Concerns About The New Omicron Coronavirus Variant Dominate Sentiment

Notes/Observations

• Concerns about the new omicron coronavirus variant dominate.
• OPEC+ ministers meet today; likely to maintain the current production increase policy of 400K bpd.
• Focus on upcoming US payroll report due out on Friday.

Asia

• South Korea Q3 Final GDP unrevised (Q/Q: 0.3% v 0.3% prelim; Y/Y: 4.0% v 4.0% prelim).
• South Korea Nov CPI registered its 8th straight month above target and fastest pace since Dec 2011) (YoY: 3.7% v 3.1%e).
• BOK stated that CPI to be above target for considerable time and the 2021 CPI might be slightly above Nov outlook of 2.3%.
• BOJ Member Suzuki reiterated that BOJ to continue to take appropriate policy steps; reiterated would not hesitate to add easing if needed. BOJ would carry on supporting corporate funding under pandemic relief programs.
• Australia Oct Trade Balance (A$): 11.2B v 11.0Be.

Europe

• EU’s Sefcovic called on Britain to reciprocate on Brexit proposals as there was no time to lose. Needed to find solutions to the problems posed by the Northern Ireland protocol.
• Turkey President Erdogan removes Fin Min Elvan, names Nurettin Nebati as new Fin Min.

Americas

• Fed Beige Book ECONOMIC ACTIVITY GREW AT MODEST TO MODERATE PACE IN MOST DISTRICTS; PRICES ROSE AT MODERATE TO ROBUST PACE WITH PRICE HIKES WIDESPREAD.
• Fed’s Mester (non-voter, hawk) noted that was very open to considering a faster taper pace, Should be able to hike rates a couple times in 2022 if needed, momentum in economy was clear , seen higher inflation rates.
• Senate Majority Leader Schumer (D-NY) stated that talks with GOP leader McConnell to avert a govt shutdown were making good progress.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.90% at 466.62, FTSE -0.59% at 7,126.27, DAX -0.91% at 15,331.63, CAC-40 -0.72% at 6,832.09, IBEX-35 -0.97% at 8,370.85, FTSE MIB -0.63% at 26,207.00, SMI -0.96% at 12,148.76, S&P 500 Futures +0.68%].

Market Focal Points/Key Themes:

Equities

• European indices opened lower falling yesterday’s sell-off in US indices; sectors trending toward the downside include technology and consumer discretionary; in pandemic-related news, drug giant GlaxoSmithKline announced its COVID-19 antiviral pill was effective against new Omicron variant in first testing; shares of European’s Apple suppliers trade lower across the board following press speculation that demand for iPhone 13 is weakening; in other corporate news, Thyssenkrupp shares trade down 2% following its CMD targets; earnings expected during the upcoming US session include Kroger, Express, Dollar General, Signet Jewelers and TD Bank.
• Consumer discretionary: Deliveroo [ROO.UK] -5% (share block sale).
• Financials: Serco Group [SRP.UK] +1% (CMD).
• Healthcare: Vifor Pharma [VIFN.CH] +15% (attracts interest), GlaxoSmithKline [GSK.UK] -1% (antibody drug effective against Omicron variant).
• Industrials: Thyssenkrupp [TKA.DE] -2% (CMD).
• Technology: Infineon [IFX.DE] -2%, STMIcroelectronics [STM.FR] -4% (iPhone component suppliers were said to have been told that demand has slowed down).

Speakers

• EU Court said to give non-binding opinion regarding rule of law issue for Poland and Hungary. Stated that principle to link the bloc’s budget disbursements to the respect for rule of law were compatible with the bloc’s laws and that the challenge by Hungary and Poland should be dismissed.
• Russia Central Bank (CBR) Gov Nabiullina reiterated she expected 2022 CPI to fall to 4.0-4.5% during 2022. Key One-Week Auction Rate to return to neutral zone in 2023.
• Turkey Central Bank (CBRT) Gov Kavcioglu noted that impact of current monetary policy stance to be seen in H1 2022. To continue FX Reserve accumulation. Excessive FX volatility was not wanted and had ability to intervene if necessary.
• Poland Central Bank (NBP) Gov Glapinski stated that inflation was not transitory but burdensome.
• China govt advisers said to have recommended lowering the official 2022 GDP growth target to 5.0-5.5% range (**Note: 2021 GDP Target >6%).
• Biden administration said to tighten its travel policy and expand availability of free COVID-19 tests due to Omicron variant.
• OPEC+ said to likely to discuss pausing oil production increase in January as among its options.

Currencies/Fixed Income

• USD was steady in the session with dealer believing the Fed was on course to normalize policy, despite COVID-risk.
• EUR/USD holding above the 1.13 handle. Dealers noted that the appearance of the Omicron variant would likely affect the upcoming ECB meeting in mid-Dec on its QE outlook. Germany seemed likely to implement “lockdown-like” measures this week which could impact the region’s growth outlook.

Economic data

• (CH) Swiss Oct Real Retail Sales Y/Y: 1.2% v 2.6% prior.
• (ES) Spain Nov Unemployment Change: -74.4K v -0.7K prior (9th straight monthly decline and back to pre-pandemic level).
• (HU) Hungary Sept Final Trade Balance: -€0.1B v €0.0B prelim.
• (BR) Brazil Nov FIPE CPI (Sao Paulo): 0.7% v 0.8%e.
• (HU) Hungary Central Bank raised its One-week Deposit Rate by 20bps to 3.10%.
• (IT) Italy Oct Unemployment Rate: 9.4% v 9.1%e.
• UN FAO Nov World Food Price Index: 134.4 v 133.2 prior (4th straight rise and highest since 2011).
• (EU) Euro Zone Oct Unemployment Rate: 7.3% v 7.3%e.
• (EU) Euro Zone Oct PPI M/M: 5.4% v 3.8%e; Y/Y: 21.9% v 19.0%e.
• (BE) Belgium Oct Unemployment Rate: 6.3% v 6.3% prior.
• (CY) Cyprus Nov CPI M/M: 0.5% v 0.7% prior; Y/Y: 4.3% v 4.3% prior.

Fixed income Issuance

• (ES) Spain Debt Agency (Tesoro) sold total €2.029B vs. €1.5-2.5B indicated range in 2025 and 2031 bonds.
• Sold €1.13B in 2.15% Oct 2025 SPGB bond; Avg Yield: % v -0.013% prior; Bid-to-cover: 2.17x v 1.99x prior.
• Sold €899M in 0.50% Oct 2031 SPGB bonds; Avg Yield: 0.386% v 0.465% prior; bid-to-cover: 2.07x v 1.40x prior.
• (ES) Spain Debt Agency (Tesoro) sold €475M vs. €250-750M indicated range in 0.70% Nov 2033 inflation-linked bonds (SPGBi); Real Yield: -1.047% v -1.074% prior; Bid-to-cover: x v 1.41x prior (Oct 7th 2021).
• (FR) France Debt Agency (AFT) sold total €B vs. €3.0-4.0B indicated range in 2030, 2041 and 2045 bonds.
• Sold €2.22B in 2.50% May 2030 Oat; Avg Yield: -0.19% v -0.05% prior; Bid-to-cover: 2.66x v 2.47x prior.
• Sold €677M in 4.50% Apr 2041 Oat; Avg yield: 0.38% v 0.10% prior; Bid-to-cover: 2.97x v 2.82x prior.
• Sold €1.099B in 3.25% May 2045 Oat Avg Yield: 0.50% v 1.42% prior; Bid-to-cover: 2.70x v 2.66x prior.

Looking ahead

• (RO) Romania Nov International Reserves: No est v $45.0B prior.
• (AT) OPEC and Non-OPEC Ministerial Meeting by Videoconference.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds.
• 06:00 (ZA) South Africa Oct Electricity Production Y/Y: No est v 0.0% prior; Electricity Consumption Y/Y: No est v 0.1% prior.
• 06:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Ohlsson.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (BR) Brazil Q3 GDP Q/Q: 0.0%e v -0.1% prior; Y/Y: 4.2%e v 12.4% prior; GDP 4Quarters Accumulated: 3.9%e v 1.8% prior.
• 07:00 (MX) Mexico Oct Leading Indicators M/M: No est v -0.04 prior.
• 07:00 (MX) Mexico Nov Vehicle Domestic Sales: No est v 76.6K prior.
• 07:30 (US) Nov Challenger Job Cuts: No est v 22.8K prior; Y/Y: No est v -71.7% prior.
• 08:00 (RU) Russia Gold and Forex Reserve w/e Nov 26th: No est v $626.3B prior.
• 08:00 (SG) Singapore Nov Purchasing Managers Index (PMI): 51.0e v 50.8 prior; Electronics Sector Index: No est v 51.1 prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Initial Jobless Claims: 240Ke v 199K prior; Continuing Claims: 2.00Me v 2.049M prior.
• 08:30 (US) Weekly USDA Net Export Sales.
• 08:30 (US) Fed’s Bostic on Housing.
• 09:00 (IT) ECB Panetti (Italy).
• 10:30 (US) Weekly EIA Natural Gas Inventories.
• 11:00 (DK) Denmark Nov Foreign Reserves (DKK): No est v 491.9B prior.
• 11:00 (US) Fed’s Quarles.
• 11:30 (US) Fed’s Bostic participates in event.
• 11:30 (US) Fed’s Daly and member Barkin at Peterson Institute.
• 16:00 (KR) South Korea Nov Foreign Reserves: No est v $469.2B prior.
• 17:00 (AU) Australia Nov Final PMI Services: No est v 55.0 prelim; PMI Composite: No est v 55.0 prelim.
• 19:30 (JP) Japan Nov Final PMI Services: No est v 52.1 prelim; PMI Composite: No est v 52.5 prelim.
• 19:30 (SG) Singapore Nov PMI (whole economy): No est v 52.3 prior.
• 19:30 (HK) Hong Kong Nov PMI (whole economy): No est v 50.8 prior.
• 20:01 (IE) Ireland Nov PMI Services: No est v 63.4 prior; PMI Composite: No est v 62.5 prior.
• 20:45 (CN) China Nov Caixin PMI Services: 53.0e v 53.8 prior; PMI Composite: No est v 51.5 prior.
• 22:30 (TH) Thailand Nov CPI M/M: 0.1%e v 0.7% prior; Y/Y: 2.5%e v 2.4% prior; CPI Core Y/Y: 0.3%e v 0.2% prior.
• 22:30 (HK) Hong Kong to sell 1-month bills.