Inflation UK Q3 GDP Data Misses Expectations

Notes/Observations

• Markets brace of growing risk of Fed rate increases after a bigger-than-expected rise in U.S. CPI data.
• High inflation likely to be persistent rather than transitory.
• UK Q3 GDP data keeps chance of Dec BOE rate hike.
• Biden-Xi virtual summit said to be tentatively set for Monday; Nov 15th (no confirmations).

Asia

• Australia Oct Employment Change missed expectations and likely reflected lagged recognition of Covid-19 lockdowns across the prior three months (-46.3K v +50.0Ke; Unemployment Rate: 5.2% v 4.8%e).
• Japan Oct PPI (CGPI) registered its highest annual pace since the Jan 1981 (Y/Y: 8.0% v 7.0%e).
• BOK Gov Lee noted that higher than expected CPI to continue for a while and hard to predict whether global inflation was temporary as hard to predict when global supply bottlenecks would ease; economic trend was in line with expectations with growth being steady with consumption quickly improving.
• Chin aproperty developer Evergrande [3333.HK] looked set to avert another default.
• China city of Shenyang will ease its curbs on home purchase rules (Note: later refuted).
• PBOC proposes change to debt-ratio rules to allow purchases of distressed property assets.
• China PBoC said to be considering opening a pathway for financially strained property firms to unload projects by allowing buyers to take over the assets without having the projects’ associated debt affect their own debt ratio.

Europe

• ECB’s Holzmann (Austria) stated that the economic situation since the summer had deteriorated; It might take two years to reach the 2019 growth path. Inflation should be below 2% in 2023 or 2024.

Americas

• President Biden stated that Consumer prices were still too high, people were still unsettled about the economy because of higher prices.
• President Biden said to plan to sign $1.2T infrastructure bill on Monday, Nov 15th.
• Fed’s Daly (non-voter, dove) stated that inflation was high; facing a challenge right now but likely a transitory period.
• US Senator Manchin (D-VW) said to possible delay Biden social spending agenda until next year over inflation worries.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.16% at 484.54, FTSE +0.37% at 7,366.89, DAX +0.18% at 16,096.05, CAC-40 +0.34% at 7,069.11, IBEX-35 -0.13% at 9,129.50, FTSE MIB +0.04% at 27,573.00, SMI +0.29% at 12,436.87, S&P 500 Futures +0.38%].
• Market Focal Points/Key Themes: European indices open modestly lower across the board but later turned to trade generally mixed; materials and financials sectors among the better performers; while consumer discreationary and energy sectors lagged; Poland closed for holiday; Skia acquires MBCC; Spie negotiation acquisition of Worksphere; Prophotonix to be acquried by Exaktera; Engie and Credit Agricole unit acquire Eolia; earnings expected during the upcoming US session include Deutsche Euroshop, Tapestry, Brookfield Asset Management and Pirelli.

Equities

• Consumer discretionary: Delivery Hero [DHER.DE] +2% (earnings), Burberry [BRBY.UK] -8% (earnings).
• Consumer staples: Sixt [SIX2.DE] -5% (earnings).
• Financials: Generali [G.IT] +1% (earnings).
• Healthcare: Merck KGaA [MRK.DE] -1% (earnings).
• Industrials: Siemens [SIE.DE] +2.5% (earnings; initial outlook), FLSmidth [FLS.DK] +8% (earnings; CEO to step down).
• Materials: ArcelorMittal [MT.NL] +2.5% (earnings), Johnson Matthey [JMAT.UK] -19% (trading update; CEO retires; exit business segment).

Speakers

• Sweden Central Bank (Riksbank) Gov Ingves stated that the current high level of inflation generally seen as transitory.
• German SPD leader Scholz stated that the pandemic still remained with us; needed additional measures to get through winter. Chancellor Merkel and State Premiers to meeting during week of Nov 15th to discuss the pandemic (**Reminder: Germany recently reported another COVID-19 record with almost 52K new cases for its 4th straight record high).
• EU Commission updated its Autumn Economic Forecasts which raised the EU-19 2021 inflation from 1.9% to 2.4% and raised the EU-19 2022 inflation from 1.4% to 2.2%. It set EU-19 2023 inflation at 1.4% (**Note: below ECB 2% target).
• EU Economic Commissioner Gentiloni (Italy): Economy was moving from recovery to expansion.
• EU’s Dombrovskis stated that inflation should be closely monitored and policies adjusted if needed; Needed to address bottlenecks in the supply chain and surging.
• EU official noted that there was scope for finding shared solutions with the UK.
• Belarus President Lukashenko said to warn he could shutdown gas pipeline to EU; to respond robustly to any new sanction.
• US Treasury Sec Yellen said to have stressed importance of global supply chain issues revealed by the pandemic in recent meeting with Australia, New Zealand, Canada and UK counterparts.

Currencies/Fixed Income

• US Dollar Index at 15-month high in the aftermath of Wed’s US CPI data as markets reassessed its bets on an accelerated monetary tightening trajectory. Yields did climb across the front end of the curve.
• GBP/USD tested below the 1.34 for fresh 2021 lows following a slight miss in Q3 GDP data. Dealers noted that the data provided some headwinds into a Dec BOE rate hike as a slowing recovery and increasing inflation poised a troubling mix for policymakers.
• EUR/USD tested the 1.1440 in the aftermath of the US inflation data.
• USD/JPY holding above the 114.00 level by mid-session.

Economic data

• (SE) Sweden Oct PES Unemployment Rate: 3.6% v 3.7% prior.
• (TR) Turkey Sept Current Account Balance: $1.7B v $1.3Be.
• (UK) Sept Monthly GDP M/M: 0.6% v 0.4%e.
• (UK) Q3 Preliminary GDP Q/Q: 1.3% v 1.5%e; Y/Y: 6.6% v 6.8%e.
• (UK) Q3 Preliminary Private Consumption Q/Q: 2.0% v 3.1%e; Government Spending Q/Q: 0.9% v 0.7%e; Gross Fixed Capital Formation Q/Q: 0.8% v 2.4%e; Exports Q/Q: -1.9% v -1.5%e; Imports Q/Q: 2.5% v 3.4%e.
• (UK) Q3 Preliminary Total Business Investment Q/Q: 0.4% v 3.5%e; Y/Y: 0.8% v 12.9% prior.
• (UK) Sept Industrial Production M/M: -0.4% v +0.2%e; Y/Y: 2.9% v 3.1%e.
• (UK) Sept Manufacturing Production M/M: -0.1% v +0.2%e; Y/Y: 2.8% v 3.1%e.
• (UK) Sept Construction Output M/M: 1.3% v 0.2%e; Y/Y: 7.2% v 6.9%e.
• (UK) Sept Index of Services M/M: 0.7% v 0.5%e; 3M/3M: 1.6% v 1.9%e.
• (UK) Sept Visible Trade Balance: -£14.7B v -£14.4Be; Overall Trade Balance: -£2.8B v -£3.3Be; Trade Balance Non-EU: -£9.1B v -£7.4B prior.
• (ZA) South Africa Sept Total Mining Production M/M: -3.7% v -2.0% prior; Y/Y: -3.4% v +2.7%e; Gold Production Y/Y: -6.9% v +17.7% prior; Platinum Production Y/Y: -7.5% v +1.5% prior.

Fixed income Issuance

• (DK) Denmark sold total DKK3.70B in 3-month, 6-month and 9-month Bills.
• (SE) Sweden sold total SEK1.25B vs. SEK1.25B indicated in 2030 and 2032 I/L Bonds.
• (IT) Italy Debt Agency (Tesoro) sold total €5.75B vs. €4.75-5.75B indicated range in 3-year and 7-year BTP Bonds.
• Sold €2.0B vs. €1.5-2.0B indicated range in 0.0% Aug 2024 BTP; Avg Yield: -0.16% v -0.27% prior; bid-to-cover: 1.58x v 1.65x prior (Sept 14th 2021).
• Sold €3.75B vs. €3.25-3.75B indicated range in new 0.45% Nov 2029 BTP; Avg Yield: 0.60% v 0.48%..

Looking ahead

• (IE) Ireland Debt Agency (NTMA) to sell €1.0B in 2028 and 2031 IGB Bonds.
• OPEC Monthly Oil Report.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills; Avg Yield: % v 1.75% prior; bid-to-cover: 1.41x prior (Oct 28th 2021).
• 06:00 (IE) Ireland Oct CPI M/M: No est v 0.5% prior; Y/Y: No est v 3.7% prior.
• 06:00 (IE) Ireland Oct CPI EU Harmonized M/M: No est v 0.4% prior; Y/Y: No est v 3.8% prior.
• 06:00 (PT) Portugal Oct CPI M/M: No est v 0.5% prior; Y/Y: No est v 1.8% prior.
• 06:00 (PT) Portugal Oct CPI EU Harmonized M/M: No est v 0.4% prior; Y/Y: No est v 1.8% prior.
• 06:00 (IL) Israel Oct Trade Balance: No est v -$3.6B prior.
• 06:00 (ZA) South Africa Sept Manufacturing Production M/M: 1.2%e v 7.6% prior; Y/Y: -1.3%e v +1.8% prior.
• 06:45 (UK) BOE’s Mann.
• 07:00 (MX) Mexico Sept Industrial Production M/M: -0.2%e v +0.4% prior; Y/Y: 4.0%e v 5.5% prior; Manufacturing Production Y/Y: 3.2%e v 6.6% prior.
• 07:00 (BR) Brazil Sept Retail Sales M/M: -0.6%e v -3.1% prior; Y/Y: -4.1%e v -4.1% prior.
• 07:00 (BR) Brazil Sept Broad Retail Sales M/M: 0.0%e v -2.5% prior; Y/Y: -2.9%e v 0.0% prior.
• 08:00 (RU) Russia Gold and Forex Reserve w/e Nov 5th: No est v $623.2B prior.
• 08:00 (RU) Russia Sept Trade Balance: $18.5Be v $17.1B prior; Exports: $44.7Be v $43.2B prior; Imports: $26.7Be v $26.0B prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:15 (IE) ECB’s Lane (Ireland, chief economist).
• 10:00 (CO) Colombia Sept Manufacturing Production Y/Y: 16.0%e v 22.9% prior.
• 10:00 (CO) Colombia Sept Retail Sales Y/Y: 19.0%e v 32.0% prior.
• 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to raise the Overnight Rate by 25bps to 5.00%.
• 14:00 (AR) Argentina Oct National CPI M/M 3.4%e v 3.5% prior; Y/Y: 52.0%e v 52.5% prior.
• 14:00 (CO) Colombia Sept Industrial Production Y/Y: No est v 15.5% prior.
• 16:00 (KR) South Korea Oct Import Price Index M/M: No est v 2.4% prior; Y/Y: No est v 26.8% prior.
• 16:00 (KR) South Korea Oct Export Price Index M/M: No est v 1.0% prior; Y/Y: No est v 20.2% prior.
• 16:30 (NZ) New Zealand Oct Manufacturing PMI: No est v 51.4 prior.
• 18:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to raise Reference Rate by 50bps to 2.00%.
• 21:30 (JP) Japan to sell 3-Month Bills.
• 22:00 (CN) China to sell 30-year Upsize Bond.
• 23:00 (MY) Malaysia Q3 GDP Q/Q: -0.6%e v -2.0% prior; Y/Y: -1.9%e v +16.1% prior.
• 23:00 (MY) Malaysia Q3 Current Account Balance (MYR): 16.5Be v 14.4B prior.