MNI US OPEN - Sentiment Steadies as Missile Strike Seen Out of Russia's Remit

NEWS

SECURITY (MNI): RTRS-Biden Tells G7/NATO Missile Hitting Poland Came from Ukraine

Reuters reporting that according to a NATO source, US President Joe Biden has told G7 and NATO allies that the missile that struck Poland last night and killed two individuals originated not from Russia, but from a Ukrainian air defence system.

G20 (MNI): Declaration Speaks on Ukraine, Energy, Climate Change

The G20 declaration, agreed to unanimously by all parties, contains condemnation of the war in Ukraine from 'most countries', as well as broad statements on combating climate change and supporting food security.

UK (MNI): MNI Autumn Statement Preview

We look at some of the main measures that are expected to be announced (or have seen a lot of discussion in the media) in this week's Autumn Statement and discuss the financial market and political implications of the statement.

US (Politico): Trump Announces He's Running for President Again

Donald Trump, who lost the 2020 election and left the White House under the cloud of impeachment for his role in the Jan. 6 riots on Capitol Hill, is running for president again. The 45th president announced his bid for a second term during a primetime event at his Mar-a-Lago club in Palm Beach, Florida. He filed a statement of candidacy as well.

CHINA (MNI): China Home Prices Post Biggest Fall in Seven Years

The pressing need for Beijing's new suite of measures to support China's ailing property sector was underscored by the biggest decline in new home prices in seven years in October, according to data released by the National Bureau of Statistics on Wednesday. New home prices fell 0.37% in October, the 14th consecutive monthly decline and the biggest decline in a single month since February 2015. Average new home prices fell 2.4% y/y, a slight acceleration from a 2.3% y/y decline in September.

CHINA (MNI): China's Economic Recovery to Accelerate - NDRC

China’s economic growth is expected to accelerate, though a sustained recovery in Q4 will require "arduous efforts" to offset disruptions from renewed Covid outbreaks, said Meng Wei, spokeswoman for the National Development and Reform Commission at a briefing on Wednesday.

JAPAN (MNI): BOJ Worries High Costs Will Hurt Q1 Spending

Bank of Japan officials are focused on whether a higher-than-average propensity to spend can be maintained, as they worry higher prices may weigh on private consumption that is being supported by pent-up demand, MNI understands. Whether the propensity-to-consume gains further momentum in the first quarter will be key to forecasting the outlook for spending, which is recovering but is still at low levels.

AUSTRALIA (MNI): RBA On Track for 25bp As Wage Rises Hit Decade High

The Reserve Bank of Australia appears set to deliver another 25bp hike at its December meeting as yearly wage growth rose to a 10-year high, finally hitting the level identified by policymakers as consistent with its 2-3% inflation target.

DATA

UK (MNI): Inflation Surges, But EPG Caps Upside

• UK OCT CPI +2% M/M, +11.1% Y/Y
• UK OCT CORE CPI +0.7% M/M, +6.5% Y/Y
• UK OCT RPI +2.5% M/M, +14.2% Y/Y
• UK OCT OUTPUT PPI +0.3% M/M, +14.8% Y/Y
• UK OCT INPUT PPI +0.6% M/M, +19.2% Y/Y

UK inflation surges to a fresh 40-year high in October, although the upside was capped by the government's introduction of a cap on energy costs from the start of Q3, according to data released by the Office for National Statistics on Wednesday. CPI has now risen for 15 consecutive months. A spokesperson for the ONS said inflation would have risen to 13.8% without the intervention on energy prices. Core inflation was unchanged in September at 6.5%, leaving the gap with headline at a series high 4.6%.

ITALY FINAL OCT HICP +12.6%r Y/Y (FLSH +12.8%); SEP +9.4% (MNI)

JAPAN SEP CORE MACHINE ORDERS -4.6% M/M; AUG -5.8%
JAPAN Q4 CORE MACHINE ORDERS SEEN +3.6% Q/Q; Q3 -1.6%

FX SUMMARY: Sentiment Stabilises as Likelihood Points to Errant Ukrainian Missile

• Following the late knock to risk sentiment on Tuesday following reports of a missile strike crossing the Ukrainian border into Poland, the market fallout looks more contained Wednesday. The USD is resuming the weakening trend and the JPY giving back the entirety of the Tuesday rally. Similarly, the 2% rally in EUR/PLN has been erased to put prices on a much more stable footing. The stabilisation of markets follows firm intelligence reports that the errant missile strike was Ukrainian in origin, rather than Russian, leaving the triggering of NATO's collective defence far less likely after an emergency meeting this morning.
• Nonetheless, the sharp moves continue to underpin the fractious nature of markets at present, with front-end implied vols generally higher across G10.
• UK inflation data left little lasting mark on GBP, with higher-than-expected CPI countered by a much more moderate core inflation reading. This keeps focus on tomorrow's Autumn Statement, at which the government are expected to outline a tighter, more fiscally-focused grip on government finances.
• USD and JPY are the weakest in G10 on an intraday basis, while NOK and EUR are trading more favourably.
• Focus turns to the October US retail sales release, seen rising 1.0% on the month and 0.2% ex-auto and gas. Central bank speakers due Wednesday include ECB's Villeroy, Panetta and Lagarde, as well as Fed's Williams, Barr and Waller.

BOND SUMMARY: Core FI Off Overnight Highs But Gilts Move Higher Despite Higher CPI

• Treasuries and Bunds are off their overnight highs following the missile strike in Poland as it remains unclear if the situation was caused by friendly fire or a stray Russian missile. Russia has denied any responsibility and risk has recovered somewhat. The Treasury curve has seen a bit of a bear steepening while the German curve has marginally flattened.
• Gilts have been more moving to their own beat following this morning's inflation print. Headline CPI was 0.4ppt above consensus expectations and 0.2ppt above the Bank's forecasts while core CPI remained at 6.5%Y/Y rather than falling back 0.1ppt as had been expected. Much of the upside surprise came from energy and food prices which lead to the upside coming largely through higher goods prices. PPI output costs were lower than expected. Overall, the details were less concerning than the headline surprise would suggest and gilts are now higher on the day. Expectations for the December MPC meeting rose to around a 55% probability of a 75bp hike but have since fallen back to around 45% (in line with yesterday's levels).
• Looking ahead we have US retail sales and import / export prices as well as manufacturing production.
• Four MPC members (Bailey, Broadbent, Mann and Dhingra) will testify ahead of the TSC later today while the Fed's Williams will deliver the keynote speech at the Treasury Market Conference. We will also hear from the ECB's Lagarde and Villeroy and the Fed's Waller.
• TY1 futures are down -0-0+ today at 112-17+ with 10y UST yields up 2.8bp at 3.800% and 2y yields up 2.4bp at 4.365%.
• Bund futures are down -0.15 today at 139.18 with 10y Bund yields down -0.1bp at 2.104% and Schatz yields up 1.1bp at 2.123%.
• Gilt futures are up 0.21 today at 105.18 with 10y yields down -1.0bp at 3.280% and 2y yields up 0.3bp at 3.071%.

EQUITIES: Equity Futures Consolidate Close to Recent Highs

• A bullish EUROSTOXX 50 futures outlook remains intact. Price is consolidating but importantly the contract remains at its recent highs. Resistance at 3810.00, the Aug 17 high and an important bull trigger, has been breached. Moving average studies are in a bull mode set-up and this highlights positive market sentiment. The focus is on 3944.00, Mar 29 high on the continuation chart. Initial firm support lies at 3697.00, the Nov 10 low.
• S&P E-Minis remains bullish and the contract is holding on to the bulk of its recent gains. A bullish theme follows last week’s strong gains that resulted in a break of resistance at 3928.00, Nov 1 high. This strengthens a short-term bullish condition with focus on 4100.00 next. On the downside, key short-term support is at 3704.25, the Nov 3 low.

• Japan's NIKKEI closed higher by 38.13 pts or +0.14% at 28028.3 and the TOPIX ended 0.93 pts lower or -0.05% at 1963.29.
• Elsewhere, in China the SHANGHAI closed lower by 14.098 pts or -0.45% at 3119.98 and the HANG SENG ended 86.64 pts lower or -0.47% at 18256.48.
• Across Europe, Germany's DAX trades lower by 63.56 pts or -0.44% at 14325.82, FTSE 100 higher by 8.03 pts or +0.11% at 7381.15, CAC 40 up 0.92 pts or +0.01% at 6643.59 and Euro Stoxx 50 down 4.44 pts or -0.11% at 3912.63.
• Dow Jones mini up 65 pts or +0.19% at 33678, S&P 500 mini up 6.75 pts or +0.17% at 4007.5, NASDAQ mini up 18.5 pts or +0.16% at 11929.25.

COMMODITIES: Gold Price Action Tuesday Reinforces Bullish Conditions

• WTI futures appear vulnerable following last week’s bearish price activity and this week’s move lower. A bearish shooting star candle on Nov 7 was followed by a bearish engulfing candle the following day and these patterns highlighted an early reversal signal. A continuation lower would open $81.30, the Oct 18 low and a key support. On the upside, key short-term resistance is at $93.74, Nov 7 high.
• Gold traded higher again Tuesday and conditions remain bullish. Last week’s rally resulted in the break of a number of important resistance points. The yellow metal has cleared $1729.5, the Oct 4 high. This strengthens the current bullish theme and opens the $1800.0 handle and a key resistance at $1807.9, the Aug 10 high. On the downside, initial firm support is seen at $1702.3, the Nov 9 low.

• WTI Crude down $0.14 or -0.16% at $87.08
• Natural Gas down $0.06 or -0.91% at $5.985
• Gold spot up $1.69 or +0.1% at $1780.62
• Copper down $0.2 or -0.05% at $381.85
• Silver up $0.3 or +1.38% at $21.8525
• Platinum up $2.38 or +0.23% at $1020.28