US Dollar lower ahead of Powell comments

EU mid-market update: Euro Area PMI Manufacturing readings continue to improve but remain in contraction territory; US dollar lower ahead of Powell comments.

Notes/observations

- Major European PMI manufacturing continued to beat consensus but remain in contraction territory (Beats: Euro Zone, Germany, France, Spain; Misses: Italy).

- UK Nationwide House Price Index registered its 3rd MoM rise.

- Hostilities recommence in the Israel-Hamas conflict.

- Focus on Fed Chair Powell; likely to reiterate the possibility of further tightening and dampen expectations of rate cuts; Fed futures for the first time price small (<5%) for rate cuts at both Jan and Mar 2024 meetings.

Asia

- China Nov Caixin PMI Manufacturing: 50.7 v 49.6e (moved back into expansion).

- Australia Nov Final PMI Manufacturing: 47.7 v 48.2 prior (confirmed 9th month of contraction).

- Japan Nov Final PMI Manufacturing: 48.3 v 48.1 prelim (confirmed 6th month of contraction).

- Japan Oct Jobless Rate: 2.5% v 2.6%e.

- Japan Q3 Capital Spending (capex) Y/Y: 3.4% v 3.4%e; Capital Spending (ex-software) Y/Y: 1.7% v 3.4%e.

- South Korea Nov Trade Balance: $3.0B v $1.0Be; Exports Y/Y: 7.8% v 5.3%e; Imports Y/Y:-11.6% v -8.6%e.

- New Zealand Nov ANZ Consumer Confidence: 91.9 v 88.1 prior.

- China PBOC might cut the RRR in order to meet liquidity needs at the end of 2023.

- Rengo [largest trade union in Japan]: Formally sought pay hike demand of at least 5.0% in upcoming spring wage talks.

Global conflict/tensions

- Israel-Hamas truce expired with no announcement of an extension; Israel later resumed combat actions against Hamas in Gaza saying Hamas violated the ceasefire.

Europe

- ECB’s Nagel (Germany) reiterated stance that was far too early to discuss rate cuts. Inflation risks remain on the upside so further hikes could not be ruled out.

- S&P affirmed Turkey's sovereign rating at 'B'; Revises outlook from stable to positive.

- Goldman Sachs analysts bring forward view on 1st potential ECB rate cut from Q3 to Q2 2024 citing German recent constitutional court crisis and inflation deceleration.

- Fitch Ratings' review later today could be pivotal for Greece; It needs to be a minimum of BBB- or equivalent from two of the three major rating companies (S&P, Moody's or Fitch) to be re-admitted to investment-grade-only bond indexes.

Energy

- OPEC+ agreed to 1M bpd of additional production cuts. To be on top of extension of Saudi's voluntary 1M in cuts.

- Russia Dep PM Novak stated that OPEC+ additional oil production cuts would be more than 2M bpd.

- Angola rejected OPEC+ quota and would not adgere to it. Country to produce 1.18M b/d (**Note: OPEC called for Angola to produce 1.11M bpd).

- OPEC+ confirmed Brazil to join OPEC+ charter beginning in Jan 2024.

- US purchased 2.73M barrels for SPR refill - US Department of Energy (DOE).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.64% at 10,919.60, FTSE +0.69% at 7,505.23, DAX +0.83% at 16,349.58, CAC-40 +0.45% at 7,343.41, IBEX-35 +0.49% at 10,107.82, FTSE MIB +0.41% at 29,860.00, SMI +0.60% at 10,919.60, S&P 500 Futures +0.13%].

Market focal points/key themes: European indices open higher across the board and remained upbeat through the early part of the session; among sectors leading into the green are materials and financials; while lagging sectors include consumer discretionary and industrials; reportedly Lufthansa sought EU approval to take stake in ITA Airways; UK CMA declines to investigate Siemens-Heliox merger; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Technogym [TGYM.IT] +7.0% (sells stake), Bechtle [BC8.DE] -5.5% (convertible bonds placement).

- Consumer staples: Casino Guichard-Perrachon [CO.FR] -5.5% (confirms interest for its hypermarkets), Tesco [TSCO.UK] -1.5% (analyst downgrade).

- Financials: Leonteq [LEON.CH] -13.5% (cuts outlook), Pierre & Vacances [VAC.FR] -7.0% (earnings).

- Healthcare: AstraZeneca [AZN.UK] +1.0% (to discontinue 2 trials).

- Industrials: Jenoptik [JEN.DE] +5.0% (raises EBITDA target).

- Telecom: Viaplay Group [VPLAYB.SE] -75.5% (earnings; recapitalization plan).

- Materials: Anglo American [AAL.UK] +7.0% (Chinese PMI expansion; analyst upgrade).

Speakers

- Sweden Central Bank (Riksbank) Gov Thedeen noted that property firms need to cut debts; sector have had problems since the tightening cycle began. Added that the recent pause in tightening should not be interpreted that inflation risks have disappeared.

- German VDMA Engineering Association: Oct Orders -5% y/y.

- Russia govt spokesperson noted that OPEC+ contributes to stabilization of energy markets. Known that Western sanctions against the country would last many years.

- US and Taiwan to hold trade initiative talks in Taipei.

- Malaysia Central Bank (BNM) Gov Rasheed: Key rate at 3.00% remains accommodative. MYR currency (Ringget) to recover once rate peak in advance economies.

- China Pres Xi stressed the need to effectively defend rights and enforce the law; To resolutely defend China's territorial sovereignty and maritime rights and interest.

- Fed's Barr stated that wanted banks to use the Discount Window for funding needs; use of facility should not have stigma.

Currencies/fixed income

- USD holding steady after its dismal performance in Nov. Focus on Fed Chair Powell; likely to reiterate the possibility of further tightening and dampen expectations of rate cuts.

- EUR/USD staying below the 1.09 level despite better PMI Manufacturing readings from the region during the session. Dealers noted that weaker-than-expected inflation data from both the Euro Zone and various member countries have caused the Euro to reverse a clear upward trend over the past month. Goldman Sachs analysts brought forward its view on 1st potential ECB rate cut from Q3 to Q2 2024 citing German recent constitutional court crisis and inflation deceleration.

- USD/JPY just below the 148 handle and appeared to be locked with 147-152 range until the Japanese spring wage talks provide a clear picture on proposed increases. BOJ members have repeatedly stressed that it was key that wages needed to rise in order to support consumer spending. Wages are viewed as critical for Japan to achieve its 2% inflation target on a sustainably basis. Rengo [largest trade union in Japan] was said to seek at least 5.0% in spring talks. End of the decades long easy cycle likely to upend the lucrative yen carry trade.

Economic data

- (RU) Russia Nov Manufacturing PMI: 53.8 v 54.0e.

- (NL) Netherlands Nov Manufacturing PMI: 44.9 v 43.8 prior.

- (UK) Nov Nationwide House Price Index M/M: +0.2% v -0.4%e; Y/Y: -2.0% v -2.3%e (3rd straight monthly rise).

- (TR) Turkey Nov Manufacturing PMI: 47.2 v 48.4 prior (5th straight contraction).

- (HU) Hungary Q3 Final GDP Q/Q: 0.9% v 0.9% prelim; Y/Y: -0.4% v -0.4% prelim.

- (HU) Hungary Sept Final Trade Balance: €1.3B v €1.3B prelim.

- (SE) Sweden Nov PMI Manufacturing: 49.0 v 46.2 prior.

- (TH) Thailand Nov Business Sentiment Index: 49.0 v 48.9 prior.

- (TH) Thailand Nov Foreign Reserves w/e Nov 24th: $217.7B v $216.8B prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 26.2K v 35.9K tons prior.

- (FR) France Oct YTD Budget Balance: -€177.7B v -€186.1B prior.

- (CH) Swiss Q3 GDP Q/Q: 0.3% v 0.1%e; Y/Y: 0.3% v 0.5%e.

- (CZ) Czech Q3 Preliminary GDP (2nd reading) Q/Q: -0.5% v -0.3% prior; Y/Y: -0.7% v -0.6% prior.

- (HU) Hungary Nov Manufacturing PMI: 52.2 v 50.7e (2nd month of expansion).

- (PL) Poland Nov Manufacturing PMI: 48.7 v 45.7e (19th straight contraction).

- (RU) Russia Narrow Money Supply w/e Nov 24th (RUB): 18.22T v 18.39T prior.

- (ES) Spain Nov Manufacturing PMI: 46.3v 45.5e (8th straight contraction).

- (CH) Swiss Nov PMI Manufacturing: 42.1 v 42.0e (11th straight contraction).

- (CZ) Czech Nov Manufacturing PMI: 43.2 v 42.9e (18th straight contraction).

- (NG) Nigeria Nov Manufacturing PMI: 48.0 v 49.1 prior.

- (IT) Italy Nov Manufacturing PMI: 44.4 v 45.2e (8th month of contraction).

- (FR) France Nov Final Manufacturing PMI: 42.9 v 42.6 prelim (confirmed 11th month of contraction).

- (DE) GermanyNov Final Manufacturing PMI: 42.6 v 42.3 prelim (confirmed 17th straight contraction).

- (IT) Italy Q3 Final GDP Q/Q: 0.1% v 0.0% prelim; Y/Y: 0.1% v 0.0% prelim (avoids a technical recession).

- (EU) Euro Zone Nov Final Manufacturing PMI: 44.2v 43.8 prelim (confirmed 17th straight contraction).

- (GR) Greece Nov Manufacturing PMI: 50.9 v 50.8 prior (10th straight expansion).

- (ZA) South Africa Nov Manufacturing PMI: 48.2 v 45.0e (10th straight contraction).

- (NO) Norway Nov PMI Manufacturing: 49.9 v 47.9 prior (2nd month of contraction).

- (NO) Norway Nov Unemployment Rate: 1.8% v 1.9%e.

- (IS) Iceland Q3 Current Account Balance (ISK): B v 7.5B prior.

- (UK) Nov Final Manufacturing PMI: 47.2 v 46.7e (confirmed 16th month of contraction).

- (CY) Cyprus Q3 Final GDP Q/Q: 1.1% v 1.1% prelim; Y/Y: 2.5% v 2.5% prelim.

Fixed income issuance

- (IN) India sold total INR300B vs. INR300B indicated in 2028, 2033 and 2053 bonds.

- (ZA) South Africa sold total ZAR1.0B vs. ZAR1.0B indicated in I/L 2028, 2038 and 2050 bonds.

Looking ahead

- (ZA) South Africa Nov Naamsa Vehicle Sales Y/Y: -5.6%e v -2.0% prior.

- (IT) Italy Nov Budget Balance: No est v -€4.5B prior.

- (CO) Colombia Q3 Current Account: No est v -$2.5B prior.

- (US) Nov Total Vehicle Sales (SAAR) data to be released during session.

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

- 06:00 (IE) Ireland Q3 Final GDP Q/Q: No est v -1.8% prelim; Y/Y: No est v -4.7% prelim.

- 06:00 (IE) Ireland Q3 Current Account Balance: No est v €15.8B prior.

- 06:00 (UK) DMO to sell £5.0B in 1-month, 3-month and 6-month bills (£1.5B, £1.5B and £2.0B respectively).

- 06:30 (CL) Chile Oct Economic Activity Index (Monthly GDP) M/M: 0.1%e v 0.6% prior; Y/Y: 0.4%e v 0.0% prior.

- 06:30 (IN) India Weekly Forex Reserve w/e Nov 24th: No est v $595.4B prior.

- 06:30 (IN) India announces upcoming bill issuance (held on Wed).

- 06:30 (EU) ECB chief Lagarde.

- 06:30 (IS) Iceland to sell 2026 and 2035 Bonds.

- 07:00 (BR) Brazil Oct Industrial Production M/M: 0.4%e v 0.1% prior; Y/Y: 1.9%e v 0.6% prior.

- 08:00 (CZ) Czech Nov Budget Balance (CZK): No est v -210.7B prior.

- 08:00 (BR) Brazil Nov Manufacturing PMI: No est v 48.6 prior.

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

- 08:30 (CA) Canada Nov Net Change in Employment: +14.0Ke v +17.5K prior; Unemployment Rate: 5.8%e v 5.7% prior; Full Time Employment Change: No est v -3.3K prior; Part Time Employment Change: No est v +20.8K prior; Participation Rate: 65.6%e v 65.6% prior; Hourly Wage Rate M/M: 4.9%e v 5.0% prior.

- 09:30 (CA) Canada Nov Manufacturing PMI: No est v 48.6 prior.

- 09:45 (US) Nov Final S&P Manufacturing PMI: 49.5e v 49.4 prelim.

- 10:00 (US) Nov ISM Manufacturing: 47.8e v 46.7 prior; Prices Paid: 46.1e v 45.1 prior.

- 10:00 (US) Oct Construction Spending M/M: 0.3%e v 0.4% prior.

- 10:00 (MX) Mexico Nov Manufacturing PMI: No est v 52.1 prior.

- 10:00 (MX) Mexico Oct Total Remittances: $5.7Be v $5.61B prior.

- 10:00 (MX) Mexico Central Bank Economist Survey.

- 10:00 (CO) Colombia Nov PMI Manufacturing: No est v 48.1 prior.

- 10:00 (PE) Peru Nov CPI M/M: +0.1%e v -0.3% prior; Y/Y: 3.9%e v 4.3% prior.

- 10:00 (US) Fed’s Goolsbee.

- 11:00 (US) Fed chief Powell fireside chat.

- 11:30 (EU) Potential sovereign ratings after European close (Fitch on Italy).

- 12:00 (IT) Italy Nov New Car Registrations Y/Y: No est v 20.0% prior.

- 13:00 (BR) Brazil Nov Trade Balance: $9.1Be v $9.0B prior; Exports: $29.1Be v $29.5B prior; Imports: $20.2Be v $20.5B prior.

- 13:00 (MX) Mexico Nov IMEF Manufacturing Index: 50.2e v 50.5 prior; Non-Manufacturing Index: 51.8e v 52.2 prior

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

- 14:00 (US) Fed chief Powell.