ECB Lagarde Reiterates Stance That Conditions For A Rate Hike In 2022 Is Unlikely

Notes/Observations

• Focus on Biden-Xi virtual summit later on Monday.
• Emerging EU and Nordic inflation data continued its upward trajectory.

Asia

• China Oct Retail Sales beat expectations (YoY: 4.9% v 3.7%e).
• China Oct Industrial Production data beat expectations (YoY3.5% v 3.0%e).
• Japan Preliminary Q3 GDP missed expectations (Q/Q: -0.8% v -0.2%e; GDP Annualized QoQ: -3.0% v -0.7%e).
• China National Bureau of Stats (NBS) stated that more effort was needed to maintain economic stability, periodic structural problems still existed in the economy, consumer inflation to remain mild. Stagflation signs in Economy caused by short term factors.
• China PBcC conducted ¥1.0T in maturing 1-year Medium-Term Lending Facility (MLF).
• Japan Econ Min Yamagiwa reiterated its overall assessment that the domestic economy was continuing to pick up, but pace was weakening and needed policy support, economic stimulus would include measures to address.

Coronavirus

• Austria govt ordered a nationwide lockdown for unvaccinated people from Monday, Nov 15th.

Ameicas

• Treasury Sec Yellen reiterated that US inflation will not normalize until late 2022. Expected spikes in the prices of goods to abate by the second half of next year, if the pandemic is brought under control.
• Fed’s Kashkari (dove, non-voter) stated that the Fed had taken appropriate steps in face of inflation. Saw higher inflation continuing over next few months and important not to overreact to temporary factors.

Energy

• Russian gas flows towards Germany via the Yamal Europe pipeline said to have risen over the weekend.
• Sen Maj Leader Schumer (D-NY) stated that President Biden must call to release oil reserves from SPR to lower gasoline prices.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.02% at 486.86, FTSE -0.02% at 7,346.48, DAX +0.10% at 16,110.15, CAC-40 +0.25% at 7,109.17, IBEX-35 -0.04% at 9,077.27, FTSE MIB +0.15% at 27,774.00, SMI -0.03% at 12,512.57, S&P 500 Futures +0.16%].
• Market Focal Points/Key Themes: European indices open with a slight generalized downward bias but later moved to trade generally mixed; sectors that are performing better include consumer discretionary and materials; financials industrials ;BBVA launches offer to take remaining stake in Garanti Bank; paragon sells it stake in Votabox; Heineken acquires Distell and Namibia Breweries; Raiffeisen sells its Bulgarian unit to KBC; Shell to simplify it’s share structure; Ahold Delhaize studying spin-off of Bol.com unit; corporate events expected in the upcoming US session include earngings from Warner Music and Ahold Delhaze’s investor day.

Equities

• Consumer discretionary: Cineworld Group [CINE.UK] +12% (trading update), Heineken [HEIA.NL] +1.5% (acquisitions).
• Financials: BBVA [BBVA.ES] -4% (bid for Turkish bank), KBC Group [KBC.BE] -2% (acquisition).
• Industrials: Airbus [AIR.FR] +3% (orders for jets).

Speakers

• ECB chief Lagarde testimony in EU Parliament reiterated view that expected inflation to moderate in 2022 but would will take longer to decline than originally expected; Saw medium-term inflation remaining below 2% target. Reiterated that conditions for a rate hike in 2022 in unlikely. Saw 2022 wage growth potentially rising above current year level but no signs of 2nd round effects. Growth momentum had moderated due to supply bottlenecks.
• BOE’s Haskel stated that Brexit added uncertainty to the UK and held back investments.
• Poland Central Bank (NBP) Gov Glapinski stated that a rate hike was more likely for now if incoming sets of data confirmed our current assessment. MPC to do all that’s necessary to keep stable prices in mid-term.
• Russia Central Bank (CBR) Gov Nabiullina testified that she was not sure if current inflationary pressures were temporary as supply chain disruptions were more serious than expected. Domestic economy had returned to pre-pandemic growth levels.
• Russia govt spokesperson Peskov stated that returning inflation to target was priority for Putin. Reiterated that Russia would not use the Nord Stream 2 to redirect flows from Belarus despite Belarus President Lukashenko threat to cut off gas transit to Europe.
• China Foreign Min spokesperson Zhao Lijian stated that the upcoming talks between Xi-Biden to involve candid exchange of views and explore ways for the two nations to get along.
• Japan govt draft on stimulus said to promote establishment of production bases for semiconductors, vaccines and medicine. To urge the govt and BOJ to share a strong sense of urgency while maintaining an appropriate mix of monetary and fiscal policies.
• Saudi Oil Min Abdulaziz stated that was not part of his job to be concerned over any US SPR release. OPEC+ was fulfilling its duties to the oil market. Oil market was not responsible for energy shortages and noted that oil inventories would build from December.
• UAE Energy Min Al Mazrouei stated that oil market to be more balanced in 2022.
• US President Biden said to plan to tell China President Xi at the virtual summit that China must play by the rules of the road; Talks expected to last several hours.

Currencies/Fixed Income

• USD drifted from 16-month highs in a quiet EU session on Monday. Recent greenback strength was aided by US inflation data which fueled speculation that the Fed might have to move faster and more aggressively on rates.
• EUR/USD steady at 1.1450 with focus on ECB’s Lagarde upcoming testimony in EU Parliament. She was likely to further resist the market’s rate hike pricing in her testimony. Dealers note that the pair can test 1.10 on technical factors in the coming months with bets the Fed would be ahead of other major central banks on tightening.

Economic data

• (FI) Finland Oct CPI M/M: 0.8% v 0.3% prior; Y/Y: 3.2% v 2.5% prior.
• (FI) Finland Sept Final Retail Sales Volume Y/Y: 2.7% v 0.6% prelim.
• (IN) India Oct Wholesale Prices (WPI) Y/Y: 12.5% v 11.1%e.
• (DK) Denmark Oct PPI M/M: 1.6% v 5.1% prior; Y/Y: 22.4% v 19.0% prior.
• (DK) Denmark Q3 GDP Indicator Q/Q: 2.0% v 2.2% prior.
• (NO) Norway Oct Trade Balance (NOK): 84.5B v 52.6B prior (record high surplus).
• (ES) Spain Sept House transactions Y/Y: 40.6% v 57.9% prior.
• (TR) Turkey Oct Central Gov’t Budget Balance (TRY): -17.4B v -23.6B prior.
• (SE) Sweden Oct CPI M/M: 0.2% v 0.0%e; Y/Y: 2.8% v 2.7%e (3rd month with annual pace above target); CPI Level: 346.44 v 345.84e.
• (SE) Sweden Oct CPIF M/M: 0.2% v 0.0%e; Y/Y: 3.1% v 3.0%e.
• (SE) Sweden Oct CPIF (ex-energy) M/M: 0.4% v 0.2%e; Y/Y: 1.8% v 1.6%e.
• (CH) Swiss weekly Total Sight Deposits (CHF): 719.2B v 719.4B prior; Domestic Sight Deposits: 644.1B v 643.7B prior.
• (CZ) Czech Sept Current Account (CZK): -10.0B v -22.7Be.
• (PL) Poland Oct Final CPI M/M: 1.1% v 1.0% prelim; Y/Y: 6.8% v 6.8% prelim (confirmed 7th month above target and highest since 2001).
• (IT) Italy Sept General Government Debt: €2.706T v €2.734T prior (moves off record highs).
• (EU) Euro Zone Sept Trade Balance (seasonally adj): €6.1B v €11.5Be; Trade Balance NSA (unadj): €7.3B v €4.8B prior.

Fixed income Issuance

• None seen.

Looking Ahead

• (NG) Nigeria Oct CPI Y/Y: 16.2%e v 16.6% prior.
• (PE) Peru Sept Economic Activity Index (Monthly GDP) Y/Y: No est v 11.8% prior.
• (SK) Slovakia Debt Agency (Adral) to sell 2024, 2030 and 2036 bonds.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (DE) Germany to sell combined €6.0B in 6-month and 12-month BuBills.
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills.
• 06:00 (IE) Ireland Sept Trade Balance: No est v €5.7B prior.
• 06:00 (IE) Ireland Sept Property Prices M/M: No est v 2.2% prior; Y/Y: No est v 10.9% prior.
• 06:00 (IL) Israel Oct Unemployment Rate: No est v 5.2% prior; Unemployment Rate (including Covid Effect): No est v 7.9% prior.
• 06:00 (RO) Romania to sell 3.5% Nov 2025 Bonds.
• 06:00 (IL) Israel to sell bonds.
• 06:30 (IN) India Oct Trade Balance: -$19.9Be v -$22.6B prior; Exports Y/Y: No est v 22.6% prior; Imports Y/Y: No est v 84.8% prior.
• 06:30 (IS) Iceland to sell 3-month and 6-month Bills.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).
• 08:00 (PL) Poland Sept Current Account Balance: -€1.3Be v -€1.7B prior; Trade Balance: -€0.5Be v -€1.4B prior; Exports: €24.4Be v €21.8B prior; Imports: €25.0Be v €23.2B prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions.
• 08:30 (US) Nov Empire Manufacturing: 22.0e v 19.8 prior.
• 08:30 (CA) Sept Manufacturing Sales M/M: -3.1%e v 0.5% prior; Wholesale Trade Sales M/M: 1.1%e v 0.3% prior.
• 08:30 (UR) Ukraine Q3 Preliminary GDP Q/Q: No est v -0.7% prior; Y/Y: 3.6%e v 5.7% prior.
• 09:00 (FR) France Debt Agency (AFT) to sell €5.0-6.2B in 3-month, 6-month and 12-month bills.
• 09:00 (CA) Canada Oct Existing Home Sales M/M: No est v 0.9% prior.
• 09:45 (UK) BOE to buy £1.47B in APF Gilt purchase operation (3-7 years).
• 11:30 (IL) Israel Oct CPI M/M: 0.4%e v 0.2% prior; Y/Y: 2.6%e v 2.5% prior.
• 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.
• 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 109.0 prior.
• 19:30 (AU) RBA Nov Minutes.
• 21:30 (AU) RBA Gov Lowe speech at ABE Webinar.
• 22:00 (TH) Thailand Central bank to sell THB50B in 3-month bills.
• 22:30 (HK) Hong Kong to sell 3-month and 6-month Bills.
• 22:35 (JP) Japan to sell 5-year JGB bonds.
• 23:30 (JP) Japan Sept Tertiary Industry Index M/M: +0.8%e v -1.7% prior.