US stocks finished mostly higher despite the post-CPI wobble on the eve of the FOMC - Newsquawk Asia-Pac Market Open

• US stocks finished mostly higher after the initial downside seen amid the release of the November US CPI figures was unwound during the session. The inflation figures printed mostly in line with expectations and are unlikely to see any last-minute changes to the Fed's Dot Plot due to be released on Wednesday, while a strong 30yr auction (first stop-through since June) also supported the recovery in stocks.
• USD ultimately weakened after a choppy reaction to the US inflation data which mostly matched estimates although headline M/M CPI printed firmer than expected, while the attention turns to the FOMC.
• Looking ahead, highlights include South Korean Unemployment Rate & BoJ Tankan Survey.

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LOOKING AHEAD

• Highlights include New Zealand Current Account, South Korean Unemployment Rate & BoJ Tankan Survey.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks finished mostly higher after the initial downside seen amid the release of the November US CPI figures was unwound during the session. The inflation figures printed mostly in line with expectations and are unlikely to see any last-minute changes to the Fed's Dot Plot due to be released on Wednesday, while a strong 30yr auction (first stop-through since June) also supported the recovery in stocks.
• SPX +0.46% at 4,643, NDX +0.82% at 16,354, DJIA +0.48% at 36,577, RUT -0.13% at 1,881.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US President Biden said CPI shows their continued progress against inflation and he is aware too many are finding things unaffordable.
• US Treasury Secretary Yellen said inflation is meaningfully coming down and sees no reason why inflation should not come down to the Fed's target. Yellen said there is no evidence that inflation is becoming ingrained or that there is a wage-price spiral, while she added that rising real rates could impact the Fed decision on the rate path, according to WSJ.
• US Senate Minority Leader McConnell said it is practically impossible for Congress to pass a supplemental funding bill including aid for Ukraine before Christmas.
• US left the 4-, 8-, and 17-week bill auction sizes unchanged at USD 80bln, 80bln, and 56bln, respectively, while the 4- and 8-week bills are to be sold on December 14th and 17-week bills are to be sold on December 13th with all to settle on December 19th.

DATA RECAP

• US CPI MM (Nov) 0.1% vs Exp. 0.0% (Prev. 0.0%)
• US CPI YY (Nov) 3.1% vs. Exp. 3.1% (Prev. 3.2%)
• US Core CPI MM (Nov) 0.3% vs. Exp. 0.3% (Prev. 0.2%)
• US Core CPI YY (Nov) 4.0% vs. Exp. 4.0% (Prev. 4.0%)
• US Cleveland Fed CPI (Nov) 0.4% (Prev. 0.3%)

FX

• USD ultimately weakened after a choppy reaction to the US inflation data which mostly matched estimates although headline M/M CPI printed firmer than expected, while the attention turns to the FOMC.
• EUR was marginally firmer against the dollar despite the brief wobble from the US CPI data.
• GBP just about remained afloat albeit with the upside limited after softer-than-expected average earnings data and a larger-than-anticipated increase in the UK claimant count.
• JPY outperformed its G10 peers which saw USD/JPY briefly dip beneath 145.00 after US CPI data.

FIXED INCOME

• Treasuries were slightly higher after initial post-CPI losses were faded amid a strong 30yr auction.

COMMODITIES

• Oil prices tumbled to their lowest levels since June with WTI back beneath the USD 70/bbl level despite some rising geopolitical tensions and a weaker dollar, while energy-specific catalysts were light although the latest EIA STEO cut world oil demand growth forecast for 2023 and 2024.
• EIA STEO stated 2023 world oil demand growth forecast was cut by 30k BPD to a 1.85mln BPD Y/Y increase, while the 2024 forecast was cut by 60k BPD to a 1.34mln BPD Y/Y increase.

GEOPOLITICS

• Israeli PM Netanyahu said he would block the Biden administration’s postwar plan to have the Palestinian Authority take over Gaza, according to WSJ. Netanyahu earlier stated they are preparing for a possible confrontation with Palestinian Authority security services in the West Bank, according to Sky News Arabia.
• Israel’s military has begun to pump seawater into Hamas’s tunnels in Gaza which is part of an intensive effort to destroy the underground infrastructure that has underpinned the group’s operations, according to WSJ citing US officials.
• US President Biden said the government in Israel is making it very difficult for the world and that PM Netanyahu has to change his government.
• US expects Israel to scale back Gaza offensive as soon as January, according to the FT citing US officials. Furthermore, experts expect a switch in tactics from January away from a ground offensive in favour of targeted raids.
• Iranian Foreign Minister said Israel and the US will never be able to eliminate Hamas.

ASIA-PAC

NOTABLE HEADLINES

• China Central Economic Work Forum readout stated priorities for 2024 policy and will plan a new round of fiscal reforms, as well as speed up construction of a new model for real estate development. China is to 'establish first before demolishing' for economic work next year and is to insist on seeking progress while maintaining stability and will consolidate and enhance the economic recovery. Furthermore, it will strengthen counter-cyclical and cross-cyclical macro policy adjustments and keep liquidity reasonably ample, while it will implement structural tax and fee reduction policies and fiscal sustainability.
• China will maintain the basic stability of the RMB exchange rate at a reasonable and balanced level, while it is to reasonably expand the scope of local governments' special bonds as capital funds.
• China warned of pressure on power supply from a cold wave snowstorm to hit Beijing and Chinese provinces between December 13th-16th.
• US lawmakers called for raising tariffs and severing economic ties with China in a bipartisan report which called for publicly traded American companies to disclose ties to China, as well as invest further in US research and manufacturing capacity to counter China’s dominance of sectors like pharmaceuticals and critical minerals, according to NYT.
• Japanese PM Kishida is preparing to replace Chief Cabinet Secretary Matsuno and three other ministers as early as Thursday over a political fundraising scandal, according to Nikkei citing officials.

DATA RECAP

• Indian CPI Inflation YY (Nov) 5.55% vs. Exp. 5.7% (Prev. 4.87%)
• Indian Industrial Production YY (Oct) 11.7% vs. Exp. 10.0% (Prev. 5.8%)
• Indian Manufacturing Output (Oct) 10.4% (Prev. 4.5%)

EU/UK

NOTABLE HEADLINES

• ECB's Villeroy said inflation's path to 2.4% from 10.6% is impressive.
• Dutch government raised the threat level to 4 out of 5 and stated the risk of an attack is "real".
• Germany's ZEW said despite the current budget crisis, the assessment of the situation and economic expectations for Germany have once again slightly increased.

DATA RECAP

• UK ILO Unemployment Rate (Oct) 4.2% vs. Exp. 4.2% (Prev. 4.2%)
• UK Claimant Count Unemployment Change (Nov) 16.0k vs. Exp. 15.0k (Prev. 17.8k, Rev. 8.9k)
• UK Employment Change (Oct) 50k (Prev. 54k)
• UK HMRC Payrolls Change (Nov) -12k (Prev. 33k)
• UK Average Earnings (ex-Bonus) (Oct) 7.3% vs. Exp. 7.4% (Prev. 7.7%, Rev. 7.8%)
• UK Average Weekly Earnings 3M YY (Oct) 7.2% vs. Exp. 7.7% (Prev. 7.9%, Rev. 8.0%)
• EU ZEW Survey Expectations (Dec) 23.0 (Prev. 13.8)
• German ZEW Economic Sentiment (Dec) 12.8 vs. Exp. 8.8 (Prev. 9.8)
• German ZEW Current Conditions (Dec) -77.1 vs. Exp. -76.0 (Prev. -79.8)