GLOBAL CAPITAL MARKETS OVERVIEW:
Global economic growth will slow from 3.1 percent this year to 2.2 percent in 2023 before accelerating to 2.7 percent in 2024, according to the OECD's latest economic outlook. The Paris-based policy forum said the world economy, especially Europe, faced major challenges, including persistently high inflation levels, rising borrowing costs, energy supply shortages, and the ongoing war in Ukraine. Eurozone GDP growth is expected to slow to 0.5% in 2023 from 3.3% this year (0.3% forecast in September), Germany's Russian gas-dependent economy will contract by 0.3% next year, and France and Italy will grow by just 0.6% and 0.2%. % %, respectively. Elsewhere, the US economy should grow just 0.5% next year, compared with 1.8% in 2022; China's GDP should expand by 4.6% after 3% (September forecast: 4.7%). This year, it is up 3% due to closures related to the pandemic and a weak housing market. However, Japan's economic expansion is expected to rise to 1.8% next year from 1.6% in 2022.European stocks rose on Tuesday, with the pan-European STOXX 600 up 0.3% to close at a more than two-month high, while Germany's DAX 40 rose 0.4% to close at a more than five-month high, supported by a rebound in commodity stocks. In addition, investors continued to assess the potential direction of global monetary policy and various risks to global economic growth, including expectations that China may re-impose severe COVID-19 restrictions. In European corporate news, TAG Immobilien suspended its dividend, the latest example of strengthening the damaged property sector's balance sheet. Italy's No. 1 utility Enel said it would sell assets for 21 billion euros to reduce debt. At the same time, Germany's Thyssenkrupp cut its stake in the steelmaker as activist investor Cevian cut its stake. The company's shares are under pressure. In the UK, electronics retailer AO World raised its full-year profit guidance. The CAC 40 traded just above 6,650 on Tuesday as investors continued to assess risks to the global economy and the trajectory of monetary policy, with European Central Bank policymakers sending mixed signals. Meanwhile, the worsening coronavirus outbreak in China and the possibility of stricter lockdowns remain worrisome. TotalEnergies surged more than 3% among individual stocks, recouping losses from the previous session. Oil prices rebounded after Saudi Arabia denied a report that it was talking with OPEC and its allies about increasing oil supply. In contrast, luxury stocks, technology companies, and financials were among the biggest losers. The Italy FTSE MIB index rose more than 0.5 percent to close at 24,500 on Tuesday, with energy stocks nearing a five-month high hit last week, supported by support from Italy's new budget law. Italian Prime Minister Giorgia Meloni's cabinet signed off on a budget of 35 billion euros for 2023, lower than expected before his government took over and in line with EU rules, pushing the budget deficit to 4.5% of GDP. The plan allocates 21 billion euros to help households and companies with soaring energy costs and is funded by a new windfall tax on energy companies. Utility providers and energy producers led gains after the document, with Tenaris and Eni up 5 percent and 4 percent, respectively. Saudi authorities said there would be no reduction in crude output, raising prices. Meanwhile, Enel rose 2 percent after announcing it would sell 21 billion euros in assets to reduce net debt. The ruble-based MOEX Russia index rose nearly 1 percent to close at 2,185 on Tuesday, rebounding from sharp losses in the previous session amid broad support from banks and metallurgists as investors reacted to President Vladimir Putin's Concerned about the new budget law. The new document assumes an oil and gas revenue distribution of 8 trillion rubles in 2023-2035, with an annual indexation of 4% from 2026. In addition, the budget deficit is planned to be 2% in 2023 and 1.4% in 2024, with 2.9 trillion rubles financed by the National Welfare Fund, an unprecedented move. On the corporate front, mining and metals producers rose an average of 1.1 percent, while lenders gained 1.4 percent. Oil producers fared well but underperformed the broader market index as investors continued to assess the sector's outlook ahead of the EU embargo in December. The Canada S&P/TSX composite index fell 0.1% to close at 19,960 on Monday, weighed down by commodity-backed stocks. At the same time, investors continued to assess the prospect of monetary tightening by North American central banks. Toronto-based energy producers and miners posted losses as deaths from the coronavirus in China fueled fears of a strict and extended lockdown in the country, weighing on commodity prices. Oil majors Suncor and Cenovus Energy fell 1.2 percent and 2.5 percent, respectively, while gold miner Barrick gold fell 1.7 percent. Meanwhile, policy-sensitive technology stocks fell on the Nasdaq, down 1%. On the other hand, bank stocks edged higher, outperforming the broader market for a second session, as producer inflation surged more than expected in October and investors continued to brace for more aggressive rate hikes by the People's Bank of China. The Hongkong Hang Seng fell 231.50 points, or 1.11%, to close at 17,424.41 on Tuesday, its fifth day of losses, as daily virus cases rose to a near-record high and were weighed down by growing concerns about the impact of coronavirus infections in China. Investors are also nervous because a surge in conditions in several mainland manufacturing cities could cause supply chain problems. A macro strategist at State Street Global Markets mentioned that the reopening of China in the second quarter of 2023 might be a story as the country enters winter. The pessimism was fueled by news that Chinese e-commerce company JD.Com had cut wages. In the U.S., concerns over the size of the Fed's tightening in December sent Wall Street lower on Monday. The technology index fell more than 3%, while the consumer, retail, and transportation sectors also fell sharply. Meituan led the decline, falling 8.3%, followed by Kuaishou Technology (-6.2%), Li Ning Company (-4.9%), Wuxi Biology (-3.4%), and Tencent Holdings (-2.2%). The China Shanghai Composite fell 0.2% to close at around 3,080 on Tuesday. In comparison, the Shenzhen Composite dropped 0.6% to close at 11,067, extending losses from the previous session after China's daily coronavirus infection count soared to near-record levels. The highest level, sparking fears that authorities will return to strict virus restrictions. Mainland stocks have been hammered in recent sessions amid shifting views on China's response to the outbreak. Some analysts remain hopeful that China will loosen coronavirus controls to support the economy, a resurgence that has challenged those expectations. Growth healthcare and new energy companies led the decline, Shijiazhuang Yilin (-6.5%), Teyi Pharmaceutical (-3.9%), Shanghai Fosun (-2.8%), Modern Ampere (-1.8%), Longji Green Energy ( -2.1%) and Sungrow (-2.5%) suffered heavy losses. The Japan Nikkei 225 rose 0.8% to around 28,160 on Tuesday, while the broader Topix gained 0.9% to 1,990 on Tuesday, extending gains from the previous session, with all sectors in positive territory. Still, investors remained cautious ahead of Federal Reserve minutes that could offer clues on the trajectory of U.S. rate hikes while keeping an eye on the coronavirus outbreak in China. Automakers such as Toyota Motor (2.8%), Mitsubishi Motors (3.7%), Shionogi & Co (2.2%), Takeda Pharmaceutical (1.5%), Nippon Steel (2%) and JFE Holdings (3.4%), healthcare and commodities Commodity-related companies rose sharply. Other index heavyweights also increased, including Mitsubishi Corporation (1.6%), Mitsubishi UFJ (1.2%), Mitsubishi Heavy Industries (2.8%), Hitachi (2%), and Tokyo Electric Power (3.9%). The Australia S&P/ASX 200 rose 0.5% to trade around 7,170 on Tuesday, erasing losses from the previous session, with energy and mining stocks leading gains in commodity prices. Still, markets remain cautious as investors assess the trajectory of U.S. rate hikes and monitor the coronavirus outbreak in China. Investors also looked forward to a speech by Reserve Bank of Australia Governor Philip Lowe later in the day for clues on the direction of domestic monetary policy. Energy companies rose as Saudi Arabia denied news of a potential output increase, with industry leaders Woodside Energy and Santos up 1 percent and 0.4 percent, respectively. Mining stocks also rose on higher metals prices, including BHP Billiton Group (0.9%), Rio Tinto (0.5%), and Pilbara Mining (1.2%). Elsewhere, healthcare, financial and consumer-related companies rose while technology stocks fell. New Zealand ANZ 50 index fell 49 points, or 0.43%, to 11,391, retreating from a near four-week high hit in the previous session, tracking a surge in coronavirus cases and new deaths in China on Monday After falling global stock markets. The most populous district in Beijing urged residents to stay at home, while at least one section in Guangzhou was locked down for five days. Traders were also cautious ahead of the Reserve Bank of New Zealand's monetary policy meeting on Wednesday, which is expected to raise the cash rate by 75 basis points to the highest level since 2008 to keep inflation in check. On the trade front, New Zealand's trade gap widened in October as exports grew less than imports. Healthcare services led to losses, falling more than 2.5 percent, while industrials and consumer durables also fell sharply. Ryman Healthcare fell almost 3 percent, followed by Auckland International Airlines (-1.41 percent), Cargo Ltd (-0.8 percent), and the Port of Tauranga (-0.5 percent). The Baltic Dry index, which measures the cost of shipping goods globally, fell about 2.4% to 1,149 on Tuesday, its ninth straight day of losses to its lowest level since Sept. 7, as rising Covid cases in China stoked demand concerns. The Capesize index, which tracks 150,000 tonnes of iron ore and coal cargoes, fell 3.3% to hit its lowest in more than two months at 1.092 points; the Panamax index, which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, fell for a fourth straight day, down 3.4 % to a more than 11-week low of 1.496. Meanwhile, the Supramax index fell 4 points to 1,160, its lowest since early February 2021.
REVIEWING ECONOMIC DATA:
Looking at the last economic data:
- CA: In October 2022, new Canadian home prices fell 0.2% from a month earlier, following a 0.1% drop in September. It was the index's first consecutive monthly decline since July 2019, as rising interest rates dampened buyer appetite. Home prices fell the most in Vancouver (-0.8%), the first decline in the region since June 2021. Additionally, Edmonton home prices were reported to have fallen sharply (-0.6%), the largest drop since July 2019. On the other hand, Montreux and Quebec saw the largest increases in new home prices (both 0.4%) among the 27 CMA surveys.
- CA: Preliminary estimates showed Canadian wholesale sales rose 1.1% in October 2022 from a month earlier, after rising just 0.1% in September, handily beating market expectations of 0.4%. This increase largely reflected higher sales (4.2%) in the Building Materials and Supplies segment. Sales also rose in personal and household goods (2.6 percent), motor vehicles and motor vehicle parts and accessories (2.0 percent), and food, beverage, and tobacco products (1.7 percent). In contrast, sales of agricultural products (-1.1%), machinery, equipment, and supplies (-0.4%), and miscellaneous goods (-1.0%) fell.
- CA: Preliminary estimates suggest Canadian manufacturing sales may rise 2% month-on-month in October 2022, recovering from flat in September. The largest increases were in the food, chemical, petroleum, and coal product industries. The data beat forecasts for a 0.2% gain.
- CA: Preliminary estimates suggest that in October 2022, Canadian retail sales could increase by 1.5% month-on-month. Consider that retail sales were down 0.5% from a month earlier in September, in line with the preliminary estimate and down from 0.4% in August. Retail sales fell in seven of the 11 subsectors, led by a third consecutive decline at gas stations (-2.4%), despite higher sales despite a 7.4% month-to-month drop in gasoline prices. Turnover also fell in food and beverage outlets (-1.1%), mainly supermarkets (-1.6%) and convenience stores (-1.8%). On the other hand, sales were higher at furniture and home furnishing stores (1.4%) and clothing stores (1.5%). On an annual basis, retail trade rose 6.9% in September, moderating from 7% in the previous month.
- IT: Italy's current account deficit of 2.018 billion euros in September 2022 differs from a surplus of 4.967 billion euros a year earlier, as a slowing global economy dents demand for Italian exports while soaring energy prices inflate imports. The goods account recorded a deficit of 3.548 billion euros from a surplus of 3.168 billion euros, and the primary account surplus narrowed to 2.618 billion euros from 3.045 billion euros. On the other hand, the service account has a deficit of 627 million euros, compared to a surplus of 274 million euros in 2021. The secondary account gap has fallen from 1,521 million euros to 461 million euros.
- EU: In September 2022, the euro area's current account surplus fell sharply to 3.8 billion euros from 33.1 billion euros in the same month a year earlier. The goods account swung to a deficit of 9.3 billion euros from a surplus of 22.3 billion euros last year, with rising energy prices driving imports to a record high of 275.5 billion euros. Meanwhile, the services surplus narrowed to 14.7 billion euros from 15.8 billion euros, while the primary income surplus widened to 10 billion euros from 8.2 billion euros. Finally, the secondary revenue deficit fell to 11.7 billion euros from 11.2 billion euros. Consider that the group reported a deficit of 82.4 billion euros between January and September, compared with a surplus of 246.5 billion euros in the same period in 2021.
- TW: In October 2022, Taiwan's seasonally adjusted unemployment rate was 3.64%, unchanged from the previous month, and remained at the lowest level since January 2001. The number of unemployed remained at 431,000, while the number of workers increased by 5,000 to 11.406 million. Meanwhile, the labor force participation rate fell to 59.18% from 59.19% in September.
- NZ: In October 2022, New Zealand's trade deficit was NZ$21.29 billion, compared to NZ$16.15 billion the previous month. The value of merchandise exports in October 2022 increased by $758 million (14%) compared to October 2021, reaching $6.1 billion. Milk powder, butter, and cheese was the largest contributor to growth, up $503 million (34%) to $2 billion. The value of imports of goods increased by $1.6 billion (24%) in October 2022 compared with October 2021, to $8.3 billion. Vehicles, parts, and accessories increased $323 million, or 37 percent, to $1.2 billion. Oil and products prices rose $289 million, or 44 percent, to $943 million.
- SK: The Composite Consumer Sentiment Index (CCSI) for November 2022 was 86.5, down from 2.3 points in October. Consumer confidence in current living standards was unchanged at 83, and confidence in prospects fell two percentage points from the previous month at 82. Consumer confidence related to future household income fell one percentage point from October to 93, while confidence related to future household spending fell three percentage points from the previous month to 107. Consumer confidence in current domestic economic conditions fell one percentage point from October to 46, while confidence in future domestic economic conditions fell two percentage points from the previous month to 54. The expected inflation rate for next year is 4.2%
- AR: Argentina's trade surplus increased to $1.827 billion from $414 million the previous month. The export value was US$7.9 billion, a year-on-year increase of 15.1%, and the import value was US$6.1 billion, a year-on-year increase of 15.8%. The largest export contributors were primary products (+30.4% year-on-year) and fuels and energy (+21.9%). The largest contributors to imports were passenger cars (+94.2%) and fuels and lubricants (+52.9%).
- LT: Producer price inflation in Latvia slowed to 32.3% in October 2022 from an upwardly revised 33.3% in the previous month, as rising costs for electricity, natural gas, steam, and air-conditioning supplies slowed (106.2% from 127.2% in September ). Meanwhile, inflation rose in manufacturing (17.5% vs. 15.9%), mining and quarrying (18.8% vs. 16.8%), and water, sewerage, waste management, and remediation activities (29.4% vs. 23.3%). As a result, on a monthly basis, producer prices rose 0.5% in October, reversing a revised 0.5% decline in September.
- IR: Wholesale prices in Ireland rose 8% in October 2022 from a year earlier, up from a 6.1% rise in September. That was the highest wholesale inflation since December 2015, with producer prices for domestic manufacturers up 10.3 percent year-on-year and producer prices for exports rising 7.7 percent. Producer prices for food rose 9.4 percent, while the index for food, beverages, and tobacco rose 9.5 percent. Wholesale construction product prices are up 16.1% in 12 months from Oct 2021. On the other hand, wholesale electricity prices are down 36.6% from Oct 2021
- SL: In November 2022, the Slovenian consumer confidence index rose slightly for the second consecutive month, rising to -37 from -38 in the previous month. The monthly increase in the confidence indicator reflected consumers' expectations for more optimism about the nation's economy (-45 vs. -48 in October), major purchases (-41 vs. -42), and perceptions of current household financial conditions (-29 vs. -30). Only households' financial outlook is more pessimistic (-34 vs. -33). At the same time, perceptions of price changes over the past 12 months were at their highest levels (85 to 83) over the entire observation period. On the other hand, expectations for near-term price action fell (45 vs. 51).
- MR: Morocco's annual inflation rate edged down to 8.1% in October 2022 from an all-time high of 8.3% in the previous month, mainly due to slower food and non-alcoholic beverage price increases (14.3% versus 15.1% in September) and Transportation (12.6% vs. 12.9%). Prices also eased in other CPI items, such as clothing and footwear (5.2% vs. 5.7%), entertainment and culture (5.5% vs. 5.7%), and miscellaneous goods and services (2.2% vs. 3.5%). On a monthly basis, consumer prices rose 0.4 percent, down from 1 percent in the previous month.
- PL: Wage growth in Poland's corporate sector slowed to an average 11% YoY growth rate of PLN 6,688 in October 2022 from 14.5% in the previous month, below market expectations for a growth rate of 11.8%. On a monthly basis, corporate wages rose 1.6%, unchanged from September. Total wages and salaries rose in all activities in January-October, with information and communications (up 12.2% to PLN 11,239.31) and mining and quarrying (up 21.6% to PLN 10,142.71) leading the way.
- DN: In November 2022, the Danish consumer confidence index rose to a three-month high of -30.4 from a record low of -37 in October. The rise in consumer confidence was largely due to higher expectations of households' future financial situation (-4.9 vs. -14.1 in October) and a notable increase in purchase intentions (-42.3 vs. -50.7). Meanwhile, expectations for the country's overall economic conditions over the next 12 months (-12.1 vs. -24.3) and the country's current economic conditions (-60.0 vs. -64.1 in October) improved. At the same time, expectations for households' current financial situation weakened slightly (-32.4 versus -32.1). Among other measures in the survey, consumers expect the unemployment rate to fall within a year (25.7 to 31.1).
- SW: House prices in Sweden fell by 3.0% month-on-month in October 2022, accelerating from a 2.8% decline in September. Home prices fell for the seventh month in the country's worst housing downturn in three decades as soaring inflation, and higher borrowing costs hit demand. Detached homes, which have reported the biggest falls, are particularly vulnerable as electricity prices soar. Single-family house prices fell in Stockholm (-3.0%), Gothenburg (-4.6%), and Malmö (-2.5%), as did apartment prices in Stockholm (-1.7%), Gothenburg (-2.4%), and Malmö (-3.2%). The latest data comes as the Riksbank prepares to tighten monetary policy further in the coming months,
Today, investors will receive the following:
- USD: Core Durable Goods Orders m/m, Durable Goods Orders m/m, Unemployment Claims, Flash Services PMI, Flash Manufacturing PMI, New Home Sales, Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations, Crude Oil Inventories, Natural Gas Storage, and FOMC Meeting Minutes.
- EUR: French Flash Services PMI, French Flash Manufacturing PMI, German Flash Manufacturing PMI, German Flash Services PMI, Flash Manufacturing PMI, Flash Services PMI, German 30-y Bond Auction, and German Buba Monthly Report.
- GBP: Flash Manufacturing PMI, Flash Services PMI, and MPC Member Pill Speak.
- JPY: Bank Holiday.
- NZD: Official Cash Rate, RBNZ Monetary Policy Statement, RBNZ Rate Statement, and RBNZ Press Conference.
- AUD: Flash Manufacturing PMI, and Flash Services PMI.
- CAD: Corporate Profits q/q.
KEY EQUITY & BOND MARKET DRIVERS:
- GE: Germany's 10-year government bond yield held above 2%, hitting 1.949% last week, its lowest since Oct. 5, as investors weighed mixed signals from European Central Bank policymakers on their stance on interest rates. ECB President Christine Lagarde said the central bank would continue to raise interest rates to fight inflation despite the risk of a recession. In contrast, policymaker Holzmann said he would support a third consecutive hike in the deposit rate by 75% of next month's base point. Meanwhile, other ECB officials said the central bank might slow down the pace of rate hikes. Investors now expect a 50 basis point rate hike in December and a reduction in bond holdings starting in the first half of 2023. Last week, the European Central Bank announced that eurozone banks would repay the ECB's multi-year loan of 296 billion euros, below market expectations of 500 billion euros. Voluntary repayment window.
- US: Equity futures contracts tied to the three major indexes traded near the flat line on Tuesday, with some positive bias, as investors digested a series of speeches from the Federal Reserve ahead of the Federal Open Market Committee's November meeting due later in the week. Please be careful before the minutes. The Federal Reserve recently poured cold water on expectations that it will stop its aggressive tightening soon. San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester are among the latest officials to echo that view. However, it shows support for December was slightly raised by 50 basis points. In addition to the Fed, the sentiment was weighed by growth concerns, particularly in China, where a resurgence of the coronavirus outbreak dashed hopes for a swift reopening of the world's largest economy. On the corporate front, Zoom Video Communications fell nearly 10% in premarket trading after it lowered its annual revenue forecast.
- JP: Japan's 10-year government bond yield remained at the Bank of Japan's implied policy ceiling of 0.25%, despite sharp volatility in overseas peers, amid expectations that the central bank will maintain its ultra-loose stance on monetary policy. The BOJ has been spending trillions of yen to maintain the former cap, keep borrowing costs low, and stimulate the economy. Furthermore, Bank of Japan Governor Haruhiko Kuroda recently reiterated that the central bank needs to continue its monetary easing program for the foreseeable future, suggesting that the BOJ will remain an outlier among its global advanced economy peers when it comes to monetary policy normalization.
- AU: Australia's 10-year government bond yield fell to 3.5%, hovering at its highest level since mid-August, as a deteriorating economic outlook and expectations of less tightening by major central banks, notably the Federal Reserve, weighed on bond investors. Some breathing room. The policymaker said that the Reserve Bank of Australia raised the cash rate by 25 basis points to 2.85% in November, becoming one of the first banks in an advanced economy to slow the tightening amid a deteriorating growth outlook. As a result, interest rates have risen sharply. The central bank mentioned that the tightening cycle is not over as Australia's inflation rate remains well above the RBA's 2-3% target range.
- CA: Canada's 10-year government bond yield fell to 3%, its lowest level since late August, as investors have been adjusting their portfolios to counter sluggish economic growth and a less aggressive stance from the central bank. The Bank of Canada raised its benchmark interest rate by a lower-than-expected 50 basis points in October while saying its historic tightening campaign was ending, surprising markets with expectations that the economy would stagnate for the next three quarters. In the U.S., similar talk of weaker growth and a less aggressive Fed has also recently pushed U.S. Treasury yields lower.
- HU: The Hungarian National Bank decided to keep the benchmark interest rate unchanged at 11% for the second consecutive time at its November meeting, which is in line with market expectations and the central bank's previous signal to end the hiking path of the benchmark interest rate. Currently, the tool for dealing with soaring inflation and a weakening forint is the new 18 percent one-day deposit facility, which was also unchanged at the meeting, effectively replacing the benchmark rate. The mechanism was created as a weak currency, and high energy prices prompted Hungarian Prime Minister Viktor Orbán to pressure the central bank to take emergency measures, which also led the NBH to raise its overnight mortgage rate by 950 basis points in October to 25%. As a result, in October, Hungary's annual inflation rate rose to 21.1%, the highest in 26 years.
- CN: China's 10-year government bond yield stabilized at around 2.84% in late November, hovering near its highest level in more than four months, as hopes for a less disruptive Covid-zero policy and expectations for aggressive easing faded. China recorded its first COVID-19 death in six months over the weekend, as infections continued to rise sharply, forcing local authorities to reimpose some restrictions, including closing offices and local schools. Meanwhile, the People's Bank of China pulled some liquidity from the financial sector this week and left key lending rates unchanged for the third straight month in November.
- AU: Australia's 10-year government bond yield fell to 3.5%, hovering at its lowest level since mid-August, as the Reserve Bank of Australia's tightening of policy eased, giving bond investors some respite. The Reserve Bank of Australia raised the cash rate by 25 basis points to 2.85% in November, becoming one of the first banks in advanced economies to slow the tightening amid a deteriorating growth outlook, with policymakers noting that rates have already risen sharply. However, the central bank mentioned that the tightening cycle is not over, as Australia's inflation rate remains well above the RBA's 2-3% target range.
- IS: The Bank of Israel raised its benchmark interest rate by 50 basis points to 3.25% at its November 2022 meeting, the sixth straight hike and pushing borrowing costs to their highest level since the first half of 2011. The decision was in line with market expectations. A year ago, rates were much lower at 0.1%. Policymakers noted that Israel's economy is recording robust economic activity, accompanied by a tight labor market and a high inflationary environment. As a result, Israel's inflation rate rose to 5.1% in October, close to the 2008 high of 5.2% reached in July. The central bank added that further rate hikes would be determined based on activity data and inflation developments.
- GR: Greece's current account deficit widened to 810 million euros in September 2022 from 300 million euros a year earlier, as the goods deficit widened to 3.71 billion euros from 2.31 billion euros a year earlier. At the same time, the services surplus increased from EUR 2.3 billion to EUR 3.0 billion, mainly due to higher tourism receipts (from EUR 2.1 billion to EUR 2.9 billion). In addition, the primary income account turned into a small surplus of 120 million euros compared to a deficit of 90 million euros in the same month last year. The secondary income deficit narrowed from 210 million euros to 180 million euros. Consider that the current account deficit widened sharply to EUR 10.8 billion in the first nine months of this year from EUR 6.1 billion in the same period in 2021.
STOCK MARKET SECTORS:
- High: Energy, Utilities, Materials, Industrials.
- Low: none
TOP CURRENCY & COMMODITIES MARKET DRIVERS:
- EUR: The euro held above $1.02, still near its highest level in more than five months, as investors weighed European Central Bank policymakers' stance on interest rates against the prospect of weaker global growth and mixed signals from China re-imposing tougher restrictions. ECB President Christine Lagarde said last week that with eurozone inflation still well above its 2% target, the central bank will keep raising rates and that even a recession is unlikely to ease price pressures enough for the ECB to hit the brakes. Meanwhile, policymaker Holzmann backed a third consecutive 75 basis-point hike in the deposit rate next month, while other ECB officials said the central bank could slow the rate hikes. Investors now expect the central bank to hike rates by an unprecedented 200 basis points since July, followed by a 50 basis point hike in December. In addition, the ECB is expected to start reducing EUR 5 trillion in debt in the first half of 2023.
- USD: On Tuesday, the U.S. dollar index fell to around 107.5, giving up some of the gains made in the previous session, as investors cautiously awaited the minutes of the latest Federal Reserve meeting, which may guide the outlook for U.S. interest rates. Traders also analyzed various comments from Fed officials, who have largely maintained their firm commitment to lowering inflation. In the latest comments, San Francisco Fed President Mary Daly warned against excessive tightening. At the same time, Cleveland Fed President Loretta Mester said she would like to see inflation decline before support pauses. The U.S. dollar index rose nearly 1% on Monday as the worsening Covid-19 situation in China spurred safe-haven demand for the currency. However, the U.S. dollar fell across the board, with the greenback selling most notably against the New Zealand dollar ahead of the Reserve Bank of New Zealand policy decision.
- CAD: The Canadian dollar weakened to 1.35 against the U.S. dollar, moving further away from an eight-week high of 1.325 set in November, as investors moved away from risky assets as a new wave of new coronavirus containment measures in China reignited concerns about the global economic outlook. Adding insult to injury, crude oil, Canada's main export, hit a nine-month low, putting additional pressure on the currency. Meanwhile, the latest CPI data showed inflation remained close to 7%, not far from the 39-year high of 8.1% in June, suggesting the Bank of Canada will keep raising interest rates. At the December meeting, money markets were divided between 25 and 50 basis point hikes. Bank of Canada Governor Steve Macklem said he understands many Canadians' pain as the central bank begins a tightening cycle. Still, building price stability in the Canadian economy is a top priority.
- BTC: Bitcoin approached $16,000 on Tuesday after plunging 3.9% on Monday but remained at its lowest level since November 2020 as the contagion from the FTX fallout continued. Cryptocurrency brokerage Genesis has warned that it will need to file for bankruptcy if it cannot raise at least $1 billion in cash. According to Bloomberg, this includes negotiations for a potential investment in cryptocurrency exchange Binance, but funding has yet to materialize. The FTX crash is the latest drag on the cryptocurrency market. Still, several factors have been weighing on it, including a broad rise in CPI and the failure of cryptocurrencies to act as a hedge against inflation, with major central banks (i.e., the Federal Reserve) tightening monetary policy, defaults, and scandals. The industry's market value, which was once about $3 trillion, is now about $900 billion.
- GAS: Gasoline futures rallied from a more than one-month low of $2.30 a gallon to above $2.50 a gallon as drivers prepared to hit the roads for Thanksgiving. While demand remains strong ahead of travel holidays, higher crude oil prices are the main driver of the short-term upward momentum. Meanwhile, EIA data showed that US gasoline inventories rose 2.207 million barrels last week to 207.9 million barrels after falling for the fourth straight week, far exceeding market expectations for an increase of 310,000 barrels. The report also showed gasoline production rose for a fifth straight week, with U.S. refineries processing an average of 16.2 million barrels per day of crude in the week ended Nov. 11, 63,000 barrels more than the previous week's average.
- GAS: Front-month natural gas futures in the Netherlands rose more than 4 percent to 121 MWh on Tuesday, rising for a third straight day and still four times higher than the average over the past five years, as supply problems persist. Gazprom has warned that from Nov. 28, it will restrict fuel shipments through Ukraine, the last pipeline still carrying Russian gas to western Europe. Shipping cuts will come when temperatures are set to be below average. On the other hand, higher-than-normal temperatures this year have brought gas storage near completion, creating a buffer for winter. As of November 20, the EU's natural gas reserves were 95% full, and Germany's total reserves were 100%. Meanwhile, the European Commission is expected to propose a one-year gas price cap from 1 January 2023. However, the actual upper limit level,
- SLV: Silver futures rose above $21.2 an ounce, rebounding from a two-week low of $20.8 hit on Nov. 21, supported by a slight retreat in the dollar ahead of the release of the FOMC minutes. In addition to supporting gold prices, the Federal Reserve's hesitation in maintaining the pace of its sharp tightening cycle will also push prices higher as demand for industrial silver through electrical conductors increases. Signs of undersupply also boosted prices, as inventories at COMEX in New York have fallen by 70% in the past 18 months to just over 1 million tonnes. Also, LBMA inventories fell for the tenth consecutive month to a record 27,100 tonnes.
- GLD: Gold prices rose above $1,740 an ounce on Tuesday, snapping a four-day losing streak, as the dollar retreated from recent highs, as investors awaited minutes from the Federal Reserve's latest meeting, which could guide the outlook for future U.S. rate hikes. Traders also analyzed various comments from Fed officials, with San Francisco Fed President Mary Daly warning against excessive tightening and Cleveland Fed President Loretta Mester said she wants to see a sustained decline in inflation before backing a pause. Gold is highly sensitive to the outlook for interest rates, as rising rates increase the opportunity cost of holding non-yielding bullion, reducing its appeal.
CHART OF THE DAY:
European stocks rose on Tuesday, with the pan-European STOXX 600 up 0.3% to close at a more than two-month high, while Germany's DAX 40 rose 0.4% to close at a more than five-month high, supported by a rebound in commodity stocks. In addition, investors continued to assess the potential direction of global monetary policy and various risks to global economic growth, including expectations that China may re-impose severe COVID-19 restrictions. In European corporate news, TAG Immobilien suspended its dividend, the latest example of strengthening the damaged property sector's balance sheet. Italy's No. 1 utility Enel said it would sell assets for 21 billion euros to reduce debt. At the same time, Germany's Thyssenkrupp cut its stake in the steelmaker as activist investor Cevian cut its stake. As a result, the company's shares are under pressure. In the UK, electronics retailer AO World raised its full-year profit guidance.
- Germany's DAX 40 index - D1, Resistance (target zone) around ~ 14888, Support (consolidation) around ~ 14062