Source: MNI - Market News/Bloomberg
UK
TRADE (POLITICO): “Northern Ireland lawmakers have voted to maintain the U.K. region’s special post-Brexit trade rules with Britain following a polarized and bitter debate.”
ECONOMY (BBC): “Government departments have recommended a pay rise of 2.8% for millions of public sector workers including teachers, NHS staff and senior civil servants next year.”
EU
ECB (MNI): “The ECB will cut by 25bp, marking the third back-to-back cut, and the fourth reduction this year. Given that the ECB has previously shown some flexibility in following its self-prescribed data dependent and meeting-by-meeting approach, future meetings carry some degree of uncertainty over policy outcomes.”
EU (POLITICO): “Speaking at POLITICO’s P28 event in Brussels, Kaja Kallas said China was “learning from Russia,” and insisted that defending Ukraine against the Kremlin would send a strong message to Beijing.”
FRANCE (BBG): “French President Emmanuel Macron is seeking to free his government from the stranglehold of National Rally leader Marine Le Pen by piecing together a coalition of moderates that will last until 2027. The president plans to appoint a new premier within 48 hours.”
GERMANY (BBG): “German Chancellor Olaf Scholz has proposed a reduction of the value-added tax on basic groceries to help low-income households cope with persistently high inflation.”
RUSSIA (POLITICO): “The EU’s top diplomat, Kaja Kallas, says Russia has learned how to influence elections through new technologies.”
SWITZERLAND (MNI): “The SNB is expected to cut its policy rate again, with a regular 25bps cut to 0.75% appearing the most likely outcome but an outsized 50bps move also remains possible. Market pricing between the two remains finely split.”
US
INFLATION (MNI): “Analysts’ forecasts for November CPI imply remarkably steady sequential inflation versus October, with the MNI median and average for core expected to show an unchanged 0.28% M/M. Combined with Thursday’s estimates for PPI inputs, core PCE is in turn seen moderating to between 0.18-0.25% M/M in November, vs 0.27% in October.”
FED (MNI): “The Federal Reserve can continue to loosen monetary policy further despite signs of continued robust growth because the trend growth rate has likely increased and the neutral rate of interest is still a ways away, Global Chief Economist at S&P Global Ratings Paul Gruenwald told MNI.”
INDUSTRY (BBG): “President Joe Biden plans to formally block the $14.1 billion sale of United States Steel Corp. to Nippon Steel Corp. on national security grounds once the deal is referred back to him later this month, people familiar with the matter said.”
OIL (BBG): “The Biden administration is weighing new, harsher sanctions against Russia’s lucrative oil trade, seeking to tighten the squeeze on the Kremlin’s war machine just weeks before Donald Trump returns to the White House.”
BUSINESS (BBG): “President-elect Donald Trump said his administration would help expedite permits for any person or company that invested at least $1 billion in the US.”
BUSINESS (BBG): “A federal judge blocked Kroger Co.’s $24.6 billion acquisition of Albertsons Cos., finding the takeover would lessen competition for US grocery shoppers, in a ruling that marks a likely death knell for the deal.”
POLITICS (BBG): “President-elect Donald Trump has selected Andrew Ferguson, a Republican member of the US Federal Trade Commission, to serve as the agency’s chair, a politically charged role currently held by Lina Khan.”
POLITICS (POLITICO): “Sen. Bernie Sanders, former presidential candidate and leader of the progressive movement in the United States for decades, said his term starting in January would likely be his last in an interview with POLITICO.”
OTHER
JAPAN (MNI): “Japan Nov CGPI rises 3.7% y/y, import prices drop.”
CANADA (MNI): “The BoC is mostly priced to cut its policy rate by 50bps for a second consecutive meeting, with last week’s strong increase in the unemployment rate playing a significant role.”
ISRAEL (BBC): “Israel has confirmed it carried out attacks on Syria's naval fleet, as part of its efforts to neutralise military assets in the country after the fall of the Assad regime.”
ARGENTINA (BBG): “Argentine President Javier Milei promised to lift capital and currency controls next year while his administration intends to negotiate a free trade agreement with the US once Donald Trump takes office.”
CHINA
POLICY (BBG): “China is set to begin its annual economic work meeting on Wednesday to map out policies for next year, with top leaders hinting at more forceful stimulus amid the threat of a potential trade war with the US.”
POLICY (YICAI): “Beijing is likely to raise its deficit-to-GDP ratio to around 4% next year, after the Politburo meeting called for implementing a more proactive fiscal policy and strengthening extraordinary countercyclical adjustment this week, Yicai.com reported.”
TRADE (MNI): “China’s export growth slowed sharply in November to 6.7% y/y, due to base effects and diminished short-term factors behind October’s 12.7% y/y increase, according to Feng Lin, executive director of research at Orient Jincheng.”
ECONOMY (CASME): “China’s SME Development Index reached 89.2 for November, up 0.2 points from October and marking the second month of consecutive increase, the China Association of Small and Medium Enterprises (CASME) said.”
CHINA MARKETS
MNI: PBOC Net Injects CNY13.8 Bln via OMO Monday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY47.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY13.8 billion after offsetting the maturity of CNY33.3 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6614% at 09:32 am local time from the close of 1.6626% on Friday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 59 on Friday, compared with the close of 53 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Higher At 7.1870 Mon; -1.39% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1870 on Monday, compared with 7.1848 set on Friday. The fixing was estimated at 7.2614 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND Q3 MANUFACTURING VOLUMES -1.2% Q/Q; PRIOR +0.3%
NEW ZEALAND Q3 MANUFACTURING SALES -0.1% Q/Q; PRIOR +0.9%
JAPAN NOV. PRODUCER PRICES +3.7% Y/Y; EST. +3.4%; PRIOR +3.6%
JAPAN NOV. PRODUCER PRICES +0.3% M/M; EST. +0.2%; PRIOR +0.3%
JAPAN Q4 BSI LARGE ALL-INDUSTRY CONFIDENCE +5.7 PPT Q/Q; PRIOR +5.1
JAPAN Q4 BSI LARGE MANUFACTURER CONFIDENCE +6.3 PPT Q/Q; PRIOR +4.5
SOUTH KOREA NOV. ADJUSTED JOBLESS RATE 2.7%; EST. 2.8%; PRIOR 2.7%
SOUTH KOREA NOV. HOUSEHOLD LENDING RISES TO KRW1,141.4T; PRIOR KRW 1139.5T
MARKETS
US TSYS: Tsys Futures Edges Lower Ahead Of US CPI
- Tsys futures are weaker ahead of US CPI later today, US consumer prices excluding food and energy probably rose 0.3% m/m last month, the same as in October, with expectations of another 0.3% reading today, while headline CPI is expected to rise to 2.7% from 2.6% in October.
- Ranges have been narrow and we currently trades within yesterday's levels across all contracts. TU is -00¾ at 103-02 and trading at session lows, TY is -04 at 110-28, just off lows of 110-27+.
- Cash tsys curves have bear-flattened, yields are 0.5-1.5bps higher across the curve. The 2yr is +1.4bps at 4.157%, 10yr is +1bps at 4.236%. The 2s10s is little changed at 7.433, off overnight highs of 9.321.
- Fed fund futures are currently pricing in 21.5bps of cuts for next weeks meeting, or a 86% chance of a 25bps cut. January is pricing in 27.4bps of cumulative cuts, while not until May is the market expecting another full cut, with 52.3bps currently priced.
- Treasury Secretary nominee Scott Bessent said he is “in complete agreement” with President-elect Trump that Fed Chair Jay Powell will serve out his full term.
- There will be a $39b Tsys auction of a November 2034 notes later today. While on the data front, first we have MBA mortgage Applications, although all eyes will be on CPI shortly after.
ACGBS: Subdued Session Ahead Of US CPI Today & AU Jobs Tomorrow
In roll-impacted dealings, ACGBs (YM -2.2 & XM -5.7) are cheaper on a data-light Sydney session. Andrew Hauser, RBA Deputy Governor, will give a speech at the ABE Annual Dinner aftermarket.
- Cash US tsys are ~1bp cheaper in today’s Asia-Pac session ahead of US CPI data later today.
- Cash ACGBs are 2-6bps cheaper on the day but remain 2-8bps richer, with a steeper curve, than yesterday’s pre-RBA levels.
- The AU-US 10-year yield differential is at -4bps, around its lowest since July.
- Swap rates are flat to 4bps higher, with the 3s10s curve steeper.
- The bills strip is little changed, with pricing flat to -1.
- RBA-dated OIS pricing is largely unchanged today but remains 3–12bps softer than pre-RBA levels observed yesterday. A 25bp rate cut is now more than fully priced for April, with market expectations at 115%. The market assigns a 60% chance to a 25bp cut at February’s meeting.
- Tomorrow, the local calendar will see the November Employment Report. Bloomberg consensus is forecasting a 25k rise in new jobs and a 0.1pp rise in the unemployment rate to 4.1%. The RBA continued to describe the labour market as tight in its December statement noting that some indicators had “stabilised”, including hours worked, underemployment and the youth unemployment rate.
NZGBS: Strong Outright & Relative Performance
NZGBs closed showing a bull-steepener, with benchmark yields flat to 3bps lower. The NZGB 10-year has outperformed its $-bloc counterparts, with the NZ-US and NZ-AU yield differentials 5bps tighter on the day. At +9bps, the NZ-US 10-year differential is around its lowest since mid-2021.
- The market appears to have benefitted from a positive spillover effect from ACGBs, following yesterday’s strong rally in the wake of the RBA decision. The local market was closed at the time of the announcement, amplifying the delayed impact.
- That said, today’s data was on the weak side. NZ manufacturing volumes fell 1.2% q/q in Q3 versus a revised +0.3% in Q2.
- Interestingly, Westpac’s forecasting model suggests that the NZ economy appears to be emerging from recession in Q4, with GDP seen to be increasing 0.2%. (per BBG)
- Swap rates closed 1-3bps lower, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed flat to 4bps softer. A cumulative 44bps of easing is priced by February, with 111bps by year-end 2025.
- Tomorrow, the local calendar will see Card Spending data ahead of BusinessNZ Manufacturing PMI and Net Migration on Friday.
- Tomorrow, the NZ Treasury plans to sell NZ$250mn of the 0.25% May-28 bond, NZ$225mn of the 4.50% May-35 bond and NZ$25mn of the 2.75% Apr-37 bond.
JGBS: Subdued Session, Light Local Calendar Again Tomorrow, US CPI Later Today
JGB futures are holding weaker and mid-range, -10 compared to settlement levels.
- Outside of the previously outlined PPI data, there hasn't been much by way of domestic drivers to flag.
- Japan's wholesale inflation accelerated for three straight months as companies continued to pass on rising raw material and labour costs, data showed on Wednesday, keeping the central bank under pressure to raise interest rates again. The data for November comes ahead of the Bank of Japan's two-day policy meeting ending on Dec. 19, when some analysts expect it to raise short-term interest rates from the current 0.25%. (per RTRS)
- Cash US tsys are ~1bp cheaper in today’s Asia-Pac session ahead of US CPI data later today.
- Cash JGBs are slightly mixed across benchmarks, with swings bounded by +/- 1bp beyond the 1-year (+2.4bps) and shy of the 40-year (-2.4bps). The benchmark 10-year yield is 0.2bp higher at 1.073% versus the cycle high of 1.108%.
- The swaps curve has twist-steepened, with rates 1bp lower to 2bps higher. Swap spreads are tighter out to the 10-year and wider beyond.
- Tomorrow, the local calendar will see Weekly International Investment Flow and Tokyo Avg Office Vacancies data alongside an Auction for Enhanced-Liquidity 5-15.5 YR.
EQUITIES: Asian Equities Mixed As Market Remains Cautious Ahead Of US CPI
Asian markets are trading cautiously ahead of key US inflation data, which could influence the Fed's interest rate decision. China's Central Economic Work Conference has fueled optimism with signals of fiscal and monetary stimulus, though skepticism lingers due to past unmet policy promises. South Korean equities continued their rebound despite lingering political uncertainty. In Japan, producer-price inflation accelerated, adding pressure for policy normalization, while traders reduced bets on a near-term rate hike. Meanwhile, weak commodity prices and unrest in Mozambique have weighed on Australian mining stocks, while overall risk aversion has dampened sentiment across the region.
- Japanese benchmarks are slightly lower, with the Nikkei underperforming, last down 0.65%, while the TOPIX is 0.25% lower. South Korea's KOSPI is trading 0.65% higher, gains are being driven by smaller-cap stocks with the likes of Samsung & SK Hynix down 0.5%, while foreign investors have been better sellers of Transports, Chemical & Machinery names.
- China & Hong Kong equities are trading slightly higher with small-caps outperforming the wider markets. The HSI is 0.20% higher, the CSI 300 trades just 0.10%, while the CSI 1000 is up 1.25%.
- Australian shares fell to a near three-week low as mining stocks struggle following unrest in Mozambique, the ASX200 is 0.40% lower. New Zealands NZX 50 is 0.10% higher.
ASIA STOCKS: Asian Equity Flows Remain Muted
Flows have been muted recently, India has seen the strongest inflows over the past week.
- South Korea: Recorded inflows of +$129m yesterday, with a 5-day total of -$367m. YTD flows remain positive at +$4.15b. The 5-day average is -$73m, better than the 20-day average of -$123m and the 100-day average of -$154m.
- Taiwan: Experienced outflows of -$279m yesterday, with a 5-day total of +$887m. YTD flows are deeply negative at -$16.43b. The 5-day average is +$177m, better than the 20-day average of -$183m and the 100-day average of -$188m.
- India: Posted inflows of +$71m yesterday, with a 5-day total of +$2.53b. YTD flows remain positive at +$906m. The 5-day average is +$507m, much better than the 20-day average of +$134m and the 100-day average of -$11m.
- Indonesia: Recorded inflows of +$5m yesterday, with a 5-day total of +$41m. YTD flows remain positive at +$1.56b. The 5-day average is +$8m, better than the 20-day average of -$29m and the 100-day average of +$17m.
- Thailand: Local market closed for Constitution Day. YTD flows are negative at -$3.92b. The 5-day average is -$18m, slightly worse than the 20-day average of -$16m but better than the 100-day average of -$6m.
- Malaysia: Experienced outflows of -$27m yesterday, with a 5-day total of -$114m. YTD flows are negative at -$524m. The 5-day average is -$23m, better than the 20-day average of -$39m but worse than the 100-day average of -$7m.
- Philippines: Posted inflows of +$23m yesterday, with a 5-day total of -$4m. YTD flows remain negative at -$317m. The 5-day average is -$1m, better than the 20-day average of -$10m and the 100-day average of +$2m.
Table 1: EM Asia Equity Flows
OIL: Crude Higher; EIA Data, OPEC Report & US CPI Released Later
Oil prices are higher ahead of US data. They have been buoyed by news that the Biden administration is considering stricter sanctions on Russia’s oil exports before Trump takes office in January, which if enforced could reduce global supply. Brent is up 0.6% to $72.63/bbl, close to the intraday high, while WTI is also 0.6% higher around $69.00. The USD index is off its low but still down 0.1%.
- Crude has been range trading in recent weeks due to offsetting factors, including increased tensions in the Middle East and a pessimistic supply/demand outlook for 2025. The market continues to monitor data and policy developments in China.
- The EIA forecast a small crude deficit of around 100kbd in 2025 in its latest outlook. The shift from a surplus was driven by OPEC’s decision to delay its output normalisation to the start of April. OPEC’s monthly report is released today and the IEA’s, which tends to be less optimistic, is on Thursday.
- Bloomberg reported that US crude oil inventories rose 0.499mn last week after falling 1.23mn the week before, according to people familiar with the API data. Gasoline stocks rose 2.85mn and distillate +2.5mn. The official EIA data are out later today.
- November US CPI data is out later, which is expected to show headline ticking up to 2.7% y/y but core steady at 3.3% y/y. The Fed is currently forecast to cut rates 25bp on December 18. US November real earnings and federal budget balance are also out and the Bank of Canada decision is announced.
LNG: European Supply Risks Still At The Fore
Natural gas prices were moderately higher on Tuesday but are still down in December to date. European gas rose 1.8% to EUR 45.67, close to the intraday high of EUR 45.87, as purchasers took advantage of lower prices. They were also supported by unplanned outages in key supplier Norway. It is still down 4.5% this month.
- The weather outlook has become milder but wind-generated power is forecast to decline over the week. But the European supply situation remains uncertain going into year end when the deal with Ukraine to allow Russian flows expires, also the impact on EU transactions of US sanctions on Gazprombank is unclear.
- US natural gas prices rose 0.2% to $3.19 to be down 5.2% in December. Supplies remain ample and warmer weather is forecast for parts of the East Coast of the US for mid-December, according to the Commodity Weather Group.
- Softer gas demand in China due to weaker industrial growth and higher global prices have meant that it is reselling LNG, according to ENN Group. Also Japan has restarted some nuclear reactors which should reduce its gas demand.
FOREX: Limited FX Moves Ahead Of US CPI Data Later
Ahead of November US CPI out later today, there have only been restrained moves in G10 currencies. The BBDXY USD index is off its intraday low but still down 0.1%. The yen has made the largest move with USDJPY down 0.3% to 151.56 but off the intraday low of 151.42. Japanese corporate goods price inflation picked up but imported pressures fell.
- AUDUSD fell to 0.6369 in early trading continuing Tuesday’s sell off but it is now up 0.1% to 0.6384, after reaching 0.6389. RBA Deputy Governor Hauser speaks at 1800 AEDT at the ABE annual dinner. AUDJPY is 0.2% lower at 96.75 after falling to 96.62.
- NZDUSD is 0.1% higher at 0.5803 after falling to 0.5797 earlier. AUDNZD has been hovering around 1.10 for much of the session to be higher than before Tuesday’s RBA announcement.
- European currencies are little changed with ECB and SNB meetings on Thursday. EURUSD is around 1.0529, EURCHF 0.9301 and EURGBP 0.8243.
- APAC equities are mixed with the Hang Seng down 0.2%, CSI 300 flat and S&P e-mini up 0.1% and KOSPI +0.6%. Oil prices are higher with WTI +0.6% to $69.00/bbl. Copper is up 0.9% and iron ore is $105-106/t.
- November US CPI data is out later, which is expected to show headline ticking up to 2.7% y/y but core steady at 3.3% y/y. The Fed is currently forecast to cut rates 25bp on December 18. US November real earnings and federal budget balance are also out and the Bank of Canada decision is announced.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 11/12/2024 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 11/12/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 11/12/2024 | - | *** |  CN | Money Supply |
| 11/12/2024 | - | *** | CN | New Loans |
| 11/12/2024 | - | *** | CN | Social Financing |
| 11/12/2024 | 1330/0830 | *** | US | CPI |
| 11/12/2024 | 1330/0830 | * |  CA | Intl Investment Position |
| 11/12/2024 | 1445/0945 | *** | CA | Bank of Canada Policy Decision |
| 11/12/2024 | 1530/1030 | CA | BOC Governor Press Conference | |
| 11/12/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 11/12/2024 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 11/12/2024 | 1900/1400 | ** | US | Treasury Budget |
| 12/12/2024 | - |  EU | European Central Bank Meeting | |
| 12/12/2024 | - |  CH | Swiss National Bank Meeting | |
| 12/12/2024 | 0030/1130 | *** |  AU | Labor Force Survey |
| 12/12/2024 | 0700/0800 | *** |  SE | Inflation Report |
| 12/12/2024 | 0830/0930 | *** | CH | SNB PolicyRate |
| 12/12/2024 | 0830/0930 | *** | CH | SNB Interest Rate Decision |