On Deck for Monday, November 21


  • Risk off, as China’s back—and not in a good way
  • Lockdowns return to Chinese city
  • PBoC keeps LPRs unchanged as expected
  • German producer prices unexpectedly plunge…
  • …but solely due to energy prices
  • Thai GDP beats, currency shakes it off
  • Very light developments expected today
  • Global Week Ahead reminder

Please see the Global Week Ahead—World Cuponomics (here) and the accompanying slide deck (here).

Key topics in this issue of the Global Week Ahead:

  • This could be an earlier, stronger holiday shopping season…
  • …as buy early sentiment and World Cuponomics…
  •        ... combine with Black Friday, Cyber Monday
  • The week’s second half may be ripe for volatility trades
  • FOMC minutes: in case you didn’t hear them the first time
  • BoC guidance may focus on stability, wages
  •        Canada’s dubious international standing on wage pressures
  • Will the RBNZ take a more hawkish turn?
  • Bank of Korea likely to downshift
  • Riksbank: hard to be more hawkish than markets
  • PBoC likely to leave LPRs unchanged
  • Turkey’s rate cuts to keep fanning inflation
  • PMIs are signalling a worldwide contraction
  • US cap-ex investment still a bright spot?
  • Canadian retail sales transition to the holiday season
  • Light global inflation, GDP updates

Moving onto the day’s developments, China is back, and not in a good way. Risk-off sentiment is driving the USD to be stronger against all major crosses. US and Canadian equity futures are down by ¼% to ¾%, European cash markets are slightly softer on average and Asian equities slipped with the Hang Seng’s nearly 2% decline leading the way. Oil prices are a few dimes lower. Sovereign bond yields are little changed on balance.

The culprit is that China’s on and off COVID Zero sentiment is, well, off again. Following a recently declining trend in China’s stringency index (chart 1), lockdowns returned to a city of 11 million that was thought to be easing. A spike in cases drove the reversal, with schools shutting as people were ordered to remain at home for five days as a mass testing program was unveiled. Three covid-19 deaths (yes three…) were registered in Beijing. One issue is uneven application of the National Health Commission’s 20 measures that were announced last week and meant to guide more targeted restrictions. Clearly another is China’s hypersensitivity to relatively small numbers of cases and its stubbornness toward embracing superior foreign vaccines.

Chart 1: China's COVID-19 Restrictions

Other overnight/weekend developments were very light. The People’s Bank of China left its 1-year and 5-year Loan Prime Rates unchanged as expected. German producer prices unexpectedly fell by 4.2% m/m (+0.6% consensus) and that mattered for, oh, let’s say maybe half an hour before 2-year bunds moved on. One reason for that may have been realization that there wasn’t any breadth to the weakness outside of energy prices (-10.4% m/m); PPI ex-energy was up 0.4% m/m. Thailand’s Q3 GDP beat expectations at 1.2% q/q (0.8% consensus) and absolutely nobody cared given China’s issues.

Very little is on tap by way of calendar-based risk today. A minor US release—the Chicago Fed’s National Activity Index for October (8:30amET)—and San Fran Fed President Daly (1pmET) are all that’s on offer.