Risk appetite continues its surge

Notes/Observations

- Sharp risk on appetite triggered globally by cooler than expected US CPI yesterday (YoY: 7.7% v 7.9%e). Momentum bolstered by news overnight from China Health Authorities announcing a reduction in multiple Covid restrictions. Sentiment also given tailwind by progressive Russia/US relations over Ukraine war and pull back in Russian troops from Kherson region.

- Despite best single day performance for US stocks since 2020 with Nasdaq100 ending over +7% and Asian Hang Seng also ending +7%, European performance more restrained with FTSE100 flat to down, following weak GDP data registering its 1st decline since 2021, in line with BOE's 8 consecutive quarter recession prediction.

- Looking ahead, remarks from ECB members: Holzmann, Panetta, Guindos, Lane, De Cos, Centeno and Nagel. Also, BOE members: Haskel and Tenreyo.

- Asia closed higher with Hang Seng outperforming at +7.7%. EU indices are mostly higher except FTSE100 at -0.2%. US futures are +0.7%. Gold +0.8%, DXY -0.9%; Commodity: Brent +2.8%, WTI +3.1%, UK Nat Gas -7.4%; Crypto: BTC +3.8%, ETH +6.5%.

Asia

- China National Health Commission: announced measures to minimize number of people under covid control; To cut quarantine time and lighten coronavirus controls; Cancels circuit breaker on inbound flights.

- China Disease control researchers: China will continually improve coronavirus policies and not relax them while virus mutates and situation changes- Japan Oct PPI (CGPI) Y/Y: 9.1% v 8.8%e.

- Japan Fin Min Suzuki stated that was seeing an increase in global concerns on a recession; No comment on FX intervention parties. Reiterated stance that closely watching FX markets with a sense of urgency; would respond to FX moves as needed.

Ukraine conflict

- Russia Foreign Ministry stated that Russia was ready to negotiate with Ukraine, taking into account the realities that were developing at the moment; Still no progress on Russia's part of grains deal; EU and US continued to obstruct export of Russian fertilizers.

- Ukraine Presidential Advisor Arestovich noted that despite withdrawal announcement, there were all signs that Russia was preparing for street fighting near Kherson.

- US said to be urging Ukraine to use a window of opportunity for peace talks as Russia withdrawals from Kherson.

Europe

- ECB’s Nagel (Germany reiterated stance that saw the prospect of further interest rate increases; Stressed that ECB must act decisively to fight inflation.

- SNB's Maechler reiterated stance that inflation remained foo high and far away from target level.

Americas

- Fed’s Harker (non-voter): Fed needs a sustained decline in inflation to moderate its rate hike campaign, Favors possible pause when rates reach 4.5%.

- Fed's George (FOMC voter): More measured rate hike moves useful as response judged.

- Fed's Daly (non-voter) stated that US Oct inflation data was good news, but one month of data was not a victory. Time was now to step down on rate hike pacing; Supported a gradual pace of getting to the peak Fed funds rate.

- Fed's Logan (non-voter): CPI inflation data is a welcome relief but there is still a long way to go; Will look to a wide range of information to assess whether policy is sufficiently restrictive.

- US Judge declared Student Loan Cancellation as Unconstitutional.

- Mexico Central Bank (Banxico) raised the Overnight Rate by 75bps to 10.00% (as expected) for its 12 straight rate hike.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.35% at 433.40, FTSE -0.32% at 7,351.93, DAX +0.49% at 14,215.00, CAC-40 +0.80% at 6,608.99, IBEX-35 +0.04% at 8,136.75, FTSE MIB +0.59% at 24,539.00, SMI +0.65% at 11,192.60, S&P 500 Futures +0.50%].

Market Focal Points/Key Themes: European indices open higher across the board and advanced into the green as the session progressed (FTSE 100 notable exception following UK GDP figures); Poland closed for holiday; sectors leading to the upside include consumer discretionary and technology; lagging sectors include financials and utilities, the latter under pressure following bump higher in crude prices; semiconductor subsector supported after ASML provided outlook, announced share buyback; Partners Group acquires controlling stake in Cloudflight; US bond market closed for Veterans’ Day with no major earnings expected during the session.

Equities

- Consumer discretionary: Richemont [CFR.CH] +12.5% (earnings).

- Energy: ENBW Energie Baden Wuerttemberg [EBK.DE] -1.5% (earnings; cuts outlook).

- Financials: Partners Group [PGHN.CH] +5% (acquisition).

- Healthcare: GSK [GSK.UK] -3% (notes FDA decision).

- Industrials: Stabilus [STM.DE] +4% (earnings).

- Real Estate: Vopak [VPK.NL] +16% (earnings).

- Materials: Salzgitter [SZG.DE] +7% (earnings).

Speakers

- EU Commission Autumn Forecasts saw inflation peaking at the end-2022; Saw recession beginning in Q4 with economic growth to return come spring 2023.

- Poland Central Bank member Kotecki express disappointment over the lack of a recent rate hike. Saw a very high risk of PLN (Zloty) weakening.

- Czech Central Bank (CNB) Nov Minutes saw a recession as likely in the near future. Incoming data indicating cooling of domestic economy amid a deep decline in household real income and consumption. Did not see a wage price spiral at this time.

- Russian govt spokesperson Peskov: Goals of special military operation could be achieved with peace talks; still consider Kherson as part of Russia.

- China PBoC reiterated stance to maintain stable CNY currency (Yuan) exchange rate.

- China said to hold new COVID-19 pandemic control briefing on Sat, Nov 12th (tomorrow).

Currencies/fixed income

- The unwinding of safe-haven flows continued in the aftermath of softer US CPI data. Dealers now expecting the Fed to begin slowing the pace of interest rate rises. Inflation report also increases confidence that 4.5%-5% area could be where the Federal Reserve pauses in the current tightening cycle. Greenback softness also attributed to China easing some Covid-19 curbs.

- GBP/USD above 1.1760 despite its 1st quarterly GDP contraction since Q1 2021. UK being the only G7 member to contract in the Q3 GDP readings thus far.

- EUR/USD approaching 1.03 area with 1.05 viewed as current medium-term resistance. ECB rhetoric continued to be hawking on the need to continue with hike to combat inflation

- USD/JPY falling below the 140 level as the divergence play saw some reversal as pace of Fed rate hikes seen subsiding starting in Dec.

Economic data

- (FI) Finland Sept Current Account Balance: +€0.4B v -€0.5B prior.

- (UK) Q3 Preliminary GDP Q/Q: -0.2% v -0.5%e; Y/Y: 2.4% v 2.1%e.

- (UK) Sept Monthly GDP M/M: -0.6% v -0.4%e.

- (UK) Q3 Preliminary Private Consumption Q/Q: -0.5% v -0.5%e; Government Spending Q/Q: +1.3% v -0.1%e; Gross Fixed Capital Formation Q/Q: 2.5% v 0.4%e; Exports Q/Q: 8.0% v 4.4%e; Imports Q/Q: -3.2% v -1.3%e.

- (UK) Q3 Preliminary Total Business Investment Q/Q: -0.5% v +0.6%e; Y/Y: 3.5% v 4.1%e.

- (UK) Sept Industrial Production M/M: -0.3%e; Y/Y: -4.4%e.

- (UK) Sept Manufacturing Production M/M: -0.4%e v -1.6% prior; Y/Y: -6.6%e v -6.7% prior.

- (UK) Sept Construction Output M/M: -0.6%e v +0.4% prior; Y/Y: 4.5%e v 6.0% prior.

- (UK) Sept Index of Services M/M: -0.8% v -0.5%e; 3M/3M: 0.0% v -0.2%e.

- (UK) Sept Visible Trade Balance:-£15.7B v -£18.6Be; Overall Trade Balance: -£3.1B v -£7.0Be.

- (DE) Germany Oct Final CPI M/M: 0.9% v 0.9% prelim; Y/Y: 10.4% v 10.4% prelim.

- (DE) Germany Oct Final CPI EU Harmonized M/M: 1.1% v 1.1% prelim; Y/Y: 11.6% v 11.6% prelim.

- (RO) Romania Oct CPI M/M: 1.3% v 1.5%e; Y/Y: 15.3% v 15.4%e.

- (TR) Turkey Sept Current Account Balance: -$3.0B v -$2.5Be.

- (TR) Turkey Sept Industrial Production M/M: -1.6% v -0.2%e; Y/Y: 0.4% v 3.3%e.

- (CN) Weekly Shanghai copper inventories (SHFE): 76.2K v 59.1K tons prior.

- (RU) Russia Narrow Money Supply w/e Nov 4th (RUB): 15.71T v 15.61T prior.

- (HK) Hong Kong Q3 Final GDP Q/Q: -2.6% v -2.6% advance; Y/Y: -4.5% v -4.5% advance.

Fixed income issuance

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

- (DK) Denmark sold DKK2.2B in 3-month bills; Avg Yield: 1.510% v 1.420% prior; bid-to-cover: 1.09x v 1.00x prior.

- (ZA) South Africa sold total ZAR1.2B vs. ZAR1.2B indicated in I/L 2029, 2033 and 2048 Bonds.

- (IT) Italy Debt Agency (Tesoro) sold total €8.75B vs. €7.25-8.75B indicated range in 3-year and 7-year and 12-year BTP Bonds.

- Sold €2.75B vs. €2.25-2.75B indicated range in new 3.50% Jan 2026 BTP; Avg Yield: 3.22% v 3.57% prior; bid-to-cover: 1.78x v 1.50x prior (Oct 13th 2022).

- Sold €4.0B vs. €3.5-4.0B indicated range in new 3.85% Dec 2029 BTP; Avg Yield: 3.84% v 4.25% prior; Bid-to-cover: 1.42x v 1.45x prior (Oct 13th 2022 under 2.8% Jun 2029).

- Sold €2.0B vs. €1.5-2.0B indicated range in 4.00% Apr 2035 green BTP bond; Avg Yield: 4.26%; Bid-to-cover: 1.56.

Looking ahead

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

- 06:00 (PT) Portugal Oct Final CPI M/M: No est v 1.3% prelim; Y/Y: No est v 10.2% prelim.

- 06:00 (PT) Portugal Oct Final CPI EU Harmonized M/M: No est v 1.2% prelim; Y/Y: No est v 10.7% prelim.

- 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 4th: No est v $531.1B prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (BR) Brazil Sept IBGE Services Volume M/M: 0.3%e v 0.7% prior; Y/Y: 8.1%e v 8.0% prior.

- 07:00 (MX) Mexico Sept Industrial Production M/M: 0.3%e v 0.0% prior; Y/Y: 4.5%e v 3.9% prior; Manufacturing Production Y/Y: 7.4%e v 8.1% prior.

- 07:00 (IN) India Sept Industrial Production Y/Y: No est v -0.8% prior.

- 07:00 (IT) ECB's Panetta (Italy).

- 07:00 (ES) ECB's de Guindos (Spain).

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

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

- 10:00 (US) Nov Preliminary University of Michigan Confidence: 59.5e v 59.9 prior.

- 08:10 (UK) BOE's Tenreyro.

- 10:00 (CO) Colombia Sept Manufacturing Production Y/Y: 7.8%e v 9.1% prior; Industrial Production Y/Y: No est v 7.1% prior.

- 10:00 (CO) Colombia Sept Retail Sales Y/Y: 7.0%e v 8.1% prior.

- 11:00 (IE) ECB's Lane (Ireland, chief economist).

- 11:00 (ES) ECB's De Cos (Spain) with member Centeno (Portugal).

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

- 12:30 (DE) ECB’s Nagel (Germany).

- 13:00 (MX) Mexico Oct Total Formal Job Creation: No est v 172.5K prior.

- 13:00 (US) Weekly Baker Hughes Rig Count.