Risk appetite continues to percolate

EU Mid-Market Update: Risk appetite continues to percolate; more EU data suggests that inflation risks turning more balanced.

Notes/Observations

- Market participation in a lull ahead of US CPI reading next week, followed by rate decisions from FOMC, BOE and ECB. Current expectations for all 3 Central Banks to slow pace of hike to 50bps from 75bps at last decision as inflation seemingly peaked in recent weeks and months.

- Background theme of China optimism as continued positive COVID news flows out gradually. China Nov CPI declined MoM, spurring a slight risk on move after.

- EU macro news very light as we entered speaker blackout periods for many of the Central Banks, as well as typical seasonal end of year wind down.

- Asia closed mixed with Hang Seng +2.3%. EU indices are slightly higher by +0.2% on average. US futures are 0.0% to +0.2%. Gold +0.3%, DXY 0.0%; Commodity: Brent +1.1%, WTI +1.4%; Crypto: BTC +2.7%, ETH +4.6%.

Asia

- China Nov CPI Y/Y: 1.6% v 2.1% prior; PPI Y/Y: -1.3% v -1.5%e.

- China Premier Li stated that the global economy faced many challenges and noted that the risk of global recession was increasing.

- Former Japan Finance Ministry official Nakao [seen as possible BOJ Gov Kuroda replacement] said new BOJ leaders should rethink policy, favored policy review with gradual adjustments.

Europe

- UK Govt set to announce biggest overhaul of financial regulations in over three decades and was expected to loosen rules on banks brought in after the 2008 financial crisis.

- UK ministers reportedly blocked possible rail strike deal.

Americas

- US Treasury Sec Yellen reiterated stance that a recession was not inevitable, believed Fed was on the right track in lowering inflation.

- Bank of Canada's Kozicki stated that BOC was ready to raise rates should data exceed expectations. Recognized that had raised interest rates rapidly and that their effects were working their way through the economy.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 +0.26% at 436.62, FTSE +0.62 at.

Market Focal Points/Key Themes: European indices open generally higher but slipped through early part of the session to trade mixed; materials; telecom energy; oil & gas subsector under pressure following further downside in crude prices; Leonardo confirms collaboration with BAE systems and Mitsubishi Heavy to develop a sixth-generation fighter-jet for Japan, UK and Italy; Crestchic to be acquired by Aggreko; Hedin dissists in bid for Pendragon; no major earnings expected in the upcoming US session.

Equities

- Consumer staples: Associated British Foods [ABF.UK] -1% (trading update), Carl Zeiss Meditec [AFX.DE] -5% (earnings).

- Energy: TotalEnergies [TTE.FR] -1.5% (impairment charge).

- Financials: Credit Suisse [CSGN.CH] +2.5% (rights offering; exec comments), ABN AMRO Holding [ABN.NL] +3% (analyst action), Man Group [EMG.UK] +5% (buyback).

- Healthcare: Ypsomed Holding [YPSN.CH] -15% (Lilly stops joint project), UCB [UCB.BE] -1% (trial data).

- Industrials: Porvair [PRV.UK] +11% (trading update).

- Materials: Anglo American [AAL.UK] -1.5% (operational update).

Speakers

- ECB's Villeroy (France) noted that 2022 GDP growth to be 2.6% and noted that 2023 GDP growth would be probably slightly positive. a temporary recession could not be excluded. Believed that 2024 should see less inflation and more growth.

- Sweden Central Bank (Riksbank) Jansson stated that had the tools to bring inflation to target and saw favorable conditions for meeting the inflation challenge.

- Poland Central Bank (NBP) Financial Stability Report noted that the financial system was stable but its prospects had worsened.

- Norway Statistics Office (SSB) Economic Trends Outlook raised the 2022 Mainland GDP (non-oil) from 3.2% to 3.8% and maintained the 2022 Underlying CPI from 3.9%. It saw Norway Central Bank (Norges) Deposit Rate peaking at 3.00% in early 2023 (**Note: currently at 2.50%).

Currencies/fixed income

- USD continued to be on soft footing as continued optimism on China reopening percolate and prompt unwinding of safe-haven flow.

- EUR/USD edging towards the 1.06 handle. Markets expected two more ECB rate hikes before QT kicks in. Analysts believe ECB to raise deposit rate by 50 bps on Dec 15th despite concerns the region appeared to be entering a winter recession.

Economic data

- (NL) Netherlands Oct Manufacturing Production M/M: -0.4% v +0.5% prior; Y/Y: 3.3% v 4.6% prior; Industrial Sales Y/Y: 15.9% v 19.6% prior.

- (FI) Finland Oct Industrial Production M/M: -2.3% v +1.3% prior; Y/Y: -0.6% v +4.2% prior.

- (NO) Norway Nov CPI M/M: -0.2% v +0.3%e; Y/Y: 6.5% v 7.0%e (moved off record highs).

- (NO) Norway Nov CPI Underlying M/M: -0.1% v +0.2%e; Y/Y: 5.7% v 6.0%e.

- (NO) Norway Nov PPI (including oil) M/M: 5.2% v -16.5% prior; Y/Y: 22.3% v 19.8% prior.

- (DK) Denmark Oct Current Account Balance (DKK): 33.2B v 35.3B prior; Trade Balance: 8.5B v 6.0B prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 78.6K v 65.2K tons prior.

- (FR) France Q3 Final Wages Q/Q: 1.0% v 0.9% prelim.

- (ES) Spain Oct Industrial Production M/M: —0.4% v -0.4%e; Y/Y: 2.5% v 2.8%e; Industrial Output NSA (unadj) Y/Y: 2.2% v 3.6% prior.

- (ES) Spain Q3 INE House Price Index Q/Q: 1.7% v 1.9% prior; Y/Y: 7.6% v 8.0% prior.

- 03:00 (AT) Austria Oct Industrial Production M/M: -0.6% v -1.2% prior; Y/Y: 3.9% v 5.9% prior.

- (RU) Russia Narrow Money Supply w/e Dec 2nd (RUB): 15.72T v 15.73T prior.

- (UK) BoE/Ipsos Quarterly Inflation Attitudes Survey: Next 12 Months: 4.8% v 4.9% prior.

- (GR) Greece Nov CPI Y/Y: 8.5% v 9.1% prior; CPI EU Harmonized Y/Y: 8.8% v 9.5% prior.

- (GR) Greece Oct Industrial Production Y/Y: -2.5% v -1.2% prior.

Fixed income issuance

- (IN) India sold total INR280B vs. INR280B indicated in 2027, 2032 and 2052 bonds.

- (ZA) South Africa sold total ZAR1.2B vs. ZAR1.2B indicated in I/L2033, 2038 and 2046 Bonds.

- (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 12-month Bills; Avg Yield: 2.669% v 2.690% prior; Bid-to-cover: 1.42x v 1.50x pr.

Looking ahead

- (MX) Mexico Nov Nominal Wages: No est v 4.4% prior.

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

- 06:00 (PT) Portugal Oct Trade Balance: No est v -€2.7B prior.

- 06:00 (UK) DMO to sell £3.5B in 1-month, 3-month and 6-month bills (£0B, £B and £B respectively).

- 06:00 (EU) ECB announcement on TLTRO repayments:

- 06:30 (IN) India Weekly Forex Reserve w/e Dec 2nd: No est v $550.1B prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IN) India announces upcoming bill issuance (held on Wed).

- 07:00 (IS) Iceland Nov Unemployment Rate: No est v 2.8% prior.

- 07:00 (BR) Brazil Nov IBGE Inflation IPCA M/M: 0.5%e v 0.6% prior; Y/Y: 6.0%e v 6.5% prior.

- 08:00 (PL) Poland Central Bank Nov Minutes (2 decisions ago).

- 08:00 (UR) Ukraine Nov CPI M/M: No est v 2.5% prior; Y/Y: 27.5%e v 26.6% prior.

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

- 08:30 (US) Nov PPI Final Demand M/M: 0.2%e v 0.2% prior; Y/Y: 7.2%e v 8.0% prior.

- 08:30 (US) Nov PPI (ex-food/energy) M/M: 0.2%e v 0.0% prior; Y/Y: 5.9%e v 6.7% prior.

- 08:30 (US) Nov PPI (ex-food/energy/trade) M/M: 0.1%e v 0.2% prior; Y/Y: 4.7%e v 5.4% prior.

- 08:30 (CA) Canada Q3 Capacity Utilization Rate: 82.2%e v 83.8% prior.

- 10:00 (US) Oct Final Wholesale Inventories M/M: 0.8%e v 0.8% prelim; Wholesale Trade Sales M/M: 0.3%e v 0.4% prior.

- 10:00 (US) Dec Preliminary University of Michigan Confidence: 57.0e v 56.8 prior.

- 11:00 (RU) Russia Nov CPI M/M: 0.4%e v 0.2% prior; Y/Y: 12.1%e v 12.6% prior.

- 11:00 (RU) Russia Nov CPI Core M/M: No est v 0.0% prior; Y/Y: No est v 16.2% prior.

- 11:00 (EU) Potential sovereign ratings after European close.

- 12:00 (US) Q3 Financial Account Household Change in Net Worth: No est v -$6.1T prior.

- 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report.

- 13:00 (US) Weekly Baker Hughes Rig Count.