MNI EUROPEAN OPEN: A$ & Local Yields Surge Following Jobs Data

MNI (SYDNEY) - EXECUTIVE SUMMARY

• TRUMP INVITES CHINA’S XI JINPING TO INAUGURATION, CBS SAYS - BBG 
• NOV US CPI LARGELY IN LINE; FED ON TRACK TO CUT - MNI BRIEF 
• ONTARIO TO CUT U.S. ENERGY FLOWS WHEN TARIFFS HIT - MNI BRIEF 
• AUSSIE LABOUR MARKET TIGHTENS, UNEMPLOYMENT AT 3.9% - MNI BRIEF 
• RATES HEADED ABOVE 14%, DESTINATION UNCLEAR - MNI EM BCB WATCH 

Fig. 1: AUD/USD Up With Local Yields Post Nov Jobs Data

Source: MNI - Market News/Bloomberg

UK

HOUSE PRICES (BBG): “RICS in London report the Nov. residential market survey results today. Forecast range 17% to 20% from 8 economists. House price balance at 25 in Nov. vs 16 last month, highest since September 2022.”

JOBS (BBG):  "Government ministers are planning to slash more than 10,000 jobs in the UK’s civil service, amid a cost-cutting drive aimed at freeing up cash for essential spending."  

EU

GERMANY (BBG): “German Chancellor Olaf Scholz filed a petition with the lower house of parliament requesting a confidence vote next Monday that will trigger a snap election in late February.” 

RUSSIA (BBG): “The Biden administration on Wednesday warned that Russia may fire another intermediate-range ballistic missile at Ukraine, after what Moscow said were strikes on its territory with US-supplied weapons.” 

US 

US/CHINA (BBG): “ US President-elect Donald Trump has invited Chinese President Xi Jinping to attend his inauguration next month, CBS reported, citing multiple sources.” 

INFLATION (MNI BRIEF):  U.S. CPI inflation accelerated slightly in November but largely met Wall Street expectations, keeping the Federal Reserve on track to cutting interest rates by another quarter point later this month. Headline CPI added 0.313% and core 0.308%, bringing the 12-month rate to 2.749% and 3.319%, respectively, according to the Bureau of Labor Statistics report Wednesday. 

FISCAL (MNI BRIEF): The U.S. government posted a USD366.8 billion budget deficit in November and has rang up a deficit of USD624.2 billion in the first two months of the fiscal year, the Treasury Department reported Wednesday. 

INFLATION (MNI INTERVIEW): US 2025 Inflation Likely Higher-Ex-Fed's Koenig

OTHER 

MIDDLE EAST (BBG): “Israel carried out more military operations in Syria on Wednesday while facing intensifying criticism from governments in the region.” 

CANADA/US (MNI BRIEF): Ontario Premier Doug Ford said Wednesday he plans to shut off energy exports to the U.S. if Donald Trump implements tariffs against Canada next month, the most strident threat of retaliation to date against the president-elect's proposed 25% levy. 

CANADA (MNI BRIEF): Former BOC Deputy Paul Beaudry said Wednesday he expects the policy interest rate to decline by another quarter or half point next year from the current 3.25%. The BOC cut by a half point for a second meeting Wednesday.

CANADA (MNI BRIEF): Bank of Canada Governor Tiff Macklem on Wednesday said officials will keep considering further cuts to borrowing costs, restoring some language he's used through parts of his loosening campaign, while underlining his new view that future moves will be more measured.

AUSTRALIA (MNI BRIEF): The unemployment rate tightened 20 basis points to 3.9% in November, 30bp better than expected, while 35,613 jobs were created, more than the 25,000 anticipated, data from the Australian Bureau of Statistics showed. 

JAPAN (MNI): The BOJ remains confident on its internal underlying CPI measure. On MNI Policy MainWire now. 

SOUTH KOREA (BBG): " South Korea’s President Yoon Suk Yeol said he would fight until the last minute to defend himself after accusing the opposition of trying to paralyze his administration." 

BRAZIL (MNI EM BCB WATCH): The Central Bank of Brazil indicated a further 200 basis points increase in its official Selic rate after a 100 basis-point hike to 12.25% Wednesday, though it did not specify whether 14.25% would be the terminal level of the cycle. 

CHINA 

YUAN (FINANCIAL NEWS): “The yuan will likely stabilise and then rise given the U.S. dollar’s weakening trend, China's economic improvement, and increasing foreign exchange settlement by year-end, the central-bank-run Financial News reported, citing experts.” 

PENSIONS (BBG): "China will expand its private pension program to the entire country, as the government grapples with retirement payout challenges due to the rapidly aging population." 

SMES (SECURITIES DAILY): “Officials have issued guidelines to increase SME access to equity, loan, insurance and guarantee financing, Securities Daily has reported.” 

CHINA MARKETS

MNI: PBOC Net Injects CNY28.8 Bln via OMO Thursday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY66.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY28.8 billion after offsetting the maturity of CNY37.3 billion today, according to Wind Information. 

• The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5980% at 09:42 am local time from the close of 1.7552% on Wednesday.
• The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 56 on Wednesday, compared with the close of 47 on Tuesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1854 Thurs; -1.13% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1854 on Thursday, compared with 7.1843 set on Wednesday. The fixing was estimated at 7.2639 by Bloomberg survey today.

MARKET DATA

NEW ZEALAND NOV CARD SPEDNING TOTAL M/M -0.1%; PRIOR 0.2% 
NEW ZEALAND NOV CARD SPEDNING RETAIL M/M 0.0%; PRIOR 0.7% 

AUSTRALIA NOV EMPLOYMENT CHANGE 35.6k; MEDIAN 25k; PRIOR 12.1k
AUSTRALIA NOV FULL TIME EMPLOYMENT CHANGE 52.6k; PRIOR 9.0k
AUSTRALIA NOV PART TIME EMPLOYMENT CHANGE -17k; PRIOR 3.2k 
AUSTRALIA NOV UNEMPLOYMENT RATE 3.9%; MEDIAN 4.2%; PRIOR 4.1%
AUSTRALIA NOV PARTICIPATION RATE 67.0%; MEDIAN 67.1%; PRIOR 67.1%

JAPAN NOV TOKYO AVG OFFICE VACANCIES 4.16%; PRIOR 4.48% 

UK NOV RICS HOUSE PRICE BALANCE 25%; MEDIAN 19%; PRIOR 16% 

MARKETS

US TSYS: Tsys Futures Edge Lower Ahead Of PPI & Jobless Claims

• Tsys futures have edged lower throughout the session, with most contracts breaking below Wednesday's lows. There hasn't been much in the way of headlines, while volumes have also been below recent averages, there has also been no notable trades to mention. TU is the best performing contract, trading -00+ at 103-01+, while TY trades -02 at 110-20, WN is trading -11 at 124.23
• Focus tonight will be on PPI numbers with consensus for m/m PPI to remain in line with the prior month at 0.2%.
• Cash tsys curve has continued the overnight moves, with the curve slightly steeper. Yields are 0.8bps to 1.2bps higher, with the 2yr  +0.8bps at 4.161%, while the 10yr is +1.2bps at 4.283%. The 2s10s is +0.336 at 11.914.
• Fed fund futures are currently pricing in 24.7bps of cuts next week, up from 21.5bps prior to CPI. Pricing has just been bought forward slightly, with rate cut pricing cooling 3-5bps further out, currently the market expects a cumulative 83.5bps of cuts through to December 2025.
• Tonight, we have PPI and Jobless claims. There will also be a 4w, 8w and a 30y auction.

JGBS: Futures Up From Earlier Lows, Recent Ranges Maintained, Tankan Tomorrow

JGB futures have drifted higher post the lunchtime break. We were last 142.93, -.04 compared to settlement levels. Earlier lows were at 142.79. Recent highs have been around 143.06, so we remain within recent ranges.  

• The US backdrop has been for weaker US Tsy futures, although aggregate moves haven't been large. Aussie bond futures slumped post the stronger Nov jobs report, but spillover was limited for JGBS.
• In the cash JGB space, yields have ticked down a touch as the session has progressed. The 10yr is back under 1.07%, while the 20-40yr tenors are off by 1-2bps. The 1yr yield is holding higher though, up 2bps to 0.46%.
• In the swap space, yields are holding higher, led by the 20-30yr tenors, but are away from best levels.
• Tomorrow, the main focus will be on the Tankan Q4 print. Dec hike odds are down noticeably from late Nov levels above 60%. We also have BoJ Rinban ops tomorrow. 

BONDS: ACGBs Yields Jump Following Strong Employment Data

Focus was on the stronger-than expected employment data today, which saw yields rise. Yield curves have bear-flattened slightly, with the 3yr underperforming across the curve.

• Australia's unemployment rate unexpectedly fell to 3.9% in November, defying forecasts and highlighting labor market resilience despite high interest rates. The stronger-than-expected jobs data, driven entirely by full-time employment gains (FT +52.6k, PT -17k), led markets to scale back the probability of a February rate cut from 74% to 50%.
• ACGBs were already on the back foot after US tsys yields rose 1-6.5bps overnight. The Aussie 2yr is trading +10.4bps at 3.886%, 3yr +11.3bps at 3.834%, while the 10yr is the best performing, trading +9.5bps at 4.277%. The 2s10s is -2bps at 37.66, while the 3s10s is -2.25bps at 43.20 erasing Wednesday's steepening move.
• ACGBS futures are currently YM -11.4 & XM -9.3
• Swaps are trading +8 to +12bps, with the short-end underperforming, curve has flattened.
• Bills strip is trading -2 to -10
• RBA-date OIS pricing has cooled 5-10bps, with the April meeting now pricing in just 24bps of cuts, down from 32bps of cuts prior to Employment. The first cut is priced in for May, with 43bps priced, while further out the curve there are 73bps of cumulative cuts priced by November.
• The AU-US 10yr spread is off monthly lows and now trades flat.
• There calendar is empty for tomorrow.

BONDS: NZGB Curve Bear-Steepens, 2yr Yield Holds Steady

NZGBs bear-steepened throughout the session with yields closing near session highs. The moves largely track those made overnight US tsys, while the stronger-than-expected AU employment data may have also contributed to higher yields.

• Data calendar locally was quiet with just card spending remaining flat in November, following a revised 0.7% increase in October. Total card spending declined 0.1% m/m after a revised 0.2% gain previously. Fuel outlet sales rose 1.3% m/m, while core sales edged up 0.1% m/m.
• We did have some bond auctions today with NZ$500m raised across three tenors. NZ$250m NZGB 0.25% 15 May 2028, saw a bid/cover ratio of 3.162, up from 2.45 prior with an average yield of 3.8120%. NZ$225m NZGB 4.50% 15 May 2035 saw a bid/cover lower than prior coming in at 2.11 vs 2.28, with a average yields of 4.4637 and finally we had NZ$25m 2.75% 15 Apr 2037 with a bid/cover of 3.72, up from 2.82 prior, with a average yield of 4.6445%.
• Earlier ANZ stated they expected New Zealand's economy to contract by 0.4% in Q3, exceeding the central bank's and ANZ's earlier projections of a 0.2% decline, reflecting the impact of prior rate hikes on activity. NZ GDP is due out On December 19th.
• NZGBs yields closed -0.2bps to +6.6bps with the curve bear-steepening. The 2yr closed -0.2bps at 3.711%, holding near yearly lows, while the 10yr closed +5.9bps 4.372%
• The RBNZ dated OIS was steady throughout the session with 43bps of cuts priced in for the Feb meeting, and a cumulative 109bps of cuts priced in through to October 2025.
• Tomorrow we have November BusinessNZ Manufacturing PMI data

FOREX: A$ Rebounds As Yields Surge Post Jobs Beat

The USD BBDXY index sits lower, last near 1283, off nearly 0.15% in Thursday trade so far. We remain comfortably within recent ranges for the index though. The biggest outperformer has been the A$, up over 0.70%, to be tracking in the 0.6415/20 region. 

• The A$ surged following the better than expected jobs data for Nov. The headline was better than forecast and was all driven by the full time component. The unemployment rate ticked down as well to 3.9%, against a 4.2% forecast.
• Local Australian government bond yields have surged across the curve, up around 10bps. RBA easing expectations have been trimmed for Feb next year, now back to 50/50 (per OIS off WIRP on BBG). Tues/Wed we were pricing in a 66% chance of a cut.
• For AUD/USD we are still some distance from the 20-day EMA, which is back around 0.6480/85.
• The other positive for the AUD has been higher China/HK equities, as the economic work conference in China wraps up. The market will be looking for any stimulus clues for before year end and into 2025.
• NZD/USD is up 0.40%, last near 0.5805/10. It has been dragged higher with AUD, although the AUD/NZD cross is still up to 1.1050 (lows at the start of the week were 1.0933).
• USD/JPY got to lows of 151.96, but sits back at 152.29 in latest dealing, still modestly stronger in yen terms for the session. AUD/JPY is back to 97.70/75, up 0.60% for the session. The better equity backdrop in the region is likely helping the cross.
• Looking ahead, the main focus will be on the ECB decision. A 25bps cut is expected. Before that we have the SNB outcome. In the US, we have the PPI and initial jobless claims.  

EQUITIES: China & HK Equities Jump As Policy Conference Wraps Up

Hong Kong and Chinese have rallied heading into the lunch break as investors awaited the conclusion of China’s economic work conference for insights on 2025 fiscal and monetary strategies. Retail stocks in China surged on news of voucher programs to boost consumption.

• Tech stocks are benefitting from a rally overnight in the US, with the NASDAQ closing 1.90% higher. The HSTech Index is currently 2.00% higher, with Tongcheng Travel up 8.50%, Trip.com up 4.35% and Bilibili is 5.20% higher. Elsewhere property stocks are trading higher, with the Mainland Property Index up 1.20%, while the HSI is up 1.45%
• China mainland equities are also trading well with all sectors in the green. The CSI 300 is up 0.85%, outperforming smaller-cap indices.
• The Chinese economic policy meeting is expected to wrap up shortly with investors hopeful for supportive measures that could reveal what measures Beijing might use next year to combat deflation and the impact of potentially higher US tariffs.
• The data calendar is light on for the rest of the week, with focus turning to Industrial Production, Retail Sales on Monday,

Equities Higher, Semiconductor Stocks Jump, Nikkei Tests 40,000

Asian equities are mostly higher today, led by gains in Japanese stocks with the Nikkei briefly breaking back above 40,000. The moves follow a surge in US equities overnight with the Nasdaq climbing 1.9% after Amazon & Meta hit new highs, while Broadcom jumped 6.5% after a report that the chipmaker was working with Apple on an AI deal. Locally, focus was on Australia's Employment numbers which showed a strong beat in Full time employment, with the unemployment rate falling to 3.9%, further hurting chances of a rate cut any time soon.

• South Korea President spoke earlier where he said he would fight to defend himself and accused the opposition of trying to paralyze parliament. There has been volatility in the local equity market today following consistent headlines out, surrounding the president, however we now trade toward session highs now, with the KOSPI  +0.90%, while the KOSDAQ is 0.50% higher.
• Japanese equities are benefitting from report that the BOJ is in no hurry to raise interest rates. The Nikkei briefly trading back above 40,000, we sit just below these levels now, although still trades up 1.30% for the session, while the TOPIX is 1% higher. Semiconductor stocks are the top performing sector today, although Tokyo Electron is off earlier highs, up just 0.60% the slight weakness could be on the back of headlines that the US plans to cap countries semiconductor access, although Advantest is trading up 4.85% near session best levels.
• Taiwan's Taiex is trading 0.90% higher today, with TSMC jumping 2.40%.
• Australian equities are slightly lower today following stronger-than-expected employment data. RBA-dated OIS cooled following the data, with the market now pricing in the first full cut in May. The ASX200 is trading 0.30% lower, with Industrials & Real Estate stocks the worst performing. The NZX50 is 0.55% lower after Fisher & Paykel fell 2.50%.

Oil Consolidates Gains Following US Sanctions News. 

• As President Biden approaches the end of his term, it appears that one of his last actions may be targeted at Russian oil.
• It is believed that Biden’s team are looking at further restrictions to impact the flow of Russian oil, a move that the President has avoided in the past for fear of a spike in energy costs.
• However, with the current OPEC+ oversupply issues, the market seems able to withstand possible sanctions should they come to pass.
• Prices did rise on the news with WTI steadily rising throughout the US trading day to break through the US$70/bl mark, closing at $70.29 where it has stayed at all day in Asian trading.
• Brent maintained a positive bias throughout the US trading day also reaching a high just prior to US close of US$73.75, before closing at $73.52.  It rose marginally through the Asian trading day to $73.59.
• OPEC+ released its forecasts for the full year 2024 and projections for next year for oil demand, with both seeing major downward revisions. 

Gold Prices Up on Steady US Inflation.  

• Gold’s good run continued overnight following the US inflation print firming up expectations for a rate cut.
• US consumer prices rose in line with expectations at +2.7% y/y, whilst moderately up from the prior month.
• Core CPI rose +0.3% MoM as expected.
• Markets reacted favourably to the data with the cut now almost 100% priced in versus only <90% as of start of the week.
• Starting the US trading day at US$2,694.25 gold rose steadily all day to close at $2,718.23.
• The supportive CPI is an additional positive factor for gold this week following news of China’s Central Bank – the PBOC – has resumed purchases of bullion.
• Gold was up +0.89% in price yesterday, marking the fourth consecutive day of positive returns and on track for a strong week. 

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
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
12/12/2024	-	***	CN	Money Supply
12/12/2024	-	***	CN	New Loans
12/12/2024	-	***	CN	Social Financing
12/12/2024	1315/1415	***	EU	ECB Deposit Rate
12/12/2024	1315/1415	***	EU	ECB Main Refi Rate
12/12/2024	1315/1415	***	EU	ECB Marginal Lending Rate
12/12/2024	1330/0830	***	US	Jobless Claims
12/12/2024	1330/0830	***	US	PPI
12/12/2024	1330/0830	*	CA	Building Permits
12/12/2024	1330/0830	*	CA	Household debt-to-income
12/12/2024	1330/0830	**	US	WASDE Weekly Import/Export
12/12/2024	1345/1445		EU	ECB Monetary Policy Press Conference
12/12/2024	1500/1000	*	US	Services Revenues
12/12/2024	1530/1030	**	US	Natural Gas Stocks
12/12/2024	1630/1130	**	US	US Bill 04 Week Treasury Auction Result
12/12/2024	1630/1130	*	US	US Bill 08 Week Treasury Auction Result
12/12/2024	1800/1300	***	US	US Treasury Auction Result for 30 Year Bond
13/12/2024	2350/0850	***	JP	Tankan
13/12/2024	0001/0001	**	GB	Gfk Monthly Consumer Confidence
13/12/2024	0430/1330	**	JP	Industrial Production
13/12/2024	0700/0800	**	SE	Unemployment
13/12/2024	0700/0700	**	GB	UK Monthly GDP
13/12/2024	0700/0700	**	GB	Index of Services
13/12/2024	0700/0700	***	GB	Index of Production
13/12/2024	0700/0700	**	GB	Output in the Construction Industry
13/12/2024	0700/0700	**	GB	Trade Balance
13/12/2024	0700/0800	**	DE	Trade Balance
13/12/2024	0745/0845	***	FR	HICP (f)
13/12/2024	0800/0900	***	ES	HICP (f)
13/12/2024	0930/0930	**	GB	Bank of England/Ipsos Inflation Attitudes Survey
13/12/2024	1000/1100	**	EU	Industrial Production
13/12/2024	1330/0830	**	US	Import/Export Price Index
13/12/2024	1330/0830	**	CA	Monthly Survey of Manufacturing
13/12/2024	1330/0830	**	CA	Wholesale Trade