MNI ASIA OPEN - Reports Suggest Israel/Hamas Truce To Be Extended By Two Days

NEWS

GERMANY (MNI): Cabinet Agrees To 2023 Supplementary Budget Plans - Fin Min
The German Finance Ministry has stated that the Cabinet has agreed to a draft 2023 supplementary budget, with wires reporting that: Further effects of court decision on special funds still being examined....2023 supplementary budget in line with gov'ts sustainability strategy...Ukraine war effects to continue to significantly impact gov'ts 2023 revenue and spending...there was and is still risk that falling consumer spending could set off downward economic spiral...Sufficient funds still available to cover planned climate fund expenditure in 2024.

US (MNI): Fed Likely Done Hiking, Focused On Length Of Hold
The Federal Reserve is most likely done raising interest rates and policymakers are already pivoting to communication about the need for a prolonged period of higher rates, while expressing caution about whether inflation is sustainably headed to the central bank’s 2% target. A confluence of dovish factors favor an extended Fed pause over any additional rises in the federal funds rate to a 22-year high of 5.25-5.5%.

MNI GLOBAL POLITICAL RISK: Week Ahead 27 Nov-3 Dec
MNI's Political Risk team has published its Week Ahead article looking at some of the major political events taking place around the world over the coming seven days. Includes info on the German government setting out 2023 supplemental budget; UK Chancellor facing select committee after Autumn Statement; delayed OPEC+ meeting to take place virtually; and the COP28 summit getting underway in Dubai.

GLOBAL (MNI): Qatar Say Pact Reached To Extend Truce By Two Days
Wires reporting comments from the Qatari Foreign Ministry stating that "We announce that an agreement has been reached to extend the humanitarian truce for an additional two days in Gaza". The initial four-day truce was due to expire at the end of today. However, the apparent success in the hostages-for-prisoners exchanges will see the truce extended through 28 and 29 November. There remains significant uncertainty as to the state of play once the truce ends or all Hamas hostages are released. The IDF resuming a bombardment of Gaza and physical incursion into the strip could see international pressure on the Netanyahu gov't rise.

GLOBAL (WSJ): Talks to Extend Israel-Hamas Truce Go Down to the Wire
Mediators were working to secure a two-day extension to the four-day truce deal in the war in Gaza that ends later on Monday and pave the way for more Israeli hostages to be released from Hamas custody.

EUROZONE (BBG): ECB May Look at Pandemic Bond Reinvestments Soon - Lagarde
European Central Bank officials may soon revisit their €1.7 trillion ($1.9 trillion) pandemic bond portfolio and reconsider how long they will replace maturing securities, President Christine Lagarde said.

CANADA (MNI): Share of Canada Firms Hiking Prices Lowest In 2 Yrs
The share of Canadian firms planning to raise prices in the next three months has fallen to the lowest in just over two years according to a quarterly survey Monday from the federal statistics agency, welcome news for a central bank seeking evidence its 10 rate hikes are enough to tame inflation.

CHINA (MNI): Economy Likely To Further Recover in 2024 - China Macroeconomy Forum
China should set its economic growth target at 5% for 2024 to boost market confidence, though the GDP is estimated to print near 4.8%, according to a report released by a prominent think tank. The economy will likely further recover next year, as both the inventory cycle and balance sheet repair have begun to bottom out with narrowing declines in export and real-estate investment, according to the annual report by the China Macroeconomy Forum.

EUROZONE (MNI): ECB Too Confident On Rates - Holtemoeller
The European Central Bank is likely to keep rates at current levels beyond the second quarter of next year, a leading German government adviser told MNI, but he added that it had been unwise to commit to keeping policy unchanged for an extended period.

GLOBAL TRADE (BBG): Ship Owner Reroutes Tankers Via Suez After Panama Canal Snags
The Panama Canal has become so backlogged that the world’s largest operator of chemical tankers has decided to reroute its fleet to the Suez Canal. London-based Stolt-Nielsen, which has a tanker division with 166 ships, is charging customers additional costs for the longer route, it said in an email. A bottleneck at the Panama Canal due to low water levels has prompted shippers to divert to Suez, the Cape of Good Hope, or even through the Strait of Magellan off the tip of South America.

UK: MNI Gilt Week Ahead - MPC speakers, DMP data, DMO calendar
MNI looks ahead to this week's UK events including MPC speakers, economic data and the DMO calendar release. In terms of MPC appearances this week we will hear from Bailey, Haskel and Greene. The economic release highlight will be the Decision Maker Panel data.

UK (MNI): BOE Remit Should Be Reviewed Every 5 Years - UK Lords
The UK Parliament should conduct an "overarching review of the Bank's remit and operations every five years", thereby boosting the ability of legislators to hold Threadneedle Street to account and express its view on the Bank’s performance and leadership, a report published Monday concludes.

NETHERLANDS (MNI): Scout Intending To Sound Out Coalition Resigns Amid Fraud Links
Senator Gom van Strien has resigned as parliamentary 'scout', the individual tasked with making initial inquiries with party leaders about the potential formation of a coalition gov't following elections. Media reports over the weekend found that van Strien, finance spox for the PVV in the Senate, was linked to a fraud at his former employer Utrecht Holdings.

MEXICO (MNI): Banxico’s Heath Says Rate Adjustment Could Come By February/March
Banxico Deputy Governor Jonathan Heath has said that if inflation continues to drop, especially core inflation, an 'adjustment' to interest rates could come by February or March. In a radio interview, Heath highlighted that any early interest rate cuts should be seen as "slight adjustments," not the start of a rate-lowering cycle. Heath says “one, two cuts could come, but very gradually and with great caution”.

DATA

US DATA: New Home Sales Miss In October But Keep To Recent Range

• New home sales were weaker than expected in October at a seasonally adjusted 679k annualized (cons 723k). However, it only takes it back close to levels seen in August as volatility remains, and with sales broadly flatlining between 660-730k since April.
• The latest monthly change was broadly in keeping with consensus (falling -5.6% vs -5.1%), with the miss driven by some of last month's notable strength being revised away (8.6% vs initial 12.3%) along with some downward revisions to July and August.
• The regional breakdown offers no clear trends, with latest M/M rates ranging between -23% M/M and +13% M/M.
• Despite the trend flatlining in new home sales, they paint a notably different picture to existing home sales, with new home sales at pre-pandemic levels vs new home sales almost 30% lower.

• The Dallas Fed manufacturing survey slipped further from -19.2 to -19.9 in Nov, contrary to consensus for a small rise to -16.0.
• The near unchanged monthly reading masks a sharper decline in new orders, from -8.8 to -20.5, which aside from the -22.8 in Nov'22 is its lowest since Mar-May'20 and before that 2009.
• This is the eighteenth consecutive monthly decline for new orders, although the overall index trumps it with a nineteenth consecutive decline.
• Nevertheless, the six-month ahead production index remains in positive territory at 13.7, similar to the level its averaged over the past year with some noise.

US TSYS: Modest 5Y Auction Trade Through Allows Further Step In Day's EGB-Led Rally

• Cash Tsys are close to or pushing fresh highs late in the session, now 5.5-8bps richer.
• The day’s rally followed in EGB footsteps after German fiscal matters concerning no net new debt issuance this year and Lagarde looking at PEPP reinvestments in the not-too-distant future (and indeed Bund yields closed -9.5bps, 10Y BTPs -11bps). This was aided by softer than expected lower tier data in new home sales and Dallas Fed manufacturing activity offsetting a paring of WTI losses.
• The largest tail for a 2Y auction at 1130ET briefly stalled this even if the cheapening impulse was quickly unwound, before a modest 0.5bp trade through for the 5Y auction at 1300ET allowed the rally to take another step (the auction being better than October’s weakest of the year but certainly not stellar with bid-to-cover and dealer take-up both suggesting a weaker auction than the five-auction average).
• TYZ3 has pushed to a new session high of 109-00+ as it plays to the bullish trend structure for a step back closer to resistance at the bull trigger of 109-08+ (Nov 17/22 high).
• Fed Funds pricing meanwhile sees little change over nearer-term meetings, with a first cut seen coming in June (27bp cumulative from current levels) but cuts to end-2024 have built some more from levels earlier in the session to a cumulative 88bps.
• Tomorrow sees house prices and the Conference Board consumer survey in focus for data, as well as a heavy Fedspeak schedule including text from Governor Waller (voter) on the economic outlook. Additional note issuance no doubt is watched closely as well, with $39B of 7-year paper.

FOREX: USD Index Starts The Week On A Soft Note, JPY A Beneficiary Of Tsy Rally

• After a mid-session lift, the USD index has returned to moderate weakness seen earlier on to start the week on a soft note. It shock off softer than expected second tier US data but a further slide in Treasury yields with rare double Treasury auctions out of the way has added a headwind for the greenback.
• The Japanese Yen is stronger with USDJPY having extended its session low to 148.55, back below the 149 handle. The bullish price pattern on Nov 21 - a dragonfly doji candle - signals a potential reversal and the end of the recent corrective move down. If correct, it suggests scope for a rally that would expose key resistance at 151.95, the Oct 21 2022 high. For bears, a break of 147.15, the Nov 21 low, would cancel the reversal pattern and instead open 146.38, trendline support drawn from the Mar 24 low.
• AUD has consolidated last week's rally, with the pair benefiting from the first close above the 200-dma since July (0.6584). Resultingly, AUD/USD has touched the best level since Aug10 at 0.6614 on Monday, closely matching touted resistance at the Oct 8 high, although despite heading to the APAC crossover on a strong note can’t quite get back to that level. Price action reinforces the bullish theme and signals scope for a continuation higher near-term.
• Australia retail sales data and the participation of RBA Governor Bullock in a panel discussion highlight Tuesday's APAC docket. US consumer confidence and Richmond manufacturing will precede a slew of Fed speakers are scheduled during the US session.

US STOCKS: Ending A Listless Session On A Softer Note

• The S&P e-mini at 4560 (-0.2%) is ending the session on a weaker note but remains within earlier ranges after a volatile day with little clear trend.
• It continues to sit towards resistance at 4580.5 (Nov 22 high) after which sits key resistance at 4597.5 (Sep 1 high), whilst support is seen at 4501.75 (Nov 16 low).
• Treasuries have seen a solid rally today, but it has predominantly been borne out in lower breakevens with a small decline in real yields, offering less of a macro tailwind to stocks (10Y yield -7.8bps, breakevens -5.2bps).
• The Nasdaq 100 outperforms (unch) whilst the Dow and Russell 2000 marginally underperform (-0.24/-0.3%).
• As for SPX, real estate (+0.6%) and consumer discretionary (+0.3%) lead whilst energy (-0.8%) and health care (-0.7%) lag. Hinted by the Nasdaq outperformance, some large names help aggregate bias returns higher, with Nvidia and Amazon paring earlier gains but both still +1%.

COMMODITIES: WTI Eases Further As Weaker Demand Meets OPEC+ Supply Uncertainty

• Crude erased earlier gains to be trading lower on the day, with a drop in WTI near the close after a volatile session. OPEC+ supply uncertainty is being weighed against a weaker demand picture, worsened by softer-than-expected industrial profits in China.
• The OPEC+ meeting is scheduled for 1PM GMT (8AM ET) Thursday according to a draft agenda seen by Reuters. Separately, OPEC is considering deepening its oil production cuts despite reluctance from some members, an OPEC+ source told Reuters.
• OPEC+ has still not reached an agreement on Nigeria/Angola production quotas for 2024 according to Chief OPEC correspondent Amena Bakr on X.
• Saudi Arabia is asking other OPEC+ members to reduce their oil output quotas but some members are resisting, OPEC delegates said, cited by Bloomberg.
• Efforts to refill the US emergency oil reserve are being hampered by companies delaying their return of borrowed barrels, according to Bloomberg.
• WTI is -0.8% at $74.94 but not testing support at $72.37 (Nov 16 low).
• Brent is -0.7% at $80.02 but not testing support at $76.60 (Nov 8 low).
• Gold is +0.6% at $2013.42 having touched a high of $2018.21 overnight to pierce resistance at $2009.4 (Nov 7 high). The modestly softer USD index and rally in US Tsy yields has further supported this earlier move. A clear break of this hurdle would confirm a resumption of the uptrend and open $2022.2, the May 15 high.