cpi meaning

There is no sign of inflation slowing down, there are still major issues with the supply chains, money supply is still rising and the war in the Ukraine affecting investor sentiment are all aspects driving the rise in inflation worldwide. UK Inflation: The increase has deepened the cost of living crisis in the UK The UKs inflation hit an all time 30 year high in March and the April reading is expected to further increase. As a result over the last month, investments in REITs have increased, as investors are looking to REITs as a potential hedge against inflation, REITs are also a useful tool to diversify an investment portfolio. The graph shows one of the top REITs (Residential Secure Income Plc ) in the UK and its performance over the past week amidst the announcements of housing inflation increasing. Related article: ECB To Shock Markets In The Following Week!? US Dollar Rate Under Pressure As Well! Price Chart of Residential Secure Income Plc

US small business optimism held steady in April after three consecutive falls. Nonetheless, businesses retain the ability to pass higher costs onto their customers and this will keep inflation sticky. Ongoing supply chain issues and rising fuel costs mean 2% inflation is a distant prospect Business sentiment holds steady, but firms still want to hire The recent US data has been mixed and that has helped to fuel fears that the economy could experience a marked slowdown, especially with the Federal Reserve firmly focused on inflation and hiking interest rates. Dollar strength is acting as a further headwind to growth by making US exports less price competitive in what is already a challenging external demand environment for companies. In this regard this morning’s National Federation of Independent Business survey for April was marginally better than expected at the headline level with optimism holding steady versus expectations of a fourth consecutive monthly drop. Nonetheless it is still the weakest level since April 2020 in the immediate aftermath of the pandemic striking. The details show a slight improvement in the proportion of small businesses expecting higher sales, but there was a little more pessimism on the outlook for the economy and whether it was a good time to expand. Set against this softer environment, firms are still struggling with worker shortages and are desperate to hire. The NFIB released the labour components last Thursday, which a net 46% having raised worker compensation during the past 3 months and 27% expecting to do so further. Inflation pressures show no sign of moderating Looking to tomorrow's inflation data the NFIB report shows a net 70% of companies raised their selling prices in the past 3 month - down from last month's 72% balance, but this is still the second highest reading in the survey's 47-year history. Moreover, a net 46% of firms plan to raise their prices further over the next three months (down from 50%, but this is still the 6th highest reading in the survey's history). This reinforces the message the despite concerns about where the economy is heading, businesses continue to have pricing power and highlights the breadth of inflation pressures in the economy. The ability to raise prices is seen across all sectors and all sizes of businesses NFIB price indicators show no sign of a turn in inflation Source: Macrobond, ING Inflation may be peaking, but 2% is a long way away Tomorrow's CPI report will probably show that inflation has passed the peak, due largely to lower used car prices, but in the absence of major improvements in supply chains and geopolitical tensions, the descent to the 2% target will be very slow and may not be achieved until the very end of 2023. However, with national gasoline prices hitting a new all-time high yesterday that will come as little comfort to most households. TagsUS Inflation Federal Reserve Business optimism   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

All quiet in Asia ahead of US inflation In this article Macro outlook What to look out for: China and US inflation Source: shutterstock Macro outlook Global: The big story today is going to be the April US CPI release, and markets may be quite muted ahead of this. Our Chief US Economist has written about this in the context of the latest NFIB business survey, so please check out this link for more details. But to summarise, whatever happens tonight, he isn’t looking for US inflation to fall quickly. That may bring back concern about potentially more aggressive FOMC behaviour. In this vein, Loretta Mester yesterday suggested that if inflation wasn’t falling by the second half of the year, the FOMC may need to increase the pace of its tightening. US stocks managed to eke out some small gains yesterday after the big falls earlier this week. But trading was choppy, and it could have gone either way. We don’t read too much directional steer into this for Asia’s open today. G-10 FX continued to show USD support, but movements were not large. EURUSD drifted down to about 1.0530 from about 1.0560 yesterday. The AUD still looks pressured lower and is about 0.6937 as of writing. Other Asian FX was fairly muted, though note there is a BNM meeting today, so a “no-change” which is on the cards, could see the MYR softening further. Bond markets were also fairly muted. 2-year US Treasury yields edged up slightly, but the 10Y US Treasury bond yield drifted back under 3.0%. 10Y JGBs have been drifting higher – challenging the 0.25% level, and breaching it intraday, so we may be due an official response of sorts imminently.    China: April CPI and PPI inflation rates are expected to slow from March due to lower metal and coal prices and weak demand for consumer goods. We will probably see higher prices for pork and fertilizer. This set of data reflects slower economic growth resulting from the Covid-19 social distancing measures. Korea: The Jobless rate remained unchanged in April at 2.7% (vs the market consensus of 2.8%) for the third straight month, while the labour participation rate improved to 63.8% (vs 63.5% in March), indicating that the labour market continued on a recovery track. Reopening is supporting employment growth in service sectors such as retail sales, recreation, and transportation. Despite a gloomier outlook for manufacturing, employment in that sector posted a solid gain for the eighth straight month. However, one potential caveat to this month’s report was that the majority of the employment growth came from the older age group (60+) while the 30’s (supposedly the most productive group) lost the most jobs. President Yoon Seok Yeol’s party has proposed a supplementary budget plan to the government this morning. Although the size was in line with the market expectation of about KRW33tr, it is noted that the extra budget would not require additional bond issuance. More details will be released tomorrow. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM What to look out for: China and US inflation Korea unemployment (11 May) China CPI and PPI inflation (11 May) US CPI inflation (11 May) Philippines 1Q GDP (12 May) US PPI inflation and initial jobless claims (12 May) Malaysia GDP (13 May) Hong Kong GDP (13 May) US Michigan sentiment (13 May) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

It’s D-day of the week: we will see whether inflation in the US started easing in April after hitting a four-decade high in March, and if yes, by how much. A soft inflation read will come as a relief that the Federal Reserve’s (Fed) efforts to tame inflation start paying off, but any disappointment could send another shock wave to the market. In the FX, the US dollar extended gains, despite the easing yields yesterday, as the risk-off flows continued supporting the greenback For now, activity on Fed funds futures give almost 90% chance for a 50-bp hike in FOMC’s June meeting; there is a lot left to be priced for a 75bp hike, if the data doesn’t please. To avoid pricing in a 75bp hike at next FOMC meeting, we must see an encouraging cooldown in inflation. In the FX, the US dollar extended gains, despite the easing yields yesterday, as the risk-off flows continued supporting the greenback.   The barrel of US crude tipped a toe below the $100 level on news that the Europeans softened their sanctions proposal against the Russian oil The levels against the majors like euro, yen and sterling remained flat, but the positive pressure in the dollar, combined with Turkey’s unconventional monetary policy start giving signs of exhaustion. The dollar-try advanced past the 15 mark, and the government asked institutions to make their FX operations within the most liquid trading hours. Two weeks ago, the bank had revised its regulations on banks' reserve requirements, applying them to the asset side of balance sheets in order to strengthen its macroprudential policy toolkit. The latter required reserves now pressure the overnight rates to the upside – suggesting that the unconventional policy is near limits. Energy are up and down… but mostly up. The barrel of US crude tipped a toe below the $100 level on news that the Europeans softened their sanctions proposal against the Russian oil, but oil is already above the $100 this morning. The upside potential is fading due to slower global growth prospects, and the Chinese lockdown. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM Watch the full episode to find out more! 0:00 Intro 0:24 All eyes on US inflation data! 2:30 Market update 3:50 Strong US dollar threatens lira stability 5:50 Risks in energy markets remain tilted to the upside 6.35 Why Chinese zero Covid policy won’t work 8.07 Coinbase hit hard by crypto meltdown 8:39 Energy, still the best option for investors Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.  

S&P 500 modest risk-on turn talked yesterday, is underway – with adequate support from bonds. That means the dollar is going to get under daily selling pressure, with positive consequences for assets spanning commonidities, precious metals and sure supporting tech as well (looking at TLT to cast a decisive vote for Nasdaq). Unfolding just fine, but what about the CPI effect? Likely to temper the oh so fast inflation theme, at least temporarily – and that would take pressure off the Fed‘s hand being twisted by the markets. Note though how both the 2-year and 10-year Treasury paused over the last days. Together with the arriving as anticipated negative quarterly GDP print, the temporary slowdown in pace of inflation would get an ally in retreating (especially long-term) Treasury yields reflecting the darkening real economy prospects. Time for a relief S&P 500 rally with both tech and value participation, if only HYG can perform somewhat better. Time for a relief S&P 500 rally with both tech and value participation, if only HYG can perform somewhat better. The bulls have a chance, and can run with it as best as they can. Cryptos thus far are modestly leaning in the „local bottom is in“ direction (in spite of the tectonic Tether developments), so the odds are for price gains across the board (at the expense of the dollar) during today – as long as markets interpret the upcoming CPI reading as slowing down / slowly peaking. Yes, since Jun 2020 when I started to talk early effects of inflation, the last week has been the first time when I raised the good likelihood of inflation making a local peak when May / Jun CPI readings come in, only to spring quickly back to life on the „economy is slowing, do something“ change in tune of demands made to the Fed. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM At these trying times for real asset bulls, let‘s take the proper precious metals perspective, enjoy the rich caption: It‘s the dollar, yields and miners coming back to life that would mark the coming upleg arrival Plenty of upside risk to become evident in 2H 2022, with my Monday‘s article covering the game plan for turnaround across the many assets on my daily watch. It‘s the dollar, yields and miners coming back to life that would mark the coming upleg arrival. Lean times until then. Read next: (EUR/USD) German Inflation Meets Forecasts, Pound Sterling Continues To Weaken (EUR/GBP, GBP/USD), (EUR/JPY) Japanese Yen Strengthens As Investors Seek Safe-Haven Assets| FXMAG.COM There, you can subscribe to the free Monica‘s Insider Club Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

Today at 14:30 important macroeconomic data for the US economy will be published, which may also affect asset valuations outside the United States - we are talking about inflation data. In March 2022, inflation in the United States rose to 8.5 percent, which was the highest reading in 40 years. The rise in prices, in turn, may have affected several market measures. First, it forced the Fed to act, as the Federal Reserve is supposed to care about price stability and should raise interest rates if prices rise. This in turn could have influenced expectations of higher USD interest rates in the future and a strengthening of the dollar to levels last seen 20 years ago. Further expectations of rising rates could lead to an increase in bond yields, where for 10-year bonds they are in the region of 3%. The increase in bond yields, expectations of further tightening of monetary policy, and shrinking of the Fed's balance sheet, in turn, are information that could adversely affect the stock market, which in the case of the Nasdaq 100 index found itself in bear market territory. This spiral seen in many markets may continue until investors fully discount inflation, rising yields, and expectations of interest rate hikes. Interestingly, the latter had already begun to fall earlier in the week as recession fears increased. Currently, based on the federal funds rate contracts, the market is assuming a peak for hikes in mid-2023 at 3.00-3.25 percent. That's lower than the 3.5-.375 percent assumed as recently as the beginning of the month. The determinant, in turn, of whether there is a chance of full pricing for U.S. rate hikes may be where inflation will be. If this one peaks this six months and starts to fall, the market may stop assuming very aggressive Fed action. This, in turn, could bring relief to the bond market, the stock market, and also lead to the US dollar being close to its cyclical peak. Hence, today's and subsequent data on price growth in the U.S. economy could be so important. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

The dollar got a fresh boost, with stocks coming under renewed pressure after a new batch of US inflation data. The annual inflation rate slowed from 8.5% to 8.3% The US consumer price index rose 0.3% in April after 1.2% a month earlier. The annual inflation rate slowed from 8.5% to 8.3% but was higher than the expected 8.1% y/y. Particularly worrying for markets is the development of core inflation. The corresponding index added 0.6% m/m and 6.2% y/y last month, higher than the expected 0.4% and 6.0%, continuing the sprawl of inflation. Higher-than-expected inflation is now positive for the dollar and weighs on equities as it suggests a more robust Fed response While the annual rate of core and core inflation seems to have peaked, higher-than-expected inflation is now positive for the dollar and weighs on equities as it suggests a more robust Fed response. With inflation far from the 2% target, the Fed will be inclined to act faster (raise rates more than 50 points at a time) or stop hiking at a higher level. A significant risk demand indicator, bitcoin, has already moved out of the range with a lower boundary in January 2021 Locally, we see a tug-of-war around the dollar against the euro and yen near the lows of the past two weeks and swings against the pound and the franc near this week’s extremes. However, a significant risk demand indicator, bitcoin, has already moved out of the range with a lower boundary in January 2021. The S&P500 and Nasdaq futures were also pushed back to this week’s lows, indicating continued bearish pressure.

Gold dipped to $1832 on Wednesday morning, pulling back to a critical support line in the form of the 200-day moving average, losing more than 11% from the peak levels reached in early March. Gold has been losing buyers amid a jump in US government bond yields Gold has been under systematic pressure for the past month and a half amid a rally in the dollar. In addition to this increase in the underlying price, gold has been losing buyers amid a jump in US government bond yields. However, it is too early to talk about a break in the uptrend in gold, but only a retreat into deep defences ahead of essential data. Most of the time, the correlation between inflation expectations and long-term bond yields governs the dynamics in gold. Weak real bond yields lead to a pull in the precious metal as investors look to protect the purchasing value of capital.  A significant event for the gold outlook is today’s US inflation release With high interest rates and inflation control, investors prefer to earn yields in bonds by selling off gold. A significant event for the gold outlook is today’s US inflation release. The market reaction to this event could be decisive for gold in the coming days or weeks. If gold manages to develop a pullback from current levels, we could see a sharp increase in buying over the next few days Consolidation below $1830 on the day would be an essential bearish signal that could rapidly decline towards $1800. Moreover, there would be an immediate question of double-top formation through 2020 and 2022 peaks as an early signal of a long-term downward trend with a potential of $1200. If gold manages to develop a pullback from current levels, we could see a sharp increase in buying over the next few days, as we did in early February and late November. But unlike those episodes, this time, the bears might not wait for a quick reversal, and a further rally would be an important signal that gold continues to claw its way out of the prolonged correction. In this case, the nearest stops might be the levels near $1900, and further, the market might quickly target a renewal of the historic highs above $2075 before the end of the year. 

The inflation concerns are easing ahead of today’s US CPI reading. We doubt central bankers will back down so soon, however. Markets are coming around to our view that a peak is near in yields, but we think it might still be a couple of months away In this article US 10yr edges back below 3% on remarkable easing in inflation expectations The inflation scare is easing but beware of circular reasonings Global growth gloom means holding psychologically important levels will be more difficult Today’s events and market views The peak in yields may be near US 10yr edges back below 3% on remarkable easing in inflation expectations The juxtaposition between rising real rates and falling inflation expectations remains, and over the past 24 hours the fall in inflation expectations has been dominant. And that’s why the US 10yr yield has dipped back below 3%. Right now, US 10yr inflation expectations are in the region of 2.65%. They were in excess of 3%, albeit briefly, a few weeks back, at which point talk of a 75bp hike in June were sounding like a solid call. Now that inflation expectations are well down, the 50bp promised looks fine. "10yr real rate in the area of 1% would not look out of whack" Meanwhile the 10yr real yield is now above 30bp. Add that to the inflation expectation and we get the sub-3% 10yr Treasury yield. The move higher in the real yield has been spectacular. Back in March it was deeper than -100bp. The move to 30bp is a sign that the economy has morphed away from the need for ultra-loose policy. And a continued move higher takes it towards a more normal footing. In fact a 10yr real rate in the area of 1% would not look out of whack. If we got there, inflation expectations would fall far more. The adjustment higher in real yields is a threat to risk asset valuations Source: Refinitiv, ING   Today’s US CPI number will be important, but not determinative. In other words it should not have a material impact on the 10yr inflation expectation. That said, if it’s an outsized / surprise number, it’s then more likely to have an impact out the curve. Our central view is in line with the market view, where we do see a fall in contemporaneous inflation, consistent with the recent tendency for inflation expectations to ease lower. We’ve been surprised by this though, and think it’s too early to call it a trend. The inflation scare is easing but beware of circular reasonings The ‘peak inflation’ narrative should receive a boost from slowing US annual headline and core inflation readings today but we would be cautious about chasing the move lower in rates. As always, forward-looking markets could apply a heavy discount to central bank rhetoric but an acceleration in monthly core CPI means Fed officials are unlikely to change tack just yet. One should also remember that the decline from the inflation peak will be very slow indeed, keeping pressure on the Fed to act. Swaps show inflation is no longer the market's only concern Source: Refinitiv, ING   US CPI and Eurozone HICP swaps have dropped significantly this month Further afield, inflation compensation offered by US CPI and Eurozone HICP swaps has dropped significantly this month. Should markets conclude that central banks can now afford to be less hawkish? Only up to a point. To some extent, the drop in inflation swaps is owing to a deteriorating global macro environment, but the post-FOMC timing of this drop also suggests that it has at least as much to do with expectations that central banks will deliver on expected tightening. We would be careful with such circular reasonings. Global growth gloom means holding psychologically important levels will be more difficult For an example of the doubt setting in investors’ mind about central banks’ ability to tighten policy, look no further than yesterday’s better-than-expected German (Zew) and US (National Federation of Independent Business) sentiment indicators. None of the readings was enough to alleviate global growth gloom but the NFIB details in particular could have brought inflation fears back to the fore. We suspect it is too early to call the end of the hawkish re-pricing, with central bankers still very much on their front-foot when it comes to delivering monetary tightening. Bonds risk failing a psychologically important test Source: Refinitiv, ING   We have sympathy with the growing view that there is a short time limit to this tightening cycle We think a better candidate for a peak in yields in this cycle is during the third quarter of this year, after the ECB’s expected first hike and after the couple of additional 50bp hikes the Fed has committed to. This being said, turning points are notoriously difficult to pick and we have sympathy with the growing view that there is a short time limit to this tightening cycle. Should 10Y bonds fail to hold on to their recent jump above the psychologically important levels of 3% for Treasuries and 1% for Bunds, it may take a lot of good news to test these levels again. Today’s events and market views Germany (10Y) and Portugal (8Y) make up today’s Euro sovereign supply slate. This will come on top of a dual tranche NGeu syndicated deal in the 3Y (new issue) and 30Y (tap) sectors. In the US session, the Treasury will auction 10Y notes. The main release of note in the afternoon will be the April CPI report. Consensus is for the annual readings to cool down from the previous month but a monthly acceleration in core could muddy the picture for rates. There is also an extensive list of ECB speakers on the schedule, culminating with interventions from Christine Lagarde and Isabel Schnabel. TagsRates Daily   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

US inflation has slowed marginally in April thanks to a fall in used car prices and gasoline. Fed rate hikes will bring demand into better balance with supply, but in the absence of major improvements in supply chains, labour shortages and geopolitical tensions the descent back to the 2% target will be slow In this article Inflation finally slows Past the peak? Housing will make inflation especially sticky Fed has a lot more work to do Rental prices continue to remain elevated 8.3% Annual rate of inflation for April 2022   Inflation finally slows In the immediate aftermath of the pandemic amid plunging energy, air fare and hotel prices, inflation bottomed at 0.1% year-on-year in May 2020 and has been on a rapid climbed to 8.5% ever since. Today though, the annual rate of US consumer price inflation has slowed from 8.5% in March to 8.3% in April. The core rate, which excludes food and energy prices slowed marginally more to stand at 6.2% versus 6.5% in March. While this was in line with our forecasts, the market had been looking for a larger moderation with consensus forecasts of 8.1% for headline CPI and 6.0% for core. The details show energy prices fell 2.7% month-on-month on lower gasoline costs, but this will be fully reversed next month given gasoline is back at all-time highs. Used car prices fell 0.4% MoM, not as much as hoped given the Mannheim car auction data, while apparel fell 0.8% after a strong series of price hikes. Everything else was firm though with food prices rising 0.9% MoM, new vehicles up 1.1% and primary rents (0.6% MoM) and owners' equivalent rent up 0.5% MoM. Airline fares jumped another 18.6% MoM! The chart below shows the contributions and clearly shows there is a moderation in core goods prices (orange bars), but this is being offset to a large extent by the service sector (yellow). Contributions to annual US inflation Source: Macrobond, ING Past the peak? We think that March 2022 will have marked the peak for annual inflation. Mannheim used car auction prices are down 6.4% over the past three months so used vehicle prices should fall further and they have quite a heavy weight of 4.1% of the total basket of goods and services within CPI. The shift in consumer demand from goods, whose availability has been significantly impacted by supply chain issues, towards services should also contribute to a gradual moderation in the rate of inflation. Nonetheless, we remain nervous about the impact from gasoline and the growing price pressures within services. Moreover, substantial declines in the annual rate of inflation are unlikely to materialise until there are significant improvements in geopolitical tensions (that would get energy prices lower), supply chain strains and labour market shortages. Unfortunately, there is little sign of any of this happening anytime soon – The Russia-Ukraine conflict shows no end in sight, Chinese lockdowns will continue to impact the global economy while last Friday’s jobs report showed a decline in the labour force participation rate leaving the economy with 1.9 job vacancies for every unemployed person in America. At the moment consumer demand is firm and businesses have pricing power, meaning that they can pass higher costs onto their customers. This was highlighted by yesterday’s National Federation of Independent Businesses survey reporting that a net 70% of small businesses raised prices over the past three months, with a net 46% expecting to raise prices further. We haven’t seen this sort of pricing power for the small business sector before and we doubt it is any weaker for larger firms. NFIB survey shows firms can continue to pass higher costs onto customers Source: Macrobond, ING Housing will make inflation especially sticky Furthermore, the housing market remains red hot and this feeds through into primary rents and owners’ equivalent rent (OER) components of inflation with a lag of around 12-18 months. Rent contracts are typically only changed once a year when your contract is renewed so it takes time to feed through while OER is a based on a survey question for what you would rent the house you own out for. Homeowners may not necessarily closely follow the month-to-month changes in the housing market so there is a delayed response. As the chart below shows, the housing components, accounting for more than 30% of the CPI basket, are not likely to turn lower soon. No reason to expect an imminent turn in rent components Source: Macrobond, ING Fed has a lot more work to do This situation intensifies the pressure on the Fed to hike interest rates. The central bank wants to take some of the heat out of the economy and bring demand back into better balance with the supply capacity of the US economy. This potentially means aggressive rate hikes and the risks of a marked slowdown/recession. This message was re-affirmed by several officials over the past couple of days and we look for 50bp rate hikes at the upcoming June, July and September FOMC meetings. With the Fed running down its balance sheet we expect the Fed to revert back to 25bp from November onwards with the target rate peaking at 3.25% in early 2023. Even with this Fed action and hopefully some improvements in the supply side story we have doubts that CPI will get back to 2% target before the end of 2023. TagsUS Recession Inflation Federal Reserve   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Gold held near three-month lows near 1,825 USD per ounce on Friday and is falling for the fourth week in a row from 1990 USD. One factor for the decline in gold prices could be the strengthening U.S. dollar, which seems to have stabilized near the 20-year high reached on Thursday. The USD strengthening may have followed the release of US consumer and producer inflation data, which seems to reinforce expectations of aggressive interest rate hikes by the Federal Reserve. This, in turn, may raise concerns about a weaker global economic outlook, helping to boost USD demand. The recent strengthening of the USD may also be related to the divergence in monetary policy on both sides of the Atlantic Recall that the U.S. core CPI remained near a 40-year high of 8.3 percent in April, while the core CPI also exceeded expectations at 6.2 percent, fueling fears that high price levels may persist. Thus, markets are anticipating increases of 50 basis points at each of the next two Fed meetings in June and July. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM This could also be significant for the EUR/USD major pair, which approached the 1.0350 level this week, its lowest level since December 2016. The recent strengthening of the USD may also be related to the divergence in monetary policy on both sides of the Atlantic. The Fed is moving towards aggressive hikes, while the European Central Bank may raise interest rates by 50-75 basis points in total by the end of the year. Thus, the scale of divergences seems to be very large. Bitcoin rebounded yesterday from its lowest level in almost 17 months and crossed the $30,000 mark today In addition to gold and the dollar, attention should again turn to the cryptocurrency market and towards stock market indices, where in both cases an attempt to defend against possible further declines may be underway. Bitcoin rebounded yesterday from its lowest level in almost 17 months and crossed the $30,000 mark today. Despite this, the world's most popular and widely used cryptocurrency is at this point on its way to its worst week in four months, falling more than 10 percent. Yesterday, the market additionally saw a likely panic as the tether to USD exchange rate departed at 1:1. At the apogee of fears for the collapse of the largest stablecoin, the cryptocurrency market seemed to have reached its weekly lows. Currently, USDT is trying to get back to the 1:1 exchange rate, and the rest of the market seems to be stabilizing. Read next: (BTC) Bitcoin’s Price Tanks Along With Equities. U.S. Stock Market Awaits CPI Report, Poor Performance From The FTSE 100. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

The GBP/USD currency pair also showed no desire to move volatile on Monday. The price continues to be above the moving average line, and at least one linear regression channel is already directed upwards. As in the case of the euro currency, the pound overcame the important lines of the Ichimoku indicator on the 24-hour TF, so it has technical grounds for continuing growth in the medium term. However, there are a lot of questions about the "foundation" and geopolitics. What will happen if the conflict in Ukraine escalates with renewed vigor? What will happen if the Bank of England stops raising the rate in the near future? Recall that the military conflict between Ukraine and Russia has not been completed or frozen, and peace talks are not even "smelling" now. The APU is gradually moving forward, but this hardly means that the Russian army will turn back, which would end the conflict. New rocket attacks on Ukrainian cities are not excluded, the use of new weapons is not excluded, and the intervention of third countries directly into the conflict is not excluded. I don't even want to talk about sanctions because the parties have already introduced almost everything that could have been introduced. We can assume that the worst is over, but the probability of this is not 100%.  Bank of England The same is true with the Bank of England and its monetary policy. The British regulator has already raised the rate eight times in a row, and inflation has been growing and continues to grow. The key rate at the moment is already 3%; this is the value at which it is possible to expect at least a slight slowdown in price growth. However, this week, the next inflation report will be published and judging by the forecasts, there is no point in expecting something good from it. Currently, inflation in the UK is 10.1%, and forecasts for October indicate a new increase to 10.7–11.0%. Consequently, the Bank of England can be expected to tighten monetary policy by another 0.75% in December, but to what extent can it raise the rate? After all, its economy is also going through hard times. The British government So far, it is unclear how the British government will close the "hole" in the budget by 50 billion pounds. The corresponding financial plan from Jeremy Hunt and Rishi Sunak will be presented only on November 17. Most likely, taxes will be raised, which may cause serious discontent among the British population and significantly lower the ratings of the Conservative Party. Therefore, the BA does not have the opportunity, like the Fed, to raise the rate as much as it wants. British inflation British inflation is the most important report of the week. Unemployment rate In the UK, the unemployment rate, changes in average wages, and retail sales will also be published this week. Of course, these reports do not match the inflation report, so we associate the main market reaction with this report. A new increase in the consumer price index can support the pound, as it will likely mean a new increase in the BA rate in December by another 0.75%. But this is just a theory and an assumption, and the market can react as you like. And also, no one can know if this report has not already been worked out because it is very easy and simple to expect a new acceleration of inflation in Britain now. UK Data In the US, retail sales, industrial production, and data on applications for unemployment benefits will be released this week. Also, quite secondary are the reports. With such a macroeconomic background, it will be difficult for the pair to continue growing, which now largely depends on traders' expectations for the Fed and BA rates. We expect a tangible correction after the "take-off" last week. The pound has recovered from its absolute lows by 1400 points and is regularly adjusted downwards. Therefore, this week is a good time for a rollback. As for the longer-term prospects, the pound may continue to grow, but we do not expect a rapid recovery after losses over the past year and a half. Most likely, periods of growth and rather deep corrections will alternate. The pound still needs to look like a stable and safe currency. GBP/USD The average volatility of the GBP/USD pair over the last five trading days is 222 points. For the pound/dollar pair, this value is "very high." On Tuesday, November 15, thus, we expect movement inside the channel, limited by the levels of 1.1516 and 1.1954. The upward reversal of the Heiken Ashi indicator signals the resumption of the upward movement. Nearest support levels: S1 – 1.1719 S2 – 1.1597 S3 – 1.1475 Nearest resistance levels: R1 – 1.1841 R2 – 1.1963 Trading Recommendations: The GBP/USD pair has started a minimal correction in the 4-hour timeframe. Therefore, at the moment, buy orders with targets of 1.1841 and 1.1960 should be considered in the case of a reversal of the Heiken Ashi indicator upwards. Open sell orders should be fixed below the moving average with targets of 1.1475 and 1.1353. Explanations of the illustrations: Linear regression channels – help to determine the current trend. The trend is strong if both are directed in the same direction. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.       Relevance up to 01:00 2022-11-16 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327097

Equities saw some profit taking in last week’s post-US inflation rally, as some Federal Reserve (Fed) officials reminded investors that the 7.7% inflation is still high and that the Fed would continue fighting to bring it lower. G20 In geopolitics, yesterday’s meeting between Jow Biden and Xi Jinping went well. US-listed Chinese stocks extended gains. Crude Oil In energy, American crude dived on the news that OPEC cut its oil demand outlook and warned of uncertainties around global growth. Earnings In earnings, big US retailers Walmart and Home Depot are due to release earnings today Donald Trump And in fun news, Donald Trump will make an important announcement! Whoo! Watch the full episode to find out more! 0:00 Intro 0:41 Fed members warn of premature optimism 2:54 US inflation expectations go up 4:31 China could be the next hit to global inflation 5:05 Crude oil down on OPEC demand outlook cut 6:20 Biden, Xi meeting went well! 7.49 Crypto selloff cools 8:53 What to watch today? Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #US #inflation #expectations #G20 #Biden #Xi #meeting #US #China #crude #oil #FTX #bankruptcy #Bitcoin #Ethereum #selloff #Binance #recovery #funds #Walmart #HomeDepot #earnings #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH

It is busy day. Reports will be from many economies CPI from European countries and PPI from America. And also Asian countries shared their GDP and Industrial Production reports. Japan GDP Events on the global market started with the publication of GDP in Japan. The results turned out to be negative. GDP fell from 1.1% to -0.3% quarter on quarter, while GDP y/y fell even more sharply, from 4.6% to -1.2%. Both results were below zero, which proves that the recession is starting in this country. RBA Meeting Minutes From Australia came a summary of the economic situation, i.e. Minutes of the Monetary Policy Meeting of the Reserve Bank Board. Members commenced their discussion of international economic developments by observing that inflation abroad. Members also noted that Australian financial markets had followed global trends. Such a summary can help to assess the condition of the country and its sub-sectors and determine next steps. Industrial Production in China and Japan China and Japan have published reports on their Industrial Production. Comparing October this year to October last year, a decrease was recorded in China. The current Industrial Production level was 5.0%, down 1.3% from the previous reading. In Japan there was also a decline, but in Industrial Production M/M. The indicator fell from 3.4% to -1.7%. Which means that the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities has dropped drastically. This is a consequence of high inflation and, as far as China is concerned, the fight against the Covid pandemic. UK data The UK released the reports at 9am CET. Two of them were positive. Only the unemployment rate turned out to be negative as it increased slightly from 3.5% to 3.6%. The change in the number of unemployed people in the U.K. during the reported month fell. U.K. Claimant Count Change dropped from 3.9K to 3.3K. This may turn out to be a slight decrease, but in the face of the forecasts of 17.3K, it turns out to be very optimistic. Average Earnings Index +Bonus, although it fell from 6.1% to 6.0%, is a positive reading as it was expected to fall to 5.9%. Which may mean that despite the forecasts, the decline is milder and personal income growth during the given month was only slightly lower, which is good news for households. CPI Two Western European countries, France and Spain, published data on CPI. In France, CPI y/y increased from 5.0% to 6.2%. The opposite was the case in Spain where consumer inflation fell from 8.9% to 7.3%, moreover meeting expectations. Despite high inflation, which is still higher than the expected level of 2%, these European countries, can be said, are doing well and their economies are not facing recession. Speeches Today's attention-grabbing speeches will be from the German Bundesbank. The first one took place at 10:00 CET, and the speaker was Dr. Sabine Mauderer. The next speeches will take place in the second half of the day at 16:00 CET. The speakers will be: German Bundesbank Vice President Buch and Burkhard Balz ZEW Economic Sentiment Economic sentiment in Germany rose once again. Currently, they have risen to the level of -36.7. Previously, they rose from -61.0 to 59.2. Although ZEW have increased but are still below zero, which means that the general mood is pessimistic US PPI The most important event of the day is the result of inflation from the producer side in the US, i.e. U.S. Producer Price Index (PPI). The previous level of 0.4% is expected to hold. This may mean that from the producers' point of view, the situation in price changes tends to stabilise, which may have a positive impact on the dollar as well as on the US economy in general. Canadian data Canada will release its Manufacturing Sales and Wholesale Sales reports at 15:30 CET. Both are expected to be below zero. Manufacturing Sales is projected to increase from -2.0% to -0.5%. This means that progress in this sector is expected. The wholesale sales level is forecasted at -0.2% vs. the previous 1.4%. Summary 1:50 CET Japan GDP (Q3) 2:30 CET RBA Meeting Minutes 4:00 CET China Industrial Production (YoY) 6:30 CET Japan Industrial Production (MoM) (Sep) 9:00 CET UK Average Earnings Index +Bonus (Sep) 9:00 CET UK Claimant Count Change (Oct) 9:00 CET UK Unemployment Rate (Sep) 9:45 CET French CPI 10:00 CET German Buba Mauderer Speaks 10:00 CET Spanish CPI 12:00 CET German ZEW Economic Sentiment (Nov) 12:00 CET EU ZEW Economic Sentiment (Nov) 15:30 CET US PPI (MoM) (Oct) 15:30 CET Canada Manufacturing Sales (MoM) (Sep) 16:00 CET German Buba Balz Speaks 16:00 CET German Buba Vice President Buch Speaks Source: https://www.investing.com/economic-calendar/

The StatOffice confirmed its estimate of October CPI at 17.9% year-on-year. We estimate that core inflation rose to 11.2% from 10.7% YoY in September. Our concerns about high core inflation are shared by economists at the National Bank of Poland. Despite this, the MPC has decided to essentially end the rate hike cycle We already knew from the flash CPI estimate that the significant increase in food and fuel prices was mainly responsible for the increase in inflation last month relative to September. On the other hand, there was slightly less pressure from energy carriers, as prices grew at a slightly slower rate (1.9% month-on-month) than in August and September, mainly due to the deceleration of coal price increases. This does not change the fact that energy carriers are now more than 40% more expensive than a year ago, despite the Anti-Inflation Shield (VAT and excise tax cuts) covering electricity, gas, thermal energy prices, and the freeze on regulated prices through 2022. CPI increase in October vs. September mainly stemmed from upswing in food prices % YoY, percentage points.   Source: GUS, ING.   We are now seeing the effects of the energy shock (more expensive fuel and energy carriers), but the most worrying phenomenon is the propagation of this shock in the economy and the increasing spillover of price increases due to secondary effects. Rapidly rising core inflation confirms that the impulse from this side is strong, and its impact on prices may be long-lasting. Based on the CPI structure data in October, we estimate that core inflation rose by about 1.1% MoM to 11.2% from 10.7% YoY in September.   Our concerns about the high core inflation and the spillover of price increases across the economy are shared by economists at the central bank. In its November projection, the National Bank of Poland said that high inflation expectations of companies and households translate into increased acceptance of price increases in many sectors of the economy, increasing its persistence. At the same time, the minutes of the October meeting noted that in light of the inflation expectations of companies, households, and professional forecasters, the level of real interest rates remains negative. Despite this, the MPC has decided to essentially end the cycle of interest rate hikes and has adopted a wait-and-see attitude. Policymakers prefer a gradual and slow decline in CPI to the target. In our view, such solutions mean that ultimately, the cost of fighting inflation will be higher. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The G20 leaders' declaration published on Wednesday, stated that “G20 central banks are strongly committed to achieving price stability, in line with their respective mandates.” Additional takeaways     Central banks will continue to appropriately calibrate the pace of monetary policy tightening in a data-dependent and clearly communicated manner while limiting cross-country spill-overs. Central bank independence is crucial to achieving price stability, and buttressing monetary policy credibility. Countries must take temporary and targeted measures to help sustain purchasing power of most vulnerable, cushion the impact of commodity price increases.   Market reaction The US Dollar Index was last seen trading modestly flat at around 106.50.  

At the beginning of the day positive data came from Australia. GBP traders eyes will be on the UK budget release. Behind the assessment, there will also be important reports and speeches that may affect the situation on the currency market. Australian Labour Market In October, there was an improvement in the employment sector. The number of people employed increased from a negative level (-3.8K) to 32.2K. The unemployment rate also turned out to be positive. The reading was lower than expected and will reach 3.4% against the previous 3.5%. Strong employment data may help the Australian currency (AUD) and also influence the RBA's future monetary policy decisions. EU CPI Inflation in Eurozone turned out to be slightly lower than expected. The current reading showed that inflation rose from 9.9% to 10.6%. It was expected to reach 10.7%. Core inflation reached the expected level of 5.0%. Read more: Forecast For The Eurozone Are Not Optimistic, Inflation Can Reach A Record High| FXMAG.COM Autumn UK Forecast Statement Chancellor Jeremy Hunt will deliver the statement to MPs. The government is set to announce tens of billions of pounds worth of spending cuts and tax rises. It is expected about 55% of the measures will be spending cuts, but confirmation of this will appear at 14:30 CET. The Autumn Statement will affect the take-home pay and household budgets of millions of people, as well as money for key public services. Some of the Autumn Statement will affect the whole of the UK. However, the governments of Scotland, Wales and Northern Ireland also make some tax and spending decisions independently. UK Speeches In connection with the publication of budget data, speeches from the UK are also expected. The first speech will take place at 14:30 CET with MPC Member Huw Pill as the speaker. The next speaker will be Silvana Tenreyro, his speech is scheduled for 16:30 CET. US Building Permits Building permits are a key indicator of demand in the housing market. The change in the number of new construction permits issued by the government last time increased to 1,564M. It is expected that there will be no further increase and the number of permits will fall to the level of 1,512M. Observing the data from the beginning of the year, we see that the downward trend continues, and the few rebounds from the trend suggest better temporary periods. Source: investing.com Initial Jobless Claims The weekly report on he number of individuals who filed for unemployment insurance for the first time during the past week will appear today. Previously, this number increased significantly from 218K to 225K. The figure from the previous reading is expected to hold. Philadelphia Fed Manufacturing Index The Philadelphia Federal Reserve Manufacturing Index rates the relative level of general business conditions in Philadelphia. We have been seeing negative results since May. And the last two readings were below zero, and it is expected that this time the level will be below zero, but will increase slightly. Forecasts show that the indicator may increase from -8.7 to -6.2. This may mean that a bad situation may slowly improve. Source: investing.com FOMC speeches Fed officials will also speak today. The first speeches will take place at 15:00 CET. The Federal Reserve Bank of St. Louis President and Federal Open Market Committee (FOMC) voting member James Bullard. At 16:15 CET, Michelle W. Bowman, member of the Board of Governors of the Federal Reserve System, will speak. U.S. Federal Open Market Committee (FOMC) Member Mester also speaks at 16:40 CET. Summary: 2:30 CET Employment Change 2:30 CET Unemployment Rate (Oct) 12:00 CET EU CPI (YoY) (Oct) 14:30 CET Autumn UK Forecast Statement 14:30 CET BoE MPC Member Pill Speaks 15:00 CET FOMC Member Bullard Speaks 15:30 CET US Building Permits (Oct) 15:30 CET Initial Jobless Claims 15:30 CET Philadelphia Fed Manufacturing Index (Nov) 16:15 CET FOMC Member Bowman Speaks 16:30 CET MPC Member Tenreyro Speaks 16:40 CET FOMC Member Mester Speaks Source: https://www.investing.com/economic-calendar/

Summary:  Our ‘Macro Chartmania’ series collects Macrobond data and focuses on a single chart chosen for its relevance. This week, we focus on the U.S. Employment Cost Index. It shows that inflationary pressures are finally fading on Main Street but not good for reasons. Click to download this week's full edition of Macro Chartmania. The market narrative machine is fascinating. In 2022, the bear market narrative was « inflation shock, rates shock and recession shock ». For 2023, the market narrative is rather bullish. Analysts expect that inflation will move lower but will remain sticky, that a mild recession will affect most of the developed economies and that central banks will hike a little further (probably until the start of the second quarter) before pausing for the rest of the year. It is certainly too early to know the steepness of the recession and whether the United States will manage to avoid it. This is an ongoing debate among economists. But there are early signs inflation is finally receding, at least in the United States. This is not the case in the United Kingdom where the October CPI reached 11.1% year-over-year, for instance. In the United States, higher wages reflecting Covid unbalances, worker shortage and tight labor market partially explained the increase in prices. This is now reversing. In just the last several weeks, we have seen major layoff announcements from the tech sector (Meta, Stripe, Paypal, Microsoft, Amazon etc.). But this is not just a technology story. We have seen layoffs in other sectors of the economy, from the real estate promoter Redfin and the trucking giant C.H. Robinson among many others. To understand why layoffs are starting now, we need to first understand the sequence of the economy. Employment is a well-known lagging indicator. In the past, it has already happened that job losses started only with a lag of several months after the economy entered into a recession (job losses started 8 months after the official start of the 1974 recession, for instance). But some sectors of the economy are more sensitive than others to higher interest rates, which can help predict whether or not we will face massive layoffs. This is the case of the housing market especially (we used to say that the housing market is the business cycle in the United States). With the cooling of the housing market which started in early 2022, the consumption of things associated with home buying are also going down - with a lag. Think home appliances, home-building tools etc. The housing slowdown is spreading into the rest of the economy. This puts pressure on big durable goods and thus on the industry that moves these goods around the world. This explains why C.H. Robinson fired 650 employees one week ago. This is only the beginning, in our view. Mass layoff to come means that the drop in wage increases, which has just started, will continue in the coming months. In the below chart, we have plotted the National Federation of Independent Business (NFIB) compensation plans and the Employment Cost Index. Only a net 23 % of small businesses plan to raise compensation in the next three months. This is much lower than a few months ago (when it was at a cycle peak of 32 %). Compensation practices of small businesses tend to lead to broader wage and salary growth. Therefore, we can expect that the Employment Cost Index, which has started to decelerate recently, will continue moving downwards, likely well below 4% going into 2023. This could ultimately ease inflationary pressures and open the door to a slower pace of Fed rate hikes. This echoes comments from Fed Vice Chair Lael Brainard earlier this week : “It will probably be appropriate soon to move to a slower pace of increases.” Source: https://www.home.saxo/content/articles/macro/chart-of-the-week--us--employment-cost-index-18112022

Summary:  Market sentiment managed to bounce mid-session yesterday in the US and was steady overnight, with the USD back lower but still very range bound and US treasury yields rising off their lows, with a new extreme for the cycle in the yield-curve inversion, suggesting the market remains worried that the Fed’s tightening will lead to recession. The market shrugged off yesterday’s budget statement from UK Chancellor Jeremy Hunt as most of the measures were flagged ahead of his speech.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures extended their declines yesterday to the 100-day moving average at around the 3,916 level driven by comments from Fed’s Bullard saying the sufficiently restrictive zone on policy rate was in the range 5-7% spooking markets. It is obvious, that the Fed is out trying to dampen expectations following the rally on the lower than estimated US October inflation print. S&P 500 futures are bounced back after the initial shock but closing lower for the session and this morning they are trading around the 3,950 level. Hong Kong’s Hang Seng (HSIX2) and China’s CSI300 (03188:xhkg) Hang Seng Index snapped a two-day decline and bounced about 0.3% as of writing. China interest stocks led the charge higher following Alibaba reporting earnings beating expectations and adding to its share repurchase programme. The Chinese authorities’ grant of a new round of 70 online game licences to firms including Tencent and NetEase also help the market sentiment. Hang Sent Tech Index climbed 2%. In mainland bourses, healthcare shares gained as new Covid cases surged to above 25,000, a new high since April. Online gaming stocks rose on the new game license approval. Financials however continued to trade weak as investors are troubled by recent incidents of retail investment products losing heavily as bond yields rising in China. CSI 300 gained 0.2%. FX: USD rally eases on risk sentiment bounce of the lows yesterday The US dollar eased lower after a bout of weak risk sentiment was turned mid-session yesterday in New York and despite US treasury yields lifting all along the curve (with a new multi-decade low in the yield curve inversion suggesting the market remains concerned that the Fed’s tightening regime will lead to a recession. After the very sharp move lower off the back of the October CPI data, the USD has traded in a rather tight range in most places, with EURUSD bottled up near the 200-day moving average (currently 1.0414) and GBPUSD still hugging the 1.1900 area after the market shrugged off the autumn budget statement yesterday. Next week has the Thanksgiving holiday in the US, which usually sees light trading from Wednesday through Friday and the first key data is not up until the week after, so upcoming catalysts are not readily evident. Crude oil (CLZ2 & LCOF3) Crude dropped sharply yesterday to multi-week lows, trading as low as 89.53 in January Brent and 81.40 in December WTI. Concerns of weakening demand in China are purportedly behind some of the weakness yesterday, but with a new extreme in the yield curve inversion yesterday, rising market anticipation of an incoming recession is likely weighing on sentiment in oil. For the December WTI contract, the 81.30 level is the last significant pivot low ahead of the 75.70 September low for that contract. For January Brent, the  87.52 level is the last pivot low ahead of the 80.94 September low for that contract. Gold (XAUUSD) Pushed a bit lower yesterday on the rise in US treasury yields, trading above 1,760 this morning after the 1,786 high earlier this week. The 200-day moving average is near the important 1,800+ area. An extension of the recent rally likely requires further declines in yields and the US dollar or some other catalyst that sees a run to safety. US treasuries (TLT, IEF) US yields surged across the entire yield curve with yields rising the most in the front end. The 2-year yield jumped 10bps to 4.45% and the 10-year climbed 8bps to 4.77%. The 2-10 year spread inverted further hitting a new low of minus 71bps. Selling concentrated on the front end as St. Louis Fed President James Bullard referred to the “sufficiently restrictive level” being “5% to 5.25%” and “that’s a minimum”. In addition, Bullard showed a chart that suggested a range of terminal rates from 5% to 7%. Meanwhile, Minneapolis Fed President Kashkari said the Fed is “not there yet” to pause and it is an open question of how far the Fed needs to go. What is going on? Japan’s CPI increased more than expected in October Japan released its national CPI data which came in hotter than expected. Headline CPI grew 3.7% Y/Y (consensus: 3.6%, Sep: 3.0%). CPI excluding Fresh Food was 3.6% higher than last year (consensus: 3.5%, Sep: 3.0%) and CPI excluding Fresh Food and Energy increased 2.5% Y/Y in October (consensus: 2.4%, Sep: 1.8%). UK budget statement sees little market reaction, but huge Gilt issuance set for next year The mix of measures was more or less as anticipated, with many of the specific larger moves well flagged ahead of yesterday’s speech on the budget from UK Chancellor Jeremy Hunt. After a strong surge in UK gilts (sovereign bonds), UK yields rose yesterday, as the Debt Management Office in the UK project that issuance of gilts in the 2023-24 financial year will rise almost 50% to £305 billion, with net issuance at £255 billion, almost double the previous high from 2011. Near term issuance to the end of the current fiscal year to April is expected somewhat lower than prior estimates. China urges local authorities to strike a better balance in pandemic control measures China’s National Health Commission urged local authorities to avoid “irresponsible loosening” of pandemic control measures. In a press briefing, health officials said local authorities “must continue to rectify the practice of excessive measures such as lockdowns and oppose the irresponsibility of evading a solution by loosening up”.The world’s second biggest lithium producer, SQM, sees lithium prices staying higher in 2023.SQM sees the Chinese electric vehicle market showing strong growth, buttressing solid demand for lithium. In its third quarter result, SQM’s income beat analyst estimates, rising by more than 10 times to $1.1 billion. The surge was fueled by the lithium price more than tripling over the past year, and rallying over 1,200% since 2020, amid tight supply and rising demand from EV makers. SQM sees the lithium market staying tight and higher prices for the rest of 2022 and into 2023. BHP (BHP) raised its takeover offer for copper giant, Oz Minerals (OZL) The offer was raised to $6.4 billion as global miners are hungry to boost copper production. Copper is a vital metal in electricity networks, electric vehicles, housing and renewable energy. BHP currently makes about 48.7% of its revenue from iron ore, 26.7% from copper, and 24.6% from thermal coal.What are we watching next? Earnings to watch today: JD.com Today’s earnings calendar is light with only the Chinese e-commerce giant JD.com reporting results. Analysts expect revenue growth of 11% y/y and EPS of $4.46 up 194% y/y on expanding EBITDA margin, but given the results from other Chinese companies we find it a bit unlikely that JD.com can deliver those types of results. Options expiry today in US to hit new record Options expire today on a notional $2.1 trillion in underlying instruments today as this month looks likely to set the record for options volume, with 46 million contracts in daily trading on average, up 12% from last month. Increasingly popular are contracts that expire within 24 hours, a phenomenon that may have driven the extreme volatility around the Thursday October CPI release last week. Economic calendar highlights for today (times GMT) 0830 – ECB President Lagarde to speak 1315 – UK Bank of England’s Catherine Mann to speak 1330 – Canada Oct. Home Price Index 1340 – US Fed’s Collins (non-voter) to speak 1500 – US Oct. Existing Home Sales 1500 – US Oct. Leading Index Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-18-2022-18112022

A regional wage agreement in Baden-Wuerttemberg yesterday will pave the way for broader wage developments and shows the European Central Bank that second-round effects will kick in next year but should be dampened Last night, employers and unions in the metal and electronics industry in Baden-Wuerttemberg reached a new wage agreement. Wages will be increased by 5.2% in June 2023 and by 3.3% in May 2024. There will also be a one-off payment of €3,000, exactly the amount the German government had offered to exempt from tax and social security contributions. While this is "only" a regional wage agreement, it will have knock-on effects on other regional and sectoral wage negotiations. Almost four million people in Germany work in the metal and electronics industry. Traditionally, there has been a lot of attention on German wage settlements across the eurozone. The takeaway for German wage developments and the risk of second-round effects is that last night's deal shows what a compromise can look like. It won’t be enough to fully offset the drop in purchasing power caused by higher inflation, but it softens the damage. For the ECB, it signals that second-round effects remain dampened and that a lower, subdued inflationary pressure can last for longer than markets currently think. TagsInflation Germany Eurozone ECB   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Inflation in Japan soared to the highest levels in more than 30 years, to 3.7% in October, up from 3% printed a month earlier. High inflation print sure revived the Bank of Japan (BoJ) hawks, and the calls for a policy rate hike, and kept the dollar-yen below the 140 level, but it’s unsure whether the BoJ will give up on its ultra-soft policy stance. Therefore, if the US dollar picks up momentum, which will certainly be the case, the USDJPY could easily rebound back above its 50-DMA, which stands near 145. US And the reason I think the US dollar will recover is because most Fed members remain relatively hawkish regarding the Fed’s policy tightening. Plus, option traders are building topside structure over the one-month tenor that covers the next US inflation report and the Fed’s next policy meeting in December. Stock market So, the ambiance in the stock markets is not as cheery as it was at the end of last week. UK In the UK, the autumn budget statement went happily eventless. Gilts rallied, pound saw limited sell-off, while energy companies’ reaction to windfall taxes remained muted. Watch the full episode to find out more! 0:00 Intro 0:30 Japan inflation soars, Mr. Kuroda! 1:34 Should you prepare for another USD rally? 3:32 Market mood turns… meh. 4:01 The retail roundup 6:11 The happily eventless UK budget Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.   #hawkish #Fed #USD #recovery #US #retail #sales #Walmart #Target #Macys #HomeDepot #Lowes #Alibaba #earnings #UK #Budget #GBP #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH

Changes keep happening. Payments keep evolving. Inflation is also increasing, even in Japan. Layoffs at larger companies like Amazon are also on the rise. In this article: The 100 People list Transforming Business Business owners' Amazon Cross-border payments Japanese economy Goldman Sachs Chief Information Officer is in Top100 Goldman Sachs tweets about the 100 People list Transforming Business by Insider. .@BusinessInsider's 2022 list of Top 100 People Transforming Business recognizes our Chief Information Officer, Marco Argenti, among other game-changing leaders! Read more about how Marco is breaking new ground on Wall Street through technology: https://t.co/qDGLAooKCq — Goldman Sachs (@GoldmanSachs) November 17, 2022 Every year, Insider surfaces 100 leaders across 10 industries who are driving unprecedented change and innovation. The T100 does more than highlight career milestones. Goldman Sachs Chief Information Officer, Marco Argenti is on this list. Recognition of one of the directors in the field of finance is important for personal positioning and thus also for the company. Business owners' optimism UBS tweets about business owners' optimism. Despite recession fears, business owners continue to fill post-COVID labor gaps and are still optimistic about their businesses for the next year. #UBSInvestorSentiment #shareUBS — UBS (@UBS) November 17, 2022 There is no doubt that from 2020, companies, markets and entire economies are struggling. The pandemic has had a negative impact on employment, and the current inflation is also not encouraging. Despite the fear and all the difficulties, companies are getting ahead of it and are still hiring new employees. According to UBS bananas, business owners are very optimistic about the future. This is of particular importance for the labor market, as it affects not only the situation of households but also entire economies. Layoff in Amazon CNBC Now quotes the statement of Amazon CEO Andy Jassy. BREAKING: Amazon CEO Andy Jassy says layoffs will continue into next yearhttps://t.co/QEL5Diikjs — CNBC Now (@CNBCnow) November 17, 2022 The employment situation at Amazon is unstable. The company began informing workers this week that they were being let go. CEO Andy Jassy said this will continue next year. The cuts are being made as Amazon reckons with a worsening economy. Amazon isn't the only one struggling. Other giants also decided to reduce staffing. Cross-border payments IMF tweets about possible developments in cross-border payments. Cross-border payments are on track to be transformed by digital money. Learn how in F&D. https://t.co/uXmnOnQd8g pic.twitter.com/PwRn2wW1ki — IMF (@IMFNews) November 18, 2022 The development in this sector is very fast, but cross-border payments are still the Achilles' heel. We have all felt the frustration of sending money abroad. It takes time. It’s expensive. It turns out that there may be development in this payment sector. For people who love to travel or those who live in several countries, such a possibility may be very desirable. Japan CPI Reuters Business discusses the situation in Japan in its post. Japan's core consumer inflation accelerated to a 40-year high in October, driven by currency weakness and imported cost pressures that the central bank shrugs off as it sticks to a policy of ultra-low interest rates. Read more: https://t.co/AoJ6rkjSBw pic.twitter.com/DGaEal1df9 — Reuters Business (@ReutersBiz) November 18, 2022 Many economies around the world have been struggling with high inflation since the beginning of this year. Japanese inflation has been low for a long time. In October, it rose for the first time, reaching its highest level in 40 years. The activities of the Bank of Japan were dovish, which largely translates into the yen (JPY) exchange rate and the economic situation of the country. The Bank of Japan has made several interventions in the foreign exchange market, but economists do not expect the BOJ to join a global trend of raising interest rates. The more the question arises, will there be another intervention?

A rate hike by the Bank of Korea, and inflation data from Tokyo and Singapore are just some of the highlights in the region next week In this article BoK to hike rates but expect a slower pace of tightening Inflation remains elevated in Japan and Singapore Export and manufacturing data for Taiwan Other important data reports: Loan rates in China steady and growth downgraded in Singapore Source: Shutterstock BoK to hike rates but expect a slower pace of tightening The Bank of Korea (BoK) will meet next Thursday and we expect it to carry out a 25bp hike. Consumer prices edged up in October but inflation appears to have passed its peak.  The recent FX market move probably would be one factor for BoK to adjust its pace of tightening after its recent jumbo increase. However, given that financial market stresses remain high, the BoK will need to consider market stability for its policy decision.  Inflation remains elevated in Japan and Singapore Next week, Japan will release November CPI inflation for Tokyo. We expect Tokyo inflation to accelerate to 3.6% year-on-year, from 3.5% in October. The travel voucher programme probably cooled down some of the service price pressures although other commodity prices rose to offset this decline. In Singapore, inflation is expected to remain elevated for both headline and core, although the headline number may dip from last month. Evident price pressure should keep the Monetary Authority of Singapore hawkish to close out the year as it monitors the impact of recent tightening.    Export and manufacturing data for Taiwan Taiwan will release data on export orders and industrial production. We project both figures to post a YoY contraction due to softer demand for semiconductors. Demand for electronics has been dampened by a mix of high inflation data in some economies and slower growth for others. More upside however could be anticipated in next month’s data as China’s Covid-19 measures have been eased. Other important data reports: Loan rates in China steady and growth downgraded in Singapore China will release its Loan Prime Rate next Monday and we expect no change from the current 3.65% for 1Y and 4.3% for 5Y. Loan prime rates will likely be untouched as the Medium Lending Facility Rate was put on hold by the People's Bank of China.   Lastly, Singapore will report revised third-quarter GDP figures and we expect a downward revision to the earlier report. Both retail sales and non-oil domestic exports have shown signs of moderation as higher inflation and slowing global trade appear to be taking their toll on the growth momentum. Asia Economic Calendar Source:Refinitiv, ING TagsAsia week ahead Asia Pacific Asia Markets Asia Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Executive summary 1)Following the Russian invasion of Ukraine in 2022, European and Polish economies are experiencing a huge energy shock due to record-high prices and the risk of energy supply disruptions. 2)Due to the dependence on energy from Russia and the structure of energy balances, it is mainly a gas problem for the EU and a coal problem for Poland. This applies less to power plants as it does to households and district heating units which rely heavily on imported coal from Russia. The source is not only high prices, but also the risk of natural gas and coal shortages over the coming winter. 3)Higher energy prices on wholesale markets have contributed to a significant increase in producer and consumer prices, but this is not an automatic pass-through. It is stretched over time. Producer prices depend on previous contracts, competitive conditions and the substitutability of energy carriers. 4)The pass-through of higher costs to the end user depends on both demand and fiscal policy. Energy prices for households are largely influenced by the decisions of the government (e.g., the anti-inflation shield) and the regulator (Energy Regulatory Office tariffs). On average, consumer electricity prices increased by about 5% in 2022, following increases of 12% in 2020 and 10% in 2021. 5)Our survey of 300 small and medium-sized companies shows that: •70% of companies are concerned about access to energy in the upcoming heating season. •Companies have generally only partially passed on higher energy costs to buyers and are actively reducing other expenses. •High energy prices are increasing SMEs' interest in investing in energy efficiency and renewable energy sources (RES), especially in industrial companies. •The anti-inflation shield alone is not enough support but should be maintained at least until the end of 2023. •Companies are rather sceptical about the effectiveness of EU policy support. Energy Shock 2022: On the back of an economic rebound following the pandemic in 2021 and thereafter due to Russia's invasion of Ukraine in 2022, the prices of energy carriers in Europe have remained in a clear upward trend and fluctuated strongly. They shot up in the summer of 2022 following the initial threat and again after Nord Stream 1 completely halted gas supplies to Europe. By the end imports to Europe were about threeof September, daily Russian gas quarters lower year Gazprom manipulation from mid2021:onyear. Prices of energy carriers have been on an upward trend since mid2021. Russia's gas manipulations led to a jump in prices later that year, with energy prices rising further after the outbreak of war in Ukraine. Local maximum in midAugust: In midAugust 2 022, energy prices were many times higher than the average in January 2021. Prices for natural gas rose more than 15 times, electricity (wholesale market) by 7 times, coal by almost 5 times, and oil almost twice. The explosion in gas prices was due to volu me restrictions imposed by Gazprom. Shipments through Nord Stream 1 fell to 40% in June 2022, then to 20% in July August preceding the complete suspension of supplies through this pipeline in early September. September correction: When the European Commission and EU member states responded to Russia's gas manipulation, prices fell sharply. The correction in oil prices was largely due to recession fears in the global economy and also driven partly by monetary tightening. In early October, following fluctuati ons due to the Nord Stream leaks and the EU Council's decision to control rising energy costs, price increases were eight times higher for natural gas, almost three times for electrici and 1.5 times for oil. Prices of energy carriers: January 2021 =100 Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Energy prices are driving up CPI inflation: The increase in energy carrier prices in 2022 strongly impacted the acceleration of consumer inflation. In August, the contribution of fuels in transportation and home energy carriers was 6.0 percentage points inflation at 17.2% YoY. Neverthel, with CPI ess, the initial impetus for higher energy prices was also translated through socalled secondround effects on price increases for food and other goods and services in the core inflation basket CPI inflation and its sources (% change YoY) It’s not only energy responsible for the acceleration of inflation: In our view, the high price increase is a combination of cost inflation (pandemic, war in Ukraine) and demand inflation (consumption boom for a few years, tight labour market). These factors will continue to bring about high inflation as a result of the o ngoing energy crisis. Core inflation will rise with a peak in early 2023 because of the delayed pass producer price increases to retail prices. We forecast double-- through of digit CPI price growth in 202324. The anti-inflation shield and energy prices for households: Since the beginning of 2022, the government has actively used instruments to mitigate energy price increases by introducing indirect tax cuts as part of the antiinflation shield. These solutions have now been extended until the end of 2 022. Thanks to the reduction of the VAT rate on electricity (from 23% to 8%) in January 2022, the increase in this component of the CPI was about 5% rather than 24%, which would have otherwise been the result of Energy Regulatory Office’s hike in tar the 6 iffs for households. Prices of energy carriers in Poland - components of the CPI index (%ch YoY) Increases despite the anti-inflation shield: While the government has announced a freeze on the price of electricity, energy and gas for early 2023, consumers are still expected to face solid fuel (coal) price increases in autumn. Upward pressure on the price of food and other goods and services (second-round effects) will also persist. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

EU response to Russian invasion of Ukraine: In response to the Russian invasion of Ukraine, the EU has introduced economic sanctions on Russia, including a full coal embargo (since August), an oil embargo (with exceptions) and a two-thirds reduction in gas imports by the end of the year. Substitution of Russian gas in the EU: EU measures (more LNG and network gas from other locations, fuel substitution, and energy efficiency) leave a gap of around 20bcm. The EC has proposed voluntary (and forced if necessary) consumption cuts of 15% in EU countries. This is roughly equivalent to the additional gas consumption that occurs during a cold winter in Europe. Re-Power EU: EU policy, in particular the May 2022 Re-Power EU program, has remained consistent with the long-term goal of climate neutrality and the Green Deal strategy. In addition to diversifying gas supplies, it envisions accelerating the low-carbon transition, mainly through support for RES and energy efficiency. EU shields package from high energy prices: On 14 September, EC President Ursula von der Leyen announced the following: •A target to reduce gas and electricity consumption by 10% and by 5% during the peak winter season to a 5-year average •A tax on excess profits of energy producers •A €180/MWh price cap on low-cost technologies (mainly nuclear, lignite and RES) for the wholesale market in all segments and bilateral contracts •A €3 million investment in hydrogen The gas shock has already caused a significant reduction in natural gas consumption in EU countries, although market prices have not been passed on to the end user. In January-July 2022, gas consumption in the EU was 10% and in Poland 15% YoY lower than in 2021. Natural gas consumption in JanuaryJuly 2022 (%YoY) In the context of deep declines in gas consumption this year, the mechanism proposed by the EC in July to reduce consumption by 15% by member countries does not seem to be a major challenge for Poland. Twelve EU countries, including Poland, have already re duced gas consumption by 15% YoY in January-July 2022. High storage fills, the launch of the Baltic Pipe pipeline from late September and new interconnectors with Lithuania and Slovakia reduce the risk of a gas shortage in Poland in the upcoming heating season. High prices are being boosted by negative events related to the war in Ukraine, including sabotage at Nord Stream. Record high prices encourage gas substitution and directly affect the decline in demand and production in gasintensive sectors. Househ olds and the service sector are generally protected; hence price increases are most severe for producers of the chemical (including fertilisers), mineral and metal smelting industries. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Energy price shock for producers in 2022 Translation of wholesale market prices into Producer Price Index (PPI) and Consumer Price Index (CPI) prices: Producer prices typically respond quickly to changes in wholesale energy market prices, which are driven by global developments. In Europe, they are largely impacted by the EU’s energy and climate policy and the EU’s energy market design. However, for individual companies, price changes are often indexed to market prices and occur with some delay. While stock market transactions are transparent, we have limited insights into bilateral contracts between energy utilities and individual manufacturers. Finally , the transmission of shifts in wholesale and 4 producer prices on consumer prices in Poland is constrained by the Energy Regulatory Office, which is responsible for electricity and gas tariffs to households, as well as government decisions on taxes and bene fits. Energy prices what and what does it depend on? Postrecession rebound 2021 and rising oil prices: The upward pressure on industrial output in 2021 was a rebound from the 2020 pandemic recession steadily. In January 2021, PPI growth was 1% built up quickly and YoY, and by December was already at 14.4%, largely driven by price increases in the coke a nd refined petroleum products While January 2021 saw a 6.9% . YoY decline in this category, while December 2021 price growth was 64.3% YoY. This category accounts for 5.2% of the PPI index basket in 2022. Producer price index (PPI) and its energy categories (%ch YoY) A rapid buildup of cost pressures in 2022 and increases in gas and electricity prices: Throughout 2022, water incre prices in the generation and supply of electricity, gas, steam, and hot ased systematically . Price increases in this category reached 30% January 2022 and accelerated to nearly 80% YoY in YoY in August. This category accounts for .8% 7.5% of the PPI basket in 2022. Increases in energy and other categories moved the PPI index from 14 YoY in January to 25.5% in August At the starting point ( before the energy shock ) , 2022 . energy prices for companies in Poland were generally close to the EU average: for companies (including taxes) average in Poland in the second half of 2021. They the past According to Eurostat data, electricity prices were about a quarter lower than the EU27 have increased by a total of about 25% over four years (between the second half of 2021 and of 2018). The price of natural gas for companies saw a total increase of 30% in four years, close to the EU average . Electricity prices for companies in the EU in second half of 2021 Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The quantitative survey was conducted by GFK Polonia on behalf of ING Bank Slaski in August 2022, using the Computer Assisted Telephone Interviewing (CATI) method. The sample consisted of 300 small and medium enterprises (SME). Research questions In the survey, we searched for responses to the following questions: 1) How are companies coping in times of an energy shock, mainly for natural gas? How does expensive energy affect their business? Do companies have problems with access to energy? Are they worried about energy access problems in the coming year? 2) How have they responded so far? What are their plans for investing in energy- efficient technologies or perhaps their own sources like photovoltaics, windmill, heat pump, and energy storage? 3) Does the anti-inflation shield (including the reduction of VAT and excise taxes on energy) help them? 4) Given the context of the current climate crisis, do they feel pressure/identify a need to switch to clean energy in the near future? 5) Are they aware of EU climate policy and opportunities to support clean energy and energy efficiency? Types of energy used One in five companies has its own power generator, and 17% of companies say they have their own sources of electricity. Own boilers/furnaces as heat sources are used by almost half of the companies - that's as often as heat from the grid. 10% of companies declare using electric-powered vehicles, although this result is likely inflated. According to local automotive associations PZPM and PSPA there are only about 50,000 pure electric and plug-in hybrid cars in Poland. Natural gas is twice as popular as electricity in company vehicles. Share of energy in total costs About two-thirds of all companies indicate a share of energy (all carriers, including transport fuels) making up more than 10% in company costs. Larger companies declare a larger share of energy in their costs, most often between 10% and 30% (for more than half of the companies over PLN 10 million in turnover last year). About half of the companies with higher turnover are industrial companies, which are generally more energy-intensive than the service or construction industries. Average share of energy costs in the company's costs Perception of the energy situation Companies perceive energy and fuel price increases differently. Most (26%) believe that prices have already risen between 50% and 80%. Perception of past increases in fuel and energy costs - by how much? (%) Expectations for future increases are slightly more consistent, with 32% of companies predicting that prices will still rise between 30% and 50% further. Predicting further increases in fuel and energy costs - by how much? (%) The vast majority of companies (nearly 70%) are concerned about problems with access to energy and fuels. Concerns about access to fuel and Energy Responses to increased energy and fuel costs Almost all companies have reacted to rising energy and fuel costs by increasing the price of products or services. Only 5% have avoided this so far. The second most common way to cope with the situation is looking for cheaper materials and suppliers (recorded by 77% of companies), followed by cutting other costs (60%) and halting R&D investments (41%). More than one in three companies intend to invest in solutions that will help save energy in the future. Responses to increased energy and fuel costs Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Europe is facing an energy crisis, rampant inflation and a clear economic slowdown. Germany as the main and largest economy in Europe and the European Union attracts the attention of not only tourists but also investors. General outlook A drop in energy imports from Russia after the invasion of Ukraine sent energy prices soaring in Germany, driving inflation to its highest level in more than 25 years, while fueling fears of a potential gas shortage this winter, even with storage facilities nearly full. All leading indicators point to a further weakening of the economy in the fourth quarter, with no improvement in sight. The prices of consumer goods and services are rising at a double-digit rate in Germany, according to the latest data from the local statistical office. CPI inflation rose to 10.4% in October, exceeding economists' forecasts. Inflationary pressures actually extend throughout the economy. The almost record high inflation in Germany, as in the whole of Europe, was to a large extent caused by a sharp increase in fuel and energy prices (by 43% y/y against 43.9% in September and 35.6% in August). Food prices also accelerated (to 20.3% against 18.7%). Prices of services increased even faster than in previous months (4.0% against 3.6%). In addition, the pressure on price increases was reduced by the reduction of the VAT rate on gas from 19% to 7%. October flash PMIs for Germany are worse than market expectations. Manufacturing PMI falls to 45.1 in October, lowest since May 2020. Manufacturers saw a deepening decline in new orders due to growing concerns about the economic outlook and high energy costs. Any result below 50 points (neutral level) suggests a recession of the economy. PMI indices show what GDP may look like soon. The economy continued to thrive despite challenging global economic conditions: broken supply chains, rising prices and war in Ukraine. GDP forecast The German economy can surprise GDP growth in the third quarter. However, this does not mean that the country will avoid a recession. Estimate of third-quarter German GDP growth came in at 0.3% quarter-on-quarter, from 0.1% QoQ in the second quarter. It is too early to be optimistic about the country's economic prospects next year, despite the expected GDP growth. The official results will be published on Friday, 25 November. Source: investing.com Recession? Despite not the best forecasts, Germany defends itself against a decline in GDP. This does not mean that the country will avoid recession in the future. Even though the weather has brought some relief to the German economy as rainfall has raised water levels and warm October weather has delayed the start of the heating season, a gradual recession continues. Businesses and households are increasingly suffering from higher energy bills and persistently high inflation adjusting consumption and investment. The war in Ukraine probably marked the end of a very successful German business model: importing cheap (Russian) energy and raw materials, while exporting high-quality products to the world, benefiting from globalization. The country is now forced to accelerate its green transition, restructure its supply chains and prepare for a less globalized world. Such a change can be time-consuming and moreover generate more costs. A sharp decline in German production will help drag the EU into recession this winter. Production across the EU is expected to fall in the current quarter and the first three months of 2023, with Germany experiencing one of the largest drops in activity. Production is important for the German economy and its decline has a significant impact on the economic situation. Source: investing.com

The beginning of the week is quite calm when it comes to reports. Today, attention may be drawn to the events from the second half of the day, ie reports from New Zealand. German PPI In Germany, there was a report on inflation from the manufacturer. For Europe's largest economy, it turns out that the reading was positive/negative. The current reading has reached the level of -4.2% , which is what was expected. In September, the PPI m/m peaked at 7.9% for the year and then dropped dramatically to 2.3%. Today's reading may suggest a negative trend. PPI YoY has been on an upward trend since the beginning of the year. The current reading is at 34.5% and it is a drop from level of 45.8%. Hong Kong CPI The Hong Kong Consumer Price Index has reached 1.8% and thus increased/decreased. Since the beginning of the current year, it has remained at low levels to a maximum of 2.5%. A sharp increase in inflation took place in September and reached the level of 4.4%. Source: investing.com Speeches Today, the market awaits three speeches from the European continent, including one from Great Britain. The first speech was at 10:00 CET, The European Central Bank Supervisory Board Member Edouard Fernandez-Bollo. This speech can clarify certain aspects of the financial regulation in the eurozone. The speeches of the ECB's officials often contain references to possible future monetary policy objectives, assessments and measures Bank of England (BOE) Monetary Policy Committee (MPC) Member Sir Jon Cunliffe will speak at 11:05 CET. His speeches often contain indications on the future possible direction of monetary policy. Deutsche Bundesbank President and voting member of the ECB Governing Council Joachim Nagel is set to speak at 19:30 CET. He may drop subtle clues regarding future monetary policy. BCB Focus Market Readout The Central Bank of Brazil will publish a report on market expectations regarding the economic performance of the country's economy, i.e. Focus Market Readout. Expectations are important because they will determine what mood prevails in the economy, whether the country is developing and what the further economic situation in Brazil may look like. US 2-Y and 5-Y Note-Auction Yield fluctuations should be monitored closely as an indicator of the government debt situation. Investors compare the average rate at auction to the rate at previous auctions of the same security. US Treasuries have maturities of two to ten years. Governments issue government bonds to borrow money to cover the gap between the amount they receive in taxes and the amount they spend refinancing existing debt and/or raising capital. The interest rate on government bonds reflects the return an investor will receive by holding the bond for its life. When it comes to 2Y and 5Y bonds, yields are increasing, which means that investors rate the risk associated with US debt high. And they want the highest possible rate of return to decide to buy US bonds. The last reading for 2Y was 4.460% and if the trend continues you can expect a drop of 4.5%. The situation for 5-Y bonds is better as the ongoing uptrend has not gone that high and the last reading was down. The decrease took place from the level of 4.228% to the level of 4.192% New Zealand Trade Balance At the end of the day, reports on imports and exports, and thus on the trade balance, will come from New Zealand. This country is expected to import more than it exports and its trade balance will remain negative. The trade balance is forecast at -1.715M, this is the expected decline from the previous reading which was at -1.615M. It can mean that a country with a large trade deficit borrows money to pay for its goods and services. Even though the beginning of the week was calm, watch out for the next days. There may be important reports for the markets. Summary: 3:15 CET China New Loans 9:00 CET German PPI (Oct) 10:00 CET ECB Supervisory Board Member Fernandez-Bollo Speaks 10:30 CET Hong Kong CPI (YoY) (Oct) 11:05 CET BoE MPC Member Cunliffe Speaks 13:25 CET BCB Focus Market Readout 18:30 CET US 2-Year Note Auction 19:30 CET German Buba President Nagel Speaks 20:00 CET US 5-Year Note Auction 23:45 CET New Zealand Trade Balance Source: https://www.investing.com/economic-calendar/

The minutes of the November meeting of the Federal Reserve are expected to help shape the upcoming week on Wall Street, which is shortened due to the holidays. U.S. stock and bond markets will be closed Thursday, Nov. 24, due to the Thanksgiving holiday. Also, on Black Friday, trading will close early. The report on the discussions at the U.S. central bank meeting earlier this month, due out Wednesday, will be the highlight of the economic calendar in the coming days. The earnings calendar will also be relatively sparse as the third quarter reports come to a close. Stocks posted a loss last week despite a modest gain on Friday after hawkish statements from the Federal Reserve dampened optimism. The S&P 500 fell 0.7% last week: Nasdaq Composite lost about 1.6% as central bank members said they intend to continue aggressive policy tightening. The Dow Jones Industrial Average remained virtually unchanged over the week: Minutes from the latest meeting of the Federal Open Market Committee (FOMC) show that officials are planning a half-point rate hike at their December meeting. Fed Chairman Jerome Powell said at a press conference that he and his colleagues have some avenues to mitigate rising prices, acknowledging that the inflation picture has become more complex. An aggressive increase in interest rates could lead to a recession in the U.S. economy, and Fed officials have recently become more open about this risk. Goldman Sachs raised its Fed rate forecast to a range of 5% to 5.25%, adding another 25 basis point hike in May, noting that the investment bank's exposure to its Fed outlook has turned up. "Inflation is likely to remain uncomfortably high for a while, and this could put pressure on the FOMC to deliver a longer string of small hikes next year," economists led by Jan Hatzius said. Wall Street is nearing the end of its reporting season, but the results from Dell (DELL), J.M. Smucker (SJM), Zoom Video (ZM) and Dollar Tree (DLTR) will be some of the key corporate updates in the report. According to FactSet Research, fewer companies are expressing recession fears in the third quarter compared to the second quarter. Of the S&P 500 companies that reported earnings between Sept. 15 and Nov. 16, 26% fewer companies mentioned the term "recession," with 179 mentioning the word, compared with 242 in the reporting period for the most recent quarter. Still, according to FactSet, this quarter still ranks third among companies stressing fears of a potential economic downturn, at least since 2010.     Relevance up to 10:00 2022-11-26 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327652

For now, higher-than-expected inflation data trumps the mounting concerns about the housing market for the Riksbank. A 75bp rate hike looks likely on Thursday, and we expect one final 50bp increase in February In this article The Riksbank is likely to hike faster than signalled in September Riksbank is keen to stay ahead of the ECB, but housing is a risk A stronger SEK still unlikely in the near term The Riksbank is likely to hike faster than signalled in September When the Riksbank hiked its policy rate by a full percentage point back in September, it was coupled with a message that this was unlikely to happen a second time. The bank’s forecasts pointed to a peak policy rate of 2.5% in April, effectively setting the stage for a 50bp hike this week. But in what has become a familiar tale for central banks, core inflation has since come in higher than the Riksbank had anticipated, and a more aggressive move now looks likely. The Riksbank's September rate hike projection Source: Riksbank, ING   At 7.9%, core CPIF is half a percentage point above the central bank’s September forecast. The jobs market still looks strong, too, even if we saw an unexpected rise in the unemployment rate in the latest set of data (these numbers are fairly volatile). Together with the weak krona, it looks like policymakers will opt for a 75bp rate rise on Thursday. We’re forecasting that rates peak at 3% in February. Core inflation rose from 7.4% to 7.9% in October Source: Riksbank, ING Riksbank is keen to stay ahead of the ECB, but housing is a risk All of this is reinforced by the recent messaging we’ve had from Swedish policymakers. Among the Riksbank’s hawks, Governor Stefan Ingves has stressed the importance of staying a “comfortable distance” ahead of the European Central Bank. Don’t forget that Thursday’s meeting is the last before February, and the ECB will meet – and presumably hike rates – twice before then. Ingves said in the last set of meeting minutes that the Riksbank would need to “follow along upwards at the same pace” at the very least. However, there are good reasons to think the Riksbank is not very far away from the end of its tightening cycle, and the most obvious of these is the housing market. It’s no secret that Sweden’s economy is among the more interest-rate sensitive, and there are already signs that tighter policy is weighing on the housing market. Transaction volumes have fallen sharply, and by some measures, property prices have already started to fall. The headline Valueguard HOX housing index fell a further 3% in October alone, and the Riksbank has projected more declines to come. Much of Sweden’s mortgage market is either fixed for short periods or not at all. Housing market is declining at a faster pace than expected Source: Macrobond, ING   In short, there’s a growing trade-off for the Riksbank between taming inflation and exposing debt fragilities – a challenge that’s far from unique to Sweden. We expect the Riksbank’s new rate projections to factor in a further 25-50bp of tightening next year, and much will depend on the outcome of wage negotiations in the spring. A stronger SEK still unlikely in the near term The SEK OIS curve is embedding around 60bp of tightening this week, so a 75bp move would likely come as a hawkish surprise. However, we believe a greater focus will be on the new rate projections, which are (unlike in Norway) hardly ever followed to the letter by investors, but will provide an indication of how much appetite there is for further tightening. Implicitly, the projections will also show how much the focus is shifting from the mere inflation-fighting exercise to domestic concerns – in particular on housing. This is important because it will shape how SEK rates react to future data releases. On the FX side, despite the Riksbank’s constant protests against a weak krona, the implications of monetary policy remain rather limited for the near term, where we see EUR/SEK trading around 11.00 and facing upside risks. The RB’s hawkishness has been ineffective at lifting SEK in an unstable risk environment, especially in Europe, and we doubt this will change any time soon. The actual implications may emerge in the longer run. If the RB ends up hiking substantially more than the ECB by the time both central banks’ tightening cycles come to an end, then EUR/SEK may face some downward pressure next year, but only under the condition that risk sentiment stabilises. As discussed in our 2023 FX Outlook, we expect SEK to remain vulnerable on the back of European and global risk factors, and only expect limited downside risks for EUR/SEK into end-2023 despite a widening in the Riksbank-ECB rate differential. We currently forecast 10.40/50 for the pair in 2H23. TagsSwedish krona Sweden Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  

We see a case for the bond rally to extend in the near term but we expect the move to run our of steam ahead of the next weeks’ inflation and employment data In this article Drift lower in yields to continue for a few days but is increasingly running on fumes Today’s events and market view   Drift lower in yields to continue for a few days but is increasingly running on fumes We didn’t have a potential OPEC output increase on our list of reasons why bonds should continue to rally this week but it clearly doesn’t hurt. Our reasoning had more to do with classic bond fundamentals. Even if winter has proved mild so far, and this may well change, we expect PMIs’ gradual slide lower to drive home the message that Europe is headed for a recession. What’s more, the Federal Open Market Committee minutes to be released tomorrow night are likely to paint a less hawkish picture than Powell’s press conference did after the meeting. Both would be supportive for bonds, and help them extend their already impressive rally. The odds of a snapback higher in yields are rising There is one problem, however. We think this is the wrong macro move and the odds of a snapback higher in yields are rising. For one thing, the all-important batch of employment and inflation releases that starts next week could well  trigger a wave of position-squaring from short-term longs. More importantly, volatility in economic releases, and the solid performance of US employment data so far in this cycle, means the bar for a further bond rally is higher and less likely to be met. Finally, as bond real rates drop, the odds of a pushback from central banks increases. In the case of 10Y German Bund, this means any dip below 2% in yields is unlikely to last past the end of this week in our view. In the case of US Treasuries, any test of 3.75% to the downside is likely to set up another jump back towards 4%. The drop in real rates is a headache for central banks fighting inflation Source: Refinitiv, ING Today’s events and market view Today’s European economic releases consist of the eurozone current account figures, as well as consumer confidence. The latter is expected to edge up slightly after its spectacular fall earlier this year. The UK Office for Budget Responsibility (OBR) testimony will also be closely watched by sterling investors given the controversy surrounding the government’s budget and economic forecasts. The European Central Bank speakers list features Robert Holzmann, Olli Rehn, and Joachim Nagel. Germany will make up today’s supply slate with a €3bn 5Y sale. The US Treasury will sell $35bn 7Y T-notes. The UK will sell 50Y inflation-linked gilts. The US economic calendar brings an update to the Richmond Fed manufacturing index. Fed speakers are likely to have a hawkish tone thanks to Loretta Mester, Esther George, and James Bullard all due to make public comments. TagsRates Daily   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Market sentiment is fragile on uncertainty regarding whether China would make a U-turn on its Covid reopening plans. Oil Recession fears were already weighing on fragilized oil on Monday morning, when news that OPEC+ would increase oil production by half a million barrels per day on the upcoming December 4th meeting wreaked havoc yesterday. The barrel of US crude tanked to $75 per barrel, below the September dip. Later, Saudi denied the report and we are back to $80 this morning. Forex In the FX, the US dollar index bounced higher after getting very close to the 38.2% retracement level on 2021-2022 rally, and mixed Fed comments tilt the balance to the upside for the greenback. Cryto In cryptocurrencies, news that Genesis warned investors that it could file for bankruptcy further weighed on sector sentiment. Watch the full episode to find out more! 0:00 Intro 0:22 China Covid worries fuel global recession fears 1:53 Oil dips on China worries, OPEC rumour 3:57 US dollar gains, equities fall 5:14 Should you sell Tesla because you don’t like Elon Musk? 7:39 Disney up as ex-CEO returns 8:30 Bitcoin slips below $16K on FTX contagion, Genesis warning Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Twitter #Tesla #Elon #Musk #China #Covid #selloff #crude #oil #EUR #USD #hawkish #Fed #FTX #contagion #Genesis #Bitcoin #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH

Against the backdrop of a tense market situation, any unexpected news may lead to sharp price movements. The Wall Street Journal insider said that OPEC+ would be discussing a 500,000 bpd increase in oil production at a meeting in early December, pushing futures on the North Sea crude to a 10-month low. Only a rebuttal from Saudi Arabia allowed Brent to recover. Was that a fake? The decision to cut production would mean reversing the previous OPEC+ decree to increase it by 2 mln bpd. However, insiders cited four reasons why such a reverse could take place. Firstly, a day after the meeting, the EU embargo on Russian oil and the G7 price cap on it will come into effect. According to the IEA, these restrictions will lead to a reduction in Russian oil production by 2 mln bpd, to 9.6 mln bpd by the end of March 2023, as Moscow will find it difficult to find new markets. Changes in oil production in Russia Second, Saudi Arabia may have made compromises to the US that called for lower oil production after the White House told a federal court that Crown Prince and Prime Minister of Saudi Arabia Mohammed bin Salman should have sovereign immunity from a lawsuit in the United States over the murder of a Saudi journalist. Third, OPEC forecasts that oil demand will increase by 1.69 million bpd in the first quarter, to 101.3 million, and a production ramp-up is needed to balance the market. Finally, the UAE and Iraq have a huge desire to increase production. The former has a quota of just over 3 million bpd, while its production capacity is estimated at 4.45 million bpd, and the country intends to increase it to 5 million bpd by 2025. The reasons are certainly weighty but in the current conditions, the increase in supply will drag the Brent quotations to the bottom, which is not beneficial both for OPEC+ and Saudi Arabia. Its statement that the Alliance's production cuts of 2 million bpd will be valid until the end of 2023 and no one is going to cancel it, has calmed the oil market. It returned to its usual drivers: the COVID-19 outbreak in China and the assessment of risks associated with squeezing Russia out of the market. The number of coronavirus cases in China rose to 27,307 per day, which is close to the April peak. The fatalities increase the risks of the economic shutdown, which has a negative impact on demand and prices. On the other hand, Russia's active production cuts could be grounds for a bullish shock. From the technical point of view, a pin bar with a long lower shadow was formed on Brent's daily chart. If the price manages to reach above the high near $88 per barrel, it may create an opportunity to open short-term longs with the target at the pivot level of $89.4 and the resistance level in the form of the MA at $91. If the price rebounds from these levels, bears may return to the market and drag the price to the downside.     search   g_translate     Relevance up to 08:00 2022-11-27 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327778

Inflation dipped below expectations after global crude oil prices slipped in September  Source: Shutterstock   5.1% Core inflation for October (year-on-year)  Lower Core inflation dips to 5.1% Price pressures eased slightly in October with both headline and core inflation slipping below market consensus. Headline inflation dipped to 6.7% YoY, down from 7.5% and much lower than expectations for a 7.0% increase. Core inflation was also lower than consensus, settling at 5.1% YoY from 5.3%. The downside surprise for inflation was traced to slower price gains for utilities and transport, both moderating as global crude oil prices edged lower in September.  Slower inflation was also recorded for clothing & footwear and recreation & culture, possibly as consumers adjust to tighter liquidity conditions and elevated prices. Food inflation, however, was higher at 7.1% YoY compared to the previous month’s 6.9%.  Start of the turn? MAS monitors impact of recent aggressive tightening Source: Singapore Department of Statistics Some breathing room but MAS likely to remain hawkish Today’s lower-than-expected inflation report gives the Monetary Authority of Singapore (MAS) some breathing room after core inflation finally eased after seven months of acceleration. The inflation reading also validates MAS’s view that the recent string of aggressive tightening would feed through the economy and lower price pressures over the next few months. Despite the apparent turn in inflation, MAS will likely remain vigilant, maintaining its hawkish tone while monitoring the trajectory of core inflation.    TagsSingapore inflation Monetary Authority of Singapore   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Market sentiment bounced yesterday on little news, with sentiment steady in Asia overnight. Long US treasury yields dipped, and short yields were steady ahead of today's FOMC minutes release from the November 2 meeting, taking the US yield curve inversion to a multi-decade low of -75 basis points. The focus in Europe today will be on preliminary November PMI for a sense of how badly the EU is tilting into recession.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rallied 1.3% yesterday closing at the 4,010 level, the highest close since 9 September, suggesting bulls are in control as bears are already sitting on strong profits for the year and therefore has little incentive to take bigger positions before yearend. The next big level on the upside is the 200-day moving average at around the 4,060 level. Today’s key events are preliminary US PMI figures for November and later this evening the FOMC Minutes which could provide more clues into the thinking of policymakers. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) According to Reuters, the Chinese regulators may be close to a decision to impose a fine of over $1 billion on Jack Ma’s Ant Group. Since its IPO was halted by the Chinese authorities in 2020, the group has been under regulatory overhaul. While the amount of the fine is substantial, initial reactions from the investment community to the news were positive as the fine could set the stage for the conclusion of the regulatory overhaul. Alibaba (09988:xhkg) jumped more than 4% on the news. China internet stocks gained, led by Kuaishou Technology (01024:xhkg) as the social media platform company surged 6.2% on better-than-expected Q3 results. After rising 25.5% yesterday, China Aluminum (02068:xhkg) continued its advance, rising 18% on Wednesday. Overall market sentiment remains cautious as the number of new cases reached 28,883 on Tuesday, just a touch below the April high of 29,317 cases. Hang Seng Index gained 1.2% and CSI 300 climbed 0.5%. In mainland A shares, infrastructure names surged while pharmaceutical and biotech stocks retreated. FX: Dollar drops as risk sentiment rebounds Softer long US treasury yields also pushed the US dollar lower as the US yield curve inverted to a new cycle low. Still, the big dollar has done very little after the huge, but brief sell-off move on the October CPI release nearly two full weeks ago, with today’s large data dump and FOMC minutes the last hope this week for providing a spark of volatility in either direction ahead of the long holiday weekend (tomorrow, US markets are closed, with most workers also out Friday). The FOMC minutes late today are not highly anticipated, but could surprise if there is more consensus on a hawkish stance than anticipated. EURUSD has carved out a 1.0222-1.0479 range now. Crude oil (CLF3 & LCOF3) Crude oil closed higher on Tuesday supported by a general recovery in risk appetite as the dollar softened and recent short sales in response to false production hike rumor were paired back. Crude oil prices have traded lower this month in response to a drop in demand from China as Covid cases surge to near a record with restrictions of movements currently impacting 48 cities. Ahead of today’s weekly EIA report, the API reported a 4.8 million barrel drop in US crude stocks. The data also showed that gasoline inventories declined by about 0.4m barrels last week, and distillate stocks increased by 1.1M barrels. EU diplomats will discuss and potentially approve a price cap on Russian seaborne oil sales today (see below), and if implemented Russia may retaliate by refusing to sell its crude to nations that adopt the cap. WTI resistance at $82.25 followed by $84.50 Gold (XAUUSD) Gold trades nervously around the $1735 support level for a second day as the market awaits the release of FOMC minutes. The yellow metal managed a small bounce on Tuesday as the dollar softened after Fed officials indicated they were open to implementing less aggressive hikes going forward. In the short-term the direction will be determined by fund activity and whether they need to make further reductions in recently established, and now under water, long positions. An extension of the recent rally likely requires further declines in yields and the US dollar driving fresh demand for ETFs or some other catalyst that sees a run to safety. US treasuries (TLT, IEF) US treasury yields were steady at the short end and dipped at the long end yesterday, driving a new extreme in the 2-10 yield curve inversion of –75 basis points. Traders are awaiting incoming US data today and the FOMC minutes for next steps, although more heavy hitting data awaits next week with Wednesday’s November PCE inflation data and next Friday’s November US jobs report. The key upside swing area for the 10-year treasury yield is near 4.00%, while the major downside focus beyond the 3.67% pivot low is the 3.50% cycle high from June. What is going on? New Zealand’s RBNZ hikes 75 basis points to 4.25% The market was divided on whether the bank would go with the larger rate hike after a string of 50 basis points moves prior to the meeting overnight. NZ two-year yields jumped back toward the cycle highs overnight as the market participants raised the anticipated peak in the policy rate by mid-year next year to almost 5.50%, up about 30 basis points after the decision. Fed’s Mester and George keep the focus on inflation As investors continue to try and gauge the path of Federal Reserve rate hikes, Cleveland Fed President Loretta Mester reiterated on Tuesday that lowering inflation remains critical for the central bank, a day after supporting a smaller rate hike in December. Kansas City President Esther George said the central bank may need to boost interest rates to a higher level and hold them there for longer in order to temper consumer demand and cool inflation. Russian oil price cap in the works The Wall Street Journal is reporting that Western countries are set to agree on Russian oil price cap around $60 per barrel. However, it could be as high as $70 per barrel on oil loaded after the December 5 start date. The sanctions that the G7, EU and Australia will set, will ban the provisions of maritime services for shipments of Russian oil unless the oil sells below the cap price. The aim is to reduce petroleum revenues for Russia's war machine while maintaining flows of its oil to global markets and preventing price spikes. Russian Urals crude oil already trades at around a 25-dollar discount to Brent, so the impact on Russia’s revenues at current international prices would be limited. Credit Suisse warns of big loss in Q4 The Swiss bank is stating in a press release this morning that it could lose $1.6bn in Q4 driven by losses in its investment banks. In addition, the bank says that it has seen net outflows of 6% relative to AUM in Q3. To improve profitability the bank is one-third of all investment banking employees in its Chinese subsidiary following a recent staff expansion in the country. HP cuts 6,000 employees as PC demand weakens The technology company reported Q4 results yesterday in line with estimates but its FY2023 (ending 31 October 2023) outlook was below estimates with adj. EPS guidance of $3.20-3.60 vs est. $3.61. Over the next two years the company expects to reduce staff level by 6,000 to improve profitability. The OECD revised downward its 2023 growth forecasts Yesterday, the OECD published its latest Economic Outlook. There is not much surprise. Global growth is expected to slow down significantly in 2023 to 2.2 % and to rebound modestly in 2024 at 2.7 %. This will be a long and painful economic crisis. Asia will remain the main engine of growth in the short-term. But the zero Covid policy in China will likely limit the country’s contribution to global GDP growth. Before Covid, China represented about 30 % of global growth impulse. It is now down to roughly 10 %. The OECD warns that the fight against inflation will take time. But several countries are successful. For example, in Brazil, the central bank moved swiftly, and inflation has started to come down in recent months. In the United States, the latest data also seem to suggest some progress in the fight against inflation. Nevertheless, a pause in monetary policy is unlikely in most countries in the short-term. Read the full report here. The increase in the ECB’s TLTRO funding costs for European banks came into effect Until today, European banks’ outstanding borrowings from the ECB’s Targeted Long-term Refinancing Operations III (TLTRO III). LTRO III has been funded at as low as 50bps below the average of the ECB’s Depository Facility Rate (DFR) over the entire life of those borrowings. The DFR, which is currently 1.5%, has been kept at minus 50bps from Sept 2019 to July 2022. It has been a large subsidy from the ECB in the form of below-market funding costs to European banks. Some banks are depositing these monies back into the ECB and arbitraging the interest rate differential. Last month, the ECB announced to change the calculation of the applicable DFR index with effect from Nov 23 to over the current period as opposed to the whole life of the borrowings. The move will reduce European banks’ net interest income and withdraw liquidity from the banking system. Currently, the TLTRO III balance is EUR 2.1 trillion.     JD.COM cut senior management pays while increasing benefits for all employees JD.Com announced that the company is slashing the pay for about 2,000 managers by 10-20% and using some of the savings from the move to fund planned increases in staff benefits, including health and housing benefits, for all employees including hundreds of thousands of delivery staff. Founder Richard Liu will also donate 100 million yuan of his own money towards staff benefits. Under the quest for “common prosperity” of the top government leadership, Chinese tycoons are mindful of doing their share in redistributing income. What are we watching next? Flash PMIs on the radar for US, UK and EU The S&P flash PMIs for the US, EU and UK will be released in the week, and will likely test the soft-landing rhetoric that has been gaining traction. We will likely see further broad-based easing in the metrics from the October prints, as consumer spending remains constrained amid high inflation and a rise in interest rates. While expectations for December remain tilted towards a downshift in rate hikes for the Fed, ECB and the BOE, the upcoming data point will be more key in determining the terminal rate pricing. Markets are now back at pricing 5% levels for the Fed, but the ECB’s pricing for the terminal rate is still sub-3% while UK’s is 4.7% with fiscal austerity being delayed. Copper demand growth shifting from China to Europe and the US At the FT Commodities Asia Summit in Singapore, Jeremy Weir, the CEO of Trafigura said demand for copper is shifting away from cooling building activities in China to energy transition demand, especially in Europe and the US. Weir said demand for copper has remained strong despite recent global headwinds. “We’re seeing for example very strong copper demand in Europe through electrification and even through the pandemic,” he said. “Even the current crisis and conflict in Ukraine is not reducing the demand for copper.” Following a recent rally, that got rejected ahead of key resistance at $4 per pound, HG copper has dropped back and currently trades near the middle of its established range around $3.55 FOMC minutes to be key for terminal rate pricing The FOMC minutes from the November 2 meeting are scheduled to be released on Wednesday, just ahead of the Thanksgiving holiday. The key message delivered by Powell at this meeting was that the pace of rate hikes will slow down as needed, and that will likely remain the highlight of the minutes as well. However, Powell managed to deliver this hawkish message at the press conference, but the risk from the minutes remains tilted to the dovish side. There is likely to be little consensus about whether the rates are in restrictive territory or there’s still room for that, and the divide within the committee remains key to watch as investors remain on the edge to expect a Fed pivot sometime in 2023. Earnings to watch Today’s US earnings focus is Deere, the US manufacturer of agricultural and forestry equipment, with analysts expecting FY22 Q4 (ending 31 October) revenue growth of 18% y/y and EPS of $7.09 up 72% as momentum and pricing power remain strong due to high commodity prices on agricultural products. Today: Xiaomi, Prosus, Deere Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Nov. Preliminary Manufacturing and Services PMI 0930 – UK Nov. Preliminary Manufacturing and Services PMI 1330 – US Oct. Preliminary Durable Goods Orders 1330 – US Weekly Initial Jobless Claims 1445 – US Nov. Preliminary Manufacturing and Services PMI 1500 – US Nov. Final University of Michigan Sentiment 1500 – US Oct. New Home Sales 1530 – EIA's Weekly Crude and Fuel Stocks Report 1700 – US Weekly Natural Gas Storage change 1905 – US FOMC Meeting Minutes 1905 – New Zealand RBNZ Governor at Parliament committee 2130 – Canada Bank of Canada Governor Macklem to testify to parliament committee Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-23-2022-23112022

Today is full of important statistics from the USA. The first will be a report on durable goods orders, which will reflect the state of the industrial sector and consumer demand. In addition, there will be PMI reports from the European Union and the UK. RBNZ Interest Rate Decision Undoubtedly, Wednesday is a very busy day. The first important information came from Noerj Zealand. As expected, Reserved Bank Of New Zealand raised rates by 75bp. Thus, interest rates are the highest since 2008. RBNZ Interest Rate reached 4.25%. CPI data Singapore At the beginning of the day, information about the level of inflation in Singapore also appeared. CPI and Core CPI reached lower than expected levels. CPI for October will amount to 6.7% against the last reading of 7.5%. Core CPI decreased by 0.2% and reached 5.1%. This may mean that inflation is heading to decline and reach a stable 2% level. South Africa The opposite movement of inflation took place in South Africa. CPI Y/Y increased to 7.6% and Core CPI Y/Y reached 5.0% PMI data French Manufacturing PMI (Nov) rose from 47.2 to 49.1. Services PMI (Nov) fell to 49.4. German A similar situation took place in Germany. The Manufacturing PMI (Nov) rose to 46.7 and the Services PMI (Nov) fell 0.1 to 46.4. Both readings were greater than expected. EU PMI In the European Union, PMIs were higher than expected. The Services PMI (Nov) held its previous level of 48.6 against expectations of a decline to 48.0, and the Manufacturing PMI rose from 47.3. In Europe, the manufacturing PMI improved while services declined or remained flat. UK PMI In the UK, declines were expected, but the Manufacturing PMI And Services PMI remained at its previous level. The Manufacturing PMI remained at 46.2 and the Services PMI at 48.8. US PMI In the US, PMI reports will appear at 16:45 CET. The manufacturing PMI is expected to decline while the services PMI is expected to increase slightly. US Reports Ahead of Thanksgiving, the US will release a broad package of reports. Weekly reports as well as reports from the real estate sector may have an impact on the situation in this and other economies. Read more: Important US Reports Ahead, The Services And Manufacturing Projected Under 50| FXMAG.COM Speeches There will also be a lot of speeches today, especially from the Bank of England. At 11:45 CET, David Ramsden, Deputy Governor of the Bank of England took the floor. His public engagements are often used to drop subtle clues regarding future monetary policy. At 12:30 the Bank of England Monetary Policy Committee (MPC) Member Pill took the floor. Dr Catherine L Mann serves as a member of the Monetary Policy Committee (MPC) of the Bank of England to speak at 15:45 CET. The last speeches from the islands will be at 5:30 pm CET and Huw Pill will speak again. Representatives of the German bank will also take the floor. Two speeches are scheduled for 14:30 CET, Prof. Dr. Johannes Beermann and Professor Joachim Wuermeling are set to speak. At 16:00 CET Prof. Dr. Johannes Beermann will be speak again. FOMC Meeting Minutes The minutes are arrived today. The minutes offer detailed insights regarding the FOMC's stance on monetary policy, so currency traders carefully examine them for clues regarding the outcome of future interest rate decisions. Summary: 3:00 CET RBNZ Interest Rate Decision 7:00 CET Singapore CPI (YoY) 10:00 CET South Africa CPI (MoM) (Oct) 10:15 CET French PMI (Nov) 10:30 CET German PMI 11:00 CET EU PMI 11:30 CET UK PMI 11:45 CET MPC Member Ramsden Speaks 12:30 CET BoE MPC Member Pill Speaks 14:30 CET German Buba Beermann Speaks 14:30 CET German Buba Wuermeling Speaks 15:00 CET US Building Permits 15:30 CET US Core Durable Goods Orders 15:30 CET US Initial Jobless Claims 15:45 CET BoE MPC Member Mann 16:00 CET German Buba Beermann Speaks 16:45 CET US PMI 17:00 CET US New Home Sales 17:00 CET US Crude Oil Inventories 21:00 CET BoE MPC Member Pill Speaks 21:00 CET FOMC Meeting Minutes Source: https://www.investing.com/economic-calendar/

The eurozone composite PMI came in at 47.8 in November, slightly better than in October but nonetheless confirms a contraction in the business economy. The good news is that inflation pressures are fading on the back of easing supply problems and the imminent recession The slight increase in the November PMI was mainly driven by the manufacturing PMI     American economist Robert Solow famously said that the computer age was everywhere but in the productivity statistics. At the moment, we can say that the recession is everywhere except for in the GDP statistics. While the eurozone economy still eked out positive growth in the third quarter, it seems inevitable that a recession has started in the current quarter and today’s PMI figures confirm that. The slight increase in the PMI was mainly driven by the manufacturing PMI, which saw an uptick from 43.8 to 45.7. This is still showing a sharp contraction, but slightly less than last month. New orders continue to decline, meaning that current production is coming from a lot of previously built-up backlogs. The pace of decline in services was similar to October and fierce by historical standards. New orders continue to decline here too, and businesses are becoming increasingly reluctant to hire on the back of sluggish economic activity. The upside to the clearly recessionary environment is that inflationary pressures are fading. Weaker demand, lower energy prices than in August, and easing supply-side problems are all contributing to a softening of price pressures. While energy prices remain volatile and businesses are likely to still price through some of the higher costs incurred, these factors do point to a turning point in the inflation rate around the turn of the year. TagsInflation GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The British pound has steadied on Thursday, after soaring 1.4% a day earlier. In the European session, GBP/USD is trading at 1.2074, up 0.17%. The pound has enjoyed a splendid November, gaining 5.3%. The upswing has been impressive but is more a case of a broad pullback in the US dollar rather than newfound strength in the pound. The UK economy is likely in a recession, and the outlook is as gloomy as a rainy November day in London. The October Manufacturing and Services PMIs remained mired in negative territory, pointing to contraction. The labour market has been a bright spot but that could soon change, with the Bank of England projecting that unemployment will double to 6.5%. The UK economy declined by 0.2% in Q3, and the BoE has warned that negative growth will extend all the way to the first half of 2024. With these formidable economic headwinds, it’s difficult to make a case for the pound continuing its upswing. Inflation has hit a staggering 11.1%, despite the BoE raising the cash rate to 3.0%. The bank pressed harder on the rate pedal at the last meeting, raising rates by 75 basis points. The BoE expects rates to peak at 5%, which means there’s a lot more tightening on the way. The bank will have to tread carefully in order not to choke off economic growth as it continues to tighten in order to curb red-hot inflation. Fed says pace of hikes will ease The Fed minutes reiterated what the Fed has been telegraphing for weeks; namely, smaller rates are on the way. Fed members agreed that smaller rate increases would happen “soon”, as they continue to evaluate the impact of the current policy on the economy. Members also noted that inflation was yet to show any signs of a peak. The markets aren’t completely convinced that we’ll see lower rates at the December meeting – the odds of a 75 basis point move are at 65%, with a 35% chance of a 50 bp increase. GBP/USD Technical 1.2040 and 1.1875 are the next support levels There is resistance at 1.2192 and 1.2357 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

The Bank of Korea raised its policy rate by 25bp today with a hawkish tilt, expecting inflation to remain higher than its target of 2% throughout next year. But, given the falling pipeline prices and growing concerns over growth, we believe that the BoK is close to its final destination in raising interest rates Source: Shutterstock   3.25% BoK's 7-Day Repo Rate    As expected Terminal rate debate will be continued The Monetary Policy Board unanimously decided to raise rates by 25bp today. Compared to the previous month, volatility in the FX market has calmed significantly and the credit squeeze in the short-term money market has worsened, thus the BoK returned to a normal rate hike pace. However, the board seems to have quite different views on the terminal rate - one for 3.25%, three for 3.5%, and two for 3.5%-3.75%, not including Governor Rhee Chang-yong's own opinions. Regarding future policy decisions, Governor Rhee mentioned that as CPI inflation over the next two months is expected to fall due to the high base last year, the BoK will be cautious about reading into those figures and will wait to see whether inflation rebounds again in January and February. Also, the Korean won has appreciated meaningfully but external factors such as the Federal Reserve's December rate hike and China's Covid policy stance are uncertain, so FX moves in the coming months are another factor to consider in future policy decisions.  We are maintaining our call for a 25bp increase in 1Q23, and now see a better chance of a rate hike in February rather than January unless the Fed surprises the market with another large step in December. As inflation is expected to slow in the future, we believe that financial market stability and growth should be the focus of the BoK from now on. Also, the BoK is expected to adjust its hiking pace as there is limited room for further rate hikes.    The BoK has downgraded its 2023 GDP and CPI inflation forecasts The BoK revised down quite meaningfully its GDP forecast for 2023 from 2.1% to 1.7%. Most of the downward adjustments come from the external demand component, with growth in major trading partners such as the US (0.3%), the EU (-0.2%) and China (4.5%) expected to slow down in 2023.  Meanwhile, the BoK forecast that next year's inflation would be only marginally lower, at 3.6% from 3.7%. The accumulated pressure to raise prices is expected to continue until next year, offsetting much of the weakening pressure on the demand side due to the economic slowdown. For the next couple of months, base effects will play a major role in inflation thus CPI inflation is expected to fall to the 4% level temporarily but rebound to the 5% level in January. The BoK expects prices for gas, electricity, and manufactured food to rise further early next year, thus headline inflation is expected to stay above 4% in the first half of next year. What we see similarly to BoK's outlook First, Korea's growth is largely dependent on the external demand condition. Both ING and BoK have a cloudy global outlook, which is expected to negatively affect Korea's growth next year.  Second, the semiconductor cycle is expected to bottom out in the second half of next year. The recent slump in exports is mainly driven by sluggish semiconductor exports, but exports should rebound in the second half of next year.  Third, investment is expected to fall due to tight financial conditions and the bleak outlook for the construction sector. Fourth, although credit tightening in the short-term money market and some market jitters will likely continue, this shouldn't threaten the overall financial system. We think some losses are expected in the Project Financing and construction industry, but the shock is expected to be contained within the sector. (Please see "South Korea: corporate debt is a concern for the economy). What we see differently to the BoK's outlook First of all, ING's 2023 GDP forecasts for the US and the EU are -0.4% and -0.7% year-on-year, respectively, which is weak compared to the BoK's own forecasts of 0.3% in the US and -0.2% in the EU. As mentioned earlier, considering Korea's high dependency on external demand, we see a bigger negative impact on Korea's exports and overall growth.   Second, private consumption is expected to shrink in the first half of next year as the debt service burden increases, while the BoK expects consumption to continue to recover. More than 70% of household debt is based on floating interest rates and more than 65% of households are indebted. We have been seeing the deleveraging of household debt mostly in personal loans for several months which is a good sign for long-term growth but, in the short term, the propensity of households to spend should weaken. In addition, the wealth effect of Korean households is expected to weaken as real estate prices will likely continue to adjust further. These are the reasons that we foresee sluggish private consumption in 1H23. Third, we believe that inflation will decline faster than the BoK's forecast. It is true that there have been accumulated price pressures in utilities and other service prices and Korea's CPI is more sensitive to supply-side inflation factors. But, we think the price declines in rent and housing should have a bigger impact in leading to a sharp decline while price hikes from reopening will likely dissipate as well.  ING vs BoK's outlook BoK, INGBoK releases bi-annual %YoY forecasts only. ING estimates quarterly growth based on the BoK's bi-annual numbers Forward-looking price components point to further deceleration in coming months In a separate report, the BoK announced its Producer Price Index for October. Headline PPI inflation slowed to 7.3% YoY in October (vs 7.9% in September) with goods prices down the most. Goods prices such as fresh food (4.1% vs 7.1% Sept) and industrial products (7.7% vs 9.6% Sept) all declined due to good harvesting of winter vegetables and the drop in gasoline prices. Meanwhile, utility (32.4% vs 25.2% Sept) and services prices (3.4% vs 3.3% Sept) continued to rise, reflecting the recent gas/electricity rates hike. The utility rate hike will have some lingering effects, pushing up service prices in a few months, but we believe that headline prices will continue to decelerate as demand-side pressures are expected to turn weak with higher interest rates.  We expect CPI inflation to decline quite sharply to 5.1% YoY in November (vs 5.7% in October) for the following reasons. The Korean won significantly stabilised compared to October, gasoline prices continued to decline, and fresh vegetable prices came down meaningfully during the month. Also, we believe that inflation will likely decelerate to the 4% level in 1Q23 although there will be additional utility rate hikes next year. Pipeline prices continued to drop since early summer CEIC TagsMonetary Policy GDP CPI inflation Bank of Korea Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

South Korea hopes to achieve carbon neutrality by 2050 by expanding its renewable energy sources, namely nuclear power. In this article, our senior economist in Seoul looks at South Korea's journey to net-zero, and how this has been impacted by the war in Ukraine In this article Korea's electricity supply and demand South Korea’s efforts to achieve its net-zero 2050 target The Transition Committee’s five policy guidelines How has the war impacted the energy market? The Kori nuclear power plant in South Korea is the world's largest fully operational nuclear generating station    Korea's electricity supply and demand South Korea wants to pursue reliable and cheaper energy sources. In the following charts, we look at the reliability of South Korea's current energy supply. Industry (manufacturing) consumes more than half of electricity/energy Industry depends on more reliable and cheaper energy sources IEA, Kepco (LHS). KEEI as of 2020 (RHS)World as of 2019, Korea as of 2020 (LHS) This is to do with the structure of the Korean economy/industry Top electricity consumer shifted from Heavy Industry to IT. Both require a steady/reliable supply of electricity KEPCO Thus, Korea has been highly dependent on 'reliable' conventional energy Electricity generation heavily depend on coal, LNG, and nuclear Renewable facilities have grown fast to 14.5%. Power generation accounted 6% as of 2020 KEPCO   In the next set of charts, we look at how inexpensive power is in Korea. Inexpensive power: electricity consumption per capita ranked 13th Electricity is an important factor in the Korean economy, supporting the activities of industry and households BP statistical review of World Energy 2021 Almost 100% overseas dependence & isolated national power grid system The economy heavily depends on energy imports and households are more sensitive to energy prices KEEI and CEIC Higher energy prices affect Korea’s macro economy: inflation Households are more sensitive to energy prices and pay for electricity on a progressive rate KEEI, CEIC Higher energy prices affect Korea’s macro economy: trade balance CEIC Production of renewable energy (calorific unit) Renewable production increased steadily Korea Energy Agency, as of 2020Non-renewable waste data has been excluded since 4Q19 Inexpensive power: power purchasing unit cost by energy source Unit cost of renewable has lowered and has reached comparable levels for coal and hydro (if excluding RPS) KEPCOFore renewable, excluding RPS (Renewable Portfolio Standard) South Korea’s efforts to achieve its net-zero 2050 target Where does it want to be? South Korea has become the 14th country in the world to legislate a carbon target, aiming for a 40% reduction in emissions from 2018 levels by 2030 to achieve carbon neutrality by 2050 What has it been doing to get there? Since its formation in May 2021, the 2050 Carbon Neutrality and Green Growth Commission has implemented several measures in an effort to gradually move towards total carbon neutrality. The Carbon Neutrality Act, for example, became effective in March 2022 and aims to facilitate the transition to a carbon-neutral society and increased green growth. Alongside legislative changes, the government has also increased its 2022 carbon neutrality budget to KRW 12 trillion from the previous year’s KRW 7.3 trillion, with a newly established KRW 2.5 trillion climate fund. Following a change of government in early 2022, progress on energy policy has come to a halt. Although the previous administration was criticised for setting overly ambitious goals and disregarding corporate voices, the new government has confirmed that it intends to stick to the original plans, with details set to be reviewed more closely moving forward. The Ministry of Trade, Industry and Energy (MTIE) announced on 5 July that the government will resume the construction of Shin Hanul Units 3 and 4 nuclear reactors and maintain the current level of reactor capacity if safety is ensured. As a result, nuclear will be responsible for more than 30% of power by 2030, up from 27.4% last year. In addition, the Korean government plans to create a new law for disposing of high-level radioactive waste in order to reduce potential hazards, organising a team exclusively for nuclear waste management. The revised outline, including the target for renewables, will be detailed in the 10th Basic Plan on Electricity Demand and Supply due in the fourth quarter of 2022. The Transition Committee’s five policy guidelines 1. Feasible Carbon Neutrality Plan and energy mix No change for the internationally committed carbon neutrality objectives, but the implementation plans should be amended by embracing nuclear energy in its decarbonisation efforts. 2. Market-Based demand efficiency A market-based initiative to promote energy demand efficiency, and foster market principles and market competition. 3. Energy policy as a new growth engine Invest in nuclear power technology and export the K-nuclear plants. as well as foster renewable technologies such as solar, wind, and hydrogen as new growth engines 4. Strengthen resource security Secure a reliable supply chain of energy and core minerals and reinforce resource security. 5. Strengthen energy welfare policy Provide energy welfare policies for low-income households and reduce coal power generation, under the consideration of jobs and the local economy. How has the war impacted the energy market? Similar to other energy importers, South Korea is suffering from the ongoing war due to high inflation and worsening trade conditions. However, as a major refining/petrochemical exporter, South Korea has significantly reduced its oil imports from Russia and this trend is likely to continue. Meanwhile, LNG and coal imports have fallen but at a slower pace due to the high dependence on power generated by fossil fuels. South Korea plans to expand its renewable energy sources, with the anticipated gap likely to be filled by nuclear power. Given its value as a reliable and affordable renewable energy source, nuclear power is expected to become an increasingly critical point of focus for the government moving forward. What’s happened since the Ukraine war? South Korea’s imports of oil, coal, and LNG (in volume terms) CEIC Oil has seen the most dramatic change KITA (Korea International Trade Association) LNG: total imports volume declined -2.6% YoY due to high price Russia’s LNG import share significantly declined in 2022 and diversified imports sources 80% of LNG is provided under long-term contract KITA (Korea International Trade Association) Coal: Russian import share actually increased in 2022 KITA (Korea International Trade Association) TagsHydrogen Energy crisis Energy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Regional PMI readings and inflation reports will be the highlight for the coming week In this article Regional PMIs Inflation from Australia, Indonesia and South Korea Growth numbers from India Other key data releases   Shutterstock   Regional PMIs Both official manufacturing and non-manufacturing PMIs for China should be in deeper contraction in October as the number of Covid cases increased, affecting both factory and retail activities. This should also be reflected in the Caixin manufacturing PMI numbers which could show a bigger contraction, as smaller factories are more adversely affected given the challenging logistical situation.  Meanwhile, PMI indices for both South Korea and Taiwan should edge lower due to stalling demand for semiconductors from the US, Europe and China. Inflation from Australia, Indonesia and South Korea Next week we have Australia's October CPI inflation. Inflation data has typically only been released quarterly so this provides us with much more insight into the evolution of prices and provides much more timely updates than we have been used to. We think the outcome will probably be close to the recent month-on-month rate of increase, which would keep it roughly in line with the same period last year and leave inflation at about 7.3%. That could be interpreted as the peak, so markets may respond positively to that. Inflation in Indonesia will likely pick up further, with core inflation likely accelerating to 3.5% year-on-year while headline inflation should settle at 5.9% YoY.  Elevated price pressures have kept Bank Indonesia busy lately with the central bank recently tightening by 50bp. We expect inflation to inch higher in the coming months which could ensure that BI will stay hawkish going into 2023.  Meanwhile, inflation in Korea is expected to decelerate quite sharply to 5.1% YoY, mainly due to base effects. Fresh food and gasoline prices stabilised during the month while pipeline prices suggest a further deceleration in the coming months. Growth numbers from India India releases 3Q22 GDP data next week. The 2Q figure was buoyed by base effects and came in at 13.51%, which although admittedly very high, was a disappointment, and led us to downgrade our GDP forecasts. We have 6.3% YoY pencilled in for the third quarter, as well as for the full calendar year 2023. Deficit data for October is also due, and will likely show that a modest improvement in India’s debt to GDP in 2022/23 remains on track. Something in the region of INR40,000 crore would be in line with recent deficit trends. Other key data releases In Korea, November exports will likely be disappointing as suggested by preliminary data reports. We expect a contraction of 10.5% YoY in November as semiconductor exports and exports to China remain sluggish. Slowing export activity should translate to industrial production contracting for a fourth straight month. Semiconductor and steel production will likely be a drag, but auto production should rebound. In Japan, the jobless rate may edge up to 2.7% (vs 2.6% in September), but overall labour market conditions remain healthy. However, given the disappointing 3Q GDP report, September industrial production is expected to drop 1.0% MoM, seasonally adjusted, with weak external demand pressuring manufacturing activity. TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The end of the week is quiet due to America's lack of activity due to Thanksgiving. The market's attention will be focused mainly on the Asian and European markets. Today, an important report turns out to be the result of the German GDP. Tokyo CPI At the beginning of today, Japan, and more specifically Tokyo, published its inflation report. In this city, Core CPI increased from 3.4% to 3.6% and it was a higher than expected reading (3.5%). The upward trend of this indicator has been going on since the beginning of May, but since May Core CPI has been above 1.0%. Also CPI increased significantly from 3.5% to 3.8%. The consumer price index only in Tokyo excluding fresh food and energy prices held its previous level of 0.2%. In this city, the rate peaked this year in May (0.4%), and then fell twice. After that, from July to September it held the level of 0.3%. Singapore Industrial Production Singapore Industrial Production MoM increased significantly. Comparing October to September, the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities was 0.9%, which is a good result as another decline was expected. The same index comparing the result from October 22 to October 21 has fallen. The fall was expected. The current reading is -0.8%, it is the first result in a year that was below zero, but it was higher than the expected -0.9%. This means that the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities has decreased significantly, but not as much as expected. Source: investing.com German GDP In Germany, both the quarterly and annual change in gross domestic product turned out to be a positive surprise. GDP Q3 YoY was 1.2%. Unfortunately, it was a decrease in comparison to the previous period, the reading of which was at the level of 1.8%. This time it was expected to score 0.1% lower. A very positive result for the German economy as well as for the euro zone turns out to be the reading of GDP Q3 q/q. The index increased by 0.3% compared to the previous period and reached the level of 0.4%. An increase to 0.3% was expected, but the result higher than expected may raise some optimism. German GDP figures show the country’s economy has grown slightly more in the third quarter than anticipated on the back of consumer spending. Switzerland Employment Level The Employment Level measures the number of people employed during the previous quarter. As the current reading shows, the exemplary trend is successively maintained. Employment increased this time to the level of 5,362M. The previous reading was about 46M than (5,316M). Such results show the good condition of the economy, because employment increases household income, and thus these households are able to spend more, which drives the economy because money remains in constant circulation. ECB’s speeches Markets expect only two speeches at the end of the week, and this time only from the European Central Bank (ECB). The first speeches took place at 9:50 CET. The European Central Bank Supervisory Board Member Kerstin af Jochnick spoke. The second and final speech of the day will take place at 18:00 CET, with Luis de Guindos, Vice-President of the European Central Bank The speeches of the ECB's officials often contain references to possible future monetary policy objectives, assessments and measures. What's more, statements can give strength to the euro (EUR), or set it in the opposite direction. Summary: 0:30 CET Tokyo CPI 0:30 CET CPI Tokyo Ex Food and Energy (MoM) (Nov) 6:00 CET Singapore Industrial Production MoM 8:00 CET German GDP (Q3) 8:30 CET Switzerland Employment Level 9:50 CET ECB's Supervisory Board Member Jochnick Speaks 18:00 CET ECB's De Guindos Speaks Source: https://www.investing.com/economic-calendar/

Internationally, governments face a difficult challenge: supporting their citizens at a time when prices are rising dramatically, especially for necessities such as food and fuel, which have been deeply affected by the war in Ukraine. The Outlook The outlook for the global economy heading into 2023 has worsened, according to multiple recent analyses, as the ongoing war in Ukraine continues to hamper trade, especially in Europe, and as markets await a more complete reopening of the Chinese economy after months of destructive COVID-19 lockdowns. In the United States, signs of a tightening labor market and a slowdown in economic activity fueled fears of a recession. Globally, inflation picked up and business activity, particularly in the euro area and the UK, continued to decline. In June, inflation rose to a 40-year high of 9.1% and remained at 7.7% in October, well above the Fed's target of 2% a year. Fed Chairman Jerome Powell and his associates responded by raising interest rates from near zero in March to a range of 3.75% to 4%, with signaling indicators likely to exceed 5% for the first time since 2007. 2.6% in Q3 Gross domestic product in the US in the third quarter of 2022 increased by 2.6 percent. quarter-on-quarter (annualized), according to preliminary data from the Department of Commerce. This reading is higher than market expectations, as an increase of 2.4% was expected. This result was presented at the end of October (27.10.22) and this gave the Federal Reserve room to raise interest rates further. Forecast Expectations for the next reading are even more positive. GDP is expected to reach 2.7%. Source: investing.com How it is calcuated? The US uses a different way than European countries to compare GDP. They annualize their data, i.e. they convert short-term data as if they were to apply to the whole year, e.g. the monthly value is multiplied 12 times, and the quarterly value 4 times. For example, if GDP growth in a given quarter was 1%. compared to the previous quarter, the annualized growth rate was - to put it simply - slightly more than 4%. This means that we cannot directly compare data on GDP dynamics in the US to that recorded in European countries that publish data on economic growth dynamics without annualization. Recession? There is currently no recession in the US as it was not declared by the NBER, although the country entered a technical recession in the second quarter of 2022 with a second consistent quarter of negative GDP growth. However, there are several factors pointing to a growing likelihood of a recession in the coming months. Painful inflation can often persist without pushing the economy into recession. On the other hand, the actions of the US Federal Reserve (Fed), which sticks to a 2% price increase target, are increasingly likely to push the US into recession. Fed economists said it was a virtual coin toss as to whether the economy would grow or plunge into recession in 2023. Central bank staff cited rising pressure on consumer spending, trouble abroad and higher borrowing costs as short-term headwinds. Among the forecasts of a recession in the United States, there seems to be a growing consensus on its occurrence. However, there are some discrepancies as to how deep and how long it will be. Source: investing.com

Summary:  A pivotal post-holiday week ahead kicked off with risk-off due to protests in China over the Zero covid policy, and China PMIs due this week could potentially signal demand weakness as well. The week is also key for US data and Fed as financial conditions are the easiest since May and more pushback may be on the cards with the most hawkish members of the Fed board, Powell and Bullard, on the wires this week before the FOMC quiet period kicks in. We also get ISM manufacturing, PCE inflation and jobs data that will be key for the dollar. Eurozone inflation may soften, but that won’t be enough for the ECB to take the foot off the pedal, while Australian CPI will pressure the RBA to continue with its steady rate hikes. An important week ahead for incoming US data: ISM manufacturing, PCE inflation and jobs data to be key for the dollar This week will offer an interesting test for markets, including the US dollar, which trades at pivotal levels, as we have a look at the next important data macro data points out of the US, especially the PCE inflation data and the Friday November jobs report. Core PCE is forecast to rise 0.3% MoM in October from 0.5% previously. In addition, we’ll have a look at the ISM manufacturing survey for the month on Thursday, which is also expected to slip into contraction after the decline in S&P flash PMIs last week resulted in further easing of Fed tightening expectations. The question for the run-up into the December 14 FOMC meeting and in the month or so beyond is how long the market can continue to celebrate the Fed easing off the accelerator, when the reason it is doing so is that economic slowing and an eventual recession threaten. Normally, a recession is associated with poor market performance as profits fall and credit risks mount. Bullard and Powell speak – pushback against easing financial conditions? While the economic data continues to slow, and markets continue to cheer on that, it will key for Fed members to bring the focus back to easing of financial conditions and consider what that means for inflation. Chicago Fed national financial conditions index eased further in the week of November 18, bringing financial conditions to their easiest levels since May. Most of the Fed members that have spoken since that soft CPI release for October have pushed back against pivot expectations, but it hasn’t been enough. Further pushback is still needed if the Fed is serious about bringing inflation under control, and only the most hawkish members of the committee Bullard and Powell may be able to deliver that. Both will be on the wires this week. Bullard speaks on Monday while Powell discusses the economic outlook and labor market on Wednesday. Other Fed members like Williams, Bowman, Cook, Logan and Evans will also be on the wires. China PMIs likely to show demand weakness, Asia PMIs also due China’s NBS manufacturing PMI is expected to decline to 49.0 in November, further into the contractionary territory, from 49.2 October, according to the survey of economists conducted by Bloomberg. The imposition of movement restrictions in many large cities has incurred disruption to economic activities. High-frequency data such as steel rebar output, cement plants’ capacity utilization rates, and container throughputs have weakened in November versus October. Likewise, the Caixin manufacturing PMI is expected to drop to 49.0 (Bloomberg survey) in November from 49.2 in October. Economists surveyed by Bloomberg expect the NBS Non-manufacturing to slow to 48.0. in November from 48.7 in October, on the enlargement of pandemic containment measures. PMIs for other Asian countries are also due to be reported this week, and the divergence between the tech-dependent North Asian countries like Taiwan and South Korea vs. more domestic-oriented South Asian countries like India and Indonesia will likely continue, with the latter outperforming. EUR may be watching the flash Eurozone CPI release Eurozone inflation touched double digits for October, and the flash release for November is due this week. The headline rate of the harmonized index of consumer prices (HICP) is expected to ease slightly to 10.4% YoY from 10.7% YoY last month. The core rate that excludes food and energy prices is forecast to however remain unchanged at 5% YoY. This print will be key for markets as the magnitude of the ECB’s next rate hike at the December meeting is still uncertain, and about 60bps is priced in for now. But even with a slight cooling in inflation, which will most likely be driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Australia’s economy continues to weaken. Retail slides. CPI data is the next catalyst Australia has continued to receive mostly weaker than expected economic data, that support the RBA’s dovish tone. Today Australian retail trade data unexpected fell, showing sales dropped 0.2% from the prior month. This reflects that consumers are feeling the strain of inflation and rising interest rates. As a house, Saxo thinks further weakness in spending is likely ahead in 4Q and into 2023, with the full impact of rate hikes passing through households, and increasing amount of Australian in financial duress. This view is somewhat supported by the RBA’s thinking. The data the RBA will be watching next is ; Australian inflation data for October, released Wednesday 30 November. Inflation is likely to have fallen over the month, however consensus expects inflation to have increase year on year, up 7.6% year on year. If the market thinking comes to fruition, this would show Australian inflation rose from the prior reading (whereby CPI rose 7.3% yoy). Regardless, if inflation does rise, we think the RBA will likely save face, and keep hiking rates by 0.25%, with its next hike due December 6. Twitter to launch its ‘Verified’ service After Musk acquired Twitter last month for $44 billion, he plans to "tentatively" roll out its verified service on December 2, with multiple colours for different types of users. Blue checks will be allotted to people, while verified company accounts will get gold checks and grey marks will be given to governments. Musk said all verified accounts will be manually authenticated, before the check activates, which will be cumbersome. Twitter recently halted the launch of its $8 verified service, as it failed to cease impersonation issues the company has been having. Key earnings to watch this week Peter Garnry highlights earnings results to watch in his note. Pinduoduo on Monday is the key earnings focus in China with analysts expecting Q3 revenue growth of 44% y/y and the EBITDA margin staying at healthy levels around 21.2%. The main menu next week is on Wednesday with earnings from US technology companies Salesforce and Snowflake. Analysts expect Salesforce FY23 Q3 (ending 31 October) revenue growth to decline to 14% y/y down from 27% y/y a year ago and analysts expect Snowflake to report FY23 Q3 (ending 31 October) revenue growth of 61% y/y down from 110% y/y a year ago. Expectations for both companies highlight the slowdown in technology enterprise spending that we have seen from other technology companies including Intel, HP etc. Key economic releases & central bank meetings this week Monday, Nov 28 Eurozone M3 (Oct)UK CBI Retail Sales (Nov)U.S. Fed Bullard at MarketWatch Live Event Tuesday, Nov 29 U.S.  Conference Board Consumer Confidence (Nov)U.S. St. Louis Fed President Bullard speechJapan Unemployment Rate (Oct)Japan Retail Sales (Oct) Wednesday, Nov 30 U.S. ADP Private Employment (Nov)U.S. JOLTS Job Openings (Oct)U.S.  Fed Chair Powell speechEurozone HICP (Nov, flash)Germany Unemployment Rate (Nov)Japan Industrial Production (Oct)Japan Housing Starts (Oct)China NBS Manufacturing PMI (Nov)China NBS Non-manufacturing PMI (Nov)India Real GDP (Q3)Thailand Bank of Thailand policy meeting Thursday, Dec 1 U.S. PCE (Oct)U.S. ISM Manufacturing (Nov)U.S. Initial Jobless Claims (weekly)Eurozone Unemployment Rate (Oct)Japan Capital Spending (Q3)Japan Consumer Confidence (Nov)China Caixin China PMI Manufacturing (Nov) Friday, Dec 2 U.S. Nonfarm Payrolls (Nov)U.S. Unemployment Rate (Nov)Eurozone PPI (Oct)   Key earnings releases this week Monday: Pinduoduo, Capitaland, H World Group Tuesday: Li Auto, DiDi Global, Bank of Nova Scotia, Intuit, Workday, Crowdstrike, HP Enterprise, NetApp, Shaw Communication Wednesday: Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger     Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-28-nov-2022-28112022

A new ING survey on a representative panel shows that nine in ten Belgians are reducing their energy consumption and six in ten are even saving on daily expenses. Over the next six months, they plan to step up their efforts. Online spending is also under pressure, even more so than in other countries. This will adversely impact economic activity In this article High inflation prompts six in ten Belgians to save on daily expenses Four in ten Belgians see energy bill more than doubling in last six months Decline in online purchases for all spending categories Belgians are much more cautious than their neighbours when it comes to budgeting Belgian economy dives into the red     High inflation prompts six in ten Belgians to save on daily expenses Belgians are looking for savings to cope with the rising cost of living. An international ING survey, conducted in early November in Belgium, the Netherlands, Germany, Romania, Poland, Turkey and Spain, shows that almost six in ten Belgians are saving on fresh food and groceries (see chart 1). A slight majority of Belgians also cut their clothing expenses. The Belgian urge to save is also slightly higher than in Germany for most product categories. While in Belgium, 58% already save on daily expenses, in Germany this is 'only' 50%. Remarkably, about half of Belgians also cut back on their spending on catering, travel and leisure activities, sectors that benefited greatly from the end of the pandemic. Compared to the results of the same survey in March 2022, the number of households cutting back on their consumption has risen sharply. In addition, many households plan to reduce their spending further in the coming months. While this was only 44% in March, 57% of Belgians say they are already saving on daily expenses and 60% expect to do so in the next six months. More and more Belgians are cutting back on their spending Due to rising prices, I try to save on... (% of respondents) ING consumer survey November 2022 Four in ten Belgians see energy bill more than doubling in last six months The extreme caution of households is obviously due to the energy crisis. According to the survey, the energy bill has more than doubled for four out of ten Belgians over the last six months. For almost one in ten, it has increased more than fivefold. In this context, the number of households taking measures to save energy and try to reduce the impact of the price increase has risen sharply, from 77% in March to 86% today. More than six out of ten Belgians say they are cutting back on heating, while four out of ten respondents say they are more economical with the use of electrical appliances, such as dishwashers (see chart 2). Six in ten Belgians turn down heating In what ways do you try to reduce your energy bills? (% of respondents) ING consumer survey November 2022 Decline in online purchases for all spending categories During the pandemic, Belgians appeared to be very active online shoppers, but the unusually sharp increase during the pandemic seems to be normalising somewhat. Almost a quarter (23%) of respondents say they have been buying online less often since the end of the pandemic, compared to only 15% who say they are buying online more often. When asked whether they expect to spend more online during the holidays than last year, one in four Belgians (25%) said they would spend less. The survey results show that the decline is mainly due to a general deterioration in the economic climate and not to consumers buying more in physical shops since the relaxation of health restrictions. Indeed, the percentage of respondents saying they spend relatively more in physical shops than online (21%) is balanced by the percentage saying they buy relatively more online than in physical shops (23%). Moreover, a significant proportion of the households also say they plan to further reduce their online purchases in the coming year. For instance, only 9% of respondents plan to buy more clothes online in the coming year, while 28% plan to buy less (see chart 3). Although the decline seems stronger for electronics and clothing, the trend is clearly felt across all product categories. It is therefore likely that the decline in online spending will be widespread in the coming months. No sector seems to be able to escape the economic downturn. Lots of families plan to further cut online budgets next year Do you plan to purchase more online in the coming months (% of respondents)? ING Consumer Survey November 2022 Belgians are much more cautious than their neighbours when it comes to budgeting The share of households planning to reduce their online spending is significantly higher in Belgium than in the Netherlands and Germany, and this is true for almost all product categories (see chart 4). While, for example, 28% of Belgian respondents said they would like to buy fewer clothes and shoes online, this is only 14% in the Netherlands and 23% in Germany. Although Belgians' purchasing power is much better protected compared to other eurozone countries thanks to the automatic indexation of wages, the crisis seems to have a greater impact on consumption patterns in Belgium than in other countries. Belgians seem much more cautious and willing to economise more to get through this difficult period. More Belgians cut online budget than neighbouring countries Do you plan to buy less online in the coming months (% of respondents)? ING Consumer Survey November 2022 Belgian economy dives into the red Belgians are massively looking to save money to cope with the rising cost of living. This will have an impact on economic growth in Belgium. The Belgian economy has already contracted slightly (-0.1%) in the third quarter, and this is expected to continue in the coming quarters. We expect economic growth to be negative in 2023. The full study is available in Dutch and French. TagsGDP Eurozone Energy crisis Consumption Belgium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Spain's inflation figure fell again sharply in November and is now already four percentage points below its peak level in July. The decline will continue in the coming months In this article Spanish inflation falls for the fourth month in a row Spanish inflation now significantly below eurozone average The light at the end of the inflation tunnel is getting brighter     Spanish inflation falls for the fourth month in a row Spanish inflation was 6.8% year-on-year in November, down from 7.3% in October. Over the month, consumer prices fell by 0.1%. The harmonised index was 6.6%, down from 7.3% in October. This development was mainly due to a fall in fuel prices last month, while they rose in November last year. Also, price increases for clothing and footwear were more moderate last month than in November 2021. Spanish inflation now significantly below eurozone average Spanish inflation has generally been above the eurozone average since the beginning of the year, but has fallen sharply since peaking at 10.7% in July. The weight of food in Spain is much higher than the eurozone average, which turbocharged the sharp price increases within this component. Hospitality also contributed more to price increases than the eurozone average, through a combination of faster rising prices but also a greater weight in the inflation basket. After its peak level, Spanish inflation has fallen sharply, making it unique in the euro area. Energy inflation has fallen sharply and is well below the eurozone average. Energy prices in Spain rose sharply in autumn 2021, making the year-on-year comparison much weaker this year.  Also the VAT cut on gas and electricity eased energy inflation. Details by component for November are not yet available, but October data showed that electricity inflation already turned negative last month (-15.4%) while also gas inflation fell sharply to 13.3% in October from 24.3% a month earlier. This decline will manifest itself further in the coming months. Spain’s inflation slowdown has set in earlier INE, Eurostat The light at the end of the inflation tunnel is getting brighter Price pressures higher up the production chain are starting to ease. Both commodity prices, freight costs for transport and factory prices are starting to fall sharply from their recent peak levels. Last Friday, Spain's statistics office INE announced that producer prices fell again in October. While producer price inflation was still 42.9% in August, it fell to 26.1% in October, its lowest level since September 2021. Moreover, it is also becoming increasingly difficult for companies to implement new price increases as demand has fallen and inventories have risen sharply. Inflation will gradually continue to normalise in 2023, but it will probably take until 2024 before inflation hovers around 2% again, the ECB's target. The development next year will depend on several factors, such as the prices of energy and other inputs on international markets, the fall in demand, the euro-dollar exchange rate and the speed at which falling prices higher up the production chain lead to lower prices for consumers. We expect inflation to reach 4.4% on average next year. TagsSpain Inflation Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Markets await the release of the EU CPI, but before that event we are looking at the CPI reports in Germany and Spain. From North America there are also reports from both the USA and Canada. Switzerland Gross Domestic Product Switzerland Gross Domestic Product fell again. This time it was a drastic drop from 2.2% to 0.5%. On the other hand, the quarterly change in this indicator was higher than the previous reading. GDP Q/Q increased from 0.1% to 0.2%, but was lower than expected (0.3%). Spanish CPI At the beginning of the day, the inflation report from Spain appeared. The readings turned out to be lower than expected and also down compared to previous readings. CPI Y/Y dropped from 7.3% to 6.8%. Natmosiat CPI from month to month fell by as much as 0.6% and reached the level of 6.6%. Growth was expected in both cases. A decrease in this indicator may suggest an improvement in the situation, i.e. prices are not rising but have started to fall. Another reading may confirm this direction. Harmonised Index of Consumer Prices, is the same as CPI, but with a joint basket of products for all Eurozone member countries. The HICP also fell to 6.6%. German CPI The German CPI report is yet to come. CPI Y/Y is expected to maintain its previous level of 10.4%. On the other hand, CPI M/M will fall from 0.9% to -0.2%. As for the German HICP, it is expected to fall in both cases, ie year-on-year and month-on-month. The HICP M/M is expected to reach a horizontal 0.1% and if confirmed, it will be lower than the previous one by 1%. HICP Y/Y is expected to decline slightly by 0.3%. The previous reading was 11.6%. Canada GDP Canada's Gross Domestic Product report comes out today. The monthly change in GDP is expected to be at the same level as last time, ie 0.1%. This may mean that the Canadian economy is stagnating. Source: investing.com On the other hand, the quarterly change shows that the goposadraka is shrinking as it is expected to fall from 0.8% to 0.4%. Speeches Today, markets and traders are also waiting for speeches from the ECB and from the UK. Luis de Guindos, Vice-President of the European Central Bank has already given speeches. This speech took place at 9:10 am CET. The next speech from the European Central Bank is scheduled for 14:30 CET. Isabel Schnabel, member of the Executive Board of the European Central Bank, is set to speak. Two speeches are also scheduled from the Bank of England. The first will take place at 13:25 CET. Dr Catherine L Mann, a member of the Monetary Policy Committee (MPC) of the Bank of England, will speak. The next speech is scheduled for 16:00 CET. This time will be Bank of England (BOE) Governor Andrew Bailey. Bailey has more influence over sterling's value than any other person. Traders scrutinize his public engagements for clues regarding future monetary policy. CB Consumer Confidence The level of consumer confidence in economic activity expects a drop from 102.5 to 100.0 It is a leading indicator as it can predict consumer spending, which plays a major role in overall economic activity. Higher readings point to higher consumer optimism. But this time pessimistic sentiment is expected, once again. The last worsening took place in October and it may happen again this time. Summary: 9:00 CET                Spanish CPI (YoY) 9:00 CET                Switzerland Gross Domestic Product 9:10 CET                ECB's De Guindos Speaks 13:35 CET                BoE MPC Member Mann 14:00 CET                German CPI (Nov) 14:30 CET                Canada GDP 14:30 CET                ECB's Schnabel Speaks  16:00 CET                BoE Gov Bailey Speaks 16:00 CET                CB Consumer Confidence   Source: https://www.investing.com/economic-calendar/

The economic sentiment indicator increased slightly in November from 92.7 to 93.7, mainly due to a consumer rebound. The overall picture continues to show a mild recession, but also more signs of slowly fading inflation pressures The service sector saw the indicator for recent demand deteriorate further in November     The eurozone economy continues to show clear signs of recession. While consumers became slightly more upbeat – but still at depressed levels – in November, industry and services still showed signs of contracting activity. Industry sentiment decreased from -1.2 to -2 in November, the lowest reading since January last year. Businesses reported a sharp decline in recent production trends as new orders continue to drop. Production expectations slightly improved, perhaps as supply chain problems are easing. Nevertheless, with orders still in decline, it is hard to predict a swift turnaround in production. The service sector also saw the indicator for recent demand deteriorate further in November, although modestly. The retail sector noticed a slight improvement in recent demand and overall we see that the service sector has become slightly more upbeat about the months ahead. Overall, it looks like the current environment is one that is in line with a mild recession occurring. We often hear from the European Central Bank (ECB) that a mild recession is not enough to bring inflation down sustainably, but it is important to take this together with the easing supply side problems that the economy has faced recently. Signs of a changing inflation picture are slowly becoming more apparent. Energy prices have moderated somewhat, which is helping headline inflation readings for November stay on the low side. But easing supply-side pressures, lower wholesale energy prices, weakening demand and higher volumes of stock are also causing businesses to become somewhat less keen to increase prices, according to this survey. In industry and retail, in particular, we clearly see a lower number of businesses that are keen to increase selling prices in November. While these are only the first signs that inflation is set to moderate, they are very important to the ECB. We think the ECB will opt for a 50bp rate hike in December as the recession is becoming more apparent and inflationary pressures are cautiously easing. TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

China stocks bouyed by more thoughtful approach to zero Covid; production data from Korea and Japan disappoint; Australian inflation data surprises on the downside; Powell tonight!  In this article Macro Outlook What to look out for: Fed Speakers and US jobs report   shutterstock Macro Outlook Global markets: Chinese stocks made strong gains yesterday as a scheduled announcement on the recent Zero-Covid measures promised a less draconian approach in the future. Among the various measures noted, one was more pressure on the elderly to get vaccinated, which could be one route out of Zero-Covid, though there is a long way to go yet before this happens. The Hang Seng Index gained 5.24%, and the CSI 300 rose 3.09%. Daily symptomatic case numbers are currently hovering at a little under 4,000, where they have been since recording 4,010 on 23 November. US stocks were less upbeat. Both the NASDAQ and S&P500 made small losses on the day, perhaps taking defensive positions ahead of today’s speech by Fed chair, Jerome Powell, which we expect will be one of the more hawkish speeches to date. US equity futures also look slightly jittery.  US Treasury yields are edging higher too. The 2Y Treasury yield is up 3.5bp over the last 24 hours and there was a bigger 6.3bp rise from the 10Y bond which now yields 3.744%. European bond yields fell yesterday by about 6bp on average, probably helped by some lower inflation numbers. The EURUSD exchange rate pulled back a little further to 1.0323 on the combination of slightly higher risk aversion and yield differential swings. The AUD is actually slightly stronger than this time yesterday at 0.6674, but recent direction has been weaker after a big upswing. Cable performed much the same bi-directional move and is little changed in net terms at 1.1944 from a day ago, and the same goes for USDJPY which is currently trading at 138.75.  Asian currencies had a mixed performance in the last 24 hours. The CNH and CNY have both strengthened following the reassurances given on Zero-Covid policies, and that probably helped drag along the THB and TWD for smaller gains. The MYR held up the bottom of the table, variously blamed by newswires on profit taking and lower crude oil prices.   G-7 Macro: Germany’s inflation rate for November, fell to 10.0% from 10.4% in October (11.3% from 11.6% on a harmonised basis). Though as the linked note here suggests, inflation may not yet have peaked in Germany, so the drop in yields may prove short-lived.  Eurozone November inflation data is released later today and the harmonised inflation rate is due to decline to 11.3% YoY from 11.8%. In the US, the ADP survey provides the first and least unreliable indicator for Friday’s payrolls release. JOLTS job openings and layoffs data adds some nuance to last month’s employment numbers, but don’t actually tell us much new, and are unlikely to be market moving. The same goes for the second release of US 3Q22 GDP data. Industrial Production in October from South Korea and Japan were weaker than expected, reflecting signs of a global demand slowdown. Korea: Industrial production (IP) plunged -3.5% MoM sa in October, lower than the market expectation of -1.0% (vs a revised -1.9% in September).  All industry IP dropped -1.5% MoM sa in October, falling for the fourth consecutive month, and the contraction even intensified in October.  Meanwhile, retail sales (-0.2%) and facility investment (0.0%) outcomes were also sluggish as interest rate hikes and the gloomy outlook for the overall economy weighed on activity. Today’s weak outcomes support our view that GDP in the current quarter will contract, and that the ongoing trucker strike will put more strain on economic activity, at least in the current quarter. In addition, as the effect of the rate hikes to date have begun to have a more full-fledged impact on economic activity along with weak external demand conditions, the Bank of Korea probably only has limited room for further rate hikes. Japan: Industrial production fell -2.6% MoM sa in October (vs -1.7% in September, market consensus: -1.8%), recording a second monthly drop.  After the economy contracted in the third quarter, this weak start to the current quarter signals a cloudy outlook. Australia: Monthly October CPI data for Australia surprised with a much lower rate of inflation than the market had been expecting (Consensus 7.6%, ING f 7.8%). Headline inflation in October dropped back from 7.3% in September to only 6.9%YoY. The core trimmed mean inflation rate also edged slightly lower to 5.3% YoY from 5.4%, and against expectations for further increases. Lower-than-expected food prices were responsible for about 0.1pp of the decline. But the bigger share was attributable to a drop in the prices for holiday travel and accommodation. We don’t believe these lower inflation figures have any substantial ramifications for Reserve Bank (RBA) policy, which we believe will continue to increase at a 25bp per meeting pace into next year. But it does make us more comfortable with our 3.6% cash rate peak call. India: 3Q22 GDP data for India is out later today. We don’t disagree with the consensus 6.2%YoY figure, which is a sharp drop back from the 13.5%YoY base-effect driven 2Q number, with the latest number being a much better reflection of underlying economic growth. We still look for India to grow by about 6.3%YoY for the full calendar year 2022, but may have to adjust this view in the light of any surprises from today’s data.   What to look out for: Fed Speakers and US jobs report US Conference board consumer confidence (29 November) South Korea industrial production (29 November) Japan industrial production (29 November) Fed’s Williams and Bullard speak (29 November) China PMI manufacturing and non-manufacturing (30 November) Bank of Thailand policy meeting and trade (30 November) India GDP (30 November) US ADP employment and pending home sales (30 November) Fed’s Bowman speaks (30 November) South Korea 3Q GDP and trade (1 December) Regional PMI (1 December) China Caixin PMI (1 December) Indonesia CPI inflation (1 December) US personal spending, initial jobless claims and ISM manufacturing (1 December) Fed’s Cook, Bowman, Logan, Barr and Powell speak (1 December) South Korea CPI inflation (2 December) Fed’s Evans speaks (2 December) US non-farm payrolls (2 December) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Back in August, the Fed pushed back against an easing of financial conditions and triggered a sizeable sell-off in Treasuries. Markets will be wary of a repeat of this pushback in today’s speech by Fed Chair Powell In this article The Treasury market is nervous about a repeat of the August hawkish Fed pushback Closer to the end of this cycle but the 5Y is most at risk of cheapening today Today’s events and market views   The Treasury market is nervous about a repeat of the August hawkish Fed pushback Market participants await nervously Powell’s speech this evening after the October CPI report sent bond yields lower and riskier asset prices higher. Even if the surprise slowdown in inflation is good news, it is only the first in a long series of conditions the Fed needs to see before it pauses its hiking cycle. Longer-term, the direction of travel is indeed towards lower inflation and an end to this tightening cycle but we expect the Fed to take Fed Funds rates some 100bp higher than currently, just under 5%, before this is the case. The Fed will be wary of markets undoing some of the painstakingly-delivered tightening of financial conditions There is just over two months to go before the last hike in this cycle in our view. In the meantime, the Fed will be wary of markets undoing some of the painstakingly-delivered tightening of financial conditions. There is a precedent. In June to August of this year, 10Y Treasuries rallied 90bp peak to trough, helped by a lower-than- expected inflation report. This prompted a strong pushback from Fed officials in August, culminating in Powell’s Jackson Hole speech. Treasuries went on to sell off 167bp. The drop in nominal and real Treasury yields prompted a pushback by the Fed Refinitiv, ING Closer to the end of this cycle but the 5Y is most at risk of cheapening today Where this phase is different is that the Fed is having a harder time delivering its hawkish message as it signalled in no uncertain terms that the pace of hikes will soon reduce from 75bp to 50bp per meeting. There is still one employment and one inflation report before the December 14th meeting, but the burden of the proof is on those calling for another 75bp hike. Still, the 50bp drop in nominal 10Y Treasury yields, and 26bp in real yields, is a headache for the Fed. So is the aggressive flattening of the term structure, meaning that even if markets continue to expect the Fed to deliver hikes, the effect of these hikes do not feed through to longer borrowing costs. With Treasury yields over 100bp below where we expect the Fed funds rate to peak, we think the market is vulnerable to a sell-off around Powell’s speech. The 50bp drop in nominal 10Y Treasury yields, and 26bp in real yields, is a headache for the Fed Curve flattening is an inevitable effect of markets seeing the end of the Fed’s cycle, but we think this makes the sectors that rallied the most into today’s speech most at risk of a retracement. Rather counter-intuitively, this should mean a re-steepening of the 2s10s slope on the Treasury curve. If Powell is successful in delivering his hawkish message, the 5Y point on the curve should retrace its recent outperformance, which will be visible in a richening of the 2s5s10s butterfly. The curve flattening and richening of the 5Y point are at risk of retracing around Powell's speech Refinitiv, ING Today’s events and market views The eurozone HICP inflation looms large on today’s agenda. Spanish and German releases yesterday came on the low side of expectations, although this was less visible in the EU-harmonised measure that is most relevant for today’s HICP print. Still, a confirmation that other member states are also seeing inflation ease off, however slightly, is welcome news for markets that looked overstretched after their November rally. German unemployment figures complete the list of European releases. In bond supply, Germany will auction 10Y debt. Fed Chair Jerome Powell is due to speak this evening. We expect him to push back against the tightening of financial conditions that occurred in the wake of the lower- than-expected CPI report. US releases feature the second reading of US third quarter GDP, including core PCE. This will complete the ADP employment report, Chicago PMI, job openings, and pending home sales. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Monthly inflation data not only provides a more timely look at Australia's inflation than the old quarterly series, it has also ushered in some welcome lower numbers 6.9% October inflation (year-on-year) Back to school effect?  Lower Both headline inflation and core rates fall in October Against expectations for an increase, both headline and core inflation rates for Australia's monthly inflation series fell in October. The headline inflation rate fell from 7.3% year-on-year in September to only 6.9% YoY in October. The monthly trimmed mean index inflation rate also fell slightly, to 5.3%YoY from 5.4%.  When we examine the components of the index, we can see that most of the current rate of inflation is being driven by housing components (in particular house purchase costs), food and beverages, and transport. However, this month, it was smaller increases in recreation as well as some moderation in the high rates of food price inflation that led to the lower-than-expected figure for October.  The particular recreation sub-component that provided the biggest impact to the headline rate was holiday accommodation and travel. The Australian Bureau of Statistics (ABS) says of this component "The monthly fall in holiday travel and accommodation was driven by the conclusion of the school holiday period and the end of the peak tourist season for travel to Europe and America".  Contributions to year-on-year inflation rate (pp) CEIC, ING What now for the Reserve Bank of Australia? This drop in inflation vindicates the Reserve Bank of Australia's (RBA) dovish pivot some months ago when it decided to only increase rates at a 25bp per meeting pace. At 6.9%, inflation is still way too high for comfort, but we believe that the RBA will see this as confirmation that it is on the right track, and that further declines could lead them to entertain thoughts of a pause in rates.  We are currently forecasting a fairly low peak in the cash rate target at only 3.6% in 1Q23 next year. But while there remains considerable uncertainty about the future path of both inflation and rates, today's numbers provide us with some encouragement that we are not too far off the right track.  TagsRBA rate policy Australia inflation Australia economy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The current wave markup is quite clear, and the news background is complex. The US dollar is rising right now. However, the market is unwilling to increase demand for it in any way, so even if one downward correction wave is constructed, there are still significant issues. Recalling the numerous FOMC members who have spoken on the state of the economy in recent weeks, their rhetoric has become even more strident. Although the market is anticipating a slowdown in the PEPP's rate of tightening, Fed officials' rhetoric indicates that it is still getting tighter, so this is a good time for the US dollar to resume its upward trend. But as I've already mentioned, the market is unimpressed with the dollar and is unwilling to purchase it for some reason. What exactly is causing the market's fear? The rate will increase in the US for at least a few more meetings. After that, it will stay high for at least 1.5 years. How many more shocks to the world economy can there be in the next 1.5 years? How many more geopolitical conflicts and escalations will we witness during this period? And the US dollar continues to be a reserve currency, with rising demand in challenging times. Therefore, I wouldn't conclude that the market has lost faith in the dollar and is now disillusioned with it. Market players are watching for a significant event to restart its increasing demand. What incidents can be called iconic? First, Fed President Jerome Powell will deliver today's speech. Although Mary Daly's and James Bullard's opinions are undoubtedly noteworthy and carry significant weight, Powell's rhetoric is still far more significant. The market may not take Daly or Bullard at their word, but it is much more likely to listen to what the FOMC chairman says. Additionally, Powell's rhetoric no longer raises any concerns. Powell is also expected to discuss the necessity of maintaining the rate above 5% for a considerable time. What additional "hawkish" elements does the market require? A new nonfarm payroll report for the US will be made public on Friday. Although this indicator's value has been declining in recent years, it is still at levels that cannot be considered weak. Please remind me that the Federal Reserve and Congress think the labor market is still in excellent shape and that it is inappropriate to discuss a recession in the American economy. The market may increase demand for US currency if Friday's payrolls again show a respectable value. The fact that the rate is rising and the labor market is holding steady is just a fantastic alignment for the American economy. A new report on US inflation will be released in mid-December, and that report will serve as the foundation for the decisions made at the FOMC meeting that same month. If inflation resumes its insignificant slowdown, the FOMC members' rhetoric may become more constrictive. Any of this will not harm the US dollar. The market itself is still the problem. I conclude that the upward trend section's construction is complete and has increased complexity to five waves. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. There is a chance that the upward section of the trend will become more complicated and take on an extended form, but this chance is currently at most 10%. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Since the wave marking permits the construction of a downward trend section, I cannot advise purchasing the instrument. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer shape. Relevance up to 06:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328530

Inflation stabilised at 6.2% in France in November, but it has not reached its peak. Inflationary pressures are likely to intensify further in 2023 We expect French inflation to be around 5% for the whole of 2023   Consumer price inflation stood at 6.2% in France in November, unchanged from October. The monthly variation in prices was +0.4% against +1% in October. The less dynamic evolution of the price of petroleum products, after October was marked by fuel shortages, made it possible to compensate for the drop in the fuel rebate, which went from €0.30/litre to €0.15/litre in mid-November. As a result, energy inflation stood at 18.5% compared to 19.1% in October. A considerable level, but still much lower than in other European countries. The various measures taken by the government, including the tariff shield on the price of gas and electricity, have removed 2.5 points from inflation. In addition, food prices continue to accelerate, by 12.2% over one year, against 12% in October, as do those of manufactured goods (4.4% against 4.2% the previous month). Services inflation is stable, and comparatively low, at 3%. The harmonised index, important for the European Central Bank (ECB), remained stable at 7.1%. Overall, while this stabilisation of inflation can be seen as good news, it does not mean that inflation has peaked. On the contrary, the peak of inflation in France is still to come. A further acceleration of prices for December It is likely that inflation will rise again in December, probably reaching 6.5%. Indeed, the fuel rebate will be less important during the whole month of December than it was on average in November. In addition, past sharp increases in producer prices will continue to be passed on to consumer prices for manufactured goods and food. According to statistics published today by INSEE, the national statistics bureau of France, producer prices rose at a slower pace in October, with an annual increase of 21.4% compared to 26% in September. Although producer prices appear to have peaked, producer price inflation remains historically high, and this should continue to be reflected in the consumer price index in the coming months. Inflationary pressures will intensify further in 2023 Inflation in France is expected to rise further in early 2023. Indeed, due to regulations and contracts, many price revisions can only take place once a year, usually at the beginning of the year. This is particularly the case in the transport sector. These price revisions will significantly boost inflation in the first quarter of 2023. Moreover, companies seem confident in their ability to pass on past cost increases to their prices. In November, according to the European Commission's survey, companies' expectations regarding selling prices rose again, both in industry and in the services sector, despite the context of slowing demand. Strong inflationary pressures therefore still seem to be on the cards and core inflation is likely to rise further in early 2023. Furthermore, the energy inflation faced by households in 2023 will be influenced by the tariff shield, which foresees a 15% increase in the price cap for gas and electricity (compared to a 4% increase in 2022). The revision of the cap and the end of fuel rebates could add up to one percentage point to French inflation from January. As a result, energy inflation in France will continue to rise sharply next year, while it will start to fall in other European countries due to more favourable base effects. The peak of inflation in France should therefore only be reached later in 2023, and French inflation will fall much less rapidly than in neighbouring countries. The "delayed" peak in French inflation is bad news for the ECB, as average inflation in the euro area is likely to fall less quickly than expected. We expect French inflation to be around 5% for the whole of 2023, after 5.3% in 2022.  TagsInflation France Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Falling inflationary pressures and energy prices that are well below their peak levels led to a cautious rise in consumer confidence in November. However, this is not enough to prevent a contraction in the fourth quarter Inflation and high energy prices are forcing 40% of Spaniards to cut their daily expenses Spanish consumers slightly more upbeat, but still at depressed levels Spanish consumer confidence rose to -28.7 in November, from -31.6 in October, as published by the Ministry of the Economy and Finance this morning. A faster-than-expected fall in inflation and energy prices that are well below their peak levels is providing some relief for consumers. As reported yesterday, the Spanish inflation rate fell in November for the fourth month in a row and is now already four percentage points below its July peak level. The fall is likely to continue as price pressures higher up the production chain are starting to ease. Both commodity prices, freight costs for transport, and factory prices have already decreased considerably. Energy prices have also moderated somewhat since the end of the summer. Despite this, the index remains at recessionary levels. Inflation and energy prices force four in ten Spaniards to cut daily expenses Despite the improvement, the negative economic impact of high inflation and energy prices remains in place. A new ING survey on a representative panel conducted by IPSOS in early November shows that almost four in ten Spaniards are saving on daily expenses, like fresh food and groceries. More than half of Spaniards are also cutting back on restaurant visits, travel, and leisure activities to cope with the rising cost of living. With high energy prices, Spaniards are also looking to save on energy consumption. Almost half of the respondents say they are more economical with the use of electrical appliances, such as dishwashers, while a third say they are cutting back on heating. Many Spaniards are cutting back on their spending Due to rising prices, I try to save on... (% of respondents) ING consumer survey November 2022 Not out of the danger zone yet The Spanish economy has already slowed significantly in the third quarter and is likely to contract in the fourth quarter. The cost-of-living crisis leads households to consume less, which slows down economic activity. The less tight energy markets and a faster-than-expected drop in inflationary pressures are likely to ease the winter contraction, allowing Spain to narrowly avoid a recession. However, the overall outlook for next year remains subdued. Some favourable factors, such as mild weather and lower liquefied natural gas (LNG) demand from China, have brought some relief this year, but the situation remains very precarious. Next year will be a lot harder to replenish gas supplies, given the reduction in Russian supply. A strong recovery in China is also likely to put strong pressure on the oil and gas market, which could cause another jump in energy prices. The resulting loss of competitiveness of European businesses, together with ECB interest rate hikes that will not take full effect until 2023, will limit Spain’s growth potential next year. Therefore, we expect the Spanish economy to grow by less than 1% next year. TagsSpain GDP Eurozone Consumption Consumer confidence Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Markets are constantly changing, economic and political situations exert influence on them. Understanding them is very important, and getting acquainted with important events or statements about their team can help in making decisions. In this article: What can bring 2024? UBS Year Ahead 2023 Renewables in Europe The housing market The price of energy insecurity 2024 ahead and what else? Morgan Stanley tweets about the difficulties facing Europe next year. As we head into a new year, Europe faces multiple challenges across inflation, energy and financial conditions, meaning investors will want to keep an eye on recession risk, the ECB, and European equities. https://t.co/0Wtj18Dmbj pic.twitter.com/ImPUGRiuhd — Morgan Stanley (@MorganStanley) November 29, 2022 The new year is approaching. Everyone plans changes, makes resolutions. However, this does not change the fact that the economic situation or the economy will change so suddenly. Therefore, when making their plans, especially Europeans, they should take into account how the geopolitical and economic situation may affect them. And to make this possible, it is worth getting acquainted with the possible scenarios for the next year. We can expect that the fight against inflation will continue, and difficulties on the energy market will also be an important aspect of economic decisions of countries. Stocks and bonds UBS discusses stocks and bonds in their tweet. Is the worst over for stocks and bonds? Or will the years ahead remain challenging? Find out what we think will drive markets in the decade ahead in our UBS Year Ahead 2023: https://t.co/pro4XIuBiG#shareUBS pic.twitter.com/dzcbPOfp7f — UBS (@UBS) November 30, 2022 There is no doubt that the stock and bond markets have had a crazy year. Investors, analyzing the situation, wonder whether the stock and bond markets can expect an improvement or rather a deterioration of the situation. UBS analysts are also looking at this. Their opinion is presented in UBS Year Ahead 2023, and getting to know its results can help investors. Renewables in Europe Goldman Sachs tweets about renewables in Europe. Our head of European utilities research, Alberto Gandolfi, discusses Europe's headstart when it comes to renewables in the utility sector at our #Carbonomics Conference. Listen here: https://t.co/6r5Au9dZ70 #GSsustainability — Goldman Sachs (@GoldmanSachs) November 29, 2022 Alberto Gandolfi, head of utilities at Goldman Sachs, speaks to CNBC’s Steve Sedgwick at the Goldman Sachs Carbonomics event in London mostly about renewables in Europe. According to him, Europe has great potential in this area. The fight for a better tomorrow for future generations is still going on. Renewable energy sources are an important aspect of this. While all non-renewable energy sources: coal, gas or oil, will eventually run out and their further extraction will be impossible, energy obtained from renewable sources is a permanent and reliable source that will never run out. Thanks to this, we can count on safe and predictable energy supplies, without risk. Real estate market Morningstar, Inc. tweets about the real estate market. As the housing market moves into uncharted territory, advisors can help clients feel more comfortable making big financial decisions like buying their first home or refinancing their current one. Join us on December 8th: https://t.co/t5cDNyfB3G #AdvisorPracticeAccelerator pic.twitter.com/ZQ5daEeAJu — Morningstar, Inc. (@MorningstarInc) November 29, 2022 The housing market is important not only for the economy but also for potential buyers. Getting acquainted with it, better understanding it may help in making investment decisions. As the value of the property changes, opportunities arise and advisers can put this knowledge into practice. The price of energy insecurity IMF tweets about the price of energy insecurity. Europe is learning the hard way what happens to an economy tethered and dependent on fossil fuels, writes Bob Keefe. Read our latest Finance & Development for more on the price of energy insecurity: https://t.co/CqabcSqcQw pic.twitter.com/ZpfCi22opn — IMF (@IMFNews) November 29, 2022 Climate change is an environmental issue. This is also clearly an economic issue, and at the heart of the economics of climate change is energy security. The rippling impacts of climate change and the effects of energy security have been sweeping through the global economy throughout 2022, leaving few safe havens from the climate-related economic storm. especially when the supplies are controlled by the Russian dictator. Of course, energy insecurity – and the economic disasters it causes – is just one of the countless side effects of climate change hitting our wallets. How to fix it? Are renewable energy sources the answer? Find out from this tweet.

It continues to be a quiet week for the euro. In the European session, EUR/USD is trading at 1.0363. Eurozone inflation falls to 10.0% The ECB’s number one priority has been bringing down inflation, which has hit double-digits. ECB policy makers are no doubt pleased that November CPI fell sharply to 10.0%, down from 10.6% a month earlier. This beat the consensus of 10.4%, and the euro has responded with slight gains. The drop in eurozone inflation was the first since June 2021, and investors will be hoping that this indicates that inflation is finally peaking. On Tuesday, German CPI showed a similar trend, falling to 10.0%, down from 10.4% (10.3% est). Still, eurozone Core CPI remained unchanged at 5.0%, matching the forecast. One inflation report is not sufficient to indicate a trend, and with inflation still in double digits, nobody is declaring victory in the battle against inflation. Still, the drop in German and eurozone inflation increases the likelihood of a 50 basis-point increase at the December 12th meeting, following two straight hikes of 75 basis points. With market direction very much connected to US interest rate movement, a speech from Fed Chair Jerome Powell later today could be a market-mover. Powell is expected to discuss inflation and the labour market, and his remarks could echo the hawkish stance that Fed members have been signalling to the markets over the past several weeks. The market pricing for the December meeting is 65% for a 50-bp move and 35% for a 75-bp hike, which means that the markets aren’t all on the Fed easing rates. Even if the Fed does slow to 50 bp in December, it will still be a record year of tightening, at 425 basis points.   EUR/USD Technical EUR/USD is testing resistance at 1.0359. Above, there is resistance at 1.0490 There is support at 1.0264 and 1.0131 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

3Q22 GDP rose at a 6.3%YoY pace, slightly exceeding market expectations and keeping growth for the full year on track to exceed 6%, which would make India one of the fastest-growing economies in Asia  Shutterstock 6.3%YoY 3Q22 GDP 6.2% expected  Higher 2022 growth on track to exceed 6% Although down from the 13.5%YoY growth rate achieved in 2Q22, that growth rate had been achieved almost entirely through base effects. The 6.3%YoY growth achieved in 3Q22 had a much stronger provenance, deriving from a solid 3.5%QoQ gain from the previous quarter. This means that with only very conservative growth assumptions for the final quarter of this calendar year, India should be on track to exceed 6% growth for the year as a whole and possibly for the fiscal year too.  India GDP by expenditure (YoY%) CEIC, ING Outperforming its peers India is well placed to outperform many of its Asian peers in the short term, given its very low trade dependency on China compared to the rest of the region. It may also be capitalising on some of China's current problems, offering an alternative destination for foreign investment as multinational firms look to spread their supply chain risks while remaining in the region.  Would do even better with broader based industrial growth The breakdown of GDP by expenditure components shows strength across the board in the main domestic demand components. Consumer spending and capital investment both grew at more than a 10%YoY pace, with only government spending spoiling the picture. Though that in itself may be no bad thing considering the October fiscal deficit figures, which were considerably higher than the same period last year. This suggests that a little government restraint over the end of the year might well be warranted. Export growth was also strong, though overall GDP was pulled down by a large drag from imports, and the net trade contribution dragged the overall GDP growth total down by a massive 4.3 percentage points.  Still, there is little in this GDP breakdown that suggests trouble has been stored up for the final quarter of the year, so we remain optimistic about the eventual tally. About the only cause for complaint with the 3Q22 GDP print was that on a gross value-added basis, the contribution remains heavily concentrated on the service sector, with a small contribution from agriculture, but a drag from industry. India could do with broadening its economic base, as this will also likely lessen the drag from net exports and allow for an even faster rate of growth in the future.        Policy and market implications There are two main policy implications from this: The first is that with growth holding up well, this provides the Reserve Bank of India more room to manoeuvre to raise policy rates and control inflation. That said, rates have already risen a long way, and inflation shows signs of turning lower, so this is probably a benefit that isn't actually needed.  On the fiscal front, today's October fiscal deficit figures do suggest that fiscal policy might be an area to finesse a little over the turn of the year, and in doing so, might help lessen the inflow of imports too, which could help prop up the INR  - though the rupee has had quite a decent day today, declining to 81.43 against the USD.  In short, there is nothing much wrong with Indian GDP growth, and still scope for further improvement with well-targeted policy measures.  TagsRBI policy rates India GDP India economy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Due to a weaker-than-expected export outcome in November, the downside risks to GDP this quarter have increased. The Bank of Korea (BoK) is likely to slow down its hiking pace next year due to the sharp deterioration of real activity data   -14.0 Exports % YoY  Lower Trade deficit widened again due to soft exports in November Exports fell for a second consecutive month (-14.0% YoY in November vs -5.7% in October), and were weaker than the market consensus of -11.2%. By export items, automobiles (31.0%), petroleum (26.0%), and batteries (0.5%) grew, while semiconductors (-29.8%), and petrochemicals (-26.5%) dropped sharply. By destination, exports to the US (8.0%), the Middle East (4.5%), and the EU (0.1%) continued to increase. Yet, inter-regional exports continued to decline, with exports to China (-25.5%) and ASEAN (-13.9%) down. We believe that catch-up demand in the auto sector will persist for a while with lifting supply constraints. However, the outlook for IT investment and consumption is cloudy. We interpret the sluggish exports to China and ASEAN as being more strongly related to global IT demand rather than necessarily to regional demand. China's lockdown itself should work against Korea's exports, but what's more worrisome is that the final demand for IT seems to be falling very quickly.  Meanwhile, imports rose 2.7% YoY in November (vs 9.9% in October) with continued increases in commodities (27.1%). As a result, the trade deficit widened to -USD7.0bn in November (vs -USD6.7bn in October).  Exports contracted for a second straight month in November CEIC November manufacturing PMI rebounded but remains below the neutral level November's manufacturing PMI improved to 49.0 (vs 48.2 in October), but stayed in the contraction zone for a fifth consecutive month. Sluggish semiconductor performance appears to be driving weak output and orders, which means that semiconductor activity is likely to remain sluggish in the near future.   Manufacturing PMI suggests soft manufacturing activity ahead CEIC GDP outlook The Bank of Korea released its revised report on 3QGDP this morning as well. Headline growth of 0.3%QoQ was unchanged from the advance estimate, but the details have changed slightly. By expenditure, private consumption (1.7% vs 1.9% advance) and construction (-0.2% vs 0.4% advance) were lowered, while facility investment was revised up to 7.9% (vs 5.0% advance) as machinery and transportation investment increased. 3QGDP growth was mainly led by domestic demand components, but consumption and facility investment are likely to weaken due to interest rate hikes. Construction, which already contracted last quarter, is struggling with the ongoing tight financial conditions and sluggish real estate market. Meanwhile, China's weak PMI (48.0 official manufacturing) and strict corona policy mean that Korea's exports will face strong headwinds in the coming months. Making things worse, the nationwide truckers' strike is adding an additional burden on the economy. Considering the sluggish October IP outcomes yesterday and dismal exports this morning, the downside risk for the current quarter’s GDP forecast (-0.1% QoQ) has substantially increased. GDP outlook is likely to be revised down Bank of Korea, INGBank of Korea releases bi-annual %YoY growth forecasts. ING estimated the quarterly growth figures based on the bi-annual forecasts. The Bank of Korea will slow down its hiking pace next year Consumer price index (CPI) inflation data for November will be released tomorrow. We expect inflation to decelerate to 5.1% YoY (vs 5.7% in October) mainly due to falling gasoline and fresh food prices. Although base effects will also work to calm inflation in the coming months, we see additional signs of inflation slowing further. The recently released data signals a sharp deterioration in the economy in the current and subsequent quarters. We, therefore, expect the BoK to deliver its last hike this cycle in February. Beyond the first quarter, the BoK will likely adopt a wait-and-see stance, together with hawkish comments. But if we are right about contracting growth and inflation falling to around 3% in 1H23, then the BoK will likely consider easing policies in 2H23. Financial market updates Korea's equity market and the Korean won are rallying on the back of relatively dovish remarks from Jerome Powell last night. The KRW recorded its best performance in the region for a month. We think that the KRW will likely strengthen further by the year-end, but we still have to be cautious in the next quarter. We expect further widening of the yield gap between the US and Korea and uncertainties in China to extend into the next quarter, which together with a weak trade performance, could adversely affect the won.  TagsKorean trade GDP Exports Bank of Korea Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

At the beginning of the last month of the year, and thus the last month of the quarter, a lot of reports appear. The focus today is on the Manufacturing PMI reports. Japan Capital Spending The change in the overall value of capital investment made by companies in Japan has increased significantly. The current reading is at 9.8%, an increase of 5.2%. Australia Private New Capital Expenditure The change in the total inflation-adjusted value of new capital expenditures made by private businesses dropped significantly from 0.0% to -0.6%. So new capital expenditures made by private businesses have decreased and this may affect the economic situation of the country. UK Nationwide HPI The National House Price Index shows that the average change in house prices across the country has slowed year-on-year and month-on-month. Nationwide HPI (YoY) dropped from 7.2% to 4.4% while MoM fell below zero at -1.4%. This monthly decline was significant as it was expected to rise from -0.9% to -0.3%. To put it simply, the average houses dropped significantly in the analyzed periods. This study is carried out by the National Housing Association. Retail Sales Reports published by two countries of the old continent show a significant decrease. In Germany, M/M retail sales fell from 1.2% to -2.8%. Which shows that the German economy is not in good shape and retailers are exposed to financial difficulties because fixed costs such as rent and energy bills will not change, and if they sell less they may not earn. In Switzerland, the situation is similar to Germany, but the decline was larger. Sales fell from 2.6% to -2.5%. Growth was expected, and a significant fall may affect the condition of the country's currency (CHF). Switzerland Consumer Price Index In Switzerland, inflation remained at the previous level of 3.0%. However, there was a change in CPI M/M. CPI M/M fell from 0.1% to 0.0% In the monthly change, we can expect a return to the level below zero, ie deflation. Source: investing.com Speeches There won't be many speeches today. The first one took place at 7:00 CET and was addressed by a member of the Bank of Japan, Governor Haruhiko Kuroda. Traders watch his speeches closely as they are often used to drop subtle hints regarding future monetary policy and interest rate shifts. Speeches by members of the European Central Bank attract further attention. At 9:00 CET, Andrea Enria, Chair of Supervisory Board of the European Central Bank, spoke. Further speeches will take place in the second part of the day. At 17:45 CET, Philip R. Lane, member of the Executive Board of the European Central Bank will speak, followed by a speech at 18:30 CET Frank Elderson, member of the Executive Board and Vice-Chair of the Supervisory Board of the European Central Bank. These speeches may give clues to the future of the eurozone's monetary policy. Manufacturing PMI The main report from the European, American and Chinese economies today is the Manufacturing PMI. In China, the report appeared first. The current reading is positive, the current level is 49.4 and is higher than the previous one (49.2) and also higher than expected (48.9). In Europe, the first report came from Spain and was positive. In Spain, it rose from 44.7 to 45.7. In Italy it also rose to 48.4. France and Germany also saw growth, but it was lower than those economies expected. In France, the current readings showed a level of 48.3, and an increase to 49.1 was expected. In Germany, a larger increase to 46.7 was also expected, but the readings showed a level of 46.2. In all countries of the European Union and the euro area, there was an increase in the PMI index, and thus also for the EU Manufacturing PMI. For the Eurozone, it increased from 46.4 to 47.1. And similarly to the main economies (Germany and France) of this region, a larger increase was expected to the level of 47.3 Also in the UK there was an increase in the Manufacturing PMI. The current level of 46.5 is higher than the expected (46.2) and the previous reading (46.2). We have to wait until 16:00 CET for the reading from the United States, but it is expected that the U.S. The ISM Manufacturing Purchasing Managers Index will drop to 49.8 from the previous reading of 50.2. EU Unemployment Rate The unemployment rate fell slightly in the EU from 6.6% to 6.5%. Brazil GDP (YoY) (Q3) Brazil's economy expects GDP growth from 3.2% to 3.7%. US Core PCE Price Index Report about the changes in the price of goods and services purchased by consumers for the purpose of consumption, excluding food and energy will also appear today. It is expected to fall from 0.5% to 0.3%. The Core Personal Consumption Expenditure (PCE) Price Index measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation. Initial Jobless Claims The weekly report on the number of individuals who filed for unemployment insurance for the first time during the past week will also appear today. The last reading was very negative and showed a significant increase in the number of people applying for this insurance (240K). This reading is expected to be better and drop to 235K. Summary: 0:50 CET Japan Capital Spending (YoY) (Q3) 1:30 CET Australia Private New Capital Expenditure (QoQ) (Q3) 2:45 CET Caixin Manufacturing PMI 7:00 CET BoJ Governor Kuroda Speaks 8:00 CET UK Nationwide HPI 8:00 CET German Retail Sales 8:30 CET Switzerland Retail Sales 8:30 CET Switzerland Consumer Price Index 9:00 CET ECB's Enria Speaks 9:15 CET Spanish Manufacturing PMI 9:45 CET Italian Manufacturing PMI 9:50 CET French Manufacturing PMI 9:55 CET German Manufacturing PMI 10:00 CET EU Manufacturing PMI 10:30 CET UK Manufacturing PMI 11:00 CET EU Unemployment Rate 13:00 CET Brazil GDP (YoY) (Q3) 14:30 CET US Core PCE Price Index 14:30 CET Initial Jobless Claims 16:00 CET ISM Manufacturing PMI 17:45 CET ECB's Lane Speaks 18:30 CET ECB's Elderson Speaks Source: Economic Calendar - Investing.com

Summary:  Today we look at the market exploding higher in the wake of the Fed Chair Powell speech on inflation and the labor market yesterday, as we note that Powell failed to specifically push back much against the current easing of financial conditions and market expectations that Fed policy will be loosening already by late next year and especially in 2024. But we also caution that, while the US equity market rallied through key resistance yesterday, the market has a tendency to react strongly to event risks on the day without notable follow through in following sessions. On that note, we also have important incoming data that can test yesterday's reaction in the form of the October US PCE inflation indicator ahead of tomorrow's US jobs report. We also look at the commodities market reaction to Powell's speech, particularly precious metals and discuss copper in the context of the drumbeat of news pointing to China easing up on Covid policy, as well as crude oil. Today's pod features Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.     Source: https://www.home.saxo/content/articles/podcast/podcast-dec-1-2022-01122022

The sharp slowdown in consumer price growth in November was largely due to stable gasoline and fresh food prices, but also to a high base last year.  But we believe that today's outcome is not enough to dispel concern within the Bank of Korea (BoK) about inflation. And we expect the BoK to maintain its hawkish tone until early next year  Source: Shutterstock.com 5.0% Consumer price inflation YoY Lower than expected Food and energy prices were the main reasons for the decline. Consumer price inflation eased more than expected in November, with headline inflation declining to 5.0% YoY in November (vs 5.7% in October, 5.2% market consensus). The main cause of November's inflation decline was a fall in agricultural prices (-2.0%), and gasoline prices returned close to pre-Ukraine-war levels. However, service price inflation remained at an elevated level, with core inflation up 4.8%. Eating-out prices rose the most (8.6%) in November while other service prices gradually stabilized. We believe that rents will continue to slow down as market-observed rentals declined in November. Since Korea's lease contracts are usually for two-year terms, the degree to which falling rents will be reflected in the CPI is limited. However, the recent rapid decline in Jeonse prices is expected to be visible in the price index with about a 6-month time lag.  Rentals will decline gradually over the coming months Source: CEIC BoK outlook Today's lower-than-expected inflation is unlikely to change the BoK's policy stance. Governor Rhee Chang-yong had already mentioned last month that base effects leading to a temporary slowdown in CPI inflation would not change the BoK's inflation outlook. Also, core inflation is still high. Consequently, we expect the BoK to stay on a hiking path until early next year. We believe that rate increases in power and gas will follow early next year, but rent and service price growth should slow down. As a result, inflation will likely soften further throughout next year. We maintain our view that the BoK will take a pause until 2Q23 after raising 25bp in February.  Read this article on THINK TagsHousing Prices CPI Bank of Korea Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Today we look at a slight divergence in reaction patterns across markets after a weaker than expected core PCE inflation reading and ISM Manufacturing survey in the US pushed treasury yields and the US dollar lower, but failed to support further equity market upside. Elsewhere, we round up interesting earnings reports from yesterday, discuss silver technicals and the crude oil and natural gas outlook, today's November US jobs report and more. Today's pod features Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-dec-2-2022-02122022

A tentative start to trading on Friday as we wrap up another action-packed week with the US jobs report in a couple of hours. Jerome Powell’s comments on Wednesday made clear the direction of travel that Fed policymakers are keen to undertake but ultimately, the data must allow for it. So far, that has very much happened with inflation falling more than anticipated in October, the manufacturing sector softening, supply chains improving and labour market performing less well. US nonfarm payrolls expected to fall to 200K Today’s jobs report will offer further insight into whether this last point continues to be the case. Jobs growth around 200,000 would continue the trend since earlier this year and, alongside rising jobless claims, point to a cooling in the labour market. But it’s the wages that the Fed cares most about. A moderation in earnings growth is essential to get policymakers on board and perhaps even bring down the terminal rate over the coming months. It’s not just about putting inflation on a better trajectory, it’s about ensuring it can return to target on a sustainable basis and that requires earnings to rise at a more modest rate to ensure inflation doesn’t become entrenched. Read next: If ECB policymakers should make a decision between fighting inflation and avoiding recession, they will likely choose fighting inflation says Ipek Ozkardeskaya| FXMAG.COM Considering the data we’ve seen since the last meeting, it would take something truly shocking for the Fed to change course now, I feel. And perhaps even that would need to be backed up by a nasty shock from the inflation data a day before they announce their next rate decision. Of course, at this point, the terminal rate is what matters most so an encouraging report today would be very welcomed and could see markets end the week on a high. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

In the first half of December we will have a litany of central bank meetings. The ball will start rolling with Reserve Bank of Australia and Bank of Canada next week, both of which are set to raise interest rates, albeit at a slower pace. The Outlook Economic development since the last RBA meeting has been favorable. The labor market remains extremely tight and the unemployment rate has fallen to its lowest level in half a century. Meanwhile, wage growth accelerated in the last quarter, which is usually a sign of strengthening inflationary forces. The problems with the COVID-19 in China and the closure of this economy because of COVID situation, hits Australia. There is no doubt that Australia, the world's most dependent economy on China, is shaken by the shock wave of the virus. Accounting for one-third of Australia's total exports, it has caused significant economic problems across huge swaths of the Australian economy in recent times. Inflation Against expectations for an increase, both headline and core inflation rates for Australia's monthly inflation series fell in October. The headline inflation rate fell from 7.3% year-on-year in September to only 6.9% YoY in October. How the RBA fight against inflation? The RBA is working very hard to cool economic growth. It raised interest rates extremely quickly, from 0.1% to 2.85% in six months. They are expected to raise them more. Interest rate hikes slow down the economy and fight inflation in a number of ways: households pay more for a mortgage, leaving less for discretionary spending; the australian dolar (AUD) appreciates, driving down imports and discouraging people from buying local produce; The return on savings is higher, which encourages people to save rather than spend, the cost of borrowing is high, which makes businesses less likely to borrow and spend. Interest rate hikes are designed to divert money from spending to local businesses, making those businesses feel like they can't raise prices and wages. The RBA's job is to keep inflation an average of 2 to 3% a year and currently inflation is well above that target. Expectations The latest inflation figures might provide a reprieve for mortgage holders from ongoing escalating interest rate rises when the Reserve Bank meets on December 6 to decide on the official cash rate. The Australian economy continues to run at full capacity, setting the stage for another interest rate hike. Investors say that the cycle of monetary policy tightening may be stopped as soon as this month. This is mainly because inflation fell unexpectedly in October, fueling hopes that the worst was over. With house prices also falling and external threats intensifying as the Chinese economy loses momentum, there are solid arguments for a slowdown in the RBA. Markets currently rate a 75% probability of a quarter point rate hike and a 25% chance of no change at all. Westpac chief economist Bill Evans still believes the RBA needs to raise interest rates by 0.25 percentage points both in December and at its next meeting in February to quell continued inflationary pressures. The RBA said it would watch the data to see how many more rate hikes are needed to cool inflation without crushing the economy. The problem is that most of the data is from a few months ago, before rate hikes became popular. It takes some time for interest rates to take effect.

The media are scaring about economic recession, which should inevitably appear as a consequence of persistently high inflation and a radical increase in the main interest rates. Even in private conversations, you can often hear that many other countries in the world are threatened with recession. What is this? Definition In the economic literature, there is also a definition of recession as a decrease in GDP in two consecutive quarters, where annual dynamics in individual quarters are used to qualify the state of recession without removing the impact of price changes and the impact of seasonal factors. According to John R. Meyer and D. H. Weinberg, a recession is "a period of decline in the general activity of the economy, having a wide impact on various areas of economic life, which lasts at least a year". The terms recession, crisis and depression are synonymous and often used interchangeably. Economists who study business cycles consider the first two terms to be synonymous. After World War II, the term "recession" was often used instead of the term "crisis" (which was initiated by the NBER). However, it is believed that this is mainly due to psychological reasons (less negative reception of "recession"). On the other hand, "depression" is in practice a deeper phenomenon, defined as long-term and very severe recessions. Types Recession is often compared by researchers to the letters of the alphabet, which corresponds to the appearance of this stage on the business cycle chart, and at the same time helps to visually determine its duration and course. Recession types: "V" - the most common type: quick exit from the collapse, return to the growth rate before the recession in no longer than the period of falling into it, "W" - after reaching the bottom of the cycle, the economy quickly recovers, only to collapse again (often deeper) and only after the "second bottom" go into recovery mode, "U" - rapid entry of the economy into a recession, followed by a slowdown in further decline and remaining at a low level of development, it usually takes several years to return to the rate of economic growth before the recession "L" - after reaching the lowest level, the economy is unable to return to a higher growth rate, inverted letter "L" - a relatively quick, but short-lived recovery of the economy is interrupted by a long-term phase of stagnation. In practice From the point of view of economics, recession is a macroeconomic phenomenon that involves a significant slowdown in economic growth. In general, a recession leads to a decline in domestic production, employment, investment and real wages. Instead of growing, the country's GDP is decreasing. Mainly, the recession is visible from the side of entrepreneurs, where it manifests itself as disturbances in financial liquidity, downtime in production due to the lack of orders or materials needed for its implementation. At the level of individuals, i.e. natural persons who do not run a business, recession means higher unemployment and lower wages as well as impoverishment of the society. During a recession, the average citizen begins to spend less, which results in a decline in consumption across the country. Causes The causes of a recession can be very different. The most common causes of recessions include bad monetary policy and excessive state interference in the economy, and in particular in the financial system. War and natural disasters also have an impact on the occurrence of recessions. Consequences The most serious effect of the recession is the decline in gross domestic product (GDP). There is also a decrease in the value of goods and services. GDP decreases, which leads to negative economic growth. Among other, equally serious consequences related to the occurrence of recession, the following can also be distinguished: lowering real wages and incomes in society; decrease in capital expenditures; increase of unemployment; reduction in the level of labor productivity and growth rate; lowering consumer demand. At the same time, along with the decreasing demand for consumer goods, a recession most often leads to a slowdown in price growth, and thus to a reduction in inflation. What comes after a recession? Many experts consider the recession to be the first phase of the economic cycle. According to this theory, a recession is followed by a depression, i.e. low levels of output, prices, interest rates, and employment. How to prevent? When anticipating a recession, stabilization (anti-recession) policy tools can be used, e.g. lowering taxes on enterprises (thus increasing the amount of investment in durable goods), reducing social spending (to stop the budget deficit from growing) or lowering interest rates (assuming that appropriate mix). During the beginning of the recession phase, it is possible to temporarily increase budgetary accidents, influence the weakening of the national currency exchange rate (which allows for a temporary increase in the competitiveness of export goods) or increase the protection of the internal market against the influx of imported goods, in a situation where it does not violate international agreements. Thanks to stabilization policy tools and properly conducted fiscal and monetary policy, recession can be prevented or mitigated. Source: Begg D., Fischer S., Dornbusch R. (1997) Ekonomia. Makroekonomia

Over the years, we have been able to observe how the phases of the business cycle, their length, nomenclature, as well as their classification have changed. The division into smaller and larger cycles (crisis, depression, recovery, boom) has gone down in history, and the classic business cycle consists of two phases: decline (recession) and growth (expansion). Growth is positive, while recession is the opposite. Economic growth Economic growth is nothing more than the process of increasing the production of goods and services in a given country and over a certain period of time (e.g. per year). Economic growth includes those elements of the economy that we can measure (e.g. production, income, employment). The measures of economic growth are gross domestic product (GDP) and gross national product (GNP). Economic growth does not guarantee that all citizens will benefit from it. It happens that some social groups fare better, while others are poorer. For this reason, GDP per capita (GDP per capita) is considered an important measure of economic growth. This indicator is calculated by dividing a country's GDP by its population. Economists distinguish four driving forces of economic growth: labor supply, capital (physical, financial and human), natural resources and technology. Stagnation Simply put, stagnation is a state of the economy in which, in the long term, the volume of production, income of business entities, investment outlays and trade remain at a relatively constant, usually relatively low level, which is usually accompanied by a high level of unemployment. Stagnation may concern the entire economy as well as one indicator (e.g. investments, exports, demand, consumption). This term characterizes an economy in which, first of all, the rate of growth slowed down, and only as a consequence an increase in unemployment. It is characterized by a low level of prices and general economic activity. Economic stagnation - what does it mean? The concept of economic stagnation is understood as a weakening of the pace of development or even a lack of economic growth. It is a situation in which in a given economy an increase in the number of unemployed people can be observed, a decrease in the level of consumption and a decrease in the capital that companies invest in the development of their activities. This state of affairs is also a serious burden for the public sector. The decline in business activity translates into layoffs. This means that the state must allocate more resources to unemployment benefits and other forms of assistance during the economic downturn. Stagflation Stagflation is a macroeconomic phenomenon that describes the occurrence of inflation and economic stagnation at the same time. Then we are dealing with high inflation and low growth and/or economic slowdown. In addition, stagflation occurs when the economy is in recession and the cost of living continues to rise. All this, however, has a negative impact on the life of society. Causes One of the main causes of stagflation is a negative supply shock. It causes an increase in prices on the market and a reduction in raw materials, which in turn causes an economic crisis. Stagflation may also be caused by a break in supply chains, lack of energy resources, and thus a sharp increase in their prices. What are the effects of stagflation? Stagflation is considered by economists to be a highly negative economic phenomenon. Its effect is primarily an increase in unemployment in the country, a reduction in the production of raw materials, a general increase in prices, and as a result, a decrease in the value of the national currency. Source: Begg D., Fischer S., Dornbusch R. (1997) Ekonomia. Makroekonomia

EU There are a number of economic releases on the calendar next week but it’s almost entirely made up of tier two and three data. That includes final PMIs, revised GDP and retail sales.  The most notable events for the EU over the next week are speeches by ECB policymakers ahead of the last meeting of the year a week later – including President Lagarde on Monday and Thursday – and the final negotiations on the Russian oil price cap as part of a package of sanctions due to come into force on Monday. UK  Compared with the soap opera of the last few months, next week is looking pretty bland from a UK perspective. A couple of tier two and three releases are notable including the final services PMI, BRC retail sales monitor and consumer inflation expectations. I’m not convinced any will be particularly impactful, barring a truly shocking number. Russia The most notable economic release next week is the CPI on Friday which is seen moderating further to 12% from 12.6% in October, potentially allowing for further easing from the CBR a week later. South Africa Politics appears to be dominating the South African markets at the moment as efforts to impeach President Cyril Ramaphosa go into the weekend. The rand has seemingly been very sensitive to developments this week, with the prospect of a resignation appearing to trigger sharp sell-off’s in the currency and the country’s bonds. Under the circumstances, that could bring weekend risk for South African assets depending on how events progress over the coming days.  On the data front, next week brings GDP on Tuesday and manufacturing production on Thursday.  Turkey Ordinarily, especially these days, inflation releases are widely followed but that is less the case for a country and central bank that has such little interest in it. Official inflation is expected to ease slightly, but only to 84.65% from 85.51% in October, hardly something to celebrate. The central bank has indicated that its easing cycle will now pause at 9% so perhaps another reason to disregard the inflation data. Switzerland A quieter week after one of repeated disappointment on the economic data front. Whether that will be enough to push the SNB into a slower pace of tightening isn’t clear, although it has repeatedly stressed the threat of inflation and need to control it. The meeting on 15 December remains this months highlight while next week has only unemployment on Wednesday to offer. China The PBOC announced on 25 November its decision to cut the reserve requirement ratio for banks by 25 basis points, lowering the weighted average ratio for financial institutions to 7.8% and releasing about 500 billion yuan in long-term liquidity to prop up the faltering economy.   In response to the various property crises that have emerged in the real estate sector over the past year or so, i.e. debt defaults by real estate companies, mortgage suspensions leading to unfinished buildings, and real estate-related non-performing loan crises, the Chinese government has issued a new 16-point plan. Focus next week will be on the Caixin services PMI, trade data, CPI release and the protests. China’s strict zero-Covid measures are hammering growth and the public is clearly becoming increasingly frustrated. It will be a fine balance between managing protests and easing Covid-zero measures to support growth in a country not used to the former. India The RBI could potentially bring its tightening cycle to a close next Wednesday with a final 35 basis point hike, taking the repo rate to 6.25%. While the outlook remains cloudy given the global economic outlook, there is some reason to be optimistic. The tightening cycle may soon be at an end, the economy exited recession in the last quarter and Indian stock hit a record high this week, something of an outlier compared with its global peers. Australia & New Zealand Recent figures show that inflation (YoY) in Australia rose to 7.3% in the third quarter, compared to the target range of 2%-3%. The RBA began to weaken their hawkish stance in the past two months, raising rates by just 25 basis points each time to bring the official rate to 2.85%. The market is currently expecting a 25 basis point rate hike next week as well. Also worth noting is Australia’s third quarter GDP trade balance figures. New Zealand inflation (YoY) surged 7.2% in the third quarter, compared to the RBNZ’s inflation target range of 1%-3%. Previously, the RBNZ had been raising rates by 50 basis points but that changed last month as they ramped it up with a 75 basis point hike. The current official rate is now 4.25%. Japan The Japan Tokyo CPI rose by 3.8% year-on-year in November, up from 3.5% in October and the 3.6% expected. Ex-fresh food and energy it increased by 2.5%, up from 2.2% and above the 2.3% expected. Japan’s manufacturing PMI fell to 49.4 in November, the worst in two years, with both new export orders and overall new orders declining and falling below 50 for the fifth consecutive month, which alines with the unexpected 0.3% fall in Japanese GDP in the third quarter. Japan department store sales rose 11.4% year-on-year in October, down from 20.2% in September.    The poor PMI and retail sales data may have reinforced the BOJ’s view that domestic demand is weak and CPI inflation is largely input and cost driven and, therefore, unsustainable. The central bank will likely continue to pursue an accommodative monetary policy, especially in light of the current poor global economic outlook. Final GDP for the third quarter is in focus next week, with the quarterly figure expected to be negative meaning the economy may be in recession. Lots of other releases throughout the week but the majority, if not all, are tier two and three. Singapore Singapore’s CPI for October was 6.7% (YoY), below expectations of 7.1% and the 7.50% reading. GDP for the third quarter (YoY) was 4.1%, below expectations of 4.2% and 4.40% previously. On the quarter, it was 1.1% down from 1.50%. Next week the only release of note is retail sales on Monday. Economic Calendar Saturday, Dec. 3 Economic Events ECB President Lagarde chairs a roundtable on “The Global Dimensions of Policy Normalization” at a Bank of Thailand conference Sunday, Dec. 4 Economic Data/Events Thailand consumer confidence OPEC+ output virtual meeting ECB’s Nagel and Villeroy appear on German television Monday, Dec. 5 Economic Data/Events US factory orders, durable goods orders, ISM services index Eurozone Services PMI Singapore Services PMI Australia Services PMI, inflation gauge, job advertisements, inventories China Caixin services PMI India services PMI Eurozone retail sales Japan PMI New Zealand commodity prices Singapore retail sales Taiwan foreign reserves Turkey CPI European Union sanctions on Russian oil are expected to begin ECB President Lagarde gives a keynote speech on “Transition Towards a Greener Economy: Challenges and Solutions” ECB’s Villeroy speaks at a conference of French banking and finance supervisor ACPR in Paris ECB’s Makhlouf speaks in Dublin EU finance ministers meet in Brussels The US Business Roundtable publishes its CEO Economic Outlook survey Tuesday, Dec. 6 Economic Data/Events US Trade Thailand CPI RBA rate decision: Expected to raise Cash Rate Target by 25bps to 3.10% Australia BoP, net exports of GDP Germany factory orders, Services PMI Japan household spending Mexico international reserves South Africa GDP Georgia’s US Senate runoff The first-ever EU-Western Balkans summit is held in Albania Goldman Sachs Financial Services conference Wednesday, Dec. 7 Economic Data/Events US Trade MBA mortgage applications China reserves, Trade Australia GDP, reserves Eurozone GDP Canada central bank (BOC) rate decision: Expected to raise rates by 25bps to 4.00% India central bank (RBI) rate decision: Expected to raise rates by 25bps to 6.15% Poland central bank rate decision:  Expected to keep rates steady at 6.75% Singapore reserves Germany industrial production Japan leading index BOJ’s Toyoaki Nakamura speaks in Nagano EIA crude oil inventory report Foreign policy forum is held in Moscow with Russian Foreign Minister Lavrov speaks at a foreign policy forum in Moscow. Thursday, Dec. 8 Economic Data/Events US initial jobless claims Australia trade Indonesia consumer confidence Japan GDP, BoP Mexico CPI New Zealand heavy traffic index South Africa current account, manufacturing production ECB President Lagarde speaks at the European Systemic Risk Board’s sixth annual conference SNB’s Maechler participates in a panel discussion ECB’s Villeroy speaks at the Toulouse School of Economics European Defence Agency holds its annual conference in Brussels Friday, Dec. 9 Economic Data/Events US PPI, wholesale inventories, University of Michigan consumer sentiment China CPI Russia CPI  China PPI, aggregate financing, money supply, new yuan loans Japan M2 New Zealand card spending, manufacturing activity Spain industrial production Thailand foreign reserves, forward contracts Portuguese PM Costa, Spain PM Sanchez, and French President Macron attend a meeting in Spain Sovereign Rating Updates United Kingdom (Fitch) EFSF (Moody’s) ESM (Moody’s) Netherlands (Moody’s) Saudi Arabia (Moody’s) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Appetite for high beta fixed income has allowed the ECB to reduce its overweight in peripheral bonds. There is no sign of US curve dis-inversion yet - we think this is most likely to occur with a long-end sell off. ECB reduces its peripheral bond overweight The ECB didn’t use the flexibility offered by the PEPP’s redemption to lean against wide sovereign spreads in the months of October and November. On the contrary, data show that it increased its holding of core (eg Netherlands and Germany) and reduced its holding of periphery (eg Spain, Portugal and Italy). The changes may be explained in part by different timing between redemption and reinvestment of the proceeds but there seems to be a trend here: the overweight in peripheral countries is at least being partially unwound. The higher-beta sovereign bond markets require less of the ECB’s support Looking at market moves of late, this is understandable. Spreads have been on a tightening spree, suggesting the higher-beta sovereign bond markets require less of the ECB’s support. This is good news, until it isn’t anymore. As long as the ECB retains the flexibility to lean against volatility in the sovereign bond markets all should be well. The looming QT announcement is one key risk to this. So far, spreads have tightened alongside the improvement in global risk sentiment. That tightening cannot be entirely explained by the rally in core rates, and suggests instead genuine risk appetite for high beta fixed income. The ECB has partially unwound its summer intervention in peripheral markets Source: Refinitiv, ING No sign of re-steepening yet If the bond rally has stalled, which itself is still unsure, there is no sign yet of curve re-steepening. In the US in particular, where the Fed has presumably the most room to cut rates, the curve remains as inverted as ever. Dis-inversion can occur for two reasons. Firstly, front-end rates can drop on expectations of imminent Fed easing. In our view, this is only realistic once inflation is clearly on a path towards reaching the Fed’s target, and the economy is near a recession. We think these conditions will only be met by mid-2023. It is not yet clear that the Fed is near the end of its cycle The other reason for a curve dis-inversion is if long-end rates reverse some of their November rally. This looks a more realistic scenario in the near-term. Risk appetite, from stock to credit, has received a boost once it became clear that the Fed was easing off on the pace of hikes. This has also boosted demand for duration on the Treasury curve as investors look more kindly to any kind of investment risk. The problem is that it is not yet clear that the Fed is near the end of its cycle. Fed Funds forwards are steeply inverted from late 2023, implying the odds of a rate cut are rising. We think this is right but that pricing may be reversed soon if data doesn’t worsen quickly. The rally in long-end bonds has come with Fed Funds forwards pricing rate cuts in 2024 Source: Refinitiv, ING Today's events and market view The headline Q3 Eurozone is less liable to surprise markets, this being the third and final release but the details of the report, including employment, will be of interest. The EU has mandated banks for the sale of a new 15Y bond for €6.5bn. The same deal will also features a smaller tap of a 30Y bond. The deal may weigh on bonds but supply this week is otherwise light. Today is the last day before the start of the pre-ECB meeting quiet period. Fabio Panetta and Philip Lane, both doves, are scheduled to speak. Any hawkish comment would catch the market off guards and push yields higher. The US Q3 unit labour cost publication is also a final release but, as it is key to the Fed’s decision-making, any revision will be of importance. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

USD/INR takes offers to refresh intraday low as riskier assets cheer US dollar weakness. Recovery in Crude Oil fails to challenge Indian Rupee buyers amid cautious optimism at home and abroad. US consumer sentiment, inflation expectations should be watched for fresh impulse. USD/INR cheers the US Dollar weakness as it drops to the lowest level in three days, around 81.15 during early Friday. In doing so, the Indian Rupee (INR) pair pays little heed to the firmer Oil price, which generally has inverse relations with the INR moves. Although the weekly prints tease the greenback buyers, the US Dollar Index (DXY) prints a three-day downtrend near 104.60, down 0.21% intraday as traders brace for the next week’s busy schedule comprising the Federal Reserve (Fed) monetary policy meeting and the inflation data, not to forget today’s consumer-centric figures. In doing so, the greenback’s gauge versus the six major currencies traces the US Treasury bond yields while justifying the downbeat US data. Talking about the latest data, US Initial Jobless Claims matched 230K market consensus for the week ended on December 02, versus the upwardly revised 226K prior. Further, the four-week average also printed 230K figure compared to 229K in previous readings. Earlier in the week, the US Goods and Services Trade Balance deteriorated to $-78.2 billion versus $-79.1 billion expected and $-73.28 billion prior. Further, the final readings of the Unit Labour for Q3 eased to 2.4% QoQ versus 3.5% first estimations. On the other hand, WTI crude oil prints the first daily gain in six, up 1.08% intraday near $72.35 by the press time, as geopolitical fears join hopes of more demand from China to favor the energy buyers. Even so, the black gold remains near the yearly low marked the previous day. Against this backdrop, S&P 500 Futures and stocks in the Asia-Pacific zone print mild losses while the US 10-year Treasury bond yields remain pressured around the three-month low marked on Wednesday. Moving on, intraday USD/INR traders should pay attention to preliminary readings of the Michigan Consumer Sentiment Index for December, expected 53.3 versus 56.8 prior. Also important to watch will be the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations for the said month, 3.0% previous readings. Technical analysis USD/INR justifies the failure to cross a seven-week-old resistance line, around 82.65 by the press time, as bears approach 50-DMA support, at 81.95 as we write

Inflation data is in focus next week. In the Czech Republic, surveys suggest food prices continue to rise, and we believe fuel will be the only item to show deflation in November. Thus, we expect inflation to accelerate to 0.9% month-on-month. In Poland, core CPI grew to 11.3% year-on-year, and we see it peaking above 20% in February 2023 In this article Poland: No turnaround in inflation yet Czech Republic: Inflation accelerates again   Shutterstock Poland: No turnaround in inflation yet Current account (€-263mn) We forecast that the current account deficit narrowed substantially in October even though the trade deficit in goods was at a similar level as in the previous month. The main improvement is projected to come from an improvement in the primary income balance. For 2022 as a whole, we project a current account deficit of about 4% of GDP, declining further to 3.2% in 2023 on the back of weak domestic demand and a moderate increase in foreign sales. CPI (17.4%YoY) According to the flash estimate, CPI declined to 17.4% year-on-year in November from 17.9%YoY in October, as an expected month-on-month drop in gasoline prices was accompanied by an unexpected fall in energy prices due to cheaper coal. Still, core CPI grew to 11.3%YoY from 11.0%YoY in the previous month. Lower inflation in November is not yet a sign of a turnaround in the inflation trend. We see consumer inflation peaking above 20%YoY in February 2023 before declining to around 10%YoY in the fourth quarter of next year. You can read more in our 2023 economic outlook here. Czech Republic: Inflation accelerates again Surveys suggest that food prices in the Czech Republic continue to rise rapidly. While they rose by 3.0% in October, we expect a 2.1% month-on-month jump for November, which is still significantly higher than in the months leading up to October. On the other hand, we expect fuel prices to have fallen (1.7%). However, we believe this is the only item in the consumer basket that shows deflation in November. The main issue, as always, is energy prices. In October, the statistics office surprised with its aggressive approach to including the energy-saving tariff in the CPI, which led to a massive drop in inflation. This effect will last until December and will be replaced in January by the price cap, which we believe will have a similar effect on inflation. Unlike the price cap, the savings tariff allows energy prices to rise further. Therefore, we expect a slight increase in energy prices in November, but again, this is the main CPI item that may surprise. Thus, overall, we expect inflation to accelerate from -1.4% to 0.9% month-on-month, which should translate into a headline number rising from 15.1% to 15.9% year-on-year. Key events in EMEA next week Refinitiv, ING Read the article on ING Economics TagsEMEA Czech Repulbic Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

While 2022 was a challenging year for the muni-bond market, 2023 is setting up for more positive momentum, according to Franklin Templeton Fixed Income Municipal Bond Director Ben Barber. Read the team’s views on the year ahead. 2022: A persistently volatile year Reviewing the past 12 months, municipal bond (muni) investors will be hard pressed to find a more persistently volatile market time since the global financial crisis of 2008. At the beginning of the year, the US Federal Reserve (Fed) maintained its fed funds rate at the zero-lower-bound, and concerns over rising inflation were muted as many thought that these forces were “transitory.” But as the year progressed and inflation marched higher, the Fed entered a period of rapid rate hikes at a pace and magnitude not seen since the 1980s. The fed funds rate moved to an economically restrictive 3.75%–4.00% range. Consequently, US Treasury (UST) yields moved much higher, particularly on the front end of the yield curve. Increased market volatility negatively impacted most fixed income sectors as concerns over a potential recession shifted market sentiment negative. Munis were not exempt, as the sector saw large continuous outflows of funds throughout much of the year, driving down valuations. This, coupled with rising UST yields, led to poor absolute performance for munis—the Bloomberg Municipal Bond Index has declined 9.32%1 year-to-date, and yields rose from 1.12% to 3.65%.2 The selloff was broad-based over most sectors and rating classifications. Despite the negative technical tone, there have been several short periods of strong positive performance, which indicates the market’s resilience and investors’ appetite to return to the asset class. These factors speak to a technically driven selloff, rather than one driven by poor credit fundamentals. Fundamentals remained strong throughout 2022, and we have observed many more rating upgrades than downgrades. Many muni issuers have been operating at surpluses for the better part of the past 12 months and have been able to increase their contributions to “rainy-day” funds. New-issue supply has been lower for most of the year in both the tax-exempt market and taxable muni market. At the beginning of 2022, muni valuations were considered “expensive;” however, they cheapened aggressively as fund outflows increased by mid-April. This trend carried on for most of the year. Only in the latter part of November did we start to see shorter-maturity bonds become expensive relative to historical averages as investors moved out of their cash holdings into less interest-rate sensitive positions, while still capturing a strong yield pickup. Technicals Driving Selloff Exhibit 1: Long-Term Mutual Fund Net New Cash Flow in Millions, US DollarsAs of November 30, 2022   Source: Investment Company Institute. Estimated Long-Term Mutual Fund Net Cash Flow “Release: Estimated Long-Term Mutual Fund Flows | Investment Company Institute (ici.org).   Despite the poor performance relative to previous years, the municipal bond sector remains in a fundamentally stable position with valuations cheaper than those of 2021 where the sector saw record inflows. Muni momentum looking more positive in 2023 Looking forward into 2023, there are a few key themes that we believe could provide strong momentum for munis. First, the technical environment may be shifting more positive as tax-loss harvesting and fund redemptions slow. As the Fed cuts back its pace of interest rate hikes, this could provide a path for a more stable yield environment, which would bolster investor confidence in the sector. Munis can be valuable for investors looking to find an attractive yield, especially considering the after-tax equivalent options available. Fundamentals remain strong as surpluses have accumulated over the past several years, and prudent fiscal budgeting will continue to provide a ballast to balance sheets. With the threat of a recession still an overhang on the market, we are paying particular attention to several sectors as we progress through 2023. We feel security selection will become even more critical in 2023, with deep credit research proving vital to investment returns. We believe opportunities will continue to present themselves up and down the credit quality spectrum in 2023. Moving into 2023, valuations will need to be closely watched. The shorter end of the maturity curve has been extremely active in late 2022, and its yields have moved lower more aggressively than longer-maturity bonds. Investors seem to be nervous about the Fed’s rate-hiking cycle and may continue to favor a shorter-duration positioning. That being said, the longer-maturity end of the muni yield curve looks attractive to us on a historical basis. Additionally, the potential carry from higher muni yields further solidifies the opportunity for investors to take advantage of better valuations available on the longer end of the curve. Endnotes Source: Bloomberg as of November 25, 2022. Source: Bloomberg as of November 25, 2022. WHAT ARE THE RISKS? All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Because municipal bonds are sensitive to interest rate movements, a municipal bond portfolio’s yield and value will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the portfolio’s value may decline. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value.    

US Two blockbuster events will have Wall Street on edge as the disinflation trade may have gotten ahead of itself. The last major piece of economic news before the Fed meets will be the November inflation report which is expected to show pricing pressures are decelerating.  The headline reading from a month ago is expected to rise 0.3%, a tick lower from the pace in October.  On a year-over-year basis, inflation is expected to decline from 7.7% to 7.3%. There is still a lot more work that needs to be done with bringing inflation down, but for now, it seems the trend is headed in the right direction.  The FOMC decision will be “Must See TV” as the Fed is expected to downshift to a half-point rate-hiking pace and yet still reiterate that they are not done raising rates.  The Fed will likely show that rates could rise anywhere from 4.75-5.25%, which will be very restrictive and should lead to a quicker cooling of the labor market.   EU  The ECB meeting next week promises to be a defining moment in the bloc’s fight against inflation. It was late to the party, very late in fact, but once it arrived it quickly started playing catch up culminating in a 75 basis point rate hike last week. The belief is that it won’t have to go as far as others in raising rates, with the terminal rate currently believed to be around 3%. That means the central bank is expected to already slow the pace of tightening on Thursday, with a 50 basis point hike, followed by another 100 over the first three meetings in the new year.  It’s not just the decision that investors will be focused on. The press conference and new macroeconomic projections will tell us everything we need to know about where the central bank sees itself in the tightening cycle and whether it is aligned with the markets. UK It’s all going on in the UK next week. The third week of the month brings a variety of major economic indicators including inflation, employment, retail sales, GDP and PMIs. This month has the added spice of the BoE meeting, the central bank that is arguably most stuck between a rock and a hard place among its peers. The economy is suffering and probably already in recession, inflation is 11.1% – although that is expected to drop slightly ahead of the meeting – and the cost-of-living crisis in squeezing those households least able to cope with it most. And yet the BoE is of the belief that the only policy response is to keep hiking rates. Markets expect another 50 basis points on Thursday and a further 100-125 in the first half of next year. The central bank has previously pushed back against market positioning and we may see language to the same effect in the statement, not to mention more dovish dissent.  Russia A week of no change is on the cards, it would appear. The CBR is expected to leave the Key Rate unchanged at 7.5% on Friday, the second consecutive hold after many months of hikes and then cuts following the invasion of Ukraine. On Wednesday, the third quarter GDP reading is also expected to be unchanged at -4% annualized.  South Africa The political environment appears to have cooled a little but President Ramaphosa isn’t necessarily safe yet. The focus will remain on this but there’s also inflation and retail sales data in the middle of the week that will be of interest. Turkey A few notable data releases next week although maybe not anything that will move the needle under the circumstances. Unemployment and industrial production stand out. Switzerland The SNB is expected to raise its policy rate by 50 basis points to 1% next week as it attempts to get a grip of inflation. It’s currently running at 3%, above its target of below 2% and the SNB has been clear in its determination to bring it down.  China China is facing a potential surge in cases as COVID rules are loosened. Following the protests over the zero-Covid policy in several Chinese cities last week, the Chinese government is pivoting its policy.  The elimination of key tenets of its virus elimination plan suggests they will try to learn to live with the virus. It will be a busy and not-so-good week of Chinese economic data. At some point this week we will see the release of aggregate financing, new yuan loans, and money supply data.  On Thursday, industrial production, retail sales, fixed assets, and the surveyed jobless rate will be released, with most expecting a softer print. The PBOC is also expected to hold its 1-year medium-term lending facility rate at 2.75% as volumes (CNY) could decline from 850 billion to 500 billion.     India All eyes will be on the November inflation report which could show a deceleration in pricing pressures coming closer to the upper boundaries of the RBI’s 2-6% target. Given the growth slowdown that is forming, inflation could continue its decline next quarter which should help finish the job of bringing it back to target.  India is also expected to see industrial production drop from 3.1% to -0.6%.   Australia & New Zealand Following the recent RBA rate decision, investors expect the bank to be nearing the end of its tightening cycle.  The focus for Australia now shifts to business conditions/confidence and the labor market.  The Australian economy is expected to add 15,000 jobs, a slower gain than the 32,000 seen in the prior month.   New Zealand’s GDP growth will quickly cool as the latest tourist boom eases. Third quarter GDP on a quarterly basis is expected to soften from 1.7% to 0.8%.   Japan Investors will have to be patient until the spring when the new leadership team has been created. The BOJ policy review could lead to the end of a decade-long ultra-loose monetary policy. The upcoming week is filled with economic data releases. The main highlights include the BOJ’s Tankan report which will show big manufacturers are struggling and non-manufacturing activity got a boost on easing covid rules. The November PPI report will show minimal pricing relief, while the trade deficit is expected to narrow.  The preliminary PMIs could show both manufacturing and service activity are weakening.     Singapore It could be mostly a quiet week for Singapore with the exception of the release of non-oil domestic exports.    Economic Calendar Saturday, Dec. 10 Economic Events The annual Bund Summit continues in Shanghai The International Coffee Organization conference takes place in Vietnam Sunday, Dec. 11 China FDI, Aggregate Financing, Money Supply, and New Yuan loans expected this week Monday, Dec. 12 Economic Data/Events India CPI, industrial production Japan PPI, machine tool orders Kenya GDP New Zealand net migration Mexico industrial production Turkey current account UK industrial production Brazil’s presidential election is expected to be certified Tuesday, Dec. 13 Economic Data/Events US November CPI M/M: 0.3%e v 0.4% prior; Y/Y: 7.3%e v 7.7% prior Australia consumer confidence, household spending Germany CPI, ZEW survey expectations Hong Kong industrial production, PPI Israel trade Italy industrial production Japan Bloomberg economic survey New Zealand home sales, food prices Philippines trade South Korea money supply Turkey industrial production UK jobless claims, unemployment The Bank of England releases its financial stability report US House Financial Services Committee holds an initial hearing on FTX’s collapse US President Joe Biden hosts the US-Africa Leaders Summit New Zealand’s government releases its half-year economic and fiscal update Wednesday, Dec. 14 Economic Data/Events FOMC Decision: Expected to raise the target range by 50bps to 4.25-4.50% Eurozone industrial production India trade, wholesale prices Japan machinery orders, industrial production Mexico international reserves New Zealand current account GDP ratio, BoP Russia GDP South Africa CPI, retail sales South Korea jobless rate Spain CPI UK CPI EIA crude oil inventory report The European Union and the Association of Southeast Asian Nations will celebrate the 45th anniversary of their partnership at a summit in Brussels US Senate Banking Committee holds a hearing on FTX’s collapse The US-Africa Leaders Summit continues with keynote remarks from Biden The Bank of Japan will announce the outright purchase amount of Japanese government securities RBA Gov Lowe delivers an address at the 2022 AusPayNet Annual Summit Thursday, Dec. 15 Economic Data/Events US Retail Sales, cross-border investment, business inventories, empire manufacturing, initial jobless claims, industrial production ECB Rate Decision: Expected to raise Main Refinancing rate by 50bps to 2.50% BOE Rate Decision: Expected to raise rates by 50bps to 3.50% Switzerland rate decision: Expected to raise rates by 50bps to 1.00% Norway rate decision: Expected to raise rates by 25bps to 2.75% Mexico rate decision: Expected to raise rates by 50bps to 10.50% Australia unemployment, consumer inflation expectation Canada existing home sales, housing starts China medium-term lending, property prices, retail sales, industrial production, surveyed jobless Eurozone new car registrations France CPI Japan tertiary index, trade New Zealand GDP Nigeria CPI Poland CPI Spain trade Friday, Dec. 16 Economic Data/Events US deadline for a new funding deal to avert a federal government shutdown US markets observe “Triple witching”, which is the quarterly event where the expiry of stock and index options occur with those of index futures US preliminary PMIs Australia preliminary PMI readings  European flash PMIs: Eurozone, Germany, UK, and France   Hong Kong jobless rate Italy CPI, trade Japan PMIs, department store sales New Zealand PMI Russia rate decision: Expected to keep rates steady at 7.50% Singapore trade Thailand foreign reserves, forward contracts, car sales Bank of Finland Governor Rehn speaks on the Nordic nation’s economy South Africa’s governing party begins its five-yearly elective conference in Johannesburg Sovereign Rating Updates Luxembourg (Moody’s) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

There are 3 weeks left till New Year, but the situation in the financial markets is not becoming less tense. Next week it seems to be the most importan of these 3. 2022 has been a dramatic year for rate hikes from the U.S. Federal Reserve (Fed), and there is still one meeting to go. Read next:Monetary Aggregates - Money Supply In The Economy| FXMAG.COM Data There’s lot of economic data came before the meeting, this will shape the December decision. The main things to watch are inflation and employment. The Producer Price Index, which measures the prices companies pay for goods and services before they reach consumers, rose 7.4% in November from a year earlier, the Bureau of Labor Statistics said on Friday. This is less than the revised 8.1% increase recorded in October.US stocks fell immediately after the report was released. The PPI report generally receives less attention than the corresponding Consumer Price Index, which measures the prices US consumers pay for goods and services. However, it is a rare month that the PPI report comes ahead of the CPI report due out on Tuesday. It is expected to decline again and reach 7.3%. The downward trend in inflation has been maintained since August, which may be a sign that the Fed's actions are bringing results. Source: investing.com The number of Americans filing new unemployment claims rose moderately last week, pointing to a still tense and strong labor market despite growing fears of a recession, economists have warned against reading too much as data is volatile at this time of year. Tensions and labor market resilience mean the US central bank is on track to continue raising interest rates for some time. Claims tend to be volatile at the start of the holiday season as businesses temporarily close or slow down hiring, which can make it difficult to get a clear picture of the job market. Forecast The Fed is widely expected to slow down to raise its benchmark rate by half a percentage point, slower than four 0.75 point rate hikes since June. This will put the Fed reference rate in the range of 4.25%-4.5%. While some economists argued that November's strong jobs report brought back a 0.75 point hike. Overall, economists are expecting a hawkish Wednesday. The key question here is how high the Fed wants rates to go in 2023. If December sees a 0.75 percentage point increase, that’s a signal that interest rates may top out at 5.5% or higher. However, if the December decision is a 0.5 percentage point hike or lower, then peak rates for this cycle may come in closer to 5%. Fed Chairman Jerome Powell During the Federal Reserve’s last battle with high inflation in the 1970s and 1980s, Fed officials didn’t talk much at all publicly. Forty years later, there is no sign of a lack of comment from the central bank when Fed Chairman Jerome Powell holds a press conference after the meeting. And investors and economists will get plenty of information, not just smoke, from the central bank. At his press conference in November, Powell said that if the Fed tightened policy, "we could use our tools to support the economy." Markets then picked up a dovish signal from Powell's comment from a week ago that the central bank did not want to tighten policy. Source: investing.com

Rarely have predictions for an upcoming year been so difficult and wide-ranging. But we are sure of some things, and we are doing our best to help you navigate this unprecedented uncertainty  In this article Goodbye to all that Different shades of recession The widest range of possible outcomes and forecasts 3 calls for 2023: Recession, inflation and central banks Carsten Brzeski on what he's expecting in 2023 Goodbye to all that 'May he live in interesting times' is a Chinese proverb that many of us have heard, perhaps a little too often in recent times. The list of unprecedented crises gets longer by the year. 2022 was supposed to be the year of post-pandemic and post-lockdown reopenings. But it became the year of war, inflation, energy and commodity price crises, drought and floods. It was also a year which saw a paradigm shift at major central banks, trying to fight inflation at all costs. It's where we said goodbye to low interest rates for longer and that easing bias. Central banks got all of us used to jumbo-size rate hikes and, at least in the US, the policy rate is almost back at levels last seen prior to other financial crises. 2022 was also the year of what the Germans call 'Zeitenwende' or 'game changer', at least for Europe: a war in the EU’s backyard, which is still ongoing with no end in sight; an end to cheap energy, and an end to globalisation as we knew it. Combined with the well-known longer-term challenges of population ageing, a lack of international competitiveness, and the never-ending debate on further European integration, Europe's to-do list is long. The chances are very high that the continent will have a hard time returning to a pre-crisis growth trajectory any time soon.  Different shades of recession So what will 2023 bring? A natural reflex of many forecasters is to simply extrapolate recent trends and developments into the new year. And, indeed, many of this year's issues will also be prominent in the next: war, the energy crisis, inflation, trade tensions and even Covid are likely to affect the global economy significantly. This is not the moment to identify potential new black or grey swans... nor even pink ones. Our predictions and calls for 2023 reflect our base case: median forecasts backed by this year’s events and assumptions. We expect to see several different shades of recession in 2023. We should get a rather textbook-style recession in the US with the central bank hiking rates until the real estate and labour markets start to weaken, inflation comes down, and the Fed can actually cut policy rates again.  Expect a recession that feels but doesn’t read like a recession in China with Covid restrictions, a deflating real estate market and weakening global demand, bringing down economic activity to almost unprecedented low levels. And finally, look forward to an end to the typical cycle in the eurozone, where a mild recession will be followed by only very subdued growth, with a risk of a 'double dip', as the region has to shoulder many structural challenges and transitions. These transitions will first weigh on growth before, if successfully mastered, they can increase the bloc’s potential and actually add to growth again. The widest range of possible outcomes and forecasts Inflation will continue to be one of the key themes of 2023. We expect it to come down quickly in America, given the very special characteristics of the US inflation basket, allowing the Fed to stop rate hikes and eventually even cut before the end of the year. In the eurozone, inflation could turn out to be stickier than the European Central Bank would like and also perhaps afford. Still, with interest rates entering restrictive territory in early 2023, the looming loss of economic wealth and a large need for investment, the bank will be forced to stop earlier than it perhaps might like. Or, alternatively, it could commit a policy mistake if it hikes rates far beyond mildly restrictive levels. In any case, we are entering a year with the widest range of possible outcomes and forecasts in years. And this is not even taking into account potential blind spots such as the start of a pandemic or a war in Europe that markets simply did not have on their radar screens at the end of 2019 or 2021. It is both interesting and challenging, for the economy, for financial markets, for companies, for households but also for economists like us. 'May he live in interesting times'. A friend of mine just told me that this is actually not a Chinese proverb but more a curse. We shall see. In any case, Merry Christmas and a Happy New Year.   This article is part of ING’s Economic Outlook 2023: ‘May he live in interesting times’ Read the article on ING Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more   View 21 articles

The global economy at a glance In this article US: Markets doubt the Fed’s intent Eurozone: Lower energy prices have temporarily stopped the downturn UK: Calmer markets and delayed fiscal pain not enough to stop recession China: Still dire from rising number of Covid cases Rest of Asia: No recession, but certainly slowdown CEE: Geopolitical misfortune  Rates: To reverse higher first, and then collapse lower as a theme for 2023 FX: Everyone is asking whether the dollar has topped   Shutterstock The World Reimagined globes in London, UK - 20 Nov 2022   1US: Markets doubt the Fed’s intent The economy is experiencing a strong second half of 2022. Jobs are being created in significant number, wages continue to rise and household keep spending as the Fed signals a step down to 50bp incremental rate hikes, but with a higher ultimate rate than they indicated was likely back in September. Officials suggest they may not cut rates until 2024 given their concern about stickiness in key service sector components of inflation, but their forward guidance needs to be taken with huge handfuls of salt given their recent track record. The “hawkish” rhetoric is likely the result of concern that the recent steep falls in Treasury yields and the dollar, coupled with a narrowing of credit spreads is loosening financial condition – the exact opposite of what the Fed wants to see as it battles to get inflation lower. Nonetheless, the softer core inflation prints seen in October, combined with bad housing market data and weaker business confidence has led the market to anticipate rate cuts from second half of 2023 – in line with our long-held view. 2Eurozone: Lower energy prices have temporarily stopped the downturn With lower natural gas prices on the back of the unusual warm autumn weather the downturn in sentiment has been temporarily halted, though most indicators are still weak. With retail sales falling sharply in October a recession over the winter quarters still looks very likely, albeit perhaps not as deep as we previously pencilled in. Thereafter, growth will be subdued at best, as higher interest rates will start to bite, energy prices are likely to remain at elevated levels, while budgetary stimulus is bound to peter out in the course of 2023. Headline inflation fell back in November to a still high 10%, while underlying inflation remains stuck at 5%. The ECB is therefore likely to lift the deposit rate to 2% in December, considered by some members of the Governing Council as the neutral rate. The first quarter might see another 50 bp further tightening, as well as the start of gradual reduction of the balance sheet, though at a very slow pace in the beginning. 3UK: Calmer markets and delayed fiscal pain not enough to stop recession Calmer financial markets and some fresh tax rises allowed the Chancellor to put off some of the painful spending cuts until after the next election in 2024/25 in his Autumn Statement. Nevertheless, energy support will become considerably less generous for most households from April, and the housing market is showing very early signs of faltering. Despite the sharp fall in swap rates since September’s mini-budget crisis, mortgage rates have fallen much more gradually. A recession now looks virtually inevitable, though it might not be until the first quarter until we see more material signs of slowing. The Bank of England has begun to talk down market rate hike pricing, and investors have taken the hint, but are still probably overestimating what is to come. We expect the BoE to pivot back to a 50bp hike in December, and expect one further 50bp move in February, which is likely to mark the top of this tightening cycle. 4China: Still dire from rising number of Covid cases Even the government offers property developers to increase funding channels, uncompleted home projects are yet to be finished. Most of those projects are left in the hands of local governments to find a private company to finish the construction work. This takes time to finish. The housing market is therefore quiet as home price continues to fall. On Covid, more local governments have subtly changed to slightly softer practices to implement Covid measures. But the higher number of Covid cases means that there is limitation on how fine-tuning can benefit the economy. Sporadic lockdowns would continue and still affect retail sales and production adversely. We have already seen retail sales fell into yearly contraction in October, and PMIs showed that could easily repeat for the rest of 4Q22. More, exports should continue to show weaknesses due to high inflation in US and Europe. The only support to the economy is now fiscal spending, which has been in the area of advanced technology and new energy. 5Rest of Asia: No recession, but certainly slowdown On the positive side, inflation rates in Asia look to be peaking out, and at levels well below comparable rates in Europe and the US. And this has also meant that although central banks across the region have been raising policy rates, they have not gone up alarmingly, and it feels as if in many cases, we are nearing a peak after the next one or two hikes. On the negative side, Asia is highly geared to global growth through global trade, and so with Europe contracting, China in as weak a state as we have seen it, and the US slowing, it is not surprising to see Asia export figures swinging sharply negative, with Korea and Taiwan the bellwethers for the North Asia, and Singapore’s Non-oil domestic export declines performing the same barometer role for SE Asia. Not entirely independently, the global semiconductor downturn is heaping further downward pressure on the region, which is the key production centre for most global technology hardware, weighing on industrial production and exacerbating the export downturn. 6CEE: Geopolitical misfortune  In addition to the global story of high energy prices and headline inflation, the CEE region is suffering from its own problems. The common denominator is the region's unfortunate geographic location in the current geopolitical landscape and historically strong labour market. The result is significantly higher inflation than in Western Europe, but also high and persistent core inflation, underpinned by a still massively tight labour market that shows no signs of easing despite the coming recession. Moreover, in response to the energy and migration crises at the same time, governments across the region have come up with another wave of household support spending, resulting in massive twin deficits. However, this has been countered by central banks tightening monetary conditions through interest rate hikes, well above global peers, but also often through the FX channel. The resulting picture of this wild mix for next year is thus a shallow recession driven mainly by a fall in household consumption, only gradually slowing inflation with a possible upside surprise, and cautious central bank foot-dragging around the timing of the start of monetary policy normalisation.  7Rates: To reverse higher first, and then collapse lower as a theme for 2023 2022 is shaping up to be the biggest bear market for bonds in modern times. This might help explain why market rates have reversed lower in recent weeks. But it’s also to do with position squaring, as a decent rump of investors square up on bear market positions taken in 2022. That requires the buying of both duration and risk. However, this stores up problems for the turn of the year. Arguably, financial conditions (especially in the US) are prone to loosening too much, driven there by falls in market rates. But the Fed is still hiking and needs tighter financial conditions. That should force market rates back up first. But the biggest narrative for 2023 will be one of big falls in market rates. The Fed and the ECB will peak in the first quarter, and once there, market rates will have a carte blanche to anticipate future cuts. 8FX: Everyone is asking whether the dollar has topped At top of everyone’s minds in the FX market is the question as to whether the dollar has topped. Softer US inflation data and some hints of softer Covid policy in China have combined to knock the dollar some 8% off its late September highs. Those arguing for a continued dollar decline are wholly focused on the Fed story and the extension of a Fed pivot into a full-blown easing cycle. We certainly agree that a dovish turn at the Fed – a turn that finally sees short-dated US yields start to fall – is a necessary condition for a drop in the dollar. But a sufficient condition requires investment destinations in Europe and Asia being attractive enough to pull funds out of dollar deposits yielding 4%+. It remains questionable whether either of these necessary or sufficient conditions are met in 2023 and we remain sceptical that EUR/USD will be able to sustain gains above the 1.05 level. Elsewhere, sterling has recovered after November’s fiscal U-turn – a sign that policy credibility has a big role to play in FX markets. And finally, Japanese policy makers will be looking at back at some incredibly effective FX intervention to sell USD/JPY in September and October. Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

An overview of our current base case alongside potential upside and downside scenarios of what could be next for the global economy     Energy and commodity prices have taken over from Covid lockdowns as a key driver for the global economy and inflation developments across the world. Needless to say that at the current juncture, all forecasts are surrounded by unprecedented uncertainty. Therefore, we're continuing with our tradition of stress testing assumptions and central forecasts. What follows is an overview of our base case alongside both upside and downside scenarios for growth, inflation and central bank policy. Three scenarios for energy prices Macrobond, ING Three scenarios for the US economy Macrobond, ING Three scenarios for the eurozone economy Macrobond, ING Three scenarios for the UK economy Macrobond, ING Three scenarios for China's economy Macrobond, ING TagsInflation Energy Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Inflation – it's complicated. And it has dominated headlines for the past two years. Here's what we think is going to happen next In this article A complicated story The long road towards lower inflation Longer-term factors likely to push up inflation again   Industrial unrest has been increasing as workers demand higher wages to match inflation. 'For our wages' reads this banner at a recent protest in France A complicated story The drivers behind inflation have been discussed extensively. Lockdowns and reopenings, supply chain frictions, the war in Ukraine and an energy crisis pushed up headline inflation in most industrialised economies into double-digit levels this year. While inflation in Europe is still mainly driven by higher energy, commodity and food prices, it's become much more domestically driven in the US. At the end of the year, headline inflation in the States had started to come down significantly, and it seemed to have approached its peak in the eurozone. The big question for 2023 is whether headline inflation will retreat further and, if it does, how fast will the fall be? As we've seen over the past couple of years, the inflation outlook varies between regions.  The long road towards lower inflation Generally speaking, manufacturing firms across developed markets are reporting lower orders and rapidly rising inventory levels. Coupled with lower input prices for many commodities and also shipping, this points not only to lower inflation but also potentially to outright price falls in some durable goods categories; we already see that with used cars. That’s consistent with history, too: Goods inflation, particularly consumer durables, tends to be more volatile, but trends are also less persistent than services inflation. Just as goods price inflation surprised higher during Covid, it also has the potential to do the same on the downside. In the US, the latest ex-food and energy inflation readings are undershooting expectations, with some evidence that weakening corporate pricing power is spreading as businesses become more cautious about the outlook and see their inventory levels rise. However, Federal Reserve officials have signalled concern about services excluding housing (around 25% of the inflation basket) with the latest strong wage data set to keep them cautious.  We believe that the high share of shelter and used cars in the inflation measure (more than 40% of the basket) could push down headline inflation faster than many policymakers currently expect. After all, they reflect assets, so there is greater scope for outright price falls than for services. In the eurozone, however, headline inflation could prove to be a bit stickier, certainly if our house view is correct and gas prices stay high into winter 2023. Also, the pass-through from higher wholesale gas prices to consumers comes in waves and is likely to continue far into next year. As a consequence, headline inflation will just gradually come down and will only reach the ECB’s 2% target in 2024. Labour markets pose more of a conundrum but are crucial for the outlook for core inflation. While there’s little doubt hiring appetite is weakening as recession sets in - and that will continue - structural labour shortages suggest firms have an incentive to ‘hoard’ staff more than in past recessions. Given that demographics are less favourable in Europe than in the US, labour hoarding could be more accentuated in Europe. That suggests wage growth may also not slow as much. In any case, let’s not forget that wage growth is one of the most lagging indicators and even with a looming recession, wage negotiations at the start of 2023 will still be highly impacted by the inflation developments of the past two years and less by the looming recession. Remarkably, the UK faces a unique situation of an uptrend in the proportion of adults neither employed nor actively seeking a job, a situation exacerbated by healthcare problems. Longer-term factors likely to push up inflation again Our base case scenario remains that inflation in the developed economies will return to around 2% in 2024. However, this is no reason for relief and could be a very short-lived experience. In the longer term, structural shifts in the global economy are likely to push up costs and hence inflation. Deglobalisation - the restructuring of supply chains but also new trade barriers - presents new costs for corporates. Climate change and the transition to net zero will also initially push up costs for energy and commodities and will lead to more volatile inflation over the coming years. While 2022 saw higher gas prices due to the Ukraine war, those prices were already volatile in 2021, which was partly linked to periods of poor renewables' output. Until advances in energy storage become more widespread, the switch to zero-carbon electricity - and the associated volatility in output - implies periods of more volatile European power prices. Extreme weather also points to more volatility linked to supply chain pinch-points, as we saw with the drought-affected river Rhine in the summer. Demographic change, already leaving its mark on labour markets, will only grow and add to upside pressure on wages unless jobs are automated. Against this background of gradually declining but structurally higher inflation, the key question is what central banks will do if core inflation doesn’t return fully to target over the next 12 to 18 months. One option would be to keep policy rates high or higher for longer. The other option could be to become more flexible once inflation falls much lower. But it does suggest a return to consistently below-neutral interest rates is less likely in the medium-term. TagsInflation Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The European Central Bank meets next Thursday and looks set to slow the pace of aggressive interest rate hikes as inflationary pressures finally show signs of abating. Read naxt: FX: Movement Of Major Currency Pairs This Week| FXMAG.COM Forecast The ECB has already raised its main lending rate by 2% since July in three separate increases. The ECB is due to meet again on December 15 amid expectations that rate will be increased again. Comments from ECB officials this week saying inflation was probably close to its peak have bolstered expectations that the central bank is likely to slow its pace of interest-rate increases to half a point from 75 basis points previously, on December 15. Markets anticipate a 50 basis point, or half point, rate hike after two straight increases of 75 basis points each, slowing the pace of tightening. Recent comments from ECB officials wouldn’t lead one to believe that a pace decrease is in sight but market participants are still leaning towards a smaller rise, with 55bps priced in, after 75bps hikes in September and October. The dovish emphasis came from the October meeting minutes which highlighted the progress that had been made from removing the accommodative policies. In its October decision, the ECB said "substantial progress" had been made in withdrawing policy accommodation and the lags involved in the transmission of the earlier tightening measures. But the ECB is likely to stay hawkish and investors will also look for clues on where the deposit rate is going. Deutsche Bank economists see the terminal rate at 3%, with risks skewed to the upside. The ECB meeting coming after the Fed, so some may question whether the Fed’s decision will have an impact at all. Data A sharp slowdown in inflation in the US in October and the eurozone in November has encouraged investors to believe the worst may be over in terms of price pressures, causing global yields to drop sharply in recent weeks. Germany's 10-year bond yield, seen as the benchmark for the eurozone, rose one basis point to 1.8%, while the Irish and French 10-year yields traded at around 2.3%. Many investors say the sharp drop in eurozone yields has gone too far, given that annual inflation is still running at 10% and that the ECB is set to raise rates to at least 2% next week. Eurostat said area inflation rose 10% in the year to November, which is a decline on October's 10.6% and lower than the consensus expectation amongst economists for a reading of 10.4%. Excluding food, fuel, alcohol and tobacco, inflation is at 5% and pipeline pressures remain abundant. Closely-watched business activity data points to a mild recession and latest forecasts should show how the ECB views the coming slowdown. In September, it forecast 0.9% eurozone growth in 2023, a significant downgrade from its June prediction. Recent reports have shown that employment rose slightly and the GDP Y/Y and GDP Q/Q readings turned out to be higher than expected. GDP Y/Y increased to 2.3% against the expected 2.1%, while GDP Q/Q increased by 0.1% to 0.3%. A positive GDP reading may influence the ECB's decision. Retail sales in Europe continue to fall. It came down to -2.7% in October, which is far worse than the expected. EUR/USD Euro exchange rates would be set to benefit if the European Central Bank (ECB) defies expectations next week by hiking 75 basis points, an outcome some economists say is likely. A 50bp move would therefore be a neutral outcome for the Euro to Dollar exchange rate. Source: investing.com, ecb.europe.eu

India inflation reading out tonight but the highlight for the week will be US inflation and the Fed policy decision later in the week  Source: shutterstock Macro outlook Global Markets: At times, markets simply see what they want to see in the data to justify the direction they intended to go anyway, and Friday’s trading looked a lot like that. US data (on which more below) put in a mixed performance on Friday. On balance, the data still pushed in the direction of moderating inflation, but there were some upside misses (PPI) and some downside (University of Michigan inflation expectations) misses too.  Neither of these has all much relevance for this week’s CPI data, save to confirm that it will probably also show a moderation, though exactly how much, and what split between headline and core rates remain uncertain. Yet markets had been longing to correct, which is exactly what they did. The S&P500 lost 0.74%, rounding off a poor week, while the NASDAQ lost 0.7%. Chinese stocks finished in better form, still buying into the China reopening story. The CSI rose 0.99% on Friday, the Hang Seng rose 2.32%. US equity futures remain a little downbeat about today’s opening prices. US Treasury yields added a little more gloom to the market story, with yields rising, though only by 3.7bp for the 2Y, while the 10Y yield rose 9.6bp taking the yield to 3.578%.  EURUSD remains above 1.05, pulling back from just below the 1.06 level on Friday and settling slightly lower. The AUD is a little stronger at 0.6788, the same as Cable at 1.2246, and the JPY is more or less unchanged at 136.71.  Most Asian FX made small gains on Friday, but there aren’t many clues as to their direction today. For choice, it’s probably looking a bit more negative for Asian FX than positive today. G-7 Macro: As mentioned above, the news flow out of the US on Friday supported the moderating inflation theme. University of Michigan inflation expectations for one year ahead dropped to 4.6%YoY from 4.9%, against expectations for no change, but the PPI index for November showed producer price inflation dropping less than expected at both headline and core levels, and this was probably what markets zoomed in on when selling Treasuries and stocks on Friday. It’s a big week for macro and probably therefore markets this week, with US CPI on Tuesday, and the FOMC Wednesday (3am SGT Thursday), not to mention NFIB and retail sales. UK production and construction data dominate the G-7 calendar today, and while this may have implications for Gilts and sterling, probably won’t do too much to alter the broader market picture. India: November CPI inflation is expected to come in at 6.36%YoY by the Bloomberg consensus, though we think there is a bit of downside risk to that figure (ING f 6.2%YoY). Falling vegetable prices and stable gasoline prices will drive a weak month-on-month increase and help deliver the lower inflation print, which will then be only just above the RBI’s 4%+/-2% target and suggests that they may be getting close to a peak in rates with the policy rate in line with projected inflation at 6.25%YoY.  Probably one more hike early next year should do it for the RBI. What to look out for: Inflation reports and central bank meetings later in the week Japan PPI inflation (12 December) India CPI inflation and industrial production (12 December) Australia Westpac consumer confidence (13 December) Philippines trade balance (13 December) US CPI inflation (13 December) South Korea unemployment rate (14 December) Japan Tankan survey and industrial production (14 December) US MBA mortgage applications and import price index (14 December) FOMC policy meeting (15 December) New Zealand GDP (15 December) Japan trade balance (15 December) Australia labor report (15 December) China industrial production and retail sales (15 December) Indonesia trade balance (15 December) BSP policy meeting (15 December) Taiwan CBC policy meeting (15 December) ECB policy meeting (15 December) US retail sales and initial jobless claims (15 December) Singapore NODX (16 December) Japan Jibun PMI (16 December) Eurozone CPI inflation (16 December) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

    Softer US CPI to offer mixed signals and considerable volatility Last month’s softer US CPI report was a turning point in the markets and inflation expectations have turned markedly lower since then. Consensus is looking for another softer report in November, with headline rate expected at 7.3% YoY, 0.3% MoM (from 7.7% YoY, 0.4% MoM) while the core is expected to be steadier at 6.1% YoY, 0.3% MoM (from 6.3% YoY, 0.3% MoM). While the case for further disinflationary pressures can be built given lower energy prices, easing supply constraints and holiday discounts to clear excess inventory levels, but PPI report on Friday indicated that goods inflation could return in the months to come and wage inflation also continues to remain strong. Easing financial conditions and China’s reopening can be the other key factors to watch, which could potentially bring another leg higher in inflation especially if there is premature easing from the Fed. Shelter inflation will once again be key to watch, which means clear signs of inflation peaking out will continue to remain elusive. Why volatility in equites could pick up this week and what we learnt from prior inflationary out outs Will the inflation read show CPI fell to 7.3% in November as the market expects, down from 7.7% YoY? The risk is that inflation doesn’t fall as forecast, and that may likely push up bond yields and pressure equites lower. We saw this set up play out on Friday. November’s producer price index showed wholesale prices rose more than expected, which spooked markets that this week’s CPI could be bleak. As such bonds were sold off on Friday, pushing yields up; with the 10-year bond yield rising 10bps to 3.58%, while equities were pressure lower. Consider over the past six months, the S&P 500 has seen an average move of about 3% in either direction on the day US CPI has been released, according to Bloomberg. We haven’t seen these moves since 2009. Also consider, the S&P 500 has fallen on seven of the 11 CPI reporting days this year. December FOMC and dot plot may have little new to offer, so focus remains on Powell’s press conference The Fed is expected to lift its Federal Funds Rate target by 50bps to 4.25-4.50%, according to the consensus as well as the general commentary from Fed officials signalling a downshift in the pace of rate hikes. The updated economic projections will also be released, and are expected to show a higher terminal rate than the September projections (4.6%), as has been alluded to by Chair Powell at the November FOMC and in remarks made in December. But that means little room for market surprise as the Fed funds futures are pricing in a terminal rate of 4.96% in May 2023. Easing financial conditions and expected China stimulus could mean Fed continues to chase the inflation train from the back into the next year as well, so Powell’s press conference remains key to watch. There will have to be a lot of focus on pushing out the rate cuts of ~50bps that are priced in for next year, and emphasise that the Fed will not ease prematurely if Powell and committee want to avoid further easing of financial conditions. China is expected to convene the Central Economic Work Conference this week The Chinese Communist Party is expected to have its annual Central Economic Work Conference this week to formulate the macroeconomic policy framework for 2023. Investors are expecting supportive initiatives including measures to ease the stress in the ailing property sector. The conference will set out directions and blueprints but short of releasing key policy targets which will be for the National People’s Conference to be held next March. A weak set of Chinese activity data is expected Economists surveyed by Bloomberg are forecasting that China’s retail sales shrank sharply by 3.9% Y/Y in November. The potential weakness is likely attributed to poor performance of auto sales, dining-in activities, and sales during the “double-11” online shopping festival in the midst of Covid-19 lockdowns during the best part of November. November auto sales in China fell by 9.2 %Y/Y and by 10.5% M/M. Courier parcels processed on Nov 11 fell 20.7% Y/Y. The growth in industrial production is expected to fall to 3.7% Y/Y in November from 5% to 3.7%, following a weak November NBS manufacturing PMI and soft high-frequency data of steel production. Year-to-date fixed asset investment is expected to edge down to 5.6% from 5.8%, dragged by stringent pandemic control practices. ECB also likely to downshift to a smaller rate hike The European Central Bank (ECB) is also expected to slow down its pace of rate hikes to a 50bps increase this week. Headline inflation eased slightly in November, coming in at 10.0% YoY (exp. 10.4%), but was overshadowed by an unexpected rise in core inflation 6.6% YoY (exp. 6.3%, prev. 6.4%). While there is likely to remain some split in ECB members at this week’s meeting, the central bank’s Chief Economist Lane remains inclined to take into account the scale of tightening done so far. There is also uncertainty on the announcement of quantitative tightening. Bank of England may remain more divided than the other major central banks The Bank of England is also expected to follow the Fed and the ECB and downshift to a smaller rate hike this week, but the decision will likely see a split vote. A host of key data, including GDP, employment and inflation will be due this week in the run up to the BOE decision, and significant positive surprises could tilt the market pricing more in favour of a larger move which also creates a bigger risk of disappointment from the central bank. Headline annualised inflation advanced to 11.1% Y/Y in October, while the core rate remained at an elevated level of 6.5%. Consensus expects inflation to cool slightly to 10.9% Y/Y in November, but the core to remain unchanged at 6.5% Y/Y. Wage pressures are also likely to be sustained, and the cooling in the labor market will remain gradual. In Australia, this week the focus will be on consumer confidence and employment data There are a couple of economic read outs that could move the market needle, the ASX200 (ASXSP200.1) this week. Weakening confidence is expected; starting with Consumer Confidence for December (released on Tuesday), followed by Business Confidence for November. Employment reports are due on Thursday for November, and likely to show employment fell; 17,000 jobs are expected to be added, down from the 32,200 that were added in October. So focus will be on the AUD and a potential pull back if the data is weaker than expected. Iron ore equites to see volatility China reopening talk vs shut downs pre lunar new year The iron ore (SCOA) trading at four month highs $110.80 rallying as China has been easing restrictions, plus there are whispers Chinese property developers could get more support, which would support demand for iron ore rising. However we mentioned on Friday, why iron ore could pull back, as buying volume appears slowing. So be mindful of potential pull back in iron ore pricing and mining equities. Secondly, consider seasonable halts of Chinese steel plants ahead of the Lunar New year holiday. Restocking typically occurs 5-8 weeks before the holiday, but plants could be closed earlier, due to poor profits and weaker demand. This could cause volatility in iron ore and iron ore equities. So, keep an eye on iron ore majors, Vale, Fortescue Metals, Champion Iron, BHP and Rio as they could see profit taking after rallying ~25-55% from October.   China’s new aggregate financing and RMB loans are expected to have bounced in November Market economists, as surveyed by Bloomberg, are expecting China’s new aggregate financing to bounce to RMB 2,100 billion in November from RMB 907.9 billion in October and new RMB loans to rise to RMB 1,400 billion in November from RMB 615.2 billion as People’s Bank of China urged banks to extend credits to support private enterprises including property developers. Less bond issuance by local governments and corporate and weak loan demand however might have weighed on the pace of credit expansion in November. Key earnings to watch: Adobe (ADBE:xnas), Trip.com (TCOM:xnas) In his note for key earnings this week, Peter Garnry highlights Adobe and Trip.com. The past five earnings releases have all led to a negative price reaction in Adobe shares as growth has come down while the cost of capital has gone up. Can Adobe buck the trend next when the company reports earnings? Another question investors will be asking is an update on the company’s $20bn acquisition of the industry challenger Figma, which was delayed due to a US Department of Justice investigation of the deal. Adobe reports FY22 Q4 (ending 30 November) earnings on Thursday with revenue growth expected at 10% y/y and EPS of $3.50 up 36% y/y as cost-cutting exercises are expected to improve profitability. Adobe is expected to end the fiscal year with revenue of $17.6bn and strong free cash flow generation of $7.3bn which translates into 5% free cash flow yield. Recently the Chinese government has chosen to move ahead with reopening the economy taking on the associated Covid risks and this could be good for the outlook for travel activity and thus Trip.com. The Chinese online travel agency platform is expected to report earnings on Wednesday with analysts expecting revenue growth of 22% y/y. Analysts expect revenue to increase 50% y/y in 2023 to CNY 29.6bn. •          Monday: Oracle•         Tuesday: DiDi Global•          Wednesday: Lennar, Trip.com, Nordson, Inditex•          Thursday: Adobe•          Friday: Accenture, Darden Restaurants   Key economic releases & central bank meetings this week Monday 12 December United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Oct)United Kingdom Goods Trade Balance (Oct)India CPI and Industrial Output (Nov)China (Mainland) M2, New Yuan Loans, Loan Growth (Nov) Tuesday 13 December Germany CPI (Nov, final)United Kingdom Labour Market Report (Oct)Hong Kong Industrial Production, PPI (Q3)Germany ZEW Economic Sentiment (Dec)United States CPI (Nov) Wednesday 14 December Japan Tankan Survey (Q4)United Kingdom Inflation (Nov)Eurozone Industrial Production (Oct)United States Fed Funds Target Rate (14 Dec) Thursday 15 December New Zealand GDP (Q3)Japan Trade Balance (Nov)South Korea Export and Import Growth (Nov)Australia Employment (Nov)China (Mainland) Industrial Output, Retail Sales, Urban Investment (Nov)Philippines Policy Interest Rate (15 Dec)Switzerland SNB Policy Rate (Q4)Norway Key Policy Rate (15 Dec)United Kingdom BOE Bank Rate (Dec)Eurozone ECB Deposit and Refinancing Rate (Dec)United States Initial Jobless ClaimsUnited States Retail Sales and Industrial Production (Nov)Taiwan Discount Rate (Q4) Friday 16 December Australia Judo Bank Flash PMI, Manufacturing & ServicesJapan au Jibun Bank Flash Manufacturing PMIUK S&P Global/CIPS Flash PMI, Manufacturing & ServicesGermany S&P Global Flash PMI, Manufacturing & ServicesFrance S&P Global Flash PMI, Manufacturing & ServicesEurozone S&P Global Flash PMI, Manufacturing & ServicesUS S&P Global Flash PMI, Manufacturing & ServicesUnited Kingdom GfK Consumer Confidence (Dec)Singapore Non-Oil Exports (Nov)United Kingdom Retail Sales (Nov)Eurozone Total Trade Balance (Oct)Eurozone HICP (Nov, final)   Sign up for our Outrageous Predictions 2023 webinar - APAC edition: Wed, 14 Dec, 11.30am SGT Source:Saxo Spotlight: What’s on the radar for investors & traders for the week of 12-16 Dec? A flurry of central bank meetings from Fed to BOE to ECB, US/UK CPI, China’s reopening and Adobe earnings | Saxo Group (home.saxo)  

Summary:  Big week ahead keeping investors on edge as US CPI is likely to soften but the PPI release from Friday has awakened the case for an upside surprise. Focus quickly turns to the last FOMC meeting of the year with 50bps rate hike widely priced in but significant wage pressures laying the case for higher-for-longer. We discuss what to watch in the updated dot plot and Chair Powell’s press conference, and how it can move the markets. Even the middle of December doesn’t seem to be getting any quieter yet, and this week brings a host of Tier 1 economic data and a flurry of central bank meetings that can cause considerable volatility. In addition, we have the China reopening momentum extending further, and hopes of more stimulus measures especially for the property sector. Geopolitics is also taking another turn as Putin continues to threaten the use of nuclear and also risk of a production cut in crude oil is seen as a response from Russia to the G7 price cap that was set last week. It is unlikely that we will get a quiet end to the year. The bigger focus for this week will still be the US CPI (scheduled for release on Tuesday 13 Dec at 9:30pm SGT), where investors are starting to get nervous about an upside surprise especially after Friday’s November PPI report that was above expectations broadly. The market reaction to that PPI report was erased quickly, but that may not be the case for CPI. We can expect a moderation this week on the back of easing supply chain pressures, stable gasoline prices and holiday discounts from retailers to clear inventories. However, the Cleveland Fed CPI model suggests upside risks vs. consensus expectations with a 7.5% Y/Y print for headline and 6.3% Y/Y for the core (vs. consensus of 7.3% Y/Y and 6.1% Y/Y respectively). We believe the narrative really needs to shift from peak inflation to how low inflation can go and how fast it will reach there? Consensus expects 0.3% M/M for both the headline and the core – anything lower than that can cause the markets to rally but will also provoke the Fed to send in a stronger message the following day to convey its message of avoiding premature easing. The Fed meeting next day (Thursday 15 Dec 3am SGT) is broadly expected to deliver a 50bps rate hike, which will mean cumulative hikes of 425bps this year. It is unlikely that the CPI print from a day before could change that. While this is a step down from the four consecutive 75bps rate hikes seen in the last few month, more important for the markets will be to watch for: How high do the terminal rate expectations go? Anything above 5% is still a bearish surprise for the markets, but the dot plot will have to show terminal rates to be in the 5.25-5.50% area to sound a hawkish alarm. If the dot plot signals a peak rate of 4.9%, it could signal to the markets that the Fed is starting to get worried about recession and may soon pause or pivot. Is the decision unanimous? Most of the Fed members recently have conveyed a very similar message. But any split votes, with the more hawkish members Bullard and Powell still preferring a 75bps rate hike, could be a hawkish surprise. Inflation and GDP growth outlook Any signs of upside risks to inflation from China’s reopening or easing financial conditions could be interpreted as hawkish. On the other hand, if the Fed talks about the lag effect of policy rate hikes, that will likely sound dovish. It will also be key to watch how Fed views the incoming data and its thoughts on recession concerns. Powell’s press conference How strong a pushback we get on 2023 rate cuts priced in by the markets. Could Powell open the door to a further step down to 25bps from February? Does he still see the risk of over-tightening to be less severe than the risks of under-tightening?   What to watch? US Dollar USD reversed sharply lower after the softer October CPI print, after a strong 5-month run from the greenback. The positioning is far more balanced now, with the biggest pullback risk seen in sterling which has been one of the biggest gainers (after the NZD) in the G-10 basket since the November 10 release. A more dovish turn by the markets could make EURUSD breach 1.06 resistance and bring 1.08 in focus, while USDJPY could break below the 200-dma at 135.16. S&P500 and NASDAQ100 S&P500 failed to break above the trendline resistance around 4,100 earlier this month but broke below trendline support at 3,992 last week. Next key support level for S&P500 is at 3,906 before 3,900 comes into view. A dovish surprise could bring a break above 4,000 again. Meanwhile, bear trend for NASDAQ100 could resume if it closes below 11,450. Source: Macro Insights: Pivotal week ahead with US CPI and Fed meeting on the radar | Saxo Group (home.saxo)

Inflation accelerated again in November and would have been at a new record high without government measures. Prices will rise further but the key question is the January number. This is heading towards 19% in our estimates. Even so, this will not be a reason for the central bank to hike rates. However, the risk is a later rate cut than our forecast 16.2% November inflation (YoY)   Higher than expected Inflation is back Consumer prices rose by 1.2% month-on-month in November, a re-acceleration from the 1.4% decline in October. Of course, in the previous month, the main reason for the fall in prices was the introduction of government measures against high energy prices. Thus, inflation has rather returned to the normal of recent months. Month-on-month growth was mainly driven by higher prices of housing, food and clothing. By contrast, the only item that fell in November, as we expected, was fuel. In year-on-year terms, consumer prices rose by 16.2% in November, which was 1.1pp higher than in October. The higher year-on-year figure is partly due to the comparative base from last year when VAT on energy prices was waived. In terms of year-on-year contributions to the CPI, only energy prices (from 3.1pp to 4.5pp) and transport prices (from 1.7pp to 1.4pp) showed a significant change from the previous month. Contributions to year-on-year inflation (pp) Source: Macrobond, ING Without measures, inflation would be at a new record high Year-on-year inflation would have reached a record high of 19.8% without the effect of the energy-saving tariff. Thus, with the inclusion of government measures, inflation is below the central bank's forecast, while without the inclusion of measures it is well above the forecast. On the other hand, core inflation slowed from 1.2% to 0.6% MoM and from 14.6% to 13.6% year-on-year, according to our estimates. The Czech National Bank (CNB) will release commentary later today including core inflation. If our estimate is confirmed, the overall picture for the fourth quarter would show headline inflation significantly higher than the CNB forecast if we exclude government measures, while core inflation is roughly in line. January revaluation will push inflation even higher Our fresh estimate for December points to a further rise in inflation to 16.9% YoY, but the more interesting question is January inflation. We expect January's change in government measures from the savings tariff to the price cap to have about the same impact on CPI. Thus, the main upside risk is the new year's repricing. A number of large companies have already announced significant price increases for January, on the other hand, the already high comparative base from this year should come into play. However, ultimately this means inflation will move close to the 19% YoY level, more than we previously expected. Given that the CNB's summer forecast expected inflation to be above 20% by this time, and even that was not a reason to raise rates, we believe that this outlook will not be a reason for the central bank to raise rates either. We do, however, see a risk of a slower inclination to discuss rate cuts next year compared to our forecast, which currently expects the first rate cut in the second quarter of 2023.  Read this article on THINK TagsCzech Republic Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Indian inflation comes in below policy rates...the pattern for others? US November inflation later Source: shutterstock Macro outlook Global markets: US stocks snapped their losing spell yesterday with some solid gains. The S&P500 rose 1.43% and the NASDAQ rose 1.26%. But with no macro releases to speak of and no Fed speakers during the blackout period before this week’s FOMC meeting, it is hard to see what drove yesterday’s moves higher. It certainly wasn’t falling bond yields, as US Treasury yields made further, albeit small gains. 2Y and 10Y UST yields both rose about 3bp. The 10Y yield now stands at about 3.61%. EURUSD looks almost unchanged from this time yesterday but has tested both ends of the 1.05 level, sitting at 1.0541 currently. Other G-10 pairs are a mixed bag, with the AUD and JPY looking soft, while GBP mirrored the EUR moves and ended roughly unchanged from a day ago. Most Asian FX sold off against the USD yesterday with the PHP at the bottom of the non-G-10 pile, followed by the KRW. The VND made small gains.  G-7 Macro: Today will be dominated by the US CPI release for November. The consensus expects the headline inflation rate to decline to 7.3% from 7.7%YoY, following a 0.3%MoM increase in the price level. And the core rate of inflation is expected to decline to 6.1%YoY from 6.3%, again on a 0.3%MoM gain in the core price level. The US NFIB survey is also released today, which provides a lot of price and wage-setting intentions for smaller firms, which have a strong track record predicting actual inflation, so well worth a look. Outside the US, Germany’s ZEW survey has registered small improvements recently, though from an extremely low base, and more of the same is anticipated for the latest data. India: November inflation dropped far more sharply than had been expected, with the headline inflation rate dropping to only 5.88%YoY (consensus 6.35%, ING f 6.20%).  The main culprit for the fall was a larger-than-expected fall in food prices, but the housing component was also weaker, as were the transport, and recreation sectors. With inflation now below the RBI’s policy rate (repo rate is 6.25%) there is a strong case to be made for at least easing back on further tightening, and possibly even considering a pause/peak in rates. That would certainly be welcome news for the economy, which registered a 4.0% decline in industrial production in October and could do with a boost. China: Aggregate finance increased CNY1990 bn in November from CNY908 bn a month ago, while new yuan loans rose CNY1210 bn, almost double the amount in October. The data is in line with expectations that loan growth increased in November after a quiet month in October. Over 70% of new yuan loans went to corporates. This should help the corporate sector to keep business running as the government eases Covid measures, and could keep employment stable. Household long-term loans, most of which will be mortgages, increased CNY210 bn in November from CNY33 bn the previous month. Though not comparable to pre-Covid level, this shows some home buyers started to find bargains in the home market. Government bond issuance increased by CNY652 bn, which should continue to increase in the coming months to finance infrastructure investment in 2023. Philippines:  The October trade report should show exports sliding back into contraction after posting a surprise expansion in the previous month.  The electronics subsector should revert to a contraction, dragging down the export sector for the rest of the year.  Meanwhile, imports should sustain their double-digit expansion, resulting in a still sizable trade deficit to keep some depreciation pressure on the PHP.   What to look out for: US inflation Australia Westpac consumer confidence (13 December) Philippines trade balance (13 December) US CPI inflation (13 December) South Korea unemployment rate (14 December) Japan Tankan survey and industrial production (14 December) US MBA mortgage applications and import price index (14 December) FOMC policy meeting (15 December) New Zealand GDP (15 December) Japan trade balance (15 December) Australia labor report (15 December) China industrial production and retail sales (15 December) Indonesia trade balance (15 December) BSP policy meeting (15 December) Taiwan CBC policy meeting (15 December) ECB policy meeting (15 December) US retail sales and initial jobless claims (15 December) Singapore NODX (16 December) Japan Jibun PMI (16 December) Eurozone CPI inflation (16 December) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The US November CPI report released today will skew the way markets deal with the Fed’s communication tomorrow. A higher print would be most market-moving. Source: Shutterstock US CPI to skew the way the market reacts to the Fed tomorrow The upside to yields we expected into this week’s US CPI release and central bank meetings is materialising, but it is still limited and unlikely to amount to much of a change in market narrative. The predominant view, judging by market moves in recent weeks, remains that inflation is on its way down and should allow the Fed to slow, and eventually stop, its hiking cycle at the coming meetings. Data on that front is encouraging. Consumer inflation expectations in the University of Michigan and New York Fed surveys is, globally, on its way down, and the price components of surveys such as the ISM are also suggesting the direction of travel is lower. There is no guarantee that inflation continues to converge on a linear path towards the Fed’s target The problem of course is that there is no guarantee that inflation continues to converge on a linear path towards the Fed’s target. One key worry, for instance, is that after an initial drop, inflation upside resumes. In that context most, including us, expect the Fed to continue striking a cautious tone at this and subsequent meetings. Since the summer, this has resulted in the Fed pushing back against instances of easing of financial conditions. Lately, that pushback has been less effective, due to more encouraging data. Today’s CPI release should be no exception. A core monthly print at 0.3% could take the edge off Powell’s hawkish tone, but we think it is a higher reading that would have the most market impact, as it would wrong-foot almost two months’ worth of bond rally. It is still too early to talk about a change in the market’s economic outlook. Most telling market moves, the richening of 5Y on the curve and the flattening of the 2s10s slope, have merely stopped, rather than reversed. In addition to the uncertainty about the sign of the inflation surprise today, and about the strength of the Fed’s pushback, one needs to add uncertainty about the market’s reaction. The speed of the moves since October make a retracement most likely, before rates converge lower and before the curve re-steepens in the course of 2023. Consumer inflation expectations support the current dovish narrative Source: New York Fed, ING Today's events and market view Italian industrial production and Germany’s Zew surveys are the two main releases in the European morning. Consensus is for the expectations component of the latter to continue its bounce back from very depressed levels. Italy will auction 2Y, 3Y and 7Y debt. The US Treasury will sell 30Y T-bonds. Both headline and core US CPI are expected at 0.3% MoM which is an improvement on the 2021 and 2022 average but still too high to be consistent with inflation at 2% annualised. Any deviation to consensus is likely to skew market expectations ahead of tomorrow’s Fed meeting but the bar is high for market to price a 75bp hike in our view. NFIB small business activity completes the list of releases for today. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  U.S. equities had a broad-based rally ahead of the CPI data with energy leading the gains. USDJPY bounced, approaching 138, as US yields moved higher. Crude oil prices rose snapping a 5-day losing streak amid supply worries from Keystone pipeline. Traders took profits in Hong Kong and Chinese stocks, selling Chinese property, technology and EV names. All eyes on November US CPI now where a softer print is generally expected but room for an upside surprise remains. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) advanced ahead of the CPI report Softer prints in the one, three, and five years ahead inflation expectation numbers in the New York Fed’s Consumer Expectations Survey on Monday boosted risk-on sentiments ahead of the release of the most watched CPI report on Tuesday. The S&P500 bounced from its 100-day moving average, gaining 1.4%. All 11 sectors of the benchmark advanced, with energy, utilities, and information technology leading the gains. Valero Energy, surging 5.2%, was the best performer in the S&P500. The tech-heavy Nasdaq 100 rose 1.2%. Tesla (TSLA:xnas) shed 6.3%, falling to the stock’s lowest level in two years on concerns about suspending output in stages at his Shanghai factory ahead of the Lunar New Year and Musk pledged more Tesla shares for margin loans. US Treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) rose after a weak 10-year notes auction In a thin-volume session ahead of the CPI report on Tuesday and the FOMC on Wednesday, yields on Treasuries were 1bp to 3bps higher. The auction of USD32 billion of 10-year notes, awarded at 3.625%, 3.7bps cheaper than at the time of the auction, was the worst since 2009.  The one, three, and five years ahead consumers’ inflation expectations in the New York Fed’s Consumer Expectations Survey fell to 5.2%, 3%, and 2.3% in November from 5.7%, 3.1%, and 2.4% respectively in October. The yields on the 2-year notes and 10-year notes added 3bps each to 4.38% and 3.61% respectively. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) consolidated ahead of key events Ahead of two key events, the FOMC meeting in the U.S. and the Central Economic Work Conference (CEWC) in China, investors in Hong Kong and mainland Chinese stocks took profits and saw the Hang Seng Index 2.2% lower and the CSI300 sliding 1.1%. Chinese property developers and management services, technology, and EV stocks led the charge lower. Country Garden Services (06098:xhk) tumbled 17% after the property services company’s Chairman agreed to sell more than HKD5 billion worth of shares at a 10.9% discount. Longfor (00960:xhkg), The Hang Seng Tech Index dropped by 4%, with Meituan (03690:xhkg) declining by 7%. Li Auto (02015:xhkg) tumbled 12% after reporting larger losses and a large gross margin miss. In A shares, property and financials stocks were top losers while pharmaceuticals gained. FX: USDJPY heading to 138 ahead of US CPI release The US dollar remained supported ahead of the big flow of key data and central bank meetings later in the week. The modest run up higher in US Treasury yields, along with higher oil prices, brought back some weakness in the Japanese yen. USDJPY reached in sight of 138 and the US CPI release today will be key for further direction. EURUSD remained capped below the key 1.06 handle, but a break of that if it was to happen will open the doors to 1.08. NZDUSD eying a firmer break above 0.64 but would possibly need help from CPI for that. Crude oil (CLF3 & LCOF3) prices gain further on China’s easing while Keystone pipeline remains shut Crude oil prices rose on Monday after a week of heavy losses on demand concerns and fading China reopening. Prices were underpinned by further easing of China’s restrictions despite concerns earlier in the week from a rapid surge in cases. Despite reports that the Keystone pipeline was being partially reopened, it remains completely shut on Monday which suggests a potential drop in storage levels at Cushing, Oklahoma, the WTI delivery hub. WTI futures rose to $74/barrel, while Brent touched $78.50. The market awaits news from Russia on whether it will make good on its threat to cut supply to price cap supporters, while the focus will also turn to US CPI today and the FOMC decision tomorrow, as well as the oil market reports from OPEC and IEA.   What to consider? Stronger UK GDP growth but clouded energy outlook, expect more volatility Some respite was seen in UK’s growth trajectory as October GDP rose 0.5% M/M after being down 0.6% M/M last month’s due to the holiday for Queen’s funeral and a period of national mourning. However, the UK may already be in a recession and the outlook remains clouded which suggests there isn’t enough reason for Bank of England to consider anything more than a 50bps rate hike this week. Energy debate continues to run hot and create volatility in gas prices, after weaker wind generation led to talks of refiring the reserve coal plants, but the request was cancelled later on Monday as wind generation rose. The situation continues to highlight the vulnerability of the energy infrastructure due to lack of baseload, and a bigger test probably lies ahead in 2023. Focus will be on energy companies amid the cold snap in the northern hemisphere with coal plants on standby. Agriculture commodities also a focus Australia’s ASX200 (ASXSP200.1) is expected to have a positive day of trade on Tuesday, as well as Japan’s market, while other Asia futures are lower. In Australia, consumer and business confidence are due to be released. In equites, focus will be on energy commodities and equities, given weather forecasts show a deep chill is descending on the northern hemisphere, and threatening to erode heating fuel stockpiles. Natural gas futures surged, while Oil rose 3% $73.17 a barrel. Energy stocks to watch include Australia’s Woodside, Beach Energy and Santos, Japan’s Japan Petroleum Exploration, Eneos, JGC, Chiyoda and Hong Kong-listed PetroChina, CNOOC and China Oilfield Services. Separately, coal futures are also higher, with Asia set to face a coal winter, and coal plants were previously asked to be on high alert in the UK, with snow blanketing parts of the UK. For coal stock to watch, click here. Separately, wheat prices rose 2.8% on expectations supply could wane; so keep an eye on Australia’s wheat producers GrainCorp, and Elders. Elsewhere, Australian beef output is poised to ramp up in the first half of next year, as the herd continues to rebuild. Australia’s Rural Bank agriculture outlook expects increased slaughter rates, and beef production to rise 5% in the first half, (mind you that’s well below average). So keep an eye on Elders, which helps sell and buy livestock, and Australian Agricultural Co – Australia’s largest integrated cattle and beef producer. EV car makers dominate headlines; revving up competition, despite concerns demand could soften Tesla shares fell 6.3% Monday, to its lowest level since November 2020, making it the worst performer by market cap. TSLA shares have fallen about 54% this year. TSLA is reportedly suspending output at its Shanghai electric car factory in stages, from the end of the month, until as long as early January, amid production line upgrades, slowing consumer demand and Lunar New Year holidays. Most workers on both the Model Y and Model 3 assembly lines won’t be required in the last week of December. Rivian shares also fell 6.2% on reports its scrapping plans to make electric vans in Europe with Mercedes. Instead, Rivian will focus on its own products. While Mercedes-Benz says it will continue to pursue the electrification of its vans and its shares closed almost flat in Europe. VW shares were also lower in Europe, despite it announcing plans to increase market share in North America to 10% by 2030 from 4%. VW wants to produce more electric SUV models in the US; and produce ~90,000 VW’s ID.4 model in 2023 in America. NY Fed consumer expectations survey shows slowing inflation, but.. NY Fed’s Survey of Consumer Expectations indicated that respondents see one-year inflation running at a 5.2% pace, down 0.7 percentage point from the October reading. Expectations 3yrs ahead fell to 3.0% from 3.1% and expectations 5yrs ahead fell to 2.3% from 2.4%. However, it is worth noting that inflation expectations remain above fed’s 2% target and unemployment and wage data was reportedly steady. Softer US CPI to offer mixed signals and considerable volatility Last month’s softer US CPI report was a turning point in the markets and inflation expectations have turned markedly lower since then. Consensus is looking for another softer report in November, with headline rate expected at 7.3% YoY, 0.3% MoM (from 7.7% YoY, 0.4% MoM) while the core is expected to be steadier at 6.1% YoY, 0.3% MoM (from 6.3% YoY, 0.3% MoM). While the case for further disinflationary pressures can be built given lower energy prices, easing supply constraints and holiday discounts to clear excess inventory levels, but PPI report on Friday indicated that goods inflation could return in the months to come and wage inflation also continues to remain strong. Easing financial conditions and China’s reopening can be the other key factors to watch, which could potentially bring another leg higher in inflation especially if there is premature easing from the Fed. Shelter inflation will once again be key to watch, which means clear signs of inflation peaking out will continue to remain elusive. China’s aggregate financing and RMB loans weaker than expectations In November, China’s new aggregate financing increased less than expected to RMB1,990 billion (Bloomberg consensus: RMB2,100bn) from RMB908 billion in October. The growth of total outstanding aggregate financing slowed to 10.0% Y/Y in November from 10.3% in October. New RMB loans also came in weaker than expected at RMB1,210 billion (Bloomberg consensus: RMB1,400bn; Oct: RMB615.2bn). Despite the push from the authorities to expand credits, loan growth remained muted as demand for loans were sluggish. Japan and the Netherland joining the U.S. in restricting semiconductor equipment exports to China According to Bloomberg, Japan and the Netherland have agreed in principle with the U.S. to join the latter in restricting the exports of advanced chipmaking machinery and equipment to China. The decisions have yet to be confirmed but it is expected that announcements will be made in the coming weeks.     Detailed US CPI and FOMC Preview – read here. Sign up for our Outrageous Predictions 2023 webinar - APAC edition: Wed, 14 Dec, 11.30am SGT For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: US CPI day, expect considerable volatility – 13 December 2022 | Saxo Group (home.saxo)

Summary:  The Fed is moderating the pace of rate hikes into 2023 but inflation is likely to be stubbornly elevated. The combination of these creates an environment in which Treasury Inflation-protected securities (TIPS) could potentially be an attractive investment option. Declines in real interest rates will see TIPS prices higher and their principal value and coupon amounts (while the coupon rates are constant) will rise together with the consumer price index. The Fed is poised to downshift as it believes that it must have got to somewhere after running so fast As our previous Fixed Income Update suggests, the modus operandi of the Fed has arguably shifted to risk management which aims at balancing the risks of inflation and the yet-to-be-fully-felt impact of monetary tightening on the real economy. Fed Chair Powell signals in his speech at the Brookings Institution on November 30. 2022 that being sufficiently restrictive, in his mind, is likely just “somewhat higher” than the 4.50%-4.75% (mid-point 4.625%) terminal rate in the FOMC’s September projections and he argues for “moderating the pace” of rate increases and “holding policy at a restrictive level”, not keep hiking, “for some time”. Powell acknowledges the fact that the employment, wage growth, and core services ex-housing inflation are all too strong to confidently foretell a victory in fighting inflation anytime soon and admits that the Fed has “a long way to go in restoring price stability”. Nonetheless, resorting to the notion of impact lags of monetary policy, Powell argues that it “makes sense” to downshift rate increases. This may mean that after a 50bp increase this Wednesday, as being well telegraphed and fully priced in, and probably another 50bps to 75bps in total in the February and March 2023 meetings. Powell has apparently on purpose been preparing the market that the Fed may pause even without seeing inflation falling significantly towards the 2% target as he and the November FOMC minutes emphasized the time lags of monetary policies and the importance of financial stability. Since August 2020, the Fed has adopted a new set of a new monetary policy framework that redefines its 2 percent inflation goal not as a ceiling but as inflation averaging 2 percent over time, and the unspecific “average over time” gives the Fed room to maneuver. The Fed may remain behind the inflation train for a prolonged period Alice looked round her in great surprise. “Why, I do believe we’ve been under this tree the whole time! Everything’s just as it was!” “Of course it is,” said the Queen, “what would you have it?” “Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else—if you ran very fast for a long time, as we’ve been doing.” “A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” “I’d rather not try, please!” said Alice."  Lewis Carroll, Through the Looking-Glass. After running as fast as it can with 375bp hikes including four 75bp hikes, since March 2022, the Fed ends up in a situation where inflation rates are not accelerating further but stay at elevated levels and are not coming down. Inflation rates as represented by the key measures on which the Fed is focusing are more or less at the same place as when the Fed started raising rates nine months ago (Figure 1). In his Brookings Institution speech, Powell highlighted the personal consumption expenditure core services ex-housing index being a key indicator for the future path of inflation because he is least confident for this component to fall, as opposed to prices of core goods and costs of housing services.   Figure 1. U.S. inflation rates; Source: Saxo, Bloomberg Likewise, the three measures of wage growth to which the Fed refers are at basically the same place as the Fed start raising the Fed Fund target rate in March 2022 (Figure 2). Elevated wage growth rates tend to fuel inflation, and high inflation raises demand for higher wages. Figure 2. U.S. wage growth; Source: Saxo, Bloomberg While the Fed may not have yet caught up with the runaway inflation train even after running very fast since March this year, it is signaling that it wants to switch to a low gear and hope that the cumulative rate hikes working through the proverbial impact lags, plus the ongoing quantitative tightening will work their wonder in bringing down inflation. The 2-year yield has hit a floor and may bounce As inflation remain elevated, the Fed can downshift the pace of rate hikes but does not have room to pause or cut rates in the next few meetings. Therefore, three-month T-bill rates (currently at 4.23%) will become a floor to the 2-year yield. Unless the Fed’s next move is a rate cut, which will not be the case, 2-year yields will unlikely fall below the yield of 3-month Treasury bills. As illustrated in Figure 3, during the five times over the past 30 years when 2-year yields fell below 3-month yields, the next move by the Fed was cutting rates. When the Fed was not about to cut rates, yields on the 2-year notes did not fall below those of the 3-month bills. When 2-year notes are yielding only 4.33%, they offer little investing value. While we are expecting bonds to be a valuable asset class to have in a portfolio in 2023, we caution investors to be patient and look for a better entry level. Figure 3. 3-month T-bills vs 2-year T-notes spread; Source: Saxo, Bloomberg Without a recession, the value at the long end of the yield curve is stretched At Saxo, it is our view that the U.S. is not entering into a recession. Without a recession that drags down inflation and pushes up unemployment rates substantially and therefore brings about a series of rate cuts, the term premium is unlikely to stay so negative. In other words, investors will demand higher yields to compensate for the risks of owning long-term bonds. This is particularly true when the interest rate volatility is high. Higher implied volatility of treasury yields demands higher term premiums, i.e. higher long-term yields relative to short-term yields. Figure 4 plots the 3-month Treasury yield versus the 10-year Treasury yield spread against the ICE BofA Merrill Lynch Option Volatility Estimate (MOVE) Index. The divergence between the inversion of the yield curve and the elevated level of the MOVE index is unusual and may point to pressure for yields on 10-year notes to go up. Figure 4. 3-month T-bills vs 10-year T-notes spread, Implied volatility of Treasury yields; Source: Saxo, Bloomberg Powell does not want to see bond yields rising too fast and too much from here The Fed does not fear a recession or prolonged bear market in equities. It may welcome both as they help the Fed strive to dampen the development of a wage-price spiral and tighten financial conditions. It is the functioning of the Treasury market that is the elephant in the room and keeps Powell up at night. In the Fed’s own words in its November FOMC minutes, the U.S. Treasury market is important “for the transmission of monetary policy, for meeting the financing needs of the federal government, and for the operation of the global financial system. The FOMC participants noted that “the value of resilience of the market for Treasury securities was underlined by recent gilt market disruption.” In its Global Financial Stability Report Oct 2022, the IMF warns about poor market liquidity in government bond markets as quantitative tightening “leaving more of these bonds in private hands, which could translate into a shallower pocket to absorb shocks and therefore higher liquidity premiums and lower market liquidity.” As the total amount of outstanding Treasury securities has surged by seven times from USD3.2 trillion in 2002 to USD23.7 trillion in November 2022, the average daily turnover of the Treasury market has less than doubled during the same period.  As a result, the average daily turnover as a percentage of the amount of outstanding Treasury securities has declined from 11.6% to 2.6% over the past 20 years (Figure 5). Figure 5. Average daily turnover of Treasury securities as % of outstanding Source: Saxo, Securities Industry and Financial Markets Association Using the deviation of the quoted prices of individual securities from the fair-value curve as a proxy for market liquidity (Figure 6), the liquidity of the Treasury market has drastically deteriorated and stays currently at an elevated level similar to those in March 2020 when the Fed decided to come to the rescue and start a new round of open-ended buying of Treasury securities, i.e. quantitative easing.   Figure 6. Bloomberg U.S. Government Securities Liquidity Index; Source: Saxo, Bloomberg Both the Fed and the Treasury Department will do yield curve control if needed What if inflation does not come down and raising interest rates not “somewhat higher” but much higher, together with quantitative tightening, risk draining market liquidity and breaking the Treasury securities market? Not speculating on the political dynamic between the Fed, the White House, and Congress, the Federal Reserve Act of 1913, under which the Fed operates, provides that: The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.                                                                           Section 2A. of the Federal Reserve Act The notion of moderate long-term interest rates is a goal imposed on the Fed by law, though the Fed has certain leeway to decide on what “moderate” is. The Fed usually talks about a “dual mandate” of monetary policy without mentioning the third one because the Fed considers that “an economy in which people who want to work either have a job or are likely to find one fairly quickly and in which the price level (meaning a broad measure of the price of goods and services purchased by consumers) is stable creates the conditions needed for interest rates to settle at moderate levels”, without the need to define what “moderate levels” are. It may not be the case when bond investors become fed up with the elevated inflation rates and a Fed not willing to run any faster than what it has done to keep up with inflation in a liquidity-strained Treasury market. It was alarming when Treasury Secretary Janet Yellen warned publicly about “a loss of adequate liquidity in the [U.S. Treasury securities] market” in October. As the Fed is busy trimming its holdings of Treasury securities at a pace of USD95 billion a month as qualitative tightening, Secretary Yellen is worried enough to prepare to open her wallet and buy back Treasury securities. In October, the Treasury Borrowing Advisory Committee asked around primary dealers about their responses if the Treasury Department putting in place a debt management program to buy back long-term treasuries and said in its report in November 2022 that the Treasury Department “should continue to gather information as to the benefits and risks” of bond buybacks. The move highlights the Treasury Department’s concern about its costs and even abilities to fund the U.S. Federal Government’s budget deficits through issuing Treasury securities and the amount of federal debt held by the public as a percentage of U.S. GDP has ballooned to nearly 100% this year and is heading towards 110% by 2032 (Figure 7), surpassing the peak at the end of the Second World War. It was noteworthy to remind our readers that from 1942 to 1951, the Fed implemented yield curve control and capped the Treasury long-term bond yield at 2.5% to help the Treasury Department finance the federal government at low interest rates and bring debt down. Figure 7: U.S Federal Debt Held by the Public; Source: Congressional Budget Office (2022) Options for Reducing the Deficit, 2023 to 2032. P.12. file:///C:/Users/WENW/OneDrive%20-%20Saxo%20Bank%20AS/Documents/research/bonds/58164-budget-options-large-effects.pdf Elevated inflation and Fed downshift: TIPS may do well in this environment The total return on Treasury inflation-protected securities (TIPS) tends to outperform that of nominal bonds when real yields are falling and the Consumer Price Index for All Urban Consumers (CPI-U) is rising or simply stays at elevated levels higher and more persistently than previously expected. TIPS are quoted and traded in real yields that can be positive or negative. When the real yield rises, the price of TIPS falls; when the real yield falls, the price of TIPS rises. The most unique feature of TIPS is the principal value varies and is indexed to the CPI-U. The index ratio is calculated by the CPI-U index value published three months before the settlement date divided by the CPI-U index value as of the issuance date of the TIPS. For days during the month, linear interpolation of the monthly CPI-U indices is used. The Treasury Department publishes the updated index ratios for all TIPS issues on its website. When the CPI-U index value rises, i.e. inflation is positive, the principal value of TIPS will rise by the same percentage. When the CPI-U index value falls, i.e. inflation is negative, the principal value of TIPS will fall. The coupon rate of a TIPS is constant and does not change over the life of the bond. However, the coupon payment will change over time proportional to the change in the principal value. Therefore, the principal and coupon cash flows, that the investor receives, are protected from inflation. What is not protected is a rise in the real yield of TIPS that reduce the quoted price of the bond. When inflation is positive and even increasingly positive but the real yield is rising fast, the increase in the inflation-indexed principal may not be sufficiently large to offset a decline in bond price and the investor ends up with a loss in total return. From March, the month the Fed started raising rates, to October 2022, the TIPS yield swung dramatically from negative to positive as the Fed raised interest rates aggressively. The 10-year TIPS yield soared from minus-1.0% on March 1, 2022, to positive 1.6% on October 31, 2022, a 2.6% or 260bp movement which caused the 10-year TIPS to fall 21.4% in price. The rise in principal value contributed 5%. The net loss over that eight months was 16.5%. Rising inflation is not enough to generate a positive return for TIPS investors if the Fed aggressively pushes up real interest rates like it did this year. Many investors asked why TIPS lost money in most of 2022 through October and the 260bps rise in the real yield is the answer. The investment environment has become more favorable for TIPS since November 2022 when the Fed signaled to the market that it will downshift the tightening pace even before inflation falls substantially. In Figure 8, the green, light blue, and dark blue lines are breakeven inflation rates implied by the difference between yields on nominal Treasury note yields and the yields on TIPS, which are real yields. The bond market is pricing in future inflation at very near to the Fed’s 2% target as investors believe that the Fed will be able to bring down inflation towards 2%. In a combination of stubbornly high inflation and the Fed’s downshift in the pace of tightening, the line of least resistance for breakeven inflation is going upward, approaching the elevated actual inflation and away from 2% rather than falling below 2%.  Figure 8. Breakeven inflation rates implied versus CPI-U % change Y/Y; Source: Saxo, Bloomberg The breakeven inflation is the difference between nominal Treasury yields and TIPS yields. As inflation turns out to be more persistent into 2023, nominal bond yields are likely to bounce from this current trough level and rise to test the October 4.34% high in yield. However, given the Fed is mindful of the liquidity in the Treasury securities market and not to disrupt its smooth function, the rise in yields will be measured and much behind the rate of inflation. The aggressive pace of raising interest rates was something for 2022 and will unlikely be repeated in 2023. In this environment, for the breakeven inflation to rise, TIPS yields will probably need to fall. That will give TIPS a sweet spot of elevated inflation and at the same time declining real yield. Currently, 5-year TIPS are at 1.44% and 10-year TIPS are at 1.31% (Figure 9) and have room to fall in yield and rise in price. On top of that, the principal of TIPS is rising at the same rate as inflation as it is indexed to the CPI-U. Current inflation assumptions used for index factor calculation are around 8% p.a. Figure 9. Yields on 5-year and 10-year TIPS; Source: Saxo, Bloomberg In Figure 10 below, a list of TIPS is shown for illustration purposes.    Figure 10: Examples of TIPS on the Saxo trading platform for illustration purposes, not as recommendations; Source: Saxo Key Takeaways: Inflation is not coming down as much as the market is hoping for in 2023 Despite elevated inflation, the Fed is going to moderate its tightening pace The Fed and the Treasury Department are mindful of keeping long-term interest rates at moderate levels Nominal bond yields may bounce from the current low levels but be slower than inflation TIPS benefit from a fall in persistently higher-than-expected inflation and a fall in real yields Elevated inflation and a cautious Fed in low gear may present a sweet spot for TIPS   Source: Fixed Income Update: Elevated inflation and Fed downshift could potentially be a sweet spot for Treasury Inflation-protected Securities (TIPS) | Saxo Group (home.saxo)

European equities traded in the red at the start of the week, but equities in the US rebounded as investors are hanging on to hope of slower inflation and reasonably hawkish Federal Reserve (Fed) by their fingernails. US CPI Today and tomorrow will tell whether they are right to be optimistic or not. If, by any chance, we see a softer CPI figure, then the S&P500 could easily jump above its 200-DMA, and even above the ytd descending channel top. But, but, but… today’s US CPI data, unless there is a huge surprise, will probably not change the Fed’s plan to hike the interest rates by 50bp this week. Therefore, even if we see a great CPI print and a nice market rally today, it may not extend past the Fed decision on Wednesday. US In energy, US nat gas prices jumped more than 30% since last week due to a powerful Pacific storm bringing cold and snow to the norther and central plains in the US. UK In the UK, power prices hit another ATH yesterday. European nat gas futures Happily, we haven’t seen a significant rise in the European nat gas futures, which in contrary kicked off the week downbeat. Crude Oil But crude oil rallied as much as 2.60% on Monday on several factors that could however not lead to sustainable gains in the mid-run. Watch the full episode to find out more! 0:00 Intro 0:29 US CPI: possible scenarios 2:50 But the Fed may not care much about the data 4:10 Opportunity to sell the latest crude oil rally? 6:17 Is it time for Chinese stocks to recover… sustainably? 8:03 UK grows more than expected, but… 8:43 Binance may have processes $10bn illegal funds. Bitcoin stable. 9:11 Amgen buys Horizon Therapeutics, Microsoft takes 4% stake in LSE Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #USD #CPI #inflation #data #FOMC #Fed #rate #decision #dotplot #enery #crisis #natgas #crudeoil #Russia #China #Covid #reopening #HangSeng #Alibaba #Amgen #HorizonTherapeutics #Microsoft #LSE #acquisition #Bitcoin #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH      

At 16.8%, the November 2022 inflation print is the highest it has been in Romania in almost 20 years. We are reasonably confident that December 2022 will mark the peak of this cycle at around 17.0%. Nevertheless, price pressures in the service sector are becoming more prominent and could nudge the central bank into another 25bp hike to 7.00% in January  16.8% November headline inflation   Higher than expected   While we have attempted to call the peak in inflation already twice this year, we now have a stronger reason than ever to believe that November-December will mark the summit: there are no more months left in the year to see higher prints. November inflation accelerated well beyond the 16.1% Bloomberg consensus but relatively close to our 16.6% estimate. The forecast error on our side came entirely from the service sector where broad price pressures are beginning to surprise to the upside. Inflation (YoY%) and components (ppt) Source: NSI, ING   Headline inflation might inch a little bit higher this month, probably touching 17%. Starting in January 2023, strong base effects should push the headline inflation back around 16.0% while the end of the first quarter could see inflation closer to 15.0%. A gradual descent towards low double digits will follow, but getting back below 10% might not be achievable until the fourth quarter of 2023.    With core inflation already above 14.0%, there is mounting pressure for the National Bank of Romania (NBR) to deliver another hike at the January 2023 policy meeting. While we narrowly opted for the end of the hiking cycle at the current 6.75% key rate, we underlined that a final 25bp increase in January was still a strong possibility. Based on today’s data, the balance might be now tilted toward the latter option. Read this article on THINK TagsNational Bank of Romania Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Australia's economy is showing clear signs of slowing and will drop further in 2023. House price growth appears to be on the cusp of turning negative and provides a rationale for a peak cash rate at the relatively low level of 3.6%. We believe the economic slowdown will be accompanied by a similarly rapid decline in inflation Macroeconomy: inflation outlook turning down A lot has changed in the last year. In October 2021, the Reserve Bank of Australia (RBA) was still maintaining that the inflation target would not be sustainably met until 2024. A month later, it was abandoning its yield curve control in the face of market pressures. By May of this year, the RBA was hiking rates, throwing in the towel on its previous stance that concluded inflation would not sustainably be up to the RBA’s target until wage growth exceeded 3.5% (it still isn’t based on the 3Q22 wage price index). Inflation hit 7.3% year-on-year in the third quarter of this year, with rises also in core measures, although the October monthly series has raised hopes that inflation may already have peaked, dropping to 6.9%YoY. We think it will now slow quite rapidly. Policy rates nearing a peak Source: CEIC, ING Inflation is mainly due to goods, not services Most of Australia's inflation comes from goods rather than the service sector. But this is not simply an imported phenomenon. Inflation in the tradeable sector is no higher than in the non-traded sector. However, what this does mean is that this is less likely a labour-cost-driven event than a discrete price-level shock (or series of shocks), and as such, is probably easier to squeeze out of the economy. Inflation by source (goods vs services and tradeable vs non-tradeable) Source: CEIC, ING Don't blame inflation on wages growth, which remains negative in real terms By sub-component, there are few inflation standouts. Certainly, the transport sub-component was swollen earlier in the year by high oil prices, although with Brent crude now back below $90/bbl, oil is no longer contributing to higher inflation, and may even be a slight drag in the near future. Widespread flooding this year across many parts of the country has also pushed up food prices at times. Everything from cereals to dairy was looking more expensive. Though even this looks to be normalising.  In the near-term, inflation is likely to remain the focus for policy-setters and the investment community. But on the assumption that energy prices remain roughly where they are now and do not re-accelerate upwards from here, we look for inflation to rapidly subside over 2023 and could be as low as about 3.0%YoY by the end of 2023.  One thing that policymakers obsess over is second-round price effects – wage-price spirals for example. RBA anecdotes point to a pick-up in wages, which fills in the gaps left by the wage-price index, which is only released quarterly and with long lags. That is only showing a growth rate of 3.1%YoY (3Q22). The wage price index inflation rate will surely rise further, but the large current gap between wages and prices shows that wages are being dragged higher, rather than driving prices higher. In the end, the wage component of the economy is becoming less of a cost issue than other components. We do not need to worry unduly about the cost implications of this. The labour market as a whole is not squeezing margins, though admittedly there will be pockets of the service sector where it is. Employment growth by sector Source: CEIC, ING Household spending is running out of sources of growth So far this year, consumer spending has by far contributed to the bulk of GDP growth. And that is not just because consumer spending accounts for the bulk of GDP. It has also been growing unlike most other parts of GDP.  Underpinning that real spending growth – which as we have determined is not a function of wages (which are falling in real terms) – is employment growth. The last 12 months have seen Australia adding around 400,000 jobs to a labour force of just over 14 million. More than half of these jobs were full-time (generally better-paying) jobs. Comparing employment against its values four quarters ago, we see that the gains are not in manufacturing or agriculture. Lately, jobs in the hospitality industry have been on the rise (some of which may be part-time), as well as in the wholesale and retail sectors. Construction jobs have also gained ground recently. Within the other service sector jobs, not surprisingly in the wake of the Covid-19 pandemic, healthcare-related jobs, as well as professional and scientific jobs, rose consistently, although growth in these areas is now beginning to slow. Jobs growth in public administration is also slowing down now after rising in the previous three quarters, and so too are jobs in finance. In the three months since July, the number of employed has stagnated at just over 13.6 million. It looks like the boost to spending likely to come from employment growth is slowing. And with wages negative in real terms, the only way household spending is going to continue to boost economic growth in the quarters ahead is if households draw down savings (e.g. borrow more). That doesn’t look as if it is going to happen to any large extent. Household balance sheets received a big boost during the pandemic, mainly from markets juiced up by easing monetary policy pushing up equity prices and reserves held in superannuation accounts. Liquid savings in the form of currency and deposits also picked up. But household balance sheets peaked at the turn of the year and have since begun to decline. And while liquid assets will provide a solid buffer, the household savings ratio has now fallen to 6.9%, well below the post-war historical average of 9.5%, so further declines are probably going to be limited unless they are a response to crisis conditions. And if that is the cause, then it probably won’t matter all that much. Rising interest rates will also deter discretionary dis-saving. Savings ratio and personal income growth (YoY%) Source: CEIC, ING Rent-reset shocks should be modest in 2023 Another factor that could weigh on household spending is that a sizeable number of Australian households will be facing much higher mortgage payments shortly after the New Year. The latest Financial Stability Review by the Reserve Bank has a detailed chapter on the impact of rising interest rates and inflation on indebted households’ cash flows. Households that are owner-occupiers with variable-rate mortgages account for about two-fifths of outstanding housing credit. Many of these are making sizeable prepayments on their mortgages, which they could trim back as rates rise. Some (about 15% according to the RBA) might see their spare cash flow turn negative, requiring a drawdown of savings buffers, with the possibility that some owners might even fall into arrears. Using scenario analysis based on market expectations for the likely further increase in the cash rate, the RBA analysis noted that: “Just over half of variable-rate owner-occupier borrowers would see their spare cash flows decline by more than 20% over the next couple of years, including around 15% of households whose spare cash flows would become negative as the combined burden of higher interest payments and the higher cost of essential goods and services exceed their initial spare cash flows.” Mortgage rates to reset Source: Reserve Bank of Australia House price inflation likely to turn even more negative in 2023 Around 35% of outstanding household credit is for fixed-rate mortgages (including split-rate loans). And around two-thirds of these are due to expire by the end of 2023. The RBA estimates that most fixed-rate borrowers will face a discrete rise of 3-4 percentage points in their mortgage rates when they re-set. Some will face this re-set as early as January 2023. That being said, the current household finance ratio is still close to all-time lows at around 5-6% of disposable household income, so this would only take it back to historical norms.   The rate of quarterly increase in mean house prices peaked in the third quarter of 2021 at 6.7% quarter-on-quarter, but it has been slowing ever since. In the second quarter of this year, house prices registered a small (-1.8%QoQ) decline, which was followed by a larger decline in the third quarter (-4.0%QoQ). Annual house price growth has now dropped to only 1.1 %YoY.  We anticipate this price decline continuing through at least the first half of 2023 before prices begin to stabilise and then slowly turn around again. Year-on-year house price growth will turn negative in the first quarter of 2023 and could show something close to a 10%YoY decline at its worst in the second quarter before starting to stabilise. Year-on-year house price declines will likely persist until early 2024, and while they do, they should put a further dampener on household spending. House price inflation already dropping sharply Source: CEIC, ING Business investment: not coming to the rescue Business investment is a much smaller proportion of Australian GDP than consumer spending, but its importance for the business cycle is not to be underestimated, since it is the variance of GDP components, as well as their absolute size that provides the impetus to cyclical swings. Business investment Source: CEIC, ING   Gross fixed capital formation is the official GDP term for such business investment, and this grew by 0.7%QoQ in the third quarter of this year, however this wasn't enough to prop up the year-on-year growth rate, which showed a contraction of 0.3%YoY. As rates continue to rise, the domestic economy slows, and Australia's main trading partners skirt recession, it is hard to believe that there won't be a further slowdown in the pace of business investment. Construction by type (contribution to GDP YoY%) Source: CEIC, ING Construction going nowhere For the subset of business investment that falls under the generic term “construction”, there has not been any contribution to GDP from this sector for several quarters. Residential construction (on dwellings) has been a recent underperformer, dragging on year-on-year GDP growth by more than 0.2pp in the last two quarters. This could well deteriorate further given what is happening to the housing market. There is a marginally less dour story emerging on engineering construction. This comes mainly from electricity generating expenditure and roadbuilding, and less from the extraction industries, where spending is softening. Extraction exploration: no longer following the money Normally, we would expect exploration expenditure in the extraction industries to follow the price of the underlying commodity. That would support spending on coal extraction, and maybe natural gas. Instead, what we see is that the liveliest investment part of this industry in recent years relates to gold, though this too is beginning to peak out. It is possible that this mix of exploration spending reflects new attitudes to fossil fuels and the financing of their extraction. Indeed, we also see relatively muted exploration expenditures in onshore and offshore petroleum (including natural gas) which would tie in with that hypothesis. In short, while there remain some pockets of resilience, business investment overall is flat to slightly down, and we anticipate the going getting even tougher during 2023 before recovering in a more supportive lower rates environment in 2024. Extraction exploration (AUDm four quarter moving average) Source: CEIC, ING Trade is already dragging on growth, but this should slow One bright spot in the economy has been international trade. Thanks in part to some extremely helpful swings in Australia’s terms of trade (the ratio of export prices to import prices), what was once a long-standing deficit and leakage from the economy has provided a consistent surplus since late 2016. The 12-month average trade surplus is now more than AUD10bn and is still trending higher, though more slowly than it was. That slowdown in trade surplus expansion means that the contribution to year-on-year GDP growth from net exports actually turned to a small drag at the end of 2021, and has subtracted from year-on-year growth in three out of the last four quarters. That contribution could change as the domestic economy, in particular household consumption, slows further, causing import growth to decelerate. Though it may have to slow quite a lot if it is to outweigh the slowdown in external demand likely to stem from the US, Europe and China all effectively going into recession in 2023 and weighing on exports. The external environment could begin to turn around in the second half of 2023. But that's not a foregone conclusion.   Contributions to Australian GDP (QoQ%) Source: CEIC, ING Terms of trade have helped create Australia's external surplus The upswing in Australia's terms of trade implies a much stronger AUD/USD exchange rate than has actually been the case, and this will also have helped to keep Australia’s exports very competitive. The fact that the currency has not absorbed more of the terms of trade shift owes a lot to the RBA’s seemingly conscious decision to always pitch monetary policy on the dovish side of the US Federal Reserve and will have helped keep the AUD weaker and more competitive than it would otherwise have been.  Considering how important China has been to Australia’s export success, it is perhaps even more surprising that Australia’s trade surplus has held up so well. Digging into the data, after China closed some export avenues with Australia following political disagreements, export flows into China seem to have been steadily improving again. It may be that given China’s domestic economic weakness and the stresses following the Russia-Ukraine war, the authorities have decided to take a more pragmatic approach to trade with Australia. We think this will continue, however China's domestic weakness remains a concern, and it is not clear that recent efforts at re-opening will bear fruit quickly – though in time this approach is probably the right way forward  Terms of trade and trade surplus Source: CEIC, ING Financial markets: a more positive outlook despite the economic slowdown The Reserve Bank of Australia successfully adopted what might be described as a "dovish pivot" at its October meeting, slowing the pace of tightening from 50bp to only 25bp, and taking greater account of the current level of rates and the absolute change in the policy rate from its pandemic low. Following the latest 25bp rate hike at the December meeting, the current cash-rate target is 3.10%, up 300bp from its pandemic low of 0.1%.  This finessing of the tightening that the RBA is implementing has been vindicated by subsequent inflation data and also the slowdown becoming more apparent in GDP growth and the housing market.  Recent RBA statements still claim that policy will respond to the flow of data. However, it looks more like policy is not particularly data-dependent, but is instead, “state-dependent”. And the current "state" is that policy may now be in mildly restrictive territory and has already tightened a lot. We don’t, therefore, expect policy tightening to deviate on the upside from the current 25bp per meeting approach over the next few months, whatever the data delivers, and look for rates to get up to no more than 3.6% in the first quarter of next year. At this point, with inflation clearly on its way down, we think the RBA will opt to keep rates on hold.  Australian bond yields Source: CEIC, ING   This approach to monetary policy is considerably less hawkish than that suggested by the Federal Reserve. And so while longer-dated Australian government bonds are very heavily influenced by US treasuries (correlation coefficient of 0.98 over the last two years) Australian 10Y yields have recently traded lower than their US counterparts, following a long period of trading above them. This looks set to continue and the negative spread could even widen further – though we have to add that the actual path of both US Treasuries and Australian government bonds is subject to considerable uncertainty.  That Fed/bond yield view is also likely to play a large role in the outlook for the AUD. You can do lots of fancy analysis about iron ore futures, terms of trade, trade surpluses and relative producer prices and rates of productivity. But in the end, like the importance of Treasury yields for AUD government bond yields, the direction of EUR/USD is likely to explain most of the variance of the AUD over the next 12 months. A sense of peak Fed funds and bond yields is likely to correlate with a shift out of the USD and into everything else. It is possible this has already started, though there is still a tail risk of a further down leg in sentiment as the global recession is priced into risk assets more fully than it currently is.   The year ahead for Australia is likely to exhibit considerably slower growth, but also a peak in inflation, which raises the prospects of a shift in domestic and foreign monetary policy. And it is this elimination of inflation and turning rate cycle that will usher in an eventual improvement in market sentiment and eventually the real economy. Even with growth slowing, we still look for growth to come close to (but below) 2% for the full-year 2023 (and not much more in 2024). On paper, that is still a fairly soft landing, though we concede that it could be harder, especially if we get a more violent correction in real estate prices than we are anticipating, or if financial markets fall more heavily. In this respect, the RBA's recent caution seems much better suited to the economic backdrop than a more hawkish "higher for longer" approach.  Summary forecast table Source: CEIC, ING Read this article on THINK TagsRBA rate policy Australian inflation Australian house prices Australia economy AUD Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Stock markets are tentatively higher in Asia while Europe and the US are poised for a similarly modest start to trade in what is the start of a hectic 72 hours in the markets. For so many weeks now, the December Fed decision has dominated the minds of traders, while sentiment in the markets has been dictated by how small changes in various data points influence the outcome of the meeting. When a meeting or event generates this much hype, it can often disappoint and be something of an anticlimax but I’m not sure that will be the case this time. It’s not so much the decision itself but what accompanies it that will set the stage for next year. For so long the question has been will the Fed hike into a recession. In that time it’s remained convinced that a soft landing can be achieved and the resilience of the economic data has supported that but unfortunately, the same resilience has also supported the case for more hikes and a higher terminal rate. Last month’s CPI release gave investors real hope that in much the same way that inflation’s acceleration higher this year blew expectations out of the water, the path lower may also not be as gradual as feared. Unfortunately, some of the data since then hasn’t been so favourable – most notably the wages component of the jobs report – so a lot is now hanging on today’s release. Another number below forecasts of around 7.3%, year on year, could get the excitement flowing once more. Jobs data keeps pressure on BoE The pound is relatively steady after the release of the UK jobs data that was in line with market expectations. Unemployment rose marginally to 3.7% while wages rose by 6.1%. While the data does indicate some additional slack in the labour market, the wages number – despite falling well short of inflation – will be of concern to the BoE and ensure its foot remains firmly on the brake in the short term. Steady despite FTX developments and Binance concerns Bitcoin continues to trade around $17,000, undeterred by reports of Sam Bankman-Fried’s arrest and possible charges for money laundering against Binance. Withdrawals on the platform highlight the uncertainty and shattered confidence in the space, a desperation not to be caught up in another FTX event. Even when the situation looks very different. But that’s what fear does, especially in a situation where confidence has been so severely damaged, as it has in recent weeks. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

The British pound remains calm this week and is trading at 1.2286, up 0.20%. It is a busy week on the economic calendar, but GBP/USD isn’t showing much interest. Today’s UK employment data was within market expectations, which resulted in a muted reaction from sleepy sterling. The unemployment rate ticked upwards to 3.7%, up from 3.6%. Wage growth climbed to 6.1%, up from 5.9% and above the consensus of 5.8%. Wages remain well below the inflation level of 11.1%, but will still be of concern to Bank of England policy makers, who will want to avoid the spectre of a wage-price spiral, which would make the battle against inflation that much more difficult. This may not be something that the BoE can control, with the threat of public workers going on strike to demand more pay. The BoE is likely to continue raising rates, despite weak economic conditions, as defeating inflation remains its first priority.  The BoE meets on Thursday and is expected to raise rates by 50 basis points, which would bring the cash rate to 3.50%. US CPI expected to dip All eyes are on the US inflation report for November, which will be released later today. The consensus stands at 7.3%, following a 7.7% gain in October. The timing of the report is interesting, as it comes just one day before the Federal Reserve meeting on Wednesday. Inflation fell in October and was softer than expected, and the US dollar took a plunge, as the markets became hopeful of a dovish pivot from the Fed. If inflation is again lower than expected, the dollar could find itself under pressure, although the markets could be more cautious with a Fed meeting just around the corner.   GBP/USD Technical 1.2240 and 1.2136 are the next support levels There is resistance at 1.2374 and 1.2478 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Summary:  Today, we highlight the absurd levels of volatility around recent US CPI releases ahead of today's US November CPI data point, noting signs that market speculators and hedgers are revving up for another blast of volatility in the wake of today's release. At the same time, we suggest that the reaction function may be difficult as the FOMC meeting follows hot on the heels of this release the following day. Elsewhere, we look at precious metals and copper levels, whether regulators will (or should) approve mergers like the Novozymes-Christian Hansen attempt, earnings to watch for the rest of the week and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-dec-13-2022-13122022

While US CPI seems to have collapsed, a lot of this is from exceptional factors. The real underlying number is closer to 0.4% MoM in services. Bond yields will test further lower, but there is a limit to that (c.3.25%). A reversion higher (to 3.75%) remains a risk as we move into the first quarter. Look for 50bp from the Fed today, and more to come in Q1. US inflation not as straightforward as seems Falls in real rates and inflation expectations were seen post the CPI number. This solidifies the remarkable recent move in the 10yr from 4.25% to 3.5%, and now approaching 3.4%. The terminal fed funds rate discount has also been shaved lower. It was comfortably discounting a peak at 4.75-5%. It is still in that range, but now toying with pulling that lower, to 4.5-4.75%. The 10yr is more than100bp below this still, which is quite a yield discount. It limits the room for a big move to the downside from here. The marketplace has done a remarkably good job at anticipating this number It feels like the marketplace has done a remarkably good job at anticipating this number, but as always we need to see some repeats before we can conclude that the inflation fighting job is done. The 20bp fall in the 2yr yield to sub-4.2% reflects the same theme, and is now at a sizeable 75bp discount to the market discount for the terminal funds rate. The bond market is trading as if the Fed delivers 50bp today, and then they are done. In all probability the Fed is not done, but if this number proves to be the beginning of a theme of low inflation prints, its increasingly likely that any hikes in the first quarter will be insurance ones, a far cry from the panic stations of previous months that saw consecutive 75bp hikes. Real yields have led the move lower in USD rates Source: Refinitiv, ING Downside to 10Y yields is more limited from here The market has been increasingly sensing this, with the 5yr trading remarkably rich to the curve now, and the 2/10yr segment showing the beginning of a tendency to steepen / dis-invert (from a state of deep inversion). Despite all of this, it is questionable how much room there is to the downside for yields. Anything below 3% for the 10yr looks too low here.  Market rates could still decide to trend higher. Yesterday’s 10yr auction did suggest some resistance to buying at these levels. It will be interesting to see whether the Fed might frustrate things with any suggestion of bond selling (hard QT) going forward. The rationale would be to limit the ability for long yields to go too low too fast, and to downsize it's balance sheet. The inflation flight is still on On the CPI report itself, the 0.2% MoM outcome was largely pulled there by exceptionally large moves in certain components (e.g. used car prices). 60% of the index is "services less energy services", and that is running at a steady 0.4% MoM (which annualises to 6% inflation). That will be tougher to shift lower fast. The inflation flight is still on, the Fed is set to hike, and the bond market could well get a fright at a CPI report not too far from here. For that reason, a hawkish 50bp hike is still expected from the Fed today. They could even contemplate some discussion of bond selling, or even simply entertaining that posibility. That would reverse things quite quickly, allowing the Fed to get more value from the delivered hike. Leaving the market braced for another hike in February 2023 is also probable. European rates have less room to fall, with domestic inflation still not under control Source: Refinitiv, ING European rates struggle to join the US party A striking feature of the post-US CPI bond rally is how sterling-denominated bonds struggled to follow their USD peers higher (lower in yields). The underperformance of EUR bonds relative to Treasuries was less spectacular but speak to an important theme as we head into 2023: it looks like the Fed is getting a grip on inflation much earlier than its European peers, and so US rates are in a better position to outperform until more tangible evidence of lower inflation emerges in the UK and eurozone. It is much less clear European inflation has seen a peak yet In the case of UK bonds, their underperformance was made worse by stronger labour and GDP data this week, and by a warning from Andrew Bailey against second round inflation effects. We see hawkish risk at both the Bank of England (BoE) and European Central Bank (ECB) meetings on Thursday. The difference with the US is that there is a greater chance that these hawkish warnings have a market impact as it is much less clear that European inflation has seen a peak yet. Today's events and market view The main release this morning is eurozone industrial production although this comes on the back of national measures which have taken the surprise out of the eurozone-wide measure. Spain’s CPI reports is a final reading, and Italian unemployment completes this list. US data has a few interesting releases too, including import prices and mortgage applications, but it is the FOMC meeting that will attract the most attention, especially after the second consecutive surprise slowdown in CPI in November (see above). With regards to primary markets today the German debt agency will announce its issuance plans for 2023. There is a significant upside risk to this year’s 230bn in bond issuance. To what degree the higher funding needs feed through to the bond target also depends on what other sources the agency will tap into, i.e. bills, repo or cash reserves. In any case, the market should expect more collateral. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Yesterday, financial markets seemed to rejoice at the fact that inflation in November in the US was less than expected. Although CPI is still above 7 percent, and was previously a level rather favorable for falling stock prices, the opposite is now true. Why? It seems to be because of, for the time being, a permanent reversal of price growth dynamics. Following the release of yesterday's data, the dollar index seems to have weakened this morning after falling to around 104 points. Today, investors seem to be awaiting the Federal Reserve's decision on interest rates. The market expects the Fed to scale back its aggressive monetary tightening campaign, but may point to a higher peak for rates in the future, i.e. the hikes may be smaller (interest rate volatility may decrease), but they may last longer and end up not at 4.75-5 percent, but at least at 5-5.25 percent. As a result, uncertainty may have already set in on Wall Street, where after yesterday's first strong upward reaction, the indexes then turned back. After the euphoria, the market may have moved on to a cool calculation that while the pace of hikes may be slower, in the end it is probably better to have a lower interest rate than a higher one. It indicates the level of the investment risk-free rate, and the higher it is, the lower stock valuations could be. Source: Conotoxia MT5, US500, Daily Conference and projections in focus Today, traders will be closely watching Fed Chairman Jerome Powell's press conference after the decision announcement for clues on future rate hikes. The Fed's latest macroeconomic projections may also provide additional information. Going back to yesterday's data, the annual U.S. inflation rate slowed to 7.1% in November 2022, down from 7.7% in October and below market expectations of 7.3%. Other central banks on target Later in the week, we will learn the decisions of equally important central banks. Investors thus may remain cautious in their actions, as the European Central Bank, the Bank of England and the Swiss National Bank would take the stage, with monetary policy decisions to be made as early as Thursday. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.     search   g_translate    

Summary:  Today we look at yesterday's reaction to the softer than expected US November CPI data, with equity market upside fading quickly even as the reaction in US yields and the US dollar was stickier. We also discuss today's upcoming FOMC meeting, with the Fed facing a tough task if it wants to push back against easing market conditions and policy expectations today. We also look at Tesla posting new cycle lows and concerns for the stock and EV market, Apple, Inditex, crude oil, precious metals, and more. Today's pod features Peter Garnry on equities, Ole S Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: FOMC will have a hard time moving the needle today | Saxo Group (home.saxo)

Business sentiment remained stable in December and is still above its long-term average. If this is confirmed by the other indicators, it could mean that the French economy will escape the contraction of activity in the fourth quarter. The recovery after the winter is likely to be sluggish The business climate in France remained stable in December for the fourth consecutive month   The business climate in France remained stable in December, at 102, for the fourth consecutive month. It remains above its long-term average. Stability can be seen in the service sector, industry, and construction. While the assessment of order books, especially foreign ones, continues to deteriorate, the production outlook seems to have improved slightly, and the assessment of past production rebounds. In addition, sentiment is improving in the retail sector, thanks to an increase in order intentions. Employment sentiment rebounded in December to 111 from 107 in November, as companies still seem ready to hire. Business leaders' opinions on price expectations for the next few months are once again on the rise, signalling that inflationary pressures are far from easing in France. Overall, the picture painted by the business climate indicator is one of stability for the French economy in the fourth quarter of 2022. If this were to be confirmed by the other indicators, it could mean that the French economy escapes the contraction in activity in the fourth quarter, or even grow slightly. However, the sharp deterioration in the PMI indices in November and the significant contractions in industrial production and consumption in October make us cautious about the stabilisation signal sent by the business climate. The probability of a recession this winter remains high. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM Beyond the recession, the question of recovery after the winter is very important. We believe that the recovery will be sluggish. Indeed, household purchasing power is still deteriorating. Energy prices are likely to remain high throughout 2023 and the winter of 2023/2024 holds a major supply risk. Public finances, which have largely mitigated the impact of the economic shock, are likely to be less generous, which will slow the recovery. Finally, rising interest rates will have an increasing impact on the most interest-sensitive sectors. Ultimately, we expect sluggish economic growth in all four quarters of 2023, leading to stagnant GDP for the year as a whole. Inflation will rise again in early 2023, before falling very gradually. Changes to the tariff shield, which was implemented by the government to freeze gas prices amid rising costs, mean energy bills will rise by 15% in 2023 compared to 4% in 2022, leading to a sharp rise in inflation. As many more general price revisions can only take place once a year, food and service inflation is expected to rise sharply in the first quarter. French inflation should therefore be higher in 2023 than its average level in 2022. We expect 5.8% on average for the year, compared to 5.3% in 2023.   Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM Read this article on THINK TagsInflation GDP France Eurozone Business climate Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

  The Swiss National Bank (SNB) raised its key rate by 50bp as expected, bringing the total monetary tightening to 175bp. The upward revision of medium-term inflation forecasts signals a further rate hike in March A 50bp hike As widely expected, the SNB decided to raise its key rate by 50bp to 1% – following the 75bp increase in September and the 50bp increase in June – to combat the spread of inflationary pressures. The total monetary tightening in Switzerland will therefore have been 175bp in 2022, compared with probably 250bp in the eurozone and 425bp in the United States over the same period. The SNB also indicated that it is prepared to continue to be active in the foreign exchange market. In recent months, the SNB has sold foreign currencies, which has helped to strengthen the appreciation of the Swiss franc and limit imported inflation.  Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM Inflation expectations are above the medium-term target After years of fighting deflation with a very accommodating monetary policy, the SNB remains very uncomfortable with the current level of inflation, despite the stabilisation at 3%, down from the peak of 3.5% reached in August. It believes that "inflation remains well above the range that the SNB equates with price stability", which is between 0% and 2%, and that "while developments are pleasing, it is too early to let our guard down". Thanks to a more favourable energy mix, a lower share of energy in consumption, and above all the appreciation of the Swiss franc, which limits imported inflation, inflation in Switzerland is nevertheless much lower than in neighbouring countries. That said, the SNB considers that the risk of second-round effects is still present, which is why "it cannot be ruled out that further rate hikes will be necessary to ensure price stability in the medium term". The SNB's inflation forecast shows inflation at 2.1% at the end of its forecast horizon, the third quarter of 2025. It believes that "increased inflationary pressure from abroad and the spread of price increases to the various categories of goods and services in the consumer price index will push this forecast higher in the medium term". The SNB now expects inflation to average 2.9% in 2022, 2.4% in 2023 and 1.8% in 2024. These above-target inflation forecasts for the end of the forecast horizon signal that the SNB is not done with monetary tightening. We believe that a further 50bp rate hike could take place at the next meeting in March 2023, taking the rate to 1.5%. Rates will then remain stable for an extended period. Indeed, we expect price growth to decelerate gradually but slowly over the year. This will make it more comfortable for the SNB to intervene in the foreign exchange market afterwards, without changing the interest rate further. FX: SNB confirms it has been selling FX reserves recently In today’s communication, SNB President Thomas Jordan confirmed that the SNB had been intervening in FX markets to sell FX over recent months. This has got nothing to do with the SNB wanting to downsize its FX reserves for financial stability reasons, but everything to do with monetary policy. Here Jordan confirmed that a stronger Swiss franc has helped ensure that less inflation has been imported from abroad. This is all in keeping with this year’s policy of wanting to keep the real Swiss franc stable. To achieve that – and given that Swiss inflation is substantially lower than that overseas – the SNB requires nominal Swiss franc appreciation. The SNB confirmed the nominal franc has appreciated 4% this year. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM On the assumption that inflation differentials between Switzerland and its trading partners do not immediately narrow, we assume that the SNB will want further nominal appreciation in 2023. The big question is through which channels this occurs. The recent sharp fall in USD/CHF has taken the pressure off the EUR/CHF axis to make the adjustment. But if we are right with our call for the dollar to strengthen into the first quarter of 2023, then EUR/CHF will have to come lower – helped in part by SNB intervention. Our call is that EUR/CHF continues to struggle to hold any gains over 0.99 and heads back to the 0.95 area into next spring. Read this article on THINK TagsSwitzerland SNB Inflation CHF Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Tapering of the CSPP and CBPP3 is the next ingredient in the credit cocktail and is more severe than expected. Markets reacted to yesterday's ECB event with a mix of higher rates and a widening of CDS spreads. Credit spreads remained steady, but what will dominate? Is this a bear trap or will the bulls swim in higher yields? Faster tapering than previously expected Tapering reinvestments of the asset purchase programme (APP) will begin in March 2023, thus we will see lower reinvestments under the corporate sector purchase programme (CSPP) and third covered bond purchase programme (CBPP3). The tapering will be in the form of a decline of €15bn per month as of March until the end of the second quarter, with the subsequent pace to be determined later. Many details, such as the breakdown of which programme will see what decline in reinvestments, and the choices between bonds, have been left very unclear, but more information will come in February.   The €15bn reduction in holdings is a much faster tapering than previously expected, averaging at just 50% of reinvestments. On the back of this, we have seen some small spread widening, but nothing substantial. The big moves in rates have made yields more attractive with many buyers stepping in. However, this may be the setup of a bear trap, as fundamentally credit is looking slightly weaker. The hawkish stance of the European Central Bank (ECB) makes it clear that it is still concerned about inflation, so we could see inflation putting more pressure on corporates and ultimately credit markets in 2023. Combined with the more severe tapering, we could see some spread widening from these levels. Although long term, any widening will add more value to credit in our view, adding more magic into the credit markets, as we remain constructive on credit for the full year 2023. This of course will also be added to the list of risks and drivers of increased volatility in credit, alongside the recessionary environment, high inflation, the Russia/Ukraine war, the energy crisis and supply chain shortages. Covered bonds may be under a bit more pressure from this tapering if Bund asset swap spreads normalise further, as they are still relatively tight to begin with. As we highlighted in our report 'Tapering could be the next ingredient in the credit cocktail'. We foresee the following: The lower level of support will add to the turbulence and increase volatility, as well as reprice spreads wider, ultimately adding more value to credit. More pressure and spread widening in the case of an even faster tapering come July or an abrupt stop as the market becomes more exposed, with a large number of participants no longer active at all. Selling of holdings will have much more negative implications on spreads. Based on current oversubscription levels, deals can still get done even with lower CSPP participation. Thus, primary market activity shouldn’t struggle to price, meaning less pressure on spread widening. An indirect implication may be supply indigestion, as many corporates may push to issue earlier in the year for a better chance of having the ECB involved in the deal (this may mostly be seen in January). This will add some extra volatility and perhaps underperformance. The tapered CSPP reinvestment levels in the chart below illustrate how low reinvestments will likely be assuming an equal ratio of tapering for each programme, and assuming a continuation of a €15bn reduction. Initially, reinvestments would pick up in 2023 and support with between €2-4bn per month. Now reinvestments will be notably lower between €1-2bn per month, offering very little support from March onward. Therefore, if the ECB continues to reduce the holdings by €15bn per month, CSPP reinvestments will total no more than €11bn for the year. Forecasted CSPP reinvestments Source: ING, ECB   A pro-rata distribution of the lower reinvestments of redemptions across the different purchase programmes under the APP means that the CSPP3 will only reinvest €21bn in 2023 instead of €35bn in the event of full reinvestments. We assume here that the €15bn will remain stable from March until year-end. If reinvestments were to drop to 0 after June, CSPP3 reinvestments will sum to €16bn in the first half of 2023. At our estimate of €118bn supply in 2023 by eurozone issuers, €21bn represents 18% of the total supply by eurozone banks expected for next year. Most reinvestments are centred in the first quarter of the year when most supply is also expected. Nonetheless, reinvestments will still make up about a quarter of the amount of eligible covered bonds we expect to be brought to the market in that quarter. If 40% is reinvested via the primary market, the order size of the CBPP3 in the primary could still be around 15% in that quarter. It will likely decline to 5-10% from 2Q23 onwards. The impact on spreads will consequently likely become more meaningful from the second quarter onwards. The biggest impact on covered bonds will still come from the indirect effect on sovereign asset swap spread levels, more so than from the direct effect of the CBPP3 being less present in the primary and secondary markets. CBPP3 reinvestments of redemptions (at €15bn lower APP reinvestments divided pro-rata per programme for Mar-Dec '23) Source: ING, ECB Read this article on THINK TagsMonetary policy Inflation ECB Tapering ECB Credit Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Benefitting from geopolitical turmoil The momentum of post-Covid recovery is gradually fading for Azerbaijan, but the country has two tactical strengths: gas and fiscal reserves. With the EU headed to lose Russia as a supplier of 150bcm of gas annually, the vast Shakh-Deniz is a big asset. Also, the country has some fiscal space for providing more support to the household income. Azerbaijan’s strong external and fiscal position should make it easy to place Eurobonds at the end of 2023, which are needed to refinance existing debt anyway. The risks to the local markets are coming from locally driven stories, such as long-standing tensions with Armenia, high inflationary risks driven by import-dependency, as well as a small and highly dollarized local banking sector. Activity slowing, but gas and budget policy offer support GDP showed 5.6% YoY growth in 9M22 but has moderated since 3Q22 due to maturing oil fields and declining household income. On the bright side, the fuel sector should remain supported by growing gas production, as gas supply to the EU is set to double to 10-12bcm in 2022 vs 2021 and could increase to 20bcm by 2027 if the EU were to guarantee this demand, giving Azerbaijan confidence to commit to vast capex. Meanwhile, the non-fuel sector may get fiscal support as the current c.US$75/bbl breakeven leaves room for generosity. Support on Karabakh may increase from 2.3-2.4% to 2.8-3.0% of GDP in 2023, while direct support to low-income households may rise from the current 11-12% to 14% of GDP, leaving the non-oil deficit at a sizeable 26-28% of non-oil GDP but still well covered by oil revenues. Current account supported by geopolitics The geopolitical turmoil of 2022 has created favorable conditions for Azerbaijan’s external trade through higher oil and gas prices and additional demand for gas volumes from the EU, partially offsetting the supply that used to come from Russia. The current account is set expand from 15% to 21% of GDP in 2022 and may remain close to those levels in 2023 assuming a favorable house view on oil. A sizeable 30-40% of it will be used to gain sovereign FX assets. Meanwhile, a US$1.0-1.2bn Eurobond placement is planned for end2023 to refinance the debt maturing in early 2024. This is likely to be met with demand given the country’s solid financial position. On the other hand, the stable net FDI outflow of 2-4% of GDP remains a sign of the challenging investment climate. Inflation close to peaks, but local risks are still high Azerbaijan is no exception to the post-Covid global inflationary trend, with CPI accelerating from 3-5% in 2020 to 15%+ currently. The pass-through of global trends into local CPI could be amplified due to high import-dependency of local consumption. Around 25-30% of local retail trade is imported, and food self-sufficiency is low. As a result, even though current CPI feels like a peak, average CPI should remain in low double digits in 2023, and upward risks to year-end expectations are high. Downside to the key rate is limited as CPI is well above the target range of 2-6%. Monetary transmission is restrained by the small banking sector, pegged FX, and high dollarization of deposits of around 49-51% in 2021-22. Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

An almost wasted year Far from saying “we told you so”, our previous Directional Economics piece on Bulgaria pointed out that the “zero tolerance” to corruption policy promised by the Continuing the Change party would hit a wall rather quickly. The government coalition lasted for only six months. Another inconclusive snap election took place in October 2022, with the next one due to take place in March 2023. We expect the political uncertainty to persist over the medium term and believe that this will postpone by at least one year the 2024 self-imposed euro adoption target, but this would be the most benign outcome in our view. After four general elections in 18 months, an understandable ‘politics fatigue’ on the part of the electorate might validate more extremist parties. Meanwhile, the interim government(s) are likely to remain fiscally responsible, though the outlook starts to become somewhat foggier Not a bad year but slowdown follows Given the very robust growth in 1H22 when the economy advanced by over 4.0%, and the flash 3Q22 GDP showing a 3.2% expansion, it will be rather difficult for the Bulgarian economy to close 2022 with a real GDP growth below 3.0%. For 2023, however, the outlook turns rather grim as the contraction in disposable income due to high inflation will start to yield more pronounced negative results in consumption. Moreover, the anticipated eurozone contraction will mean more subdued export demand, which will hit the economy in 1H23. Increased absorption of EU funds will be one of the few opportunities to offset these developments, but without a stable government to deliver straight-through implementation, our 1.4% GDP growth estimate for 2023 looks quite reasonable. The peak is behind, but inflation will remain high While it could be subject to a degree of flexibility from the EU when assessing euro adoption, the price stability criteria is obviously not on track for Bulgaria. We believe that inflation has peaked (at 18.6% in September 2022) and a gradual slowdown is to follow. Single-digit inflation could be seen as early as late-2Q23, but the subsequent pace of the slowdown looks a lot less steep which means that inflation could still stabilise well above the three best performing EU member states. This assumes household protection measures remain fully in place in 2023 and partially in 2024. Phasing out the support measures earlier would lift the inflation profile by up to 4ppt, depending on the exact specifications of the support measures. Read the article on ING Economics K Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Eurozone and Schengen accession For many generations of Croatians, 1 January 2023 will be a day to remember. After years of painstaking efforts to recover from the 2008-09 deep recession and put public finances back on track, the country will join the eurozone in a relatively solid economic shape. Somewhat overshadowed by the eurozone accession, joining the Schengen area will also be a major milestone, with the potential to further boost Croatia’s exports of goods and especially services. Essentially, on 1 January 2023, Croatia’s EU integration story will be complete, with no other major milestones to be achieved in the coming years. In the short term, we believe that despite already being largely reflected in current ratings, the Eurozone and Schengen accession could bring another one notch upgrade from at least one agency. What a comeback this was Unlike the aftermath of the 2008-09 crisis when it took six years for the Croatian economy to resume growth, the post-pandemic recovery has been extremely fast. As usual, a strong tourist season made quite a difference, but tourism revenues in 2022 have dwarfed the record 2019 levels by some 30% to 40% despite a slightly lower number of tourists. This was due partly to inflation but also to the qualitative improvements in the sector which is now able to tap into more premium public. Looking to 2023, the outlook is influenced by an expected slowdown in the eurozone which will affect the demand for goods and services. Nevertheless, public investments should act as a backstop for a flattening private consumption, hence we maintain our 1.6% GDP growth estimate for 2023. Getting back on track The revised official targets for the fiscal balance point to a 1.6% of GDP deficit in 2022 and 2.3% in 2023, which given the current macro assumptions seem to be sensible estimates. An important aspect is how well the support measures for households will work in practice. In theory, their cost (estimated at around 5% of GDP) will be largely offset by revenues from EU funds and energy companies. Combined with the lower GDP growth and some remaining public sector arrears, it could mean that risks for exceeding the deficit next year are skewed to the upside. Nevertheless, primary deficits remain under control and with GDP growth still holding on, the overall debt position should continue to improve. Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Deepest economic contraction in CEE In our view, the Czech economy entered recession in 3Q, mainly due to a fall in household demand. Within the CEE region, we expect the deepest economic contraction in the Czech Republic. Moreover, the level of leading indicators is the main downside risk to our forecasts. Nevertheless, the labour market remains tight and, were it not for government measures, inflation would rise further. Core inflation accelerated again in October and is proving more persistent. The Czech National Bank last hiked rates in June and we do not expect further monetary tightening despite the board's mention of risks. We see a reversal in monetary policy, an end to FX intervention and rate cuts likely before the end of the first half of next year. Fiscal policy incorporates plans for consolidation for next year, but still far from the levels of the pre-Covid years. Macro digest According to the second release, the Czech economy grew by 1.7% YoY and contracted by 0.2% QoQ in the third quarter and thus, in our view, started a period of recession. The main reason for the contraction was lower household consumption, which has fallen for the fourth quarter in a row. The fall in disposable income is limiting demand, especially for durable goods. On the other hand, the contribution of investment to growth is still positive but the smallest since the beginning of last year. The contribution of the foreign balance also turned positive for the first time since the beginning of last year. Looking ahead, for 1H23 we expect the QoQ pace of economic contraction to deepen, with the economy stagnating in 3Q23 and only returning to visible growth in 4Q23. The labour market remains a strong anchor of the Czech economy. Unemployment has risen only marginally from historic lows in 2019 and we do not expect it to exceed 3% in the coming years. Nominal wage growth will remain near record highs at just below 8% YoY but will not turn positive in real terms until 3Q23 at the earliest. The picture indicated by the leading indicators is the main risk to our forecasts. The PMI is deep in recession territory and only slightly above the record low levels of the Covid years. The PMI points to a sharp decline in output and new orders and rising cost pressures. A CZSO survey shows that shortages of materials and equipment are the main barrier to growth for a third of businesses, while insufficient demand is a major obstacle for a quarter. Consumer confidence bounced back from a low in November, probably due to government measures, but remains near record lows. Inflation fell from 18.0% to 15.1% while the CNB expected 17.4% YoY in October. The surprise can be explained by the government's measures to tackle high energy prices. On the other hand, core inflation accelerated sharply again from 0.3% to 1.2% MoM, almost back to the mid-year peak. In annual terms, it thus remained almost unchanged for the fifth month in a row at 14.6%, above the CNB’s forecast. Moreover, the central bank itself admits that government measures have cut 3.5ppt off inflation, implying actual inflation at 18.6% YoY, which would indicate a new record high. Looking ahead, we expect inflation to remain at similar levels until the end of the year and the change in government measures in January to have a similar effect on CPI as current measures had. Barring a surprise upwards repricing in January, the peak in inflation should be over and we expect the first single-digit numbers in the second half of the year. However, core inflation is still surprising to the upside and proving more persistent, which we think will lead to a slower decline. Only slow consolidation of public finances MinFin approved an increase in the state budget deficit in November to CZK375bn (5.5% of GDP), reflecting new government measures including the saving tariff and revised tax revenues. For next year, the plan expects a deficit of CZK295bn. In both cases, we remain on the optimistic side with a slightly lower deficit in our forecast due to traditionally underestimated tax revenues. However, the pace of fiscal consolidation is still far from the preCovid years. On the other hand, municipalities are running record budget surpluses, which improves the overall public finance picture. We expect a deficit of 4.6% for this year and 3.2% of GDP for next year. Given the strong nominal GDP growth, government debt will remain below 45% of GDP. In our view, the risk of a downgrade remains. Hiking cycle is over, attention turns to the first cut The Czech National Bank halted the hiking cycle in August and although the board still mentions risks that could lead to additional interest rate hikes, we turn our attention to the first interest rate cut next year. We see the current board as more dovish than the previous one and therefore see the possibility of a decision to cut before the end of the second quarter given the downturn in the economy, the risks of a deeper recession and inflation heading into single-digit territory. The CNB still sees the equilibrium interest rate at 3% which, with a record strong koruna, currently indicates very tight monetary conditions in the eyes of central bankers. In the meantime, we expect continued FX interventions to defend the koruna, which we think are likely to continue during 1Q next year. Mortgage market frozen, companies financing in euros The volume of new mortgages has remained stagnant for the past three months after a strong fall in 2Q22. Year-on-year, the volume of new mortgages is down 80%. This is due to the significant rise in interest rate but also the frontloading effect last year before the CNB tightened mortgage lending rules and implemented further key rate hikes. New CZK loans to corporates have fallen by 40% this year, but some of the corporate sector is responding to the current situation of high koruna rates by switching to FX financing. The share of euro-loans in total new loans to businesses has thus reached twothirds in recent months. However, even taking FX loans into account, this year's new lending to corporates has been falling, responding to monetary policy tightening. Deepest current account deficit since 2003 The trade balance has deteriorated significantly in recent months, mainly due to higher energy prices and import growth. We have seen an improvement on the export side in recent months, but we do not expect a quick return to positive levels. Also contributing to the CA deficit is the involvement of Ukrainian immigrants, whose wages are reflected as payments to non-residents. In addition, dividend outflows abroad have increased significantly in recent months, reaching the highest volume on record when looking at a rolling 3M sum. Thus, we expect a current account deficit of 5.1% of GDP for this year, essentially the worst result since 2003. For next year, we expect the trade balance to improve and energy prices to normalise, which should lead to the deficit falling to 3.5% of GDP. FX The CZK market has been under the control of the CNB since midMay with the intention to "prevent excessive fluctuations of the koruna". According to official figures, the central bank spent €25.5bn (16% of FX reserves) to defend the koruna from May to September. According to our estimates, the CNB may not have been active in the market in October and November given the EUR/CZK level has remained well below the intervention level of 24.60-70. The CNB is thus in a very comfortable situation, and we expect this regime to continue at least until the end of 1Q next year. If current market conditions persist and the CNB is not forced to intervene significantly, we believe 2Q23 will be an opportunity to end this regime, which should allow the koruna to weaken slightly towards EUR/CZK 25.0, however, we expect the koruna to strengthen again in the second half of the year due to the economic recovery and the EUR/USD turnaround. Market attention in recent months has been focused on the koruna only during the CNB meetings, building short positioning in view of the end of the central bank intervention regime. However, we expect this decision later than most. Fixed income The CNB is sticking to the rhetoric of "no change or rate hike" and "higher rates for longer" and, in our view, it is too early to reverse this mood on the markets. However, market rates have fallen from levels above the CNB's forecast to well below it in recent weeks. Currently, the market sees the first rate cut in four months and a near return to the equilibrium level of 3.00% in two years, while the CNB forecast expects the key rate to still be above 4.50% at the end of 2024. Overall, we view current market valuations as too aggressive in terms of rate cuts. In addition, despite the recent move, the long end of the IRS curve is still lagging behind core rates, according to our model, which points to higher levels. The June peak of the CNB hiking cycle and the upward revision of the state budget disrupted the traditional seasonality in CZGB issuance and unusually boosted supply in recent months, which we believe led to significant cheapening in ASW. For next year, we expect only slightly lower gross CZGB supply, but on a net basis it is almost half the volume of the Covid years. Thus, in our view, CZGBs have a lot of room to normalise in relative terms against the IRS curve. In addition, CZGBs can benefit relative to their regional peers from stable FX, a relatively low twin deficit and a politically stable situation domestically and with the EU. In nominal terms, we think current yields are in rather expensive territory, but in relative terms we see a lot of room for normalisation. Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Bullish in every aspect Although Hungary is still facing a trifecta of challenges, the technical recession during late-2022 and early-2023 will provide a tailwind to tackle the issues. We expect inflation to gradually descend from its early-2023 peak, reaching single-digit territory by the end of the year if price caps are extended. At the same time, negative net real wage growth and tighter monetary and fiscal policies will keep domestic demand muted. The latter will be driven by postponed public investment spending and windfall taxes. Retreating consumption and lower investment activity reduces the country’s import need, which is also supported by a spreading awareness of energy usage. Improving external balance and diminishing net external financing need will boost the relative attractiveness of Hungarian assets, especially the forint. We are bullish in every aspect Macro digest After the post-Covid led rebound in 2021, this year started on a strong footing. GDP growth came in at 7.3% YoY during the first half of 2022. Despite all the challenges presented by the war and resultant energy crisis, Hungarian economic activity was boosted by rising domestic demand. A key source of this was the government’s pre-election spending spree during the first quarter. As this positive momentum of re-opening and fiscal easing starts to fade and the challenge of rising energy bills and extreme inflation starts to bite, the economy’s quarterly based performance is beginning to slump. The two biggest difficulties Hungary is facing – higher energy bills and increasing unemployment – didn't fully impact the economy in the third quarter. Nonetheless, the 0.4% quarter-on-quarter drop in real GDP means that we’ve already seen the first leg of the expected technical recession in Hungary. We expect the drop to continue in the fourth quarter mainly due to falling consumption and shrinking investment activity. Real wage growth reached negative territory in September, while lending activity also dropped. In the corporate sector, we see companies going out of business or reducing working hours due to skyrocketing energy costs. Big data also suggests the economy has been on a downtrend. But despite the weak second half, the strong first half will save the year: we see 2022 GDP growth at around 4.8%. When it comes to the 2023 outlook, the negative carry-over effect, the ongoing fiscal and monetary tightening and the shrinking purchasing power of households will take their toll. We expect 0.1% GDP growth on average in 2023, followed by a marked rebound in 2024 as Hungary will have access to EU funds, boosting investment activity. Headline inflation moved to 21.1% YoY in October, the highest reading since 1996. 58% of the price pressure is from the food, alcoholic beverages, and tobacco sectors. This is due to a combination of a weather-related supply-side shock in agriculture, the high costsensitivity to energy in the food industry and the transmitted tax changes affecting food products and retailers. In the short run, we expect further increases in CPI, though the peak might be near. Negative real wage growth, thus decreasing aggregate demand, is reducing the pricing power of corporates. Price expectations of retailers have also started to drift lower, pointing to an impending turnaround in inflation. The peak could be around 23% (if price caps are extended), followed by a gradual slowdown during the first half of 2023 and a more rapid normalisation in the second half of next year. However, the full-year average in 2023 could be higher – around 16.7% - than the average in 2022, which we forecast to come in at 14.4%. Fiscal consolidation is on the way During the first half of 2022, there was a major fiscal spending spree, not necessarily unrelated to the April general election. As the energy crisis deepened, the government introduced significant fiscal tightening during the second half of this year. Against this backdrop, we don’t see an issue with the 6.1% of GDP deficit target. Indeed, it might be even better due to the higher nominal GDP. Fiscal consolidation will continue in 2023 via limited investment spending and temporary windfall tax revenues. Shrinking nominal financing need and strong nominal GDP growth will help reach the Maastricht deficit criteria by 2024. Expected EU funds inflow will significantly help the budget, especially the sum of €5bn related to the 2014-2020 Cohesion Fund, which is due by mid-2024 Central bank keeps its hawkish “whatever it takes” stance The recent monetary policy setup lies on three pillars. The 13% base rate will remain unchanged for a long period, ensuring structural price stability. In the meantime, monetary tightening will continue with liquidity measures. Roughly half (c.HUF5bn) of the excess liquidity is tied up in long-term facilities like the 2-month deposit and the required reserve. The other half sits in the one-day quick deposit facility at 18% and one-day FX swap facility at 17%, as parts of the third pillar. These are to stabilise financial markets. We see the gradual convergence of the effective (18%) rate to the base rate in parallel with a permanent improvement in both external and internal risks. Timing wise, this means a reversal of the “whatever it takes” hawkish stance might start only in the first quarter of 2023. Labour market shows resilience under stress The unemployment rate has started to rise as companies are operating under severe stress. However, the move from a nearrecord low 3.2% to 3.6% in 3Q22 is nowhere near to a collapse. A high level of orders keeps manufacturers optimistic and in need of labour. By contrast, in the services sector, where energy and labour account for a greater part of costs, companies have reduced working hours, laid off employees or gone out of business. Due to this duality, we expect the unemployment rate to peak at only around 4.5% during mid-2023. With an above 20% inflation, we see tough negotiations between employers and employees about next year’s salaries. In our view, real wage growth – reaching practically zero in 3Q – will turn negative and remain so until the end of next year The worst in current account deficit might soon be over Due to the energy crisis, Hungary’s trade balance of goods has been on a downtrend. But we see light at the end of the tunnel. With the changes in the utility bill support scheme, households have started to be more aware of their energy usage. Companies have spent more on energy efficiency lately. Hungary has already secured its gas supply throughout the winter. This means less pressure on the external balance from an energy import view going forwards. With falling consumption and a reduction in investment activity by households and the public sector, import needs will retreat as well in the coming quarters. However, this improvement comes too late, so we see an 8.4% of GDP deficit in 2022 with a slight improvement in the balance to –6.8% of GDP next year. FX (with Frantisek Taborsky, EMEA FX & FI Strategist) When it comes to the Hungarian forint, we believe it is more likely to be moved by non-monetary events and shocks in the short run. The government's conflict with the EU over the rule of law has entirely dominated the market and will remain a major issue at least until the end of this year, in our view. We expect a positive outcome on the rule of law issue and an unlocking of the potential of the forint, which has lost by far the most in the CEE region this year. As some form of positive outcome of this story seems to be priced in already, and also market positioning seems to have flipped to a slightly longer view in recent weeks, in our view, the EU story has become asymmetric for the HUF. So instead of a jump in forint strength, we expect a gradual drift lower below 400 EUR/HUF next year. However, our strong conviction regarding a positive outcome for Hungary makes the forint our currency of choice in the CEE4 space. Moreover, in our view, Poland will take the baton of major market attention from Hungary next year with its ongoing conflict with the EU, looming elections, expansionary fiscal policy and a central bank trying in vain to end the hiking cycle. On the other hand, we believe that the period of emergency NBH meetings is over, that the EU story is coming to an end, fiscal policy is pointing to tangible consolidation and that the current account deficit should come under control. Fixed income (with Frantisek Taborsky, EMEA FX & FI Strategist If the forint remains under control, we see more room for normalisation of the short end of the IRS curve. On the other hand, the long end should decline to a lesser extent also due to the support of core rates, resulting in bull steepening. However, the timing of NBH policy normalisation remains a risk and low liquidity of the market may be painful. On the HGBs side, we see favourable supply conditions and ASW levels have finally returned to normal territories. The AKK's focus on the long end of the curve and basically zero issuance in the shortend maturity bucket supports our steepening bias. However, we see that the EU story is more about FX trades and the FI market is still struggling. Therefore, we see better value in other countries in the region for now but believe HGB's time will come soon, and we remain constructive in our views. On the back of a tough year for Hungary’s external bonds, we see current valuations as attractive given optimism of some improvement in the key areas of EU funds, fiscal policy, energy issues and the external balance. We think spread levels on the nation’s euro-denominated bonds in particular have room to compress versus regional and rating peers. This preference should be supported by expectations that near-term external issuance is likely to be in dollars rather than euros. Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The economy has contracted in three months as soaring prices hit businesses and households, and the UK is projected to head into recession. The short-term outlook remains grim as consumers continue to grapple with the brunt of high inflation. Final GDP The final UK gross domestic product reading for the third quarter is likely to confirm that the UK economy contracted in the three months leading up to September. GDP is forecast to drop below zero to -0.2 percent. The 0.5% decline in household spending was one of the main obstacles in Q3. Meanwhile, monthly estimates suggest that GDP fell by 0.6% in September, partly due to the public holiday associated with the state funeral of Queen Elizabeth II. From an economic point of view, a level below zero suggests an incipient recession. In his autumn statement last month, Mr Hunt said the UK was already in recession. This is expected to be officially confirmed early next year when the October-December economic figures are released. Read next: Forex Market Week Sum Up:The Overall Picture Of Major Currency Pairs Is Bearish| FXMAG.COM Source: investing.com The overview of UK economy UK consumers are tightening their belts as business activity contracted for a fifth consecutive month, according to new figures that suggest the economy has entered a prolonged recession. UK retail sales fell by 0.4 percent between October and November. Meanwhile, a closely watched private sector health monitor, S&P Global's Preliminary UK Purchasing Managers' Index (PMI), rose to 49 in December from 48.2 in November. Despite the increase, the reading was below 50 for the fifth month in a row, indicating that most companies reported a decline. Purchases of non-food items and fuels also fell, with only food sales recording an increase from October to November. Consumer inflation fell slightly to 10.7 percent last month from a 41-year high of 11.1 percent in October. External demand also remained subdued in December and overall new export orders declined. Over the past three months, economic activity in the UK has slowed across all major sectors, including manufacturing, construction and services. The data fueled fears that the economy had already entered a long recession. Not only the recession is a problem - strikes In 2016, the British economy – like other large economies – was negatively affected by high inflation and falling real wages. In Britain, conflicts between governments and economic failures have exacerbated these problems. The UK faces more strikes over pay and working conditions this month and into the New Year. Some 40,000 train and rail workers will walk out on Tuesday in a series of strikes. Royal Mail workers will also continue industrial action this week with strikes What next? The economy is projected to contract for at least the rest of the winter and possibly longer. On the other hand, there is hope that inflation is close to its peak, which may mean that the Bank will be able to limit the increase in the cost of credit. But the question is not whether the economy will go into a recession, but how deep and how long that recession will be. When a country is in recession, it is a sign that its economy is doing badly. During a downturn, companies typically make less money and the number of people unemployed rises. Graduates and school leavers also find it harder to get their first job. Source: investing.com

Economies today face a litany of challenges they have not faced in the last decade: Putin's war in Ukraine, record-breaking inflationary pressures, looming global recession and the struggle to stay ahead of the ongoing climate crisis. The banks are doing what they can to slow down inflation, but not the Bank of Japan. His decision may remain unchanged. Meanwhile, geopolitical uncertainty, the threat of further disruption to the global supply chain and higher interest rates remain key risks to Canada's economic growth. Bank of Japan Japan's benchmark interest rates have been among the lowest in the world for decades. Part of the yen's recent strength stems in part from talk that the BoJ may change its yield-curve control policy now that consumer price inflation has surged to 3.7% - an eight-year high. However, such a move seems unlikely. Japan's central bank has pledged to pursue an "over-inflation" policy and appears to have no intention of curbing its extremely loose monetary policy. Inflation in Japan is low compared to rates in other developed economies, which allows the country's central bank to keep interest rates very low. Although the Bank of Japan has raised its inflation forecast for 2022 to 2.9%, down from its previous forecast of 2.3%, it is expected to keep its key short-term interest rate at -0.1% and maintain the 0% cap for its 10-year bond yield at this month's meeting. During his decade in office, Kuroda, seeking to push inflation to 2%, introduced massive asset purchase and YCC, an elaborate program that combined a negative short-term target rate and a 0% cap on 10-year bond yields. In addition to the global supply pressure caused by the war in Ukraine and the pandemic, the collapse of the yen triggered a sharp increase in the cost of imported raw materials and ultimately household goods, making Kuroda and its currency-deprecating low interest rates the target of public outcry As Japan's massive pile of debt makes an abrupt interest rate hike too costly, the BoJ will tread carefully and explain the shift as a gradual move towards normalizing emergency stimulus - rather than full monetary tightening, they said. But policymakers also know they are running out of time to deal with the huge costs of the Bank of Japan's relentless defense of its 0% yield cap, such as declining bond market liquidity, crushed bank margins and a devastating yen sell-off. BOJ officials are now preparing the theoretical basis for future policy change, releasing research into whether firms and households will finally shake off their deep-seated reluctance to raise prices. Any apparent shift in BoJ thinking, even if it does not lead to an immediate change in monetary policy, could trigger a massive sell-off in Japanese bonds, with significant implications for global markets. Canada GDP The Canadian economy is moving closer to a recession in 2023. Early signs of easing inflationary pressures raise the odds that the slowdown will be "mild" by historical standards. Unemployment fell to a record low in the summer (at least since 1976) and only slightly increased since then. The US economy is also expected to plunge into recession in 2023, which will take a toll on Canadian exports. Price growth is still well above the central bank's targets, but increases have been smaller and less widespread in recent months. The crisis in the global supply chain, which largely contributed to the initial rise in inflation, is weakening. Commodity prices remain high but have fallen after a sharp rise earlier this year when Russia invaded Ukraine. Withholding interest rate hikes will not prevent a recession in Canada in the coming year. A mild deterioration of the economic situation is probably already certain in the light of the current restrictive level of interest rates. GDP is expected to stay at 0.1%, but neither rising nor falling suggests stagnation, which could lead to a mild recession. Source: investing.com

With the end of the year, I look at what may happen in 2023. JP Morgan looks at finance from the economic side and what affects it, and Jim Cramer traditionally focuses on the stock market. In this article: Outlook Of 2023 by JP Morgan Jim Cramer’s look at stock market Elon Musk And Twitter Outlook 2023 Most of the things that could go wrong for investors happened in 2022, driven by high inflation, an aggressive cycle of interest rate hikes around the world, and the war in Ukraine. Remarkably, both stocks and bonds suffered heavy losses in 2022 – one of the worst years in the history of a balanced portfolio. Lower stock valuations and higher bond yields offer investors the most attractive entry point into a traditional portfolio in more than a decade. All this will be reflected in the new year. JP Morgan takes into account key economic and market factors in this year's forecast - the consequences of monetary policy tightening, the weakening of the global economy, market prices and valuation resets Higher rates. Weaker growth. Valuation resets. Explore what these key economic and market forces may mean for investors. — J.P. Morgan (@jpmorgan) December 16, 2022 Read next: Rise Of The Attractiveness Of Living In Cities – Urbanization| FXMAG.COM Jim Cramer’s look at stock market Jim Cramer looks at market action, this time specifically industrial stocks. The specialist looks at the situations of individual companies and assesses their attractiveness. His tips can be helpful for investors, especially those who are starting their adventure with this market. Jim Cramer on Friday identified three industrial stocks that he believes are worth owning next year “CAT has much more exposure to infrastructure, and I think they’ve got a boost from the oil and gas industry coming,” Cramer said. According to a specialist, companies such as Caterpillar, Illinois Tool Works and rail operator CSX are noteworthy. Here is why @JimCramer sees more upside ahead for Caterpillar in 2023. https://t.co/CmEl3RctII — Mad Money On CNBC (@MadMoneyOnCNBC) December 17, 2022 Elon Musk And Twitter For the past two months, Elon Musk's attention has been focused on the development of Twitter, which he purchased in late October. Since then, his activities on this social networking site have been watched with special attention. Not only on Twitter, but also after it. One such action was blocking the accounts of journalists. The suspensions stemmed from disagreements over a Twitter account called ElonJet that tracked Musk's private jet using publicly available information. On Wednesday, Twitter suspended the account and others that tracked private jets, despite Musk's earlier tweet saying he would not suspend ElonJet in the name of free speech. Soon after, Twitter changed its privacy policy to prohibit the sharing of "live location information." Then on Thursday night, several journalists, including those from the New York Times, CNN and the Washington Post, were suspended from Twitter without notice. The episode, which one high-profile security researcher called a "Thursday night massacre," is regarded by critics as new evidence that Musk considers himself a "free speech absolutist," eliminating speech and users he personally dislikes. Now it has been reported that Elon Musk has reinstated the Twitter accounts of several journalists who had been suspended for a day in connection with the controversy over publishing public data about the billionaire's plane. The reinstatement came after unprecedented suspensions prompted heavy criticism on Friday from government officials, advocacy groups and journalistic organizations in several parts of the world, with some saying the microblogging platform threatened press freedom. Elon Musk reinstated the Twitter accounts of several journalists that were suspended in a controversy over publishing public data about the billionaire' s plane https://t.co/MPaQFmEp3Q pic.twitter.com/V6ipgraOpY — Reuters Business (@ReutersBiz) December 18, 2022

Summary:  Quieter markets ahead as we head into the year-end, but focus will remain on US PCE data which is the Fed’s preferred inflation gauge. China’s reopening may continue to be the bigger focus as holiday season sets in with Chinese New Year in January, likely raising concerns of a wider Covid spread. China’s loan prime rate fixing on watch this week and RBA minutes will likely confirm the bank’s dovish bent, but bigger focus will be on Bank of Japan’s possible hints of a policy review in 2023. On the earnings front, Nike (NKE:xnys), FedEx (FDX:xnys), and Carnival (CCL:xnys) will be the key ones to watch. This is the last Saxo Spotlight for 2022. Our first edition for 2023 will be on 9 January. We would like to wish all our readers a safe and enjoyable festive season.   US November PCE may be on course for further easing for now US inflation is cooling, but we argue that the debate at this point needs to move away from peak inflation to how low inflation can go and how fast it can reach there. Fed’s preferred inflation gauge, the Core PCE, will continue to remain in focus especially after Powell has highlighted it a key metric recently at both the Brookings Institute and the December FOMC press conference. However, PCE may now slow as rapidly as CPI with the two key restraining components – goods and energy – likely to play a smaller part in PCE. Expectations are for a November reading of 4.7% YoY reading vs a previous reading of 5.0% YoY while core is expected to come in at 5.5% YoY from 6% YoY in October. Still, risks to inflation remain tilted to the upside going into 2023 as financial conditions have been easing and China reopening brings a fresh wave of inflation risks. Therefore, despite a soft PCE, it will remain hard for the Fed to part with its hawkish stance. The first of 2023 will bring December ISM prints, which will be key to watch after the flash S&P PMIs indicated quickening economic concerns. The FOMC minutes from the December 14 meeting will also be due on January 5. The focus of China’s economic data during the three festive weeks will be on PMIs The economic calendar is light in the three festive weeks ahead in China and the primary focus will be on the official NBS Manufacturing PMI and Non-manufacturing PMI scheduled to release on Dec 31, 2022, Caixin China PMI Manufacturing on January 2, 2023, and Caixin China PMI Services on January 4, 2023. These reports cover the month of December 2022 when China across the country has substantially exited from stringent Covid containment restrictions. As high-frequency data are yet to show meaningful pick-ups in economic activities, these December PMI readings are expected to stay in the contractionary territory.  Watch for Bank of Japan’s policy review hints, Japan CPI also due later in the week The Bank of Japan is set to meet on Tuesday this week, and no change is expected in its monetary policy stance. The BOJ is expected to keep rates unchanged at -0.1% while maintaining its cap on the 10-Year JGB at 0.25%. Even as inflation increased to 3.6% YoY in October, the BOJ remains focused on achieving wage inflation before it considers a shift in policy stance. However, keep an eye out for any comments about a monetary policy review, which can trigger a strong JPY correction. There have been some mentions by BOJ members regarding a review of how monetary policy is conducted, they have generally been dismissed. While the timeline is still expected to be closer or after Governor Kuroda’s retirement in spring, any notes on who will succeed him or what policy change can be expected would be critical. Japan will also release November’s CPI on Friday. Expectations are for an uptick in core to 3.7% YoY while the headline gets closer to 4% YoY. RBA minutes remain on watch to confirm a dovish bias Despite the major global central banks maintaining their hawkish stance last week, the minutes from the Reserve bank of Australia’s December meeting will likely confirm a dovish bent. This comes despite a strong labor market report last week, that showed strong hiring demand and record low unemployment rate may continue to fuel more inflationary pressures especially as China’s reopening and policy stimulus gathers further traction in 2023. This could mean an environment for underperformance for Aussie assets for now, after AUD was the weakest G10 currency against the USD last week. Key earnings this week Earnings to focus on this week are Nike (NKE:xnys), FedEx (FDX:xnys), and Carnival (CCL:xnys). As Peter Garnry highlighted in his note, with recent sell-side analyst upgrades, the pressure is on Nike to deliver on the outlook for 2023. For FedEx, the situation is completely opposite as revenue expectations have come down to zero growth over the two next quarters suggesting a hangover for the logistics company following the boom days of the pandemic. Monday: HEICO Tuesday: Nike, FedEx, General Mills, FactSet Research Systems Wednesday: Toro, Micron Technology, Cintas, Carnival Thursday: Paychex, CarMax Friday: Nitori   Key economic releases & central bank meetings this week Monday 19 December Malaysia Trade (Nov) Germany IFO surveys (Dec) US NAHB Housing Market Index (Dec) EU Energy Ministers Meeting Tuesday 20 December China Loan Prime rate 1Y/5Y Germany PPI (Nov) Japan BOJ Interest Rate Decision Taiwan Export orders (Nov) US Building Permits, Housing Starts (Nov) Wednesday 21 December South Korea 20 Days exports and imports (Dec) Canada CPI (Nov) US consumer confidence (Dec) Thursday 22 December Bank Indonesia meeting Taiwan Unemployment rate (22 December) UK GDP (Q3 F) US Initial jobless claims (Dec 17) and 3Q GDP Final Friday 23 December Japan CPI inflation (Nov) Taiwan Industrial output (Nov) Singapore CPI inflation (Nov) US Durable goods orders, personal Income, Core PCE price index, and new home sales (Nov) Source: Saxo Spotlight: What’s on the radar for investors & traders for the week of 19-23 Dec? US PCE, China LPRs, RBA minutes, possible hints of BOJ policy review and earnings focus on Nike and FedEx | Saxo Group (home.saxo)

Summary:  At the annual Central Economic Work Conference held last week, the Chinese leadership emphasized policy priorities as being economic stability and high quality of development. Fiscal and monetary policies will be rolled out to support growth but will be measured. Industrial policies are aimed at promoting development as well as national security and focus on addressing the weak links and bottlenecks of the country’s supply chain. The most notable positive development from the meeting is a shift to a conciliatory stance towards the private sector and a pledge to support internet platform companies. The Central Economic Work Conference sends a conciliatory message to the private sector The Chinese Communist Party held its annual Central Economic Work Conference (CEWC) on Dec 15 and 16 to formulate China’s macroeconomic policy frameworks for 2023. The most important new message sent from the readout of the CEWC is a shift to a more conciliatory stance towards the private sector and in particular the internet platform companies. The CEWC removes last year’s “preventing the disorderly growth and expansion of capital” from its readout this year and instead says the authorities will “support the development of the private sector and private enterprises” and pledges “support to platform enterprises in leading development, creating employment, shining in competing globally”. It goes on to call for thorough implementation of the legal and institutional equal treatment of private enterprises and state-owned enterprises and protection of the rights of private enterprises and entrepreneurs according to the law. The CEWC instructs ranks and files of the Communist Party to provide assistance to private enterprises in resolving issues.On Sunday, two days after the conclusion of the CEWC, the Party Secretary of the Zhejiang province, who came to the office this month, paid a visit to Alibaba’s campus. He was the most senior-ranked official to visit the e-commerce giant since the Chinese authorities started cracking down on the allegedly monopolistic power of Alibaba ad some other Chinese internet giants. Prioritizing domestic consumption The CEWC prioritizes the stimulation of domestic consumption at the top position in its plan to expand aggregate demand. It pledges to roll out more fiscal policies to increase the income of the rural population and support household consumption spending on the improvement in housing conditions, new energy vehicles, and elderly care services. Speeding up technological innovation to boost development as well as national security The crux of industrial policy is to speed up technological innovation to address deficiencies and bottlenecks in key industrial supply chains. It reiterates the importance to develop energy and mineral resources and increase food production. On the new economy front, the CEWC highlights the focus on new energy, artificial intelligence, biomanufacturing, green technology, and quantum computing. Industrial policies are positioned as an instrument to address development as well as national security considerations. Supporting the property sector in the context of financial stability The CEWC places the discussion of supporting the property sector within the section of “effectively resolving significant economic and financial risks” and frames the policy discussion in that context. It puts the rhetoric of “housing is for living in, not for speculation”, which was missing in the statement from the recent Politburo meeting, back to the readout of the CEWC this time. The focus of the supportive measures to the property sector is to pre-emptively prevent systemic risks in the financial sector and local government debt crises. The CEWC insists on cleaning up and prohibiting increases in housing inventories. Macroeconomic adjustment and stability over pursuing high growth While the shift in the stance to be more private sector-friendly is pro-growth in essence, the CEWC emphasizes that growth must be of high quality and the overarching focus for 2023 was on macroeconomic adjustment and stability. Development must be in adherence to the new development paradigm that aims at the transformation to a high-value-added economy. Fiscal policies will be “proactive” and monetary policies will be “steady, forceful, and targeted”. At the same time, policies must be steady and give utmost importance to stability. In other words, while both fiscal and monetary policies will be expansionary, they will likely be measured. Growth is on a best-effort basis The CEWC pledges to “do its best to achieve the economic development goals from 2023”. It refrains from using the more committal words of “must” or “shall” and signals that the achievement of economic development goals will be on a best-effort basis. GDP growth rate is not the most important consideration for 2023. In the taxonomy of dialectic that is at the core of the communist methodology, the primary contradictions highlighted at the CEWC are pandemic control and economic development, quality and quantity in economic development, supply-side reform and aggregate demand management, and domestic circulation and international circulation. It is the aim of the Chinese leadership to navigate and strike a balance among each pair of these contradictions. While there are no massive waves of economic stimuli to come, the conciliatory stance towards the private sector is a positive development Investors may find the lack of commitment to more and larger-scale stimulus policies underwhelming and even disappointing. Nonetheless, the shift to a conciliatory stance towards the private sector and not reiterating the traffic-light approach to regulate the technology sector will contribute to economic growth as well as reduce risk premiums for investing in Chinese stocks. On balance, the outcome from the CEWC tends to be positive for investing in China.  Source: China Update: The Chinese authorities are expressing a more conciliatory stance towards the private sector | Saxo Group (home.saxo)

The National Bank of Hungary is expected to maintain policy rates unchanged. The decision is unlikely to affect the Forint, in the view of economists at Commerzbank.  MNB’s rate decision a non-event “A rise in the Hungarian inflation rate to 22.5% in November is no doubt unfortunate – this is the highest level since 1996. But the Hungarian central bank (MNB) will nonetheless keep its key rate unchanged at 13% today, which consensus is also expecting.”  “Initially inflation in December is likely to rise further after the fuel price cap was abolished. As a result, HUF might get a battering in mid-January when the December inflation data is published. Today’s rate decision is likely to be a non-event for the market though, thus not having much effect on the exchange rates.”

For several weeks, the world has been watching events related to the scandal around FTX. Today there was information about the development of the situation. Moreover, the American law may have more advantages than it might seem. In this article: Just take the chances – story of Lenny Pyrrhus IMF in Africa Extradition IRA Just take the chances Nearly 20 years ago, most of Lenny Pyrrhus' immediate family fled Haiti after his uncle, the popular musician known as Ti Pierre, was killed during a political protest against the repressive military-led government in 1991. Pyrrhus felt "drawn into a new world" when he arrived in the United States as a child. Pyrrhus says he was lucky to be enrolled in a school that did not hold back immigrant students by placing them in remedial classes. For Pyrrhus, this meant taking advantage of educational opportunities in the United States, where his mathematical talent led to a successful career. Today, he earns $130,000 as an infrastructure developer for JPMorgan Chase in Philadelphia. This seemingly simple story shows that a sudden change turned out to be a chance for a young man. The hero of this story himself can become an inspiration for many people to act, especially when the conditions are not favorable or this story simply teaches how to see opportunities. This 26-year-old fled violence in Haiti as a child — now he makes $130,000 working for JPMorgan. Here’s how he spends his money. https://t.co/CFaaO5zWTT (via @CNBCMakeIt) pic.twitter.com/gozJdBIDue — CNBC (@CNBC) December 20, 2022 Read next: The FCC Seeks More Than $200 Million From Four Cellphone Carriers| FXMAG.COM IMF in Africa The IMF's structural reform program in Kenya is progressing, albeit with some delays. In the areas of governance and transparency, the authorities have completed and published audits of COVID-19 vaccine spending and started publishing information on the beneficial owners of successful bidders in new contracts. However, progress on addressing the financial vulnerabilities of state-owned enterprises and the planned overhaul of the fuel pricing mechanism has been delayed during the political transition. The IMF Executive Board completed the fourth review of the EFF/ECF arrangements with Kenya, granting the country access to SDR 336.54 million As the data shows, the Kenyan economy remains resilient to difficult global conditions and is projected to grow by 5.3% in 2022. Inflation surpassed the Central Bank of Kenya (CBK) target range in June and is expected to peak in early 2023. The IMF Executive Board today approved the disbursement of $447.39 million (includes $215.81 million in additional low-cost financing) to Kenya under the current arrangement with the IMF to support the country’s reform program. https://t.co/HVi8q7sy2p pic.twitter.com/1OKWJnYy4P — IMF Africa (@IMFAfrica) December 19, 2022 Extradition Bankman-Fried was given the chance to speak to his U.S. counsel over the phone and then remanded back to the Caribbean nation's Fox Hill prison. He has decided to agree to be extradited to the United States to face fraud charges. Watch: Sam Bankman-Fried has decided to agree to be extradited to the United States to face fraud charges, a person familiar with the matter said, just hours after the FTX founder's lawyer told a Bahamas judge he was not ready to consent https://t.co/GSUFofn5OV pic.twitter.com/s2gyr94tTf — Reuters Business (@ReutersBiz) December 20, 2022 IRA For saving climate According to estimates by the US Congressional Budget Office, over 10 years energy and climate spending will amount to more than $390 billion, of which approximately $270 billion in the form of additional tax incentives for companies and individuals to seek and invest in cleaner and more efficient energy sources. Globally, we need $1.8 trillion in higher annual spending this decade to be on track to net zero by 2050. The Inflation Reduction Act (IRA), which aims to put the United States on an accelerated path to net zero The IRA also encourages concrete action. In August, First Solar, a U.S. solar technology company, announced $1 billion in additional U.S. investments to expand production capacity. It is expected that there will be more of these types of investments after an IRA is passed. While the IRA does a lot to attract and accelerate investment in decarbonizing the economy, it is not enough to drive the energy transition.   The U.S. Inflation Reduction Act is “shifting the worldview on the art of the possible” when it comes to investing in the country’s climate transition, according to our senior leaders. https://t.co/h0FX3sItN8 — Goldman Sachs (@GoldmanSachs) December 19, 2022

Industrial output rose 4.6% year-on-year in November (consensus: 2.2%; ING: 0.7%), following an increase of 6.6% in October (revised). Power generation turned out stronger than we expected while the decline in manufacturing production is gradual, which is consistent with the recent improvement in economic indicators in Germany and the eurozone   European industry has been supported by the better availability of components amid improvements in supply chains in recent months as well as reduced concern about possible gas shortages due to favourable weather conditions at the beginning of the heating season in Europe. As a result, domestic industries with a large share of production for export - (1) machinery and equipment, (2) electrical equipment, (3) automobile manufacturing - performed solidly. This does not change the fact that the performance of industry is expected to deteriorate in the coming quarters. Industrial output (month-on-month, SA) Solid activity amid improving euro area leading indicators   Further disinflation is evident in producer prices. PPI slowed to 20.8% YoY in November from 23.1% YoY in October. On a monthly basis, the PPI index declined for the first time since August 2020. Prices in the energy supply section increased on a MoM basis after two months of marked declines. Energy prices are now about 60% higher than a year ago. In manufacturing, the deepest year-on-year price decline was in the production of coke and refined petroleum products (-7.6% YoY). Prices also fell in the production of metals and electronics. The end of the year looks relatively favourable for domestic manufacturing, which is entering the slowdown quite gently, accompanied by a decline in inflationary pressures, although PPI inflation remains high. Domestic manufacturing once again confirms solid resilience to external shocks. Tomorrow's retail sales data will provide a better assessment of the health of the service sector in 4Q22. We currently forecast GDP growth in the current quarter of around 2.5% YoY. Read this article on THINK TagsPoland industrial production Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

2022 has been a volatile year for stock markets worldwide: with a 10-month decline and a recovery in the last two months, we are a long way from the highs. So what can we expect for 2023 on stocks and indices? Enjoy the viewing! 0:00 Intro 00:39 How severe is the 2022 bear market compared to previous bear markets? 1:35 How do our feelings change through an equity market cycle? 2:41 Being in drawdown is not unusual 4:23 Bear market comparisons: are we close to a bottom in equities, or do we have more to suffer? 5:29 The era of easy money is over! 7:16 What to expect next year regarding monetary policy and interest rates? 8:00 Why has inflation been so sticky? What could make inflation persist in 2023? 11:12 Best and worst sectors in case of a recession in 2023 14:05 Best trade idea for 2023   The second part of Outlook 2023: forex and commodities: https://youtu.be/kod851_Yx2Y Glenn began his investment management career in 1997 and has managed private client and family office wealth ever since. Glenn is the Founder & Managing Director of Harver Capital, an active macro investment manager at www.harvercapital.com. Ipek Ozkardeskaya has begun her financial career in 2010 at the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high-net-worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst at the London Capital Group in London and in Shanghai. She returned to Swissquote Bank as a Senior Analyst in 2020. #swissquote #investing #stockmarket #indices #bearmarket #inflation #tradingideas #spx #outlook #outlook2023 #recession _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars, and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

Summary:  Risk sentiment bounced yesterday after December US Consumer Confidence came in far stronger than expected, jumping to an eight-month high. And yet, US Treasury yields fell gently all along the curve yesterday, in part as the same US confidence survey showed inflation expectations dropping more quickly than expected and on a strong 20-year US treasury auction. In FX, the Aussie has rebounded sharply on hopes for stimulus measures in China and a friendly diplomatic tone in recent talks between Australian and Chinese leaders.   Note: This is the final Saxo Market Quick Take until Monday January 2, 2023. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rallied 1.5% yesterday closing above the 50-day moving average as positive earnings from Nike helped lift sentiment yesterday and provided a positive assessment of the US consumer. Equity trading will slowly enter hibernation as the holiday period approaches so expect little price action today and tomorrow. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) rallied on stimulus rhetoric and talk of shortening quarantine The Hang Seng Index rallied 2.4% and CSI 300 climbed 0.4% as of writing, after China’s State Council, the People’s Bank of China, and the China Securities Regulatory Commission separately released meeting readout or statements to pledge to implement the decisions from the recent Central Economic Work Conference to boost the economy, support the property sector, and the internet platform companies. Adding to the risk-on sentiment is market chatter about the shortening of quarantine to three days. Mega-cap China internet stocks surged 3% to 6%. Leading retail and catering stocks jumped by 2% to 11%. FX: choppy markets as USD starts day on a weak footing Some gentle back and forth in FX yesterday as the USD put on a show of rallying, while most of the action has been in the crosses and the greenback has eased back lower after a strong session for risk sentiment yesterday and lower US treasury yields helping USDJPY back lower after its traumatic sell-off and broad JPY rally on Tuesday’s surprise tweak of BoJ policy. The biggest mover to the upside has been the Aussie, which is enjoying the more friendly diplomatic tone with China and has suddenly rallied in the crosses, especially in AUDNZD, on more rhetoric overnight from China on its intent to boost growth. Crude oil (CLG3 & LCOG3) rally extends on US inventory data Crude oil closed at the highest level since December 5 after the US DoE inventory reports showed a nearly 6M barrel draw on crude oil stocks, while gasoline inventory levels rose nearly 2.5M barrels, a half million more than expected, and distillates inventories fell –242k vs. A rise of 1.5M barrels expected. Gasoline and distillate stocks have been generally building of late, but the latter remains slightly below the inventory range of the past 5 years. Gold (XAUUSD) and silver (XAGUSD) remain near recent highs ... after surging in the wake of the Bank of Japan policy tweak on Tuesday and despite yields easing lower yesterday in the US. BOth 2020 and 2021 saw gold ending the year on a strong note and then sharp follow-on rallies in January were quickly reversed. Yields on US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) remained subdued despite surge in US Consumer Confidence US Treasury yields eased lower all along the curve yesterday despite a large and unexpected surge in US Consumer Confidence as that same survey’s drop in inflation expectations may have received more attention. Later in the day, a strong US 20-year auction, where bidding metrics were the firmest since this spring. End-of-year portfolio rebalancing may obscure the next bigger move for treasuries until we roll into the New Year. What is going on? Mixed U.S. data: weaker home sales, higher consumer confidence, lower inflation expectations Economic data were mixed. The 1-year-ahead inflation expectation in the Conference Board Consumer Confidence survey softened from 7.1% in November to 6.7% in December, the lowest since September of 2021. On the other hand, Headline consumer confidence as well as the present situation and expectations components rose in the Conference Board Consumer Confidence survey. The headline consumer confidence improved to 108.2, (vs consensus 101.0; Nov: 101.4), the highest level since April this year. Elsewhere, the annualized rate of existing home sales fell -7.7% in November, the 10th consecutive month of declines as the historic surge in US mortgage rates this year continues to pressure the US housing market. Micron shares down 2% as glut in memory chips continues The US memory chip manufacturer delivered last night a positive surprise on FY23 Q1 (ending 1 December) adjusted EPS at $0.04 vs est. $-0.88 and announced a 10% headcount reduction to reduce costs. The real negative surprise was the Q2 revenue outlook of $3.6-4bn vs est. $3.9bn and the Q2 adjusted gross margin of 6-11% vs est. 17.8% suggesting significant pricing headwinds compared to market expectations. Micron is also drastically reducing its 2024 capex plans. China and Australia seek to improve the relationship between the two countries During a phone call to mark the 50th anniversary of the official diplomatic relationship between China and Australia, China’s President Xi told Australian Prime Minister Anthony Albanese that China would seek to “promote a sustainable development of the China-Australia comprehensive strategic partnership”. Meanwhile, Australian Foreign Minister Penny Wong told reporters that China and Australia agreed to continue high-level dialogue on issues including the removal of China’s trade sanctions on Australian goods. What are we watching next? Japan’s November Inflation data up tonight After an historic move in the JPY this week, the market will be watching the latest batch of Japan’s CPI data, which has surged to multi-decade highs recently and is expected in at +3.9% YoY for the headline and +2.8% YoY ex Fresh Food and Energy. The rally in the JPY by some 12% from its lows of two months ago will help moderate the relative inflation risks for Japan. US PCE inflation data for November out tomorrow This is arguably the last interesting macro data point out of the US until the first week of the New Year. The PCE data is expected to show that core inflation will drop sharply to 4.6% YoY vs. 5.0% in October, while the headline is expected in at 5.5% versus 6.0% in October. Hotter than expected inflation readings will be an interesting test for markets in coming months as the market has a strong view that the Fed is poised to halt rate hikes as soon as Q2 of next year and will be cutting by year end, despite the Fed “dot plot” projections suggesting the Fed will have a policy rate at the end of next year of above 5% (versus 4.25%-4.50% now). Earnings to watch The earnings calendar is winding down for the year, with payroll and HR-services company Paychex reporting today before the market opens and struggling US used car seller and servicer CarMax, which is trading near its lows for the year, likewise reports before the market open today. Today: Paychex, CarMax Friday: Nitori Economic calendar highlights for today (times GMT) 1100 – Turkey Rate Announcement 1330 – US Weekly Initial Jobless Claims 1530 – US Weekly Natural Gas Storage Change 2330 – Japan Nov. CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:   Source: Financial Markets Today: Quick Take – December 22, 2022 | Saxo Group (home.saxo)

USD/CAD holds lower grounds near intraday bottom, prints four-day downtrend. Cautious optimism, downbeat Treasury yields weigh on US Dollar. WTI seesaws near 13-day high amid hopes of more demand on winter, travel concerns. USD/CAD takes offers to refresh intraday low near 1.3580 during early Thursday morning in Europe. In doing so, the Loonie pair drops for the fourth consecutive day while extending the previous day’s downside break of a short-term key support trend line toward another support line. That said, the quote’s latest weakness could be linked to the broad US Dollar weakness, as well as firmer prices of WTI crude oil, Canada’s main export item. It should be noted that the mixed prints of Canada inflation data failed to recall USD/CAD buyers the previous day. US Dollar Index (DXY) drops half a percent to around 103.85 at the latest as the US 10-year Treasury yields remain depressed at around 3.65%, extending the previous day’s pullback from the monthly high. WTI crude oil prints mild losses as it pares the daily gains around $78.40. Even so, hopes of more energy demand due to fierce winter and more travel forecasts keep the black gold positive on a weekly basis. On Wednesday, Canada’s Consumer Price Index (CPI) declined to 6.8% YoY in November from 6.9% in October, versus market forecasts of 6.7%. Further, the more important reading of inflation, namely the Core Bank of Canada (BOC) CPI, which excludes volatile food and energy prices, remained unchanged at 5.8% YoY. It should be noted that the Bank of Japan’s (BOJ) second unscheduled bond-buying joins the cautious optimism in the market, as portrayed by mildly bid stock futures and Asia-Pacific equities, also exert downside pressure on the USD/CAD prices. Bloomberg cites China’s State Council and the People’s Bank of China (PBOC) to hint at more positives for the dragon nation and revives the market’s optimism of late. “China’s State Council, People’s Bank of China (PBoC) and the country’s top securities regulator jointly conducted a study during last week’s economic policy meeting, aiming to prioritize growth and boost the property market in 2023,” reported Bloomberg. Alternatively, news suggesting China’s biggest budget deficit on record, for the January-November period, joins the Russia-Ukraine woes to probe the USD/CAD bears. Looking forward, final prints of the US Gross Domestic Product (GDP) and Core Personal Consumption Expenditure (PCE) details for the third quarter (Q3) could entertain traders ahead of Friday’s US Core PCE Price Index for November, also known as the Fed’s preferred inflation gauge. That said, the US GDP is expected to confirm 2.9% Annualized growth in Q3 while the Core PCE is anticipated to also meet the initial forecasts of 4.6% QoQ during the stated period. Technical analysis A clear downside break of the two-week-old ascending trend line, around 1.3630 by the press time, directs USD/CAD bears towards an upward-sloping support line from November 15, close to 1.3540 at the latest.

Summary:  In this Special Edition of the podcast, we discuss the Saxo 2023 Outrageous Predictions for 2023, based on the theme of The War Economy. Our Outrageous Predictions are a yearly exercise in looking at possible, if improbable events that may unfold in the year ahead and will alter the investment landscape if they do come to pass. This Special Edition podcast features Editor-in-Chief of the 2023 Outrageous Predictions John J. Hardy and major contributor Peter Garnry. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Special Edition - Saxo Outrageous Predictions for 2023 | Saxo Group (home.saxo)

Bank Indonesia hikes rates by 25bp, as expected.  BI set to continue tightening in early 2023. Indonesia's central bank governor Perry Warjiyo 5.5% 7-day Reverse Repurchase rate   As expected BI hikes again but downshifts to less aggressive tightening In a move widely anticipated by market participants, Bank Indonesia (BI) has hiked policy rates by 25bp to 5.5%.  Price pressures have abated somewhat, as evidenced by the recent slip in headline inflation and we believe that inflation in Indonesia may have peaked.  The softer inflation reading - combined with the general outlook for growth challenges in 2023 - convinced the central bank that a less forceful rate hike should be rolled out today.  A similar downshift in the pace of tightening from global central banks also allowed BI to implement the 25bp increase in policy rates today.    BI rolls out 25bp rate hike as inflation pressures ease Source: Badan Pusat Statistik Rate hikes set to continue in early 2023 Despite the pullback in the pace of tightening, we believe BI will continue with the current tightening cycle next year.  BI believes that the Fed will continue to hike rates in the first half of 2023 and we could see BI following suit with rate hikes of their own.  The IDR has come under some pressure to close out 2022 and we believe BI will need to match Fed rate hikes to help maintain FX stability.  With BI’s policy rate at 5.5%, IDR should move sideways to close out the year - with investors monitoring the fallout from the recent bond buyback announcement from the national government.  Read this article on THINK TagsIDR Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Summary: S&P500 shed 1.5% and Nasdaq 100 tumbled 2.2% following an upward revision to the U.S. Q3 GDP data that dashed investors’ optimism of goldilocks of moderation of inflation and a potential soft landing. Among today’s several economic data releases from the U.S., all eyes will be on the November PCE report which has the most potential to shape expectations on the Fed’s policy path. This is the last Market Insights Today for 2022. Our first edition for 2023 will be on 3 January. We would like to wish all our readers a joyous festive season and happy New Year.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) reversed and fell on upward revision in Q3 GDP U.S. equities reversed the gains from the previous session and tumbled on an upward revision in the Q3 GDP to 3.2% from the previously reported 2.9%. Coming in at 216K, the initial jobless claims increased less than the 222K expected. Investors were whipsawed by the hope of goldilocks of moderation of inflation and a soft landing and the fear of the persistent strength in the labor market and the economy preventing the Fed from lifting its foot from the brake. A day after the hope on Wednesday, investors succumbed to fear on stronger than expected economic data that were taken as bad news for the market. S&P500 fell by 1.5% and Nasdaq 100 shed 2.2% on Thursday. All 11 sectors within the S&P 500 declined, with laggards of consumer discretionary, information technology, and energy falling over 2% each. Tesla (TSLA:xnas), plunging 8.9% was once again the top loser in the S&P 500 as well as the Nasdaq 100. Please refer to Peter Garnry’s notes on more about the harsh reality that Tesla is facing. Following the gloomy demand outlook from Micron (MU:xnas), the semiconductors were sold off, with Lam Research (LRCX:xnas) falling 8.7%, Applied Material (AMAT:xnas) down 7.8%, Nvidia (NVDA:xnas) down 7%, and Advanced Micro Devices (AMD:xnas) down 5.6%. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) cheapened on strong economic data Q3 GDP was revised up to 3.2% from the previously reported 2.9%. The personal consumption component was revised up to 2.3% from the previously reported 1.7% on firmer services consumption. The quarterly core PCE in the Q3 GDP report was revised up to 4.7% from the previously reported 4.6%. The monthly PCE and core PCE for November are scheduled to release today. The stronger-than-expected GDP revision saw yields on the 2-year Treasuries 6bps cheaper to 4.27%. The long-end’s reaction to the data was muted with yields on the 10-year 2bps higher to 3.68%. The demand in the 4-week and 8-week bill auctions was good while the demand in the 5-year TIPS auction is relatively subdued. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) rallied on stimulus rhetoric and talk of shortening quarantine The Hang Seng Index rallied 2.4% and CSI 300 climbed 0.4% as of writing, after China’s State Council, the People’s Bank of China, and the China Securities Regulatory Commission separately released meeting readouts or statements to pledge to implement the decisions from the recent Central Economic Work Conference to boost the economy, support the property sector, and the internet platform companies. Mega-cap China internet stocks surged, with Alibaba (09988:xhkg) up 4.1%, Tencent (00700:xhkg) up 4.1%, Meituan (03690:xhkg) up 6.8%, and Bilibili (09626:xhkg) up 9.6%. Adding to the risk-on sentiment is market chatter about the shortening of quarantine to three days. Leading retail and catering stocks soared. Xiabuxibu (00520:xhkg) jumped 15.7% and Haidilao (06862:xhkg) rose by 7.6%. Li Ning (02331) surged 7.4%. Educational services providers continued to rise in anticipation of potential loosening restrictions over the sector. FX: US dollar little changed versus major currencies The U.S. dollar tread water in thin trading ahead of a busy economic calendar today in the U.S. with the closely watched PCE deflators, plus personal spending, durable goods, new home sales, and the U. of Michigan Consumer Sentiment Survey. USDJP and EURUSD were nearly unchanged at 132.30 and 1.0600 respectively. GBPUSD was moderately lower at 1.2030, down 0.4% and AUDUSD was down 0.5% to 0.6670. What to consider? Japan’s November CPI in line with expectations Japan’s national CPI released this morning came in basically in line with expectations. The headline CPI ticked up to 3.8% Y/Y from 3.7% in October but below the 3.9% consensus forecast. CPI excluding fresh food and CPI excluding fresh food and energy were as expected, being at 3.7% Y/Y (vs consensus: 3.7%, Oct: 3.6%) and 2.8% Y/Y (vs consensus: 2.8%, Oct: 2.5%) respectively in November. US November PCE may be on course for further easing for now US inflation is cooling, but we argue that the debate at this point needs to move away from peak inflation to how low inflation can go and how fast it can reach there. Fed’s preferred inflation gauge, the Core PCE, will continue t,o remain in focus especially after Powell has highlighted it a key metric recently at both the Brookings Institute and the December FOMC press conference. However, PCE may now slow as rapidly as CPI with the two key restraining components – goods and energy – likely to play a smaller part in PCE. Expectations are for a November reading of 5.5% Y/Y reading vs a previous reading of 6.0% Y/Y while the core is expected to come in at 4.6% Y/Y from 5.0% Y/Y in October. Still, risks to inflation remain tilted to the upside going into 2023 as financial conditions have been easing and China’s reopening brings a fresh wave of inflation risks. For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: U.S. stocks reversed and fell on upward Q3 GDP revision ahead of today’s November PCE deflator – 23 December 2022 | Saxo Group (home.saxo)

In the view of economists at ING, recession will accelerate inflation's slide and allow the Federal Reserve to respond with rate cuts before 2023 is out. Recession risks mount as businesses pull back “We're likely to see the jobs market and the outlook for business capital expenditure deteriorate markedly over the next couple of quarters. While the US entered a technical recession in the first half of 2022, this was tied to legacy supply chain issues which led to volatility in trade and inventories. A recession will feel much more ‘real’ this time around.” Inflation set to hit 2% “Corporate pricing power already appears to be waning based on survey evidence. The deteriorating activity story will help dampen price and wage pressures further. The composition of the US inflation basket, which is heavily skewed toward housing and vehicles – accounting for more than 40% by weight – is also important for our call that inflation will hit 2% by the end of the year.” The Fed will respond early and fast with rate cuts “With the Fed continuing to suggest the risk of doing too little outweighs the risk of doing too much, it appears prepared to accept a recession to ensure inflation is defeated. Given this situation, there is some upside risk to our forecast of 100 bps of rate hikes from here on. But given the prospect of recession and sharply lower inflation, the Fed will be in a position to cut interest rates in the second half of the year.”  

Entering 2023, we expect headline CPI to head down to 4%. Gasoline prices and utility fees are set to rise meaningfully but base effects will anchor headline CPI Source: Shutterstock 5.0% Consumer Price Inflation % YoY Lower than expected Headline CPI rose by 5% YoY for a second month in December Both headline and core inflation were unchanged for a second month in December. Headline CPI remained at 5.0% YoY, slightly lower than the market consensus of 5.1%, with core CPI remaining at 4.8%.  Electricity, Water and Gas (EWS) rose the most - by 23.17% - while fresh vegetable prices fell (by 2.5%) for the second month. Among services, rent slowed to 1.4% in December (vs 1.6% in November). Given Korea's two-year lease structure, the sharp declines observed haved have only gradually been reflected in CPI. We expect the trend to fall in the coming months.  Rents set to decline in the coming months Source: CEIC, ING estimates CPI Outlook The government and KEPCO announced today that electiricity rates will rise by 11.4 won (9.5%) per KWh from 1 January, pushing up CPI by about 0.15 pt. On top of this, gasoline tax cut will be reduced from 37% to 25% also from 1 January, adding another 0.12 pt. Combined, the two will boost CPI by about 0.3 pt in January.  This will trigger the secondary effect of further price hikes over time, and other public service fees such as public transportation rates are also planned to rise.  Thus, headline CPI is set to remain above 2% throughout the year. We still expect downward pressure to grow due to sharp declines in rents and weak demand-side pressures.  Base effects will likely lower headlince CPI early next year, thus we look for a level of 4% for CPI in 1Q23.  CPI inflation set to stabilize in 2023 Source: CEIC, ING estimates Read this article on THINK TagsSouth Korea CPI inflation Bank of Korea Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Back to the 70s Even superficially assessing the current situation, there are similarities to the first half of the 1970s considerable. The war (then in the Middle East) and the resulting rise in oil prices characterize both periods. Surprisingly, even the scale of the raw material price increase was similar. In 72-74 it was 182% as measured by the GSCI price index, while now (April 2020 to June this year) it is 199%. However, there are more similarities. Let's start with the positives. In 1974, the peak in the commodity market also marked a peak inflation (for several consecutive years). The Commodity Price Index peaked in November 1974 and it was then that the highest level of inflation in the United States was recorded. Core inflation (without energy and food prices) reached its peak 3 months later. Imposition on the commodity price index and annual inflation show a clear correlation. The US inflation shock of 1974 2021/22 US inflation shock GSCI CPI y/y Core CPI y/y The fall in commodity prices in 1974 helped bring inflation down to lower, though still unsatisfactory, levels. Source: Macrobond, XTB Research It would seem that this supports the market's expectations of a fall in inflation, confirmed recently by a much lower level of the ISM Prices Paid Index. However, it is worth noting that this drop occurred before the peak of the GSCI index, and the inflation relation itself seems to be stronger with the GSCI index. Therefore, the transaction prices component of the ISM is rather of secondary importance to us. It is worth noting, however, that it is not about the peak level of inflation itself, but about its return to the target, that is 2%. In the 1970s, the Fed did not yet have an inflation target (it was introduced only in 1995), but we can clearly see that core inflation before the shock did not exceed 3%, while after 1974 it did not fall below 6%, and from 1978 it started to grow again. Why? Custom recession The labor market is often cited as the cause of inflation in the 1970s. Big role unions meant pressure to increase wages, and higher wages allowed for the acceptance of higher prices. It is worth noting, however, that wage growth at the peak of inflation (approx. 5.5%) in the US was similar to today's, and lower in real terms (data for 2020 and the first half of 2021 are a deviation from the trend due to temporary layoffs low paid workers). Prices started rising in 1975 and this helped anchor inflation at higher levels. Inflation vs Wages, 1974 Inflation vs Wages, 2021/22 Salaries y/y CPI y/y Core CPI y/y Wage growth was one of the factors anchoring inflation at higher levels in the 1970s and should be watched closely today as well. The publication of the NFP report is usually held on the first Friday of each month. Source: Macrobond, XTB Research The fact that inflation began to fall along with commodity prices was the result of a deep recession triggered both by price increases and Fed policy. A weakening economy usually eases the pressure and therefore inflation often falls in line with weaker macroeconomic readings. In In the 1970s, inflation rose with weaker macroeconomic readings, because weaker economic data was the result of higher inflation. It's the same today. Why Didn't the Fed Beat Inflation? In short, he feared the recession. Let's start with the Federal Reserve anyway she was in a better position then. In 1972, no time was wasted whining about temporary inflation, but interest rates were aggressively raised (from 5 percent to 13 percent in just two years). However, a sharp economic downturn and a rise in the unemployment rate caused the white flag to be waved and in just a few months the main Fed interest rate returned to its baseline. This revived the economy, but with it inflation and wage pressures. Fed inflation and interest rates, 1974 Fed inflation and interest rates, 2021/22 Fed interest rates CPI y/y Core CPI y/y The Fed capitulated completely in 1974. The rapid retreat from monetary tightening allowed economic and market recovery, but it perpetuated higher levels of inflation. Will the FOMC headed by Jerome Powell do the same? Source: Macrobond, XTB Research This time, the Fed only started raising rates just before inflation peaked. So it won't surprisingly, the cumulative effect of tightening will be much smaller, and the possible pivot in monetary policy much more risky in terms of inflation persistence the American economy. What now? In the realities of a strong labor market and high dynamics of price growth, the Fed can ignore it persistent inflation at your own risk. As proved above, too fast relaxation monetary policy caused another spike in inflation in the 1970s and the Fed – despite promising signals from the commodities market - may consider a very similar scenario. Reserve Federal now has two options: Option 1 - PIVOT. This is what the markets expect. Investors hope the Fed will back off path of monetary policy tightening and will allow economic recovery. this scenario would most likely lead to a return to inflation, but it would be a worry for the markets for later. Pivot Fed could have a positive impact on US indices, oil, precious metals or cryptocurrencies, and negative on the dollar. Option 2 - fighting inflation. This is what the Fed is constantly communicating: we want to make sure that inflation it will fall to the level of 2% and will remain there, argue the members of the Reserve. The question is - whether The Fed will be able to continue to tighten monetary conditions in the face of potentially painful economic downturn? If the answer is yes, it may be negative signal for US indices, oil, precious metals and cryptocurrencies, and positive for US dollar.

Energy resources: OIL, NATGAS The entire world is heavily dependent on conventional energy sources such as oil petroleum, natural gas or coal, so there is a clear connection between the raw materials energy and inflation. When prices move moderately, producers do not they change react immediately because they can take advantage of economies of scale. The problem occurs in when the price increases several times and the producers' costs have to be passed on to consumers. As we mentioned earlier, the current situation is reminiscent of the 70s of the last century, when the energy crisis led to an inflationary spiral. As then, so now the supply of oil is strongly limited (initially artificially, and now due to problems in the supply chain and lack of appropriate investment in production capacity). It is true that the supply is slowly growing, but the demand recovers much faster, which has led to a huge increase in raw material prices. Oil and natural gas prices in Europe have already started to fall from near historic highs. The question, however, is whether the market is experiencing demand destruction? Stocks of raw materials are at exceptionally low levels, with no greater ones on the horizon investment in the extractive sector, and countries with spare production capacity will take advantage of the current high prices. Therefore, there is a risk of extending the period of highs prices, as it was in the 1970s and in 2011-2014. In addition, when we adjust oil prices for inflation, we can see that after the initial increase at the beginning in the 1970s, the valuation of this raw material remained at a high level until the early 1980s. It is another argument proving that without an adequate increase in supply, high oil prices can stay with us longer. Forex market: EURUSD, USDJPY The recent return of higher and volatile global price dynamics has triggered a surge exchange rate volatility and depreciation of the currencies of countries with the highest inflation rate. In In times of economic uncertainty, investors tend to turn to safe haven currencies (the so-called safe havens of the foreign exchange market), mainly the US dollar. Also and this time it was no different, and the dollar index rebounded from the June 2021 lows by over 20%. Meanwhile, the trade-weighted index (TWI) remains at elevated levels. This index, adjusted for inflation, measures the strength of the US dollar against the currencies of major partners of the United States. We see that the TWI REER USD index has strengthened significantly in recent years, which may indicate that the dollar is overvalued. When it comes to EURUSD, however, the situation is more complicated. In mid-July 2022 euros reached parity with the dollar, falling to its lowest level in 20 years. this fall it was triggered not only by the strength of the US currency, but also because of the crisis as a consequence of the war between Russia and Ukraine. High energy prices in Europe have worsened trading conditions in the euro area, leading to an even greater depreciation of the single currency. There is no indication that energy prices will fall in the near future, but if such a scenario materializes, the euro would have a chance to move away from the parity level. In the case of EURUSD, the market's attention is focused on the weakness of the euro, while in the case of USDJPY monetary policy sets the pace. Since the early 2000s, the Bank of Japan has pursued an ultra-loose policy monetary policy while controlling the bond yield curve. This has not changed even after inflation started to rise. Meanwhile, the Fed turned its stance 180 degrees to strangle inflation through aggressive interest rate hikes. The difference in bond yields is a key factor for this pair, even if the Bank of Japan decides to change its current policy. Cryptocurrencies: BITCOIN, ETHEREUM Cryptocurrencies are still a young asset class. The history of Bitcoin goes back a little over 10 years, a most of the remaining cryptocurrencies (so-called altcoins) were created after 2017, which is why the reactions of the cryptocurrency exchange rate to the increase in the level of inflation are not sufficiently known. from this Therefore, when trying to assess digital asset quotes, it is difficult to rely solely on on historical data. Due to the tendency of investors to buy cryptocurrencies as part of diversifying their exposure to traditional financial markets, as well as the involvement of institutions in this market, begins to be a visible correlation between the reactions of debt-financed companies and the price of Bitcoin. Movements Cryptocurrency rates in response to rising inflation are beginning to resemble stock market reactions, which based on historical data are a bit easier to track and analyze. As a rule, rising inflation is not conducive to the valuation of risky assets and becomes a disadvantage for them burden when central banks decide to tighten monetary policy. Rate hikes interest rates, difficulties in obtaining capital and the rising cost of living in a recessionary environment indicate a decrease in risk sentiment and decreases in the valuation of risky assets. having it in mind, the cryptocurrency market will not be helped by rising inflation, which prompts banks to raise Stop. Therefore, even if the trend of cryptocurrency adoption continues - and they are noticeable signals that this is the case - movements on the charts of individual cryptocurrencies may resemble those of US100, only on a larger scale. Five key facts about cryptocurrency adoption BlackRock creates a bitcoin trust fund for US investors institutional and begins cooperation with Coinbase JP Morgan creates an open living room inside the Decentraland metaverse and explores the possibilities blockchain technology Ethereum processed 1.45 million smart contracts in Q1 2022 vs. 1.16 million in Q4 2021 (up 25%) NFT popularity is growing: 7.84 million transactions in OpenSea in Q1 2022 vs. 4.85 million carried out in Q4 2021 (up 61.6%) 46 million Americans own Bitcoins and 1 billion people will use cryptocurrencies in over the next 4 years

Falling inflation scenario still at play Ken Leech Chief Investment Officer Western Asset Where are you looking in 2023 to position to best maintain yield averages? Inflation has proceeded faster and for longer than we antici- pated, and the damage to fixed income investments has been commensurate. However, we believe a falling-inflation scenario is still at play—one that would provide some comfort and respite to bond investors. In our analysis, bond yields are also now at very attractive levels—the 10-year US Treasury bond is at its highest rate since 2008. Given these factors and current market pricing, the priority for us over the next 12 months is to position portfolios to best maintain our current yield advantage relative to benchmarks. We see opportunities in specific places across fixed-income sectors. Can you provide some examples of opportunities? The combination of higher rates, wider spreads and de minimis defaults makes a good case for owning IG credit, despite macro concerns. Fundamentals at the corporate level still appear very good to us, given issuers’ conservative approach to balance-sheet management. Looking ahead, companies are going to face some challenges. Margins are likely to continue to feel the squeeze from elevated labor, financing and input costs. Corporates are already feeling the effects of significant wage increases, as evidenced by the first layoff announcements from various technology companies. In the United States, corporate fundamentals may have peaked, but they are coming off a strong starting point. Concerns abound that earnings will decelerate given tighter financial conditions, rising input costs and the currency impact of a surging US dollar. We see opportunities in banking (where we expect further ratings upgrades), energy, select reopening industries (such as airlines, cruise lines and lodging), and rising-star candidates. In Europe, utilities face higher funding needs, but with government support we see some opportunities in this space. Yields at multi-year highs look attractive to us. In particular, we like the three- to five-year part of the market. We find the most value in financials and real estate investment trusts (REITs) and are cautious on more cyclical consumer- facing sectors. Additionally, we believe the quality of the HY market is the best it’s been in decades. Fallen angels downgraded from IG ratings during the COVID-19 pandemic put a significant amount of BB rated issues in the HY index. However, we continue to be extremely selective, choosing issues name by name. We also continue to favor IG energy. In the United States, we believe HY credit spreads are relatively attractive. In our analysis, default rates are likely to rise from very low levels in the coming quarters, but yields are providing ample cushion for higher defaults. We continue to see opportunity in service-related sectors that are still recovering from the COVID-led recession and potential rising stars In Europe, credit fundamentals face challenges including slowing regional growth, elevated energy prices, and tightening financial conditions. We see value in BB and B rated issues—focusing on more defensive industries, including telecommunications/cable and health care. With your forecast that home prices are poised to have a major pullback, what are the challenges/opportunities in sectors like mortgage-backed securities (MBS) in 2023? While we expect the homebuilding market is in for a major pullback as well as substantial home price declines, we see selective opportunities. Here are a couple of examples: For agency MBS, diminishing Fed and bank demand coupled with increased volatility remain headwinds, but we believe the fundamental picture has greatly improved as spreads have widened significantly and look attractive historically, while prepayment risk has subsided. For non-agency commercial MBS (CMBS), fundamentals vary by sector, with continued strength in multi-family, industrial and lodging, but challenges remain in retail and office. Macro and rates pressures are depressing prices across the market; however, if volatility declines, we believe attractive yields are available across the capital stack for high-quality credits. Why do you think inflation is likely to decline? Whether you focus on demand and supply as the driver of prices, on interest rates, or on the money stock as a measure of Fed policy, we believe all of these indicators point to a substantial moderation of inflation in the near future. Furthermore, looking at economic conditions “on the ground,” pricing in the goods and housing sectors is already moderating

Alternatives: The hunt for diversification In looking beyond stocks and bonds for diversification, many times access to alternatives limits investors. However, if this limitation can be overcome, investors might consider adding private credit or commercial real estate for greater risk-adjusted returns. Beyond the potential for less correlation to stocks and bonds, there may also be potentially higher returns in exchange for a longer-term commitment of assets. Why do some options have the potential for less correlation? For private credit, the modern market emerged after the GFC to fill the void banks left as they significantly reduced their lending to small- and medium-sized businesses. We believe emphasis needs to be on selecting top-tier managers, who not only specialize in finding genuine value, but in avoiding accidents—not indexing the category. Similarly, a different correlation from commercial real estate can come from some automatic adjustment to inflation, as rental rates often align with price increases. While current levels of inflation and the possibility of recession are chal- lenging for real estate investors, segments including industrial warehouses, life science facilities, and multi-family rental properties can provide strong returns as well as a hedge against inflation. In the alternatives section, we provide outlooks for two areas that may help with diversification: infrastructure and commercial real estate. Think diversification After a tough 2022, many investors may feel like standing on the sidelines. That sentiment, however understandable, is best avoided. As inflation declines, bond returns will likely recover, as will the potential diversification benefits of holding bonds alongside stocks and select alternatives. While it may be premature to dive into the equity markets, focusing on select themes may deliver better overall portfolio returns in 2023. For specific thoughts on allocations, we direct you to Allocation Views, our quarterly publication from the Franklin Templeton Investment Solutions team, to see how they are approaching 2023. The silver lining from 2022’s difficult markets appears to be an improved potential for long-term returns, and the return of diversification within multi-asset portfolios. In what follows, our investment teams offer their perspectives and, most importantly, their key investment opportunities for 2023.

After two years of lockdowns, COVID deaths, and rising sentiment and unrest, it was hoped that 2022 would bring some relief. Instead, 2022 turned out to be a difficult year in a year where no gnews would fall very well. We have wars, rising interest rates, rising inflation. Central banks around the world have taken action to combat the high level of inflation, including the ECB. The data is far from the expected 2% and as you can see the fight is not over. Inflation reports from the old continent will be presented next week. CPI data The week between Christmas and New Year's is usually very data-poor, and there were no Tier 1 events in Germany or the Eurozone this week. Spain released flash CPI estimates for December, which showed that inflation continued to weaken. CPI fell to 5.8% from 6.8% and below estimate of 6.0%. Inflation in Spain fell for the fifth consecutive month as energy costs continue to fall. The next week may prove to be more important for the European Union, as the inflation report will appear. Moreover, reports from Member of UE will be just as important. The ECB will be keeping a close eye on these inflation reports and the data will be an important factor in the ECB's decision on the pace of future rate hikes. Next Friday, Eurostat will give its first look at consumer prices in the euro area at the end of 2022. It predicts a decrease in the annual growth rate of basic consumer prices from 10.1% in November to 9.6% in December. Source: investing.com Energy situation Russian President Vladimir Putin's invasion of Ukraine on February 24 triggered a price shock, sparked an energy crisis and brought supply chains to a halt. Not to mention thousands dead, millions homeless and a kind of Cold War that pits Russia, with the exception of Iran and North Korea, against the rest of the world. The high volatility in the markets has persisted since the invasion and there is no end in sight. In 2021, Europe imported $117 billion worth of energy from Russia, which was about 40% of Europe's consumption of natural gas and 30% of its oil. It has yet to move away from relying on Russia, leaving European countries struggling to replenish their underground gas reserves for the colder winter months. Until recently, Europe received large amounts of natural gas from Russia via the Nord Stream pipeline. However, flows were halted in late August when Russia cut off flows to Europe via Nord Stream in response to Western sanctions. Russia is set to increase diesel exports next month before EU oil sanctions go into effect in February. Fuel deliveries from Russian ports in the Baltic and Black Seas will increase to 2.68 million tons in January. By February 5, the European Union will ban imports of Russian petroleum products, which it heavily relies on for diesel production. This follows a ban on Russian oil that came into effect in December. Should a recession be expected? Recessions in Europe seem inevitable as gas prices rise. Meanwhile, the central banks of Europe and the UK are determined to bring down inflation by continuing to raise interest rates. While recessions around the world have been suggested, analysts say they will only be mild. The outlook for 2023 remains uncertain. The war continues. Interest rates will go up until inflation goes down. Source: investing.com

Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, notes that EUR/USD stays near 6-month highs to start the new year and the US Dollar Index holds near six-month lows Eurozone is facing a recession "USD weakness remains the dominating subject on the FX market. Because the market still does not believe the Fed’s affirmations that it will not cut the key rate. It has revised its expectations a little since the last FOMC meeting, but not substantially." "This mistrust must not surprise, as the FOMC members have been incorrect with their forecasts too many times in the past. I still remember very clearly their – in retrospect – absurd dots from 2009 and the following years." Read next: Twitter Did Not Pay $136,260 Rent, Microsoft Reported Its Worst Quarterly Results In Years| FXMAG.COM "In contrast all those who celebrated New Year’s eve in a T-shirt in Europe are likely to feel less concerned about a shortage of gas. This factor that had been putting pressure on the euro, which had already eased in Q4, is thus disappearing even more quickly." "Of course, the Eurozone is facing a recession. However, if this is one that is “only” due to a tightening of monetary policy it will not be as damaging for the EUR exchange rates as a recession caused by a shortage of gas would have been." "And in comparison to the US where the real economy is having to deal with a much more aggressive Fed monetary policy the FX market seems to consider the ECB's policy as not that unattractive any longer." "Our colleagues in macro research like to refer to the long-term risks of inflation of the more cautious ECB interest rate policy. These dangers are not likely to be concrete enough for the FX market yet. It will take some time yet before it prices these in. I am not sure whether that will become an issue this year or whether that is more likely to become the subject of my outlook for 2024."

The US dollar is showing strong gains against the majors on Tuesday, with the exception of the Japanese yen. EUR/USD has tumbled by 1.27% and is trading at 1.0528 in Europe. Investors eye German CPI EUR/USD is sharply lower today, despite a very light economic calendar. The only release of note is German CPI, which will be released later today. Despite the lack of fundamentals, the US dollar is taking advantage of risk aversion in the markets. There are headwinds everywhere you look. The war in Ukraine, the threat of recession in the US and the eurozone and China’s slowdown all make for a gloomy outlook as we start the new year. Germany’s inflation has been falling, and the downtrend is expected to continue. The consensus for December CPI is 9.0%, compared to 10.0% in November. If the consensus proves accurate, it could put further pressure on the euro, as the ECB may have to reconsider its hawkish stance on rate policy. The International Monetary Fund didn’t bring any festive cheer with its pessimistic message on Monday. The IMF warned that 2023 would be tougher than 2022, as the US, EU and China would all see a decline in growth. Adding to the gloom, the IMF said that it expected one-third of the global economy to be in recession this year. In October, the IMF cut its growth outlook from 2.9% to 2.7%, due to the war in Ukraine as well as central banks around the world raising interest rates. After the Christmas and New Year’s holidays, the markets are easing back in, as the data calendar gets busier as of Wednesday. We’ll get a look at the Fed minutes from the December meeting, which was a hawkish affair that surprised investors and gave the US dollar a boost. On Friday, the US releases the employment report, which always plays an important factor in the Federal Reserve’s rate policy.   EUR/USD Technical EUR/USD is testing support at 1.0528. Below, there is support at 1.0469 There is resistance at 1.0566 and 1.0636 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.   Source: EUR/USD slides to three-week low - MarketPulseMarketPulse

Summary:  The share price of Tesla plunged 12% following releasing weak deliveries in December. Apple’s market value fell below US2 trillion for the first time since March 2021 on weakening demand for its MacBooks, the Apple Watch and Airpods. The USD bounced by 1% against EUR and GBP. Crude oil slid by 4% on higher OPEC daily production. On Wednesday, all eyes are on the US ISM Manufacturing Index, JOLTS job openings, and the December Fed minutes. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) slid with significant weakness in Apple and Tesla U.S. equities started the year weaker on Tuesday. S&P 500 slid 0.4% and Nasdaq 100 lost 0.8%. Energy, plunging 3.6% on a 4% decline in crude oil, was the worst-performing sector within the S&P 500 Index. Communication Services, up 1.4%, advanced the most, with Meta (META:xnas) up 3.7% and Alphabet (GOOGL:xnas) up 1.1%. Nasdaq 100 was dragged down particularly hard by the declines in the share prices of Apple (AAPL:xnas) which accounts for 13% index weighting and Tesla (TSLA:xnas) which accounts for 2.5% index weighting. Tesla fell by 12.3% after releasing weak December delivery data. Apple slid 3.4% on a Nikkei report suggesting potential weak demand for the company’s products, taking the company’s market value down below USD2 trillion, the first time since March 2021. Apple accounted for 13% in Nasdaq 100 weighting. Tesla plunged 12.3% on weak December deliveries Tesla announced Q4 deliveries of 405.3K coming short of the estimate at 420.8K and significantly below the 439.7K units produced in Q4. In this article, Peter Garnry suggests that Telsa is facing problems of elevated battery costs that forced the EV maker to raise prices and excessive electricity costs in Europe that weighs on demand. Some demand in the U.S. in Q4 might have been pushed into Q1 2023 by the EV purchase tax credit in the Inflation Reduction Act. The share price of Tesla plunged 12.3% on Tuesday, its largest decline by percentage since September 2020. Apple fell by 3.4% on reportedly weakening demand for its MacBooks, the Apple Watch and Airpods A Nikkei article reported that “Apple has notified several suppliers to build fewer components for Airpods, the Apple Watch and MacBooks for the first quarter, citing weakening demand”. The article stirred up concerns among investors about the demand outlook for the products of the consumer electronics giant. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied with yields on the 10-year 14bps richer to 3.74% Bids returned to Treasuries as German Bunds jumped in price following German CPI coming in softer than expectations.  Yields on 10-year German bunds fell by 6bps on Tuesday and by 18 bps since the New Year. On the tape, former Fed Chair Aland Greenspan and former New York Fed President Bill Dudley said a not-too-severe U.S. recession was the most likely outcome. The 10-year segment led the rally, with yields 14bps richer to 3.74%. Yields on the 2-year fell by 6bps to 4.37%. The corporate issuance calendar was busy with 19 investment grade bonds for a total of over 30 billion issued on Tuesday. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) On its first day of trading in 2023, Hang Seng Index opened lower but rallied to post a 1.8% gain. Hang Seng TECH Index (HSTECH.I) climbed 1.9%. Chinese telco, consumer, electricity utilities, pharmaceuticals, autos, and Macao casino operators led the charge higher. It is widely expected that the border between the mainland and Hong Kong will be reopened as soon as January 8, 2023. In addition, a rebound in mobility data in some large Chinese cities, such as Guangzhou, Chongqing, Shanghai, and Beijing helped market sentiment. Investors brushed off the weak December NBS PMI reports released during the holiday and the Caixin PMI on Tuesday and the seemingly inevitable surge and spread of Covid inflections during the initial stage of relaxation of pandemic containment in China to focus on the improved economic outlook in mainland China and Hong Kong for 2023. Southbound flows into Hong Kong amounted to a decent HKD4.25 billion, of which buying in Tencent (00700:xhkg) accounted for HKD1.58 billion. Following the release of strong December sales, BYD rose by 4.7%, Li Auto by 10.5%, and Xpeng by 7.8%.  China’s CSI 300 Index gained 0.4%, with computing, communication, media, and defense names gaining the most. FX: the dollar gained 1% versus EUR and GBP As Saxo’s Head of FX Strategy, John Hardy, put it in his note, USD wakes up with a bang ass US market come back on line. Softer CPI prints from Germany triggered selling in the Euro and saw EURUSD down 1%. The pound sterling also slid 1% versus the dollar. The Yen held on relatively well, after briefly strengthening to 129.52, finished the day little changed at around 131. Crude oil fell nearly 4% on higher OPEC production WTI crude fell 3.9% on Tuesday following production by OPEC countries increased by 150,000 barrels to 29.14 million barrels a day, partly due to higher output from Nigeria. The warmer-than-normal weather in the U.S. and Europe also weighed on the market sentiment. What to consider? German December CPI softer than expectations Germany released headline CPI at 8.6% Y/Y below the street estimate of 9.0%Y/Y and November’s 10.0%. Germany’s EU Harmonized CPI came in at 9.6% Y/Y, falling from the 10.2% expected and 11.3% in November. U.S. ISM Manufacturing Index, JOLTS Job openings, and the December FOMC minutes to focus on Wednesday We have a busy economic calendar in the U.S. on Wednesday. The ISM Manufacturing Index is generally considered by investors as one of the key indicators in the recession question. The Bloomberg consensus estimate is calling for a further decline into the contractionary territory to 48.5 in December from 49.0 in November. JOTLS job openings (consensus 10.05 million; Nov 10.33 million) will also be closely monitored as the data series was highlighted by Fed Chair Powell almost every time in his assessment of the state of the labor market and monetary policies. Finally, at 2pm US EST, we will have the minutes from the Fed’s December FOMC meeting. For a global look at markets – tune into our Podcast. Source: Market Insights Today: – Apple and Tesla plunged; ISM, JOLTS, and Fed minutes the focus on Wednesday - 4 January 2023 | Saxo Group (home.saxo)

Many dream to set up their own business, but the fear of losses or continuous investment in business and not having a profit scares. The founders of Dream Sports are an example that it takes time for an investment to pay off. In this article: The founders of Dream Sports Hedge fund Improve your financial health Story of the founders of Dream Sports Everything is brought into the virtual realm, even sports. Although it might seem that we are now witnessing the beginnings of this evolution, this is not the case. This change began more than a decade ago. Harsh Jain and Bhavit Sheth are the founders of Dream Sports, an Indian sports technology company that owns one of the country's largest fantasy gaming platforms, Dream11. Dream11, simply put, is a Game of Skill where you create a team of real players for an upcoming match and compete with other fans for big prizes. Everything is brought into the virtual realm, even sports. Although it might seem that we are now witnessing the beginnings of this evolution, this is not the case. This change began more than a decade ago. Harsh Jain and Bhavit Sheth are the founders of Dream Sports, an Indian sports technology company that owns one of the country's largest fantasy gaming platforms, Dream11. Dream11, simply put, is a Game of Skill where you create a team of real players for an upcoming match and compete with other fans for big prizes. They made a huge financial loss starting this company, but now the project is valued at $8 billion and has 160 million users. Based on the example of these two friends, one can draw conclusions that in order to gain something, one must incur high costs when it comes to an innovative company, even in the strictest terms. They launched a fantasy sports company at 22. It's now worth $8 billion. (via @CNBCMakeIt) https://t.co/exmzE1abZE — CNBC (@CNBC) January 4, 2023 Read next: EUR/USD, GBP/USD And AUD/USD Fell Sharply After The US Dollar Recovered| FXMAG.COM Hedge fund After a difficult year, everyone is wondering what the new year will bring. Investors also wonder which investments may be the most beneficial. Many hedge fund managers around the world are bracing themselves for continued inflation this year and are looking for exposure to commodities and bonds. Why can it be beneficial? An actively managed fund focused on achieving profits in various market conditions. Unlike traditional funds, the manager does not focus on imitating or beating the market pattern. Having weathered a dire 2022, many global hedge fund managers are preparing this year for persistent inflation and seeking exposure to commodities and bonds that perform well in such an environment https://t.co/puETFWUXCP — Reuters Business (@ReutersBiz) January 4, 2023 Read next: New Record For Electric Car Manufacturer - Tesla Deliveries Increased By 40% Year-On-Year| FXMAG.COM How to improve your financial health? New year means new resolutions. Everyone does them, hoping that the new year will give a chance for a new beginning and thus for new opportunities. Experts advise that when making new resolutions, look at the finances. How many of us have said to ourselves that this year we will start saving or will start to actively manage our budget. Experts can always give specific advice on where to start. This time, a tweet from Charles Schwab Corp comes to the rescue. When it comes to saving, you can follow the advice from George Samuel Clason's book "The Richest Man in Babylon" and save 10% of your income or find another way. There are many ways, but remember that you don't have to do everything at once. There are many things you can do to improve your financial health by taking it step by step and thinking of these resolutions as a checklist. It's best to start with a summary of last year.  Are you the kind of person who makes resolutions on New Year's Day? Here are 5 steps we encourage all investors to consider taking to boost their financial fitness. https://t.co/10jhiNyeie #NewYearsResolutions #OwnYourTomorrow — Charles Schwab Corp (@CharlesSchwab) January 3, 2023

Summary:  Today, we note that today's inter-market picture makes far more sense than what we saw yesterday as some low inflation data in Europe is helping to drive global bond yields lower, lifting risk sentiment and seeing a weaker US dollar. This came after a volatile and confusing day yesterday. The biggest winner of the first couple of days this year has been gold, which has soared above major resistance. We also look at the latest Tesla plunge and some of the network effects that may be aggravating its decline, discuss the reversal in crude oil prices and new lows in natural gas prices and how markets may continue to flourish on signs of a weakening economy. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Read next: How Dream Sports Built Its Value, High Inflation And Its Impact On The Hedge Fund| FXMAG.COM Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Read next:Exxon And Chevron Abandon The Global Market And Focus On The Americas| FXMAG.COM Source: Podcast: Global markets getting back in synch today | Saxo Group (home.saxo)

After a dreadful showing on Tuesday, EUR/USD has rebounded today. In the European session, the euro is trading at 1.0618, up 0.66%. Investors eye German CPI German CPI was lower than expected in December. CPI slowed to 9.6%, down sharply from 11.3% in November and below the consensus of 10.7%. This marked the first time that German inflation has fallen into single digits since the summer. Spanish inflation, released last week, also slowed in December. The next test is the release of eurozone inflation on Friday. Inflation is expected to fall to 9.7%, down from November’s 10.1%. The drop in German inflation is welcome news, but two caveats are in order. First, the German government enacted a price cap for electricity and gas in December, which meant that energy inflation slowed in December. However, services inflation, which is a more accurate gauge of price pressures, rose to 3.9% in December, up from 3.6% a month earlier. Second, inflation remains at unacceptably high levels. Germany’s annual inflation in 2022 hit 7.9%, its highest level since 1951. If eurozone inflation follows the German lead and heads lower, can we say that inflation has peaked? Some investors may think so, but I wouldn’t expect ECB policy makers to banter around the “P” word. The central bank reacted very slowly to the surge in inflation and has been playing catch-up as it tightens policy. Lagarde & Co. will therefore be very cautious before declaring victory over inflation. If eurozone inflation drops significantly in the upcoming release, it will provide some relief for the ECB in its battle with inflation. The ECB has adopted a hawkish stance, and the markets are still expecting a 50-bp hike at the February 2nd meeting. In the US, the markets are back in full swing after the holidays. Today’s key events are ISM Manufacturing PMI and the minutes from the Fed’s December meeting. In October, the PMI contracted for the first time since May 2020, with a reading of 49.0 (the 50.0 threshold separates contraction from expansion). Another weak reading is expected, with a forecast of 48.5 points. The Fed minutes will make for interesting reading, providing details about the Fed’s commitment to continue raising rates, which surprised the markets and sent the US dollar sharply higher.   EUR/USD Technical EUR/USD is putting pressure on resistance at 1.0636. Next, there is resistance at 1.0674 There is support at 1.0566 and 1.0487 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Bond yields continue their plunge on hopes that falling energy prices will help in the fight against inflation. The strength in the US labour market may not last but it is preventing Treasuries from joining the party. The Fed has also reiterated its unfinished rate hike work through the latest minutes. The next big cue comes from Friday's payrolls report. Fed insists on higher for longer in their latest minutes Market reaction to the FOMC minutes was muted. Breakevens, real rates and nominal rates did not do much at all. Although at the margin there has been a tendency for rates to test a tad higher, especially on the front end. The Fed has given a clear bias to continue to hike rates in the months ahead, so that makes a degree of sense. Further out the curve, the market is not paying too much attention, mostly as there is not a whole lot new from the minutes. There is not a whole lot new from the minutes On the technical front, the Fed noted the ease lower in use of the reverse repo facility, and noted that this went hand-in-hand with upward pressure on market repo. The Fed also notes an expectation for this to continue in the months ahead, in tandem with the ongoing bond roll-off from their balance sheet. The Fed also notes that this reflected the move of money market funds away from the reverse repo facility and towards market repo. Our observation here is that this has been quite minor so far. SOFR is struggling to make it much above the reverse repo rate (at 5bp over the fed funds floor, now at 4.30%). But it should gather more pace as we progress further through 2023. As SOFR eases above the Fed’s reverse repo rate in a more material fashion in the months ahead, there should be a larger reduction in cash going back to the Fed on their reverse repo facility. Rates shrugged off hawkish Fed minutes to continue to bet heavily on 2024 cuts Source: Refinitiv, ING The fall in energy prices triggers another 'everything rally' Bund yields are down almost 30bp since the start of the year, which is to say they’ve dropped almost 30bp in three days. As we discussed in yesterday’s Spark, we think the (mostly energy-related) drop in inflation in December is a red herring. Whilst helpful at the margin, we think core inflation should be a better predictor of European Central Bank policy. This drop in yields has been as sudden and relentless as the rise into year-end. Swaption implied volatility is down since its September peak but there are no signs so far that 2023 will prove a calmer year. There are no signs so far that 2023 will prove a calmer year Of course, anyone in search for a cause to explain the bond rally should look farther than backward-looking inflation indicators. The fall in yields has come alongside a collapse in energy prices. That trend is nothing new, explained in Europe by milder weather than normal and in the wider world by fear of a growth slowdown, in particular in China, but also reinforced by a weak ISM manufacturing in the US. This has resulted in another case of ‘everything rally’ where both stocks and safer bonds benefit from hopes that central banks will have an easier job tackling inflation. Students of the late 2022 playbook know that the ‘everything rally’ comes with tighter peripheral spreads. The 10Y Italy-Germany spread for instance has retraced almost half of its 36bp post-December ECB meeting widening. Implied volatility is down as peripheral bonds outperform Source: Refinitiv, ING US labour market strength is tough for Treasuries One area of persistent strength has been US labour market indicators. The ISM employment sub-index rose back above the 50 level, a development that our US economist thinks is hardly sustainable in light of the fall in other components. Together with higher-than-expected job openings, they offer little relief to a Fed concerned about wages feeding into core services inflation, as Fed Chair Jerome Powell is fond of repeating. If current inflation is a guide of how much further the Fed has to hike, recent data points to an imminent end to this hiking cycle. But if the job market is a guide of how long it would take before it decides to cut rates, there is still a protracted period of restrictive monetary policy ahead. A re-steepening of the US curve is on the cards At face value, this means a re-steepening of the US curve is on the cards. And indeed, the US curve has shown signs of re-steepening from very inverted levels. Our own view is that both growth and inflation will soften enough to allow the Fed to loosen policy in the latter half of 2023. Much of the action in recent days, however, has been driven by the duration rally. This means that longer bonds outperformed and the curve flattened. This isn’t necessarily consistent with the data but it seems markets are comfortable with the longer maturity skew in supply, starting today with long-end auctions and syndications from Europe (see events section below). Today's events and market view Portugal and Ireland mandated banks for the launch of new benchmarks which we expect today. Both deals are at the long end, respectively 15Y and 20Y. This will be the second green bond on the Irish curve. They will add to scheduled long-end auction from France, with maturities of 9-43Y. The drip-feed of eurozone inflation data continues today with December CPI from Italy, and PPI for the whole of the eurozone. The US data slate comprises Challenger job cuts, ADP employment, jobless claims, and services PMIs. We think the strength in US albour market indicators and heavy long-end supply will dent the performance of bonds, a bear steepening of yield curves appears most likely into the end of the week. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  European and U.S. equities as well as bonds gained on a large-than-expected decline in the rate of inflation in France. Hong Kong stocks had a strong day in anticipation of more economic stimulus, support to the real estate sector, and relation on regulations over the internet sector in mainland China. The U.S. JOLTS job openings report shows the Fed has more work to do to cool off the labor market. The December FOMC minutes sent mixed signals of warning against an easing of financial conditions and concerns about two-sided risks of under- and over-tightening. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) ended higher in a choppy session U.S. stocks had a strong start on Wednesday through the morning and then oscillated after the release of the FOMC minutes in the afternoon digesting the hawkish warnings from the Fed about an unwarranted easing in financial conditions and the dovish signal of an increasing number of Fed FOMC members being concerned about two-sided risks. S&P 500 ended the session 0.8% higher and Nasdaq 100 climbed 0.7%. The rally was broad-based as all 11 sectors within the S&P 500 gained. The interest rate-sensitive real estate sector was the best performer while the energy sector was close to flat as crude oil slid nearly 5%. Tesla (TSLA:xnas) rebounded 5%. Micorsoft (MSFT:xnas) plunged 4.4% on analyst downgrades and concerns about the company’s cloud computing business. The next key focus of investors will be the employment report this Friday. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) gained on softer French CPI prints, and the FOMC minutes showed more Fed officials concerned about two-sided risks Treasuries caught some strong bids in tandem with the European bond markets that rallied on softer-than-expected CPI prints from France. The market pared some gains after a stronger-than-expected JOLTS job openings report and position squaring ahead of the release of the FOMC minutes. Yields, in particular, those in the longer-end segment, fell again after the FOMC minutes. The 10-year finished Wednesday 6bps richer to 3.68% which yields on the 2-year falling only 2bps to 4.35%. The December FOMC minutes highlighted Fed officials’ worries about “an unwarranted easing in financial conditions” due to a misinterpretation by the market of the Fed’s downshift from 75bp to 50bp hike as a pivot. Nonetheless, the minutes showed that “many participants” argued for balancing the two-sided risks of under- and over-tightening in the December meeting. Minneapolis Fed President Kashkari said in an article that he saw rate hikes “at least at the next few meetings”, leading to a terminal rate of 5.375%. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) Hang Seng Index rallied for the second day in a row in 2023, registering an impressive gain of 3.2% and rising to above its 250-day moving average. A pledge of fiscal expansion from China’s Finance Minister fueled investors’ optimism in more economic stimulus measures. Hang Seng TECH Index surged 4.6%, led by Alibaba (09988:xhkg) which soared 8.7% following the news that the Chinese authorities approved an increase in registered capital of the consumer finance unit of Ant Group. Shares of Chinese developers and property management services providers climbed on anticipation of state support, following the state-owned Economic Daily emphasizing the importance of the real estate sector to the economy in its editorial, a recent message from the Financial Stability and Development Committee to support “systematically important” property developers, and Asset Management Association of China’s decision to resume approvals for private equity funds investing in property projects. Longfor (00960:xhkg) and Country Garden Services (06098:xhkg) each jumped more than 11%, being the two biggest gainers within the Hang Seng Index. Sunny Optical (02382:xhkg), a supplier to Apple (AAPL:xnas), plunged 10% on analyst downgrades and a Nikkei report that “Apple has notified several suppliers to build fewer components for Airpods, the Apple Watch and MacBooks for the first quarter, citing weakening demand”. Semiconductors names were among the laggards as China was reportedly going to slow its investment push for developing the country’s chip-making industry due to pressures on its fiscal budget. In A-shares, CSI 300 finished the day little changed, with real estate and financials outperforming and weakness in semiconductors and new energy. FX: AUD gained 1.6% to 0.6840 as China is considering resuming coal imports from Australia The Australian dollar was the best performer among major currencies against the dollar following news headlines saying that China is considering ending its import ban on Australian coal. EUR and GBP also rebounded from the loss the day before and each up about 0.7% against the dollar. The Japanese yen was the laggard among major currencies and weakened to 132 against the dollar. Crude oil fell nearly 5% to USD73.17 WTI crude oil fell 4.9% to US73.17 on concerns of a slowing global economy and higher-than-average temperatures in Europe and the U.S. Read next: The EUR/USD Pair Is Trading Above 1.06 Again, The USD/JPY Pair Is Close To Level Of 131| FXMAG.COM What to consider? FOMC minutes warned about an unwarranted easing in financial conditions while highlighting a shift toward risk management The FOMC minutes sent out mixed messages. FOMC participants worried that the downshift from a 75bp hike to a 50-hike would be interpreted by the market as the signal of a pivot and warned that “an unwarranted easing in financial conditions, especially if driven by a misperception by the public of the committee’s reaction function, would complicate the committee’s effort to restore price stability”. Nonetheless, the minutes showed that “many” participants argued for balancing two risks: the risk “insufficiently restrictive monetary policy could cause inflation to remain above the Committee’s target for longer than anticipated” and the other risk of “the lagged cumulative effect of policy tightening could end up being more restrictive than is necessary to bring down inflation to 2 percent and lead to an unnecessary reduction in economic activity”. That points to a data-dependent risk management approach going forward. Fed’s Kashkari expects the Fed to raise the policy rate another 100 basis points Saying in an article, Minneapolis Fed President Neel Kashkari said that “it would be appropriate to continue to raise rates at least at the next few meetings” and indicated that he saw the ultimate rate going 100 basis points higher to 5.25%-5.50%, in 2023. He suggests that any sign of slow progress that keeps inflation elevated for longer will warrant the policy rate potentially much higher. Softer-than-Expected French CPI A day after a softer-than-expected German CPI report, December CPI in France also came in softer. French December headline CPI decelerated to 5.9% Y/Y from 6.2% in November as opposed to the expectation of a rise to 6.4% Y/Y.  French CPI EU Harmonized slowed to 6.7% Y/Y in December (consensus estimate: 7.3%) from 7.1% in November. U.S. JOLTS job openings stronger than expected U.S. JOLTS job openings declined to 10.46 million in November, above the consensus estimate of 10.01 million, from a revised 10.51 million (previously reported 10.33 million) in October. It implies that the ratio of vacancies to unemployment is 1.74, above the pre-pandemic level and the labor market will be considered by the Fed as being too tight. U.S. ISM Manufacturing Index fell to 48.4, slightly below expectations The ISM Manufacturing Index slid more than expected to 48.4 in December (consensus: 48.5) from 49.0 in November. New orders were weak, falling to 45.2 from 47.2. The price-paid sub-index decelerated to 39.4 in December (consensus: 42.9) from 43.0 in November. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Softer inflation prints from France, solid JOLTS job openings report, mixed messages from the FOMC minutes – 5 January 2023 | Saxo Group (home.saxo)

Before the end of the year, we asked InstaForex about UK economy, which is expected to decrease significantly, as we approach the end of the year. Let's have a look how do they see the near future of the UK economy and what would BoE consider as a gauge ahead of next interest rate decision. Although the UK GDP for the third quarter turned out to be noticeably worse than expected, the reading was still relatively positive. In annual terms, economic expansion contracted to 1.9% from 4.0%. However, a 2.0% economic growth is quite acceptable for Western countries. At first glance, it might seem that the British economy remains stable. However, in quarterly terms, it shrank by 0.3%. It indicates that the economy is gradually sliding into a recession. Notably, analysts have been predicting such a scenario for a long time. The energy crunch has considerably crippled the eurozone economy as well as the British one. The EU managed to fill its storage sites and avoid fuel shortages. However, it would hardly help it in the future. Even after some stabilization, energy prices soared by two or three times compared to last year. Such sharp price swings adversely affect the European economy. The manufacturing sector is bearing the brunt. Production costs have risen dramatically. Manufacturers are forced to reduce the profit margin to boost their market competitiveness. However, this move leads to a bigger extension of the payback period. However, in the EU,  the payback period is almost the longest one in the world. A few years ago, the payback period of individual industrial enterprises could stretch to 50 years. It made investments in the European economy less attractive.  Over such a long time, investors will only be able to return the invested funds, abandoning hopes for any profit. Recently, the situation has become even worse. It will inevitably lead to an increase in unemployment and a reduction in tax revenues.  Thus, many European manufacturers, including British ones, are now mulling over options for moving industrial production to other regions with lower energy costs and cheap labor. It will inevitably lead to an increase in unemployment and a reduction in tax revenues. In turn, governments will have to deal with worsening social policy, e.g. payments of pensions and benefits.  The situation is extremely challenging. However, those problems appeared a long time ago. The energy crisis and other economic woes have just exposed those cracks.  Things are getting worse due to the Bank of England’s monetary policy stance. It is adamant when it comes to rate increases. As a result, the borrowing costs are rising, which further extends the payback period. Such a problem is quite acute for those who are opening new enterprises or are going to modernize the existing ones.  Even if British companies decide to keep firms and staff, it will be difficult for them even to repair equipment. As for its upgrade, it would seem an attainable goal. Naturally, such companies will quickly lose market competitiveness and lower their production volumes. It will be a rather long and painful downturn.  Read next: Bitcoin: As for the price levels, one should pay attention to the level of $18,000 that has been recently hit. Probably, this level may well serve a starting point for buyers in case the price holds above it on a daily chart | FXMAG.COM The only thing the Bank of England can do is to reduce borrowing costs The Bank of England urgently needs to tame stubbornly high inflation. According to the latest data, inflation slowed to 10.7% from 11.1%. However, it is too early to talk about a steady decline in consumer prices. In June, inflation also dropped to 9.9% from 10.1%. Shortly after, it climbed again. Moreover, its rise was facilitated by supply chain disruptions and production cuts.That is, demand is constantly growing despite the shortage of goods. This is the main reason for an uptick in consumer prices. To some extent, the problem can be resolved at least partially by increasing the output volume. However, this option looks unlikely given the high cost of investment in the industrial sector.  The only thing the Bank of England can do is to reduce borrowing costs. Besides, the watchdog is not responsible for all other issues such as legislation and taxes. Judging by the results of the last meeting, the regulator may start lowering interest rates. Additionally, speculators were surprised that two of the nine board members voted for a rate cut. The Bank of England tries to act preemptively Once inflation starts to decline confidently, the Bank of England will stop the key interest rate hike. Then, after a small pause, it is likely to loosen its monetary policy. It is quite possible that the first key rate cut will take place as early as the first part of 2023. Notably, the BoE was among the first central banks that launched monetary policy tightening. In general, the economic situation in both the US and Europe is almost the same. On both sides of the Atlantic, most structural problems are identical. The Bank of England tries to act preemptively, whereas the European Central Bank and the Federal Reserve are closely monitoring the effect of these actions. If the result is not negative, they immediately take almost the same measures. At least in the last few years, the situation has been developing according to this scenario. There is no wonder. The fact is that the Bank of England is managing a large economy, but it cannot be compared with the economies of the US and the European Union. In other words, the Fed and the European Central Bank have weightier responsibilities. Any unwise decision may lead to alarming global consequences. Apart from inflation, central banks should also take into account the labor market condition. The Bank of England does not have difficulties with this issue. In the UK, the unemployment rate is 3.7%. In the last few months, it has been rising, thus approaching its usual level of 4.0%. This, in turn, provides the BoE with another reason to cut its benchmark rate, especially if the unemployment rate slightly exceeds 4.0%. This is likely to happen when the BoE sees a steady slowdown in inflation. It is highly likely that in early 2023, the Bank of England will raise the key interest rate once more. This time, analysts expect a 25-basis-point rise to 3.75% from 3.5% aimed at reinforcing progress in combat against inflation. At the second meeting of the year, the key rate will remain unchanged so that the regulator can analyze the effect of its previous decisions. At the following meeting, which is scheduled for May 11, the central bank may cut the benchmark rate to 3.5% from 3.75%. All the following cuts will be more moderate compared to the hikes in 2022. They are likely to be limited by rather high inflation and fears that it may resume surging amid a rapid drop in interest rates. It is highly possible that by the end of the year, the key interest rate will be lowered just to 3.0%. Could such measures support the UK economy? The UK is unlikely to avoid a recession. The fact is that the US is expected to slip into a recession, thus negatively affecting the European economy. However, the loosening of monetary policy may cushion the possible impact. Nevertheless, the Bank of England is unable to alter the situation considerably. It simply has no tools to affect structural economic problems. Thus, the regulator has only a minor influence on expenses in the industrial sector. It can settle just the financial component of the issue, which is of minor importance. The Bank of England can postpone the relocation of enterprises outside the United Kingdom, thus allowing the government to take effective steps if it decides to take this opportunity. 

CPI inflation fell to 16.6% year-on-year in December from 17.5% YoY in November on the back of cheaper coal (down by more than 20% vs. November). Core inflation continued to trend upwards and probably rose to 11.7% YoY from 11.4% YoY in the previous month. Persistently high core inflation will leave no room for rate cuts in 2023   According to the flash estimate, CPI inflation fell to 16.6% YoY in December (ING: 17.4%; consensus: 17.3%) from 17.5% YoY in November. Compared to November, prices rose by just 0.2%, largely due to a 3.3% monthly fall in energy prices. This can be attributed to a decline in coal prices, including government-subsidised imported coal. Given that electricity and gas prices for households are regulated and did not change significantly in December, this means that coal cheapened by more than 20% in December relative to November. By contrast, the fall in fuel prices and the rise in food prices were both close to our expectations. We estimate that core inflation, excluding food and energy prices, accelerated to 11.7% YoY in December from 11.4% YoY in November. Consumer inflation declined for the second month in a row, but the scale of the decline in December was sharper than the most optimistic forecasts. The withdrawal of the Anti-Inflation Shield from 1 January and the low reference base associated with its introduction will boost annual CPI inflation readings in the first two months of this year. The local peak is therefore still ahead, but it is increasingly likely to be below 20% YoY. There is also a growing chance that inflation could decline to single digits by the end of 2023. This means that the MPC will most likely be able to formally declare that the current rate hike cycle is over. We expect that rates will probably remain unchanged until March (and most likely throughout 2023), while the MPC awaits the results of the next macroeconomic projection to better assess the inflation outlook. The energy shock is losing momentum supported, among other things, by weather anomalies in Europe. In our view, there will be no conditions for interest rate cuts this year due to the high and persistent core inflation. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Positive developments in gas prices suggests that the peak in headline inflation might be behind us, but future declines will be slowed down by some inertia in the core component Weather conditions will play a key role in determining the scope of the deceleration in the energy component of the CPI basket Energy goods and fresh food at the heart of the deceleration Preliminary Istat data shows that in December 2022 the headline inflation slowed down marginally to 11.6% year-on-year from 11.8% in November, in line with expectations.  The drivers of the slowdown were the modest deceleration in the energy good component (to 64.7% from 67.6% in November) and in fresh food (to 9.5% from 11.4%). The core measure, which excludes fresh food and energy, inched up to 5.8% year-on-year from 5.6% in November, signalling that the pass-through of past energy price pressures is still ongoing, if at a decelerating pace. Energy component still exposed to volatility Looking forward, the inflation profile looks set to remain volatile, reflecting the timing of administrative decisions put in place by the government to contain the impact of past energy price increases on household and business balance sheets. Within the energy domain, in January we will likely have a neat decline in the regulated price of electricity and an increase in fuel prices at the pump as the government decided not to confirm the cut to related excises. A contained increase in motorway fares (they were frozen in January 2022) could marginally push up the transport component in January. Weather-driven gas price declines justifies some short-term optimism Over the first quarter of 2023, weather conditions will play a key role in determining the scope of the deceleration in the energy component of the CPI basket. The recent decline in TTF gas prices to the €60/MWh area reflects the combination of abnormally mild winter weather and of related softer gas demand, and is extending to future contracts maturing over 2023. If confirmed, it could bring about a sharp deceleration in the energy inflation component over the next few months. The unusually high level of gas storage filling at this time of the year (at 82% vs a 73.8% average during the pre-Covid 2017-19 period in the same days of the year) encourages some short-term optimism. Peak in headline inflation possibly passed All in all, today’s data suggest that the peak in headline inflation might have been passed. The pace of the decline in headline inflation will depend on how the energy and the core components will balance out. We still believe that the core measure has some room for further increases: the energy pass-through is not over yet, and wage increases, so far scarcely perceptible, might become more visible over the course of 2023. However, a favourable base effect should increasingly push down the energy component. After today’s release, the statistical carryover for 2023 average headline inflation is 5.1%. We forecast average CPI inflation at 6.6% in 2023.     Read this article on THINK TagsItaly Inflation Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The US added 223,000 jobs and the unemployment rate returned to cycle lows, but there are signs that a turn is coming. A fifth consecutive drop in temporary help employment is a warning signal while softer wage inflation suggests labour market dynamics are shifting. With business surveys pointing to recession, tougher times are coming The US created 223,000 jobs in December 223,000 The number of jobs added in December   Decent jobs gain, but fall in temporary help employment hints at a turn The US economy added 223k jobs in December, a little above the 203k consensus but there was a net 28k of downward revisions to the past two months. meaning we are broadly in line with what was anticipated. The details show the jobs growth was led by the service sector with education and health gaining 78k, leisure/hospitality 67k and trade and transport gaining 27k. Meanwhile construction saw employment rise 28k with manufacturing up 8k. However, we are starting to see falls in some key areas, most notably temporary help, which posted the fifth consecutive monthly fall. This is an important signal as these workers are always the first to be fired in a downturn (as they are the easiest to fire) and are likely to indicate broadening weakness in coming months. Business services fell for the second consecutive month while information services also saw employment fall. US unemployment and CEO confidence - more pain ahead Source: Macrobond, ING Unemployment indicates strength, wages... less so... Elsewhere, we have had quite a lot of revisions within the household survey, which is used to calculate the unemployment rate. It is now reported at 3.5% versus the 3.7% consensus. This is down from a downwardly revised 3.6% in November (initially reported as 3.7%). While a great number, remember that the low unemployment rate masks the fact that more that a third of the working age population are not engaged at all (participation rate is just 62.3%). Then there are the wage numbers. Again there are major revisions, but this time they make the situation look a lot weaker. The annual rate of wage inflation (average hourly earnings) is now 'just' 4.6% whereas the market had been looking for 5%. Last month’s 0.6% month-on-month initial print has been revised down to 0.4% while December's MoM rate came in at 0.3% versus 0.4% expected. So we have a weaker trend materialising it seems. Fed focus moves to next week's CPI As such the report is a fairly mixed bag. Payrolls are broadly in line with expectations, the unemployment rate indicates strength, but wages indicate softening inflationary pressures. Consequently, the focus switches to next Thursday's CPI report. Markets are currently split between whether the Fed will raise rates by 25bp or 50bp at the February Federal Open Market Committee meeting. Given the softer wage situation, if we get another softish core CPI print (0.3% MoM or below) the case for a 25bp hike at the February FOMC versus 50bp is likely to build. More pain ahead for the jobs market That’s the near-term story. Looking further ahead we have to remember that labour data is a lagging indicator – the last thing to turn in a cycle. What we should be focusing on is the economic outlook and that is deteriorating as the Federal Reserve continues to hike interest rates in its battle with inflation. This week’s ISM report showed manufacturing orders contracting for four consecutive months while the Conference Board reports that CEO confidence is at its weakest since the Global Financial Crisis – even weaker than at the worst point in the pandemic. This suggests that businesses will increasingly adopt a defensive stance, which implies a greater focus on costs, including labour. So far the job loss announcements have been concentrated in the tech sector and, more under the radar, the temporary help sector, but we expect that to change over the next twelve months. Read this article on THINK TagsWages US Unemployment Jobs Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Inflation fell back to 9.2% in December, but rising core inflation means that not much will sway the European Central Bank from the hawkish path it set out late last year Inflation fell in December on the back of slowing energy price rises   A combination of price caps and lower oil and natural gas prices have caused a significant dip in energy inflation (from 34.9% to 25.7%), which was the main driver of the decline in headline inflation. The decline was broad-based by country, with all the major eurozone economies showing significant drops in price growth. It is likely that the peak in inflation is behind us now, but far more relevant for the economy and policymakers is whether inflation will structurally trend back to 2% from here on. Core inflation continues to show little sign of relief for now. It increased from 5% to 5.2% and saw sizable increases for both goods and services. The next two months will be critical as many businesses traditionally change prices at the start of the year. It could therefore be that core inflation rises further from now. While consumption remains under pressure and retail sales have been trending down for quite some time now, businesses continue to adjust their prices to the supply-side shocks of 2021 and 2022. So while supply-side shocks are fading – not just energy, but also think of container prices and various production inputs – core inflation is still adjusting with a lag. The ECB has taken a very hawkish stance towards this development and has indicated that it will hike through a mild recession to bring inflation structurally down to 2%. With energy inflation dropping quickly and energy supply forecasts improving, 2% could be reached much sooner than expected. Still, rising core inflation will be enough for the ECB to continue to hike by 50bp in February and March. Read this article on THINK TagsInflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Infrastructure outlook: Climate legislation, macro drivers create tailwinds Charles HamiehPortfolio ManagerClearBridge InvestmentsShane HurstPortfolio ManagerClearBridge InvestmentsNick LangleyPortfolio ManagerClearBridge Investments We know the COVID-19 pandemic has had significant impacts on infrastructure. Are these impacts still being felt? The pandemic continues to create ripple effects in the global economy. From no growth in 2020 to rapid growth in 2021 to slow growth in 2022, we look at 2023 with a base case of recessions in the United States, Europe and the United Kingdom. And growth in China should be below trend for at east a good portion of 2023. Bond yields should push higher heading into 2023 before abating along with inflation later in the year. For equities, higher bond yields resulting in contracting multiples have characterized the first part of this bear market. The second phase of bear markets is generally an earnings recession, and we expect that to be a force, particularly in early 2023. However, we believe the impact on infrastructure should be muted, particularly for regulated assets, where companies generate their cash flows, earnings and dividends from their underlying asset bases. We expect those asset bases to increase over the next several years. As a result, infrastructure earnings look better protected to us when compared with global equities. How do inflation and rising bond yields typically impact infrastructure companies? Most infrastructure companies have a link to inflation in their revenue or returns. Regulated assets, such as utilities, have their allowed returns adjusted for changes in bond yields over time. As real yields rise, utilities look poised to perform well (Exhibit 3 on the next page), and we have currently tilted our infrastructure portfolios to reflect this. As a result, changes in inflation and bond yields don’t generally impact the underlying valuations of infrastructure assets. However, we have seen equity market volatility associated with higher bond yields impact the prices of listed infrastructure securities, making them more compelling when compared with unlisted infrastructure valuations in the private markets. On top of its relative appeal versus equities, we believe infrastructure should benefit from several macro trends in 2023 and beyond. First, energy security is currently driving policy globally, and a significant amount of infrastructure will need to be built to attain energy security. The Russia-Ukraine war, resulting in high gas prices and supply constraints, has highlighted the importance of Energy security and energy investment. This is supportive of Energy infrastructure, particularly in Europe, where additional. Most infrastructure companies have a link to inflation in their revenue or returns. Regulated assets, such as utilities, have their allowed returns adjusted for changes in bond yields over time. As real yields rise, utilities look poised to perform well, and we have currently tilted our infrastructure portfolios to reflect this. capacity is needed to supplant Russian oil and gas supply, and in the United States, where new basins are starting up, in part to meet fresh demand from Europe. In transport, changing trade routes and adjustments to supply chains to bring production closer to home, either through reshoring or near-shoring, are driving demand for new transport infrastructure. Airports are still struggling to return to pre-pandemic passenger levels, and a global recession in 2023 will likely interrupt the bounce-back. In addition, the industry is facing changes in long-term trends like business travel. Communications infrastructure continues to roll out 5G and develop 6G technology. It is also working to reduce network latency, driving significant investments in wireless tower businesses, generally through long-term inflation-linked contracts. However, in the short term, higher interest costs are hitting the bottom line. How does the US Inflation Reduction Act (IRA) impact the potential investment opportunities you see? In terms of fiscal policy, the US IRA, signed into law in August 2022, is one of the most significant pieces of climate legislation in US history. We believe it will be industry- transformative (Exhibit 4 on the next page) for utilities and renewables, in particular. The growing need for electrification—including more EV-charging infrastructure and more residential and smaller commercial rooftop solar—will require new substations, new transformers and upgraded wires along distribution networks. We already see its impact in the 2023 capital expenditures plans of utilities, together with the forward order books of companies involved in the energy transition—such as renewable, storage and components suppliers—increasing their growth profiles. One major macro takeaway from the IRA: There is no reason to build anything other than renewables from now on. The main reason? Tax credits. Production tax credits for solar/wind are available until 2032 or until a 75% reduction in greenhouse gases is achieved (based off of 2022 numbers). Either way, this is expected to be a tailwind for investment for well over a decade. Secular growth drivers for infrastructure should be on full display in 2023. US President Joe Biden wants to reduce emissions by 50% in the United States by 2030, with roughly half of US power coming from solar plants by 2050. It will require nearly US$320 billion to be invested in electricity transmission infrastructure by 2030 to meet net zero by 2050. The dire need for infrastructure spending underpins growth for the next decade and beyond, and the first steps for meeting these long-term goals are being taken now

The US CPI will be the headline of the publication of the most important economic data next week. This data is especially important because it will affect the future decision of the Fed. Data Non-farm payrolls released on Friday showed that the US economy added 223,000 new jobs in December, up from the +200,000 estimate. In addition, the November printout was revised to +256,000. The unemployment rate fell to 3.5% from 3.6 % and expected 3.7%. These two data points alone should raise markets' fears of a more hawkish Fed as the Fed said it needs jobs to cool down and bring down inflation. In addition, the US ISM Non-Manufacturing PMI for December was 49.6 versus 56.5 previously and expected 55. This was the first drop (below 50) in print since May 2020. Source: investing.com CPI Forecast On Thursday, the US will publish CPI data for December. Expectations are for headline at 6.5% y/y compared to November's reading of 7.1% y/y. Core prices also fell from 6.3% to 6%. Core CPI is expected to fall to 5.7%YoY from 6%YoY in November. Headline inflation has been declining since June, when it peaked at 9.1% y/y, but the core number has been a bit more sticky. If the data are weaker than expected and the US dollar falls. Source: investing.com Some of that optimism has since reset a bit due to more stable wage data, which seems to pose some two-way risk to the narrative that wants the FOMC to slow the pace of rate hikes to 25 basis points at its next meeting February 1. The CPI report provides important insight into price developments but will be supplemented by other inflation readings. The publication of the producer price index (PPI) will show how wholesale prices are developing. Fed The January CPI inflation report is expected to provide more data pointing to a downward trend in inflation. However, annual inflation will remain relatively high, which worries the Fed. Services inflation will be watched closely for signs where inflation rates may stabilize in 2023. The CPI report may provide more evidence that inflation is falling, but not as fast as the Fed wants. Therefore, in February there may be another rate hike by the Fed. The Fed sees inflation coming down but is concerned service inflation is still too high based on wage pressures. It appears the Fed will raise interest rates again in February, but by a smaller amount than for most of 2022. Markets estimate that the Fed will most likely raise interest rates by 0.25 percentage points. However, if the inflation report and other data are not encouraging, the Fed may be inclined to raise interest rates by 0.5 percentage point. The Fed believes that goods inflation and housing costs are likely to fall in 2023, but they fear services costs will continue to rise if the labor market remains relatively hot. Source: investing.com

Macroeconomic trends If 2023 is anything like 2022, then the UK may be in for a bumpy ride – inflation surged, interest rates soared, currencies swung, and the UK government clashed. But for us, one of the main challenges ahead for UK equities can be succinctly summarised: Will inflation begin to moderate as economic activity wanes? Indeed, macroeconomic headwinds remain. Investors remain hopeful that UK inflation has peaked, but continue to balance the prospect of surging prices with the rising cost of debt. Whilst the notion of transitory inflation has largely been disproven through 2022 as CPI data remained elevated, some factors are undoubtedly considered stickier than others. Frictional supply chain costs as the world emerges from the COVID-19 pandemic are already beginning to subside, but secular impacts on inflation such as globalisation and demographic change should not be overlooked. Thus, as the prospect of a technical recession is increasingly considered within the UK, the inflationary backdrop will be key to shaping its severity. Fortunately, an easing of global inflationary pressures is beginning to unfold. Data released in November showed that US consumer prices had risen by 7.7% over the past 12 months, falling short of the 8% estimates. In December, China announced a reversal of key zero-Covid policies after weeks of civil unrest. And indeed, global commodity prices have moderated since their extreme volatility earlier in the year. As inflation looks like it is peaking in the UK, the news of a cooling backdrop in the US has helped drive a rerating of equities and a pullback in government bond yields domestically. Inflation in the UK is expected to continue to fall back from highs over the next few months, although the impact from changes in consumer energy support policy will likely be a key determinant as to how this plays out. Assuming an easing in headline inflation figures, we expect the central bank to be nearing a peak in its monetary tightening programme. The Bank of England recently made steps to reduce its balance sheet, embarking on a programme of quantitative tightening in Q4 2022. Higher interest rates mean higher financing costs for corporations and consumers. Combined with the tighter flow of liquidity, this may present some short-term challenges for UK equities whilst the positive effect of moderating inflation takes its time to embed into supply/demand habits. Key economic concerns are the length and depth of this inevitable slowdown – investors remain closely focussed on the central bank response as the risk of a policy mistake is increased. As the short-lived “Trussonomics” regime unwinds, the central bank at least has some relative market stability in order to play its best hand. Market inferred peak base rates have moderated by over 100 basis points (bps) since the (not so) mini budget was announced earlier in 2022. The perception of a safe pair of economic hands with Prime Minister Rishi Sunak and Jeremy Hunt, chancellor of the Exchequer, has improved sentiment to the UK into 2023. With gilt yields stabilised, and an economic catastrophe seemingly circumnavigated, the expectation of relatively benign markets should be well received by the Bank of England as they execute monetary policy over the coming months. One must be reminded that not all consumers are proportionately impacted by the enduring cost-of-living crisis consuming the UK. The UK remains in a position of strength from the perspective of excess household savings – savings accumulated throughout the Covid-19 pandemic are now earning an attractive rate of interest income. Furthermore, the UK mortgage market has evolved since 2005 – the last meaningful period of central bank tightening – when 70% of mortgages were financed on variable terms. Today, only 14% of the UK mortgage market is financed with variable rates. The extent of fixed rate mortgage financing and indeed outright home ownership within the UK should continue to partially offset the cost-of-living burden instilled by soaring consumer energy bills. But we do expect a degree of consumer caution to remain until broader costs begin to moderate. The labour market has continued to demonstrate resilience throughout this period of volatility. Although latest data indicate that unemployment rose to 3.7% in Q3 2022 and that job vacancies dropped for the fifth consecutive quarter, one must be reminded that the labour market remains buoyant relative to historic levels. Signals such as a falling labour inactivity rate are indicative of employment re-engagement, particularly amid the over 50s, as soaring costs prompt ‘early retirees’ back into employment. Thus, we do not expect a surge in the unemployment rate, which should provide some protection against the risk of a prolonged, severe recession. Despite the relative strength of the UK equity market throughout a period of heightened volatility, investors remain mindful of the value that remains. The UK market is trading on a forward P/E ratio of around 10x – 20% beneath its 15-year median – and offers a dividend yield of 4%. Contrasting with the US, trading on a forward P/E ratio of around 18x – 12% above its 15-year median – and a dividend yield of 1.7%, UK equities look cheap to us. An economic slowdown is widely anticipated across global markets and as such, should investors continue to address the notion – is this bad news already priced in to UK assets? The UK market remains forward-looking, and in our mind is pricing in an excess of pessimism given where valuations are today. Thus, we believe the attractiveness of the region is enhanced to investors as evidenced by ongoing M&A activity, as indeed are the prospects for continued resilience through 2023 and beyond. Small- and mid-cap UK equities UK small-and-mid (SMid) cap has been an asset class that has been hugely out of favour over the last 12 months, leading to significant underperformance versus the wider UK equity market. Yet, we believe that the prospects for many companies in this area of the market remain much brighter than the investor value inferred in today’s constricted valuation multiples. Amongst the current barrage of UK negativity, short termism and ongoing selling pressure, we believe opportunities are emerging that set the stage for a recovery in 2023. The issues that the UK economy is facing are real. However, we believe that next year we are likely to see interest rate expectations peaking, inflation falling, and a manageable trading downturn. We are increasingly enthused by some of the compelling opportunities that we observe within the Smid cap market which lays the foundation for future returns. We do expect earnings to come under pressure in the short term, but the degree of valuation discount observed assumes a wide margin of safety. Currently, Smid cap companies are trading towards the lower end of their historical valuation range, along with what we believe to be attractive dividend and free cash flow yields. Many businesses are entering this well signalled downturn with significant balance sheet strength, and this enables them to continue to invest and take advantage of the opportunities which should inevitably arise. After exiting a disruptive pandemic period, not only in sound financial shape, but also operationally and competitively, we believe that many businesses and their prospects have actually been significantly strengthened. In our view, the flexibility, strength and resilience engrained in many Smid cap companies is being underestimated. Thus, we believe the prospects of the UK Smid cap market are enhanced, where the risk/reward opportunity is beginning to look compelling over the long term. Large-cap UK equities UK large-cap businesses kept the UK equity market afloat through 2022, as many other developed markets suffered at the hands of an inflationary resurgence. As humanitarian tragedy and geopolitical unrest reverberate across Europe, investors continue to shelter in recognised safe havens; this has led to an encouraging period of attractive relative returns for the FTSE 100 Index. Looking forward into 2023, the FTSE 100 looks well positioned to continue to demonstrate resiliency in the face of global headwinds. Of course, investors are presented with many unknowns… Will an enduring economic recession engulf the market? The FTSE 100 is comprised of some of the highest quality, cash generative businesses listed within the UK. These businesses are well capitalised and many raised equity where needed during the pandemic, and thus start from a position of strength relative to speculative/higher leveraged alternatives. Defensive havens remain prevalent – tobacco, pharmaceutical and utility businesses are demonstrably less sensitive to economic cyclicality. Will inflation persist? The FTSE 100 is constructed by many companies that exhibit innate inflationary resistance. Real asset businesses such as oil and gas majors and metal miners account for over 20% of the index. Whilst some may argue that their fate is in the hands of global commodity volatility, most would concur that these remain an effective hedge against soaring inflation. Furthermore, regulated businesses such as utility companies have a reliable mechanism for protecting their revenue streams from inflation. Will interest rates settle at 3-4%? Inherent interest rate protection is prevalent within the index. Multinational banks are now beginning to earn material interest income margins from their lending, after over a decade of frankly negligible rates. Furthermore, long-term liabilities for life assurance businesses are now discounted at a higher rate, reducing the value of their liabilities in today’s terms. The UK market has lagged the US market for some time due to the notable omission of high-growth, pre-profit stocks where the terminal value is discounted from many years into the future. These businesses were able to thrive in a zero-rate environment. But as rising interest rates inflate the discount rate used for equity valuations, these high-growth stocks are disproportionately sensitive to hawkish policy relative to the established, profitable, and mature businesses prominent within the FTSE 100 Index. Should investors not know what steps to take next. Then in our mind the notion of being “paid to wait” is an attractive concept amid the UK large-cap market. The mature nature of the UK large-cap landscape instils a degree of resilience in the propensity of businesses to return capital to shareholders. This may be derived from reliable dividend income – the FTSE 100 is a natural hunting ground for income, yielding over 4.5% - or indeed the opportunity to benefit from share buybacks which remain commonplace, particularly amongst businesses generating windfall profits. Source: Bloomberg as at 16/12/2022 unless otherwise stated. Read the full report

Next week’s data calendar features China's growth numbers, inflation readings from Australia and India, plus a key central bank meeting In this article Inflation finally on the downtrend? China activity and loan data due in the coming days BoK could surprise with a pause Philippines exports likely to reverse recent surprise gain   Shutterstock    Inflation finally on the downtrend? The new monthly Australian inflation series should show a further small decline in the inflation rate to 6.8% year-on-year, down from October’s 6.9% rate – still too high for the Reserve Bank of Australia to stop tightening, but moving in the right direction. And in India, further falls in food prices and stable gasoline should bring the price level down by 0.1/0.2% month-on-month, although similar falls last year mean that the inflation rate could hold up at around 5.9%YoY for a second month – still, within the Reserve Bank of India’s target range and indicating that we may be closing in on peak rates.   China activity and loan data due in the coming days China will announce loan data between 9 and 15 January and activity data and GDP data between 10 and 27 January. Loan growth should have slowed in the last month of 2022 even after the People's Bank of China cut the required reserve ratio (RRR) to absorb liquidity. The impact of the RRR cut in December should be reflected in loan growth data for January and support economic activity post-reopening. China also reports activity data and we expect retail sales to face a deeper contraction on a yearly basis. Meanwhile, industrial production could turn from positive growth to mild contraction in December. This suggests that growth was supported mainly by fixed-asset investments for the period. As a result, GDP growth for the fourth quarter of 2022 should fall into a slight year-on-year contraction. BoK could surprise with a pause Bank of Korea (BoK) will meet next Friday. The market expects a 25bp hike, but we maintain our minority view that the BoK will likely stand pat this time. Since the last meeting, both inflation and inflation expectations decelerated quite meaningfully while the Korean won stabilised under the 1300 level despite a widening yield gap between the US and Korea. The BoK is expected to use the rate hike card more carefully as there is little room left to raise interest rates in this cycle given sluggish exports and economic activity. However, given the recent rise in gasoline and power prices, upside risks remain high and thus the BoK should retain a hawkish tilt despite the pause. Philippines exports likely to reverse recent surprise gain Exports are expected to revert to contraction following a surprise jump in the previous month. Electronics form the bulk of outbound shipments from the Philippines and given slowing global demand we could see the overall exports sector fall back into the red. Imports on the other hand should continue to expand, resulting in the trade deficit widening to roughly $4.4bn.  Key events in Asia next week Refinitiv, ING TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

A difficult year ahead for the global economy is set to hit some countries harder than others. Inflation was one of the biggest macroeconomic themes in 2022 and it is likely to remain so in 2023. Inflation also contributes to gross domestic product. In Great Britain, this indicator does not look optimistic, and its upcoming reading may turn out to be crucial for the economy this year. The Bank of England has said the country is on track for a prolonged recession, as households struggle to keep up with the soaring costs of food, energy and other basic essentials. Economists opinion Around four-fifths of economists say the UK will experience a much longer recession than its peers. They predict a difficult year 2023 and a potential return to normal by 2024. The UK will face one of the worst recessions and weakest recoveries in the G7 in the coming year, as households pay a heavy price for the government’s policy failings, some economists say. A large proportion of experts expect the UK to fall behind its peers, with gross domestic product already contracting and expected to continue to do so for most or all of 2023. The result is expected to be an increasingly steep decline in household income as higher credit costs add to the pain already caused by soaring food and energy prices. In its macro forecast for 2023, Goldman Sachs forecast a 1.2% decline in UK real GDP over the course of the year, well below all other major G-10 economies. ING pointed out that GDP figures have been somewhat discrepant recently, partly due to the Queen's funeral in September last year. But the economy is clearly weakening and ING expects a negative monthly result in November, after an artificial rebound in October after September's extra day off. Inflation Throughout the last year, the Bank of England has been raising interest rates in an attempt to cool down rampant inflation. This resulted in an increase in interest rates from 0.25% to 3.5%. The cost of borrowing in the UK has increased dramatically, affecting the ability of businesses to borrow money, but also the cost of mortgage payments for millions of Britons. As mortgage repayments increase, household disposable income decreases. Disposable income is also affected by inflation as the cost of goods and services increases. The Office for National Statistics reported last month that Britain's inflation rate was 10.7% in November, down from a 40-year high of 11.1%. GDP Economic activity has slowed sharply in recent months as consumers tighten their belts in response to soaring living costs, while business investment has slumped amid concerns over the strength of the UK and global economy. Last month, GDP showed that the UK economy contracted at a rate of -0.3% in the last quarter. This reinforces speculation that the UK is facing a long recession. When it comes to forecasts for quarterly or year-on-year results, there are no forecasts, but a contraction is to be expected given the prevailing economic conditions. The Pound (GBP) on FX market Based on the current outlook, investors can expect a difficult year ahead for the pound, with the value of sterling coming under significant pressure if the economies of its major counterparts continue to outperform the UK. During the last recession, the pound fell to 1.05 to the euro and 1.14 to the dollar. Cable (GBPUSD) was trading at 1.14 Source: investing.com

Commodity markets had a weak start to the year, driven predominantly by the energy complex. Immediate demand concerns from China and milder weather in Europe were key catalysts. For this week, market direction (at least towards the end of the week) will likely be dictated by US CPI data Source: Shutterstock Energy - Speculators add to Brent long position The first trading week of 2023 saw a lot of weakness in the oil market. ICE Brent fell by almost 9% over the week. Global growth concerns and Chinese covid infections have hit sentiment in the immediate term. However, the change in China’s covid policy is constructive for the market in the medium to long term. Speculators also appear to have taken advantage of the recent weakness to enter the market. The latest positioning data shows that speculators increased their net long in ICE Brent by 17,753 lots over the last reporting week, to leave them with a net long of 161,456 lots as of last Tuesday. According to Bloomberg, the US Department of Energy rejected a number of offers it received for the potential purchase of crude oil in February in order to start refilling the strategic petroleum reserve. Reports suggest that the DOE will delay the process after offers were either too high or didn’t meeting the necessary specifications. The Biden administration had previously said that it would look to refill the SPR if WTI was to trade towards US$70/bbl. And in doing so providing some good support to prices around these levels.-  Looking at the calendar for the week, the EIA will release its monthly Short Term Energy Outlook on Tuesday, which will include the latest forecasts for US crude oil output. The outlook for US production growth has become increasingly more modest over the last year and the recent weakness in prices will likely not help this trend.  Then on Thursday, broader markets will be focused on US CPI data, with this an important data point for assessing what the US Fed may do in terms of monetary policy in upcoming meetings. Finally, on Friday, China will release its first batch of trade data for December, which will include oil import data. Metals - Boosted by more property measures in China Copper and iron ore prices rose again on Friday, on a report that China may ease curbs on borrowings by developers. Beijing may allow some property firms to add leverage by easing borrowing caps and pushing back the grace period for meeting debt targets, according to a report from Bloomberg. A raft of policy moves in recent weeks in China has boosted confidence that the economy is stabilizing, improving the outlook for industrial metals. In mine supply, Peru’s latest official numbers showed copper output in the country rising 15.3% YoY (although declining 3.2% MoM) to 225kt in November. Most of the annual production gain came from mines including Antamina, Cerro Verde and Southern Peru Copper. Amongst other metals, zinc production in the country declined 2.9% YoY in November. Aluminium exchange inventories in Chinese warehouses continue to show signs of recovery. The latest data from Shanghai Futures Exchange (ShFE) showed weekly inventories for aluminium increasing by 22.6kt for a fourth consecutive week to 118.5kt as of Friday. Other base metals stocks also reported inflows over the week. In nickel, Tsingshan Holdings Group Co., the largest nickel producer, has started a primary nickel plant in Hubei province with monthly capacity of 1,500 tonnes, according to a report from SMM. Agriculture – Ukraine corn harvest progress The latest data from Ukraine’s Agriculture Ministry shows that farmers in the nation harvested 22.1mt of corn from 3.4m hectares as of 6th January, which accounts for 81% of corn area for the 2022/23 season. The USDA released its weekly export sales report on Friday, which shows that US soybean sales remained strong, while shipments for wheat and corn remained weak for the week ending 29th December. Export sales of soybean rose to 872kt for the week, higher than the 706kt a week ago. For wheat, the agency reported that US export sales fell to 144kt for the above-mentioned week, lower than the 511kt seen the previous week. US corn export sales declined to 319kt; from 952kt a week ago. The latest CFTC data shows that money managers increased their net longs in CBOT soybeans by 14,378 lots over the last week, leaving them with a net long position of 142,994 lots as of 3 January. The move was predominantly driven by rising long positions with gross longs increasing by 15,672 lots to 166,894 lots. For wheat, speculators decreased their net short position in CBOT wheat by 3,497 lots to 57,715 lots. Speculative net longs in CBOT corn increased by 37,142 lots to 196,457 lots. Read this article on THINK TagsSpeculators Oil Iron ore Grains CPI inflation China property   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Volatility back in focus this week with US CPI on the radar, after jobs report showed a strong headline but softening wage growth. Economic concerns in the US are increasing but it still isn’t enough for the Fed to shift focus from inflation which is likely to remain about three times the Fed’s 2% target, and Fed Chair Powell’s comments this week will also be key. China’s December CPI is expected to come in modestly higher, with PPI less negative as well. Australia’s November CPI will key for further direction in AUDUSD. UK’s November GDP will likely signal the start of an incoming official recession, and Q4 earnings season kicks off with bank earnings in focus this week.         US CPI remains the most key data point to watch, Fed Chair Powell speaks as well There is enough reason to believe that we can get some further disinflationary pressures in the coming weeks. Economic momentum has been weakening, as highlighted by the plunge in ISM services last week into contraction territory, particularly with the forward-looking new orders subcomponent. An unusually warm winter has also helped to provide some reprieve from inflation pains. Bloomberg consensus forecasts are pointing to a softening in headline inflation to 6.5% YoY, 0.0% MoM (from 7.1% YoY, 0.1% MoM prev) while core inflation remains firmer at 5.7% YoY, 0.3% MoM (from 6.0% YoY, 0.2% MoM). Still, these inflation prints remain more than three times faster than the Federal Reserve’s 2% target. Fed officials have made it clear they expect goods price inflation to continue to ease, expecting another big drop in used car prices. But officials are seemingly focused on services ex-housing which remains high. So even a softer inflation print is unlikely to provide enough ammunition for the Fed to further slow down its pace of rate hikes. Fed Chair Jerome Powell this week as well, and his tone will be key to watch. Volatility on watch if US CPI sees a big surprise The last two months have shown that big swings in US CPI can spark significant volatility in the equity markets, given the large amounts of hedging flows and short-term options covering. With a big focus on CPI numbers again this week, similar volatility cannot be ruled out. Volume might be thin still this week as many are still on holidays, so moves in equities could be amplified in either direction. Meanwhile, FX reaction to CPI has been far more muted, but some key levels remain on watch this week. A higher-than-expected CPI print could keep expectations tilted towards a 50bps rate hike again in February, while a miss could mean expectations of further slowdown in Fed’s tightening pace to 25bps in February could pick up which can be yield and dollar negative. EURUSD looks stretched above 1.0650 and key levels to watch will be 1.0500, while USDJPY needs to close below 130.38 to extend the downturn further. USDCNH remains key to watch as well as it gets closer to test 6.8000 amid China reopening and easing in property sector. AUDUSD is also flashing a bullish signal after breaking above the key 0.69 this morning with China reopening momentum underpinning. The Aussie dollar flags a bullish signal, crossing a key level. Could inflation add to the rally? After the US dollar suffered its longest streak of weekly falls in two months, the commodity currency - the Aussie dollar broke above its 200-day moving average, which is seen by some as a bullish sign with the Aussie dollar (AUDUSD) trading at two-month high of 0.69 US cents. What's also supporting the currency is that China’s reopening is expected to add considerably to Australia’s GDP. There’s a potential 0.5% addition to GDP in a year once Chinese students and tourists return. Plus there is likely to be an extra boost to GDP from the anticipated pick up in commodity buying from China. Extra hot sauce could even come from China potentially buying Australian coal again. JPMorgan thinks over the next two years, Aussie GDP will grow 1% alone thanks to inbound Chinese students and holiday makers likely returning. The next catalyst for the currency is inflation, CPI data out on Wednesday Jan 11. Core or trimmed CPI is expected to have risen from 5.3% YoY to 5.5% YoY. If CPI come in line with expectations, or above 5.3% YoY, you might also think the AUD rally could be supported.  China’s CPI expected modestly higher, PPI less negative Economists surveyed by Bloomberg had a median forecast of China’s December CPI at an increase of 1.8% Y/Y, edging up from 1.6% in November, mainly due to base effects, as food prices are likely to be stable and higher outprices in the manufacturing sector might be offset by a fall in services prices. PPI in December is expected to be -0.1% Y/Y, a smaller decline from -1.3% Y/Y in November, benefiting from base effects. The decline in coal prices was likely to be offset by an increase in steel prices. Growth in new RMB loan and aggregate financing expected to slow in China The Bloomberg survey consensus is forecasting a modest decline in new RMB loans to RMB1,200 billion in December from RMB1,210 billion in November despite the Chinese authorities have been urging banks to lend to the real estate sector. New aggregate financing is expected to slow to RMB1,850 billion from RMB1,990 billion, primarily dragged by a decline in bond issuance from local governments. UK November GDP to signal an incoming recession UK’s monthly GDP numbers are due this week, and consensus expects a contraction of 0.3% MoM in November from +0.5% MoM previously which was boosted by the favourable M/M comparison vs. September, which was impacted by the extra bank holiday for the Queen’s funeral. The economy is clearly weakening, and another quarter of negative GDP print remains likely which will mark the official start of a recession in the UK. Start of the US earnings season The Q4 earnings season starts next week with major US banking earnings most notably from Bank of America, JPMorgan Chase, and Citigroup. Analysts remain muted on US banks with earnings expected to show another quarter of negative earnings growth compared to a year ago. For the overall Q4 earnings season we expect to see more industries experiencing margin compression than industries experiencing expanding margins. This will continue to be a headwind for earnings growth. Analysts did not see the margin compression coming in Q3 and judging from current estimates they have not materially revised down their expectations. That means that the Q4 earnings season and beyond could be paved with more disappointments. The list below shows the most important earnings releases next week. Tuesday: Albertsons Thursday: Fast Retailing, Seven & I Friday: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic Read next: The U.K. Economy Is In Trouble, Fall Of GDP Is Expected!| FXMAG.COM Key economic releases & central bank meetings this week Monday 9 January U.S. Manheim used vehicle index (Dec) Germany Industrial production (Nov) Eurozone Sentix Investor Confidence (Jan) Eurozone Unemployment rate (Nov) Japan: market closed for holiday Tuesday 10 January France Industrial production (Nov) Japan Tokyo-area CPI (Dec) Fed's Bostic speaks in a moderated discussion Fed's Daly interviewed in WSJ Live event Fed Chair Powell speaks at Riksbank event Wednesday 11 January Australia retail sales (Nov) Australia CPI (Nov) U.S. MBA mortgage applications (Jan 6) Thursday 12 January Australia trade (Nov) U.S. CPI (Dec) China CPI & PPI (Dec) Fed's Harker discusses the economic outlook Friday 13 January U.S. U of Michigan Consumer Sentiment (Jan, preliminary) Eurozone: Industrial production (Nov) UK: Monthly GDP (Nov) Japan: Money supply (Dec) China: Imports, exports and trade balance During the week: China: Aggregate financing, new RMB loans, money supply (Dec) Source: Saxo Spotlight: What’s on the radar for investors & traders for the week of 9-13 Jan? US/China/Australia inflation, UK GDP and the start of Q4 earnings season | Saxo Group (home.saxo)

Summary:  As the FOMC voting rotates, the new set of voters in 2023 will likely see a dovish tilt. Hawkish members like Bullard, Mester and George will not be voting this year, being replaced by Goolsbee, Logan and Harker. Kashkari, who is currently hawkish, will also be voting in 2023. Still, broad consensus is likely to remain on Fed policy unless economic conditions deteriorate materially and labor market starts to loosen in H2. Going into 2023, the focus for the Fed will squarely remain on inflation, despite the recent softening. A tight labour market meanwhile continues to provide room to the Fed to continue hiking rates well above 5%. However, it will be key to watch how the Fed’s voting committee changes could potentially affect policy direction. A number of the hawkish Fed members will not be voting this year as the Fed ensues its annual voting rotation. James Bullard of the St. Louis Fed, Loretta Mester of the Cleveland Fed and Esther George of the Kansas City Fed, all of whom have favored sharply higher interest rates to help curb inflation, will lose their votes. Boston’s Susan Collins, a newcomer who’s considered to be neutral, will also lose her voting seat. Charlie Evans of the Chicago Fed and Esther George of the Kansas City Fed are retiring in early 2023. Charlie’s successor has been named. Austan Goolsbee, who will have a voting role at his first meeting in 2023, will replace him. He is expected to be dovish. Goolsbee will be joined by newcomer Lorie Logan at the Dallas Fed, who is also a centrist. Philadelphia Fed president Patrick Harker will rotate into a voting position. Minneapolis’s Neel Kashkari, who is currently an arch hawk after being an uber dove for many years, will also be voting in 2023. While H1 should continue to see a broad consensus within the Fed’s board with inflation remaining a key concern, disagreements may start to flow in from H2 if economic conditions deteriorate materially and labor market starts to loosen. The bar for cutting rates in 2023 will still remain high, however, as any recession in the US – if one was to occur – will be short and shallow.   Source: Fedspeak Monitor: Fed’s 2023 voting committee has a dovish tilt, but broad consensus likely to stay | Saxo Group (home.saxo)

The eurozone unemployment rate was unchanged in November despite economic conditions pointing to contraction. This leaves the labour market historically strong, but also makes it a key risk for second-round inflation effects for the ECB   November 2022 was another strong month for eurozone labour markets. Unemployment was unchanged from October at 6.5%, the lowest rate since the data series began in 1998, with many of the larger countries seeing the rate decline, such as France, Italy and Spain, however large increases in Austria and Portugal offset these developments. Overall, the resilient labour market is a positive for Europeans who are already seeing incomes come under pressure due to high inflation. This dampens the negative economic consequences of the inflation shock. With a mild recession as the most likely economic outcome for this winter, there is some cooling of the labour market to be expected. Still, with a labour market this tight, it is unlikely that unemployment will run up enough to make labour shortages a thing of the past. That makes this a key risk for the ECB at the moment. While inflation expectations are fairly well anchored right now, chances of higher trending wage growth remain an upside risk to inflation for this year. While there is no evidence of a wage-price spiral so far, the ECB has taken a hawkish turn and will remain worried about wage growth rising further anyway. Read this article on THINK TagsInflation GDP Eurozone   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Big rally in Asian FX yesterday, but today could see some profit taking  Source: shutterstock Macro outlook Global Markets: Monday stands for “mainly mediocre”. US stocks opened up but after rising in early trading, lost momentum and slid towards the close. This left the S&P500 roughly unchanged on the day, though the NASDAQ hung on to some of its gains and finished up by 0.63%. After tumbling sharply on Friday following the payrolls report, US Treasury yields only declined slightly more on Monday. 10Y Treasury yields fell 2.6bp to yield 3.53%, while 2Y yields dropped by 4bp. Two Fed officials yesterday hinted that they saw rates being raised above 5%. Raphael Bostic saw rates rising to 5-5.25%, while Mary Daly gave a vaguer “somewhere above 5%” indication. Both suggested that rates could start to go up in 25bp increments from here. Fed funds futures markets have reverted to not pricing in even 5% for peak Fed funds. The current implied peak comes in June this year at 4.93%. There were further increases in the EURUSD yesterday, which has now risen to 1.0733. This was mirrored in the AUD, which is back above 69 cents, and at its highest level since September last year.  Cable is also up at 1.2185 and the JPY is steady at 131.70. Asian FX had a great day yesterday. The KRW gained 2%, leading a pack that saw gains across the board. The THB, PHP, CNY, and SGD all gained between 1.69% (THB) and 0.7% (SGD). Today will likely see much more muted gains and perhaps some profit-taking. G-7 Macro: It was a quiet day for macro news in the G-7 yesterday. And it is also relatively quiet too today. The US NFIB business survey will be the main data point to look at. China:  Fiscal spending in 2023 should be stronger than last year. Increased spending for 2023 includes an increase in the issuance of special local government bonds and tax breaks for small and medium-sized enterprises. The aim of more government spending is to increase employment during the reopening process. So far, the reopening (which began on 8 January) has resulted in a greater increase in arrivals than departures as outbound travel has been deterred by the requirement for Covid tests in some foreign locations. We expect retail sales to pick up gradually in 1Q23 as some people could still be struggling to land a job at the beginning of the reopening process. Then we should see more pickup in activity in 2Q23, and more solid growth in 2H23. Chinese New Year annual migration has already started, and so far, we see more mobility than last year. This year, there are no "border controls" when people travel across provinces in Mainland China. The point to look for is whether this year's migration can reach a level similar to early 2020 (before Covid restrictions were imposed) Japan: Tokyo December CPI inflation data has been released. Both headline and core inflation (excluding fresh food) hit 4.0% YoY for the first time since 1982. As core inflation beat the market consensus of 3.8%, market expectations for the Bank of Japan’s (BoJ’s) exit strategy are expected to rise. But we do not believe that this data will persuade the BoJ to take any further action at their meeting next week. The BoJ thinks that higher-than-usual inflation is not sustainable, plus, other data, such as today’s household spending and the latest real cash earnings, both contracted, signalling weak growth. South Korea:  The current account posted a deficit of USD0.6bn in November - the first deficit in three months. The deficit in the goods account widened due to higher commodity prices together with sluggish exports. Also, the deficit in the services account widened as freight fares fell and outbound travel increased significantly. Today’s weak current account adds more downside risk to last quarter’s GDP.  With Industrial production and trade weaker than expected, we are considering lowering our GDP forecast for 4Q22 from -0.1% QoQ to -0.2%. Philippines: November trade data is out today.  Exports may revert to negative territory after last month's surprise growth given expectations for weak demand for electronics.  Imports, on the other hand, will likely sustain gains but fall short of double-digit growth as global energy prices eased from their peak in 2022.  The overall trade deficit should remain sizable at roughly $4.5bn, enough to keep the PHP from appreciating sharply this year as the current account remains in deficit. What to look out for: US and China inflation reports later in the week Philippines trade balance (10 January) South Korea good balance (10 January) Japan Tokyo CPI inflation (10 January) US NFIB small business optimism survey (10 January) Powell gives speeches (10 January) Australia retail sales (11 January) Malaysia industrial production (11 January) Japan trade balance (12 January) Australia trade balance (12 January) China CPI inflation (12 January) India CPI inflation (12 January) US CPI inflation and initial jobless claims (12 January) Fed’s Harker gives a speech (12 January) South Korea export price index and BoK decision (13 January) US University of Michigan sentiment (13 January) Fed’s Bullard gives speech (13 January) China trade balance (14 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  A further squeeze in US equities yesterday, perhaps inspired by the recent drop in US treasury yields, peaked out mid-session and was entirely erased by the end of the day, establishing an important line in the sand on charts ahead of the next important macro event risk on the US economic calendar, the Thursday December CPI release. Interesting session ahead for European equities after yesterday saw major indices in Europe closing at their highest levels since Russia invaded Ukraine.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures erased all of their gains in yesterday’s session, declining 1.5% from the intraday highs. The culprit was Fed member Mary Daly’s comments that she expects the policy rate to move to 5% or a bit above. Despite these comments, the US 10-year yield declined downplaying the comments from Daly suggesting the market keeps betting that the Fed will pivot before reaching the 5% level. S&P 500 futures are trading lower again this morning hovering just above the 3,900 level taking the futures back into the upper part of the trading range established since mid-December. The next important event for US equities is the December CPI report on Thursday. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) Hong Kong and Chinese equities retraced after a strong start in the new year. Hang Seng Index edged down 0.3% and CSI300 was nearly flat as of writing. China is exempting value-added tax (VAT) among small businesses till the end of 2023 and is considering a record special debt quota and a wider budget deficit. The news stirred little excitement among investors as expectations for stimulus measures are already high. Chinese leading EV maker, BYD (01211:xhkg) slid 2% following Berkshire Hathaway reduced its stake to 13.97% from 14.06%. FX: Currencies swing with risk sentiment, USDCNH rejects new lows after huge slide The US dollar found support late yesterday after an extension of its recent sell-off on a squeeze higher in equities. EURUSD spilled over to a new high since last June, posting a 1.0761 high water market before easing back as risk sentiment weakened late in the US yesterday, supporting the greenback. A good portion of the EURUSD upside was on a firmer euro, as other USD pairs remain within recent trading ranges, including USDJPY, trading mid-range this morning just below 132.00. Elsewhere, USDCNH extended its remarkable run lower in the Asian session but was quickly gathered up after hitting new lows since last August at 6.76. Several central bankers are out speaking at a conference in Stockholm, Sweden today, while the market awaits the next major US macro event risk, Thursday’s December CPI release. Crude oil (CLG3 & LCOH3) trades steady with Brent hovering around $80 Gains being driven by excitement over a rapid reopening in China with the upcoming Lunar New Year driving a pickup in demand for travel. Near-term weakness in demand will be discussed when the OPEC+ monitoring committee (JMMC) meets on February 1 and despite a drop in Russian exports, due to sanctions, forcing the price of its flagship Urals below $40 per barrel last Friday, the committee could still spring a surprise and recommend another production cut. China meanwhile issued another generous quota for crude imports that will allow 44 non-state-owned refiners to import a total 132 million tons compared with 109 this time last year. Brent trades within a small uptrend with resistance being the 21-day moving average, today at $81.30 and support at $78. Gold (XAUUSD) holds onto its gains Supported by a weaker dollar and softer yields despite comments on Monday from two Fed officials that rates may rise above 5% before pausing and holding for some time. The metal has also been buoyed by the reopening in China with pictures of very crowded gold markets seeing pre-Lunar demand and the PBoC announcing it bought 62 tons of gold during the last two months of the year. However, following two back-to-back weeks of ETF buying, total holdings dropped slightly on Monday as some investors remained cautious. Focus this week on Thursday’s US CPI print with the next major hurdle for gold being $1896, the 61.8% retracement of the 2022 correction, with support now at $1830. HG Copper breaks higher on China demand optimism With the China government considering CNY3.81trn of local government bond issuance in 2023, there is expectations of a further push to infrastructure spending which will continue to bump up industrial metals' prices. Beijing may also bump the budget deficit to 3% of GDP, up from 2.8% last year. Meanwhile, copper inventories for immediate withdrawal from LME warehouses fell 2.8%, the most since 8 December. That leaves stockpiles at just above a 17-year low. HG copper reached $4.05 on Monday with the 50% retracement of the 2022 correction now offering resistance at $4.0850, with support being the 200-day moving average at $3.84. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields ease lower, 10-year close to 3.50% Ahead of three days of treasury auctions starting with today’s auction of 3-year notes, US treasury yields dropped a few basis points all along the curve. The two-year yield is nearing the range low since last September just below 4.15%, while the 10-year benchmark yield has another 10 basis points of range to work with into the cycle low near 3.40%. A 10-year auction is up tomorrow and 30-year T-bond auction on Thursday, with prior auctions for those maturities rather weak. Read next: The Aussie Pair Is Trading Above 0.69$, The Euro Above 1.07, The British Pound Also Benefits From A Weak Dollar| FXMAG.COM What is going on? The labour market remains tight in the Eurozone The Eurostat figures for Eurozone unemployment were out at 6.5 % in November and at 6.0 % for the EU. The figures are stable compared to October. Within the EU, Spain scores the highest official unemployment rate (12.4 %) and Germany and Poland the lowest one (3.0 %). In a working paper published yesterday, ECB economists pointed out the risk of high wage growth in the coming quarters – way above historical patterns.  “This reflects robust labour markets that so far have not been substantially affected by the slowing of the economy, increases in national minimum wages and some catch-up between wages and high rates of inflation”. We tend to disagree with this assessment. Wage growth is of course fuelling inflation in the CEE area. But this is clearly not the case in Western Europe. The likelihood that wages will increase significantly, thus becoming an issue regarding the fight against inflation, is rather low in our view. The United Kingdom is certainly the only European country which may potentially face a wage-price spiral this year.  Commodities supported on optimism over a speedy reopening in China  China will return to “normal” growth soon as Beijing steps up support for households and businesses, according to party secretary of the China’s central bank. That adds to hopes that the government will expand measures to steady the economy and potentially roll out more infrastructure spending that could support industrial metals prices. The HG copper price rose over $4 at on one point, for the first time in six months, with demand likely to rise while inventory stockpiles remain near 17-year lows while the Iron ore (SCOA) price surged 2.4% to a new six month high, $119.80 on expectations for a seasonal post-Lunar new year ramp up in demand.  China reopening, authorities are anxious the nation could run out of power China’s National Development and Reform Commission has issued three notices urging parties to secure and speed up the process of locking in medium and long-term supply deals, to ensure China does not run out of power. China had banned imports of Australian coal for over two years, however, yesterday reports suggested BHP struck a deal and sold two shipments of met coal to China. This highlights that trade relations are improving but also means the price of coal is likely to remain supported as demand is increasing. Japan’s December Tokyo CPI touched the 4% mark Tokyo CPI for December was released this morning, with the headline coming in at 4.0% YoY as expected from a revised 3.7% YoY in November, suggesting price pressures in Japan haven’t started to cool off yet. Tokyo core CPI (ex-food) was higher than expected at 4.0% YoY from 3.6% YoY previously while the core-core measure (ex-food and energy) was also higher at 2.7% YoY from a revised 2.4% YoY in Nov. With Tokyo CPI numbers leading the broader print, there are clear signs that further upside pressures are likely to stay and continue to keep a policy tweak option alive for the BOJ. Russian crude exports coming under pressure Russia’s Urals grade, a far bigger export stream than any other crude that Russia sells, was $37.80 a barrel at the Baltic Sea port of Primorsk on Friday, according to data provided by Argus Media. Global benchmark Brent settled at $78.57 on the same day. Combined flows to China, India and Turkey hit the lowest last week since October, suggesting sanctions and EU embargo may be impacting Russia’s key exports. Microsoft considers $10bn investment into OpenAI The recently published ChatGPT has surprised the world by being quite good at answering all sorts of questions whether they are simple or complex. ChatGPT reached a 1mn users in just one week of beta testing. There have been serious talks about that ChatGPT might be something that could one day upend Google’s classic and very profitable search engine business. This might be the exact opportunity Microsoft is pursuing. What are we watching next? US December CPI up on Thursday The latest CPI data out of the US is the next important test for global markets, which have grown perhaps over-confident that the Fed will not only halt its policy tightening soon after perhaps 50 basis points of further tightening, but will be signalling rate cuts by year-end. The US CPI releases have triggered considerable volatility in recent months, particularly in equity markets on aggressive trading in very short-dated options. The market expects that inflation will actually fall month on month by –0.1% and only rise 6.5% year-on-year versus +7.1% in November. The core, ex Food and Energy number is expected to rise +0.3% MoM and +5.7% YoY vs. +6.0% YoY in November and a peak rate of 6.6% in September. Earnings to watch The Q4 earnings season kicks off this Friday with banking earnings from Bank of America, JPMorgan Chase, and Citigroup with consensus expecting earnings to continue contracting among US banks before coming back to growth this year. The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession or maybe no recession at all in the US economy. With higher interest rates level expectations are that banking revenue will slowly begin to accelerate and if high interest rates persist for an extended period, the longer-term growth for banks could be quite attractive. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. Today: Albertsons Thursday: Fast Retailing, Seven & I Friday: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic Economic calendar highlights for today (times GMT) 1000 – Sweden Riskbank Governor Thedeen to speak 1010 – Bank of England Governor Bailey, Bank of Canada Governor Macklem, ECB’s Schnabel speak Stockholm 1100 – US Dec. NFIB Small Business Optimism 1400 – US Fed Chair Powell to speak at Riksbank even in Stockholm 1535 – ECB's de Cos, Knot to speak in Stockholm 1700 – EIA's Short-term Energy Outlook (STEO) 1800 – US 3-year Treasury Auction 2130 – API's Weekly US Oil and Fuel Inventory Report 0030 – Australia Nov. Retail Sales 0030 – Australia Nov. CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – January 10, 2023 | Saxo Group (home.saxo)

UK Prime Minister Rishi Sunak said UK inflation is not certain to slow down this year so there is a need to continue influencing wages in order to limit their rise despite ongoing negotiations with striking sectors, including the National Health Service and the railways. Sunak has come under criticism Sunak has come under criticism over promises to halve inflation this year. This is despite the forecasts of the Budget Authority that the rate of price increase will slow down significantly as it is without any additional intervention from the government. Rising energy prices in the UK led to inflation exceeding 11% last year, causing a cost-of-living crisis. The Prime Minister and many other politicians have also changed for this reason. The new Prime Minister, Rishi Sunak, has decided to take seriously the issue of containing price rises, which is his top priority and the reason why he is resisting calls to adopt high public sector wage demands as this is sure to spur yet another rise in inflation. A growing political problem for the prime minister However, unrest is now taking place all over the country as citizens are pushing for a 19% pay rise. Another issue is that Sunak refused to answer the question of whether he has private medical care, saying it was of little consequence. This has become a growing political problem for the prime minister, who is under pressure from both members of his own Conservative Party and the general public. GBP/USD Talking about the forex market, yesterday's rise in GBP/USD is gradually slowing down, so buyers need to stay above 1.2140 in order to maintain their advantage. The breakdown of 1.2200 will push the pair to 1.2260 and 1.2301, while a drop below 1.2140 will bring it to 1.2090 and 1.2040. EUR/USD In EUR/USD, there is a chance to update the December highs, but this is only if the pair breaks above 1.0760. Such a move will push euro to 1.0790 and 1.0850, while a fall below 1.0720 will bring it to 1.0680 and 1.0650.     Relevance up to 09:00 2023-01-11 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331837

European stock markets are softer in early trade on Tuesday following a similar session in much of Asia as investors turn more cautious ahead of Thursday’s US inflation data. The commentary from Fed officials at the start of the week was more hawkish than what investors wanted to hear following a knockout jobs report. Considering the rhetoric in the weeks leading up to Friday, it shouldn’t have come as a great surprise that policymakers are sticking to the “higher for longer” narrative. There has been a determination to not allow financial conditions to loosen on the expectation of lower rates down the road as it undermines tightening efforts now. While the central bank’s assessment of future rates may be more hawkish than the markets, it’s also possible that they’re being intentionally overly hawkish now in an attempt to stop investors from getting carried away. The jobs report may not have been enough to warrant a shift in the language, but that doesn’t mean we aren’t close and any change could be quite stark. The inflation report on Thursday could further justify such a move although investors will be very wary that a bad one could ensure policymakers dig their heels in for a while longer yet. Tentatively higher Bitcoin is marginally higher after breaking back above $17,000 yesterday, buoyed by an improvement in risk appetite. That remains fragile though and a nasty surprise this Thursday from the US inflation report could send risk assets into reverse. The broader crypto environment remains the dominant driver though and it’s gone a little quiet on that front which will be welcome. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

The November monthly inflation series surprised markets with a stronger-than-expected rise. While this will be a disappointment for the Reserve Bank of Australia, many of these factors look likely to reverse in the months ahead Australian retail sales Source: Shutterstock 7.3% November inflation YoY% Higher than expected A bad number, but it should soon fade After falling to 6.9% in October, the return of inflation to 7.3% in November is quite disappointing and highlights the fact that inflation in Australia is not going to be a pushover for the Reserve Bank as it tries to squeeze it back to its 2-3% target. A relatively muted month-on-month gain in the price level in November last year meant that at best we were only likely to have seen a modest further reduction in inflation this month instead of the rise we actually saw. But some outsize rises in the price of a number of components mean that we may be waiting another month or two before we can confidently call "peak inflation" in Australia.   Rain stops play The monthly data tells the story quite well. Let's start with food. And after two consecutive months of large declines, food prices, especially fruit and vegetables, were pushed strongly higher. Poor weather and more flooding in New South Wales and Victoria are probably to blame for much of this. And December wasn't by any means a return to normality either, with the Bureau of Meteorology noting rainfall was 33% above average for the month as a whole with temperatures below or very much below normal (though New South Wales and Victoria were drier than normal after the previous month's rain).   Australian December rainfall - percentage of mean Source: Australian Bureau of Meteorology Oil isn't helping The second 2.2% month-on-month increase in a row for the transport component is largely a reflection of crude oil and retail gasoline prices, with the motor fuel component up 5.6% MoM after a 7% MoM increase in October. National pump prices in December more than reversed the November increase, though they are on the rise again in January, so any respite in December may be short-lived. Then there is the recreation component, which is being driven by holidays, the price of which rose 4.3% in November due to a choppy and hard-to-forecast combination of air fares (a derivative of oil prices) and pressure on holiday vacancies (a function of global reopening). Rising overseas visitors for Christmas mean that these November figures may only partially reverse in December after the latest spike.   Australian inflation by component MoM% Source: CEIC, ING Better news buried in the detail However, all of this could be regarded as the death throes for inflation in Australia, as there are some encouraging developments elsewhere that could signal lower inflation once this latest volatility is out of the way, and absent any renewed climate-related impacts (a very big "if" these days).  Firstly, clothing, which is a good reflection of discretionary spending strength, dropped 2.4% MoM, though it is also extremely volatile, so we aren't reading too much into just one month's reading. More importantly, housing registered only a 0.1% MoM increase in November, with house purchase costs also only up 0.1%, while rents rose only 0.2% MoM, down from 0.6% in October. These prices tend to be much less volatile, and having softened, we could anticipate even weaker figures in the months ahead, which may help to soften any residual volatility in the other components that we still need to work through.  What does this mean for markets? Interestingly, after a brief spike higher on the news, 10Y Australian bond yields have tended to drift lower today following the CPI numbers. This could indicate that markets also view this as a last hurrah for inflation rather than any meaningful setback for the Reserve Bank of Australia. The same seems true for RBA expectations, where December 2023 bank bill futures have risen, signalling an expectation for lower, not higher yields. The Australian dollar did push higher against the US dollar following the release, though drifted back before strengthening again later, though not clearly a direct result of today's data.  Certainly, today's data adds more risk to our view that the RBA will stop raising rates once it reaches 3.6% (another two 25bp rate hikes from here), and we may have to raise that to 3.85% if we don't see some more encouragement from other figures, for example, the labour data. But we are not throwing in the towel just yet. This latest inflation data offered just enough hope that this is a temporary setback to enable us to defer that decision for a little while longer.   Read this article on THINK TagsRBA rate policy Australian inflation Australian economy AUD Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Today we discuss the bounce-back in US equity markets as we are all supposedly holding our breath for a CPI release tomorrow when the last soft CPI release in December drove zany intraday volatility and a rally that was quickly erased - etching out a market top at the time. Elsewhere, we discuss the conflicting signals from expanding US credit while another sentiment survey disappoints, look at strong metals markets as a clear expression of hopes for a China-driven recovery, Apple's deepening vertical integration moves as it looks to ditch Samsung screens, and much more. Today's podcast features Peter Garnry on equities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Read next:The EUR/USD Pair Is Still Above 1.0700$, The USD/JPY Pair Was Little Changed| FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Metals are sending loud signals as US equities in limbo | Saxo Group (home.saxo)

December inflation brought a downward surprise and is good news for the central bank. However, the main issue at the moment is the January re-pricing and the impact of government measures on the CPI. The January number should bring inflation back to higher levels, but lower than the central bank expects December inflation was lower than expected in the Czech Republic 15.8% December inflation (YoY)   Lower than expected Mixed picture but overall lower than expected The overall level of consumer prices remained the same in December as in November (0.0% month-on-month). On an annual basis, consumer prices rose by 15.8% in December, 0.4pp lower than in November. The average inflation rate for the full year 2022 was 15.1%. Price developments varied across the different sections of the consumer basket. The fall in fuel prices was offset by price increases, particularly in housing, energy and food. However, growth in these items was lower than we expected. Core inflation also slowed from 0.4% to 0.2% MoM according to our calculations which translates into a slowdown from 13.8% to 13.2% year-on-year. The official number will be published by the Czech National Bank (CNB) later today but the overall picture is positive for the central bank. The CNB's November forecast was expecting a 19.1% headline number for December, however if we adjust this number for the effect of government measures, today's result is close to the CNB's forecast. Contributions to year-on-year inflation (pp) Source: Macrobond, ING Re-pricing is the main risk for January December brought a significant signal that inflation is coming under control. However, the true test of where inflation really is will not come until January. For the next figure, we see two main issues: energy prices and new year repricing. From January, the government's measure will switch from a saving tariff to an energy price cap, but we estimate this should have about the same effect (3.5pp). We thus see the main uncertainty in the January re-pricing. On the regulated side, apart from energy prices, we see a 5% excise tax hike on tobacco, which should lead to a 0.1pp contribution to CPI. On the market side, the situation is unclear. Last January, prices jumped by 4.4% MoM, the most in the region. The same pace would equal 15.7% YoY this year. We don't have all the surveys yet, but it is already certain that the same drop in fuel prices as in December (10% MoM) cannot be expected for January. And it can also be assumed that January is the last time retailers can increase their margins and offset higher costs. On the other hand, today's number lowers our expected inflation profile from above 17% to above 16% for January. Central bank expectations For CNB, today's number is clearly good news. Given the underestimated effect of government measures on the CPI, it's hard to read where the central bank's expectations really are these days. However, Governor Ales Michl mentioned in a recent interview that inflation may reach levels above 20% YoY in January. However, yesterday Deputy Governor Eva Zamrazilova said she expects levels more around 18% YoY. Both estimates suggest that the CNB expects the YoY figure to return to higher levels after the end of the saving tariff. The central bank will release a new forecast before the January number, however, at the moment we expect January inflation to be below the central bank's expectations. On the other hand, we believe the rhetoric of "higher rates for longer" will remain in place. Read this article on THINK TagsCzech Republic Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The Australian dollar is trading quietly on Wednesday. AUD/USD is at 0.6904, up 0.14%. Australian CPI climbs to 7.3% Australian inflation pushed higher in November, rising to 7.3% following a 6.9% gain in October. This matched the forecast. The trimmed mean rate, a key gauge of core inflation, rose to 5.6% in November, up from 5.4% a month earlier and its highest level since 2018. The drivers behind the increase were higher jet fuel prices as well as accommodation prices. The drop in inflation in October (6.9%, down from 7.3% prior) had raised hopes that inflation might have peaked, but the rise in the November release has dampened such hopes. Retail sales for November jumped 1.4%, buoyed by Black Friday sales. This was much higher than the forecast of 0.6% and the October read of 0.4%. Consumer spending remains strong despite the double-whammy of rising interest rates and high inflation. What will be the RBA’s take on this data? The trimmed mean rate indicates that the rise in inflation is broad-based, a reminder that the RBA has more work to do as it tackles high inflation. The strong retail sales data shows that the economy can still bear further hikes, and the markets have priced in a 25-basis point increase at the February 7th meeting. The RBA rate policy is data-dependent, which means that the quarterly CPI release on January 25th could determine what decision the central bank takes at the meeting. The minutes of the December meeting indicated that the RBA considered three options at that meeting – a 25 bp hike, a 50-bp hike and a pause. In the end, RBA members opted for the 25-bp increase. I would expect the RBA to show similar flexibility at the February meeting. Fed Chair Powell finds himself under constant scrutiny, not just for his comments but also for what he doesn’t say. Powell participated on a panel at a symposium of the Swedish central bank on Tuesday. The topic was central bank independence, and Powell did not touch upon the economy or monetary policy. The markets took this as a dovish sign and the US dollar pared gains as a result. Read next:Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM AUD/USD Technical 0.6931 remains a weak resistance line, followed by 0.7044 0.6817 and 0.6747 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

The euro is drifting on Wednesday, trading at 1.0730. EUR/USD has climbed about 1% this week, and Monday’s high of 1.0760 is its highest level since June 22nd. Can the euro continue to push higher? ECB unlikely to change aggressive stance Eurozone inflation has fallen back into single digits, raising hopes that inflation may have finally peaked. The headline rate slowed to 9.2% in December, down from 10.1% in November and beating the forecast of 9.7%. The slowdown is welcome news for the ECB, but investors shouldn’t count on the central bank becoming dovish and ending its current rate-tightening cycle, even if inflation continues its downturn in the coming months. The drop in headline inflation has been fuelled by energy subsidies by governments in Germany and other eurozone members, as well as lower energy prices. Core inflation rose to 5.2% in December, up from 5.0% in November, which indicates that underlying price pressures remain strong. The ECB is unlikely to ease its pace of hikes until the core rate shows a sustained fall as well as a drop in wage growth. In the meantime, the ECB’s message remains hawkish. ECB President Lagarde said in December that the markets were underestimating how high rates would go and noting that the ECB was likely to continue raising rates in 50-bp increments “for a period of time”. The US releases December CPI on Thursday, and we’ve seen in recent months how inflation reports can move the equity and currency markets. The consensus for headline inflation stands at 6.5%, following the November gain of 7.1%. The core rate is also expected to ease, with a forecast of 5.7% in December, compared to 6.0% in November. In recent months, soft inflation reports have sent the US dollar lower, as the markets have assumed that the Fed will not be able to continue hiking in the face of falling inflation. I would expect a similar reaction if December’s inflation numbers are lower than expected. Read next: The EUR/USD Pair Maintains A Steady Upward Trend, The Aussie Pair Keeps Close To 0.69| FXMAG.COM EUR/USD Technical EUR/USD has support at 1.0711 and 1.0612 There is resistance at 1.0800 and 1.0953 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Australia's inflation report was released on Wednesday, which exceeded expectations of most experts. The consumer price index rose 7.3% in Q4 2022, with a forecast of 6.8% growth. Notably, in the third quarter, inflation showed signs of slowing (when the growth forecast was 7.4%, the indicator turned out to be at 6.9%). And in the fourth quarter analysts expected further development of this trend - but in fact the CPI returned to the level of the second quarter, thereby puzzling market participants. In addition, on Wednesday another equally important report was published in Australia, which reflected a significant increase in consumer activity. We are talking about retail sales, which rose by 1.4% month-on-month in November (with a modest forecast of 0.6%). This is the strongest growth rate since last March. For comparison, in the previous month the figure increased by only 0.4%. The data added to the fundamental picture for the pair, which is shaping up quite positively. The relevant news flow is mainly related to China, which abandoned its "zero-Covid" policy and resumed imports of coal from Australia. The reset in relations between Beijing and Canberra was appreciated by AUD/USD traders: in the first week and a half of 2023, the pair rose more than 200 pips to settle at the 69th figure area. Interest rate  Wednesday's inflation report, which is important in and of itself, also suggests that the Reserve Bank of Australia will continue to "quietly" tighten monetary policy parameters. The RBA has cut the rate of interest rate hikes to 25 points since last October, but assures markets that it is not going to pause the tightening of monetary policy. The resumed growth of inflation in the fourth quarter suggests that the issue of a pause is now finally off the agenda (at least in the perspective of the next meetings). Following the December meeting, RBA head Philip Lowe said that the central bank does not pursue a pre-planned course: in his words, the size and timing of future rate hikes "will be determined by incoming data and the outlook for inflation and the labor market. Another noteworthy phrase from the head of the RBA is that the Board's priority remains restoring low inflation and getting inflation back into the 2-3% range over time. Inflation report is unlikely to prompt the RBA to be more aggressive As we can see, so far inflation in Australia is moving in the opposite direction. Therefore, the likelihood of any pause at this point is close to zero. On the other hand, the latest inflation report is unlikely to prompt the RBA to be more aggressive (in the context of a return to the 50-point rate). Most likely, the Australian central bank will continue to raise the rate in 25-point increments, without risking to increase the rate due to possible side effects (relevant concerns were repeatedly voiced by the RBA representatives). In other words, the aforementioned report will not lead to any "revolutionary" changes, despite its greenback color. At the same time, this release has reduced to zero the probability of a pause in the RBA rate hike. That's enough for the aussie to keep trying to climb back up to the 70s. But so far the bulls' attempts to get closer to the main price barrier at 0.7000 are failing. During the two days the pair's bulls were assaulting the intermediate resistance level at 0.6930 (the upper line of the Bollinger Bands indicator on the daily chart), but each time they were back to their previous positions, to the base of the 69th figure. The reason for such indecisiveness is also caused by the inflationary report, only now it is the American one. US data Let me remind you that the US Consumer Price Index will be released at the beginning of the US session. According to most experts, the release will reflect a further slowdown in US inflation, reinforcing the discussion that the Fed may move to a 25-point rate hike. The likelihood of such a scenario materializing (at least in the context of the February meeting) has risen to 76% after last Friday's Nonfarm data. If inflation also disappoints traders, the probability of a 25-point rate hike in February will probably rise to 85-90%. The greenback will again come under pressure and bulls will have an excuse to make a march to the 70s. The alternative scenario But the alternative scenario (though unlikely, of course) is that inflation in the US will show growth contrary to what most experts predicted. In that case, the dollar bulls will assert themselves all over the market, especially in the light of the latest statements of the Fed representatives. Mary Daly and Raphael Bostick made some very hawkish remarks this week. Specifically, Daly said that the rate could be raised "by either 25 or 50 points" at the next meeting. Also, in her opinion, the final point of the current cycle would be in the 5.1%-5.25% range (that is, she was against lowering the upper bound). Bostick took a similar stance. Fed All this suggests that it is too early to write off the hawkishness of the Fed: if the inflation report surprises market participants with its greenback, the US currency will strengthen its position considerably. Again, this option is unlikely, but judging by the dynamics of the dollar pairs, traders do not risk to play against the greenback on the threshold of this release. AUD/USD Thus, at the moment the best option for the pair is to take a wait-and-see stand, because the key macro report of Thursday is hypothetically able to "redraw" the fundamental picture for all the dollar pairs.   Relevance up to 23:00 2023-01-12 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332040

Early in the European session, Gold (XAU/USD) is trading around 1,884.24, close to the highs of 1,886.47 and with a strong bullish trend. It is likely that in the next few hours, gold will continue to rise and may reach the resistance zone around 1,895 and could reach the +1/8 Murray located at 1,906. According to the daily chart, we can see that the eagle indicator is showing strong overbought signs and it is likely that a technical correction will occur in the coming days. The key will be to wait for gold to trade below 1,875 (8/8 Murray), then there could be a decline towards 7/8 Murray located at 1,843. Investors are waiting for the inflation report to be published during the American session. Some believe that this report will be below expectations. If the annual CPI is above 6.5%, it could favor the US dollar which could exert strong pressure on gold. On the contrary, if the reading is below this level, we could expect gold to quickly reach the area of 1,900 and even rise to 1,937 (+2/8 Murray). In the next few hours, gold is likely to consolidate above 1,875 and below 1,887. Above 1,887, we could expect gold to reach the key zone of 1,900. Below 1,875 and 21 SMA, we can expect gold to drop and the price could reach 1,843 and could even decline to 1,812 (6/8 Murray).     Read next: The EUR/USD Pair Maintains A Steady Upward Trend, The Aussie Pair Keeps Close To 0.69| FXMAG.COM Relevance up to 04:00 2023-01-17 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/308290

There is the potential for a big reaction to today's US CPI report. The biggest one would be on a disappointing report that identifies sticky inflation, especially with the market tending to choose to believe that the dominant likelihood is for another surprise to the downside for inflation Auctions plus inflation expectations shine a very positive light on Treasuries - there's risk there The market has come through the auction test so far We had been quite intrigued as to the size of interest at auction yesterday in the 10yr, fearing that the recent run into money market funds might have been a signal of a reduced desire to take down duration. But in the event the auction went very well, on tight pricing, good cover and decent client interest based off the auction statistics. Today's 30yr auction will be a further test of duration appetite, although the 10yr event yesterday was the more relevant one; more representative of wider market sentiment. Bottom line the market has come through the auction test so far this week, and will now take its cue from an incredibly important CPI report today. The market will be expecting a good US CPI report. Falls in energy prices will bring down the headline monthly outcome; indeed a moderate fall is anticipated. This together with a notable base effect brings down the headline year-on-year rate to 6.5% for December. Even the core number has the capacity to surprise to the downside given the reversals being seen in prior rises from other elements, like second-hand car prices. But watch services inflation in particular. This represents about 40% of the index, and despite everything this was still running at 0.4% on the month for the previous month, which still annualises to 6%. This needs to slow, else the pressure from the Fed will remain as intense as ever. The biggest reaction would be on a disappointing CPI report We note that the Bloomberg financial conditions index is now back to neutral territory, driven there by falls in market rates, tighter credit spreads and a lower TED spread. The Fed won't mind this if the inflation story is really on the wane. But if it's not, the Fed will want to see a reversal in many of these factors. The market is in a remarkably relaxed mood right now based off this, and likely fully expecting a market-friendly CPI report. There is the potential for a big reaction to this report. The biggest one would be on a disappointing report that identifies sticky inflation, especially with the market tending to choose to believe that the dominant likelihood is for another surprise to the downside for inflation. EUR curves flatten, with the ECB still toeing the hawkish line With supply out of the way European rates managed to eke out a decent curve flattening and outperforming US rates. 10Y EUR swaps rallied 10bp lower, while the front end 2Y only nudged 2bp lower.    Front-end rates are held up with the European Central Bank continuing to signal its intention to hike rates further and officials sticking to the hawkish narrative. We have seen headline inflation drop back to single digits, but core inflation has still crept higher to a new record. With the labour market still historically strong in the eurozone, it remains one of the key risks for second-round effects as our economists have pointed out.   ECB's determination is not changed as long as core inflation has not peaked The ECB’s Holzmann stated yesterday that the central bank’s determination is not changed as long as core inflation has not peaked. Chiming in on the timelines floated by colleagues he concurred that the terminal rate could be reached by the summer, dropping the possibility that this might need another four 50bp hikes. That would be 75bp more than our economists are expecting currently, but Holzmann is also one of the most hawkish members of the ECB. And it may also reflect a view that rates should remain the ECB’s primary monetary policy tool, as he noted that the central bank should be cautious about moving too quickly on quantitative tightening – perhaps somewhat surprising coming from a hawk. All segments of the euro swap curve are now inverted Source: Refinitiv, ING EGB spreads tighten despite supply deluge Currently the ECB is slated to melt off its APP portfolio by €15bn per month starting in March and continuing at that pace through the second quarter. If we assume a doubling of that pace starting in the second half of the year and look at the overall shifting balance of government debt that will have to be digested by private investors, one can see where Holzmann's caution may stem from: The effective net supply of European government bonds (EGB) to private investors taking into account the ECB portfolio changes could rise to €600bn, an increase of €400bn over last year. Effective EGB net supply to private investors could rise to €600bn Yet so far European government bond spreads over their Bund peers have continued to narrow in the first weeks of the year. The first bulk of syndicated bond deals has been straddled and more generally risk sentiment has improved as the worst of recession fears have been placated by easing energy prices and China starting to reopen. Yesterday's chatter about possibly more joint EU financing to provide a European counterweight to the US green investment plans is also helping. 10Y Italian bonds have retightened towards 180bp, having stood at around 210bp at the turn of the year. Outperforming were Greek bonds, though, helped by market expectations that they could regain investment grade status already this year.   Euro sovereigns need to find a lot more demand for their debt this year Source: Refinitiv, ING Today's events and market view Today’s main release is the US CPI data. Expectations are largely geared towards a softer reading which would confirm market pricing converging towards a 25bp Fed hike in February. As such, the surprise impact of a higher reading than expected could be larger, as it would give more credence to the ongoing hawkish yet ineffective tones coming from the Fed. To that end we will hear from the Fed’s Bullard after the data today. He is one of the hawkish Fed speakers, although he is not a voter in the Federal Open Market Committee this year. Other speakers are the Fed’s Harker and Barkin.   Other data releases today are the US initial jobless claims. In the eurozone the main focus should be on the ECB's consumer expectations survey and its inflation measures. In the past, ECB proponents of quicker action such as the ECB's Schnabel have also drawn on these indicators to flag the risks of deanchoring inflation expectations.  In supply the focus is on the 30Y US Treasury auction while in the eurozone we will see bond auctions from Spain and – in smaller size after the recent 20Y bond syndication – Italy. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  US stocks rallied as yields fell ahead of the CPI release later today where a softer reading is widely expected. Key to watch in the inflation release will be the services ex-housing print, and significant volatility can be expected due to large hedging flows. Oil prices higher despite inventory builds. Meanwhile, the metals space continues to run hot amid positive sentiment from China’s reopening and policy stimulus, with Aluminum, Iron Ore and Copper all rising to fresh highs. Gold also held onto its recent gains, but could be ripe for a temporary correction with CPI on the radar.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) rallied on lower bond yields, short covering, and optimism of upcoming CPI data potentially soft With relatively quiet corporate headlines, S&P 500 gained 1.3% and Nasdaq 100 advanced 1.8% as bond yields slid. The interest rate-sensitive real estate sector, up 3.6%, was the top winner within the S&P 500 Index, followed by consumer discretionary and information technology. Traders notably covered some of their shorts ahead of today’s CPI as the most-shorted names were among the best performers on Wednesday. The Nasdaq 100 closed above its 50 day moving average. Meanwhile, the S&P 500 (US500.I) rose for the second day and closed at the high of the day. Tesla and Amazon shares trade at key levels; but caution is thick in the air Indeed these were some of the standouts share on Wednesday with Tesla shares up 3.7% after failing to move above a key resistance level. It appears there is some skepticism about the rally as Tesla is selling less EVs than its making and is cutting prices in China. Amazon meanwhile, gained 5.8%, closing near its high of the day and around 15% up from its low last Friday, and moved further above its 50-day moving average. These are positive signs. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied on dovish ECB comments, strong 10-year auction U.S. Treasuries were well bid through European hours in tandem with German bunds which rallied on dovish remarks from a typically hawkish Holzmann, an ECB Governing Council member. Treasuries held on to their gains and traded sideways for the most part of the New York session before rallying further with yields on the long-end falling further on a strong 10-year note auction. Yields on the 10-year were 8bps richer to 3.54%. Yields on the 2-year were off by 3bps to 4.22, bringing the 2-10-year curve 5bps more inverted to -68. Boston Fed’s Collins (non-voter) said she would “lean at this stage to 25 [basis point hike], but it’s very data-dependent.” Traders’ focus is now on the CPI data scheduled to release today. What to watch in Australia and Asia: Oil rises for 5th day, Iron ore clears $120, copper rises to six month high entering a bull market The Australian share market (ASXSP200.I) rose 1% in early trade, with Hong Kong’s market futures in the positive, as well as Japan’s futures. A major focus will be on resources, with the oil price jumping 3% to $77.41, as well as focus on industrial metal equites, that will likely rally again on optimism of China’s reopening, which has pushed some commodities into bull markets. The Copper price rose to $4.18 on the Comex market, rising 2.5% in New York, taking its rally of its July 2022 low to 29%. With copper at $9000 per tonne for the first time since June, Goldman thinks it could hit $11,500 by year-end. Copper remains Saxo’s preferred metal for its use in electrification and urbanisation (for more click here). Popular copper equities include BHP, Oz Minerals, Rio Tinto. Meanwhile, iron ore (SCOA) cleared $120 for the first time in 6-months, with the iron ore price up 54% from its October low. BHP is trading at its highest level in history. It makes 48.7% of its revenue from iron ore, 26.7% from copper and the remainder from coal. It has a PE of 8 times earnings, and a dividend yield of 13.8%. Rio Tinto also trades near its all-time high and it’s also involved in the key metals mention too; making 58% of its revenue from iron ore, 11% from copper, and the rest from aluminum and others. Rio’s PE is 6.8 times earnings, its dividend yield is 8.6%. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) pared gains after making a 6-month high After having taken out the top of trading range resistance and making a six-month new high, Hang Seng Index pared most of the gains to finish the Wednesday session up only 0.5%. Alibaba (09988:xhkg) gained 3.1% on the news report that the eCommerce platform giant entered into a strategic cooperation agreement with the municipal government of Hangzhou and a People’s Daily article sounded complimentary to the Ant Group. Air China (00753:xhkg) dropped by 1.2% and China Southern Airlines (01055:xhkg) shed 1.5% following China suspended issuing visas to visitors from South Korea and Japan. EV names gained even though the China Passenger Car Association (CPCA) dismissed the speculation on the relaxation of licensing restrictions in Beijing. EV maker BYD (01211:xhkg) and coal miner China Shenhua Energy (01088:xhkg), each rising around 4.7%, were the two top winners within the Hang Seng Index. Mainland China’s CSI300 was down 0.2%. Stocks in coal mining, oil and gas exploration, and development industries gained. FX: USDJPY drops below 132 on possible BOJ action next week The USD was range-bound on Wednesday as it awaited the key US CPI release, despite a drop in yields taking the 10-year yields closer to 3.50% support once again. Fed member Susan Collins, although a non-voter, she is leaning towards a 25bps hike at the February 1st meeting although the data will help guide her decision, adding further dovish hints in the day. However she still favoured rates above 5% and a pause thereafter throughout 2023. EURUSD broke above 1.0760 and EURCHF rose above parity for the first time since July. ECB’s De Cos said he sees “significant” rate hikes at the upcoming meetings. USDJPY saw a big move lower in the Asian morning to drop below 132 from highs of 132.88 yesterday with expectations of BOJ likely considering further tweaks to its YCC policy (read below). FX watch: Australian trade data surged beyond expectations. US CPI next catalyst for AUDUSD Australia’s trade balance data released today, rose well beyond expectations, with the trade balance surging to $13.2 billion, when consensus expected exports and imports to have fallen considerably in November, with the market expecting the surplus would fall from $12.2 billion to $11.3 billion. This data shows that trade has been improving, well ahead of China’s easing of restrictions – which is a positive sign. The AUD rallied to 69.18 US, which is the level it hit yesterday after Australian inflation and retail data came out hotter than expected. The next resistance level is a psychological one, 0.700 for the AUD vs the USD. However, if core US CPI comes out hotter than expected (5.7% YoY), then a hotter USD may pressure the AUD back down. Our Head of FX Strategy suggests if that happens the AUD could drop back to another support level. However the next few days are pivotal. Click for more on FX. Crude oil (CLG3 & LCOH3) prices continue higher on China story Crude oil prices rallied again overnight as signs of improving Chinese demand boosted sentiment. Chinese buyers have become active in the physical market, with Unipec snapping up about 3-4mbbl of US crude for March and April in recent days. This comes following news that China had issued a fresh batch of import quotas as it reopens following years of COVID-19 restrictions. Supply was supported by a huge build in US inventories, but could not dampen the price sentiment as higher inventories was expected. US crude oil stocks jumped 19m barrels last week, the biggest since Feb 2021, driven by a 2m b/d drop in exports to 2.1m b/d. WTI futures rose above $77.50/barrel while Brent got in close sight of $83. No stopping the gains in metals space, yet Industrial metals continued to march higher on positive signals from China on Zero Covid and policy stimulus. An apparent peak in infections follow the sudden dropping of COVID-19 restrictions has raised the prospect of an earlier than expected jump in industrial activity. Pent up consumer demand is likely to add to the clamour for metals. Aluminium, copper and iron ore, all rose to new highs. Iron ore (SCOF3) could be potentially ripe for a reversal, given China’s warning on tightening the supervision on iron ore pricing on Friday to crack down on speculators. Meanwhile, Copper’s gains to $4.16 have also been fast and could see scope for a correction, but the sharply improved technical outlook and limited investor positioning may drive it higher still in the short term. Gold (XAUUSD) sees correction risks ahead of CPI Gold prices are hovering around an 8-month high, but our Head of Commodity Strategy sees risk of correction even if ‘lower-than-expected’ CPI print sends gold higher to test the resistance level around $1900. He sees potential of profit taking emerge. He says, “Gold’s price action during the past week has in my opinion showed us the correct direction for 2023, but while the direction is correct, I believe the timing could be wrong.”  Read next: The EUR/USD Pair Maintains A Steady Upward Trend, The Aussie Pair Keeps Close To 0.69| FXMAG.COM What to consider? US CPI remains the most key data point to watch There is enough reason to believe that we can get some further disinflationary pressures in the coming weeks. Economic momentum has been weakening, as highlighted by the plunge in ISM services last week into contraction territory, particularly with the forward-looking new orders subcomponent. An unusually warm winter has also helped to provide some reprieve from inflation pains. Bloomberg consensus forecasts are pointing to a softening in headline inflation to 6.5% YoY, 0.0% MoM (from 7.1% YoY, 0.1% MoM prev) while core inflation remains firmer at 5.7% YoY, 0.3% MoM (from 6.0% YoY, 0.2% MoM). Still, these inflation prints remain more than three times faster than the Federal Reserve’s 2% target. Fed officials have made it clear they expect goods price inflation to continue to ease, expecting another big drop in used car prices. But officials are seemingly focused on services ex-housing which remains high. So even a softer inflation print is unlikely to provide enough ammunition for the Fed to further slow down its pace of rate hikes. Volatility on watch if US CPI sees a big surprise The last two months have shown that big swings in US CPI can spark significant volatility in the equity markets, given the large amounts of hedging flows and short-term options covering. With a big focus on CPI numbers again this week, similar volatility cannot be ruled out. Volume might be thin still this week as many are still on holidays, so moves in equities could be amplified in either direction. Meanwhile, FX reaction to CPI has been far more muted, but some key levels remain on watch this week. A higher-than-expected CPI print could keep expectations tilted towards a 50bps rate hike again in February, while a miss could mean expectations of further slowdown in Fed’s tightening pace to 25bps in February could pick up which can be yield and dollar negative. Apple plans to use its own displays in mobile devices Apple (AAPL:xnas) aims to its own custom displays in the consumer electronic giant’s mobile devices starting in 2024, as opposed to procuring from Samsung and LG. It is the latest move in a series of initiatives from Apple to reduce reliance on sourcing components from partners, including chips from Broadcom and modems from Qualcomm. China’s CPI expected modestly higher, PPI less negative Economists surveyed by Bloomberg had a median forecast of China’s December CPI at an increase of 1.8% Y/Y, edging up from 1.6% in November, mainly due to base effects, as food prices are likely to be stable and higher outprices in the manufacturing sector might be offset by a fall in services prices. PPI in December is expected to be -0.1% Y/Y, a smaller decline from -1.3% Y/Y in November, benefiting from base effects. The decline in coal prices was likely to be offset by an increase in steel prices. Signs of wage growth in Japan; could we see more action from BOJ next week? The fast-fashion Japanese retailer Uniqlo (owned by Fast Retailing) is set to hike pay for many full-time staff in Japan by as much as 40% and will raise the salary for newly hired graduates by over 17%. Bank of Japan Governor Kuroda has long stated that inflation is only rising sustainably if Japanese wages also begin to rise in line with commodity and other input costs. Meanwhile, Yomuiri reported that BOJ officials will review the side effects of the ultra-easy monetary policy at their policy meeting next week, opening the door for further adjusting the yield curve control policy or the bond-buying as the central bank continues to see 10-year yields testing the new upper limit of 0.5%. Fast Retailing (9983:xtks) reports earnings today and a 10th straight quarter of operating profit growth is seen, although the pace of growth is likely to slow amid China’s lockdowns in the November-ended quarter and fading FX benefits. TSMC (TSM:xnys) reporting Q4 results, 1H23 outlook and overseas expansion plans key to watch Given the industry-wide inventory overhang, investors will be closing monitoring the world’s largest foundry’s 1H2023 revenue outlook when TSMC reports Q4 2022 results today. Investors will also pay much attention to the management’s comments on TSMC’s plans for building manufacturing capacities outside of Taiwan and mainland China which have implications on margins and capex spending. For Q4 results, analysts surveyed by Bloomberg, on average, are forecasting revenues coming at TWD636 billion and adjusted earnings at TWD11.087 per share. For a look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: US CPI day, Bank of Japan policy tweak speculation – 12 January 2023 | Saxo Group (home.saxo)

Summary:  Markets have charged higher again, seemingly confident that today’s US December CPI data won’t provide any pushback against this rally, which is pulling up into the psychologically important 4,000 area in the US S&P 500 Index. Elsewhere, the USD remains on its back foot on hopes for a soft CPI print, while EURCHF has suddenly pulled above parity for the first time in over six months in a delayed reaction to ECB hawkishness. Oil jumped.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures extended momentum all the way up to the falling 200-day moving average closing at 3,990 and in early trading this morning the index futures are hovering around the 200-day moving average. This average was hit back in mid-December before US equities were weighed down by hawkish central bank comments and sold off into New Year. Today’s US December CPI report is naturally the key report to watch today as the previous three inflation reports have caused significant volatility over the release. If the market gets it lower inflation print then S&P 500 futures might push above 4,000 and even all the way up to 4,050. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) After making a new six-month high this morning, Hang Seng Index reversed and pared gains. Profit-taking weighed on recent policy beneficiaries, such as mainland Chinese property developers, domestic consumption names, mega-cap internet stocks, and Macao casino operators. Shares of EV makers bucked the market trend of retracement to advance, led by BYD (01211:xhkg) up 5.7%. FIT Hong Teng (06088:xhkg), a subsidiary of Foxconn, soared 23% on speculation that the company might replace GoerTek (002241:xsec) to assemble AirPods for Apple. In A-shares, defense, aerospace, auto industrial equipment and wind power outperformed as the domestic consumption space retraced. As of writing, Hang Seng Index and CSI300 edged up around 0.3%. FX: USD still low, JPY resurgent. EURCHF blasts higher The greenback remains on its back foot coming into today’s US December CPI release, with market players likely very unclear around the reaction function (more on that below in What’s Next?) to in-line or even soft data today. EURUSD etched marginal new highs above 1.0760 yesterday, but clearly faces a test over today’s data and may have been driven yesterday by flows in EURCHF, which suddenly bursts out of its range and traded well above parity – likely on the hawkish ECB outlook finally sending the pair over the edge. ECB’s De Cos said he sees “significant” rate hikes at the upcoming meetings, while ECB’s Holzmann soft-pedaled the message on QT, saying he was very cautious on moving too fast.  USDJPY dipped on the news flow overnight as described below, and many other USD pairs are still within recent ranges, if toward important USD support in places, especially AUDUSD. Crude oil (CLG3 & LCOH3) remains supported by China recovery story Crude oil prices rallied strongly on Wednesday with the improved outlook for Chinese demand and the softer dollar driving a fifth day of gains. Chinese buyers have become active in the physical market, with Unipec snapping up about 3-4mbbl of US crude for March and April in recent days. This comes following news that China had issued a fresh batch of import quotas as it reopens following years of COVID-19 restrictions. Supply was supported by a huge 19m barrels build in US inventories, the biggest since Feb 2021, but it could not dampen the positive price sentiment as higher inventories was expected after the late December cold blast reduced exports while temporarily shutting down some refineries. Fresh momentum was seen in both WTI and Brent after breaking their 21-day moving averages, now offering support at $76.35 and $81.65 respectively. Gold sees raised correction risk as US CPI looms Gold’s price action and gains during the past week has in our opinion showed us the correct direction for 2023, but while the direction is correct, we believe the timing could be wrong, and with momentum showing signs of slowing ahead of key resistance around $1900, and a potential weaker-than-forecast US CPI print today having been priced in, the risk of correction has risen. Pent-up demand in China ahead of the Lunar New Year may soon fade, while India’s demand may slow as traders adapt to the higher price level. In addition, we have yet to see demand for ETF’s, often used by long-term focused investors, spring back to life with total holdings still hovering around a near two-year low at 2923 tons. The next major hurdle for gold being $1896, the 61.8% retracement of the 2022 correction, with support around $1865 followed by $1826, the 21-day moving average. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields drop, strong 10-year auction supports The US 10-year yield dropped back toward 3.50% support overnight after falling some 7-basis point yesterday, supported in part by a solid US 10-year auction, with bidding metrics sharply improving relative to the prior couple of weak auctions. The 2-10 year yield slope inverted back toward –70 basis points. Treasuries may find additional support if today’s December US CPI report proves softer than expected. Read next: Discussion Of Bank Representatives On Financing The Ecological Transformation | FXMAG.COM What is going on? The Eurozone economy is more resilient than forecasted Economic surprises are improving significantly in the eurozone. The consensus forecasts a drop in GDP of minus 0.1% this year. Based on hard data, this seems excessively conservative. It is bound to be revised up, in our view. The German economy is especially very resilient. While gas consumption has collapsed by double digits, industry output has remained largely flat. This is a remarkable achievement. Based on the latest data on industrial production (for the month of November), it looks like there will be no recession in German industry in Q4. However, the year 2023 will be challenging in the eurozone: credit stress is on the rise (this is the first time in a decade we start the year with European IG credit yield above the 4 % level), and the market will need to absorb about 700bn euros of liquidity due to the ECB quantitative tightening. Metals pause after powering higher on China optimism Industrial metals are pausing ahead of today’s CPI print and after having marched higher on positive signals from China on Zero Covid and policy stimulus. An apparent peak in infections follow the sudden dropping of COVID-19 restrictions has raised the prospect of an earlier than expected jump in industrial activity. Pent up consumer demand is likely to add to the clamour for metals. Aluminium, copper and iron ore, all rose to new highs on Wednesday. Iron ore (SCOF3) could be potentially ripe for a reversal, given China’s warning on tightening the supervision on iron ore pricing on Friday to crack down on speculators. Meanwhile, Copper’s year-to-date gain of 9% to near $4.20 has also been fast and could see scope for a correction, but the sharply improved technical outlook and limited investor positioning may continue to provide some support in the short term. USDJPY drops below 132 on possible BOJ action next week The Bank of Japan meets next Wednesday and may be set to guide for further policy tweaks after a regional Bank of Japan report released overnight . In other news in Japan, the Yomiuri newspaper reported that the BoJ will review the side effects of its policy at next week’s meeting and a quarterly Bank of Japan report raised its assessment of the economy in four of Japan’s nine regions, noting that in “there were many cases where companies were increasing winter bonus payments, or plan to hike wages.” Also JPY-supportive, preliminary data from Japan’s Ministry of Finance suggest that Japan’s life insurers sold a record amount of foreign bonds last month. CPI and PPI inflation remained low in China CPI in China rose to 1.8% y/y in December from 1.6% in November, in line with expectations. The rise was due to a low base and on CPI was unchanged m/m. Excluding food and energy, core CPI came in at 0.7% y/y in December, edging up slightly from 0.6% y/y in November. The change in PPI however rebounded less than expected to -0.7% y/y versus -0.1% expected and -1.3% y/y in November. TSMC Q4 earnings beat estimates The world’s largest foundry of semiconductors beat on net income in Q4 driven by gross margin at 62.2% vs est. 60.1%. TSMC says company to face margin headwinds in 2023 with revenue growth slowing down. CAPEX in 2023 is expected at $32-36bn vs est. $35bn against $36bn in 2022. The company is considering a second manufacturing plant in Japan and a new automotive chips plant in Europe. It has also expanded its 28nm production in China and is planning to mass produce its new 2nm in 2025 in its facilities in Taiwan. Fast Retailing sees big miss in Q1 operating income The parent company behind the Japanese fashion retailer Uniqlo reports Q1 operating income of JPY 117bn vs est. JPY140bn but maintains its outlook for profit and revenue growth amid its commitment from yesterday to raise wages up to 40% for its Japanese retail workers. KB Home outlook hit by interest rates When the price of capital goes up the demand on homes often goes down, and this is exactly what KB Home is experiencing. The US homebuilder reported Q4 EPS of $2.47 vs est. $2.86, but it was the FY23 outlook of revenue between $5bn and $6bn missing the consensus of $6bn in revenue, but with new orders down 80% more profit warnings could come during the year. What are we watching next? WASDE report on tap with grain traders watching stock levels The Bloomberg Grains Index, rangebound for the past six month has opened a new trading year with a loss of 3.5% primarily driven by lower wheat prices on ample supply from the Black Sea region, will receive some fundamental input later today when the US Department of Agriculture releases its monthly supply and demand report. Market estimates point to a trimming of the global corn and soybeans inventories, while wheat is expected to show a small rise. US inventories, meanwhile, is expected to rise across the board driven by weakness in Chinese demand and strong competition from overseas supplies, in part due to the dollar. Also focus on Argentina where an ongoing drought may drive a 6% reduction in the country's soy and corn output. US December CPI up today – what is the reaction function? The latest CPI data out of the US is the next important test for global markets, which seem confident that the Fed will not only halt its policy tightening soon after perhaps 50 basis points of further tightening but will even cut rates cuts by year-end. The US CPI releases have triggered considerable volatility in recent months, and the November CPI release on December 13 ullustrates the potentially treacherous reaction pattern to this data points, as softer than expected inflation levels reported saw risk asset jump aggressively as US treasury yields eased, only for the equity market move to get erased within hours and the US yields to bottom out on the following day. Consensus expectations for today’s CPI print are for a fall in the month-on-month headline data of –0.1% and a rise for the year-on-year at 6.5% versus +7.1% in November. The core, ex Food and Energy number is expected to rise +0.3% MoM and +5.7% YoY vs. +6.0% YoY in November and a peak rate of 6.6% last September. Earnings to watch The Q4 earnings season kicks off tomorrow with banking earnings from Bank of America, JPMorgan Chase, and Citigroup with consensus expecting earnings to continue contracting among US banks before coming back to growth in 2023. The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession or maybe no recession at all in the US economy. With higher interest rates level expectations are that banking revenue will slowly begin to accelerate and if high interest rates persist for an extended period, the longer-term growth for banks could be quite attractive. In addition, US banks have extended credit at the fastest pace in 2022 since the year leading up to the Great Financial Crisis. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. Today: Fast Retailing, Seven & I Friday: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic Economic calendar highlights for today (times GMT) 1330 – US December CPI 1330 – US Weekly Initial Jobless Claims 1345 – US Fed’s Harker (voter 2023) to discuss economic outlook 1530 – EIA Natural Gas Storage Change 1630 – US Fed’s Bullard (non-voter) to speak 1700 – UK Bank of England’s Mann to speak 1700 – USDA's World Agriculture Supply and Demand Estimates (WASDE) Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher

AUD/USD surrenders modest intraday gains and retreats below the 0.6900 mark in the last hour. The cautious market mood lends some support to the safe-haven buck and acts as a headwind. Bets for an additional RBA rate hike in February should limit losses ahead of the key US CPI. The AUD/USD pair struggles to capitalize on its modest intraday gains and fails near the 0.6925-0.6930 supply zone for the third straight day on Thursday. Spot prices retreat below the 0.6900 mark during the early part of the European session and refresh the daily low in the last hour, though the downside seems limited. The Australian Dollar might draw support from rising bets for an additional interest rate hike by the Reserve Bank of Australia (RBA) in February, bolstered by Wednesday's hotter domestic inflation data. In fact, the Australian Bureau of Statistics reported that the headline Consumer Price Index (CPI) re-accelerated to the 7.3% YoY rate - a 32-year-high - in November from the 6.9% in the previous month. Apart from this, subdued US Dollar price action could act as a tailwind for the AUD/USD pair, at least for the time being. The USD Index, which measures the greenback's performance against a basket of currencies, languishes near a multi-month low amid diminishing odds for a more aggressive tightening by the Fed. A slowdown in the US wage growth was seen as the initial sign of easing inflationary pressures, which could allow the US central bank to soften its hawkish stance. This leads to a further decline in the US Treasury bond yields and weighs on the buck. That said, the cautious mood helps limit any further losses for the safe-haven USD. Read next:Discussion Of Bank Representatives On Financing The Ecological Transformation | FXMAG.COM The anxiety ahead of Thursday's release of the latest US consumer inflation figures tempers investors' appetite for perceived riskier assets. This is evident from a softer tone around the equity markets, which is seen benefitting the greenback's relative safe-haven status and capping the upside for the risk-sensitive Aussie. Hence, the focus remains on the crucial US CPI report, due later during the early North American session.

While market players await the crucial inflation data from last year, which could trigger another rally, three leading Chicago Fed economists said the Fed will raise rates by one more percentage point before announcing that it has reached the ceiling so it will end the monetary policy tightening. Randall Kroszner Economists predict that rates will peak around 5.5% and stay there for a long time, keeping prices of everything from food to fuel in check. "I do think the Fed is going to keep rates at the highs for a while," said Randall Kroszner, a former Fed governor. "Even if inflation falls by 200 basis points over the year, or maybe even 300 basis points, the Fed will still keep rates at 5.5%," he added. Inflation  Inflation jumped to a 40-year high last year as global demand for goods and services recovered. Although prices have fallen since then, they are still well above the Fed's 2% target, making the bank realize that they missed the appropriate time they should have started to raise rates. Of course, if no more problems arise in the market and if the situation remains stable, economic recession will still be avoided. Interest rates Fed officials increased interest rates to 4.3% last month and forecasted that it will reach 5.1% this year. This is entirely different from the path they took back in the 1970s, when inflation began to slow. It was probably because the decision before was a fatal mistake as prices began to rise sharply again, leading to a crisis in the economy. Read next: Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM The Fed has not lost confidence in the markets Although today's data may indicate that inflation remains under control, the Fed will most likely be more deliberate in its decisions. At least, that is what many market participants are hoping for. But many experts say there is a vast difference between the late 1970s, early 1980s and today as it is obvious that the Fed has not lost confidence in the markets. If events unfold in this way, a rate hike will probably lead to a mild recession later this year, but it will only be short-lived. EUR/USD In terms of the forex market, there are still chances of hitting new monthly highs in EUR/USD as long as buyers manage to push euro to 1.0760. That will spur the pair to rise above 1.0790 and reach 1.0850. But if pressure returns and sellers get ahold of 1.0760, euro will collapse to 1.0720 and head to 1.0680 or as low as 1.0650. GBP/USD In GBP/USD, the rally is gradually slowing down, which means that buyers need to stay above 1.2120 in order to maintain their advantage. Only the breakdown of 1.2180 will push pound to 1.2240 and 1.2300 as a return of pressure around 1.2120 is likely to result in a collapse to 1.2060 and 1.2010.   Relevance up to 08:00 2023-01-13 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332086

Summary:  Today we look at global equity markets gunning for more to the upside, apparently expecting a benign US CPI release today and pricing in a soft landing scenario as long treasury yields settled back lower after a strong US 10-year treasury auction yesterday. We also look at a resurgent JPY, why the euro is strong, but some thoughts on longer term caution, coffee and grains in commodities, the latest expansion plans abroad from TSMC, weak housing news but strong housing stocks & more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Read next: Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Market showing no fear ahead of US CPI | Saxo Group (home.saxo)

The European Central Bank continues to demonstrate a hawkish attitude amid contradictory data on inflation growth in the eurozone. Last week, a report on the growth of the consumer price index was published. The overall CPI was in the red zone, falling to 9.2% (with a forecast decline to 9.6%). While core inflation, excluding volatile energy and food prices, on the contrary, continued to gain momentum, rising to a record 5.2%. Energy prices  The structure of the report suggests that the growth of energy prices slowed down in December to almost 26%. While food, alcohol and tobacco rose in price by almost 14%, services increased in price by 4.4%, and industrial goods by 6.4% (in November – by 6.1%). This suggests that the decline in overall inflation is due to warm weather in the European region: the purchase price of gas in European countries in December was almost five times lower than in August. The cheapening of the blue fuel had an impact on electricity prices, as many European power plants produce electricity using gas. In particular, in France, the purchase price of electricity at the end of August exceeded €1,000 per megawatt-hour, and at the end of last month it dropped to €240. Germany also contributed to the slowdown in overall inflation: last month, German government provided a one-time compensation for electricity bills. The slowdown in the overall CPI In other words, the slowdown in the overall CPI was not due to the ECB but Mother Nature, which spoils the European region this year with warm days. The growth of the core consumer price index indicates that the problem of high inflation has not only not been resolved, but is getting worse. The ECB Hawkishness Representatives of the European Central Bank understand this very well, and therefore do not lower the degree of intensity in their rhetoric. Moreover, members of the ECB have been sounding clear hawkish signals lately. For example, Latvian central bank governor Martins Kazaks said that he expects a "significant" rate increase at the February and March meetings, after which the steps could become "less as necessary." We are talking about two 50-point rate hikes. The ECB could then slow the pace of monetary tightening to 25 bps. Isabel Schnabel ECB Governing Council member Isabel Schnabel also called for further rate hikes this week, as "inflation will not subside on its own." In turn, Austrian central bank chief Robert Holzmann said there are no signs of weakening market expectations regarding inflation at the moment. However, he added that rates would need to "raise significantly to reach levels sufficiently restrictive to ensure that inflation returns to the target level." His colleague, Bank of Finland Governor Olli Rehn, made a similar statement yesterday, saying that rates should be raised significantly "in the next couple of meetings" to keep inflation in check. The ECB will raise rates As you can see, the members of the European Central Bank remain hawkish, at least in the context of the next two meetings. However, they prefer not to specify where the final point of the current cycle of tightening monetary policy is. For example, French central bank chief Francois Villeroy de Galhau said last week that it was desirable to peak interest rates by summer, "but it's too early to say at what level." At the same time, he stressed that rates will remain at the peak level "for as long as necessary." Thus, now we can say with confidence that the ECB will raise rates at the February meeting by 50 points and very likely by the same amount at the March meeting. This scenario is the base case despite a slowdown in overall inflation in the euro area. EUR/USD Meanwhile, the prospect of a 50-point Fed rate hike at the February meeting is highly questionable. For now, the CME FedWatch Tool says there is a 74 percent chance of a 25 basis point rate hike next month. If today's U.S. inflation report comes out at least at the predicted level (not to mention the red zone), the probability of the 25-point scenario will increase to 80%–90%. In this case, the difference in interest rates between the U.S. and Europe will continue to shrink, and this circumstance will provide background support to the euro. However, this fundamental factor will play on the side of the euro even before the actual implementation—the hawkish attitude of the ECB against the background of slowing inflation in the United States will allow buyers of EUR/USD to organize another offensive upward, to the borders of the 8th figure. Technically, the pair is currently testing the upper line of the Bollinger Bands indicator on the daily chart, which corresponds to 1.0750. Overcoming this target will open the way not only to the next price barrier at 1.0800, but also to the main resistance level at 1.0930 (the upper line of the Bollinger Bands indicator, coinciding with the upper boundary of the Kumo cloud on the W1 timeframe). A slowdown in U.S. inflation, a softening of the Fed's rhetoric, and an increase in the hawkish mood of the ECB will create the necessary information background for the implementation of the upward scenario.   Relevance up to 09:00 2023-01-13 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332090

European equity markets opened cautiously higher on Thursday, following a mixed session in Asia amid nerves around the US inflation release later in the day. This inflation print has been the main topic of