Flash European PMIs came mixed, OpenAI may have reached a breakthrough

EU Mid-Market Update: Flash European PMIs came mixed; OpenAI may have reached a breakthrough, that could lead to a 'computer smarter than humans'.

Notes/observations

- Trading participation thin due holidays in both the US and Japan.

- Swedish Riksbank surprise and pauses for the for the 1st time in its tightening cycle; keeps door open for another hike early next year.

- Major European PMI readings mixed but remain in contraction territory (Beats: Germany, Euro Zone, UK; Miss: France).

- Financial press reports that CEO Altman's removal came after company researchers sent letter to board warning that artificial general intelligence (AGI) Q* project was developing a powerful AI that could 'threaten humanity' by leading to a computer smarter than humans.

- Asia closed mixed with Hang Seng out-performing at +1.0%. EU indices are -0.1% to +0.1%. US futures are +0.1-0.2%. Gold +0.2%, DXY -0.3%; Commodity: Brent. -1.2%, WTI -1.2%, TTF +1.1%; Crypto: BTC +2.3%, ETH +3.5%.

Asia

- China reportedly mulls 'unprecedented' support for homebuilders with unsecured short-term loans to qualified developers for the first time.

- Australia Nov Preliminary PMI Manufacturing: 47.7 v 48.2 prior (9th month of contraction).

- RBA Gov Bullock: More substantial tightening is right policy response.

- Indonesia and Australia reportedly sign MoU on advancing EV industry - press.

Global conflict/tensions

- Israel stated that no Gaza hostage release before Friday (**Reminder: expected that some 50 hostages would be released in exchange for a 4-day truce and 150 Palestinian prisoners).

Europe

- Dutch Freedom Party (far-right party) wins 35 seats in election behind Geert Wilders, the first time since World War II when the largest party in Netherlands elections does not come from the liberal, centre-right or centre-left European party family.

- German Federal Government to end inflation-linked bond sales end after 2023. Outstanding securities will not be reopened.

Americas

- Explosion of a car at US/Canada border bridge. No indication of a terrorist attack in the incident.

Energy

- OPEC+ meetings scheduled for 26 Nov were postponed until 30 Nov as sources revealed disagreements on O/P quotas for African members.

-Russia govt spokesperson Peskov said contacts on OPEC+ meeting are ongoing.

-Czech PM Fiala said secured LNG capacity via German terminal.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.08% at 457.60, FTSE -0.02% at 7,468.05, DAX +0.07% at 15,968.25, CAC-40 +0.17% at 7,272.86, IBEX-35 -0.04% at 9,883.39, FTSE MIB +0.15% at 29,198.00, SMI -0.13% at 10,818.20, S&P 500 Futures +0.07%].

Market Focal Points/Key Themes: European indices opened mixed with a bias towards the upside which became more pronounced through the first hours of trading, following better than expected PMIs from Germany and Eurozone; sectors leading the way higher include energy and materials; lagging sectors include consumer discretionary and telecom; Swedish competition authority authorizes Kingpsan’s takeover of Nordic Waterproofing; US closed for holiday.

Equities

- Consumer discretionary: PZ Cussons plc [PZC.UK] +1.5% (trading update), FirstGroup [FGP.UK] -2.5% (earnings), Jet2 [JET2.UK] -3.0% (earnings), Volex [VLX.UK] -5.5% (earnings).

- Financials: DFV Deutsche Familienversicherung [DFV.DE] +5.5% (earnings).

- Industrials: Kion Group [KGX.DE] -3.5% (analyst downgrade).

- Telecom: Telia [TELIA.SE] +1.5% (analyst upgrade).

Speakers

- ECB’s Nagel (Germany) stressed that rates must stay high to bring inflation to target;. Reiterated too early to talk about rate cuts. Could not be sure if ECB had reached terminal rate yet. Policy was working but inflation has yet to bet tamed. Cautioned that inflation might tick up in coming months.

- Sweden Central Bank (Riksbank) Policy Statement noted it was prepared to raise rate further in early 2024 if inflation prospects deteriorated. Monetary policy needed to be contractionary for relatively long period. Considering increasing pace of sales of govt bonds with a decision possible at Jan meeting. Reiterated SEK currency (krona) is still unjustifiably weak.

- Sweden Central Bank (Riksbank) updated its Staff Projections which cut the 2024 CPIF from 2.5% to 2.3% and cut the 2025 CPIF from 1.8% to 1.7% (below target) . Projections cut the 2024 Avg GDP from -0.1% to -0.2% while maintaining the 2025 Avg GDP at 1.9%.

- Norway Central Bank (Norges) Gov Bache noted that would likely need to maintain a tight stance for some time ahead. Reiterated that would probably raise rate in Dec (as noted at the prior policy decision). Policy was now having a tightening effect on economy and had yet to see full effects of past tightening.

- German Bundesbank Financial Stability Report noted that financial system faced more rate-hike strains. Demand for credit was weak. Credit risk was elevated in commercial real estate.

- Germany govt said to refute reports of Defense fund spending freeze.

- Indonesia Central Bank Policy Statement noted that keeping rates steady was consistent with IDR currency (Rupiah) stabilization measures and ensure that inflation stayed within target for both 2023 and 2024 period.

- Poland Central Bank (NBP) official said QE program has not breached law.

Currencies/fixed income

- FX markets were overall lulled into sleep with by holidays in Japan and US. A plethora of PMI data in Europe did little to generate volatility.

- Better PMI readings from both Germany and Eurozone help to put some strength into the EUR/USD. Pair holding above 1.09 level by mid-session.

- A surprise hold by the Riksbank saw the EUR/SEK cross rise as the SEK currency weakened a touch.

-GBP/USD pushed higher after better than expected flash PMIs, including Services PMI entering expansion territory.

Economic data

- (NO) Norway Q3 Overall GDP Q/Q: -0.5% v +0.2%e; GDP Mainland Q/Q: 0.1% v 0.2%e.

- (NO) Norway Sept Overall GDP M/M: -2.3% v -0.4% prior; GDP Mainland M/M: 0.3% v 0.0%e.

- (NO) Norway Oct Trend Unemployment Rate: 3.6% v 3.6% prior.

- (NO) Norway Oct Credit Indicator Growth Y/Y: 3.7% v 4.1% prior.

- (ID) Indonesia Central Bank (BI) left the 7-Day Reference Rate unchanged at 6.00% (as expected).

- (HU) Hungary Sept Average Gross Wages Y/Y: 14.0% v 14.5%e.

- (FR) France Nov Business Confidence: 97 v 98e; Manufacturing Confidence: 99 v 98e; Production Outlook Indicator: -11 v -9e; Own-Company Production Outlook: 6 v 7e.

- (TW) Taiwan Oct Industrial Production Y/Y: -2.3% v -6.6%e.

- (FR) France Nov Preliminary Manufacturing PMI: 42.6 v 43.3e; (11th month of contraction and lowest since May 2020) Services PMI: 45.3 v 45.5e; Composite PMI: 44.5 v 44.9e.

- (DE) Germany Nov Preliminary Manufacturing PMI: 42.3 v 41.2e (17th month of contraction, but highest since May; Services PMI: 48.7 v 48.5e; Composite PMI: 47.1 v 46.3e.

- (SE) Sweden Central Bank (Riksbank) left the Repo Rate unchanged at 4.00% (not expected) for its 1st pause in the current tightening cycle.

- (EU) Euro Zone Nov Preliminary Manufacturing PMI: 43.8 v 43.5e (17th straight contraction); Services PMI: 48.2 v 48.1e; Composite PMI: 47.1 v 46.8e.

- (UK) Nov Preliminary Manufacturing PMI: 46.7 v 45.0e (16th month of contraction); Services PMI: 50.5 v 49.5e; Composite PMI: 50.1 v 48.7e.

Fixed income issuance

- Israel to sell combined ILS3.3B in 2026, 2028, 2029, 2031, 2032, 2037 and 2051 bonds and linkers (7 tranches) on Mon, Nov 27th.

Looking ahead

- (CO) Colombia Oct Retail Confidence: No est v 15.1 prior; Industrial Confidence: No est v 0.8 prior.

- (PE) Peru Q3 GDP Y/Y: -1.0%e v -0.5% prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-Month Bills.

- 06:00 (IL) Israel Sept Manufacturing Production M/M: No est v 5.5% prior.

- 06:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to raise One-week Repo Rate by 250bps to 37.50%.

- 06:00 (CZ) Czech Republic to sell 1-month Bills.

- 06:00 (RO) Romania to sell RON500M in 7.1% July 2034 Bonds.

- 07:30 (EU) ECB Account of October Policy Meeting (Minutes).

- 08:00 (PL) Poland Oct M3 Money Supply M/M: 0.6%e v 1.9% prior; Y/Y: 8.6%e v 8.3% prior.

- 08:00 (RU) Russia Gold and Forex Reserve w/e Nov 17th: No est v $577.3B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to leave Interest Rates unchanged at 8.25%.

- 10:00 (MX) Mexico Central Bank (Banxico) Nov Minutes.

- 14:00 (AR) Argentina Sept Supermarket Sales Y/Y: No est v 5.2% prior; Shop Center Sales Y/Y: No est v 16.6% prior.

- 14:30 (EU) ECB’s Schnabel (Germany).

- 16:45 (NZ) New Zealand Q3 Retail Sales Q/Q: -0.7%e v -1.0% prior.

- 18:30 (JP) Japan Oct National CPI Y/Y: 3.4%e v 3.0% prior; CPI Ex Fresh Food (core) Y/Y: 3.0%e v 2.8% prior; CPI Ex Fresh Food/Energy (core-core) Y/Y: 4.1%e v 4.2% prior.

- 19:01 (UK) Nov GfK Consumer Confidence: -28e v -30 prior- 19:30 (JP) Japan Nov Preliminary PMI Manufacturing: No est v 48.7 prior; PMI Services: No est v 51.6 prior; PMI Composite: No est v 50.5 prior.

- 21:00 (SL) Sri Lanka Central Bank Interest Rate Decision: Expected to cut Key Rates by 75bps. Expected to cut Standing Lending Rate by 75bps to 10.25%; Expected to cut Standing Deposit Rate by 75bps to 9.25%.

- 21:35 (CN) China to sell 10-year bonds.

- 21:35 (CN) China to sell 3-month Bills.

- 22:30 (JP) Japan to sell 3-Month Bills.

- 23:00 (MY) Malaysia Oct CPI Y/Y: 1.9%e v 1.9% prior.