• European bourses & US Futures extend gains but with clear underperformance in the FTSE100
• DXY is firmer edging back towards the 103.00 level; G10’s are mixed with underperformance in the AUD following mixed data and cross-related flows.
• RBNZ opted for a hawkish hold where it kept rates unchanged but slightly raised its OCR forecasts from March 2024 to March 2025.
• EGBs bid amid EZ-member inflation prints, but have drifted slightly from best alongside USTs
• Crude remains resilient despite recent advances in the Dollar, with metals flat/mixed
• Looking ahead, German Prelim. CPI, US MBA’s, GDP Estimates, PCE Prices, Advance Goods Trade Balance, Japanese Industrial Production, Fed Beige Book, Speeches from BoE's Bailey & Fed’s Mester.

EUROPEAN TRADE

EQUITIES

• European equities, Euro Stoxx 50 +0.6% are extending gains, but with clear underperformance in the FTSE100 -0.2%, albeit the UK index is off lows.
• European sectors have a strong positive tilt; featuring strength in Autos & Parts whilst Energy lags but with both sectors underpinned by broker moves.
• US Futures are trading on the front foot, NQ & ES +0.4%, with clear outperformance in the RTY +0.8% as it pares back yesterday's losses.
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FX

• DXY finds underlying bids just shy of 102.50 and aims for 103.00
• Kiwi outperforms after hawkish RBNZ hold and Aussie caught in AUD/NZD cross-fire with added downside pressure from soft inflation data
• NZD/USD elevated within 0.6208-0.6134 range, AUD/USD depressed between 0.6676-20 parameters
• Euro undermined by weaker than forecast German state and Spanish CPI metrics. EUR/USD sub-1.1000, but holding near decent option expiry interest and former Fib resistance/breakout area
• Yen retreats towards 148.00 from circa 146.68 after dovish guidance from BoJ's Adachi
• PBoC set USD/CNY mid-point at 7.1031 vs exp. 7.1340 (prev. 7.1132).
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FIXED INCOME

• Bonds still well bid, but off new m-t-d highs
• Bunds hold comfortably above 132.00 within 132.72-131.95 range
• Gilts midway between 97.31-96.91 bounds and T-note a tad closer to 109-29 trough vs 110-14+ peak ahead of revised US Q3 GDP, Fed's Mester and Beige Book
• UK and German issuance less well covered after lack of concession
• UK sells GBP 4.25bln 3.5% 2025 Gilt: b/c 2.36x (prev. 2.61x), average yield 4.554% (prev. 4.964%) & tail 2.0bps (prev. 1.1bps)
• Italy sells EUR 6.5bln vs exp. EUR 5.5-6.5bln 4.10% 2029, 4.20% 2034 BTP & 0.75-1bln 2026 CCTeu: 4.10% 2029: b/c 1.45x (prev. 1.45x) & gross yield 3.61% (prev. 4.12%). 4.20% 2034: b/c 1.45x (prev. 1.33x) & gross yield 4.17% (prev. 4.76%). 2026 CCTeu: b/c 1.99x (prev. 2.0x) & gross yield 4.43% (prev. 4.12%)
• Germany sells EUR 2.82bln vs exp. EUR 3.5bln 2.60% 2033: b/c 1.74x (prev. 2.55x), average yield 2.45% (prev. 2.64%) & retention 19.4% (prev. 17.40%)
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COMMODITIES

• WTI and Brent, +1.3%, extend gains with the complex initially boosted by the recent weaker Dollar, and as the clock ticks down to the OPEC+ meeting tomorrow; though, the USD has since bounced but crude remains underpinned nonetheless.
• Spot gold briefly topped USD 2050/oz overnight to levels last seen in May, whilst base metals are flat/mixed taking a breather from yesterday’s Dollar-induced gains as the index lifts back towards 103.00.
• Strike at Las Bambas copper mine in Peru is limited to 48 hours after the labour authority declared the protest inappropriate.
• First Quantum (FM CA) said the Cobre Panama Mine suspended commercial production and is applying a programme of preservation and safe maintenance after the recent court ruling that its contract was unconstitutional.
• OPEC+ talks are ongoing continuing no fresh delays currently expected to tomorrow's meeting, according to Reuters sources
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NOTABLE HEADLINES

• The number of businesses set up in the UK in 2022 fell by 7% to 337k as UK business creation was hit by high borrowing costs and weaker demand, according to analysis by FT citing data released last week by the Office of National Statistics.
• Several ECB regulators are reportedly planning to push to ease bank payout stance, according to Bloomberg
• ECB's Stournaras says ECB April cut bets seem a bit optimistic, via Politico; says the first rate cut could come in the middle of 2024. Early PEPP winddown risks hurting ECB credibility
• OECD raises 2023 US growth forecast to 2.4% (prev. 2.2%), 1.5% in 2024 (prev. 1.3%), sees 1.7% 2025; Sees Chinese growth 5.2% (prev. 5.1%), 4.7% (prev. 4.6%), 4.2% in 2025; Raises UK growth forecast to 0.5% (prev. 0.3%), trims 2024 0.7% (prev. 0.8%), 1.2% in 2025.

DATA RECAP

• German state CPIs have all come in markedly cooler than prior, and as such present downward bias to the mainland figure at 13:00GMT which is expected at 3.5% (prev. 3.8%).
• German North Rhine-Westphalia State CPI Y/Y (Nov) 3.0% (Prev. 3.1%); Core Y/Y (ex-Food/Energy) 3.7% (Prev. 4.1%); MM (Nov) -0.3% (Prev. -0.1%)
• German Saxony State CPI YY (Nov) 3.9% (Prev. 4.5%); MM (Nov) -0.3% (Prev. 0.1%)
• German Import Prices MM (Oct) 0.3% vs. Exp. -0.1% (Prev. 1.6%); YY -13.0% vs. Exp. -13.4% (Prev. -14.3%)
• Spanish HICP Flash YY (Nov) 3.2% vs. Exp. 3.7% (Prev. 3.5%); Core 4.5% (prev. 5.2%); MM Flash NSA -0.4% vs. Exp. 0.05% (Prev. 0.30%)
• Italian Consumer Confidence (Nov) 103.6 vs. Exp. 102.0 (Prev. 101.6); Manufacturing Business Confidence (Nov) 96.6 vs. Exp. 96.0 (Prev. 96.0, Rev. 96.1)
• UK M4 Money Supply (Oct) 0.3% (Prev. -1.1%); BOE Consumer Credit 1.289B GB vs. Exp. 1.5B GB (Prev. 1.391B GB, Rev. 1.37B GB)
• UK Mortgage Lending -0.05B GB vs. Exp. -0.1B GB (Prev. -0.94B GB, Rev. -0.961B GB); Mortgage Approvals 47.383k vs. Exp. 45.0k (Prev. 43.328k, Rev. 43.675k)
• EU Consumer Inflation Expectations (Nov) 9.3 (Prev. 11.4, Rev. 11.3); Selling Price Expectations 2.3 (Prev. 3.6, Rev. 3.5); Consumer Confidence Final -16.9 vs. Exp. -16.9 (Prev. -16.9)
• EU Services Sentiment 4.9 vs. Exp. 4.3 (Prev. 4.5, Rev. 4.6); Economic Sentiment 93.8 vs. Exp. 93.7 (Prev. 93.3, Rev. 93.5); Industrial Sentiment -9.5 vs. Exp. -8.9 (Prev. -9.3, Rev. -9.2); EU Business Climate (Nov) -0.39 (Prev. -0.33)

NOTABLE US HEADLINES

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GEOPOLITICS

ISRAEL-HAMAS

• Israeli negotiators are offering Hamas a further three days of ceasefire through to Sunday morning if the group releases all the remaining women and children they believe it is holding, according to sources close to talks in Qatar cited by The Times.
• G7 Foreign Ministers' joint statement on Israel and Gaza stated that they welcome the release of hostages and the pause in hostilities, while they support a further extension of the pause and future pauses as needed.
• White House's Kirby said they hope to see more Americans released by Hamas and will work to see if they can extend the pause.
• US paused drone flights over Gaza as part of the truce between Israel and Hamas, according to a Pentagon spokesperson.
• Source close to Hamas says group willing to extend truce by four more days, according to AFP.
• "Israeli vehicles fire their weapons at different areas northwest of Gaza City", according to Al Arabiya.

NATO

• US State Department senior official said Turkey’s Foreign Minister told NATO he is working on the ratification of Sweden and gave the likely timeline of a 'few weeks'.
• Swedish Foreign Minister says Turkey's Foreign Minister said that ratification for Sweden's accession to NATO could occur within weeks

CRYPTO

• Bitcoin, USD 38k, trades around the unchanged mark, whilst Ethereum, -0.2%, tilts into the red.

APAC TRADE

• APAC stocks were mixed after the choppy performance on Wall St where stocks wavered, Treasuries rallied and the Dollar dipped on dovish Fed rhetoric, while the region also digested the RBNZ’s hawkish hold where it kept rates unchanged but signalled risks of a hike.
• ASX 200 was positive with the index helped by encouraging data including better-than-expected Construction Work Done which feeds into next week’s GDP release and after softer monthly CPI all but guaranteed a pause at the December RBA meeting.
• Nikkei 225 swung between gains and losses with early pressure from a firmer currency before the index rebounded off lows, while there were also comments from BoJ Adachi who stuck to the dovish script as he noted it is appropriate to patiently maintain easy policy and if needed, the BoJ will take additional easing steps.
• Hang Seng and Shanghai Comp declined with underperformance in Hong Kong after the recent rises in domestic money market rates and with the PBoC’s open market operations resulting in a net daily drain.

NOTABLE HEADLINES

• China's Vice Foreign Minister recently met with the EU's external action service deputy secretary and said that China is ready to strengthen communication and coordination with the EU side and make preparations for a China-EU summit before the end of the year. Furthermore, it was stated that the two sides need to grasp the general direction of China-EU relations, uphold mutually beneficial and win-win cooperation, as well as fully respect each other's core interests, according to Reuters.
• Japan's Finance Ministry will raise the assumed interest rate paid on bonds in the government's annual budget proposal for the first time in 17 years in fiscal 2024, reflecting policy shifts by the BoJ that have allowed yields to rise, according to Nikkei.
• BoJ Board Member Adachi said Japan is yet to see a positive wage-inflation cycle become embedded enough and it is appropriate to patiently maintain easy policy. Adachi also stated that if needed, the BoJ will take additional easing steps, while he added that the steps the BoJ took in October to make YCC more flexible are not aimed at laying the groundwork for policy normalisation.
• RBNZ kept the OCR unchanged at 5.50% as expected, while it reiterated that interest rates will need to remain at a restrictive level for a sustained period of time and interest rates are restricting spending in the economy with consumer price inflation declining as is necessary to meet the committee's remit. RBNZ said inflation remains too high and the committee remains wary of ongoing inflationary pressures, as well as noted that demand growth has eased but by less than anticipated and if inflationary pressures were to be stronger than anticipated, the OCR would likely need to increase further. Furthermore, the committee is confident the current OCR level is restricting demand but slightly raised OCR and CPI forecasts with the OCR seen at 5.63% in March 2024 (prev. 5.58%), 5.66% in December 2024 (prev. 5.50%), and 5.56% (prev. 5.36%) in March 2025, while annual CPI is seen at 2.5% by December 2024 (prev. 2.4%).
• RBNZ Governor Orr said in the press conference that they've been adamant on holding rates through next year and noted that the projection shows upward bias to rates but it is not a done deal. Orr also stated the risk to inflation is still more to the upside, while he is nervous that inflation has been outside the band for so long and concerned that longer-term inflation expectations are creeping up.
• REUTERS POLL: Chinese New Home Prices Growth expects at +3.0% Y/Y 2023 (vs 0% in August poll); 1.1% Y/Y in 2024 (1.0% in August poll)

DATA RECAP

• Australian Weighted CPI YY (Oct) 4.90% vs. Exp. 5.20% (Prev. 5.60%)
• Australian Construction Work Done (Q3) 1.3% vs. Exp. 0.4% (Prev. 0.4%)