Iran buys fighter jets from Russia despite Hamas/Israel truce being extended

EU Mid-Market Update: Iran buys fighter jets from Russia despite Hamas/Israel truce being extended; European hawks vocalize views; EasyJet positive on 2024 bookings.

- Risk off moves seen in morning trade with falling European bourses

- On the Mid-East, Iran signs a deal with Russia for SU-35 jets and helicopters as Hamas/Israel truce is extended for 2 further days. Crude oil trades higher.

- Economic data releases remain light more of a focus on Central Bank speakers today. BoE hawkish dissenter Ramsden noted a risk of sticky services inflation causing inflation persistence, while ECB hawk Nagel reiterated general council view that its premature to discuss rate cuts.

- Asia closed mixed with KOSPI out-performing at +1.1%. EU indices are -0.1% to -0.6%. US futures are -0.1% to +0.1%. Gold +0.1%, DXY -0.0%; Commodity: Brent +1.2%, WTI +1.3%, TTF -3.0%; Crypto: BTC -0.9%, ETH -1.5%.

Asia

- Australia Oct Retail Sales M/M: -0.2% v +0.1%e.

- South Korea Oct Retail Sales Y/Y: 6.4% v 9.5% prior.

- Japan Oct BOJ Core CPI Y/Y: 3.0% v 3.4% prior [slowest annualized pace since Jun].

- RBA Gov Bullock noted that domestic inflation path was similar to overseas; 2nd round price effects were evident in the economy. Stressed that was in a period where had to be a bit careful on policy and avoid imposing too much, pushing up jobless.

-Reportedly the groundwork for the lifting of Bank of Japan (BOJ)'s negative interest rates has finally begun; BOJ tries to avoid shock after lifting negative rates, Will. determine whether to lift them as early as H1 2024 after monitoring trends in spring wage talks and consumer spending [unclear which sources are cited] - Nikkei.

Global conflict/tensions

- Hamas and Israel extended its ceasefire by 2 more days with more hostages planned to be released.

Europe

- ECB's Lagarde noted that the Council would potentially reassess PEPP reinvestment policy in the not too distant future.

- ECB De Cos (Spain): Reiterates too premature to discuss rate cuts; Demand is weakening.

- BOE Dep Gov Ramsden reiterated that monetary policy needed to be restrictive for 'sufficiently long' extended period to get inflation back to 2% target.

- UK Nov BRC Shop Price Index registered its lowest reading since Jun 2022 (Y/Y: 4.3% v 5.2% prior).

Energy

- Saudi Arabia reportedly seeking OPEC+ quota cuts while some members resist.

- Energy Intelligence: Further delay of OPEC+ meeting cannot be ruled out; Yet to reach a resolution with Nigeria and Angola over new production baselines and cuts.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.48% at 456.20, FTSE -0.40% at 7,430.60, DAX -0.10% at 15,949.85, CAC-40 -0.40% at 7,236.16, IBEX-35 +0.18% at 9,954.13, FTSE MIB -0.27% at 29,264.00, SMI -0.55% at 10,761.70, S&P 500 Futures -0.01%].

Market Focal Points/Key Themes: European indices open generally lower and trended to the downside in the early part of the session; better performing sectors include financials and technology; sectors pushing to the downside include consumer discretionary and industrials; Spie acquires ROBUR in Germany; reportedly Bayer hires bankers to look at possible breakup simulation; reportedly Barclays could acquire Metro Bank’s mortgage book; earnings expected in the upcoming US session include Hewlett Packard, Intuit and NetApp.

Equities

- Consumer discretionary: EasyJet [EZJ.UK] +1.0% (FY23 results; reinstates dividend; booking trends), Ubisoft [UBI.FR] -7.0% (convertible bond issuance), LVMH [MC.FR] -2.5% (analyst downgrade), Boozt [BOOZT.SE] +2.5% (raises guidance after Black Friday).

- Financials: Lloyds [LLOY.UK] +0.5% (analyst upgrade).

- Healthcare: argenx [ARGX.BE] -16.0% (ADVANCE-SC study of VYVGART Hytrulo missed primary or secondary endpoints), Novartis [NOVN.CH] -0.5% (mid-term guidance - CMD).

- Industrials: Rolls-Royce [RR.UK] +5.0% (trading update and outlook - CMD).

- Technology: Atos [ATO.FR] -6.0% (confirms to consider capital raise, debt issuance).

- Telecom: Pearson [PSON.UK] -2.5% (analyst downgrade).

Speakers

- ECB’s Nagel (Germany) reiterated stance that was premature to discuss rate cuts and preferred to err on the side of caution. Inflation has remained too high for too long. He also stressed that the ECB balance sheet must shrink. Did not see much progress in Q4 GDP with pronounced weakness in economy. - Euro Area economy would probably avoid a recession.

- BOE Dep Gov Ramsden reiterated stance that rates to stay restrictive for extended period. Services inflation was stickier than expected and posed the greatest risk to persistent inflation. Reiterated path of rates to be data dependent.

- German Chancellor Scholz stated in Parliament that was working intensely to make all decisions necessary for 2024 budget as soon as possible.

- Hungary Fin Min Varga noted that achieving 2024 GDP growth of 4.0% would not be easy.

- Bank of Japan (BOJ) released its H1 FY23 Financial Statement with a Net ¥1.93T v ¥1.59T y/y, Op Rev ¥3.44T v ¥3.35T y/y; total assets ¥741.5T v ¥685.8T y/y. Paper loss from bond holdings: ¥10.5T while unrealized gains from ETF holdings: ¥23.6T.

- Taiwan govt updated its Staff Projections which cut the 2023 GDP growth forecast from 1.6% to 1.4% while raising the 2024 GDP growth forecast from 3.3% to 3.4%. Projections also raised the 2023 CPI forecast from 2.1% to 2.5% while maintaining 2024 CPI forecast at 1.6%.

- Iran finalized deal to purchase Russian fighter jets and helicopters.

Currencies/fixed income

- Another listless session for the greenback. As noted on Monday the USD continued to face headwinds against the major pairs and remained on track for its biggest monthly drop in a year. Greenback has been on the defensive after several data points suggested that US rates have peaked. Dealers noted that sentiment now pre-occupied about betting on the timing and pace of rate cuts next year.

- EUR/USD at 1.0950 area with focus on the upcoming inflation data out of the region. German 10-year Bund yield moving towards the 2.50% as inflation was expected to continue to recede in the region. ECB members have been vocal that it was too early to declare victory on inflation and talk about rate cuts.

- USD/JPY at 148.60 by mid-session and slightly firmer as market weight the prospect of BOJ tightening at some point next year..

Economic data

- (DE) Germany Dec GfK Consumer Confidence:-27.8 v -28.2e.

- (DK) Denmark Oct Retail Sales M/M: 0.3% v 0.4% prior; Y/Y: 3.7% v 1.7% prior.

- (FR) France Nov Consumer Confidence: 87 v 84e.

- (ES) Spain Sept Total Mortgage Lending Y/Y: -23.6% v -10.2% prior; Mortgage Approvals Y/Y: -29.6% v -22.7% prior.

- (TW) Taiwan Q3 Preliminary GDP (2nd of 3 readings) Y/Y: 2.3% v 2.3% advance reading h.

- (EU) Euro Zone Oct M3 Money Supply Y/Y: -1.0% v -0.9%e.

- (AT) Austria Nov Manufacturing PMI: 42.2 v 41.7 prior (16th straight contraction).

Fixed income issuance

- (ID) Indonesia sold total IDR19.15T vs. IDR19.0T target in bills and bonds.

- (ZA) South Africa sold total ZAR3.9B vs. ZAR3.9B indicated in 2035, 2044 and 2048 bonds.

- (UK) DMO sold £2.75B in 3.75% Oct 2053 Green Gilts; Avg Yield: 4.664% v 4.926% prior; bid-to-cover: 2.34x v 2.60x prior; Tail: 1.5bps v 0.8bps.

- (IT) Italy Debt Agency (Tesoro) sold €7.5B vs. €7.5B indicated in 6-month bills; Avg Yield: 3.859% v 3.976% prior; Bid-to-cover: 1.26x v 1.57x prior.

Looking ahead

- 05:15 (CH) Switzerland to sell 3-month Bills.

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

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

- 05:30 (PL) Poland to sell 2025, 2028, 2029 and 2033 Bonds.

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

- 06:00 (IE) Ireland Oct Retail Sales Volume M/M: No est v -1.2% prior; Y/Y: No est v 2.5% prior.

- 07:00 (BR) Brazil mid-Nov IBGE Inflation IPCA-15 M/M: 0.3%e v 0.2% prior; Y/Y: 4.8%e v 5.1% prior.

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

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

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

- 09:00 (US) Sept FHFA House Price Index M/M: 0.4%e v 0.6% prior; Q/Q: No est v 1.7% prior.

- 09:00 (US) Sept S&P/CoreLogic House Price Index (20-City) M/M: 0.80%e v 1.01% prior; Y/Y: 3.90%e v 2.16% prior; House Price Index (Overall) Y/Y: No est v 2.16% prior.

- 10:00 (US) Nov Consumer Confidence: 101.0e v 102.6 prior.

- 10:00 (US) Nov Richmond Fed Manufacturing Index: 1e v 3 prior; Business Conditions: No est v -15 prior.

- 10:00 (US) Fed’s Goolsbee.

- 10:00 (US) Fed’s Waller.

- 10:30 (US) Nov Dallas Fed Services Activity: No est v -18.2 prior.

- 10:30 (SE) Sweden Central Bank (Riksbank) Dep Gov Floden.

- 11:00 (EU) ECB chief Lagarde.

- 11:00 (BR) Brazil Formal Oct Total Formal Job Creation: +135.0Ke v +211.8K prior.

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

- 12:00 (UK) BOE’s Haskel.

- 12:30 (BR) Brazil Oct Central Govt Budget Balance (BRL): 15.4Be v 11.5B prior.

- 13:00 (US) Treasury to sell 7-Year Notes.

- 13:30 (EU) ECB’s Lane (chief economist).

- 16:00 (KR) South Korea Dec Business Manufacturing Survey: No est v 69 prior; Non-Manufacturing Survey: No est v 69 prior.

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

- 19:30 (AU) Australia Oct CPI Y/Y: 5.2%e v 5.6% prior.

- 19:30 (AU) Australia Q3 Construction Work Done: 0.3%e v 0.4% prior.

- 20:00 (NZ) Reserve Bank of New Zealand (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate (OCR) unchanged at 5.50%.

- 20:10 (JP) BOJ Outright Bond Purchase Operation for 3~5 Years, 5~10 Years and 10~25Years maturities.

- 20:30 (JP) BOJ: Adachi.

- 22:00 (TH) Thailand to sell THB8.0B in 4.0% Jun 2072 bonds.