MNI ASIA OPEN: US Senate Passes $1.7T Funding Bill Before Friday Deadline

NEWS

North America

US (BBG): Senate Passes Giant $1.7T Funding Bill With Ukraine Aid, Election Fix
The Senate easily passed a more than $1.7 trillion government funding bill that includes more aid for Ukraine and changes to the way presidential elections are counted. Passage of the bill funneling $47 billion toward the effort to help Ukraine’s defense against Russia came a day after Ukrainian President Volodymyr Zelenskiy addressed the US Congress in his first trip outside his war-torn homeland since the invasion began. The measure adds to the more than $65 billion already appropriated this year to address the Ukraine conflict.

US (BBG): Goldman Says US Spending Deal Bigger Than Expected for 2023
Goldman Sachs Group Inc. economists said the US annual spending bill now on course for approval in Congress is larger than anticipated, boosting the chance that the federal government will have a positive effect on economic growth in 2023. The bill will lift so-called discretionary spending — outside of entitlement programs such as Social Security and Medicare — by “slightly more than 5%,” unadjusted for inflation, according to Goldman. After accounting for inflation, the real increase would be around 2.5%, the bank said.

US (BBG): US Third-Quarter GDP Revised Higher to 3.2% on Firmer Spending
US economic growth in the third quarter was firmer than previously estimated, reflecting upward revisions to consumer spending and business investment. Inflation-adjusted gross domestic product, or the total value of all goods and services produced in the economy, increased at a 3.2% annualized rate during the period, Commerce Department data showed Thursday. That compares with a previously reported 2.9% advance.

US (BBG): US Mortgage Rates Drop for Sixth Straight Week, Falling to 6.27%
Mortgage rates in the US fell for a sixth straight week, hitting a roughly three-month low. The average for a 30-year, fixed loan was 6.27%, down from 6.31% last week, Freddie Mac said in a statement Thursday.

Weather (Axios): "Brutally cold" Arctic outbreak, bomb cyclone grips the Lower 48 states
An extraordinary stretch of extreme winter weather is blasting the Lower 48 as a powerful Arctic cold front sweeps south out of Canada, unleashing howling winds and sparking a bomb cyclone forming in the Midwest. The Arctic air, strong winds and an associated bomb cyclone could be deadly to anyone caught outside — and it's causing travel chaos on the roads and in the air during the holiday rush.

Global

ECB (MNI): ECB Action Unlikely Despite Tight Year-End Collateral
Collateral shortages are troubling euro zone money markets going into the year-end, but the situation is not dire enough to prompt the European Central Bank into taking further action, experts told MNI. “The collateral situation will remain tense but not tense enough that they will think of doing more,” said Francesco Papadia, former director general of market operations at the European Central Bank and now senior resident fellow at the Bruegel think tank in Brussels.

OIL (BBG): Putin to Sign Decree on Oil-Price Cap Answer Monday/Tuesday
Russia’s President Vladimir Putin told reporters he will sign a decree on nation’s response to the price cap on its crude on Monday or Tuesday. There would be “preventive measures,” Putin said without elaborating. Price cap won’t cause losses for Russian economy, budget or energy industry as the nation is currently selling its crude at around similar levels

GLOBAL TRADE (FT): Britain joins EU in criticising Biden’s green subsidies package
Britain has joined the international criticism of Joe Biden’s massive US package of green subsidies, warning they are protectionist and will hit UK-based makers of electric vehicles, batteries and other renewables.

US/CHINA (BBG): US Prepared to Help China With Vaccines to Control Covid
The US is prepared to help China with vaccines to help address its Covid-19 outbreak, but the government in Beijing hasn’t asked for assistance so far, Secretary of State Antony Blinken said.

Crypto

SEC (BBG): SEC’s Crypto Crackdown Is Just Getting Started After FTX Blowup
The US Securities and Exchange Commission is just getting started with its crackdown on crypto firms that refuse to abide by its rules. SEC Chair Gary Gensler said in an interview on Thursday that the agency’s patience is wearing thin for digital-asset exchanges and other firms that shirk its regulations.

FTC (BBG): Bankman-Fried Released on $250 Million Bond in FTX Fraud Case
Sam Bankman-Fried was released on a $250 million bail package after making his first US court appearance to face fraud charges over the collapse of FTX, the cryptocurrency exchange he co-founded.

DATA

*US 3Q ECONOMY GROWS AT 3.2% ANNUAL RATE; EST. 2.9% - bbg
*US 3Q CORE PCE PRICE INDEX RISES AT A 4.7% ANNUAL RATE - bbg
*US 3Q GDP PRICE INDEX RISES AT A 4.4% ANNUAL RATE; EST. 4.3% - bbg

* MNI: US JOBLESS CLAIMS +2K TO 216K IN DEC 17 WK
* US PREV JOBLESS CLAIMS REVISED TO 214K IN DEC 10 WK
* US CONTINUING CLAIMS -0.006M to 1.672M IN DEC 10 WK

*US NOV. LEADING INDICATOR FALLS 1.0% M/M; EST. -0.5% - bbg

*US DEC. KANSAS CITY FED MANUFACTURING INDEX -9; EST. -7 - bbg

US DATA: Real GDP Revised Higher On Domestic Demand, So Too GDI

• Real GDP was revised up again from 2.9% to 3.24% annualized in the third Q3 release.
• It was led by personal consumption (from 1.7 to 2.26%) and less so private non-residential investment in positive signs for final domestic demand, offset partly by an even larger than first thought drag from inventories (-1.4pps vs -1.2pps prior).
• That said final domestic demand is still relatively tepid at 1.5% annualized after 0.8% averaged in 1H22, weighed heavily by sliding residential investment.
• The latest Atlanta Fed GDPNow sees only a modest slowing to 2.7% in Q4.
• After a string of downward revisions, GDI also finally sees an upward revision, currently seen +0.8% annualized in Q3 (initially 0.3), which leaves a GDP-GDI average growth rate of 2% annualized in Q3 after -0.5% through 1H22.

[See further data summaries in separate Asia Markets Analysis e-mail]

US TSYS: Bear Flattening On Stronger Data and Thin Markets

• Cash Tsys have seen sizeable swings through the session but ultimately see a solid bear flattening on a combination of stronger than expected US data and thin volumes ahead of the Christmas break. Initial reaction to the US Senate passing the $1.7T funding bill was muted but Goldman sees the package as larger than expected.
• Data included upward revisions for GDP and marginally for core PCE plus further resilience in weekly jobless claims, but the market reaction appears outsized, especially with the leading index also weaker than expected.
• The 2YY is currently 4.257%, +4.4bps having traded in a wide range of 4.185-4.265% (4.21% pre-data), with increased more muted along the curve: 5YY +1.4bp at 3.784%, 10YY +0.7bps at 3.669% and 30YY +1.3bps at 3.726%.
• TYH3 currently trades little changed on the day at 113-17 with thin volumes (660k vs ¬950k typical for the time of day), off earlier lows of 113-13+ which saw the bear threat remains present with support at 113-09+ (Dec 21 low).
• A final flurry of important data tomorrow, including US core PCE & incomes/spending, preliminary durable goods and the preliminary U.Mich survey.

US 5Y TIPS Auction Review: Another Tail But Stronger Internals

• Another tail for 5Y TIPS, approx. 1.4bps after ~1bp at the Oct 20 auction.
• Internals generally stronger, bid-to-cover picks up to 2.51% from a low 2.38, back close to the five auction average of 2.52.
• Directs 17.8% vs 17.0% Oct and 5-auction av 12.1% although primary dealer 8.1% vs 7.7% Oct and 5-auction av 8.2%.

STOCKS: Buy Programs Help Limit Losses In Pre-Holiday Trade

• A string of sizeable buy programs (recently >1000 names) help equity indices off session lows, with earlier declines trimmed to -2.1% for e-mini S&P and -3.1% for Nasdaq 100 in seemingly thin trade ahead of the Christmas break.
• Main movers are as earlier in the session: In a reversal of yesterday’s gains, today’s drivers of SPX are IT (-3.2%) and consumer discretionary (-3.1%) whilst health care and consumer staples (-0.6%) outperform.
• A gloomy outlook from chipmaker Micron Technology Inc. weighed on both indexes, whilst from a macro perspective, higher Fed terminal pricing is a culprit at 4.89% in May’23 for +4bp since stronger data (with 2YY close to session highs +5bp on the day).

FOREX: GBP Extends Pullback, While USD Rallies on Solid GDP

• Tertiary GDP data provided the last look at the US economy headed into year-end, and came in with a surprising upside revision. This put annualized GDP at 3.2%, an unusual 0.3ppts beat on expectations. Personal consumption and core PCE data similarly topped forecast, buoying the USD through the London close.
• The USD Index added 0.3% in response, most notably against high beta and growth-sensitive currencies. As a result, NZD, AUD and SEK made up the bottom-end of the G10 table.
• JPY was the sole currency to outstrip the USD on Thursday, as post-BoJ YCC tweak strength persisted and an equity sell-off drove flow to safe haven currencies.
• GBPUSD trades lower still through the Thursday US close and has now dipped below the 1.20 handle. This follows the move lower on Dec 15 and the extension of weakness through the Thursday close. Attention is on the first key support at 1.1901, the Nov 30 low for now.
• Pre-holiday trade was evident, with light liquidity and only modest volumes clearly exerting their influence on prices.
• In the last pre-holiday session, market focus turns to Japanese CPI for November, Italian consumer confidence and Personal income spending, durable goods and Michigan confidence numbers from the US.

COMMODITIES: Higher Rate Fears and Dollar Strength Dominate

• Crude oil sees a mixed session with sizeable spillover from broader risk sentiment, which has for the most part been bearish today with stronger than expected US economic data seen driving higher interest rates.
• In more idiosyncratic developments, Putin is to sign a decree on the oil price response on Monday or Tuesday.
• Pulling off lows prior to the Asia-Pac crossover, WTI is -0.3% at $78.02. Resistance is formed at the intraday high of $79.90 whilst support isn’t seen until $73.40 after the recent uptrend.
• Brent is -0.9% at $81.50, off the earlier high of $83.85 and with support at $78.28 (Dec 20 low).
• Gold is -1.4% at $1789.8, sliding with USD strength and pulling more notably away from the bull trigger at $1824.5 (Dec 14 high) to instead next eye support at $1782.9 (20-day EMA).