• Major European bourses mostly hold a downward bias following weak handovers from Wall Street and then APAC; US futures are flat
• In FX, DXY found a base just above 110.00 before making its way to 111.00; GBP outperforms and the EUR lags
• Fed’s Kashkari said any talk of a pivot is premature and added that they will do what is needed to bring inflation back down
• FTX is seeking emergency funding to meet withdrawal requests and without funding would result in bankruptcy, according to Bloomberg
• Looking ahead, highlights include US CPI, IJC, Speeches from Fed's Harker, Logan, Daly, Mester, George & Williams, BoE's Tenreyro, ECB's Schnabel, SNB's Maechler, Supply from the US

10th November 2022

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• Click here for the US CPI primer

EUROPEAN TRADE

EQUITIES

• Major bourses mostly hold a downward bias following weak handovers from Wall Street and then APAC in the run-up to US CPI later today.
• Sectors in Europe are mostly in the red, although to a lesser extent than at the cash open, with no overarching theme aside from earnings.
• US equity futures are trading sideways with modest gains and relatively broad-based performance thus far.
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FX

• DXY managed to fend off further downside pressure and form a base just above 110.000 before rebounding towards 111.00.
• AUD, NZD, CHF, and EUR are the major laggards as the Buck bounced and sentiment soured.
• GBP stands as the g10 outperformer as Cable held around 1.1350 and above the 50 DMA.
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FIXED INCOME

• Bonds appear to have hit the buffers for little apparent reason other than corrective price action and positioning for US CPI.
• US Treasuries touched 110-25+ overnight compared to its 109-14 w-t-d trough.
• Gilts peaked at 103.70 on Liffe yesterday vs 99.92 the day before.
• Bunds reached 138.74 earlier having been down at 135.76 at one stage on Tuesday.
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COMMODITIES

• WTI and Brent futures trade with mild losses intraday as the mood remains cautious and the Dollar picks up.
• Spot gold has adopted a mild downside bias as the Dollar gained in recent trade, with the 100 DMA at USD 1,714.55/oz and yesterday’s low at USD 1,701.20/oz.
• Base metals are also lower across the board amid the cautious risk tone and firmer Dollar, with 3M LME copper back under USD 8,000/t (vs high USD 8,100/t).
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CRYPTO

• Bitcoin trades with intraday gains on either side of USD 16,500 whilst Ethereum remains under 1,200
• FTX's downfall was rooted in poorly performing investments made during the crypto rout and the FTX owner used customer deposits to partially finance his trading firm earlier this year, according to Reuters sources. It was also separately reported that FTX is seeking emergency funding to meet withdrawal requests and without funding would result in bankruptcy, according to Bloomberg.

NOTABLE EUROPEAN HEADLINES

• UK Chancellor Hunt is reportedly looking to cut the surcharge on UK bank profits to 3% from 8% which would effectively shield UK banks from the bulk of a corporate tax rise, according to Bloomberg.

NOTABLE US HEADLINES

• US House Democrats to hold leadership election on November 30th, Punchbowl reports citing sources.
• Fed's Kashkari (2023 voter) said inflation is not being driven by wages and is being caused by supply chain challenges, stimulus and Russia's invasion of Ukraine, while he added that they will do what is needed to bring inflation back down and once it is done, he would expect interest rates to normalise. Kashkari said any talk of a pivot is premature and he doesn't know what the Fed will do at the December meeting but thinks they are on a good path now.
• Fed's Evans (departing) said he is hopeful inflation will start slowing soon and commented that it's time to slow the pace of rate hikes.
• US President Biden said he cannot guarantee that they are going to be able to get rid of inflation but thinks that they can, while he also thinks the economy will have a soft landing.
• Edison Research projected that Republicans have picked up a net 12 US House seats previously held by Democrats with 39 of 435 races not yet called.
• Edison Research projected no candidate will receive 50% of first choice votes for the Senate seat race in Alaska, and the winner between Republican incumbent Murkowski and Trump-backed Republican Tshibaka will be decided by ranked-choice voting on November 23rd.

GEOPOLITICS

RUSSIA-UKRAINE

• US President Biden said Russia's evacuation of Kherson shows that they have real problems and he hopes that Russian President Putin will discuss more seriously a prisoner exchange for Brittney Griner.
• US will not give advanced drones to Ukraine to avoid escalation with Russia, according to WSJ.
• Top US general sees a relatively static front line in Ukraine during the winter and said opportunities to negotiate must be seized, according to Reuters.
• Indonesian government confirmed that Russian President Putin will not attend the G20 summit in Bali but said he is scheduled to participate in one session at the G20 summit virtually, while Russia is to send Foreign Minister Lavrov instead, according to Reuters.
• Russia's Kremlin said Foreign Minister Sergei Lavrov will represent Russia at the G20 summit in Indonesia, according to Al Jazeera.

OTHER

• Iranian Revolutionary Guards said "we have built a supersonic ballistic missile capable of targeting enemy anti-missile systems", according to Al Jazeera.
• Chinese Foreign Ministry said China is committed to realise peaceful co-existence with the US but Taiwan question remains at the core of China's interest; US needs to stop weaponizing trade issue, via Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded negatively as the region followed suit to the losses stateside where the major indices were pressured amid a firmer dollar and contagion from further crypto turmoil as Binance pulled out of the FTX buyout deal.
• ASX 200 was subdued by underperformance in the tech and commodity-related sectors although losses in the index were cushioned by M&A-related news with Origin Energy shares up by more than 30% following a buyout offer from a Brookfield consortium and with Perpetual underpinned after it rejected a revised non-binding indicative proposal.
• Nikkei 225 declined as participants digested a slew of earnings releases and with Honda amongst the worst performers after its H1 net fell and cut its vehicle sales forecast due to the chip shortage.
• Hang Seng and Shanghai Comp retreated amid ongoing COVID woes in China after Guangzhou locked down another district on Wednesday, while two districts in Chongqing also raised COVID restrictions and halted schools.

NOTABLE ASIA-PAC HEADLINES

• US President Biden said he is not willing to make any fundamental concessions when he meets with Chinese President Xi and he wants them to lay out what each of their red lines are when they meet. Biden added that they will discuss Taiwan and will discuss fair trade with Xi, as well as relationships with other countries, according to Reuters.
• China Politburo Standing Committee hosted its first meeting; top leadership was urged to stick with COVID zero policy, state media reports; urges more precise COVID control, stressed the need to minimise impacts on economy.
• Two districts in China's Chongqing were said to have raised COVID restrictions and halted schools.
• BoJ Governor Kuroda said they are not at the stage where they can debate an exit and that raising interest rates now would hurt the economy still in the midst of recovering from the pandemic's impact, so is undesirable. BoJ Governor Kuroda said they will maintain easy monetary policy to sustainably and stably achieve 2% inflation accompanied by wage growth, while he also stated that deepening the negative rate is among the policy options if needed, according to Reuters.
• RBA Deputy Governor Bullock said they are seeing more broad-based CPI pressure in the economy and need to raise interest rates to influence demand, although she separately commented that they are getting closer to the point where they might be able to pause and take a look, while she is hoping demand in the economy is slowing but needs more evidence, according to Reuters.
• BoJ Governor Kuroda said he told PM Kishida that the BoJ will continue with monetary easing to achieve the price target in tandem with wage growth, via Reuters.
• Japanese government has asked residents to stay at home in the event that localities request stronger measures during a future COVID wave, according to NHK.

DATA RECAP

• Chinese (Oct) M2 Money Supply 11.8% (Exp. 12.0%)
• Chinese (Oct) New Yuan Loans (CNY): 615.2B (Exp. 800B)
• Chinese (Oct) Total Social Financing (CNY): 907.9B (Exp. 1.60T)