Source: MNI - Market News/Bloomberg
UK
FINANCE (BBC): “The pound has fallen to its lowest level for nine months after UK 10-year borrowing costs surged to their highest level since the 2008 financial crisis when bank borrowing almost ground to a halt. Economists have warned the rising costs could lead to further tax rises or cuts to spending plans. The government said it would not say anything ahead of the official borrowing forecast from its independent forecaster due in March.”
JOBS (BBG): “Hiring by British businesses fell at its fastest pace in 16 months as managers brace for Labour’s tax hikes, according to a survey closely watched by the Bank of England.”
EU
ECB (MNI BRIEF): ECB interest rates should move towards their neutral rate by the summer, Bank of France Governor Francois Villeroy said tonight.
ECB (BBG): "Excessive concern about possible future inflation shocks can be harmful to the economy, European Central Bank Executive Board member Piero Cipollone told Corriere della Sera in an interview."
NATO (DW): “European NATO members would struggle to increase defense spending to 5% considering the high social welfare bill in the continent. But analysts say Trump's demand could be a negotiating tactic to reach a compromise.”
DEFENCE (BBC): “Germany and France have warned Donald Trump against threatening Greenland, after the US president-elect refused to rule out using military force to seize Denmark's autonomous territory.”
AUSTRIA (ECONOMIST): “Christian Stocker, the interim leader of Austria’s centre-right People’s Party, explained the assurances his party would require before joining a coalition with the hard-right Freedom Party. Those include “no dependence on the Russian Federation” and that government institutions remain “above party interests”.”
DENMARK (FRANCE24): “Danish Foreign Minister Lars Lokke Rasmussen has stated that Demark is 'open to dialogue' with the US on how the two countries can cooperate on the Arctic region, which includes the Danish-controlled Greenland.”
POLAND (POLITICO): “The Polish presidential election will take place on May 18, parliamentary speaker Szymon Hołownia announced Wednesday, adding that if there is a need for a second round, that will take place on June 1.”
ROMANIA (POLITICO): “Romania has set a date to rerun its presidential election after concerns of Russia’s “aggressive hybrid action” first time round, but there’s still a risk the result may be similar at the second attempt and see ultranationalist Călin Georgescu triumph. The new vote will take place on May 4, with a runoff planned two weeks later, on May 18.”
US.
FED (MNI BRIEF): Federal Reserve officials in December said it was near time to slow the pace of interest rate cuts, citing rising upside risks to inflation and elevated uncertainty over potential changes in trade and immigration policy from incoming Republican leadership, according to minutes of the meeting released Wednesday.
TECH (BBG): “President Joe Biden’s administration plans one additional round of restrictions on the export of artificial intelligence chips from the likes of Nvidia Corp. just days before leaving office, a final push in his effort to keep advanced technologies out of the hands of China and Russia.”
LABOUR (BBG): “A US dockworkers union reached a tentative deal on a new labor contract with a group of ocean carriers and terminal operators that, if ratified would avoid a shutdown of East and Gulf coast ports next week.”
OTHER
JAPAN (MNI BRIEF): Inflation-adjusted real wages, a barometer of household purchasing power, posted their fourth straight drop in November, down 0.3% vs. -0.4% in October, preliminary data released by the Ministry of Health, Labour and Welfare on Thursday showed.
CANADA (MNI INTERVIEW): BOC To Slash Rates If Trump Forces Tariffs.
AUSTRALIA (BBG): “Australian retail sales rose by less than expected in November despite pre-Christmas and Black Friday discounts, underscoring the cautious consumer mood and further bolstering the case for an interest rate cut next month.”
CHINA
INFLATION (MNI BRIEF): China's Consumer Price Index rose 0.1% y/y in December, slowing for the fourth straight month from November's 0.2% and reaching a nine month low, in line with market expectation, though core CPI continued to rebound to 0.4%, data from the National Bureau of Statistics showed Thursday.
YUAN (MNI BRIEF): The People’s Bank of China will issue CNY60 billion of offshore yuan-denominated bills in Hong Kong to shore up the currency which is under pressure due to U.S tariff concerns.
TRADE ( 21st Century Business Herald): “China’s exports are expected to maintain 3% growth in 2025 if the U.S. only imposes about 10% additional tariffs on Chinese goods, 21st Century Business Herald reported citing Lian Ping, director of China Chief Economists Forum.”
CAR SALES (YICAI): “China’s retail car sales reached 2.62 million vehicles in December, a rise of 11% y/y or 9% m/m, of which 1.38 million were electric vehicles, rising 46% y/y or 10% m/m, Yicai.com reported citing preliminary statistics by the China Automobile Dealers Association.”
CHINA MARKETS
MNI: PBOC Net Drains CNY20.7 Bln via OMO Thursday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY4.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY20.7 billion after offsetting the maturity of CNY24.8 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5658% at 10:01 am local time from the close of 1.6049% on Wednesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 48 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 Lower At 7.1886 Thurs; -2.34% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1886 on Thursday, compared with 7.1887 set on Wednesday. The fixing was estimated at 7.3373 by Bloomberg survey today.
MARKET DATA
UK DEC. BRC SHOP PRICE INDEX -1% Y/Y; EST. -0.4%; PRIOR -0.6%
AUSTRALIA NOV. RETAIL SALES +0.8% M/M; EST. +1.0%; PRIOR +0.5%
AUSTRALIA NOV. TRADE SURPLUS A$7.079B; EST. +A$5.550B; PRIOR A$5.670B
AUSTRALIA NOV. EXPORTS +4.8% M/M; PRIOR 3.5%
AUSTRALIA NOV. IMPORTS +1.7% M/M; PRIOR 0.0%
JAPAN NOV. LABOR CASH EARNINGS +3.0% Y/Y; EST. +2.7%; PRIOR +2.2%
JAPAN NOV. REAL CASH EARNINGS -0.3% Y/Y; EST. -0.6%; PRIOR -0.4%
JAPAN NOV. CASH WAGES FROM SAME SAMPLE +3.5% Y/Y; EST. +2.8%; PRIOR +2.9%
JAPAN NOV. SAME BASE REGULAR FULL-TIME PAY +2.8% Y/Y; EST. +2.8%; PRIOR +2.9%
JAPAN TOKYO DEC. OFFICE VACANCIES 4%; PRIOR 4.16%
CHINA DEC. CONSUMER PRICES +0.1% Y/Y; EST. +0.1%; PRIOR +0.2%
CHINA DEC. PRODUCER PRICES -2.3% Y/Y; EST. -2.4%; PRIOR -2.5%
MARKETS
US TSYS: Tsys Yields Edge Lower, 2s10s Holding Below 40bps
- Tsys yields have continued to grind lower throughout the Asian session, with yields now 2 to 2.6bps lower with slightly better buying seen through the belly of curves. There has been little in the way of headlines, although we did just see the highest demand for 30yr JGBs since 2020. The 10yr is trading -2.4bps at 4.665%, with the 2s10s curve holding just below 40bps at 39.860
- Futures are slightly higher, the FV having broken above the overnight highs, last +03¾ at 106-04¼ . TY is +05+ at 108-10, the trend condition is unchanged and remains bearish. This week’s fresh cycle low confirms a resumption of the downtrend. Price has traded through the 108-00 handle exposing 107-19+ next, a Fibonacci projection. Note too that moving average studies remain in a bear-mode position highlighting a dominant downtrend. Key short-term resistance is seen at 109-04+, the 20-day EMA.
JGBS: Cash Bonds Little Changed After Strong 30Y Auction
JGB futures are currently -2 versus settlement levels. After an initial spike lower following stronger-than-expected cash earnings, futures quickly reversed course and drifted higher into the lunch break. They reached new session highs in early afternoon trading following a strong 30-year auction. However, the move proved short-lived, with prices now back close to flat.
- Outside of the previously outlined cash earnings, there hasn't been much by way of domestic drivers to flag.
- Cash US tsys are 2-3bp richer in today’s Asia-Pac session. Reminder: Open outcry and CME Globex trading session for interest rate products will have an early close of 1300 ET and 1315ET, respectively on January 9, 2025.
- Cash JGBs are flat to 1bp cheaper across benchmarks. The benchmark 10-year yield is 0.9bp higher at 1.187% after setting a fresh cycle high of 1.19% today.
- The 30-year is dealing 0.2bp higher at 2.34% after today’s strong auction, which delivered the highest cover ratio for a 30-year auction since 2020.
- Swap rates are 2bps lower to 2bps higher, with a steepening bias.
- Tomorrow, the local calendar will see Household Spending, and Leading and Coincident Indices.
AUSSIE BONDS: Unchanged But At Session Highs, Early Close For US Tsys
ACGBs (YM +1.0& XM flat) are slightly richer and near Sydney session highs after Retail Sales undershot expectations.
- November retail sales rose 0.8% m/m boosted by Black Friday sales, the eighth straight monthly increase. The annual rate eased to 3.0% y/y from 3.5% y/y but continues to signal a pickup in spending in H2 2024.
- Cash US tsys are 2-3bp richening in cash US tsys in today’s Asia-Pac session. Reminder: Open outcry and CME Globex trading session for interest rate products will have an early close of 1300 ET and 1315ET, respectively on January 9, 2025.
- Cash ACGBs are flat to 1bp richer with the AU-US 10-year yield differential at -17bps.
- Swap rates are 1-2bps lower, with EFPs slightly tighter.
- The bills strip has twist-flattened, with pricing -1 to +3.
- RBA-dated OIS pricing is flat to 3bps softer across meetings today and is 2-6bps softer compared to pre-CPI levels from yesterday. A 25bp rate cut is more than fully priced for April (120%), with the probability of a February cut rising to 72% (based on an effective cash rate of 4.34%).
- Tomorrow, the local calendar will see Household Spending data.
- AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.
BONDS: NZGBS: Slightly Richer As Early Cheapening Reversed
NZGBs closed 1-3bps richer, with a steeper 2/10 curve, after dealing 3bps cheaper early. With the local calendar empty, price swings can be traced back to a 2-3bp richening in cash US tsys in today’s Asia-Pac session.
- Reminder: Open outcry and CME Globex trading session for interest rate products will have an early close of 1300 ET and 1315ET, respectively on January 9, 2025. Sole US data today: Challenger Job Cuts at 0730ET; Several Fed speakers throughout the day.
- Swap rates are 1-3bps higher.
- On a relative basis, NZGBs underperformed slightly with the NZ-US and NZ-AU 10-year yield differentials ~1bp wider.
- Swap rates closed 1-3bps lower, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed flat to 4bps softer. 51bps of easing is priced for February, with a cumulative 129bps by November 2025.
- The local calendar is empty tomorrow. The next data release is Monday, with Building Permits and Filled Jobs on tap.
FOREX: Yen Outperforms Amid Lower Yields/Equities, AUD/USD Back Sub 0.6200
Yen has outperformed in the G10 space so far in Thursday trade. Trends elsewhere are biased in favor of the USD, particularly against AUD and NZD. The BBDXY index is little changed though, last near 1311.4.
- USD/JPY is back sub 158.00, last near 157.80, around session lows and 0.35% stronger in yen terms. Earlier we had stronger than labor earnings data, although the initial reaction for USD/JPY was fairly muted.
- Cross asset supports have been evident though, with US yields a little over 2bps softer across the Tsy benchmarks. US equity futures are lower as well, after headlines crossed earlier that the Biden administration would curb chip exports further. Regional equity markets are also mostly softer.
- AUD/USD is testing under 0.6200, although is still above intra-session lows from Wednesday at 0.6188. We had retail sales slightly below expectations (+0.80%, versus +1.% forecast), while the trade surplus was higher than forecast. Market pricing for an RBA cut at the Feb meeting is just over 70%, supported after yesterday's slower core CPI print and retail sales today. NZD/USD has fallen in sympathy with the A$, off by 0.20%, last under 0.5600.
- AUD/JPY is back sub 98.00, but still above recent lows around the 97.00 level.
- EUR/USD is down slightly, but holding above 1.0300 at this stage.
- GBP/USD continues to soften, last near 1.2330/35, which is still above lows from Wednesday, but downside focus remain in play for the pair. 2024 lows just under 1.2300 aren't too far away.
- Later the Fed’s Harker, Collins, Barkin, Schmid and Bowman speak. US December Challenger job cuts, euro November retail sales, German November trade & IP print.
EQUITIES: China & Hong Kong Equities Mixed, China CPI Inline With Expectations
Chinese & Hong Kong markets are mixed today, as the market digests CPI data which highlighted worsening deflationary pressures. While Chinese policies are seen as nearing a potential bottoming-out phase, global investors remain cautious, favoring US equities. Additionally, expanding US restrictions on AI chip exports may weigh on sentiment, as they could limit access to advanced technologies crucial for China's tech sector.
- China's CPI slowed to 0.1% in December, marking the fourth consecutive month of deceleration and highlighting persistent deflationary pressures, with factory prices falling for the 27th month. While core CPI rose to 0.4%, the highest since July, weak price growth remains a concern for policymakers aiming to boost domestic demand and prevent a deflationary spiral.
- Economists warn that despite government efforts like subsidies and potential monetary easing, such as rate and RRR cuts, challenges persist in shifting sentiment and sustaining growth. The subdued inflation adds urgency to Beijing's push for targeted stimulus to revive consumption and investment.
- Overall markets are relatively subdued today with most sectors trading in narrow ranges. The HSI is 0.40% higher, the Mainland Property Index is +0.35%, while HS Tech Index is 0.50% higher. In Mainland China equities the CSI 300 is flat, CSI 300 Tech is 1% higher.
Equities Lower As Market Remains Cautious Ahead Of US Jobs
Asian shares declined amid caution ahead of the US jobs report and a market holiday. Japanese and Australian stocks fell, while Chinese equities fluctuated after data highlighted worsening deflationary pressures, casting doubt on the effectiveness of Beijing's stimulus. Weak retail sales data in Australia pressured the AUD lower, fueling rate cut expectations, while strong wage growth in Japan supported the yen and raised speculation of a BOJ rate hike. Semiconductor stocks were flat despite news of potential US export restrictions on AI chips, with Nvidia dipping in after-hours trading. Investors remain focused on Friday’s US payrolls report, which could shape Federal Reserve policy expectations.
- Foreign Investors have been better buyers of South Korea equities today, with a net inflow of $240m, with the majority of those flows heading into Tech stocks.
- APAC markets: Japan's Nikkei is -1.40%, TOPIX -1.45%, Hong Kong's HSI +0.10%, China's CSI 300 is flat, Taiwan's TAIEX is -0.95%, South Korea's KOSPI is -0.10%, Australia's ASX200 -0.40% and New Zealand's NZX 50 is -0.75%
- US Equities will be closed tonight to honor former US President Jimmy Carter, US equity futures are slightly lower today with S&P 500 Eminis and Nasdaq Eminis both -0.27%
Oil Off Intraday Lows, Significant Uncertainty Around Outlook
Oil prices continued declining during APAC trading today pressured by another very low China inflation print after falling over a percent on Wednesday. They are off their intraday lows now. WTI is down 0.2% to $73.16/bbl after falling to $72.84. Brent is also 0.2% lower at $76.00 following a trough of $75.68. The USD index is down 0.1%.
- China’s December CPI inflation eased further towards zero at only +0.1% y/y after 0.2% the previous month. The PPI improved slightly falling 2.3% y/y after -2.5%.
- 2025 has been widely forecast to have an oil surplus as China demand stays weak and non-OPEC output rises but there is significant uncertainty coming from the new US administration’s energy and sanctions policies. The next few months may provide clarity on this. Demand for Russian and Iranian oil seems to be impacted by current US sanctions but there is a significant chance that measures against Iran will be tightened substantially under President-elect Trump.
- Tariffs against Canada also remain a significant uncertainty. It is a large oil exporter to the US with the Midwestern refineries geared for the heavy crude it ships.
- The EIA reported US inventories fell 959k barrels last week, the seventh consecutive weekly decline, but product stocks continued to rise with gasoline up 6.33mn and distillate 6.07mn. Refinery utilisation rose 0.6pp to 93.3%.
- Later the Fed’s Harker, Collins, Barkin, Schmid and Bowman speak. US December Challenger job cuts, euro November retail sales, German November trade & IP print.
GOLD: Holding Recent Gains Ahead Of Key US Data
Gold is tracking near $2658.5 in latest dealings, little changed in Thursday trade so far. This is holding Wednesday's +0.50% gain which followed Tuesday's similar rise, which is keeping bullion in a modest uptrend. Wednesday highs were close to $2670, fresh highs since Dec 17 last year. Greater upside focus is likely to rest on a retest of the $2700 level. Downside support has been evident around the 100-day MA, near $2629.5.
- Gold has outperformed the elevated USD backdrop, although some slowing in the rise of US yields is likely helping (nominal yields have eased today). A further addition by China its gold reserves is another positive structural factor.
- The key event risk is likely to rest with Friday's NFP print in the US.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 09/01/2025 | 0700/0800 | ** |  DE | Trade Balance |
| 09/01/2025 | 0700/0800 | ** | DE | Industrial Production |
| 09/01/2025 | 0900/1000 | *** | DE | North Rhine Westphalia CPI |
| 09/01/2025 | 0930/0930 |  GB | Decision Maker Panel data | |
| 09/01/2025 | 1000/1100 | ** |  EU | Retail Sales |
| 09/01/2025 | 1400/0900 |  US | Philly Fed's Pat Hrker | |
| 09/01/2025 | 1405/0905 | US | Fed's Collins | |
| 09/01/2025 | 1600/1600 | GB | BOE's Breeden Speech at University of Edinburgh | |
| 09/01/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 09/01/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 09/01/2025 | 1745/1245 | US | Fed's Barkin | |
| 09/01/2025 | 1830/1330 | US | Fed's Schmid | |
| 09/01/2025 | 1835/1335 | US | Fed Gov Bowman | |
| 10/01/2025 | 2330/0830 | ** |  JP | Household spending |
| 10/01/2025 | 0645/0745 | ** |  CH | Unemployment |
| 10/01/2025 | 0700/0800 | *** |  NO | CPI Norway |
| 10/01/2025 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 10/01/2025 | 0745/0845 | * |  FR | Industrial Production |
| 10/01/2025 | 0745/0845 | ** | FR | Consumer Spending |
| 10/01/2025 | 0800/0900 | ** |  ES | Industrial Production |
| 10/01/2025 | 0900/1000 | * |  IT | Retail Sales |
| 10/01/2025 | 1330/0830 | * |  CA | Building Permits |
| 10/01/2025 | 1330/0830 | *** | CA | Labour Force Survey |
| 10/01/2025 | 1330/0830 | *** | US | Employment Report |
| 10/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |