.0% prior.

- 20:10 (JP) BOJ Outright Bond Purchase Operation for 1~3 Years, 5~10 Years maturities.

- 20:30 (KR) Bank of Korea (BOK) to sell KRW2.5T in 2-year Bonds.

- 21:10 (JP) BOJ bond purchase operation.

- 21:35 (CN) China to sell combined CNY120B in 1-year and 5-year Upsized Bond.

- 22:00 (ID) Indonesia Nov Foreign Reserves: No est v $130.2B prior.

- 22:00 (TH) Thailand to sell combined THB43.5B in 2026 and 2043 bonds.

- 20:30 (JP) BOJ Board Nakamura in Nagano.

- 22:30 (TH) Thailand Nov CPI M/M: 0.2%e v 0.3% prior; Y/Y: 5.8%e v 6.0% prior; CPI Core Y/Y: 3.2%e v 3.2% prior.

- 23:30 (IN) India Central Bank (BI) Interest Rate Decision: Expected to raise Repurchase Rate by 35bps to 6.25%.

- 23:30 (TW) Taiwan to sell NT$30B in 10-Year Bonds.