Source: MNI - Market News/Bloomberg
UK
EU (POLITICO): “Brussels will demand the U.K. to accept its court, no changes to the access of EU fishermen in British waters and a youth mobility program in exchange for discussing new terms of the trade deal between the two sides, according to a report in The Times.”
TRADE (RTRS): “Britain officially became the 12th member of a trans-Pacific trade pact which includes Japan, Australia and Canada on Sunday as it seeks to deepen ties in the region and build its global trade links after leaving the European Union.”
BUSINESS (BBC): “The sale of Royal Mail's parent company to a Czech billionaire has been approved by the government. The £3.6 billion takeover by Daniel Kretinsky's EP Group will be announced on Monday morning, the BBC understands.”
GOVERNMENT (BBC): “District councils could be abolished and more elected mayors introduced across England under new plans for a major redesign of local government. Ministers are set to publish a paper on Monday outlining plans for mergers in areas where there are currently two tiers of local authority - smaller district and larger county councils - in a bid to streamline services.”
MIDDLE EAST (BBC): “UK Foreign Secretary David Lammy has said the British government has had "diplomatic contact" with the Syrian rebel group that toppled the Assad regime. Lammy's remarks come as the government announced a £50m humanitarian aid package for vulnerable Syrians, including refugees in the region.”
EU
FRANCE (BBG): “Moody’s Ratings cut France’s credit grade, heaping pressure on the new government to bring a ballooning deficit under control after far-right leader Marine Le Pen toppled the previous prime minister over a budget dispute.”
FRANCE (BBG): “ France’s Prime Minister Francois Bayrou will meet with far-right leader Marine Le Pen on Monday, kicking off an effort to form a government that can push a budget through a divided Parliament.”
FRANCE (BBC): “Centrist leader François Bayrou has become France's latest prime minister, chosen by President Emmanuel Macron in a bid to end months of political turmoil. Bayrou, a 73-year-old mayor from the south-west who leads the MoDem party, said he was fully aware of the "Himalayan" task facing France, and he vowed to "hide nothing, neglect nothing and leave nothing aside".”
GERMANY (POLITICO): “Monday’s vote of confidence in Chancellor Olaf Scholz in the German parliament, which he'll almost certainly lose, is just the latest step in a process that started in early November and culminates in a snap election on Feb. 23.”
ECB (BBG): “The European Central Bank should lower interest rates further but probably won’t need to take them to levels that would stimulate economic expansion, according to Governing Council member Martins Kazaks.”
EU (POLITICO): “Italian Prime Minister Giorgia Meloni is stepping down as president of the European Conservatives and Reformists (ECR), the right-wing group in the European Parliament that is increasingly calling the shots in Brussels. Former Polish Prime Minister Mateusz Morawiecki is expected to take over.”
IRELAND (BBC): “Israel will close its embassy in Dublin over "the extreme anti-Israel policies of the Irish government", its foreign minister has said. Gideon Saar said the Republic of Ireland had crossed "every red line".”
ENERGY (POLITICO): “Slovakian Prime Minister Robert Fico said his government is engaged in "very intense" negotiations over natural-gas supplies for next year, including on the transit of the fuel through Ukrainian territory.”
NATO (ECONOMIST): “Sir Keir Starmer, Britain’s prime minister, joins leaders of other north European countries in Tallinn, Estonia, on Monday to discuss the future of the Joint Expeditionary Force.”
US
FED (MNI FED WATCH): The Federal Reserve is expected to close out the year with another quarter-point interest rate reduction Wednesday and signal further cuts to come, though at a slower pace and with more caution amid a slew of new uncertainties.
BITCOIN (BBG): “Bitcoin climbed to a record high, extending a rally sparked by President-elect Donald Trump’s support for digital assets and his plan to turn the US into the dominant force in the sector.”
OTHER
MIDDLE EAST (RTRS): “Israel agreed on Sunday to double its population on the occupied Golan Heights while saying threats from Syria remained despite the moderate tone of rebel leaders who ousted President Bashar al-Assad a week ago.”
JAPAN (BBG): “The Bank of Japan is set to discuss its rate hike path at this week’s policy meeting, with officials holding the view that there is limited urgency to act even though the next increase in borrowing costs is coming closer.”
JAPAN (MNI BOJ WATCH): The Bank of Japan board is likely to keep the policy interest rate at 0.25% when it meets over Dec 18-19 as policymakers choose a more cautious path and see no clear benefit to a rate hike this month amid heightened uncertainties.
SOUTH KOREA (BBG): ‘The leader of South Korea’s ruling party said he’s stepping down following mounting calls for his resignation, after President Yoon Suk Yeol was impeached over the weekend for his brief martial-law decree.”
AUSTRALIA (MNI BRIEF): Australian Treasurer Jim Chalmer has appointed Australian National University Professor Renee Fry-McKibbin and ex-Bendigo and Adelaide Bank boss Marnie Baker to the Reserve Bank of Australia’s new monetary policy board.
CHINA
CONSUMPTION (MNI BRIEF): China's consumption slowed unexpectedly in November despite the "Double 11" online shopping festival, while production and investment performance remained mediocre, data released by the National Bureau of Statistics on Monday showed.
CONSUMPTION (CCTV): “China will look to expand domestic demand especially consumption as a long-term strategic move while continuing to deepen supply-side structural reforms to improve supply, CCTV News reported citing Han Wenxiu, deputy director of the Office of the Central Financial and Economic Affairs Commission.”
MARKET SUPERVISION (YICAI): “China's top securities watchdog said it will strengthen joint supervision of domestic and foreign markets, on- and off-sites markets, and futures and spot markets, as well as increase monitoring of securities margin trading, over-the-counter derivatives and quantitative trading, said China Securities Regulatory Commission in a meeting following the Central Economic Work Conference last week, Yicai.com reported.”
POLICY (21ST CENTURY BUSINESS HERALD/BBG): “China will cut interest rates and the reserve requirement ratio in a timely manner next year, the 21st Century Business Herald reported, citing Wang Xin, director of the research bureau under the People’s Bank of China.”
HOUSE PRICES (BBG): “China’s home-price declines eased for a third month in November, suggesting values are beginning to stabilize as policymakers step up efforts to end the property slump.”
CHINA MARKETS
MNI: PBOC Net Injects CNY706 Bln via OMO Monday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY753.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY706 billion after offsetting the maturity of CNY47.1 billion. There is another CNY1.45 trillion 1Y MLF mature today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6354% at 09:26 am local time from the close of 1.6887% on Friday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 50 on Friday, compared with the close of 51 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Higher At 7.1882 Mon; -1.32% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1882 on Monday, compared with 7.1876 set on Friday. The fixing was estimated at 7.2785 by Bloomberg survey today.
MARKET DATA
UK DEC. RIGHTMOVE HOUSE PRICES -1.7% M/M; PRIOR -1.4%
UK DEC. RIGHTMOVE HOUSE PRICES +1.4% Y/Y; PRIOR +1.2%
AUSTRALIA S&P GLOBAL DEC. FLASH COMPOSITE PMI 49.9; NOV. 50.2
AUSTRALIA S&P GLOBAL DEC. FLASH MFG PMI 48.2; NOV. 49.4
AUSTRALIA S&P GLOBAL DEC. FLASH SERVICES PMI 50.4; NOV. 50.5
NEW ZEALAND NOV. BNZ SERVICES PSI 49.5; PRIOR 46.2
NEW ZEALAND NOV. FOOD PRICES -0.1% M/M; PRIOR -0.9%
JAPAN OCT. CORE MACHINE ORDERS +2.1% M/M; EST. +1.1%; PRIOR -0.7%
JAPAN OCT. CORE MACHINE ORDERS +5.6% Y/Y; EST. +1.0%; PRIOR -4.8%
JAPAN JIBUN BANK DEC. FLASH MFG PMI 49.5; NOV. 49.0
JAPAN JIBUN BANK DEC. FLASH SERVICES PMI 51.4; NOV. 50.5
JAPAN JIBUN BANK DEC. FLASH COMPOSITE PMI 50.8; NOV. 50.1
JAPAN TERTIARY INDUSTRY INDEX OCT. +0.3% M/M; EST. -0.1%; PRIOR -0.1%
CHINA NOV. NEW HOME PRICES -0.20% M/M; PRIOR +0.51%
CHINA NOV. EXISTING HOME PRICES -0.35% M/M; PRIOR -0.48%
CHINA NOV. RETAIL SALES +3.0% Y/Y; EST. +5.0%; PRIOR +4.8%
CHINA JAN.-NOV. RETAIL SALES +3.5% Y/Y; EST. 3.6%; PRIOR +3.5%
CHINA NOV. INDUSTRIAL OUTPUT +5.4% Y/Y; EST. +5.4%; PRIOR +5.3%
CHINA JAN.-NOV. INDUSTRIAL OUTPUT +5.8% Y/Y; EST. 5.7%; PRIOR +5.8%
CHINA JAN.-NOV. FIXED INVESTMENT +3.3% Y/Y; EST. +3.5%; PRIOR +3.4%
CHINA JAN.-NOV. PROPERTY DEV. INVESTMENT -10.4% Y/Y; PRIOR -10.3%
CHINA JAN.-NOV. RESIDENTIAL PROPERTY SALES -20.0% Y/Y; PRIOR -22.0%
CHINA END-NOV. SURVEYED JOBLESS RATE 5.0%; EST. 5.0%; PRIOR 5.0%
SOUTH KOREA MONEY SUPPLY L OCT. +0.4% M/M; PRIOR +0.7%
SOUTH KOREA MONEY SUPPLY M2 OCT. +1.0% M/M; PRIOR +0.2%
MARKETS
US TSYS: Tsys Futures Edge Slightly Higher Following Last Weeks Sell-Off
- Tsys futures are a touch higher today, although ranges have been narrow, volumes have also been below recent averages. TU -00⅛ at 102-28⅛, while TY is trading +01+ at 109-29+, just off initial support at 109-26 (Low Dec 13)
- Earlier, there was a large TY put seller at 0'28 x10,000.
- Cash tsys yields are -1bps lower today, with the 2yr -1.1bps at 4.234%, while the 10yr is -1bps at 4.387%. The 2s10s is hovering around recent highs at 15bps
- Investors will be focused on tonight's December US preliminary Mfg and services PMI for signs on the health of the US economy, while eyes are also on the 10yr break-even inflation rate after it climbed the most in two months as rising oil prices posed upside risks to the cost of living.
- Hedge funds trimmed net short positions in ultra 10-year to ultra-long bond futures by $6.1m/DV01 in the week to Dec. 10, while remaining bearish on the front end, adding $3m/DV01 to 2-year note shorts. Asset managers were bullish on ultra 10-year notes, extending net longs by $2.8m/DV01 to a record high, but added $1.2m/DV01 to net shorts in SOFR futures. Meanwhile, hedge funds increased their SOFR futures net longs by $2.4m/DV01.
- Projected rate cuts into early 2025 look near steady to lower vs. this morning levels (*) as follows: Dec'24 cumulative -24.3bp (-23.7bp), Jan'25 -28.6bp (-29.6bp), Mar'25 -42.2bp (-43.9bp), May'25 -48.4bp (-50.5bp).
- Later we have Empire Manufacturing & S&P Global PMI, the Fed remains in blackout ahead of the FOMC decision later this week
JGBS: Yields Play Catch Up With Core Gains, Futures Still Above Recent Lows
JGB futures have shown more of a downside bias post the lunch time break. We were last 142.35, -.22 versus settlement levels. Lows so far in Dec have largely been in the 142.10/20 region, which haven't been tested so far today.
- US Tsy futures have ticked up, leaving JGB futures underperforming, but this follows last week's outperformance trend from JGBs. US moves in the 10yr space are also relatively modest.
- JGB yields have all ticked higher, with the back end of the curve slightly firmer in yield terms. The 10yr was last 1.066%, up 2.4bps. The 20-40yr tenors were up nearly 3bps.
- It is a similar backdrop in the swaps space, with the 20-30yr tenors closing in up on recent highs, both up nearly 5bps respectively.
- Earlier data was encouraging in terms of higher core machine orders, while the PMIs rose, although manufacturing is still sub the 50.0 expansion/contraction point.
- Tomorrow the data calendar is quiet but we do have 20yr supply.
BONDS: ACGBs Trade Cheaper, Chalmers Announces New RBA Board Structure
Similar to NZGBs, Aussie bonds opened cheaper and have since traded in narrow ranges throughout the session. Focus was on China were they had a flurry of economic data, however there was little reaction across asset classes to the mixed data, notably Retail Sales coming in a 3% vs expectations of 5%.
- Earlier, Chalmers announced the The RBA's new governance structure, effective from March 2025, introduces two boards: one for monetary policy and one for governance. The monetary policy board will include two new members, Professor Fry-McKibbin, a monetary policy expert, and former Bendigo Bank head Baker, alongside existing members Harper, Watkins, Ross, Hewson, and key officials like Governor Bullock. The governance board will feature Schwartz as deputy chair and new appointees including Westacott, Gilbert, Thodey, and Dave.
- ACGBs have traded in narrow ranges today, yields are currently 1.9bps to 4.6bps cheaper. The 2yr is +1.9bps at 3.912% and trade about 12bps cheaper over the past three sessions, while the 10yr is +2.3bps at 4.309%, The 2s10s is +0.5bps at 38.260
- ACGB futures are currently YM -2.6, VTA -2.0, XM -2.8
- Swap curves have flattened, short-end is flat, while the belly to long end is trading -1 to 3bps
- Bill strip is -1 to -2
- RBA-date OIS pricing is little changed today for the Feb meeting, with 13bps of cuts price. The market is pricing in a 90% chance of a 25bps cut for the April meeting, and 42bps of cut priced for May. Looking out to November 2025 the market is currently pricing in 73bps of cumulative cuts
- Tomorrow we have Westpac Consumer Confidence, with little else on the calendar for the rest of the year.
BONDS: NZGBs Steady After Opening Cheaper, Economic Conditions "Challenging"
NZGBs opened the session cheaper and have moved very little throughout the session, yields have closed 1.5bps to 2.5bps cheaper, with the curve bear-steepening. It has been a slow session for APAC rates, with us tsys yields trading just off recent highs, after yields have risen for 5 straight session.
- New Zealand Prime Minister Christopher Luxon, speaking ahead of Tuesday’s Half-Year Economic and Fiscal Update, acknowledged challenging economic conditions but emphasized careful spending and fiscal adjustments to shorten deficits. He noted encouraging signs of economic improvement but stressed that more work remains to be done.
- Auckland Airport reported a 3% y/y increase in total passenger movements for November, reaching over 1.6m. International passengers rose 3% to 861,532, driven by a 21% surge on East and Southeast Asian routes, supported by increased Chinese tourism. Domestic passenger movements also grew 3% to 771,247. Ytd, total passenger movements increased 2% to nearly 7.7m.
- NZGBs curve has bear-steepened, the 2yr still hovers near yearly lows at 3.758%, up 1.5bps today, while the 10yr is +2.4bps at 4.430%. The 5s10s is 1bps higher at 48.30 and is nearing the yearly highs of 49bps, and almost 40bps steepening since August.
- The OIS market has cooled 2bps to 41bps of cuts priced in for the Feb meeting after hitting a 46bps on Dec 3th. There is a cumulative 107bps of cuts priced in through to October 2025.
- Tomorrow the NZ Treasury will release Half-Year Economic & Fiscal Update, followed by GDP on Thursday
FOREX: Yen Underperformance Against Higher Beta Plays Continues
The USD BBDXY index sits slightly lower for the session, with higher beta plays outperforming in the G10 space. The index was last near 1287.5, off close to 0.10% in the first part of Monday dealing.
- AUD and NZD have edged higher as the session progressed. AUD/USD last near 0.6380, NZD/USD to 0.5780, both up nearly 0.30%.
- Cross asset moves have been mixed, US equity futures are up a touch, while US yields are slightly lower, but aggregate moves are modest. Regional equity markets are mostly down, with focus on HK/China markets (losses are less than 1.0%).
- China data for Nov was mixed, but still mostly leaving question marks around the durability of the recovery, particularly from a consumption standpoint) post the retail sales miss).
- Earlier NZ monthly inflation data was consistent with further RBNZ easing, while PM Luxon noted the very challenging economic conditions at the moment (albeit with some signs of improvement).
- The Australian Treasurer announced two new members to the RBA monetary board (which will now be split into a monetary and governance board), but near term policy continuity is likely.
- USD/JPY has mostly drifted higher, getting too fresh multi week highs of 153.97, but we sit slightly lower now, last near 153.85/90. AUD/JPY is back to 98.15/20, also multi week highs. This continues last week's trend of yen underperforming higher beta play like AUD and NOK.
- Looking ahead, December PMIs for the US and Europe print. The ECB’s Lagarde, Schnabel and de Guindos speak as well as the BoC’s Macklem.
EQUITIES: Stocks Edge Lower Following China Data, Upcoming Central Bank Meetings
- Asian markets fell broadly today, weighed down by disappointing Chinese retail sales data, which grew just 3% y/y, missing expectations of 5%. China’s CSI 300 declined for a second consecutive session, dragging down Hong Kong stocks, while sentiment in Australia was hit by falling iron ore prices, pulling the ASX lower for a fifth straight day. South Korea's equities erased earlier gains following political uncertainty from President Yoon's impeachment, though analysts see limited long-term economic impact.
- The MSCI Asia gauge slipped as traders adopted a cautious stance ahead of a busy week of central bank decisions, including the Federal Reserve, Bank of Japan, and Bank of England. Meanwhile, the dollar steadied near recent highs, Asian currencies weakened to a two-week low, and Bitcoin reached a new record high amid continued optimism.
- Japanese equities were mostly lower today with investors remaining cautious ahead of key central bank meetings, including the Bank of Japan’s policy decision later this week. The TOPIX 0.20% lower, while the Nikkei is flat, exporters traded slightly better as the yen weakened a touch. While a rally on Friday for semiconductor stocks has done little to help Tokyo Electron which trades 0.50% lower.
- Taiwan's Taiex has pared earlier gains to trade flat as TSMC gives back some gains. There has been decent size selling of South Korean equities by foreign investors today, with a total outflow of $322m, the KOSPI is 0.36% lower, while the KOSDAQ is 0.67% higher.
- Australian mining stocks weighed on the ASX, with BHP, Rio Tinto, and Fortescue falling, while gold miners also declined as precious metal prices dipped, the ASX down 0.65%. New Zealand NZX 50 closed 0.34% higher.
OIL: Crude Slightly Lower On Lacklustre Risk Sentiment
After rising around 1.5% on Friday, oil prices are moderately lower during APAC trading today given lacklustre commodity and equity markets. WTI is down 0.5% to $70.96/bbl, just above the intraday low. Brent is 0.3% lower at $74.24/bbl after a low of $74.18. They were already trending lower before the mixed China data. The USD index is down 0.1%.
- China’s November IP growth was in line with expectations at 5.4% y/y but retail sales printed significantly lower at 3.0% y/y. Authorities have promised more stimulus to boost growth.
- Oil has found support from news that there may be tighter or increased sanctions on some oil producers. The US and its allies may reduce the Russian oil price cap according to Treasury Secretary Yellen. The EU is also looking at further sanctions on Russian oil. In addition, President-elect Trump is expected to tighten sanctions on Iran, which could reduce global output by 1mbd.
- The UAE has announced that it will reduce oil exports at the start of 2025 in an attempt to improve its quota compliance.
- Later preliminary December PMIs for the US and Europe print. The ECB’s Lagarde, Schnabel and de Guindos speak as well as the BoC’s Macklem. The key event for oil markets this week will be Wednesday’s FOMC decision. A 25bp cut is widely expected.
GOLD: US Rate Cut Expectations in Focus for Gold.
- As this week’s Federal Reserve Monetary decision appears a near certainty, yet markets are now looking through that to the risks for 2025.
- Rate cuts are good for gold as it reduces financing costs and for 2025 Gold traders are looking at the economic data in the US and questioning whether the three cuts in rates next year is appropriate.
- Having endured two down days in succession, Gold opened this morning in Asia at US$2,648.23 following a very heavy US close, moving only marginally higher to $2,653.86.
- The recent weakness will have little impact on what has been a strong year for gold prices, largely due to expectations for US Rates, yet also evidence that key Central Banks such as China’s PBOC are increasing their purchases of the precision commodity.
- The World Gold Council’s forecast for Gold in 2025 is for a modest increase and no doubt will face the ever present challenges from growth and inflation (and hence the FED) as well as geo-political upheaval.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 16/12/2024 | 0700/0800 |  EU | ECB's Lagarde press conference with Bank of Lithuania | |
| 16/12/2024 | 0815/0915 | ** |  FR | S&P Global Services PMI (p) |
| 16/12/2024 | 0815/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 16/12/2024 | 0815/0915 | EU | ECB's Lagarde speech on resilience amid geopolitical shift | |
| 16/12/2024 | 0830/0930 | ** |  DE | S&P Global Services PMI (p) |
| 16/12/2024 | 0830/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 16/12/2024 | 0830/0930 | EU | ECB's Lagarde in panel on pillars of resilience | |
| 16/12/2024 | 0845/0945 | EU | ECB's De Guindos remarks at Madrid Foro Empresarial | |
| 16/12/2024 | 0900/1000 | ** |  IT | Italy Final HICP |
| 16/12/2024 | 0900/1000 | ** | EU | S&P Global Services PMI (p) |
| 16/12/2024 | 0900/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 16/12/2024 | 0900/1000 | ** | EU | S&P Global Composite PMI (p) |
| 16/12/2024 | 0930/0930 | *** |  GB | S&P Global Manufacturing PMI flash |
| 16/12/2024 | 0930/0930 | *** | GB | S&P Global Services PMI flash |
| 16/12/2024 | 0930/0930 | *** | GB | S&P Global Composite PMI flash |
| 16/12/2024 | - |  CA | Canada presents fiscal update, time TBD. | |
| 16/12/2024 | 1315/0815 | ** | CA | CMHC Housing Starts |
| 16/12/2024 | 1330/0830 | ** |  US | Empire State Manufacturing Survey |
| 16/12/2024 | 1400/0900 | * | CA | CREA Existing Home Sales |
| 16/12/2024 | 1445/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 16/12/2024 | 1445/0945 | *** | US | S&P Global Services Index (flash) |
| 16/12/2024 | 1630/1730 | EU | ECB's Schnabel speech at CEPR symposium | |
| 16/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 16/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 16/12/2024 | 2020/1520 | CA | BOC Governor Macklem speaks in Vancouver. | |
| 17/12/2024 | - | US | FOMC Meeting / S.E.P. | |
| 17/12/2024 | 0700/0700 | *** | GB | Labour Market Survey |
| 17/12/2024 | 0900/1000 | *** | DE | IFO Business Climate Index |
| 17/12/2024 | 1000/1100 | *** | DE | ZEW Current Conditions Index |
| 17/12/2024 | 1000/1100 | *** | DE | ZEW Current Expectations Index |
| 17/12/2024 | 1000/1100 | * | EU | Trade Balance |
| 17/12/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 17/12/2024 | 1000/1100 | EU | ECB's Elderson at ECB Banking Supervision conference | |
| 17/12/2024 | 1330/0830 | * | CA | International Canadian Transaction in Securities |
| 17/12/2024 | 1330/0830 | *** | CA | CPI |
| 17/12/2024 | 1330/0830 | *** | US | Retail Sales |
| 17/12/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |