US EARLY MORNING: US equity futures rally, with tech leading the upside; PPI, Fedspeak ahead

SNAPSHOT: US equity futures are rallying, with the tech/growth focussed NQ leading gains. Treasury yields are lower by 1-3bps after Fed’s Brainard on Monday backed the FOMC downshifting to a lower increment of rate hikes in December, though reiterated that there was still work to be done. The Dollar Index is lower, seeing downside as Europeans arrived amid a constructive risk backdrop and some technical which were said to be supporting EURUSD; EMFX is supported by some reports out of China where some cities had begun cutting routine community COVID testing. However, COVID cases are still striking concerns in some pockets of the market; Crude futures trade lower, for instance, with reports citing the recent uptick in Chinese COVID cases posing questions on the demand side. Overnight, China activity data missed expectations, with analysts arguing the data continues to allude to a further loss of economic momentum, while the outlook also appears challenging.

OUTLOOK: JPMorgan strategist Marko Kolanovic is reducing his overweight equities position because recession risks remain high, Bloomberg reports. Kolanovic still remains constructive on equities, maintaining a long-term overweight view, but has used the recent rally to reduce overweights. He has been one of Wall Street’s most notable equity bulls, but last month tempered his bullishness citing geopolitical and monetary policy risks, noting that a recession would be hard to avoid. Citadel’s Ken Griffin has this week echoed that theme, telling a conference that it was “hard to believe” that the US can avoid a US recession in H2 2023, though he still thinks that the Fed should continue its fight against inflation: “to take the foot off the brake right now and not finish the job, I think it’s the absolute worst mistake that the Fed could possibly make.” Griffin is confident that the US will end this year with modest growth, but says the issue for 2023 is the lagged effect of the Fed having hiked rates, which “will really start to grind on the economy.”

DAY AHEAD: Eurozone flash GDP for Q3 is expected to confirm growth at 2.1% Y/Y; the German ZEW survey for November is expected to see Sentiment and Conditions improve a little. The US day will see PPI data for October will be released, and like its CPI counterpart, is expected to show some moderation in the rate of price increases. The NY Fed regional manufacturing survey for November will offer initial clues as to how the more widely viewed national ISM data will look when it is released in the early part of December. After hours, the API will release its gauge of weekly energy inventories. The speaker’s slate is busy: in Europe, the ECB’s Villeroy and Elderson are doing the rounds today. Stateside, Fed’s Harker (2023), Cook (voter), Barr (voter) will deliver remarks. The G20 meetings in Indonesia also get underway, where officials have largely stuck to themes telegraphed in advance of the gathering. Home Depot (HD) and Walmart (WMT) will release their numbers today. Full Day Ahead schedule can be accessed here

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15 Nov 2022 - 09:30- Research Sheet- Source: Newsquawk

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