GLOBAL CAPITAL MARKETS OVERVIEW:  

European stock markets rose for the third consecutive session on Thursday, with the STOXX 600 index closing above 440 points, its highest point in three and a half months, led by chemicals stocks. Domestically, Germany's DAX rose 0.8% to 14,547, its highest since June 7, after the latest data showed German business morale improved more than expected in November. Meanwhile, in the latest meeting minutes, investors digested conflicting messages from the European Central Bank and Federal Reserve. Even in the face of a recession, European officials remain committed to raising rates, even as the Federal Reserve said it would slow its rate hikes soon. In corporate news, European homewares retailer Kingfisher left its 2022-23 financial guidance largely unchanged following a strong third-quarter result. Radiation therapy equipment maker Elekta warned that uncertain macroeconomic conditions and supply chain issues would hurt its third-quarter profit margins. The CAC 40 rose about 0.4% on Thursday to close at a seven-month high of 6,707, its third straight session of gains. Investors reacted positively to the latest Federal Open Market Committee (FOMC) meeting minutes, in which the Fed said it expected to shift to modest rate hikes "very soon." In focus, approval of the energy package was delayed until mid-December because of a lack of consensus among countries. On the corporate front, financials, real estate, and industrials were the best performers, with AJ and Airbus down 0.4%. The FTSE MIB rose 0.6% to 24,730 on Thursday, its highest since late May, tracking positive sentiment in European and North American stock markets, with Fed policymakers agreeing that rate hikes should be slowed while investors focused on the European Union's turmoil surrounding Russia. Discussion of oil and gas price caps. Utility providers led gains after EU energy ministers delayed formal approval of gas price caps until December after several countries said the proposed cap of 275 euros per megawatt-hour (more than double the current price) was too loose and could become useless. Terna led the gains, rising 2.3 percent. Meanwhile, Telecom Italia extended its choppy momentum, rising nearly 3 percent, as investors continued to await news from the government on a possible takeover of the company's fixed-line network. The Istanbul Stock Exchange 100 index hit a record high for the third straight session on Thursday, reaching 4,887 points, after the Central Bank of the Republic of Turkey cut its main interest rate by another 150 basis points to 9% while signaling that it would end the current rate-cutting cycle. Since the central bank began its rate-cutting cycle in September 2021, investors have been using the stock market to hedge against surging inflation and a plunging lira in Turkey, while residents have sought assets to park their savings. Since then, the lira has plunged more than 100 percent, worsening inflationary pressures. Consumer inflation jumped to a 24-year high of 85.5% in October, buoyed by largely negative real interest rates and costly stabilization amid intense pressure from President Tayyip Erdogan's monetary measures. London shares closed little changed on Thursday, with the blue-chip FTSE 100 hovering around 7,450, as gains in the property and materials sectors offset losses in the healthcare sector. With U.S. markets on holiday and trading volumes thinned, investors digested hawkish minutes from the European Central Bank's last meeting, which showed policymakers remained committed to raising interest rates even amid a recession. While the ECB appears to be far from over on its tightening cycle, the minutes of the Fed's November meeting showed an overwhelming majority of policymakers agreed that the pace of U.S. rate hikes would soon be slowed. Intertek Group and Intermediate Capital Group were among the biggest gainers on the index, up 4.5 percent and 3 percent, respectively. Imperial Brands, on the other hand, fell nearly 4%. The ruble-based MOEX Russia index fell 5 points to close at 2,206 on Thursday, halting a two-session winning streak as investors focused on concerns over a G7 price cap on Russian oil exports and its impact on the country's energy revenues discussion. The Urals oil contract is currently trading at $67 a barrel, prompting several states to consider the current proposal for a cap of $65 to $70 too lenient. Nonetheless, Greece and Malta have advocated raising the cap to limit the impact on their shipping industries. Oil companies closed mostly lower, with Rosneft, Rosneft, and Lukoil down 0.25% to 0.5% but still holding gains for the week. Meanwhile, Gazprom closed flat after announcing plans to boost investment by 16 percent to 2.3 trillion rubles next year. On the macro front, the latest data showed that the decline in industrial activity unexpectedly eased in October, with producer prices rising at their weakest pace in two years. Canada S&P/TSX Composite index rose on Thursday, hovering around 20,350, extending the previous session's gains to June levels, with trading volumes reduced due to the U.S. Thanksgiving holiday. Mining and metallurgy specialists led gains in Toronto stocks, supported by continued increases in gold prices following the Federal Reserve's signal to slow rate hikes following the latest FOMC minutes. Policy-sensitive technology stocks also rose from the previous session, averaging 0.5%. Energy producers, meanwhile, are in the green despite falling crude prices. Investors continue to focus on the debate among the G7 countries over caps on Russian oil exports, as the Western Canadian Select oil benchmark trades at $10 a barrel, below the Urals, and faces higher competition if the cap passes and is triggered . Hong Kong stocks rose 137.09 points, or 0.78%, to close at 17660.90 points on Thursday, rising for the second consecutive trading day after the minutes of the Federal Reserve meeting showed support for gradual interest rate hikes. Market participants welcomed signs of looser monetary conditions in China, as the central bank will allow banks to reduce capital reserves to stimulate economic activity. Meanwhile, Beijing has reportedly instructed lenders to increase financial support to shore up the foundations for future growth. However, a new wave of COVID-19 cases on the mainland remains a concern, with reports of infections climbing to record highs and surpassing the previous peak in April. Financials, consumer durables, and healthcare rose, led by semiconductor manufacturing (3%), China Resources Land (1.7%), Kuaishou Technology (1.2%), HKEx and Clearing House (1.1%), and AIA Group (0.7%). China Shanghai Composite fell 0.25% to close at 3,089, and the Shenzhen Composite fell 0.15% to close at 10,987 on Thursday, with mainland Chinese stocks trailing global peers as the country's daily rate of COVID-19 infections soared to a record high. There are fears that the authorities will adopt stricter restrictions, which may have a negative impact on the economy. After top officials unleashed more monetary stimulus to support the economy, Chinese stocks are still struggling, including a possible cut to the reserve requirement ratio. Also, Thursday’s losses came even after minutes from the Federal Reserve’s latest meeting, which showed that most U.S. policymakers agreed that the rate hikes might soon be slowed. Technology and consumer stocks led losses on Thursday, while health care, new energy, and resource-related stocks mostly rose. New Zealand ANZ 50 was almost flat at 11,321.71 after falling early in the session, as market participants attempted to look past the Reserve Bank of New Zealand's recession warning and the central bank's record rate hike. At the same time, hopes are growing that New Zealand will weather a global slowdown, partly because of a stable financial system. Meanwhile, market participants digested minutes from the Federal Reserve's last meeting, which showed a "vast majority" of policymakers backed a less aggressive rate hike. In China, Beijing has rolled out a series of policies to support the property sector and plans to lower banks' reserve requirements. Technology, financials, and retail trade losses offset gains in non-energy minerals, consumer durables, and utilities. Allied Farmers is up 2.9%, Cannasouth Ltd is up 1.8%, and Contact Energy is up 1%; Asset Plus Limited (-4.6%), Argosy Property (-2.5%), Burger Fuel Group (-1.5%) and A2 Milk Co (-1 %) fell. In post-holiday trade on Thursday, the Nikkei 225 rose 1.1 percent to a more than two-month high above 28,400, while the Topix gained 1.1 percent to an 11-month high in 2017, as markets hoped the U.S. Japanese stocks caught up with global peers as the Federal Reserve tightened policy. The minutes of the latest Fed meeting showed that most officials supported the need to slow the rate hikes as soon as possible, while only a few called for a final increase in interest rates. Investors also reacted to data showing Japan's manufacturing activity contracted in November, while services sector activity remained unchanged. Technology stocks led the gains, with strong gains in Tokyo Electron (3.6%), Lasertec (4.5%), and Keyence (3.3%). Almost all other sectors were up, including index heavyweight Shionogi & Co (4.5%), Japan Yusen (4%), and Sony Group (2%). The Baltic Dry index, which measures the cost of shipping goods globally, extended gains for a second session on Thursday, rising about 4.9% to a more than one-week high of 1,242 on firmer demand in the shipping sector. The Capesize index, which tracks 150,000 tonnes of iron ore and coal cargoes, rose 11.5% to hit its highest in more than a week at 1,384 points; the Panamax index, which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, snapped a five-session losing streak with a slight gain. It rose 0.1 percent to 1.466. Elsewhere, the Supramax index rose 11 points to 1.174.

 

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- CA: Canada's CFIP Business Barometer long-term optimism index, based on a 12-month outlook, fell to 50 in November 2022 from a downwardly revised 51.2 in the previous month, suggesting that as many entrepreneurs felt pessimistic as optimistic. In addition, it was the first time since April 2020 that there was no general optimism, with agriculture, retail, and financial services seeing the most pessimistic long-term views. Overall, staffing plans have deteriorated from the previous month, and capital spending plans remain below pre-pandemic levels. Meanwhile, plans to raise future prices eased slightly from the previous month but remained positive while the outlook for wages accelerated.

- CA: In September 2022, the average weekly earnings of non-farm employees in Canada increased by 3.5% year-on-year to $1,175, continuing to rise since June 2021. It was the 16th straight month of gains in average weekly earnings, with 16 of 20 industries posting gains in September. The goods-producing sector (+4.7 percent) outpaced the national average, with forestry and logging (+1.7 percent to $1,412) and construction (+5.7 percent to $1,457) posting the biggest increases. Slower growth in services (+3.4%), with sharp gains in finance and insurance (+15.8% to $1,724) outweighed by declines in corporate and business management (-5.9% to $1,494) and education services, Partially offset by a decrease in C$1,145 (-3.2 percent to C$1,145). Year-over-year growth in September was higher than the national average in four provinces, led by New Brunswick (up 6.3 percent to $1,083) and Quebec (up 3.7 percent to $1,118).

- EU: The accounts of the ECB's October policy meeting showed that ECB policymakers agreed that the central bank should continue to normalize and tighten monetary policy to tackle high inflation, even in a shallow recession. Officials noted that the inflation outlook continued to deteriorate, with inflation running too high and repeatedly above forecasts, and that inflation could become entrenched, with a growing risk of second-round effects and wage-price spirals. Still, the central bank said it might want to pause ongoing rate hikes in the event of a prolonged and deep recession, which could do more to dampen inflation. In October, the ECB raised its key interest rate by 75 basis points, pushing borrowing costs to their highest level since early 2009. There is broad support for a once-in-a-meeting, data-dependent approach to making future monetary policy decisions.

- EU: The euro was little changed at $1.04, near its highest level since early July, on expectations that the interest rate gap between the European Central Bank and the Federal Reserve will narrow. The accounts of the European Central Bank's monetary policy meetings showed policymakers remained committed to raising interest rates to bring down inflation even in the face of a recession. In contrast, the Federal Open Market Committee meeting minutes showed the Fed would soon begin to slow the rate hikes. The euro was also supported this week by PMI data showing that the contraction in euro zone business activity eased slightly in November.

- UK: The CBI's order balance fell by one point to -5 in November 2022, according to the CBI's latest Industrial Trends Survey, but was above consensus expectations of -8, indicating total orders for the fourth consecutive month lower than normal. Export orders were also lower than normal, but to a lesser extent than last month (-7 to -14 in October), while manufacturing output is expected to decline over the next three months (-10 to 7). Meanwhile, manufacturers judge inventories to be broadly adequate (5 vs. 7). On the price front, expectations for average selling price inflation over the next three months remained roughly similar to the previous month (47 vs. 80).

- TW: In October 2022, Taiwan's broad M2 money supply increased by 7.32% year-on-year to NT$5,666.8 billion, an acceleration from September's 6.83% growth due to faster growth in foreign currency deposits and increased bank loans and investments. Considering the January-October period, the cumulative average annual growth rate was 7.54%.

-  GE: In November 2022, Germany's Ifo business climate indicator rose 1.8 points from the previous month to 86.3, the highest value in three months and above the market consensus of 85.0. Expectations for the coming months are notably less pessimistic, at a three-month high (80.0 vs. 75.9 in October), and industry export expectations have risen into positive territory. In addition, more than half of the companies are worried about supply bottlenecks, which is lower than in October. As a result, the pressure of the price increase has decreased, with only 46.8% of companies expecting to increase prices in the next three months. On the other hand, the firms' assessment of their current situation deteriorated to the lowest level since February 2021 (93.1 vs. 94.2).

- FR: In November 2022, the French manufacturing climate index fell to 101 from 103 in the previous month, lower than the market forecast of 102. Business sentiment soured as manufacturers viewed their past production (1 to 6 in October), overall production expectations (-10 to -8), and overall orders (-15 to -12), as well as foreign demands (-10 to 8). In contrast, individual production expectations improved (17 vs. 12). Also, the measure of perceived economic uncertainty eased slightly (36 vs. 37).

- SK: The Korean won traded around 1,338 per dollar, pausing its recent gains after the Bank of Korea announced a modest 25 basis point rate hike. It was the ninth hike since the central bank began tightening policy in August 2021, bringing the benchmark rate to its highest level since June 2012. At the previous two meetings, the BOK raised borrowing costs by a full percentage point to lower inflation without sacrificing growth, opting for a more dovish move. Last month, the win fell to an 11-year low as the U.S. Federal Reserve embarked on a historic tightening campaign and the South Korean economy faced external and domestic headwinds. Meanwhile, the yuan has recovered nearly 10 percent since betting on a slower pace of Fed rate hikes and a stronger domestic economic outlook.

- JP: Preliminary data showed that the au Jibun Bank Japan manufacturing PMI fell to 49.4 in November 2022 from a final 50.7 a month earlier. It was the first contraction in factory activity since January 2021 and the fastest pace in two years amid cooling demand conditions and severe inflationary pressures. Moreover, production fell by the most since September 2020, with new orders falling faster in 27 months and export orders falling faster as COVID-19 cases resurfaced in some countries. In addition, businesses continued to reduce buying activity, reflecting concerns about future demand. Meanwhile, job growth remained flat, and the backlog of jobs fell faster. On the price front, input cost inflation fell to a 14-month low while output prices also moderated. Finally, market sentiment fell to a six-month low amid ongoing concerns about the current global economic situation.

- JP: Preliminary data showed that the au Jibun Bank Japan Services PMI fell to 50.0 in November 2022 from a final 53.2 in the previous month, indicating no change in business activity. Still, following the launch of a national travel discount scheme in October, a revival in the travel industry continued to support order book growth, which rose for a third straight month, albeit at a slower pace, according to reports. At the same time, job growth has slowed, and the growth rate in backlogs of work has stalled. Furthermore, on the pricing front, input cost inflation eased while output cost inflation accelerated, with companies reportedly continuing to pass the increased cost burden on to customers. Finally, amid labor shortages and general economic uncertainty, sentiment fell to an eight-month low.

 

LOOKING AHEAD:   

Today, investors will receive the following:

- JPY: Tokyo Core CPI y/y, and SPPI y/y.

- EUR: German Final GDP q/q, and German GfK Consumer Climate.

 

KEY EQUITY & BOND MARKET DRIVERS:

- FR: French 10-year OAT yields fell to 2.3% in late November, the lowest level in more than two months and tracking global bond yields, as concerns over the Fed's upcoming meeting were raised following the release of the FOMC minutes. Bets on a slowdown in rate hikes further solidified at the meeting. Meanwhile, investors continued to assess the prospects for monetary tightening in the eurozone amid signs of a continued economic slowdown. Flash PMI data showed that private sector activity in the euro shrank for the fifth time in a row, while domestic activity contracted for the first time since February 2021. Nonetheless, ECB board members stressed that interest rates would continue to rise to contain record-high inflation in the eurozone even as the economy heads toward recession. Policymakers said rates would be raised by at least 50 basis points at the central bank's December meeting, leaving room for a more aggressive 75 basis point hike.

- IT: At the end of November, Italy's 10-year BTP yield fell further below 3.7%, the lowest level in three months, and global bond yields continued to decline after the FOMC meeting minutes showed that Fed officials agreed to slow down the pace of interest rate hikes. Domestically, Prime Minister Meloni's cabinet approved a 35 billion euro increase in spending aimed at reducing Italy's budget deficit to 4.5 percent in 2023 from 5.6 percent this year. The figure remained below the limit set by the European Union and eased concerns that political instability in Italy could exacerbate the country's high debt and weak fiscal position. Meanwhile, bond markets continued to brace for another ECB rate hike, even as PMI data provided further evidence of a slowing economy, as bringing inflation down remains a top priority for board members. The spread between the 10-year BTP and German bunds narrowed to below 175 basis points, the lowest since May, suggesting that Italian debt is less credit risk.

- GE: Germany's 10-year bond yield continued to fall to 1.8%, hitting its lowest level since Sept. 19, a day after U.S. Treasury yields fell. Minutes from the Fed's most recent meeting showed that a "substantial majority" of officials agreed that the rate hikes would likely slow soon, even if inflation remained well above the central bank's target. Elsewhere, the ECB's meeting accounts showed policymakers would continue to normalize and tighten monetary policy to combat high inflation even with a shallow recession. Still, the minutes also suggested that the central bank may want to pause ongoing rate hikes in the event of a prolonged and deep recession, which could do more to dampen inflation. Rates in the eurozone are expected to peak at around 2.8% by the end of next summer.

- UK: U.K. 10-year bond yields fell to 2.9%, the lowest level since Sept. 2, a day after U.S. Treasury yields fell sharply after minutes of the Fed's November policy meeting showed an "overwhelming majority" of policymakers agreed "Very likely soon" to slow the pace of rate hikes. Elsewhere, investors digested comments from a handful of Bank of England officials. Deputy Governor Ramsden supported further rate hikes but said he would consider cutting rates if the economy didn't develop in line with his expectations and the persistence of inflation was no longer a concern. Earlier this month, Monetary Policy Committee member Tenreyro said she expected rates to remain unchanged this year before falling in 2024, while Dhingra warned that excessive tightening could trigger a deep recession. The central bank has hiked interest rates by 290 basis points since December 2021, and markets are currently divided on pricing in a rate hike of 50 to 75 basis points in December.

- CN: China's 10-year government bond yield fell to 2.8% after hitting a more than the four-month high of 2.85% earlier this month, as bets on monetary stimulus began to fade and concerns about China's economic outlook mounted. Monetary tools such as RRR cuts will be used in a timely and appropriate manner to maintain reasonably ample liquidity, the State Council said on Wednesday, suggesting that bank deposit reserve ratios may be cut soon. That’s despite warnings from the PBOC that inflation could accelerate due to rising demand and other risks, including disruptions to global energy supplies and rapid growth in the M2 money supply. In addition, COVID-19 cases continued to increase in China, and some restrictions were reimposed.

- SW: Sweden's central bank, the Sveriges Riksbank, raised its repo rate by 75 basis points to 2.5% at its November meeting, pushing borrowing costs to their highest level since December 2008 in response to persistently high inflation. With CPI inflation at 9.3% in October, well above the central bank's 2% target, policymakers worry that the risk of the current high inflation will become entrenched as inflation pressures are slightly higher than expected. As a result, the policy rate is expected to increase further early next year when it will be below 3%. In addition, the Riksbank will allow its securities holdings to dwindle as they mature early next year.

- SK: The Bank of Korea (BoK) raised its benchmark interest rate by 25 basis points to 3.25% at its November meeting, in line with the market. Thursday's move pushed borrowing costs to their highest level since June 2012, after the central bank hiked rates by half a percentage point twice this year to keep pace with the Federal Reserve and stem a weakening currency. However, the Bank of England opted to slow down the pace of tightening to minimize pressure on the economy and credit markets while keeping inflation in check. The latest decision is the sixth consecutive rate hike and the ninth since August 2021, when the central bank began to roll back amid more than a year of easing. Policymakers said GDP growth in 2022 would remain in line with the 2.6 percent forecast in August, but forecast GDP growth next year at 1.7 percent, well below the August forecast of 2.1 percent due to mounting global headwinds and high-interest rates. Meanwhile, headline inflation is expected to be 5.1% in 2022 and 3.6% in 2023.

 

STOCK MARKET SECTORS:

- High: Consumer Discretionary, Information Technology, Industrials.

- Low: Energy.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

- CAD: The Canadian dollar strengthened further against the U.S. dollar and is now hovering around $1.335, not far from an eight-week high of $1.325 earlier this month, as the prospect of further rate hikes kept bulls optimistic. Bank of Canada Governor Tiff Macklem testified in the House of Commons that inflation remains too high while warning that the central bank's tightening cycle is still ongoing. Canada's annual inflation rate of 6.9 percent remains well above the central bank's 2 percent target following a strong jobs report in October. However, weakness in crude oil, Canada's main export, limited further gains amid a worsening global growth outlook.

- CNY: The offshore yuan was steady at around 7.15 per dollar, staying in a sideways trading range, as traders weighed the prospect of a slower pace of Fed tightening against expectations of more monetary easing from the People's Bank of China. Minutes from the latest Federal Reserve meeting showed that most U.S. policymakers agreed that a slowdown in rate hikes was likely soon. Meanwhile, top Chinese officials signaled more monetary stimulus ahead to support the economy battered by the coronavirus, including a possible cut to the reserve requirement ratio. However, the People's Bank of China kept its benchmark lending rate unchanged for the third month in November, as currency depreciation and persistent capital outflows left little room for policy easing. The world's second-largest economy has also struggled to contain a resurgence of the coronavirus since the targeted measures, with daily virus infections hitting record highs.

- JPY: The yen gained more than 140 per dollar, nearing its highest level in nearly three months, after the minutes of the latest Federal Reserve meeting showed most U.S. policymakers agreed that a slowdown in rate hikes was likely soon. Meanwhile, Bank of Japan Governor Haruhiko Kuroda recently stressed the need to maintain an ultra-loose monetary policy to support the economy after inflation data spiked again. Japan's annual core consumer prices surged to a 40-year high of 3.6 percent in October, as high global commodity prices and a weak yen pushed up import costs. Elsewhere, the latest data showed that China's trade deficit widened more than expected in October as import costs soared faster than export growth, while the economy unexpectedly contracted in the third quarter.

- NZD: The New Zealand dollar gained more than US$0.62, hitting its highest level in more than three months, after the Reserve Bank of New Zealand announced a massive 75 basis point rate hike to outpace inflation, with rates expected to reach 5.5% in September 2023 The peak value is much higher than the previous forecast of 4.1%. It was the biggest increase since the RBNZ introduced the OCR in 1999, bringing the policy rate to a 14-year high of 4.25%. New Zealand's persistently high inflation and near-record-low unemployment supported the case for more aggressive action. At the same time, other major economies began to slow the pace of tightening amid growing risks of a global recession. However, the New Zealand dollar also weakened after the minutes of the latest Federal Reserve meeting showed most U.S. policymakers agreed that a slowdown in rate hikes was likely soon.

- USD: The U.S. dollar index fell below 106 on Thursday, falling for a third straight session to its lowest level since mid-August, after the minutes of the latest Fed meeting showed an overwhelming majority of policymakers agree that a slowdown in rate hikes is likely soon paced. Earlier this month, the Fed raised interest rates by 75 basis points to 3.75%-4% for the fourth time to curb persistently high inflation, pushing borrowing costs to their highest level since 2008. The Fed now wants to assess the economic impact of its historic tightening, with recent weak U.S. financial data supporting a more dovish approach. As a result, the greenback fell across the board, with the sell-off most notable against the euro and yen.

- LIT: Lithium carbonate prices in China fell to 590,500 yuan a tonne from an all-time high of 597,500 yuan hit on Nov. 11, as authorities set to remove subsidies for battery makers in early 2023, easing a bit amid an industrial boom. Demand for raw materials soared. Department. Lithium arrivals from South America have also weighed on prices, alleviating concerns about supply shortages. Still, continued bullish demand in the sector has pushed prices up 111% year-to-date. Decarbonization goals in top consumer China prompted local governments to purchase electric vehicles through cash incentives and tax breaks, leading to an 81% year-on-year increase in sales of new energy vehicles in October. Meanwhile, the U.S. said it would provide $2.8 billion to U.S. battery makers to ramp up production, boosting demand for the input.

- IRN: Iron ore cargoes containing 63.5 percent iron ore bound for Tianjin were at $98 a tonne, not far from an eight-week high of $99.5 hit on Nov. 18, having rallied since the start of the month on fresh liquidity injections in China, the largest consumer, constituted 20% of steel consumers. The country's largest commercial bank agreed to provide $38 billion in new credit lines to private developers in response to a liquidity crunch in the sector. The move comes as the National Bond Administration expanded a key funding program by $35 billion to support bond sales in the industry after a period of defaults increased the cost of credit for homebuilders. Still, iron ore prices are 38% below their 2022 peak in March as China's pandemic containment measures led to long-term fears of a recession and supply concerns for Ukrainian exports eased.

- TRY: The Turkish lira hovered at an all-time low of 18.6 per dollar after the central bank cut rates by another 150 basis points in November, pushing borrowing costs to their lowest level since August 2020. TCMB cut its key interest rate by 1,000 basis points since September 2021, and President Erdogan asked to stimulate industrial and export growth. However, the bank said the November rate cut would end its current rate-cutting cycle. Inflation hit a 24-year high of 85.5 percent in October, as the low purchasing power of the local currency added to price pressure from soaring costs for energy that Turkey must import. In addition, the latest current account has turned into a serious deficit, and the trade deficit has increased by five times compared with the same period of the previous year, contrary to Erdogan's promise that Turkey will consolidate its strong surplus.

 

CHART OF THE DAY:

The euro was little changed at $1.04, near its strongest level since early July, on expectations of a narrowing interest rate differential between the European Central Bank and the Federal Reserve. The report from the European Central Bank's monetary policy meeting showed policymakers remained committed to raising interest rates to bring down inflation even in the face of a recession. At the same time, the minutes from the Federal Open Market Committee suggested the Fed would start slowing the rate hikes soon. The euro was also supported this week by purchasing managers' index data, which showed that the contraction in business activity in the bloc eased slightly in November.

 

 

 

- EURUSD - D1, Resistance (target zone) around ~ 1.05268, Support around  ~ 0.98570

Thinner stock trading conditions on Thanksgiving; Lithium retreats from record highs; EUR holds near 5-month highs

GLOBAL CAPITAL MARKETS OVERVIEW:  

European stock markets rose for the third consecutive session on Thursday, with the STOXX 600 index closing above 440 points, its highest point in three and a half months, led by chemicals stocks. Domestically, Germany's DAX rose 0.8% to 14,547, its highest since June 7, after the latest data showed German business morale improved more than expected in November. Meanwhile, in the latest meeting minutes, investors digested conflicting messages from the European Central Bank and Federal Reserve. Even in the face of a recession, European officials remain committed to raising rates, even as the Federal Reserve said it would slow its rate hikes soon. In corporate news, European homewares retailer Kingfisher left its 2022-23 financial guidance largely unchanged following a strong third-quarter result. Radiation therapy equipment maker Elekta warned that uncertain macroeconomic conditions and supply chain issues would hurt its third-quarter profit margins. The CAC 40 rose about 0.4% on Thursday to close at a seven-month high of 6,707, its third straight session of gains. Investors reacted positively to the latest Federal Open Market Committee (FOMC) meeting minutes, in which the Fed said it expected to shift to modest rate hikes "very soon." In focus, approval of the energy package was delayed until mid-December because of a lack of consensus among countries. On the corporate front, financials, real estate, and industrials were the best performers, with AJ and Airbus down 0.4%. The FTSE MIB rose 0.6% to 24,730 on Thursday, its highest since late May, tracking positive sentiment in European and North American stock markets, with Fed policymakers agreeing that rate hikes should be slowed while investors focused on the European Union's turmoil surrounding Russia. Discussion of oil and gas price caps. Utility providers led gains after EU energy ministers delayed formal approval of gas price caps until December after several countries said the proposed cap of 275 euros per megawatt-hour (more than double the current price) was too loose and could become useless. Terna led the gains, rising 2.3 percent. Meanwhile, Telecom Italia extended its choppy momentum, rising nearly 3 percent, as investors continued to await news from the government on a possible takeover of the company's fixed-line network. The Istanbul Stock Exchange 100 index hit a record high for the third straight session on Thursday, reaching 4,887 points, after the Central Bank of the Republic of Turkey cut its main interest rate by another 150 basis points to 9% while signaling that it would end the current rate-cutting cycle. Since the central bank began its rate-cutting cycle in September 2021, investors have been using the stock market to hedge against surging inflation and a plunging lira in Turkey, while residents have sought assets to park their savings. Since then, the lira has plunged more than 100 percent, worsening inflationary pressures. Consumer inflation jumped to a 24-year high of 85.5% in October, buoyed by largely negative real interest rates and costly stabilization amid intense pressure from President Tayyip Erdogan's monetary measures. London shares closed little changed on Thursday, with the blue-chip FTSE 100 hovering around 7,450, as gains in the property and materials sectors offset losses in the healthcare sector. With U.S. markets on holiday and trading volumes thinned, investors digested hawkish minutes from the European Central Bank's last meeting, which showed policymakers remained committed to raising interest rates even amid a recession. While the ECB appears to be far from over on its tightening cycle, the minutes of the Fed's November meeting showed an overwhelming majority of policymakers agreed that the pace of U.S. rate hikes would soon be slowed. Intertek Group and Intermediate Capital Group were among the biggest gainers on the index, up 4.5 percent and 3 percent, respectively. Imperial Brands, on the other hand, fell nearly 4%. The ruble-based MOEX Russia index fell 5 points to close at 2,206 on Thursday, halting a two-session winning streak as investors focused on concerns over a G7 price cap on Russian oil exports and its impact on the country's energy revenues discussion. The Urals oil contract is currently trading at $67 a barrel, prompting several states to consider the current proposal for a cap of $65 to $70 too lenient. Nonetheless, Greece and Malta have advocated raising the cap to limit the impact on their shipping industries. Oil companies closed mostly lower, with Rosneft, Rosneft, and Lukoil down 0.25% to 0.5% but still holding gains for the week. Meanwhile, Gazprom closed flat after announcing plans to boost investment by 16 percent to 2.3 trillion rubles next year. On the macro front, the latest data showed that the decline in industrial activity unexpectedly eased in October, with producer prices rising at their weakest pace in two years. Canada S&P/TSX Composite index rose on Thursday, hovering around 20,350, extending the previous session's gains to June levels, with trading volumes reduced due to the U.S. Thanksgiving holiday. Mining and metallurgy specialists led gains in Toronto stocks, supported by continued increases in gold prices following the Federal Reserve's signal to slow rate hikes following the latest FOMC minutes. Policy-sensitive technology stocks also rose from the previous session, averaging 0.5%. Energy producers, meanwhile, are in the green despite falling crude prices. Investors continue to focus on the debate among the G7 countries over caps on Russian oil exports, as the Western Canadian Select oil benchmark trades at $10 a barrel, below the Urals, and faces higher competition if the cap passes and is triggered . Hong Kong stocks rose 137.09 points, or 0.78%, to close at 17660.90 points on Thursday, rising for the second consecutive trading day after the minutes of the Federal Reserve meeting showed support for gradual interest rate hikes. Market participants welcomed signs of looser monetary conditions in China, as the central bank will allow banks to reduce capital reserves to stimulate economic activity. Meanwhile, Beijing has reportedly instructed lenders to increase financial support to shore up the foundations for future growth. However, a new wave of COVID-19 cases on the mainland remains a concern, with reports of infections climbing to record highs and surpassing the previous peak in April. Financials, consumer durables, and healthcare rose, led by semiconductor manufacturing (3%), China Resources Land (1.7%), Kuaishou Technology (1.2%), HKEx and Clearing House (1.1%), and AIA Group (0.7%). China Shanghai Composite fell 0.25% to close at 3,089, and the Shenzhen Composite fell 0.15% to close at 10,987 on Thursday, with mainland Chinese stocks trailing global peers as the country's daily rate of COVID-19 infections soared to a record high. There are fears that the authorities will adopt stricter restrictions, which may have a negative impact on the economy. After top officials unleashed more monetary stimulus to support the economy, Chinese stocks are still struggling, including a possible cut to the reserve requirement ratio. Also, Thursday’s losses came even after minutes from the Federal Reserve’s latest meeting, which showed that most U.S. policymakers agreed that the rate hikes might soon be slowed. Technology and consumer stocks led losses on Thursday, while health care, new energy, and resource-related stocks mostly rose. New Zealand ANZ 50 was almost flat at 11,321.71 after falling early in the session, as market participants attempted to look past the Reserve Bank of New Zealand's recession warning and the central bank's record rate hike. At the same time, hopes are growing that New Zealand will weather a global slowdown, partly because of a stable financial system. Meanwhile, market participants digested minutes from the Federal Reserve's last meeting, which showed a "vast majority" of policymakers backed a less aggressive rate hike. In China, Beijing has rolled out a series of policies to support the property sector and plans to lower banks' reserve requirements. Technology, financials, and retail trade losses offset gains in non-energy minerals, consumer durables, and utilities. Allied Farmers is up 2.9%, Cannasouth Ltd is up 1.8%, and Contact Energy is up 1%; Asset Plus Limited (-4.6%), Argosy Property (-2.5%), Burger Fuel Group (-1.5%) and A2 Milk Co (-1 %) fell. In post-holiday trade on Thursday, the Nikkei 225 rose 1.1 percent to a more than two-month high above 28,400, while the Topix gained 1.1 percent to an 11-month high in 2017, as markets hoped the U.S. Japanese stocks caught up with global peers as the Federal Reserve tightened policy. The minutes of the latest Fed meeting showed that most officials supported the need to slow the rate hikes as soon as possible, while only a few called for a final increase in interest rates. Investors also reacted to data showing Japan's manufacturing activity contracted in November, while services sector activity remained unchanged. Technology stocks led the gains, with strong gains in Tokyo Electron (3.6%), Lasertec (4.5%), and Keyence (3.3%). Almost all other sectors were up, including index heavyweight Shionogi & Co (4.5%), Japan Yusen (4%), and Sony Group (2%). The Baltic Dry index, which measures the cost of shipping goods globally, extended gains for a second session on Thursday, rising about 4.9% to a more than one-week high of 1,242 on firmer demand in the shipping sector. The Capesize index, which tracks 150,000 tonnes of iron ore and coal cargoes, rose 11.5% to hit its highest in more than a week at 1,384 points; the Panamax index, which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, snapped a five-session losing streak with a slight gain. It rose 0.1 percent to 1.466. Elsewhere, the Supramax index rose 11 points to 1.174.

 

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- CA: Canada's CFIP Business Barometer long-term optimism index, based on a 12-month outlook, fell to 50 in November 2022 from a downwardly revised 51.2 in the previous month, suggesting that as many entrepreneurs felt pessimistic as optimistic. In addition, it was the first time since April 2020 that there was no general optimism, with agriculture, retail, and financial services seeing the most pessimistic long-term views. Overall, staffing plans have deteriorated from the previous month, and capital spending plans remain below pre-pandemic levels. Meanwhile, plans to raise future prices eased slightly from the previous month but remained positive while the outlook for wages accelerated.

- CA: In September 2022, the average weekly earnings of non-farm employees in Canada increased by 3.5% year-on-year to $1,175, continuing to rise since June 2021. It was the 16th straight month of gains in average weekly earnings, with 16 of 20 industries posting gains in September. The goods-producing sector (+4.7 percent) outpaced the national average, with forestry and logging (+1.7 percent to $1,412) and construction (+5.7 percent to $1,457) posting the biggest increases. Slower growth in services (+3.4%), with sharp gains in finance and insurance (+15.8% to $1,724) outweighed by declines in corporate and business management (-5.9% to $1,494) and education services, Partially offset by a decrease in C$1,145 (-3.2 percent to C$1,145). Year-over-year growth in September was higher than the national average in four provinces, led by New Brunswick (up 6.3 percent to $1,083) and Quebec (up 3.7 percent to $1,118).

- EU: The accounts of the ECB's October policy meeting showed that ECB policymakers agreed that the central bank should continue to normalize and tighten monetary policy to tackle high inflation, even in a shallow recession. Officials noted that the inflation outlook continued to deteriorate, with inflation running too high and repeatedly above forecasts, and that inflation could become entrenched, with a growing risk of second-round effects and wage-price spirals. Still, the central bank said it might want to pause ongoing rate hikes in the event of a prolonged and deep recession, which could do more to dampen inflation. In October, the ECB raised its key interest rate by 75 basis points, pushing borrowing costs to their highest level since early 2009. There is broad support for a once-in-a-meeting, data-dependent approach to making future monetary policy decisions.

- EU: The euro was little changed at $1.04, near its highest level since early July, on expectations that the interest rate gap between the European Central Bank and the Federal Reserve will narrow. The accounts of the European Central Bank's monetary policy meetings showed policymakers remained committed to raising interest rates to bring down inflation even in the face of a recession. In contrast, the Federal Open Market Committee meeting minutes showed the Fed would soon begin to slow the rate hikes. The euro was also supported this week by PMI data showing that the contraction in euro zone business activity eased slightly in November.

- UK: The CBI's order balance fell by one point to -5 in November 2022, according to the CBI's latest Industrial Trends Survey, but was above consensus expectations of -8, indicating total orders for the fourth consecutive month lower than normal. Export orders were also lower than normal, but to a lesser extent than last month (-7 to -14 in October), while manufacturing output is expected to decline over the next three months (-10 to 7). Meanwhile, manufacturers judge inventories to be broadly adequate (5 vs. 7). On the price front, expectations for average selling price inflation over the next three months remained roughly similar to the previous month (47 vs. 80).

- TW: In October 2022, Taiwan's broad M2 money supply increased by 7.32% year-on-year to NT$5,666.8 billion, an acceleration from September's 6.83% growth due to faster growth in foreign currency deposits and increased bank loans and investments. Considering the January-October period, the cumulative average annual growth rate was 7.54%.

-  GE: In November 2022, Germany's Ifo business climate indicator rose 1.8 points from the previous month to 86.3, the highest value in three months and above the market consensus of 85.0. Expectations for the coming months are notably less pessimistic, at a three-month high (80.0 vs. 75.9 in October), and industry export expectations have risen into positive territory. In addition, more than half of the companies are worried about supply bottlenecks, which is lower than in October. As a result, the pressure of the price increase has decreased, with only 46.8% of companies expecting to increase prices in the next three months. On the other hand, the firms' assessment of their current situation deteriorated to the lowest level since February 2021 (93.1 vs. 94.2).

- FR: In November 2022, the French manufacturing climate index fell to 101 from 103 in the previous month, lower than the market forecast of 102. Business sentiment soured as manufacturers viewed their past production (1 to 6 in October), overall production expectations (-10 to -8), and overall orders (-15 to -12), as well as foreign demands (-10 to 8). In contrast, individual production expectations improved (17 vs. 12). Also, the measure of perceived economic uncertainty eased slightly (36 vs. 37).

- SK: The Korean won traded around 1,338 per dollar, pausing its recent gains after the Bank of Korea announced a modest 25 basis point rate hike. It was the ninth hike since the central bank began tightening policy in August 2021, bringing the benchmark rate to its highest level since June 2012. At the previous two meetings, the BOK raised borrowing costs by a full percentage point to lower inflation without sacrificing growth, opting for a more dovish move. Last month, the win fell to an 11-year low as the U.S. Federal Reserve embarked on a historic tightening campaign and the South Korean economy faced external and domestic headwinds. Meanwhile, the yuan has recovered nearly 10 percent since betting on a slower pace of Fed rate hikes and a stronger domestic economic outlook.

- JP: Preliminary data showed that the au Jibun Bank Japan manufacturing PMI fell to 49.4 in November 2022 from a final 50.7 a month earlier. It was the first contraction in factory activity since January 2021 and the fastest pace in two years amid cooling demand conditions and severe inflationary pressures. Moreover, production fell by the most since September 2020, with new orders falling faster in 27 months and export orders falling faster as COVID-19 cases resurfaced in some countries. In addition, businesses continued to reduce buying activity, reflecting concerns about future demand. Meanwhile, job growth remained flat, and the backlog of jobs fell faster. On the price front, input cost inflation fell to a 14-month low while output prices also moderated. Finally, market sentiment fell to a six-month low amid ongoing concerns about the current global economic situation.

- JP: Preliminary data showed that the au Jibun Bank Japan Services PMI fell to 50.0 in November 2022 from a final 53.2 in the previous month, indicating no change in business activity. Still, following the launch of a national travel discount scheme in October, a revival in the travel industry continued to support order book growth, which rose for a third straight month, albeit at a slower pace, according to reports. At the same time, job growth has slowed, and the growth rate in backlogs of work has stalled. Furthermore, on the pricing front, input cost inflation eased while output cost inflation accelerated, with companies reportedly continuing to pass the increased cost burden on to customers. Finally, amid labor shortages and general economic uncertainty, sentiment fell to an eight-month low.

 

LOOKING AHEAD:   

Today, investors will receive the following:

- JPY: Tokyo Core CPI y/y, and SPPI y/y.

- EUR: German Final GDP q/q, and German GfK Consumer Climate.

 

KEY EQUITY & BOND MARKET DRIVERS:

- FR: French 10-year OAT yields fell to 2.3% in late November, the lowest level in more than two months and tracking global bond yields, as concerns over the Fed's upcoming meeting were raised following the release of the FOMC minutes. Bets on a slowdown in rate hikes further solidified at the meeting. Meanwhile, investors continued to assess the prospects for monetary tightening in the eurozone amid signs of a continued economic slowdown. Flash PMI data showed that private sector activity in the euro shrank for the fifth time in a row, while domestic activity contracted for the first time since February 2021. Nonetheless, ECB board members stressed that interest rates would continue to rise to contain record-high inflation in the eurozone even as the economy heads toward recession. Policymakers said rates would be raised by at least 50 basis points at the central bank's December meeting, leaving room for a more aggressive 75 basis point hike.

- IT: At the end of November, Italy's 10-year BTP yield fell further below 3.7%, the lowest level in three months, and global bond yields continued to decline after the FOMC meeting minutes showed that Fed officials agreed to slow down the pace of interest rate hikes. Domestically, Prime Minister Meloni's cabinet approved a 35 billion euro increase in spending aimed at reducing Italy's budget deficit to 4.5 percent in 2023 from 5.6 percent this year. The figure remained below the limit set by the European Union and eased concerns that political instability in Italy could exacerbate the country's high debt and weak fiscal position. Meanwhile, bond markets continued to brace for another ECB rate hike, even as PMI data provided further evidence of a slowing economy, as bringing inflation down remains a top priority for board members. The spread between the 10-year BTP and German bunds narrowed to below 175 basis points, the lowest since May, suggesting that Italian debt is less credit risk.

- GE: Germany's 10-year bond yield continued to fall to 1.8%, hitting its lowest level since Sept. 19, a day after U.S. Treasury yields fell. Minutes from the Fed's most recent meeting showed that a "substantial majority" of officials agreed that the rate hikes would likely slow soon, even if inflation remained well above the central bank's target. Elsewhere, the ECB's meeting accounts showed policymakers would continue to normalize and tighten monetary policy to combat high inflation even with a shallow recession. Still, the minutes also suggested that the central bank may want to pause ongoing rate hikes in the event of a prolonged and deep recession, which could do more to dampen inflation. Rates in the eurozone are expected to peak at around 2.8% by the end of next summer.

- UK: U.K. 10-year bond yields fell to 2.9%, the lowest level since Sept. 2, a day after U.S. Treasury yields fell sharply after minutes of the Fed's November policy meeting showed an "overwhelming majority" of policymakers agreed "Very likely soon" to slow the pace of rate hikes. Elsewhere, investors digested comments from a handful of Bank of England officials. Deputy Governor Ramsden supported further rate hikes but said he would consider cutting rates if the economy didn't develop in line with his expectations and the persistence of inflation was no longer a concern. Earlier this month, Monetary Policy Committee member Tenreyro said she expected rates to remain unchanged this year before falling in 2024, while Dhingra warned that excessive tightening could trigger a deep recession. The central bank has hiked interest rates by 290 basis points since December 2021, and markets are currently divided on pricing in a rate hike of 50 to 75 basis points in December.

- CN: China's 10-year government bond yield fell to 2.8% after hitting a more than the four-month high of 2.85% earlier this month, as bets on monetary stimulus began to fade and concerns about China's economic outlook mounted. Monetary tools such as RRR cuts will be used in a timely and appropriate manner to maintain reasonably ample liquidity, the State Council said on Wednesday, suggesting that bank deposit reserve ratios may be cut soon. That’s despite warnings from the PBOC that inflation could accelerate due to rising demand and other risks, including disruptions to global energy supplies and rapid growth in the M2 money supply. In addition, COVID-19 cases continued to increase in China, and some restrictions were reimposed.

- SW: Sweden's central bank, the Sveriges Riksbank, raised its repo rate by 75 basis points to 2.5% at its November meeting, pushing borrowing costs to their highest level since December 2008 in response to persistently high inflation. With CPI inflation at 9.3% in October, well above the central bank's 2% target, policymakers worry that the risk of the current high inflation will become entrenched as inflation pressures are slightly higher than expected. As a result, the policy rate is expected to increase further early next year when it will be below 3%. In addition, the Riksbank will allow its securities holdings to dwindle as they mature early next year.

- SK: The Bank of Korea (BoK) raised its benchmark interest rate by 25 basis points to 3.25% at its November meeting, in line with the market. Thursday's move pushed borrowing costs to their highest level since June 2012, after the central bank hiked rates by half a percentage point twice this year to keep pace with the Federal Reserve and stem a weakening currency. However, the Bank of England opted to slow down the pace of tightening to minimize pressure on the economy and credit markets while keeping inflation in check. The latest decision is the sixth consecutive rate hike and the ninth since August 2021, when the central bank began to roll back amid more than a year of easing. Policymakers said GDP growth in 2022 would remain in line with the 2.6 percent forecast in August, but forecast GDP growth next year at 1.7 percent, well below the August forecast of 2.1 percent due to mounting global headwinds and high-interest rates. Meanwhile, headline inflation is expected to be 5.1% in 2022 and 3.6% in 2023.

 

STOCK MARKET SECTORS:

- High: Consumer Discretionary, Information Technology, Industrials.

- Low: Energy.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

- CAD: The Canadian dollar strengthened further against the U.S. dollar and is now hovering around $1.335, not far from an eight-week high of $1.325 earlier this month, as the prospect of further rate hikes kept bulls optimistic. Bank of Canada Governor Tiff Macklem testified in the House of Commons that inflation remains too high while warning that the central bank's tightening cycle is still ongoing. Canada's annual inflation rate of 6.9 percent remains well above the central bank's 2 percent target following a strong jobs report in October. However, weakness in crude oil, Canada's main export, limited further gains amid a worsening global growth outlook.

- CNY: The offshore yuan was steady at around 7.15 per dollar, staying in a sideways trading range, as traders weighed the prospect of a slower pace of Fed tightening against expectations of more monetary easing from the People's Bank of China. Minutes from the latest Federal Reserve meeting showed that most U.S. policymakers agreed that a slowdown in rate hikes was likely soon. Meanwhile, top Chinese officials signaled more monetary stimulus ahead to support the economy battered by the coronavirus, including a possible cut to the reserve requirement ratio. However, the People's Bank of China kept its benchmark lending rate unchanged for the third month in November, as currency depreciation and persistent capital outflows left little room for policy easing. The world's second-largest economy has also struggled to contain a resurgence of the coronavirus since the targeted measures, with daily virus infections hitting record highs.

- JPY: The yen gained more than 140 per dollar, nearing its highest level in nearly three months, after the minutes of the latest Federal Reserve meeting showed most U.S. policymakers agreed that a slowdown in rate hikes was likely soon. Meanwhile, Bank of Japan Governor Haruhiko Kuroda recently stressed the need to maintain an ultra-loose monetary policy to support the economy after inflation data spiked again. Japan's annual core consumer prices surged to a 40-year high of 3.6 percent in October, as high global commodity prices and a weak yen pushed up import costs. Elsewhere, the latest data showed that China's trade deficit widened more than expected in October as import costs soared faster than export growth, while the economy unexpectedly contracted in the third quarter.

- NZD: The New Zealand dollar gained more than US$0.62, hitting its highest level in more than three months, after the Reserve Bank of New Zealand announced a massive 75 basis point rate hike to outpace inflation, with rates expected to reach 5.5% in September 2023 The peak value is much higher than the previous forecast of 4.1%. It was the biggest increase since the RBNZ introduced the OCR in 1999, bringing the policy rate to a 14-year high of 4.25%. New Zealand's persistently high inflation and near-record-low unemployment supported the case for more aggressive action. At the same time, other major economies began to slow the pace of tightening amid growing risks of a global recession. However, the New Zealand dollar also weakened after the minutes of the latest Federal Reserve meeting showed most U.S. policymakers agreed that a slowdown in rate hikes was likely soon.

- USD: The U.S. dollar index fell below 106 on Thursday, falling for a third straight session to its lowest level since mid-August, after the minutes of the latest Fed meeting showed an overwhelming majority of policymakers agree that a slowdown in rate hikes is likely soon paced. Earlier this month, the Fed raised interest rates by 75 basis points to 3.75%-4% for the fourth time to curb persistently high inflation, pushing borrowing costs to their highest level since 2008. The Fed now wants to assess the economic impact of its historic tightening, with recent weak U.S. financial data supporting a more dovish approach. As a result, the greenback fell across the board, with the sell-off most notable against the euro and yen.

- LIT: Lithium carbonate prices in China fell to 590,500 yuan a tonne from an all-time high of 597,500 yuan hit on Nov. 11, as authorities set to remove subsidies for battery makers in early 2023, easing a bit amid an industrial boom. Demand for raw materials soared. Department. Lithium arrivals from South America have also weighed on prices, alleviating concerns about supply shortages. Still, continued bullish demand in the sector has pushed prices up 111% year-to-date. Decarbonization goals in top consumer China prompted local governments to purchase electric vehicles through cash incentives and tax breaks, leading to an 81% year-on-year increase in sales of new energy vehicles in October. Meanwhile, the U.S. said it would provide $2.8 billion to U.S. battery makers to ramp up production, boosting demand for the input.

- IRN: Iron ore cargoes containing 63.5 percent iron ore bound for Tianjin were at $98 a tonne, not far from an eight-week high of $99.5 hit on Nov. 18, having rallied since the start of the month on fresh liquidity injections in China, the largest consumer, constituted 20% of steel consumers. The country's largest commercial bank agreed to provide $38 billion in new credit lines to private developers in response to a liquidity crunch in the sector. The move comes as the National Bond Administration expanded a key funding program by $35 billion to support bond sales in the industry after a period of defaults increased the cost of credit for homebuilders. Still, iron ore prices are 38% below their 2022 peak in March as China's pandemic containment measures led to long-term fears of a recession and supply concerns for Ukrainian exports eased.

- TRY: The Turkish lira hovered at an all-time low of 18.6 per dollar after the central bank cut rates by another 150 basis points in November, pushing borrowing costs to their lowest level since August 2020. TCMB cut its key interest rate by 1,000 basis points since September 2021, and President Erdogan asked to stimulate industrial and export growth. However, the bank said the November rate cut would end its current rate-cutting cycle. Inflation hit a 24-year high of 85.5 percent in October, as the low purchasing power of the local currency added to price pressure from soaring costs for energy that Turkey must import. In addition, the latest current account has turned into a serious deficit, and the trade deficit has increased by five times compared with the same period of the previous year, contrary to Erdogan's promise that Turkey will consolidate its strong surplus.

 

CHART OF THE DAY:

The euro was little changed at $1.04, near its strongest level since early July, on expectations of a narrowing interest rate differential between the European Central Bank and the Federal Reserve. The report from the European Central Bank's monetary policy meeting showed policymakers remained committed to raising interest rates to bring down inflation even in the face of a recession. At the same time, the minutes from the Federal Open Market Committee suggested the Fed would start slowing the rate hikes soon. The euro was also supported this week by purchasing managers' index data, which showed that the contraction in business activity in the bloc eased slightly in November.

 

 

 

- EURUSD - D1, Resistance (target zone) around ~ 1.05268, Support around  ~ 0.98570

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