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Market movers today

• Fed speakers: On an otherwise quiet day on the data front, markets will keep an eye on a range of Fed speakers and the weekly US unemployment claims.
• Norway: Norges Bank releases its quarterly expectations survey and we are particularly interested how wage expectations have evolved in Q4. The oil investment survey should also see a solid upward revision of expectations for next year.
• Sweden: Labour force survey for October.

The 60 second overview

Natural gas prices continue to attract a lot of focus after the German decision earlier this week to delay the approval of the Nordstream 2 pipeline. The Dutch benchmark future traded yesterday above 100 EUR a megawatt hour, up 20% in three days. That said, prices eased late in the session and ended at EUR 95 after Gazprom said it would set up a fully owned German subsidiary. The latter might satisfy German/EU regulation.

Oil prices also fell yesterday afternoon in line with natural gas prices, the stronger USD and as news agencies reported that President Biden and president Xi had discussed the release of strategic oil reserves earlier this week. Brent oil is at USD 80 a barrel at the lowest level since the beginning of October. Reuters overnight reported that the Biden administration has asked not only China but also other oil consuming nations such as India to release strategic oil reserves in a coordinated global move to bring down prices. The move comes after repeated requests to OPEC to increase production. News agencies also reported that China is in fact now working on a strategic oil release.

Lower break-evens. The move lower in especially oil prices weighed on inflation expectations and US 10Y breakeven yesterday fell some 5bp to 2.71% though still 40-50bp above the level that prevailed over the summer.

UK inflation jumped to 4.25 in October, which adds pressure on Bank of England (BoE) to raise rates next month. BoE's Bailey has said that the BoE decision is tied to labour market developments. Hence, together with the stronger-than-anticipated employment growth data released on Tuesday yesterday's higher-than-anticipated inflation means there is an increasing probability that the BoE will hike at the December meeting. That said, our base case has for a while been for a February hike, as it would allow the BoE to get more information on the state of the labour market.

Equities: After days of straight gains, US market slipped on Wednesday. Sector performance in a classic risk-off mode, with defensives (real estate, tech, health care) the only sectors gaining. Interestingly, autos were the standout, rising 3% on average. Unlike our overall defensive call, we took autos to an overweight in our last strategy report, on the back of the pent up production in 2022. S&P500 closed down -0.3%, Dow -0.6%, Nasdaq -0.3% and Russell 2000 -1.2%. Declines are following in Asia this morning, with Hang Seng worst hit on tech weakness. US futures however slightly higher this morning.

FI: No big yield drivers yesterday meaning that European government bond yields only saw minor changes with German 10Y yields being nearly unchanged and Italy/Spain/Portugal widening 0.5-1bp to Germany. However, some changes in UK short yields dropping 4.5bp and hence reducing the expectations of BoE hiking rates. German government bonds are still trading on the expensive side to EUR swaps and Bund ASW spread widened marginally after seeing high intra-day volatility.

FX: Yesterday's session was primarily characterised by the drop in commodity prices, which we think highlighted the importance of the broader rise in USD on Tuesday. The drop unsurprisingly weighed on most commodity currencies with AUD, CAD and NOK being the underperformers in the European session. EUR/USD did little on the day while EUR/GBP continues to move lower.

Credit: Credit remains under pressure, with iTraxx Xover widening almost 2bp and Main 0.4bp.

Nordic macro

Norway: Today brings the Norwegian Q4 oil investment survey. We predict only minor changes to the estimate for this year, with it still showing a moderate decline from 2020. Although we expect the survey will now show a drop in oil investment of 5-6% in 2022, this would be in line with expectations.

We will also be keeping an eye on Norges Bank's quarterly expectations survey. It does not normally attract much attention, but in the August edition there was a sharp rise in both wage and price expectations among the social partners, economists and business leaders alike. We are particularly interested to see how wage expectations move this time around.

Sweden: The Riksbank will today buy SEK 4bn covereds in 2023-2027 maturities. Statistics Sweden releases October LFS, and we are mainly interested in the development of hours worked as the number has been quite volatile over the past two months, possibly suggesting a slowing recovery. The October data will be decisive for the conclusion.

The US dollar index stabilized while American shares retreated as investors reflected on the strong numbers from the country. Data published on Wednesday showed that the country’s building permits rose from 1.56 million in September to more than 1.6 million in October. This was a 4% increase after the permits fell by more than 7% in the previous month. Further data showed that housing starts declined slightly but remained near the highest level this year. These numbers came after the US released strong retail sales data on Wednesday and a week after the strong inflation data.

US stocks declined slightly after Target published its quarterly results. The company reported strong results, but its stock fell by more than 4% after it warned about low margins as costs keep rising. The company’s net income rose to more than $1.49 billion while its revenue rose to more than $25 billion. Meanwhile, TJX share price jumped sharply after the company published strong results. It made 84 cents per share while its revenue rose to more than $12 billion. These results came a day after Walmart and Home Depot published strong earnings.

The price of crude oil declined slightly after the US published better than expected inventories data. According to the Energy Information Administration (EIA), the country’s inventories declined by more than 2.1 million barrels last week. This was a bigger drawdown than analysts were expecting. They were expecting the data to show that inventories rose by more than 1 million barrels. Prices also declined after a symbolic letter by Joe Biden to the FTC. In the letter, the president asked the agency to investigate the fuel retail industry in the country. This happened as gasoline price has soared to a multi-year high.

EURUSD

The EURUSD pair stabilized in the American session as some sellers started taking profits. The pair is trading at 1.1320, which is slightly above this week’s low of 1.1263. On the hourly chart, the pair is slightly below the 23.6% Fibonacci retracement level. It is also slightly below the 25-day moving average while the Chaikin oscillator moved above the neutral level. Therefore, the pair will likely hold steady today also the overall trend is bearish.

AUDUSD

The AUDUSD pair’s downward trend continued as the US dollar strength continued. The pair dropped to a low of 0.7267, which was the lowest level since October 7. On the four-hour chart, the pair dropped below the 25-day moving average. The MACD has moved below the neutral level. The pair will likely keep falling in the near term now that it has moved below the 61.8% retracement level.

XTIUSD

The price of crude oil declined sharply in the overnight session. The West Texas Intermediate (WTI) dropped to 79, which is slightly above the key support at 78.53. The pair has also moved below the 25-day and 50-day moving averages and the parabolic SAR. The MACD has also dropped below the neutral level. Therefore, the pair will likely keep falling.

Markets

Core bonds rose yesterday with USTs outperforming the Bund, shrugging off a tailed US 20y bond sale. The US yield curve bull flattened with changes ranging from -1.8 bps (2y) to -5.3 bps (30y). US housing starts disappointed in contrast to building permits, suggesting demand is solid but material and labour shortages weigh on construction. In addition, Brent oil prices fell towards the $80/b neckline after word got out that US President Biden wants the Federal Trade Commission to use all tools to examine fuel price wrongdoing. Markets took it as another hint the US will eventually release some of the strategic oil reserves to ease prices. The oil price decline was a key driver for faltering inflation expectations (-3 to -4 bps) in the US. German yields closed flat on face value but real yields (10y) hit a new all-time low at -2.25% in underlying dynamics. This was the main reason for EUR/USD’s lackluster performance even though the greenback corrected in general. Support at 1.129 survived but that’s basically all we can say. The trade-weighted DXY’s move north of 96 quickly ran into resistance (close 95.83). The Japanese yen saw an opportunity on falling (US) bond yields. USD/JPY erased all of the retail sales driven surge from around 114 to 115 and back. Stronger-than-expected CPI boosted sterling with odds for a BoE rate hike next month increasing. EUR/GBP finished at a new 2021 low south of 0.84. Cable gained to 1.349.

Two stories feature Asian dealings this morning. Japanese stocks erase previous losses after newspaper Nikkei reported the new Japanese fiscal stimulus package would amount to 55.7tn yen compared to the 40tn previously estimated. Chances of government support being ramped up rose after Q3 GDP figures last week disappointed heavily. The yen loses out vs. USD and EUR. A survey by the RBNZ showing inflation expectations rose to a decadehigh spurred rate hike bets and lifts the kiwi dollar (cfr. infra). Core bonds and other dollar pairs trade flat. Brent oil trades sub $80/b (see also below).

Technical considerations will guide trading today in absence of meaningful economic data. We’ve seen the dollar hitting resistance levels vs. the euro (1.129), the yen (115) and in the trade-weighted (96, upper bound in upward trend channel), suggesting strong USD momentum may ease a bit from here on out. Dragonfly doji’s in EUR/USD and DXY could herald a short-term reversal. Core bonds will largely be driven by overall sentiment, which turned a bit for the better going into the European open. Sterling awaits the final economic update with UK retail sales due tomorrow. It could force a sustained break sub 0.84 which then paves the way towards the 2020 lows of 0.8282.

News headlines

The Reserve Bank of New Zealand published its quarterly survey of business expectations. Inflation expectations for one, two and five years ahead all increased from Q3. One year ahead inflation expectations had a mean of 3.70% (from 3.02%), which is the highest since September 2010. The mean for two year ahead expectations rose to 2.96% (from 2.27%). This metric has only been higher in two occasions since March 1991 and risks moving out of the RBNZ’s 1-3% inflation target band . Five year ahead inflation expectations increased from 2.03% to 2.17%, the highest reported figure since it was added to the survey in September 2017. The RBNZ is expected to next week proceed its tightening cycle with a follow-up 25 bps rate hike to 0.75%. NZD/USD rebounds this morning with NZD strength accompanied by some USD correction. The pair so far prevented a return south of the 0.70 big figure.

Reuters reports that China is working on the release of crude oil reserves although the country’s National Food and Strategic Reserves Administration kept silence on the US’ request to disclose any details. The Biden administration is lobbying countries like China, India and Japan to consider releasing stockpiles in a coordinated effort to lower energy prices. The unusual request comes after OPEC+ on several occasions declined to meet Biden’s request to speed up production increases. Brent crude since yesterday fell from $82/barrel to just below $80/b. The latter serves as a technical neckline of a short term double top formation with targets near $74/b.

Daily Pivots: (S1) 153.56; (P) 154.15; (R1) 154.55; More...

Intraday bias in GBP/JPY stays neutral at this point. Firm break of 154.63 resistance will argue that pull back from 158.19 has completed. Intraday bias will be turned back to the upside for retesting 158.19 high. On the downside, break of 152.35 will resume the fall towards 148.93 key support instead.

In the bigger picture, rise from 123.94 is seen as the third leg of the pattern from 122.75 (2016 low). The stay above 55 week EMA affirms medium term bullishness. Current rise should now target 61.8% retracement 195.86 (2015 high) to 122.75 at 167.93 next. In any case, outlook will remain bullish as long as 148.93 structural support hold, even in case of deep pull back.

Daily Pivots: (S1) 128.79; (P) 129.44; (R1) 129.83; More....

Intraday bias in EUR/JPY remains on the downside as fall from 133.44 in in progress for 127.92 key support. Firm break there will carry larger bearish implication. On the upside, however, break of 130.58 minor resistance will turn bias back to the upside for stronger rebound.

In the bigger picture, rise from 114.42 (2020 low) is still in progress and the strong support support from 55 week EMA affirms medium term bullishness. Further rise would be seen to retest 137.49 (2018 high). Decisive break there will resume the whole long term rise from 109.03 (2016 low). However, sustained break of 127.91 support will argue that a medium term top is formed, and turn outlook bearish for deeper fall.

Daily Pivots: (S1) 0.8372; (P) 0.8404; (R1) 0.8423; More...

Intraday bias in EUR/GBP remains on the downside at this point. The current down trend from 0.9499 would target 0.8276 long term support next. On the upside, above 0.8433 minor resistance will turn intraday bias neutral for recovery first. But outlook will stay bearish as long as 0.8593 resistance holds.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen as developing into a corrective pattern. Deeper fall could be seen as long as 0.8656 resistance holds, towards long term support at 0.8276. However, firm break of 0.8656 resistance would argue that a medium term bottom was already formed. Stronger rise would be seen to 0.8861 support turned resistance to confirm completion of the corrective pattern.

Daily Pivots: (S1) 1.5518; (P) 1.5552; (R1) 1.5618; More...

Intraday bias in EUR/AUD is turned neutral first with current recovery. Outlook will remain bearish as long as 1.5743 resistance holds. On the downside, break of 1.5354 support will resume the whole fall from 1.6434 to retest 1.5250 low.

In the bigger picture, the down trend from 1.9799 (2020 high) is in progress. Firm break of 1.5250 low will confirm resumption and target 61.8% retracement of 1.1602 (2012 low) to 1.9799 at 1.4733. Sustained break there could bring more downside acceleration to 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623. In any case, break of 1.6434 resistance is needed to signal medium term bottoming, or outlook will stay bearish.

Daily Pivots: (S1) 1.0493; (P) 1.0519; (R1) 1.0534; More....

Intraday bias in EUR/CHF remains neutral first but further decline is expected as long as 1.0596 minor resistance holds. On the downside, sustained break of 1.0505 low will confirm long term down trend resumption. Next target will be 161.8% projection of 1.1149 to 1.0694 from 1.0936 at 1.0200. On the upside, though, break of 1.0596 resistance will now indicate short term bottoming, and turn bias back to the upside for stronger rebound.

In the bigger picture, current downside momentum argues that fall from 1.1149 is probably resuming the down trend from 1.2004 (2018 high). Focus is now on 1.0505 (2020 low). Decisive break there will confirm this bearish case and target 61.8% projection of 1.2004 to 1.0505 to 1.1149 at 1.0223 next. Strong support from 1.0505 will bring rebound first. But outlook will stay bearish as long as 1.0936 resistance holds.

Technical analysis

The RSI is below level 50.

The Stochastics is near the oversold zone.

Most likely scenario – SELL

Target prices: 1,862.14 1,856.24

Alternative scenario – BUY

Target prices: 1,870.74 1,877.56

Key levels

Support 1,862.14 1,856.24

Resistance 1,870.74 1,877.56

General trend

• Hang Seng has extended declines; TECH index drops amid focus on earnings; Alibaba and JD.com to report after the market close.
• HK property firms continue to announce stock offerings [Country Garden Services].
• Shanghai Composite ended morning trading slightly lower (-0.1%).
• China commented on the management of the lithium battery sector.
• Nikkei declined amid the recent Yen strength, the index pared drop on stimulus headline; Topix Shipping index weighed down by the drop in the Baltic index.
• Japan PM Kishida: To compile economic stimulus package worth several tens of trillion of yen by end of Nov 15th week [comments from Nov 10th].
• S&P ASX 200 rebounded, closed slightly higher.
• China’s Commerce Ministry (MOFCOM) sometimes holds weekly news conferences on Thurs.
• Companies due to report during the NY morning include Autohome, Berry Global, BJ’s Wholesale, Canadian Solar, Gambling.com, Kohl’s, Macy’s, Maximus, New Jersey Resources, Children’s Place, Vipshop, Petco.

Headlines/Economic data

Australia/New Zealand

• ASX 200 opened -0.1%.
• (AU) Reserve Bank of Australia (RBA) Offers to buy A$1.60B in Govt bonds v A$1.60B prior.
• (NZ) New Zealand sells NZ$500M v NZ$500M indicated in 2024, 2032 and 2041 nominal bonds.
• (NZ) New Zealand Q4 Inflation Expectation Survey (2-year outlook): 3.0% v 2.3% prior [10-year high].
• ASB Bank: Inflation expectation survey has 'locked in' 25bps rate hike during next week RBNZ meeting; leaves open possibility of 50bps hike.

Japan

• Nikkei 225 opened -0.3%.
• (JP) Said that Japan Economic Stimulus Spending requires ¥55.7T - Nikkei (prior speculated >¥40T).
• (JP) Japan Investors Net Buying of Foreign Bonds: ¥465.3B v ¥1.29T prior; Foreign Net Buying of Japan Stocks: ¥164.9B v ¥147.0B prior.
• (JP) Bank of Japan and FSA said to survey the Megabank USD Funding risk - Nikkei.
• (JP) Japan MoF sells ¥1.2T v ¥1.2T indicated in 0.500% 20-year JGBs, Avg Yield: 0.4640% v 0.4710% prior, bid-to-cover 3.78x v 2.69x prior.
• (JP) Japan LDP Official Motegi: Extra Budget to be >¥30T - Press (as expected).
• (JP) Japan Chief Cabinet Sec Matsuno: Confirms received request from US on releasing strategic Oil reserves, to ease entry restrictions to 5K arrivals per day.
• (JP) Japan PM Kishida: Will invest ¥400B in people over 3-year period.
• (JP) Japan Tax Panel Chief Miyazawa: Confirms wants the tax system to incentivize raising wages; Will set approach to financial income tax during next Fiscal Year (begins March).

Korea

• Kospi opened -0.1%.
• (KR) South Korea Q3 Short Term External Debt: $164.6B v $178.0B prior.
• (KR) South Korea: Confirms received US request to release oil reserves.
• (KR) South Korea reports record 3,292 coronavirus cases.

China/Hong Kong

• Hang Seng opened -1.1%; Shanghai Composite opened -0.2%.
• (CN) China National Food and Strategic Reserves Admin (SRB): Working on Release of crude reserves.
• (CN) China said to be considering additional industrial policies aimed to support growth - Press.
• (CN) China Oct Swift Global Payments (CNY): 1.85% 2.19% prior.
• (CN) China said to plan to strengthen Lithium Battery Sector Management and limit capacity expansion.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY50B in 7-day reverse repos v CNY50B prior; Net drain CNY50B v Net drain CNY50B prior.
• (CN) China PBOC sets Yuan reference rate: 6.3803 v 6.3935 prior (strongest CNY fix since Jun 2nd).

North America

• (US) DOE CRUDE: -2.1M V +0.5ME; GASOLINE: -0.7M V -0.5ME; DISTILLATE: -0.8M V -1.5ME.
• (US) TREASURY $23B 20-YEAR BOND AUCTION DRAWS 2.065%, BID-TO-COVER 2.34 v 2.44 PRIOR AND 2.28 OVER LAST 4 AUCTIONS.
• (US) Fed's Evans (dove, voter): High fuel prices are hitting household budgets and will be a headwind; On the other hand the stock market is high and financial conditions are good.
• (US) Democrat Congress Leaders Pelosi and Schumer: China Bill will receive a House-Senate Conference.
• (US) Former US Treasury Sec Paulson: Partial split in US and China increases financial crisis risks, a wholesale decoupling is impossible.

Europe

• (EU) EU lawmakers reportedly agree on rules to target Big Tech including Apple and Google in effort limit anti-competitive practices - FT.
• (UK) UK and EU reportedly near an agreement on Northern Ireland medical supplies - UK's Telegraph.

Other

• (ID) Indonesia Jokowi: Indonesia to stop nickel exports despite EU protest.

Levels as of 00:20 ET

• Nikkei 225, +0.1%, ASX 200 +0.1% , Hang Seng -1.2%; Shanghai Composite -0.1% ; Kospi %.
• Equity S&P500 Futures: +0.1%; Nasdaq100 +0.2%, Dax flat; FTSE100 flat.
• EUR 1.1338-1.1315 ; JPY 114.26-113.87 ; AUD 0.7278-0.7250 ;NZD 0.7031-0.6993.
• Gold -0.2% at $1,867/oz; Crude Oil -0.6% at $77.09/brl; Copper +1.2% at $4.2525/lb.