Source: MNI - Market News/Bloomberg
UK
BOE (BBG): "Investors are increasingly betting on fewer interest-rate cuts by the Bank of England next year, putting them at odds with official guidance ahead of the central bank’s decision Thursday."
EU
GERMANY (POLITICO): “Italy’s second-largest bank, UniCredit, said Wednesday morning it had indirectly increased its stake in Commerzbank through derivatives to around 28 percent, reviving the prospect of an all-out takeover. Berlin is contemplating the use of executive powers to stall an Italian bid, according to a briefing note seen by POLITICO.”
FRANCE (POLITICO): “The French parliament on Wednesday adopted special legislation to make sure that the country is not paralyzed as of January in the absence of a budget for 2025. The so-called special law will allow the government to effectively carry over the 2024 budget into 2025, until the new government proposes a new budget plan for 2025 and the parliament approves it.”
ITALY (MNI): The Italian government is adjusting its targets and milestones for the NextGenerationEU programme, making them easier in order to secure swift approval for the remaining tranches of its EUR191 billion allocation, government and coalition sources told MNI.
TECH (BBG): “The EU’s European Commission has pressed Apple Inc. to further open up the iPhone operating system to rivals, prompting the company to complain about requests from Meta Platforms Inc. that it says will undermine privacy.”
UKRAINE (POLITICO): “Ukrainian President Volodymyr Zelenskyy arrived in Brussels on Wednesday to shore up support from European allies ahead of United States President-elect Donald Trump’s return to the White House.”
UKRAINE (DW): “Volodymyr Zelenskyy said he discussed with French President Emmanuel Macron the possibility of sending Western troops to Ukraine.”
UKRAINE (POLITICO): “Ukraine currently doesn’t have the military strength to retake all the territory Russia has occupied since 2014, Ukrainian President Volodymyr Zelenskyy told French daily Le Parisien on Wednesday.”
POLAND (POLITICO): “Poland's government will now have to approve any takeover of major media company TVN, which it fears is a target for investors from countries like Hungary, Russia and China.”
US
FED (MNI FED WATCH): The Federal Reserve has entered a new chapter in its monetary easing cycle where the bar for additional interest rate cuts has risen, particularly as inflation proves longer-lasting than expected, Fed Chair Jerome Powell said Wednesday.
FED (MNI): The Federal Reserve reduced interest rates by a quarter point as expected Wednesday but revised lower the number of cuts needed next year to just two from four at the September meeting as inflation projections were bumped significantly higher.
FED (MNI): The Federal Reserve is likely to consider using its framework review next year to provide more clarity on its objectives for carrying out bond purchases via quantitative easing, which at times have been used to support market functioning and at times to provide stimulus, former Fed officials and staff told MNI.
GOVERNMENT (BBG): “President-elect Donald Trump said he opposes a proposed funding bill and threatened to oust fellow Republicans if they accepted legislation that didn’t include his demands, increasing the likelihood of a government shutdown later this week.”
OTHER
JAPAN (MNI BRIEF): The Bank of Japan Board on Thursday decided 8-to-1 to keep the unsecured overnight call loan rate at 0.25%, increasing chances of a January hike after ascertaining wage data and the outlook for the U.S. economy.
JAPAN (MNI BRIEF): The Bank of Japan Board on Thursday repeated its policy stance of conducting monetary policy as appropriate to achieve its 2% target in response to developments in economic activity and prices, a statement released by the BOJ said.
NEW ZEALAND (MNI BRIEF): New Zealand’s economy contracted 1% over Q3, 80 basis points more than the market's and the Reserve Bank of New Zealand’s forecasts, Stats NZ data showed Thursday.
CHINA
FISCAL (YICAI): “Beijing should issue consumer coupons and fiscal subsidies to increase residents’ income and property earnings, expanding employment, and promoting the private economy, Yicai.com reported, citing Teng Tai, president at the Wanbo New Economic Research Institute.”
PROPERTY (SHANGHAI SECURITIES NEWS): “Nearly 10 cities in China, including Chongqing and Suzhou, have acquired over 10,000 unsold homes to increase affordable housing, Shanghai Securities News reported.”
YUAN (BBG): “China ramped up support for the currency via its daily reference rate after Federal Reserve’s caution over future interest rate cuts boosted the dollar and sent the offshore yuan to a fresh one-year low.”
LGFVs (BBG): “ Chinese local government financing vehicles are selling an unprecedented amount of offshore yuan bonds, skirting attempts made by Beijing to reduce their debt sales.”
CHINA MARKETS
MNI: PBOC Net Injects CNY14.5 Bln via OMO Thursday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY80.6 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY14.5 billion after offsetting the maturity of CNY66.1 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5000% at 09:25 am local time from the close of 1.8057% on Wednesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 45 on Wednesday, compared with the close of 49 on Tuesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Higher At 7.1911 Thurs; -2.12% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1911 on Thursday, compared with 7.1880 set on Wednesday. The fixing was estimated at 7.3143 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND Q3 GDP -1.0% Q/Q; EST. -0.2%; PRIOR -1.1%
NEW ZEALAND Q3 GDP -1.5% Y/Y; EST. -0.4%; PRIOR -0.5%
NEW ZEALAND DEC. ANZ BUSINESS CONFIDENCE 62.3; PRIOR 64.9
NEW ZEALAND DEC. ANZ BUSINESS ACTIVITY OUTLOOK 50.3; PRIOR 48.0
AUSTRALIA MI DEC. INFLATION EXPECTATIONS 4.2%; PRIOR 3.8%
MARKETS
US TSYS: Tsys Future Hold Steady Post Fed Sell-Off, GDP Later
- Tsys futures are little changed today, with ranges narrow. TU is +00⅛ at 102-20⅜ vs overnight lows of 102-19¼, while TY is -04 at 108-28+ vs overnight lows of 108-27.
- TY plunged through key support levels post the fed overnight, and briefly tested 108-28 (1.236 proj of the Oct 1 - 14 - 16 price swing)
- The Fed's hawkish move has caused sharp moves in pricing with just one 25bps rate cut in 2025 and low odds for a second. Fed fund futures are now pricing in a cumulative 33bps of cuts through to December 2025.
- Cash tsys have given back some of their gains, with yields now -0.5bps to +1.5bps, with the curve steepening. The 2yr yield is trading about 10bps higher for December, -0.5bps today at 4.348% remaining just below the November highs of 4.38%, while the 10yr has broken above the November highs, last +0.8bps at 4.522%, vs the yearly highs of 4.705%.
- Overnight, Powell emphasized renewed inflation concerns, signaling a shift in strategy as the Fed capped 2024 with a third consecutive rate cut. Despite recent reductions totaling 100bps, Powell acknowledged that inflation progress has stalled, delaying the timeline to reach the 2% target to 2027. The Fed scaled back expectations for rate cuts in 2025, with Powell stating that further reductions hinge on clearer inflation improvement.
- Later today we have GDP, Jobless Claims, Leading Index & Existing Home Sales
JGBS: Cheaper But Off Worst Levels After BOJ Decision
JGB futures remain weaker but well above morning lows after the BOJ decision, -24 compared to the settlement levels.
- The BOJ decided 8-to-1 to keep the unsecured overnight call loan rate at 0.25%, increasing chances of a January hike after ascertaining wage data and the outlook for the U.S. economy.
- Market players are focused on how BOJ Governor Kazuo Ueda refers to the outlook for monetary policy and the U.S. economy following the rate cut by the Federal Reserve at a post-meeting press conference.
- Today’s decision highlighted policymakers' reluctance to raise the policy rate.
- OIS pricing for today’s meeting was flat versus late October’s MPM, reflecting only an 8% probability of a 25bp rate hike. This marked a notable softening from the 50:50 chance priced in earlier this month. The next monetary meeting will be held on Jan. 23-24.
- Cash US tsys are flat to 2bps richer, with a steepening bias, in today’s Asia-Pac session after yesterday’s aggressive post-FOMC sell-off.
- Cash JGBs are 1-2bps cheaper across benchmarks, with a flattening bias. The benchmark 10-year yield is 0.7bp higher at 1.089% after making a fresh cycle high of 1.1130% earlier today.
- The swaps curve has bear-steepened, with rates flat to 5bps higher.
AUSSIE BONDS: Sharply Weaker As FOMC & Infl Exps Weigh
ACGBs (YM -14.0 & XM -13.0) are sharply weaker and at Sydney session lows.
- Following a negative lead from US tsys in the wake of yesterday’s hawkish FOMC statement, dot plot, and press conference, the local market extended its decline after today’s data. This move was driven by the Melbourne Institute’s measure of consumer inflation expectations, which rose to 4.2%, the highest level since September. This uptick follows a drop to 3.8% in November, marking the first time inflation expectations had fallen below 4% since August 2021.
- The Australian economy is expected to log an annual growth rate of 1.1% in 2024, down from a previous projection of 1.4%: ANZ. (per MT Newswires)
- Cash US tsys are slightly mixed, with a steepening bias, in today’s Asia-Pac session after yesterday’s aggressive post-FOMC sell-off.
- Cash ACGBs are 13bps cheaper with the AU-US 10-year yield differential at-11bps.
- Swap rates are 12-13bps higher.
- The bills strip is sharply cheaper, with pricing beyond the first contract (-4) at -9 to -15.
- RBA-dated OIS pricing is 1-11bps firmer, with late 2025 leading. A 25bp rate cut is still fully priced by April.
- Tomorrow, the local calendar will see Private Sector Credit data alongside the AOFM’s planned sale of A$700mn of the 2.25% 21 May 2028 bond.
BONDS: NZGBS: Twist-Steepener After Weak Q3 GDP
NZGBs closed showing a twist-steepener, with benchmark yields 7bps lower to 4bps higher, after today’s weak Q3 GDP print.
- NZ-US and NZ-AU 10-year yield differentials closed 8bp and 7bps tighter respectively, with the former at its lowest level since early 2021.
- Cash US tsys are slightly mixed, with a steepening bias, in today’s Asia-Pac session after yesterday’s aggressive post-FOMC sell-off.
- Q3 NZ GDP printed significantly below consensus, the RBNZ’s November forecast of -0.2% q/q and domestic banks' predictions of -0.4%. The production-based measure fell 1% q/q after a downwardly revised Q2 of -1.1%, leaving the annual rate 1.5% y/y lower.
- There are still Q3 CPI (January 22) and jobs/wages (February 5) to come, but with data like this another 50bp rate cut looks likely on February 19.
- However, the ANZ business survey continued to sound a more positive note with the outlook rising to 50.3 from 48.0 in December. Business confidence was down moderately to 62.3 from 64.9, but remains elevated.
- Swap rates closed with rates 6bps lower to 3bps higher.
- RBNZ dated OIS pricing closed 5-13bps softer across meetings, with May 2025 leading. 50bps of easing is priced for February, with 117bps by year-end 2025.
- Tomorrow, the local calendar will see ANZ Consumer Confidence and Trade Balance data.
FOREX: Yen Weakens Through 155.00 Post On Hold BoJ, Steadier Trends Elsewhere
G10 FX moves initially saw an extension of USD gains from Wednesday trade in the first part of Thursday dealing. AUD and NZD made fresh cycle lows, but sentiment has stabilized as the session progressed. The BoJ left rates on hold on expected, with USD/JPY breaking back above 155.00 and holding above this level since.
- Aggregate moves have been fairly modest though in the G10 space, after Wednesday's sharp USD rally as the Fed delivered a hawkish 25bps cut. The BBDXY was last 1301.5, little changed for the session.
- USD/JPY was supported on dips prior to the BoJ outcome and reached fresh highs of 155.44 post the decision (levels last seen on Nov 21). The BoJ decision left few surprises outside of a dissent from known hawkish board member Tamura (who was in favor of a 25bps hike).
- We now await Ueda's press conference in a few hours. Focus will be firmly on Q1 hiking risks and yen could weaken if Ueda doesn't sound hawkish enough.
- AUD/USD fell to fresh cycle lows under 0.6200 before recovering some ground, last near 0.6220/25. Inflation expectations edged up, but were down for Q4 as a whole.
- NZD/USD fell to fresh lows of 0.5608, with much weaker Q3 GDP weighing and raising odds of a further 50bps cut in early 2025. Business sentiment data from ANZ suggested an improved outlook into 2025 though.
- EUR/USD is slightly higher, last near 1.0380, but still within striking of recent lows (1.0335 in early Dec).
- Regional equities are down across the board, while US equity futures are close to flat. US yields were down in the first part of trade but sits back close to flat/slightly higher in latest dealings.
- Later US jobless claims, revised Q3 GDP, December Philly/Kansas Fed indices, November existing home sales and leading index. The BoE decision is announced but it is expected to be on hold.
EQUITIES: Markets Steady After Morning Plunge, BoJ Unchanged
- Asian markets tumbled on Thursday, with the MSCI Asia Pacific Index dropping 1.7%, marking its largest decline in over a month. The sell-off followed a "hawkish cut" by the Federal Reserve, which reduced its 2025 rate-cut expectations, citing persistent inflation concerns. Wall Street suffered a sharp sell-off, with the S&P 500 dropping 3% and the Nasdaq falling further after the Mag 7 Index dropped 3.35% led by a 8.30% drop from Tesla.
- US equity futures have found some support during the Asian session with Dow futures +0.25%, S&P 500 +0.15%, while Nasdaq futures are flat.
- Tech-heavy markets in South Korea (KOSPI -1.50%) and Taiwan (TAIEX -1.80%), alongside Australian equities (-1.90%), led regional losses, while declines in mainland China were muted on expectations of continued loose domestic policy.
- Chinese equities have performed the best across the Asian region today, however the CSI300 still trades 0.35% lower with losses in real estate, and consumer staples dragging the market into the red, Chinese tech stocks are trading higher. In Hong Kong, the HSI is 1% lower, with the Mainland Property Index 1.45% lower and the HSTech Index 1.35% lower.
- The BoJ held rates steady, weakening the yen and saw the Nikkei briefly pare earlier losses, however they were short live and the index remains 0.90% for the day, the TOPIX performing better down just 0.35%.
- Outside of the Fed & BoJ there has been little else driving the markets today. Equities markets remain well in the red, however they have held steady post the open.
OIL: Crude Moderately Lower As Fed Drives USD Strength
Oil prices are moderately lower during APAC trading today after closing Wednesday little changed. Brent is down 0.4% to $73.08/bbl after falling to $72.83, while WTI is 0.5% lower at $69.70 off the low of $69.43. The stronger USD is weighing on dollar-denominated crude but so far it is only a muted reaction (BBDXY is slightly higher today). The Fed projected fewer rate cuts in 2025, which may add to market worries about the demand outlook, especially continued weakness in China.
- Crude is lower this week as the non-OPEC supply outlook, soft China data, stronger USD and prospects of a Gaza ceasefire pressured prices. Whereas a US crude drawdown and expectations of tighter sanctions on Russia and Iran provided support. Given these ongoing factors, oil prices have been range trading since October.
- Fed Chair Powell said in the press conference that given recent easing, “our policy stance is now significantly less restrictive” and so the FOMC can “be more cautious as we consider further adjustments” to rates.
- EIA-reported oil inventories fell 934k barrels last week. US exports increased 1.8mn barrels, highest since July, signalling robust global demand. Gasoline stocks rose 2.35mn though, fifth consecutive weekly build, while distillate fell 3.18mn.
- Later US jobless claims, revised Q3 GDP, December Philly/Kansas Fed indices, November existing home sales and leading index. The BoE decision is announced but it is expected to be on hold.
- Rate cuts are good for Gold and last night’s cut, whilst watering down expectations for cuts in 2025, saw gold move aggressively lower.
- Having opened Wednesday at US$2,646.83, like a lot of markets gold traded sideways ahead of the Fed, but the move post the announcement saw gold fall to $2,585.35, a -1.85% decline back to levels it was in mid-November.
- It has rebounded somewhat in trading today and is back up to $2,607.60 in the afternoon session.
- The Feds quarterly forecasts showed that several voting members are now penciling in less cuts that what the market has priced resulting in bonds selling off, the USD up and gold down.
- The sell off does little to dent the overall performance of gold year to date, enjoying more than 20% appreciation.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 19/12/2024 | 0700/0800 | * |  DE | GFK Consumer Climate |
| 19/12/2024 | 0745/0845 | ** |  FR | Manufacturing Sentiment |
| 19/12/2024 | 0830/0930 | *** |  SE | Riksbank Interest Rate Decison |
| 19/12/2024 | 0900/1000 | *** |  NO | Norges Bank Rate Decision |
| 19/12/2024 | 0900/1000 | ** |  EU | EZ Current Account |
| 19/12/2024 | 1200/1200 | *** |  GB | Bank Of England Interest Rate |
| 19/12/2024 | 1200/1200 | GB | BOE MPS and Minutes | |
| 19/12/2024 | 1200/1200 | GB | BOE Agents' summary of business conditions | |
| 19/12/2024 | 1200/1200 | *** | GB | Bank Of England Interest Rate |
| 19/12/2024 | 1330/0830 | *** |  US | Jobless Claims |
| 19/12/2024 | 1330/0830 | *** | US | GDP |
| 19/12/2024 | 1330/0830 | * |  CA | Payroll employment |
| 19/12/2024 | 1330/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 19/12/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 19/12/2024 | 1500/1000 | *** | US | NAR existing home sales |
| 19/12/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 19/12/2024 | 1600/1100 | ** | US | Kansas City Fed Manufacturing Index |
| 19/12/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 19/12/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 19/12/2024 | 1800/1300 | ** | US | US Treasury Auction Result for TIPS 5 Year Note |
| 19/12/2024 | 1900/1400 | *** |  MX | Mexico Interest Rate |
| 19/12/2024 | 2100/1600 | ** | US | TICS |
| 20/12/2024 | 2330/0830 | *** |  JP | CPI |
| 20/12/2024 | 0700/0700 | *** | GB | Public Sector Finances |
| 20/12/2024 | 0700/0800 | ** | DE | PPI |
| 20/12/2024 | 0700/0800 | ** | SE | PPI |
| 20/12/2024 | 0700/0800 | ** | SE | Retail Sales |
| 20/12/2024 | 0700/0700 | *** | GB | Retail Sales |
| 20/12/2024 | 0745/0845 | ** | FR | PPI |
| 20/12/2024 | 0800/0900 | ** | SE | Economic Tendency Indicator |
| 20/12/2024 | 0900/1000 | ** |  IT | ISTAT Business Confidence |
| 20/12/2024 | 0900/1000 | ** | IT | ISTAT Consumer Confidence |
| 20/12/2024 | 1100/1200 | ** | IT | PPI |
| 20/12/2024 | 1100/1100 | ** | GB | CBI Distributive Trades |
| 20/12/2024 | 1330/0830 | *** | US | Personal Income and Consumption |
| 20/12/2024 | 1330/0830 | ** | CA | Retail Trade |
| 20/12/2024 | 1330/0830 | ** | CA | Retail Trade |
| 20/12/2024 | 1330/0830 | *** | US | Personal Income and Consumption |