Focus on Fed rate decision, expected to downshift on pace of tightening

Notes/Observations

- EU equities are lower ahead of gauntlet run of rate decisions. FOMC, BOE, ECB and SNB all expected to hike 50bps, representing a pullback in pace from 75bps at last meetings.

- Risk appetite turned on sharply yesterday following cooler than expected US CPI as theme of peak inflation percolates, but equities erased gains before close of play. USD selloff remains at lows with no attempt to pare loses.

- UK Nov CPI moved off 40-year highs at YoY 10.7% v 11.1% prior.

- Spain Nov final CPI confirmed its 4th straight month of easing from its July highs.

- ECB Staff Projections said to see inflation remaining above its target level in forecast horizon.

- More speculation that BOJ would consider a policy review in 2023.

- Asia closed mixed with Hang Seng +0.4%. EU indices are lower -0.3% to -0.7%. US futures are flat. Gold -0.4%, DXY -0.3%; Commodity: Brent +0.5%, WTI +0.6%; Crypto: BTC +2.8%, ETH +3.7%.

Asia

- South Korea Nov Unemployment Rate: 2.9% v 2.9%e.

- Japan Oct Core Machine Orders M/M: 5.4% v 2.1%e; Y/Y: 0.4% v 1.5%e.

- Japan Q4 Tankan Large Manufacturing Index: 7 v 6e; Outlook Survey: 6 v 6e.

- Japan Q4 Tankan Large Non-Manufacturing Index: 19 v 17e; Outlook Survey: 11 v 15e.

- New Zealand govt presented its 2023 Budget outlook which cut its 2022 GDP growth forecast from 4.2% to 3.5% and saw a contraction of 0.8% in 2023.

- RBNZ Assistant Gov Hawkesby stated that saw little impact of higher rates so far and that the neutral OCR had drifted higher.

- Japan ruling LDP party Tax Panel Chief Miyazawa stated that senior officials had agreed to increase the corporate tax, tobacco tax, and income tax for defense budget funding.

- Singapore Central Bank (MAS) Quarterly Survey of Economists raised its 2022 CPI forecast from 5.7% to 6.1% and 2022 GDP growth forecast from 3.5% to 3.6%. It cut 2023 GDP growth from 2.8% to 1.8% and set the 2023 CPI forecast at 4.0%.

Americas

- US Congressional negotiators said to have reached an agreement on govt funding through to Dec 23rd. Deal provides another week of negotiations on a final omnibus funding deal.

Energy

- Weekly API Crude Oil Inventories: +7.8M v -6.4M prior.

- EU ministers said to delay agreeing a gas price cap for a 2nd time. Did agree on a rough framework of mechanism to limit gas prices if they reached excessive levels. Could not agree on specifics such as the level at which the cap would be triggered.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 -0.65% at 439.72, FTSE -0.50% at 7,465.10, DAX -0.64% at 14,404.75, CAC-40 -0.66% at 6,700.27, IBEX-35 -0.25% at 8,310.25, FTSE MIB -0.35% at 24,550.00, SMI -0.44% at 11,087.10, S&P 500 Futures -0.09%].

Market Focal Points/Key Themes: European indices open lower across the board and drifted further into the red as the session wore on; better performing sectors include consumer discretionary and energy; sectors leading to the downside include real estate and technology; oil & gas subsector supported after Brent moves above $80/bbl; Holcim reaches deal to divest its Russia business; reportedly Grifols to consider asset sale to reduce debt; focus on upcoming interest rate decision by the Fed; earnings expected in the upcoming US session include Metro AG and Lennar.

Equities

- Consumer discretionary: Inditex [ITX.ES] +1.5% (earnings; recent sales data), Dalata Hotel [DHG.IE] +10% (trading update), TUI [TUI1.DE] -8% (earnings; capital raise), Colruyt [CLR.BE] -15% (earnings).

- Consumer staples: Watches of Switzerland [WOSG.UK] -7% (earnings).

- Healthcare: Grifols [GRF.ES] +2.5% (earnings), Oxurion [OXUR.BE] +20% (study), Lysogene [LYS.FR] -41% (proceedings).

- Technology: Cohort [CHRT.UK] +10% (earnings).

Speakers

- Upcoming ECB Staff Projections said to see inflation 'comfortable above' 2% target in 2024 and 'just above' target in 2025.

- German Chancellor Scholz commented in Parliament that he was confident an EU deal on gas price cap could be found.

- German debt agency on 2023 issuance stated that it planned to issue total €539B in debt during the year.

- German IFO Institute raised 2022 and 2023 GDP outlook but did saw a contraction during winter period. It raised the 2022 GDP growth forecast from 1.6% to 1.8% and also raised the 2023 GDP outlook from -0.3% to -0.1% (aka smaller contraction).

- Czech Central Bank (CNB) Vice-Gov Mora believed that interest rates should rise further.

- BOJ said to be considering a policy review in 2023, but said to unlikely happen before BOJ Gov Kuroda stepped down in Apr 2023 after his decade-long term.

- China govt to go ahead with its scheduled Economic Work Conference and have it begin on Thursday, Dec 15th (**Note: Was rumored to be delayed to higher covid cases).

- IEA Monthly Oil Report (OMR) raised its 2022 global oil demand growth from 2.1M bpd to 2.3M bpd and also raised the 2023 global oil demand growth from 1.6M bpd to 1.7M bpd. It noted that oil price might rally in 2023 as Russian exports sunk and market headed to tighter Q2 2023 balance.

Currencies/fixed income

- USD consolidated its recent losses following the lower US CPI reading on Tuesday which cemented the view that the Fed would slow the pace of rate increases and go with 50bps at its decision later today.

- EUR/USD hovering near its recent 6-month highs and was at 1.0660 by mid-session. Despite the ease in recent inflation data reports circulated that upcoming ECB Staff Projections would still see inflation remaining above its target level in forecast horizon.

- GBP/USD was steady as UK inflation also painting a potential picture that it had possibly peaked. Pair at 1.24 buy mid-session.

- USD/JPY tested the 134.50 area on reports that BOJ was considering a policy review in 2023.

Economic data

- (FI) Finland Nov CPI M/M: 1.2% v 0.9% prior; Y/Y: 9.1% v 8.3% prior.

- (IN) India Nov Wholesale Prices (WPI) Y/Y: 5.9% v 6.3%e.

- (UK) Nov CPI M/M: 0.4% v 0.6%e; Y/Y: 10.7% v 10.9%e; CPI Core Y/Y: 6.3% v 6.5%e; CPIH Y/Y: 9.3% v 9.6%e.

- (UK) Nov RPI M/M: 0.6% v 0.5%e; Y/Y: 14.0% v 13.9%e; RPI-X (ex-mortgage Interest Payments) Y/Y:13.5% v 13.6%e; Retail Price Index: 358.3 v 358.1e.

- (SE) Sweden Nov CPI M/M: 1.0% v 1.2%e; Y/Y: 11.5% v 11.6%e; CPI Level: 387.93 v 388.73e.

- (SE) Sweden Nov CPIF M/M: 0.7% v 0.8%e; Y/Y: 9.5% v 9.6%e.

- (SE) Sweden Nov CPIF (ex-energy) M/M: 0.2% v 0.4%e; Y/Y: 8.0% v 8.2%e.

- (CH) Swiss Nov Producer & Import Prices M/M: -0.5% v 0.0% prior; Y/Y: 3.8% v 4.9% prior.

- (ES) Spain Nov Final CPI M/M: -0.1% v -0.1% prelim; Y/Y: 6.8% v 6.8% prelim.

- (ES) Spain Nov CPI EU Harmonized M/M: -0.3% v -0.5% prelim; Y/Y: 6.7% v 6.6% prelim.

- (ES) Spain Nov CPI Core M/M: 0.7% v 1.0% prior; CPI Core (final) Y/Y: 6.3% v 6.3% prelim.

- (ZA) South Africa Nov CPI M/M: 0.3% v 0.3%e; Y/Y: 7.4% v 7.5%e.

- (ZA) South Africa Nov CPI Core M/M: 0.1% v 0.2%e; Y/Y: 5.0% v 5.1%e.

- (IT) Italy Q3 Unemployment Rate: 7.9% v 8.0%e.

- (CZ) Czech Oct Current Account Balance (CZK): B v -31.3Be v -55.8B prior.

- (UK) Oct ONS House Price Index Y/Y: 12.6% v 11.2%e.

- (EU) Euro Zone Oct Industrial Production M/M: -2.0% v -1.5%e; Y/Y: 3.4% v 3.3%e.

Fixed income issuance

- (IN) India sold total INR220B vs. INR220B indicated in 3-month, 6-month and 12-month bills.

- (DK) Denmark sold total DKK1.94B in 3-month and 6-month bills.

- (SE) Sweden sold total SEK2.0B vs. SEK2.0B indicated in 2028 and 2033 Bonds.

Looking ahead

- 05:15 (CH) Switzerland to sell 2031 and 2039 Bonds.

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

- 06:00 (IE) Ireland Oct Property Prices M/M: No est v 0.6% prior; Y/Y: No est v 10.8% prior.

- 06:00 (ZA) South Africa Oct Retail Sales M/M: 0.0%e v 0.1% prior; Y/Y: -0.6%e v -0.6% prior.

- 06:00 (PT) Portugal Nov Final CPI M/M: No est v 0.3% prelim; Y/Y: No est v 9.9% prelim.

- 06:00 (PT) Portugal Nov Final CPI EU Harmonized M/M: No est v 0.0% prelim; Y/Y: No est v 10.3% prelim.

- 06:00 (IL) Israel Q3 Current Account Balance: No est v $4.2B prior.

- 06:00 (CZ) Czech Republic to sell 2028, 2030 and 2037 Bonds (3 tranches).

- 06:00 (RU) Russia to sell OFZ Bonds (3 tranches).

- 06:45 (US) Daily Libor Fixing.

- 07:00 (US) MBA Mortgage Applications w/e Dec 9th: No est v -1.9% prior.

- 07:00 (BR) Brazil Oct Economic Activity Index (Monthly GDP) M/M: 0.5%e v 0.1% prior; Y/Y: 4.2%e v 4.0% prior.

- 07:00 (MX) Mexico Sept Gold Production: No est v 6.4K kg prior; Silver Production: No est v 355.6K kg prior; Copper Production: No est v e40.8K tons prior.

- 08:00 (PL) Poland Oct Current Account Balance: -€0.8Be v -€1.6B prior; Trade Balance: -€2.4Be v -€2.1B prior; Exports: €28.1Be v €28.5B prior; Imports: €30.4Be v €30.5B prior.

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

- 08:30 (US) Nov Import Price Index M/M: -0.5%e v -0.2% prior; Y/Y: 3.2%e v 4.2% prior; Import Price Index (ex- petroleum) M/M: -0.5%e v -0.2% prior.

- 08:30 (US) Nov Export Price Index M/M: -0.5%e v -0.3% prior; Y/Y: 5.7%e v 6.9% prior.

- 08:30 (CA) Canada Oct Manufacturing Sales M/M: 2.0%e v 0.0% prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (RU) Russia Q3 Preliminary GDP (2nd of 3 readings) Y/Y: No est v -4.0% advance.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 14:00 (AR) Argentina Oct Capacity Utilization: No est v 68.6% prior.

- 14:00 (US) FOMC Interest Rate Decision: Expected to raise Target Range by 50bps to 4.25-4.50%.

- 14:00 (US) Interest on Reserve Balances: No est v 3.90% prior.

- 14:30 (US) Fed Chair Powell post rate decision press conference.

- 16:00 (KR) South Korea Nov Export Price Index Y/Y: No est v 13.7% prior; Import Price Index Y/Y: No est v 19.8% prior.

- 16:45 (NZ) New Zealand Q3 GDP Q/Q: 0.9%e v 1.7% prior; Y/Y: 5.5%e v 0.4% prior.

- 17:30 (NL) ECB’s Elderson (Netherlands).

- 18:50 (JP) Japan Nov Trade Balance: -¥1.678Te v -¥2.16T prior; Adj Trade Balance: -¥1.238Te v -¥2.30T prior; Exports Y/Y: 19.7%e v 25.3% prior; Imports Y/Y: 26.9%e v 53.5% prior.

- 19:00 (AU) Australia Dec Consumer Inflation Expectation: No est v 6.0% prior.

- 19:30 (AU) Australia Nov Employment Change: +19Ke v +32.2K prior; Unemployment Rate: 3.4%e v 3.4% prior; Full Time Employment Change: No est v 47.1K prior; Part Time Employment Change: No est v 14.9K prior; Participation Rate: 66.6%e v 66.5% prior.

- 20:20 (CN) China PBoC 1-year Medium-term Lending Facility (MLF) Operation.

- 21:00 (CN) China Nov Industrial Production Y/Y: 3.5%e v 5.0% prior; YTD Y/Y: 4.0%e v 4.0% prior.

- 21:00 (CN) China Nov Retail Sales Y/Y: -4.0%e v -0.5% prior; YTD Y/Y: 0.4%e v 0.6% prior.

- 21:00 (CN) China Nov YTD Fixed Urban Assets Y/Y: 5.6%e v 5.8% prior.

- 21:00 (CN) China Nov YTD Property Investment Y/Y: -9.2%e v -8.8% prior.

- 21:00 (CN) China Nov YTD Residential Property Sales Y/Y: No est v -28.2% prior.

- 21:00 (CN) China Nov Surveyed Jobless Rate: 5.6%e v 5.5% prior.

- 20:30 (CN) China Nov New Home Prices M/M: No est v -0.4% prior; Y/Y: No est v -1.6% prior.

- 22:35 (JP) Japan to sell 20-Year JGB Bonds.

- 23:00 (ID) Indonesia Nov Trade Balance: $4.3Be v $5.7B prior; Exports Y/Y: 9.5%e v 12.3% prior; Imports Y/Y: 6.3%e v 17.4% prior.

- 23:30 (JP) Japan Oct Tertiary Industry Index M/M: +0.8%e v -0.4% prior.