EU Mid-Market Update: China PBOC cuts RRR; COVID outbreak triggers mass testing; EU awaits further discussion on Russian oil cap; US reduced trading hours amid Thanksgiving and Black Friday.

Notes/observations

- Risk off moves in last hour following PBOC RRR cut and COVID mass testing news out of China. US equity futures dipped as USD firmed up. Due to tail end of US Thanksgiving holiday, US trading hours still affected with mainly truncated hours via earlier closures. ‘Black Friday’ event begins.

- EU focus hinging on Russian oil price cap news after proposal by EU Commission two days ago for a cap between $65-70/bbl which caused some backlash. Ongoing discussion to continue today, unlikely to reach an agreement before week ends. Hungary granted exemption to the price cap, as well as Japan declaring oil from Sarkhalin 2 will be exempt.

- Global attention on China as COVID cases experience massive spike amid recent re-implementation of Govt containment measures. Nanjing City to undergo 5 days of mass COVID testing. China PBOC cut broad RRR by 25bps, effective Dec 5th; 1st broad RRR cut since this spring.

- Germany GDP optimistic as final Q3 revised upwards. However, GFK consumer confidence misses for 12th straight negative reading.

- Spain and Sweden PPI readings pull back substantially as rhetoric of inflation already peaking starts to dig in.

- Asia closed mixed with Hang Seng under-performing at -0.5%. EU indices are mostly lower by 0.25%. US futures are flat. Gold +0.3%, DXY +0.3%; Commodity: Brent +1.7%, WTI +2.2%, UK Nat Gas -1.5%; Crypto: BTC -1.0%, ETH -2.2%.

Asia

- (JP) Japan Nov Tokyo CPI Y/Y: 3.8% v 3.6%e; CPI (Ex-Fresh Food) Y/Y: 3.6% v 3.5%e (Fastest increase since 1982).

- (KR) Bank of Korea (BOK) Gov Rhee said may go up to 3.5% as terminal policy rate; Watching other central banks and credit market.

- (CN) China PBOC cut RRR by 25bps; effective Dec 5th.

- (CN) China's PBOC said to be planning CNY100B fund to support property project M&A deals - press.

- (CN) Nanjing city said to conduct mass COVID testing for 5 days from Nov 26th - Govt notice.

- (HK) Hong Kong extended coronavirus social distancing measures through Dec 14th.

- (NZ) New Zealand Q3 Retail Sales (ex-inflation) Q/Q: 0.4% v 0.5%e.

- (JP) Japan Fin Min Suzuki: Defense spending requires perpetual spending; Government will strive to cut issuance of short-term debt.

- (MY) Malaysia Oct CPI Y/Y: 4.0% v 3.9%e.

Taiwan

- (TW) Taiwan Digital Min Tang: Recent cyberattack on Taiwan not as strong as in Aug.

Mid-East

- Saudi and Iraq Energy Ministers ensure commitment to OPEC+ decision.

Ukraine conflict

- (EU) NATO Sec Gen Stoltenberg: Urge allies to boost air defense for Ukraine.

Europe

- (EU) ECB's Lane (Ireland, chief economist) said long term inflation expectations appear well anchored - blog post.

- (EE) ECB's Muller (Estonia, Hawk): Too risky to wait for downturn to cool prices; Delaying action now risks worse inflation later.

- (ES) Spain windfall tax on banks and energy companies passes first step in Parliament; the vote was 186 to 152.

- (UK) BOE’s Mann (hawkish) said UK Risk premium still exists, as it is reflected in the FX rate; CPI expectations still well above 2.0% target, at upper end of BOE projections.

- (UK) NHS nurses announce strike dates: Two days planned for Dec 15th and 20th.

-(FR) France Trade Min Becht: US and China not on same level as EU partners.

- (SE) Sweden FSA Bank increased capital requirements.

- (TR) Turkey Central Bank Bi-Annual Financial Stability Report: Measures taken recently have strengthened balance sheets of firms and households.

Americas

- (CO) Colombia Fin Min Ocampo said electricity fees should decrease inflation, Loan growth rate has begun moderating.

- (AR) Argentina Sept Shop Center Sales Y/Y: 13.2% v 15.9% prior.

- (AR) Argentina Econ Min Massa stated country will have >2.0% GDP growth in 2023 Budget.

Energy

- (DE) Germany Energy Regulator: Will consider gas storage level as critical if it drops below 40% by Feb 1st.

- (DE) Germany Econ Ministry noted EU ministers agreed to two sets of emergency measures; One for affordable gas supply in EU, other is for faster development of renewables.

Speakers/fixed income/fx/commodities/erratum 

Equities

Indices [Stoxx600 -0.17% at 440.10, FTSE +0.19% at 7,480.92, DAX -0.12% at 14,522.71, CAC-40 -0.11% at 6,700.04, IBEX-35 -0.06% at 8,383.16, FTSE MIB -0.06% at 24,715.00, SMI -0.02% at 11,155.10, S&P 500 Futures +0.16%].

Market Focal Points/Key Themes: European indices open mixed and failed to gain direction in the early part of the session; modest trading volume in light of US holiday; better performing sectors include financials and utilities; underperforming sectors include consumer discretionary and real estate; Helvetia divests its stake in Sa Nostra; Devro receives takeover offer from Saria Nederland; SSE to sell its stake in electricity transmission business; US markets have shortened trading hours with no major corporate events expected.

Equities

- Consumer discretionary: ScS Group [SCS.UK] +3.5% (AGM update).

- Consumer staples: Devro [DVO.UK] +60% (offer; trading update).

- Financials: Intrum [INTRUM.SE] -15% (analyst action; impairments), LSL Property Services [PSL.UK] -16% (trading update).

- Utilities: SSE [SSE.UK] +1% (divestment).

Speakers

-( EU) ECB's Lane (Ireland, chief economist): Long term inflation expectations appear well anchored - blog post.

- (EE) ECB's Muller (Estonia, Hawk): Too risky to wait for downturn to cool prices; Delaying action now risks worse inflation later.

Currencies/fixed income

-Before China news on mass COVID testing and China PBOC RRR cut, there was muted FX movement as US Thanksgiving holiday reduced liquidity and volatility. Following the news however, notable risk off move as USD firmed up, pushing USD/JPY up 0.6% to 139.5.

- GBP/USD lower at 1.208. EUR/USD lower at 1.04.

Economic data

- (DE) Germany Dec GFK Consumer Confidence: -40.2 v -39.6e (12th straight negative reading).

- (DE) Germany Q3 Final GDP Q/Q: 0.4% v 0.3%e; Y/Y: 1.3% v 1.2%e; GDP NSA (unadj) Y/Y: 1.2% v 1.1%e; Private Consumption Q/Q: 1.0% v 0.3%e; Govt Spending Q/Q: 0.0% v 0.8%e; Capital Investment Q/Q: -0.2% v -0.6%e.

- (SE) Sweden Oct PPI M/M: -1.5% v +0.4% prior; Y/Y: 18.7% v 20.6% prior.

- (SE) Sweden Oct Household Lending Y/Y: 4.5% v 5.1% prior.

- (DK) Denmark Oct Retail Sales M/M: -1.7% v -0.4% prior; Y/Y: -10.3% v -5.4% prior.

- (CH) Swiss Q3 Non-farm payrolls: 5.362M v 5.316M q/q.

- (FR) France Nov Consumer Confidence: 83 v 83e.

- (ES) Spain Oct PPI M/M: -1.4% v 0.0% prior; Y/Y: 26.1% v 35.6% prior (slowest annual pace since Sept 2021).

-(HU) Hungary Oct Unemployment Rate: 3.6% v 3.9%e.

- (RU) Russia Narrow Money Supply w/e Nov 18th (RUB): 15.83T v 15.79T prior.

- (IT) Italy Nov Consumer Confidence: 98.1 v 91.0e; Manufacturing Confidence Index: 102.5 v 99.5e; Economic Sentiment: 106.4 v 104.5 prior.

- (PL) Poland Oct Unemployment Rate: 5.1% v 5.1%e; Q3 Unemployment Rate: 2.9% v 2.5%e.

Fixed income issuance

- (IN) India sells total INR280B vs. INR280B indicated in 2027, 2032 and 2052 bonds.

- (ZA) South Africa sells total ZAR1.2B vs. ZAR1.2B indicated in I/L 2028, 2033 and 2046 Bonds.

- (FR) France Debt Agency (AFT) announces upcoming issuance; To sell €5.1-6.3B in 3-month, 6-month and 12-month bills on Monday, Nov 28th.

- (FR) France Debt Agency (AFT) announces upcoming issuance; To sell €5.0-6.0B in bonds on Thursday, Dec 1st.

- (IT) Italy Debt Agency (Tesoro) sells €5.0B vs. €5.0B indicated in 6-month Bills; Avg Yield: 2.324% v 2.049% prior; Bid-to-cover: 1.57x v 1.39x prior.

Looking ahead

- 06:00 (BR) Brazil Nov FGV Construction Costs M/M: 0.2%e v 0.0% prior.

- 06:00 (SE) Sweden Central Bank 9Riksbank) Dep Gov Floden.

- 06:00 (UK) DMO to sell £4.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £2.5B respectively).

- 06:30 (IN) India Weekly Forex Reserve w/e Nov 18th: No est v $544.7B prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IN) India announces upcoming bill issuance (held on Wed).

- 07:00 (MX) Mexico Q3 Final GDP Q/Q: 0.9%e v 1.0% prelim; Y/Y: 4.1%e v 4.2% prelim; Nominal GDP Y/Y: No est v 11.3% prior.

- 07:00 (MX) Mexico Sept IGAE Economic Activity Index (Monthly GDP) M/M: 0.1%e v 1.0% prior; Y/Y: 4.9%e v 5.7% prior.

- 07:30 (BR) Brazil Oct Current Account: -$4.5Be v -$5.7B prior; Foreign Direct Investment (FDI): $6.7Be v $9.2B prior.

- 07:30 (IS) Iceland to sell 2024, 2028 and 2037 RIKB Bonds.

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

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

- 10:00 (MX) Mexico Q3 Current Account: -$5.1Be v -$0.7B prior.

- 11:00 (EU) Potential sovereign ratings after European close.

- 12:00 (ES) ECB’s De Guindos (Spain).

- 12:30 (BR) Brazil Oct Total Federal Debt (BRL): No est v 5.752T prior.

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