US stocks were choppy, while treasuries rallied and the dollar dipped following dovish comments from Fed hawk Waller - Newsquawk Asia-Pac Market Open

• US stocks were choppy and although most indices finished in the green, gains were capped after fading the initial rally that was spurred by dovish comments from Fed's Waller who talked up the potential for rate cuts next year whilst pushing back on the need for more hikes. This fuelled further upside in treasuries with notable bull steepening, while it added to the month-end selling pressure for the dollar.
• USD was pressured and the DXY fell below 103.00 to its lowest since mid-August following dovish comments from Fed hawk Waller who is "increasingly confident" policy is well positioned to slow the economy and get inflation back to 2%, while he added that there are good economic arguments that if inflation was to continue falling for several more months, then you could lower the policy rate. Furthermore, the data releases were mixed as US Consumer Confidence rose and was better than expected, while Richmond Fed largely disappointed.
• Looking ahead, highlights include Australian Monthly CPI & Construction Work Done, RBNZ Rate Decision & Press Conference, Speech from BoJ's Adachi & Supply from Australia.

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LOOKING AHEAD

• Highlights include Australian Monthly CPI & Construction Work Done, RBNZ Rate Decision & Press Conference, Speech from BoJ's Adachi & Supply from Australia.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks were choppy and although most indices finished in the green, gains were capped after fading the initial rally that was spurred by dovish comments from Fed's Waller who talked up the potential for rate cuts next year whilst pushing back on the need for more hikes. This fuelled further upside in treasuries with notable bull steepening, while it added to the month-end selling pressure for the dollar.
• SPX +0.10% at 4,554, NDX +0.30% at 16,010, DJIA +0.24% at 35,416, RUT -0.46% at 1,792.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bowman (voter, hawk) favours hiking rates if inflation progress stalls and said inflation remains high, while she added that recent progress has been uneven and sees a risk to inflation from higher services consumption.
• Fed's Goolsbee (voter, dove) said they have made progress on inflation overall.
• Fed's Waller (voter, hawk) said he is "increasingly confident" policy is well positioned to slow the economy and get inflation back to 2%, while he noted there are good economic arguments that if inflation was to continue falling for several more months than you could lower the policy rate. Waller added if inflation consistently declines, there is no reason to insist that rates remain really high.
• Fed's Williams (voter, dovish) said it is encouraging to see a decline in inflation pressure and the Fed has signalled a strong commitment to get inflation back to 2%. Williams added that longer-run inflation expectations have been very stable and that rising inflation expectations uncertainty is not a sign that expectations have unanchored.
• Fed Discount Rate Minutes stated all Federal Reserve banks voted to hold the discount rate in the November 1st meeting.
• US cut the 4-week bill auction size to USD 80bln (prev. 85bln) but kept the 8- and 17-week bill sizes unchanged at USD 80bln and 56bln, respectively, while the 4- and 8-week bills will be sold on November 30th and the 17-week bill on November 29th with all to settle on December 5th.
• US Thanksgiving weekend shoppers crossed 200mln for the first time (prev. 196.7mln) with an average spend of USD 321.41 per consumer (prev. USD 325.44), according to NRF.

DATA RECAP

• US Consumer Confidence (Nov) 102.0 vs. Exp. 101.0 (Prev. 102.6, Rev. 99.1)
• US Richmond Fed Composite Index (Nov) -5.0 (Prev. 3.0)
• US Richmond Fed Manufacturing Shipments (Nov) -8.0 (Prev. 9.0)
• US Richmond Fed Services Index (Nov) 1.0 (Prev. -11.0)
• US CaseShiller 20 MM NSA (Sep) 0.2% (Prev. 0.4%, Rev. 0.3%)
• US CaseShiller 20 MM SA (Sep) 0.7% vs. Exp. 0.8% (Prev. 1.0%, Rev. 0.8%)
• US CaseShiller 20 YY NSA (Sep) 3.9% vs. Exp. 4.0% (Prev. 2.2%, Rev. 2.1%)
• US Monthly Home Price YY (Sep) 6.1% (Prev. 5.6%, Rev. 5.8%)

FX

• USD was pressured and the DXY fell below 103.00 to its lowest since mid-August following dovish comments from Fed hawk Waller who is "increasingly confident" policy is well positioned to slow the economy and get inflation back to 2%, while he added that there are good economic arguments that if inflation was to continue falling for several more months, then you could lower the policy rate. Furthermore, the data releases were mixed as US Consumer Confidence rose and was better than expected, while Richmond Fed largely disappointed.
• EUR benefitted from the dollar weakness and briefly reclaimed the 1.1000 handle, while there were comments from ECB's Nagel that rate hikes are not necessarily over and they would have to hike again if the inflation outlook worsened.
• GBP tested the 1.2700 level against the greenback in tandem with the strength in activity currencies.
• JPY continued to outperform with USD/JPY now sub-148.00 after US yields continued to decline.

FIXED INCOME

• Treasuries saw significant bull-steepening after Fed hawk Waller touted the potential for cuts next year, while a poor 7yr auction was faded.

COMMODITIES

• Oil prices were firmer in choppy trade as dovish Fed commentary and Israel-Hamas truce breaches offset reports about the lack of OPEC+ progress.
• US Energy Inventory Data (bbls): Crude -0.8mln (exp. -0.9mln), Gasoline -0.9mln (exp. +0.2mln), Distillate +2.8mln (exp. +0.4mln), Cushing -0.5mln.
• OPEC is to hold an online meeting at 10:00GMT/05:00EST on Thursday for OPEC internal matters rather than production policy, while the JMMC will meet at 13:00GMT/08:00EST and the OPEC+ meeting will occur at 14:00GMT/09:00EST, according to Reuters citing sources.
• OPEC+ is no closer to resolving the quota disputes around Africa, according to Bloomberg citing delegates.
• OPEC+ talks are reportedly difficult and a further delay in the meeting is possible, while a policy rollover is a possibility, according to Reuters sources.
• Russia increased gasoline and diesel output in November by around 5%, according to Reuters citing sources.
• Kazakhstan Energy Minister said oil output has been cut by 56% at its largest oilfields and it is unclear when the situation will normalise, while Kazakhstan’s Energy Ministry said the largest oil fields are to continue cutting oil output until December 3rd, according to Interfax.
• Worker unions at MMG's Las Bambas copper mine in Peru commenced strike activity for an indefinite period, according to the union leader. However, it was later reported that the strike at the Las Bambas copper mine in Peru is limited to 48 hours after the labour authority declared the protest as inappropriate.
• Panama's top court ruled the First Quantum mine deal is unconstitutional, according to Bloomberg. This is regarding the contract which would have given First Quantum a 20yr mining right with an option to double the term. It was later reported that First Quantum said the Cobre Panama mine suspended commercial production and is applying a programme of preservation and safe maintenance.

GEOPOLITICS

• Israel said the framework of operational pause had been violated and soldiers were hurt with IEDs activated on two separate occasions in the northern Gaza Strip near IDF forces in violation of the truce agreements.
• Hamas military wing Al Qassam Brigades said it clashed with an Israeli force in Northern Gaza as a result of a violation of the truce and it is committed to the truce whenever Israel abides by it, according to Al Arabiya.
• A Palestinian official familiar with truce talks said Hamas started handing over Israeli hostages to the ICRC.
• Brokers of the Israel-Hamas hostage-prisoner exchange are pushing for the two sides to prolong the cease-fire in Gaza through to the end of the week and start talks on a permanent truce that would end the war altogether, according to WSJ citing officials. However, it was reported that a long-term cease-fire would likely require Israel and Hamas to make hard-to-swallow concessions, such as trading Israeli soldiers for potentially thousands of Palestinian prisoners in Israeli jails and would require Israel to hold back on an offensive in southern Gaza intended to capture the strip and kill Hamas’s top leadership.
• Qatar's Foreign Ministry said there have been "minimal breaches" of the Gaza truce, but they have not threatened the overall agreement. It was also reported that Qatar's focus in the next 48 hours is to further extend the truce based on Hamas' ability to release 10 hostages per day.
• US paused drone flights over Gaza as part of the truce between Israel and Hamas, according to a Pentagon spokesperson.
• CIA director Burns travelled to Doha to meet with Mossad director Barnea and Qatar's PM to discuss a possible second extension of the pause in Gaza, contingent on Hamas releasing more hostages, according to Axios.
• US State Department senior official said Turkey’s Foreign Minister told NATO he is working on the ratification of Sweden and gave the likely timeline of a 'few weeks'.

ASIA-PAC

NOTABLE HEADLINES

• China's coast guard said Japanese ships intruded into Chinese territorial waters in the disputed Senkaku Islands.
• Japan's Finance Ministry will raise the assumed interest rate paid on bonds in the government's annual budget proposal for the first time in 17 years in fiscal 2024, reflecting policy shifts by the BoJ that have allowed yields to rise, according to Nikkei.

EU/UK

NOTABLE HEADLINES

• BoE's Haskel said labour market tightness will need higher rates for longer to get inflation sustainably back to the target.
• BoE's Ramsden said the UK economy has been more resilient in 2023 than forecast and thinks the OBR has taken a slightly more positive view on some judgements. Ramsden added that challenging to squeeze out services inflation poses the greatest risk of persistence and rates will need to be restrictive for some time.
• ECB's Nagel said rate hikes are not necessarily over and they would have to hike again if the inflation outlook worsened. Nagel added the inflation outlook is encouraging, but core shows dynamics continue to be strong, while he added it is premature to discuss rate cuts and prefers to err on the side of caution.
• German coalition leaders are to meet on Wednesday evening regarding the budget crisis, according to Reuters citing sources.