• European bourses & US futures are marginally firmer but with price action tentative pre-CPI
• DXY marginally lower, with EUR bid following German ZEW & Cable testing 1.23
• Debt futures retain yesterday’s gains, Bunds experienced slight downticks around supply and data
• Crude continues to build on Monday's gains; IEA OMR forecasts demand to grow for 2023 & 2024
• Looking ahead, highlights include US CPI, Cleveland Fed CPI, Japanese GDP, Speeches from Fed’s Mester, Goolsbee, Barkin & Barr, ECB’s Elderson

EUROPEAN TRADE

EQUITIES

• European bourses are modestly firmer but yet to convincingly move above the unchanged mark as the overall market tone remains non-committal ahead of US inflation data, Euro Stoxx 50 +0.2%
• Sectors are mixed with Basic Resources outperforming given Glencore and Teck updates while Informa's results have bolstered Media names, at the other end of the spectrum Travel & Leisure lags amid broker activity.
• Stateside, futures are posting very similar performance to their European peers, ES +0.1%, but with some modest NQ +0.3% outperformance as yields dip a touch stateside.
• Foxconn (2317 TT) says they are already seeing strong growth in Q4 Q/Q; Sees servers as a major growth driver next year; the largest proportion of capex next year will be in China; operations and production in China are all normal. Continue to discuss with interested parties on chip cooperation in India.
• Home Depot Inc (HD) Q3 2023 (USD): EPS 3.81 (exp. 3.76), Revenue 37.71bln (exp. 37.61bln). Sees FY Comp Sales -3% to -4% (prev. -2% to -5%).
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FX

• Dollar deflated in advance of US inflation data, as DXY retreats from 105.73 to 105.46.
• Sterling underpinned as UK pay runs hot vs consensus and Euro encouraged by improvements in ZEW metrics.
• Cable tests recent highs just above 1.2300 and Eur/Usd probes 1.0700+ peaks.
• Yen and Franc appreciate soft yields and latter SNB's Jordan underlying willingness to hike rates further if needed; USD/JPY and USD/CHF confined within 151.78-58 and 0.9026-08 respective ranges
• PBoC set USD/CNY mid-point at 7.1768 vs exp. 7.2885 (prev. 7.1769)
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FIXED INCOME

• Bonds bid, but off best levels approaching US CPI.
• Bunds suffer some contagion after a less well received Schatz sale and lose 130.00+ status within 130.01-129.65 range.
• Gilts fade between 95.44-94.87 parameters and T-note having rebounded to 107-18+ from 107-09+.
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COMMODITIES

• Crude benchmarks are tilting firmer on the session, after a stronger settlement and as the USD struggles to retain a positive foothold.
• Though, session lows printed in European hours following commentary from the Iraqi oil minister that they are optimistic re. a deal with KRG in the coming days. However, the complex rebounded in short order amid Bloomberg reports of funding to support China's housing market.
• Spot gold is essentially unchanged and remains below the USD 1950/oz mark while base metals are underpinned by the Chinese housing reports.
• US is planning to purchase 1.2mln bbls of oil for the Strategic Petroleum Reserve, according to Reuters.
• EIA sees US total shale regions oil production for December down about 1.2k BPD at 9.865mln BPD (vs 4.1k BPD fall in November), while Permian production is seen at the highest on record.
• Oil output at Kazakhstan's giant Tengiz oil field (610k BPD) to remain unchanged in 2024 Y/Y, via Energy Ministry.
• IEA raises 2023 global oil demand growth forecast by 100k BPD; raises 2024 forecast by 50k BPD; says the oil market is less tight than expected as supply climbs. Click here for more.
• Iraq Oil Minister says KRG production sharing contracts are not acceptable; has proposed to KRG and companies operating in Kurdistan to change current contracts to profit-sharing ones. Optimistic in reaching a deal with KRG in the coming days to resume oil exports.
• EU is said to be mulling 1the possibility of temporarily extending the truce with the US with regards to steel and aluminium trade to avoid the return of tariffs on as much as USD 10bln of exports, according to Bloomberg sources.
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NOTABLE HEADLINES

• EU countries and lawmakers were reportedly set to reach a deal on rules to secure the supply of critical raw materials, according to Reuters citing an EU official.
• A Reuters poll showed all 72 economists surveyed expect the ECB to keep the Deposit Rate at 4.00% through year-end, while 40 out of 72 respondents expect the ECB to wait until at least Q3 2024 before cutting rates.
• SNB's Jordan says will not hesitate to tighten monetary policy further if necessary; at the next meeting will review whether measures taken to date are sufficient to keep inflation within the price stability range on a sustainable basis. To this end, will monitor the development of inflation closely in the coming weeks.

EUROPEAN DATA

• UK Average Week Earnings 3M YY (Sep) 7.9% vs. Exp. 7.4% (Prev. 8.1%, Rev. 8.2%); Ex-Bonus (Sep) 7.7% vs. Exp. 7.7% (Prev. 7.8%, Rev. 7.9%)
• UK HMRC Payrolls Change (Oct) 33k (Prev. -11k); Claimant Count Unemployment Change (Oct) 17.8k (Prev. 20.4k, Rev. 9.0k)
• UK Employment Change (Sep) +54k vs. Exp. -198k (Prev. -82k)
• UK ILO Unemployment Rate* (Sep) 4.2% vs. Exp. 4.3% (Prev. 4.2%)
• Swedish CPIF Ex Energy YY (Oct) 6.1% vs. Exp. 6.30% (Prev. 6.90%); CPIF YY (Oct) 4.2% vs. Exp. 4.3% (Prev. 4.0%)
• German ZEW Economic Sentiment (Nov) 9.8 vs. Exp. 5.0 (Prev. -1.1); Current Conditions (Nov) -79.8 vs. Exp. -76.9 (Prev. -79.9)
• ZEW: Heightened economic expectations are accompanied by significantly more optimistic outlooks for the German industrial sector. Those observations support the impression that Germany's economic development has bottomed out. At the same time, the assessment of the current situation remains unchanged at a lower level. Economic expectations for Germany have again increased.

NOTABLE US HEADLINES

• US Senate Majority Leader Schumer signalled an openness to House Speaker Johnson’s "far from perfect" spending bill, according to The Hill.
• US Treasury Secretary Yellen said APEC finance ministers affirmed a desire to expand the productive capacity of their economies while reducing inequality and protecting the environment. Yellen also said she disagrees with Moody's decision to move the US rating outlook to negative, while she added that a government shutdown would pose an unnecessary economic headwind and it is critical that House Republicans work in a bipartisan manner.
• Fed Vice Chair Jefferson (voter) says some measures of economic uncertainty, particularly for inflation, are elevated. Uncertainty around inflation persistence may warrant a stronger policy response than otherwise. Adds policy decisions taken under uncertainty may look different from those taken under optimal certainty.
• US NFIB Business Optimism Index (Oct) 90.7 vs. Exp. 90.5 (Prev. 90.8).
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GEOPOLITICS

• Israeli PM Netanyahu said Hezbollah is playing with fire and warned attacks will be met with much stronger fire.
• Iranian proxies attacked US troops after US strikes in Syria with US troops targeted at least four times after the air strikes, according to CNN.
• US special envoy for Yemen Lendering will travel to the Gulf this week and meet with international partners to discuss necessary steps to secure a durable ceasefire, according to Reuters.
• US Defence Secretary Austin said they share interests in maintaining peace and stability in the Korean Peninsula and that the UN Command plays a crucial role in facilitating dialogue with North Korea. Furthermore, Austin said he is deeply concerned China and Russia are helping North Korea expand its capabilities and is troubled by the recent growth of military cooperation between Russia and North Korea.
• South Korean Defence Minister Shin said the UN Command is a symbol of deterrence against North Korea's military provocations and that the UN Command meeting will send a warning to groups or countries that attempt to change the status quo by force.

CRYPTO

• Bitcoin is essentially unchanged on the session, with recent action rangebound and non-committal in a similar fashion to performance for the USD ahead of US CPI and a handful of Fed speakers thereafter.
• ECB's Enria (Supervisory): "However, the turbulence experienced in crypto markets since then, including recent instances of unsustainable business models and egregious fraud, makes a strong case for a tougher regulatory approach."

APAC TRADE

• APAC stocks traded somewhat mixed with gains capped as markets awaited incoming US CPI data.
• ASX 200 was led by strength in the commodity-related sectors with outperformance in energy after the recent rebound in oil prices, which helped participants shrug off weak Consumer and Business Confidence data, while financials lacked conviction after Australia’s largest lender CBA posted flat cash profit for Q1.
• Nikkei 225 advanced amid earnings releases and with Japan’s government said to consider corporate tax breaks as an incentive for companies that implement an 8% wage increase.
• Hang Seng and Shanghai Comp were indecisive following mixed New Yuan Loans and Aggregate Financing data which both weakened from the prior month, while price action was also kept rangebound ahead of the Biden-Xi meeting with the leaders said to announce a deal on a fentanyl crackdown by China.

NOTABLE HEADLINES

• US President Biden and Chinese President Xi are to announce a deal on fentanyl crackdown by China.
• White House National Security Adviser Sullivan said US President Biden and Chinese President Xi are to focus on strengthening open lines of communication and noted that the administration is looking for specific outcomes from the Biden-Xi meeting on November 15th. Furthermore, President Biden will make a point to Xi that Iran acting in a destabilising way is not in China's interest and Biden will set out the vision for peace and stability across the Taiwan Strait, while Sullivan added US-China ties could easily veer into conflict or confrontation if it's not well managed.
• US Senator Manchin (D) urged the “strictest possible standards" for US Treasury guidance on EV tax credits to prevent Chinese minerals from winning subsidies.
• Japan's government is reportedly considering corporate tax breaks as an incentive for companies that implement an 8% wage increase, according to Yomiuri.
• Japanese Finance Minister Suzuki reiterated it is important for currencies to move stably reflecting fundamentals and that excessive moves are undesirable. Suzuki added they will continue to take all possible steps for forex moves and are aware there are pros and cons of a weak yen.
• China has asked local gov't to halt PPP projects identified as being problematic, via Reuters citing sources; will eliminate the rule allowing municipalities to earmark as much as 10% of the annual budget for such projects. To move oversight responsibilities of projects from the Finance Ministry to NDRC.
• China is said to be mulling CNY 1tln of new market funding to boost the housing market, according to Bloomberg sources; PBoC will inject funds in phases through policy banks; and may take the first step as soon as this month. Officials mulling options including Pledged Supplemental Lending and special loans. Final amount is subject to change.

DATA RECAP

• Australian Westpac Consumer Confidence Index (Nov) 79.9 (Prev. 82.0); Sentiment MM (Nov) -2.6% (Prev. 2.9%)
• Australian NAB Business Confidence (Oct) -2.0 (Prev. 1.0); Conditions (Oct) 13.0 (Prev. 11.0)
• New Zealand Food Price Index (Oct) -0.9% (Prev. -0.4%)