EXECUTIVE SUMMARY
- MNI: FOMC Delivers 25BP Rate Cut, Sees Risks As Balanced
- MNI: BOE Cuts 25bps, Now Sees Inflation At Target In Q2 2027
- MNI SECURITY: Ukraine And Russia React To Trump Election
- MNI FED: Looking To Broader Labor Conditions, Hint Of Stalling Disinflation?
- MNI US DATA: Initial Jobless Claims As Expected In First Week With No Storms Impact
- MNI US DATA: Continuing Claims Point To Further Modest Slowing In Re-Hiring
US
MNI: FOMC Delivers 25BP Rate Cut, Sees Risks As Balanced
Federal Reserve officials unanimously cut interest rates by a quarter point as expected Thursday, describing risks to their dual mandate of stable prices and maximum employment as balanced and offering no hint on the pace of future moves. The reduction follows a 50 basis point rate cut in September and brings the federal funds rate target to a 4.5%-4.75% range.
- "Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2% objective but remains somewhat elevated," the Fed said in its post-meeting statement. "The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance."
- Investors are still banking on another Fed rate cut in December. Still, a decisive electoral victory this week from former President Donald Trump and the Republican Party has raised concerns about a possible resurgence in inflation, causing some traders to pare back their more aggressive rate cut bets.
MNI FED: Looking To Broader Labor Conditions, Hint Of Stalling Disinflation?
With the expected 25bp cut to 4.50-4.75%, the November FOMC Statement contains some limited changes (PDF link of comparisons here): We've been asked about why the FOMC removed the language "The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent". This is a logical removal: remember September's statement noted the Committee had gained “greater confidence” because it was their long-stated criteria to start cutting rates - which of course they did. There's no need to say so again.
NEWS
MNI US: Biden: I Will Direct My Entire Administration To Work With Trump's Team
US President Joe Biden, speaking publicly for the first time since the general election, says he spoke with Presdient-Elect Donald Trump to congratulate him on his victory and "assured him" that he would direct his "entire administration" to work with Trump's team to ensure a "peaceful and orderly transition." Biden says: "The people vote and choose their own leaders, and they do it peacefully. And we're in a democracy... the will of the people always prevails."
MNI US: Republicans On Track To Secure Crucial Senate Buffer
Decision Desk HQ has projected that Democratic Senator Jacky Rosen (D-NV) has won re-election in Nevada. The call means Republicans are likely to secure 53 seats in the upper chamber. A three-seat buffer will have major implications for President-Elect Donald Trump's legislative agenda. Democrats will not be able to lean on two moderate Republican senators, Susan Collins (R-ME) and Lisa Murkowski (R-AK), to block Republican legislation moved under budget reconciliation - as Senators Joe Manchin (I-WV) and Kyrsten Sinema did during the first half of Biden's term when Democrats had unified control of Congress.
MNI: BOE Cuts 25bps, Now Sees Inflation At Target In Q2 2027
The Bank of England Monetary Policy Committee delivered its second rate cut this cycle, lowering its policy rate by 25 basis points to 4.75%, but raised its inflation projection substantially having factored the October 30 Budget arithmetic into its baseline projection. Eight members of the MPC voted for the 25 bps cut with only Catherine Mann dissenting in favour of leaving policy on hold. Governor Andrew Bailey said that if the economy unfolded as expected "it's likely that interest rates will continue to fall gradually from here." The BOE MPC's upgraded forecasts showed CPI rising to 2.4% in Q4 of 2024 and staying above the 2.0% target, standing at 2.2% in Q4 2026 and only dipping just below target in Q2 2027.
MNI EUROPE: EPC Meets Amid Trump Election Fallout & German Gov't Collapse
The European Political Community (EPC) is meeting in Budapest, Hungary, as leaders across the continent assess how best to interact with the US following the election of Donald Trump. The meeting of leaders from not just the EU, but non-EU countries such as the UK, Ukraine, and Turkey, also comes amid the collapse of the gov't of Europe's largest economy, Germany. Speaking at the EPC, French President Emmanuel Macron 'Reaffirms it its in our common interest that Russia must not win its war against Ukraine.' Macron: 'Europe needs to do more to boost the region's economic growth and innovation... [we] need less bureaucracy in Europe'.
MNI GERMANY: CDU's Merz Calls For Immediate Confidence Vote In Scholz Minority Gov't
Leader of the main opposition conservative Christian Democratic Union (CDU) Friedrich Merz has called for an immediate confidence vote in Chancellor Olaf Scholz's gov't following the collapse of the tripartite 'traffic light' coalition on 6 Nov. After the removal of Finance Minister Christian Lindner from office, and the withdrawal of Lindner's pro-business liberal Free Democrats (FDP) from the governing coalition, Scholz said that federal elections would be moved from September 2025 to March. However, Merz is demanding a confidence vote next week followed by an early election in January.
MNI SECURITY: Ukraine And Russia React To Trump Election
Reuters reporting comments from Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy on the election of Donald Trump and the implications for the war in Ukraine. Putin says he is, "not sure what [Trump] will do now.” Adds that Trump’s “desire to restore relations with Russia, facilitate end of Ukrainian crisis deserves attention.” A short time ago, Zelenskyy said: “…rhetoric about ceasefire in Ukraine without security guarantees being in place for Ukraine is very dangerous." Says he “believe[s] Trump wants quick end to war, this does not mean it will happen necessarily,” and says he's “not aware of any details of plan to end war fast, did not discuss it with Trump.”
MNI US TSYS: Rates Extend Post-Rate Cut Highs, Dovish Reaction To Powell Prsser
- Treasury futures gradually traded off Wednesday's post-election lows Thursday, eventually extending gains after the FOMC delivered an expected 25bp rate cut as Fed Chairman Powell's presser deemed dovish on net.
- Currently, Dec'24 10Y futures trade +23 at 110-08.5 vs. 110-13 high, below initial technical resistance at 110-21.5 (yesterday's high), 10Y yield at 4.3335% (-.0980).
- Powell called the 25bp rate cut a "further recalibration" of policy, saying again that the Committee is "not on any preset course. We will continue to make our decisions meeting by meeting". Overall Powell sounded relaxed about inflation, with very little to suggest that the Committee's outlook has changed very much since the last meeting.
- Powell again highlighted that the labor market is "essentially in balance" and "is continuing to cool, albeit at a modest rate, and we don't need further cooling, we don't think, to achieve our inflation mandate...we don't want the labor market to soften much from here".
- Fed Funds implied rates are 1-2bp lower out to mid-2025 following Powell’s press conference, leaving them little changed vs pre-decision levels. Cumulative cuts from an assumed 4.58% effective: 18bp Dec, 29bp Jan, 45bp Mar and 68bp June.
- Focus turns to Friday's UofM sentiment and inflation expectations.
OVERNIGHT DATA
MNI US DATA: Continuing Claims Point To Further Modest Slowing In Re-Hiring
Continuing claims offered a more dovish angle compared to initial claims in the week to Oct 26, surprisingly increasing to 1892k (sa, cons 1873k) after a downward revised 1853k (initial 1862k). There’s been some volatility in the series of late, but by more than reversing the prior week’s surprise decline it’s now at fresh highs since Nov 2021.
MNI US DATA: Initial Jobless Claims As Expected In First Week With No Storms Impact
Initial jobless claims were broadly as expected at 221k (sa, cons 222k) in the week to Nov 2 after a slightly upward revised 218k (initial 216k). Impacts from Hurricanes Helene and Milton have dissipated now. The six states most heavily impacted saw a typical 21.6k for the week down from 25.1k and the recent high of 36.1k in early October the first full week after Helene.
- The four-week average fell from 237k to 227k as some of the early storm disruption drops out but that’s still impressive considering there’s only been one full week with no significant impact. For context, initial claims averaged 218k in 2019.
- The non-seasonally adjusted 10.8k increase in national claims looks in keeping with the typical seasonal norm. That’s especially so for California (+4.3k) although Michigan (second largest increase with +3.6k) stands out a little more considering some recent, albeit temporary, increases.
MNI US DATA: Unit Labor Costs Reaccelerating
The Q3 nonfarm productivity / unit labor costs report shows a somewhat concerning acceleration in unit labor costs and compensation, with upward historical revisions to productivity not enough to offset the near-term inflationary implications. Preliminary nonfarm business productivity rose just 2.2% Q/Q ann (vs 2.5% expected) in Q3, with Q2 revised down 0.4pp to 2.1%. Correspondingly, ULCs rose 1.9% in Q3 (1.0% expected), with a large upside revision to Q2 (to 2.4% from 0.4%).
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 0.59 points (0%) at 43729.34
S&P E-Mini Future up 46.25 points (0.78%) at 6004.5
Nasdaq up 286 points (1.5%) at 19269.46
US 10-Yr yield is down 10.2 bps at 4.3296%
US Dec 10-Yr futures are up 23.5/32 at 110-9
EURUSD up 0.0072 (0.67%) at 1.0801
USDJPY down 1.8 (-1.16%) at 152.83
WTI Crude Oil (front-month) up $0.34 (0.47%) at $72.03
Gold is up $46.94 (1.77%) at $2706.02
European bourses closing levels:
EuroStoxx 50 up 51.33 points (1.07%) at 4851.96
FTSE 100 down 25.94 points (-0.32%) at 8140.74
German DAX up 323.21 points (1.7%) at 19362.52
French CAC 40 up 55.99 points (0.76%) at 7425.6
US TREASURY FUTURES CLOSE
3M10Y -9.807, -21.222 (L: -23.623 / H: -9.067)
2Y10Y -3.536, 13.025 (L: 10.984 / H: 19.07)
2Y30Y -0.867, 33.802 (L: 30.58 / H: 37.827)
5Y30Y +2.694, 36.346 (L: 31.479 / H: 37.766)
Current futures levels:
Dec 2-Yr futures up 3.75/32 at 102-27.625 (L: 102-22.875 / H: 102-28.25)
Dec 5-Yr futures up 12.75/32 at 107-4 (L: 106-21 / H: 107-06.5)
Dec 10-Yr futures up 23.5/32 at 110-9 (L: 109-14 / H: 110-13)
Dec 30-Yr futures up 30/32 at 117-6 (L: 115-22 / H: 117-16)
Dec Ultra futures up 38/32 at 124-1 (L: 122-02 / H: 124-16)
MNI US 10YR FUTURE TECHS: (Z4) Trend Needle Points South
- RES 4: 112-22 High Oct 16 and a key short-term resistance
- RES 3: 112-08 50-day EMA
- RES 2: 112-07 High Oct 21
- RES 1: 110-21+/111-06+ High Nov 6 / 20-day EMA
- PRICE: 110-05 @ 1245 ET Nov 7
- SUP 1: 109-07 Low Nov 6
- SUP 2: 109-05 76.4% retracement of the Apr - Sep bull cycle (cont)
- SUP 3: 109-00 Round number support
- SUP 4: 108-15 2.0% 10-dma envelope
A bear cycle in Treasuries remains in play and Wednesday's move lower reinforces current conditions. The contract has cleared the 110.00 handle and this opens 109-05 next, the 76.4% retracement of the Apr - Sep bull cycle (cont). The 109-00 handle remains exposed too. Initial firm resistance is seen at 111.06+, the 20-day EMA. Short-term gains would be considered corrective.
SOFR FUTURES CLOSE
Dec 24 +0.005 at 95.60
Mar 25 +0.030 at 95.880
Jun 25 +0.055 at 96.080
Sep 25 +0.070 at 96.185
Red Pack (Dec 25-Sep 26) +0.075 to +0.090
Green Pack (Dec 26-Sep 27) +0.090 to +0.095
Blue Pack (Dec 27-Sep 28) +0.090 to +0.095
Gold Pack (Dec 28-Sep 29) +0.10 to +0.110
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01042 to 4.62214 (-0.02986/ wk)
- 3M -0.00063 to 4.52163 (-0.03266/wk)
- 6M +0.01398 to 4.41039 (-0.00159/wk)
- 12M +0.04714 to 4.24661 (+0.05557/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.81% (-0.01), volume: $2.128T
- Broad General Collateral Rate (BGCR): 4.81% (+0.00), volume: $797B
- Tri-Party General Collateral Rate (TGCR): 4.81% (+0.00), volume: $774B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $102B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $285B
FED Reverse Repo Operation
RRP usage recedes to $159.002B from $177.871B Wednesday - this after usage fell to $143.243B on Tuesday -- the lowest since May 6, 2021. The number of counterparties at 56 from 57 prior.
PIPELINE
Corporate issuance remains absent since the end of October, companies waiting out the market volatility and waning earnings cycle before resuming debt issuance.
MNI FOREX: US Dollar Heads South Amid China Optimism & Yields Reversal
- The USD started the session poorly, and extended those moves through the US session, potentially as markets reassess the scope and breadth of a Trump administration next year, and as markets gear for a potential Chinese stimulus announcement as soon as tomorrow (coinciding with the end of the NPC Standing Committee meeting).
- Notable performers in G10, and benefitting from the ongoing surge for US equities, are AUD and NZD which are both up over 1.5% as we approach the APAC crossover. These pairs have not only eclipsed the initial losses following the election results, but have extended to near two-week highs.
- For AUDUSD (+1.65%), spot is testing firm resistance at 0.6684, the 50-day EMA - ahead of the close. A clear break of this level would alter the picture and highlight a possible reversal.
- The steady reversal lower for US yields is also boosting the Japanese yen, however, it is showing relative underperformance compared to the substantial moves higher for Antipodean FX and merging market currencies.
- USDJPY fell just short of the 155.20 resistance on Wednesday and following the sharp reversal, spot has slipped back below the 153.00 handle following the Fed, a level that marked last Friday’s close for the pair, and a short-term pivot.
- Multiple factors potentially leave the downside more vulnerable in the short-term, and we would highlight initial firm support at 151.29 (20-day EMA) as the first target which coincides with yesterday’s low. A break of this average would instead signal the start of a short-term corrective cycle. Support at the 50-day EMA, lies at 149.42.
- Also worth highlighting, that while remaining just -0.15% today, EURGBP did print a 0.8306 low, just 11 pips above key short-term support at 0.8295, the Oct 18 low. Canada employment data headlines the economic calendar Friday.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 08/11/2024 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 08/11/2024 | 0745/0845 | * |  FR | Foreign Trade |
| 08/11/2024 | 0900/1000 | * |  IT | Industrial Production |
| 08/11/2024 | 0900/1000 |  EU | ECB's Cipollone moderating event on Italy and the World Bank Group | |
| 08/11/2024 | 1000/1100 | * | IT | Retail Sales |
| 08/11/2024 | 1110/0610 |  CA | BOC Deputy Gravelle speaks on panel at ECB conference. | |
| 08/11/2024 | 1215/1215 |  GB | BOE's Pill and Shortfall hold MPC Agency briefing | |
| 08/11/2024 | 1330/0830 | *** | CA | Labour Force Survey |
| 08/11/2024 | 1500/1000 | ** |  US | U. Mich. Survey of Consumers |
| 08/11/2024 | 1600/1100 | US | Fed Governor Michelle Bowman | |
| 08/11/2024 | 1700/1200 | *** | US | USDA Crop Estimates - WASDE |
| 08/11/2024 | 1930/1430 | US | St. Louis Fed's Alberto Musalem | |
| 09/11/2024 | 0130/0930 | *** |  CN | CPI |
| 09/11/2024 | 0130/0930 | *** | CN | Producer Price Index |