• European bourses are softer while US equity futures are marginally firmer ahead of US CPI; ES +0.3%
• In FX, the DXY extended on gains in European hours, best level just shy of 96.50, and with peers subdued across the board
• PBoC set USD/CNY mid-point at 6.3702 vs exp. 6.3499 (prev. 6.3498); CBRT intervened in FX markets
• Taiwan says 13 Chinese PLA planes entered the Air Defence Identification Zone (ADIZ) on Friday
• Looking ahead, highlights include US CPI, Uni. of Michigan Survey, ECB’s Elderson

CORONAVIRUS UPDATE

WHO Strategic Advisory Group of Experts' interim recommendation supports use of JNJ (JNJ) COVID-19 vaccine as a booster with growing body of evidence supporting its use as both a mix-and-match and homologous booster. (Newswires)

US President Biden said the US is making progress against COVID-19 and that preliminary data of three shots of Pfizer (PFE) shows protection against Omicron. In other news, the White House reiterated that US President Biden will veto a bill banning vaccine mandates if it is required. (Newswires)

Hong Kong poised to tighten quarantine requirements for US travellers, health authorities poised to elevate the US to the highest Covid-19 risk level, with an announcement possibly as soon as today, SCMP sources say. (SCMP)

ASIA

Asia-Pac stocks were on the back foot as the region took its cue from the weak performance in the US, where the major indices reversed recent upside in the run-up to today’s US CPI metric. The ASX 200 (-0.4%) was led lower by the underperformance in energy and tech after a retreat in oil prices and similar weakness of their counterpart sectors in US. The Nikkei 225 (-1.0%) remained lacklustre as it succumbed to the recent inflows into the currency, although the downside was stemmed as participants digested a record increase in wholesale prices. The Hang Seng (-1.0%) and Shanghai Comp. (-0.2%) were hindered by several headwinds including lower-than-expected lending and aggregate financing data, as well as China’s latest internet crackdown in which it removed 106 apps from app stores. However, losses were contained by a softer currency after China’s efforts to curb RMB strength including the PBoC’s 200bps FX RRR hike yesterday and its overnight weakening of the reference rate by the widest margin against estimates on record. Finally, 10yr JGBs were quiet after the mixed performance in US fixed income markets and with the risk-averse mood counterbalanced by the lack of BoJ purchases in the market today, although later saw a bout of selling on a breakdown of support at the key 152.00 level.

China's economy faces shrinking demand and supply shock, and weakening expectations, State Media says; economic operations to be kept within a reasonable range. China will implement new tax and fee cuts, appropriately front-load infrastructure investment. Says that housing is for living, not for speculating; China will meet the reasonable demand of home buyers, and will promote the healthy development of property market. (Newswires)

PBoC set USD/CNY mid-point at 6.3702 vs exp. 6.3499 (prev. 6.3498)

• PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires)

US

US Senate voted 59-35 to approve the fast-track measure which paves the way for increasing the debt limit through a simple majority vote. (Newswires)

US Senate Democrats reportedly dropped the vaping tax proposal from the Senate plan as they work out the details of the Build Back Better package. (WSJ)

Tesla (TSLA) CEO Musk tweeted he is thinking about quitting his jobs and “becoming an influencer full-time”. (Twitter)This could be a joke, but the CEO can be unpredictable.

UK/EU

The European Commission has said it’s ready to go on a compromise on medicines. Sources in Brussels are confident regarding a compromise on medicines before year-end. (Politico)

UK reportedly denied any Friday deadline in the EU fishing row. (AFP) France will not get all the 104 remaining licences it has demanded in the Brexit fish wars, sources stated. (Telegraph)

UK Labour party takes a 4pt lead in the latest YouGov/Times Westminster voting intention (8-9 Dec). Con: 33% (-3 since 1-2 Dec), Lab: 37% (+4). (Times/Twitter)

UK GDP Estimate MM (Oct) 0.1% vs. Exp. 0.4% (Prev. 0.6%); YY (Oct) 4.6% vs. Exp. 4.9% (Prev. 5.3%); 3M/3M (Oct) 0.9% vs. Exp. 1.0% (Prev. 1.3%)

GEOPOLITICAL

Taiwan says 13 Chinese PLA planes entered the Air Defence Identification Zone (ADIZ) on Friday. (Newswires)

US President Biden reaffirmed US' unwavering commitment to Ukraine's sovereignty during a call with Ukraine's President, while Biden voiced deep concerns that the US and its allies have regarding Russia's aggressive actions towards Ukraine. White House also said that President Biden made it clear US and allies would respond with strong economic and other measures in the event of a further military intervention by Russia, while there were separate reports that Ukraine said Russia rejected a proposal to strengthen July 2020 ceasefire during a special meeting which took place on Thursday. (Newswires)

US Department of Defense said there was no change so far to the Russian build up near the Ukraine border since the Putin and Biden talks. (Newswires)

Russian Foreign Ministry accuses Ukraine of provoking the situation in relation to the Kerch Strait ship incident, Ria. (Newswires)

Iran says it is willing to work from the basis of texts created in June on nuclear discussions, which will now be put to the test in upcoming days, via a European diplomatic source. (Newswires)

EQUITIES

Cash bourses in Europe kicked off the session with modest losses across the board, but the region has been clambering off worst levels since (Euro Stoxx 50 -0.3%; Stoxx 600 -0.3%) as traders gear up for the US CPI release (full preview available on the Newsquawk headline feed). US equity futures meanwhile post modest broad-based gains across the ES (+0.3%), NQ (+0.3%), RTY (+0.4) and YM (+0.2%). Back to Europe, cash markets see broad but contained downside. Sectors are mixed with no overarching theme or bias. Tech resides at the foot of the bunch with heavyweight SAP (-0.2%) failing to garner impetus from Oracle’s (+11% pre-market) blockbuster earnings after beating expectations on the top and bottom lines and announcing a new USD 10bln stock-repurchase authorisation. The upside meanwhile sees some of the more inflation-related sectors, including Oil & Gas, auto, Goods, Foods, and Beverages. In terms of individual movers, Bayer (+1.8%) is firmer after the Co. won a second consecutive trial in California regarding its Roundup weed killer. Daimler (-15%) sits at the foot of the Stoxx 600 after spinning off its Daimler Trucks unit (+4%) - considered to be a market listing rather than a full initial public offering.

FX

DXY - Not a lot of deviation from recent ranges, but the Greenback is grinding higher ahead of US inflation data and Treasuries are bear-steepening to suggest hedging or positioning for an upside surprise following pointers from President Biden and NEC Director Deese to that effect (both advising that recent declines in prices, including energy, will not be reflected in November’s metrics). The index is back above the 96.000 level that has been very pivotal so far this week and hovering near the upper end of a 96.429-157 range, while the benchmark 10 year T-note yield is holding above 1.50% after a so-so long bond auction to wrap up the latest refunding remit.

NZD/JPY/GBP - It’s marginal, but the Kiwi, Yen and Pound are lagging behind in the G10 stakes, with Nzd/Usd back below 0.6800 and perhaps taking note of a marked slowdown in the manufacturing PMI to 50.6 in November from 54.3, while Usd/Jpy is straddling 113.50 and eyeing DMAs either side of the half round number and Cable remains choppy around 1.3200 in wake of UK GDP, ip and output all missing consensus.

AUD/CAD/EUR/CHF - All a tad more narrowly divergent vs the Buck, and the Aussie managing to keep tabs on 0.7150 after outperformance post-RBA on mainly external and technical impulses. Elsewhere, the Loonie has limited losses through 1.2700 with some assistance from hawkish sounding commentary from BoC Deputy Governor Gravelle rather than choppy crude prices as WTI swings around Usd 71/brl. To recap, he said that concerns over inflation are heightened on the upside much more than usual and the BoC is likely to react a little bit more readily to the upside risk given that inflation is already above the control range. Elsewhere, the Euro continues to fade on advances beyond 1.1300 and hit resistance at or near the 21 DMA and the Franc is more attuned to yields than risk sentiment at present, like the Yen, though is outpacing the Euro, as Eur/Chf veers towards 1.0400 again and Usd/Chf sits closer to 0.9250 vs 0.9200.

SCANDI/EM - Some traction for the Nok from stronger than expected Norwegian inflation data, while Brent meanders between Usd 73.80-74.80, but no pre-Xmas joy for the Try following the latest CBRT survey showing yet another rise in year end CPI projections and further Lira depreciation as plumbs fresh record lows nearer to 14.0000 vs the Usd. Thereafter, the CBRT once again defended the 14.00 mark via USD selling, subsequently dragging USD/TRY to a 13.74. Conversely, the Cnh and Cny have clawed back some post-PBoC FX RRR hike declines even though the Bank set its weakest midpoint fix against expectations ever, and the Czk has received hawkish guidance from CNB Governor Rusnok to redress some of the balance vs its CEE rivals after latest tightening moves by the NBH and NBP.

Chinese state media front page article noted the state of CNY appreciation will gradually recede and will stabilise around equilibrium level. (Newswires)

CBRT is intervening in the FX markets; selling USD amid unhealthy price formations. (Newswires)

Notable FX Expires, NY Cut:

• EUR/USD: 1.1250 (1.0BLN), 1.1290-1.1300 (820M), 1.1320-25 (680M), 1.13-50-60 (530M), 1.1375-85 (1.75BLN)
• USD/JPY: 112.50-55 (302M), 113.10-20 (1.2BLN), 113.50-60 (555M), 113.95-00 (780M), 114.25 (1.145BLN)
• AUD/USD: 0.6900 (1BLN), 0.7000 (580M), 0.7100-05 (880M), 0.7115 (412M), 0.7185 (306M)

FIXED

Debt futures have been choppy as the clock ticks down to US CPI, but are still trending lower as rebounds are sold into and become less pronounced or lasting. The inference is that inflation data is more likely to exceed this time after recent downside misses, and Bunds, Gilts and the 10 year T-note are all teetering above deeper intraday lows of 173.83, 126.75 and 130-02 at present amidst steepening along the curves. Also ahead, preliminary Michigan sentiment provides the first look at economic conditions in the current month, while ECB’s Elderson is scheduled to partake in a webinar, but may not speak publicly so close to December’s policy meeting.

COMMODITIES

WTI and Brent front-month futures have been edging higher in early European trade following a choppy APAC session and in the run-up today’s main event, the US inflation data. Currently, WTI Jan trades just under USD 71.50/bbl (vs low USD 70.32/bbl) while Brent Feb resides north of USD 74.50/bbl (vs low USD 73.80/bbl), with news flow also on the lighter side ahead of the tier 1 data. In terms of other macro events, sources suggested Iran is willing to work from the basis of texts created in June on nuclear discussions, which will now be put to the test in upcoming days, via a European diplomatic source. This would mark somewhat of a shift from reports last week which suggested that Iran took a tougher stance than it had back in June. Western diplomats last week suggested that Tehran ramped up their conditions, which resulted in talks stalling last Friday. Aside from that, relevant news flow has been light for the complex. Elsewhere, spot gold and silver are drifting lower in tandem gains in the Dollar – spot gold has dipped under USD 1,770/oz, with the current YTD low at 1,676/oz. LME copper holds its head above USD 9,500/t but within a tight range amid the overall indecisive mood across the markets.

Kuwait set January KEC OSP for Asia at Oman/Dubai + USD 2.80/bbl. (Newswires)