• European bourses & US futures continue to build on post-US CPI gains; FTSE 100 outperforms on softer-than-expected UK CPI
• Dollar finds some reprieve whilst Kiwi outperforms underpinned by encouraging Chinese activity data & GBP underperforms
• Initial UK CPI-induced Gilt strength lost as core benchmarks pullback modestly
• Crude subdued but both precious and base metals extend gains despite a slightly firmer Dollar
• Looking ahead, highlights include US Retail Sales, Japanese Trade, Fed's Barr, Biden-Xi Meeting. Earnings from Cisco

EUROPEAN TRADE

EQUITIES

• European bourses are in the green, Euro Stoxx 50 +0.6%, with support across the board for benchmarks in a continuation of Tuesday's trade with further impetus from favourable Chinese activity data.
• Sectors are mixed, with Telecom & Healthcare names underperforming while Consumer Products/Services perform well given their exposure to China.
• Stateside, futures are in the green with the NQ +0.5% continuing its outperformance despite a very modest uptick in US yields this morning.
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FX

• DXY is relatively contained after hovering in a tight 104.04-22 band in APAC and early European hours, before eking fresh highs of 104.31 after yesterday’s post-US CPI low of 103.99.
• GBP/USD slipped from a 1.2499 high set overnight to a post-UK CPI low of 1.2458 at the time of writing, well within yesterday’s 1.2261-2505 parameter; EUR/USD holds onto a lion’s share of yesterday’s gains with large FX options expiries near the money.
• Largely flat intraday trade in the Yen and Yuan, with the latter retracing the strength seen on the release of better-than-expected Chinese activity data overnight despite a lack of pertinent headlines in the European morning ahead of the Biden-Xi meeting.
• The non-US Dollars see a mixed picture with the NZD outperforming, the AUD flat and the CAD lagging.
• PBoC set USD/CNY mid-point at 7.1752 vs exp. 7.2564 (prev. 7.1769).
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FIXED INCOME

• Core fixed income began the session in the green and towards the best levels printed on Tuesday in the wake of cooler than expected US CPI.
• However, as the morning progresses and we near the commencement of US trade benchmarks have slipped from best within Europe, a move that is seemingly UST led in a slight paring of Tuesday’s significant action.
• Cooler UK CPI drove Gilts above 97.00; though, alongside a broader pullback in benchmarks Gilts have lost the level and reside towards the 96.58 low.
• Bunds received a circa. 15 tick boost on the German Constitutional Court ruling that the transfer of circa. EUR 60bln of unused COVID debt into the climate fund is illegal; though, the move was shortlived given the FY implications are limited between now and FY27.
• UK receives a record GBP 93bln of demand for their 4.75% 2043 Gilt.
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COMMODITIES

• WTI Dec and Brent Jan are softer intraday after settling relatively flat yesterday despite the softer inflation data and subsequent slide in the Dollar.
• As a reminder, the US weekly EIA data will be released in two parts today to account for last week’s data blunder – last week’s data will be released at the usual time of 15:30GMT/10:30EST whilst this week’s data is slated for 18:00GMT/13:00EST.
• Spot gold topped yesterday’s USD 1,971/oz high around the time European cash markets opened, and irrespective of Dollar strength ahead of the Biden-Xi meeting on the sidelines of the APEC summit, with the yellow metal eyeing the 7th November peak at 1,978.36/oz.
• Base metals are firmer across the board following the upbeat Chinese activity data overnight, with 3M LME copper gaining ground above USD 8,250/t
• US Private Energy Inventory Data (bbls): Crude +1.3mln (exp. +1.8mln), Cushing +1.1mln, Gasoline +0.2mln (exp. +0.6mln), Distillates -1.0mln (exp. -1.2mln)
• Vitol said its expects a fairly balanced to slight surplus in the global oil market for 2024, while it added that non-OPEC supply has surpassed previous highs and continues to grow. Furthermore, it stated that it is premature to call for peak gasoline demand in China as gasoline car sales are still being added to the fleet.
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NOTABLE HEADLINES

• ECB's Centeno says must be patient with policy. Inflation is falling faster. Data shows the global inflation is falling. Still expects a "good" inflation print for November. Do not see reasons to accelerate APP QT, via Bloomberg TV.
• German Constitutional court rules that the transfer of unused pandemic debt into climate fund is illegal (Second Supplementary Budget Act 2021 is void). "The Court’s decision means that the volume of the Climate and Transformation Fund is reduced by EUR 60 billion. Insofar as the state has entered into obligations that it can no longer service as a result of this reduction, the legislator must compensate for this through other means.". Click here for details, analysis & reaction.
• EU Commission sees EZ GDP growth at 0.6% in 2023 (prev. 0.8%), 1.2% 2024 (prev. 1.3%); Sees EZ inflation in 2023 at 5.6% (prev. 5.6%); Says ECB interest rates and weaker external demand took heavier tool on EZ growth than expected.

EUROPEAN DATA

• UK CPI YY (Oct) 4.6% vs. Exp. 4.8% (Prev. 6.7%); All Services 6.6% (prev. 6.9%); Core 5.7% vs. Exp. 5.8% (Prev. 6.1%)
• UK CPI MM (Oct) 0.0% vs. Exp. 0.1% (Prev. 0.5%); Core 0.3% vs. Exp. 0.4% (Prev. 0.5%)

NOTABLE US HEADLINES

• US House voted 336-95 to pass a temporary spending bill that would avert a government shutdown, while it was separately reported that Senate Majority Leader Schumer said the Senate would act quickly on the funding bill.
• Click here for the US Early Morning Note.

GEOPOLITICS

• Israel conducted an operation against Hamas in Gaza's Al Shifa hospital and it noted that its forces had undergone specified training to prepare for the complex and sensitive environment, while it called on all Hamas operatives in the hospital to surrender.
• US, South Korean and Japanese foreign ministers said Russia-North Korea cooperation is a serious threat to international peace, while it was also reported that North Korea developed a new type of solid-fuel engine for intermediate-range ballistic missiles, according to KCNA and Yonhap
• EU Commission has reportedly suggested fresh sanctions on Russia, via Politico citing documents; introducing a ban on diamonds and tightening other measures incl. oil price cap.

CRYPTO

• Bitcoin is modestly firmer on the session but overall action has been contained amid a lack of fresh catalysts as markets generally digest/settle from Tuesday's US CPI release; currently, BTC holding just shy of the USD 36k handle where the session high also resides.

APAC TRADE

• APAC stocks followed suit to the global risk-on mood after softer-than-expected US CPI data spurred dovish Fed repricing amid hopes that the Fed could be done with its hiking cycle, while the region also digested better-than-expected Chinese activity data.
• ASX 200 was led higher by notable outperformance in real estate and tech following a decline in yields and with the index unfazed by the acceleration in the quarterly Wage Price Index.
• Nikkei 225 extended on gains after it gapped above the 33,000 level alongside the broad heightened risk appetite which helped markets shrug off disappointing preliminary Q3 GDP.
• Hang Seng and Shanghai Comp were underpinned after Chinese Industrial Production and Retail Sales topped forecasts, while sentiment was also supported by reports that China is mulling CNY 1tln of new funding to boost the housing market and after the PBoC conducted the largest MLF net injection in seven years.

NOTABLE HEADLINES

• PBoC announced CNY 1.45tln in 1-year MLF vs CNY 850bln maturing with the rate kept at 2.50%.
• China's stats bureau official said the foundation of the economic recovery is yet to be consolidated and noted expectations that China's price situation to improve with no deflation seen. The stats bureau also said there will be twists and turns in the economic recovery with more efforts needed to promote continued economic recovery and that China's manufacturers still face inadequate market demand. However, the official also commented that the property market is still in adjustment and transformation, while they expect consumption recovery to continue due to policy support and there is still strong demand for infrastructure investment.
• US President Biden and Chinese President Xi will meet on Wednesday at 10:45PST (18.45GMT/13:45EST) and Biden will hold a press conference at 16:15PST (00:15GMT/19:15EST)
• US President Biden said US and Chinese militaries need to be able to make contact and the US is trying to improve bilateral relations with China.
• US and China reaffirmed their commitment to the Paris Agreement and agreed to restart the energy efficiency forum, while they will work together on a global and legally binding agreement to tackle plastic pollution.

DATA RECAP

• Chinese Industrial Production YY (Oct) 4.6% vs. Exp. 4.4% (Prev. 4.5%); Retail Sales YY (Oct) 7.6% vs. Exp. 7.0% (Prev. 5.5%)
• Chinese Property Investment YTD YY (Oct) -9.3% vs Exp. -9.1%
• Japanese GDP QQ (Q3) -0.5% vs. Exp. -0.1% (Prev. 1.2%, Rev. 1.1%); Annualised (Q3) -2.1% vs. Exp. -0.6% (Prev. 4.8%, Rev. 4.5%)
• Australian Wage Price Index QQ (Q3) 1.3% vs. Exp. 1.3% (Prev. 0.8%, Rev. 0.9%); YY (Q3) 4.0% vs. Exp. 3.9% (Prev. 3.6%)