Optimism trimmed slightly as central bank hawks repeat concern over market expectations of rate cuts

Notes/observations

- Modest risk-off tones as market weighs the recent positive data on inflation and expectations of a rate cuts starting in Spring, against Central Bank speakers that continue try to simmer down equity froth, most recently from Fed Chair Powell on Friday. Participants seem to be ignoring hawks and using dove comments to buoy bullish attitude from recent data.

- This morning, ECB’s Nagel, De Guindos and most Riksbank members (via minutes) again declared it is too early to discuss rate cuts or declare victory on inflation.

- Crypto given tailwinds as Bitcoin passes 40K psychological level.

- Looking ahead, all eyes will be on US jobs reports this week, with ADP on Wed, Jobless Claims on Thurs and Nonfarm Payrolls on Fri. Heavily watched event, to shine light on health of US economy.

- Asia closed mixed with Hang Seng under-performing at -1.2%. EU indices are -0.4% to +0.2%. US futures are -0.2% to -0.3%. Gold -0.2%, DXY +0.1%; Commodity: Brent -0.8%, WTI -0.8%, TTF -3.5%; Crypto: BTC +5.1%, ETH +3.8%.

Asia

- China PBOC Gov Pan reiterates to defend housing market's healthy operation.

- China said to see over 8M borrowers in default (record v 5.7M back in early 2020) across mortgages and business loans as economic crisis deepened.

- South Korea Pres Yoon conducted cabinet reshuffle and confirmed to nominate Choi Sang-Mok as new Fin Min.

Global conflict/tensions

- US Central Command noted four attacks against three separate commercial vessels operating in international waters in the southern Red Sea; believed that these attacks, while launched by the Houthis in Yemen. American destroyer shot down multiple drones on Sunday while assisting commercial ships in the Red Sea that were targeted by attacks from Yemen.

- US was aware of reports about attacks on USS Carney and commercial vessels in the Red Sea US carried out strike against an Iran backed drone staging site.

- China Military stated that a US warship entered its waters in the South China Sea on Monday.

Europe

- ECB’s Nagel (Germany) reiterated stance that was too early to declare victory on inflation. Noted that inflation would continue to decline in upcoming months but at a slower pace than previously.

- S&P affirmed France sovereign rating at AA; Outlook Negative.

- Fitch raised Greece sovereign rating to BBB-; outlook stable [**Note: Fitch joined S&P in giving Greece investment grade status].

Americas

- House Speaker Johnson believed Republicans had the votes to launch a formal impeachment inquiry into Pres Biden.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 +0.12% at 466.76, FTSE -0.41% at 7,498.83, DAX +0.03% at 16,401.95, CAC-40 -0.28% at 7,325.63, IBEX-35 +0.11% at 10,151.75, FTSE MIB -0.18% at 29,875.00, SMI +0.49% at 10,940.90, S&P 500 Futures -0.27%].

Market focal points/key themes: European indices open mixed but took on a positive bias in the early part of the session; better performing sectors include consumer discretionary and communication services; underperforming sectors include materials and energy; oil & gas subsector dragged lower after Brent fell below $80/bbl Roche to acquire Carmot Therapeutics; Sandoz and Aspen agree on asset sales; reportedly Credit Agricole considering selling its Wordline stake; earnings expected in the upcoming US session include SAIC.

Equities

- Consumer discretionary: 888 Holdings [888.UK] +16.5% (said to have rejected Playtech's offer), AutoStore [AUTO.NO] +4.5% (analyst upgrade).

- Energy: Petrofac [PFC.UK] +16.5% (business review), ITM Power [ITM.UK] +12.5% (trading update).

- Healthcare: Mithra [MITRA.BE] +9.0% (to commercialize ESTELLE and DONESTA in China), Valneva [VLA.FR] +2.5% (positive data for single-shot Chikungunya Vaccine IXCHIQ).

- Industrials: Rolls-Royce [RR.UK] +3.0% (analyst upgrade).

- Materials: Glencore [GLEN.UK] -2.5% (analyst reiteration).

- Utilities: United Utilities [UU.UK] -2.5% (press reports on pollution cases).

Speakers

- ECB's De Guindos (Spain) noted that the recent inflation data was good news, had been a 'positive surprise'. Reiterated that was too early to declare victory on inflation.

- Sweden Central Bank (Riksbank) Nov Minutes noted that inflation remained too high but was falling. Prior rate hikes had reduced demand in the domestic economy. Stressed that new data would be key for future monetary policy stance. SEK currency (krona) remained unjustifiably weak.

- Sweden Central Bank (Riksbank) Breman noted that inflation was moving in the right direction but not out of the wo.

- Iran Foreign Min Spokesperson Kanaani stated that no move against our interests would go unanswered.

- White House said to have warned Congress that they were nearly out of time on Ukrainian funds.

Currencies/fixed income

- USD took a breather from its recent soft patch to hold steady in the session. Fed Chair Powell on Friday provided some leg room for potential rates cuts down the road when he noted rates were well into restrictive territory. Focus looks ahead to US jobs data on Friday and FOMC in the following week.

- Spot Gold rises to record high on global tensions. US Central Command noted four attacks against three separate commercial vessels operating in international waters in the southern Red Sea.

- USD/BTC (bitcoin) was at its highest level since April 2022 at more than $41,700 aided by beliefs the US regulators would soon approve an exchange-traded bitcoin fund.

Economic data

- (DE) Germany Oct Trade Balance: €17.8B v €17.2Be; Exports M/M: -0.2% v +1.1%e; Imports M/M: -1.2% v +0.8%e.

- (TR) Turkey Nov CPI M/M: 3.3% v 3.2%e; Y/Y: 62.0% v 62.6%e; CPI Core Index Y/Y: 69.9% v 71.4%e.

- (TR) Turkey Nov PPI M/M: 2.8% v 1.9% prior; Y/Y: 42.3% v 39.4% prior.

- (CH) Swiss Nov CPI M/M:-0.2 % v 0.0%e; Y/Y:1.4 % v 1.7%e.

- (CH) Swiss Nov CPI EU Harmonized M/M: -0.5% v +0.1% prior; Y/Y: 1.6% v 1.9%e; CPI Core Y/Y: 1.4% v 1.5% prior.

- (ES) Spain Nov Net Unemployment Change: -24.6K v +36.9K prior.

- (CZ) Czech Q3 Average Real Monthly Wage Y/Y: -0.8% v -0.7%e; Average Nominal Monthly Wage Y/Y: 7.1% v 8.0% prior.

- (BR) Brazil Nov FIPE CPI (Sao Paulo) M/M: 0.4% v 0.3% prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 474.1B v 473.7B prior; Domestic Sight Deposits: 464.1B v 465.3B prior.

- (EU) Euro Zone Dec Sentix Investor Confidence: -16.8 v -15.6e.

Fixed income issuance

- None seen.

Looking ahead

- (RO) Romania Nov International Reserves: No est v $64.4B prior.

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

- 05:30 ((DE) Germany to sell combined €4.0B in 6-month and 12-month BuBills.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €3.0-4.0B in 3-month and 6-month Bills.

- 06:00 (PT) Portugal Oct Industrial Production M/M: No est v -3.0% prior; Y/Y: No est v -5.6% prior.

- 06:00 (IL) Israel to sell 2026, 2029, 2030, 2032 and 2052 bonds.

- 06:10 (NL) ECB’s Elderson (Netherlands).

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 06:30 (BR) Brazil Oct Current Account Balance: -$0.8Be v -$1.4B prior; Foreign Direct Investment (FDI): $4.3Be v $3.8B prior.

- 07:00 (MX) Mexico Oct Leading Indicators M/M: No est v 0.00 prior.

- 07:00 (MX) Mexico Sept Gross Fixed Investment M/M: -1.2%e v +3.1% prior; Y/Y: 26.9%e v 32.0% prior; Private Consumption Y/Y: 4.0%e v 4.1% prior.

- 07:00 (MX) Mexico Nov Vehicle Domestic Sales: No est v 112.3K prior.

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

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

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 09:00 (EU) ECB chief Lagarde.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.9-7.5B in 3-month, 6-month and 12-month bills.

- 09:30 (NL) ECB’s Elderson (Netherlands).

- 09:45 (UK) BOE Gilt sale operation.

- 10:00 (US) Oct Factory Orders: -2.6%e v 2.8% prior; Factory Orders (ex-transportation): No est v 0.8% prior.

- 10:00 (US) Oct Final Durable Goods Orders: -5.4%e v -5.4% prelim; Durables (ex-transportation): No est v 0.0% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v -0.1% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v 0.0% prelim.

- 10:00 (CO) Colombia Oct Exports FOB: $4.0Be v $4.1B prior.

- 11:00 (DK) Denmark Nov Foreign Reserves (DKK): No est v 607.6B prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 16:00 (KR) South Korea Nov Foreign Reserves: No est v $412.9B prior.

- 16:00 (NZ) New Zealand Government 4-Month Financial Statements.

- 16:45 (NZ) New Zealand Q3 Volume of All Buildings Q/Q: -0.5%e v -0.1% prior.

- 17:00 (AU) Australia Nov Final PMI Services: No est v 46.3 prelim; PMI Composite: No est v 46.4 prelim.

- 18:00 (KR) South Korea Q3 Preliminary GDP (2nd reading) Q/Q: 0.6%e v 0.6% advance; Y/Y: 1.4%e v 1.4% advance.

- 18:00 (KR) South Korea Nov CPI M/M: -0.2%e v +0.3% prior; Y/Y: 3.5%e v 3.8% prior; CPI Core Y/Y: 3.1%e v 3.2% prior.

- 18:30 (JP) Japan Nov Tokyo CPI Y/Y: 3.0%e v 3.2% prior (revised from 3.3%); CPI (ex-fresh food) Y/Y: 2.4%e v 2.7% prior; CPI (ex-fresh food/energy) Y/Y: 3.7%e v 3.8% prior.

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 76.7 prior.

- 19:00 (NZ) New Zealand Nov ANZ Commodity Price M/M: No est v 2.9% prior.

- 19:01 (UK) Nov BRC Sales LFL Y/Y: No est v 2.6% prior.

- 19:30 (JP) Japan Nov Final PMI Services: No est v 51.7 prelim; PMI Composite: No est v 50.0 prelim.

- 19:30 (SG) Singapore Nov PMI (whole economy): No est v 53.7 prior.

- 19:30 (HK) Hong Kong Nov PMI (whole economy): No est v 48.9 prior.

- 19:30 (AU) Australia Q3 Current Account Balance (A$): $3.2Be v 7.7B prior; Net Exports of GDP: -0.2%e v +0.8% prior.

- 20:00 (PH) Philippines Nov CPI M/M: +0.4%e v -0.2% prior; Y/Y: 4.3%e v 4.9% prior; Core CPI Y/Y: No est v 5.3% prior.

- 20:01 (IE) Ireland Nov PMI Services: No est v 52.6 prior; PMI Composite: No est v 49.7 prior.

- 20:45 (CN) China Nov Caixin PMI Services: 50.7e v 50.4 prior; PMI Composite: No est v 50.0 prior.

- 22:30 (AU) Reserve Bank of Australia (RBA) Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 4.35%.

- 22:35 (JP) Japan to sell 10-Year JGB Bonds.