Inflation Remains The Main Focus

Notes/Observations

• Inflation remains the key focus.

Asia

• Japan Econ Min Yamagiwa stated that would prepare flexible measures on soaring energy prices in their stimulus package as crude oil prices cannot be predicted (Note: Japan government stimulus draft did not mention the size of spending).
• China State Planner (NDRC): To increase the exploration of oil, Natural gas, and rare earth minerals during 2021-2025.
• Former PBOC Adviser Yu Yongding: Evergrande problem is controllable; China Capital Market has limited impact on the global markets; China has very strong macro adjustment capabilities.

Europe

• UK Brexit Min Frost stated that would signal to EU that the Govt was ready to renew efforts on Northern Ireland Protocol agreement and to reassure the EU that PM Johnson did not want to trigger Article 16.
• SNB’s Maechler reiterated stance that CHF currency (Franc) remains highly valued.
• Italy President Mattarella said to rule out a 2nd term.
• US said to privately warned Europe that Russian troops could plan an invasion of Ukraine.

Americas

• President Biden signed new laws preventing Chinese firms that were considered security threats to the US such as Huawei/ZTE from getting new equipment licenses.
• Some Fed watchers said to argue that Brainard was more aligned with President Biden’s economic agenda as the Fed grapples with high inflation and other economic headwinds.
• Mexico Central Bank (Banxico) raised thes Overnight Rate by 25bps to 5.00% (as expected).

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 0.00% at 485.30, FTSE -0.53% at 7,344.80, DAX +0.10% at 16,098.70, CAC-40 +0.17% at 7,071.36, IBEX-35 -0.16% at 9,077.50, FTSE MIB -0.06% at 27,618.00, SMI +0.29% at 12,457.79, S&P 500 Futures +0.09%].
• Market Focal Points/Key Themes: European indices open higher across the board (IBEX notable exception starting the day in the red) but later slipped to trade generally lower; sectors among those leading to the upside are consumer discretionary and telecom; while laggard sectors include financials and materials; John Wood initiates Strategic review of its built-environment business; Richemont in talks to extend partnership with Farfetch; CVC in talks to take over Intertrust; Millicom takes full control of Tigo Guatemala; focus on wealth of data from Japan and China over the weekend; earnings expected during the upcoming US session include Spectrum Brands, Circor and Target Hospitality.

Equities

• Consumer discretionary: Richemont [CFR.CH] +8% (earnings; talks with Farfetch), Intertrust [INTER.NL] +39% (acquisition talks with CVC).
• Healthcare: Astrazeneca [AZN.UK] -3.5% (earnings).
• Industrials: Deutsche Telekom [DTE.DE] +2% (earnings; raises outlook).
• Technology: Storytel [STORYB.SE] +5% (earnings).

Speakers

• ECB’s Rehn (Finland) stated that supply chain bottleneck relief might not come until towards end-2022. The region’s inflation was still mostly transitory even if some components were more persistent. Bottlenecks were dampening euro zone growth and pushing up inflation but saw no evidence of 2nd round effects of inflation on wages yet. Still had plenty of slack in the Euro Zone.
• ECB’s Simkus (Lithuania) stated that inflation would be below ECB’s 2% target in 2023.
• Sweden Central Bank (Riksbank) Gov Ingves: Reiterates view that rise in inflation seen as a temporary phenomenon and could peak fairly soon.
• Czech Central Bank (CNB) Nov Minutes warned against the rise in inflationary expectations. Rate hikes were reaction to local inflation risks.
• Poland Central Bank’s Lon stated that high inflation would not sway to embrace the need for intensive interest rate hikes.
• Turkey Fin Min Elvan refuted speculation that Govt seeks a weaker TRY (Lira) currency. Govt implemented a floating exchange rate policy. Domestic inflation required cautions stance.
• Russia govt spokesperson Peskov stated that talk of possible Russia invasion of Ukraine unfounded; To supply gas to Europe regardless of Belarus.
• Japan govt economic stimulus package to be over ¥40T.
• China govt official stated that hoped the upcoming Xi-Biden virtual summit would put ties between the two countries back on a correct path.
• China govt said to hold military exercises in South China Seas Nov 13-14th.

Currencies/Fixed Income

• USD continued to hold onto its recent gains against the major pairs. Dealers noted that the recent US CPI print of 6.2% would strongly suggests that Fed officials will bring forward their expected timetable for raising the policy rate. The US 10-year yield was higher by 2.5 bps in electronic trade to test near 1.58%.
• EUR/USD trading at 1.1440 as price action favoring the greenback largely reflecting the higher US Treasury yields.
• GBP/USD holding below the 1.34 area as participants await the EU press conference regarding the latest talks with the UK over the Northern Ireland Protocol.
• USD/JPY holding above the 1.14 level on divergence views between the Fed and BOJ.

Economic data

• (FI) Finland Sept Current Account Balance: €1.2B v €0.4B prior.
• (DE) Germany Oct Wholesale Price Index M/M: 1.6% v 0.8% prior; Y/Y: 15.2% v 13.2% prior.
• (TR) Turkey Central Bank Nov TCMB Expected Inflation Survey: Next 12-Month Outlook: 15.6% v 13.9% prior.
• (TR) Turkey Sept Industrial Production M/M: -1.5% v -0.7%e; Y/Y: 8.9% v 10.2%e.
• (CH) Swiss Oct Producer & Import Prices M/M: 0.6% v 0.2% prior; Y/Y: 5.1% v 4.5% prior.
• (CN) Weekly Shanghai copper inventories (SHFE): 38.0K v 37.5K tons prior.
• (ES) Spain Oct Final CPI M/M: 1.8% v 2.0% prelim; Y/Y: 5.4% v 5.5% prelim.
• (ES) Spain Oct Final CPI EU Harmonized M/M: 1.6% v 1.7% prelim; Y/Y: 5.4% v 5.5% prelim.
• (ES) Spain Oct CPI Core M/M: 1.0% v 0.3% prior; Y/Y: 1.4% v 1.2%e.
• (RU) Russia Narrow Money Supply w/e Nov 5th (RUB): 14.31T v 14.29T prior.
• (HK) Hong Kong Q3 Final GDP Q/Q: 0.1% v 0.1% prelim; Y/Y: 5.4% v 5.4% prelim.
• (IS) Iceland Oct International Reserves (ISK): 925B v 939B prior.
• (PL) Poland Q3 Preliminary GDP Q/Q: % v 1.8%e v 2.1% prior (revised from 2.1%); Y/Y: % v 4.8%e v 11.1% prior (revised from 11.1%).
• (RU) Russia Oct YTD Budget Balance (RUB) 2.140T v 1.444T prior.
• (EU) Euro Zone Sept Industrial Production M/M: -0.2% v -0.5%e; Y/Y: 5.2% v 4.1%e.

Fixed income Issuance

• (IN) India sold total INR240B vs. INR240B indicated in 2023, 2026, 2035 and 2051bonds.
• (ZA) South Africa sold total ZAR vs. ZAR1.2B indicated in I/L 2033, 2038 and 2050 Bonds.

Looking Ahead

• 05:25 (EU) Daily ECB Liquidity Stats.
• 06:00 (PT) Portugal Q3 labour Costs Y/Y: No est v -2.4% prior.
• 06:00 (UK) DMO to sell £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively).
• 06:30 (IN) India Weekly Forex Reserve w/e Nov 5th: No est v $642.0B prior.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (IN) India announces upcoming bill issuance (held on Wed).
• 07:00 (BR) Brazil Sept IBGE Services Sector Volume Y/Y: 13.5%e v 16.7% prior.
• 07:00 (IN) India Sept Industrial Production Y/Y: 4.8%e v 11.9% prior.
• 07:00 (IN) India Oct CPI Y/Y: 4.4%e v 4.4% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance.
• 10:00 (US) Sept JOLTS Job Openings: 10.300Me v 10.439M prior.
• 10:00 (US) Nov Preliminary University of Michigan Confidence: 72.5e v 71.7 prior.
• 11:00 (EU) Potential sovereign ratings after European close (Fitch Port S&P Netherlands).
• 13:00 (MX) Mexico Oct Total Formal Job Creation: No est v +174.1K prior.
• 13:00 (US) Weekly Baker Hughes Rig Count.