Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY
- EU GRANTS UKRAINE MEMBERSHIP TALKS BUT CAN'T AGREE FINANCIAL AID - RTRS
- POLICY ON HOLD, WAGE-HIKE DATA INCOMING - MNI BOJ WATCH
- CHINA TO PURSUE MODERATE POLICY SUPPORT IN 2024 - MNI
- CHINA NOVEMBER RETAIL SALES AT SIX-MONTH HIGH - MNI BRIEF
- CHINA DEVELOPERS SURGE AFTER PROPERTY CURBS EASED IN MEGA CITIES - BBG
- UK CONSUMER CONFIDENCE RISES TO ITS HIGHEST IN ALMOST TWO YEARS - BBG
Fig. 1: Hong Kong Mainland Properties Index & CSI 300 Real Estate Index
Source: MNI - Market News/Bloomberg
U.K.
CONSUMER (BBG): UK consumer confidence edged higher in December as households looked forward to lower inflation and a slightly improved economy in 2024. The market research firm GfK Ltd. said its measure of sentiment increased 2 points to minus 22, the highest level since January 2022. The negative reading still means household confidence is decidedly shaky.
EUROPE
UKRAINE (RTRS): European Union leaders agreed to open membership talks with Ukraine even as it continues to fight Russia's invasion, but they could not agree on a 50 billion euro package of financial aid for Kyiv due to opposition from Hungary.
FISCAL (MNI): A last-ditch attempt to overhaul the European Union’s fiscal rules in time for parliamentary approval during the first half of next year looks to have an uncertain chance of success, with no agreement yet in a dispute between Germany and France over how to measure budget shortfalls under the EU’s Excessive Deficit Procedures, officials told MNI.
RUSSIA (BBG): European Union member states reached a tentative agreement Thursday on a 12th package of sanctions against Russia, according to people familiar with the matter, in a show of solidarity with Ukraine. The last remaining obstacles were technical objections from Austria, which agreed to back the deal Thursday before reversing course and reviving its hold, according to people familiar with the matter.
U.S.
US/CHINA (BBG): Treasury Secretary Janet Yellen said she plans to visit China again in 2024, seeking to deepen areas of cooperation and improve communication even as she vowed to continue confronting Beijing over national security concerns and human rights.
TECH (BBG): Top US regulators view artificial intelligence as a looming vulnerability for financial stability, underscoring Washington’s mounting concern over systemic dangers posed by the burgeoning technology.
JOBS (BBG): General Motors Co. is cutting more than 1,300 hourly jobs at a pair of plants in Michigan, less than a month after a new labor contract was ratified by its unionized workforce.
CORPORATE (BBG): Citigroup Inc. will shutter its municipal business, one of the most dramatic moves yet by Chief Executive Officer Jane Fraser as she seeks to squeeze better returns out of the Wall Street giant.
US/ISRAEL(RTRS): A U.S. security envoy had talks with Israel about shifting its strategy in Gaza toward surgical operations against Hamas from a broad ground campaign, and President Joe Biden appealed for civilian lives in the Palestinian territory to be saved.
POLITICS (BBG): The Senate will delay its holiday break and return to Washington next week to try to strike a deal on more US aid for Ukraine, Majority Leader Chuck Schumer announced Thursday. The prospects for both chambers passing Ukraine aid before the end of the year have dwindled, but the ongoing negotiations open the door to Senate passage next week. That would put pressure on the House, which has already left Washington until January, to act early next month.
OTHER
JAPAN (MNI BOJ WATCH): The Bank of Japan board will likely maintain its easy policy settings at the Dec 18-19 meeting, as inflation slows in line with October’s forecast and the board awaits further clarity on the strength of wage hikes in 2024, MNI understands.
JAPAN (RTRS): The Bank of Japan (BOJ) will begin to unwind its ultra-loose monetary settings as early as January, more than a fifth of economists in a Reuters poll said, heightening expectations the controversial policy era is near an end. At the same time, over 80% of economists are expecting the Japanese central bank to ditch negative interest rates by the end of next year, a key pillar of the accommodative monetary regime, the Dec. 8-14 poll showed.
SOUTH KOREA (YONHAP/BBG): Kim Tae-hyo, South Korea’s principal deputy national security adviser, raised the possibility of North Korea launching an ICBM this month, Yonhap News says, citing Kim as speaking to reporters in US.
CHINA
POLICY (MNI): China will implement more moderate and targeted fiscal and monetary policy in 2024 as it aims to maintain GDP at 5%, while limiting risk and cultivating new drivers of high-quality growth, policy advisors told MNI.
ECONOMY: (MNI BRIEF): China's consumption continued to accelerate to a six-month high in November, with retail sales climbing by 10.1% y/y, from 7.6%, but underperforming expectations for 12.8%, data released by the National Bureau of Statistics on Friday showed.
ECONOMY (BBG): China’s economic recovery remains patchy as industrial production beat expectations but retail sales fell short, putting more pressure on Beijing to roll out supportive policies to juice growth.
PROPERTY (BBG): China’s property stocks are advancing after the nation extended its easing of homebuying curbs to Beijing and Shanghai, with analysts saying the move will help boost demand.
MARKET REFORM (CSJ/BBG): China’s institutional investors expect more measures focused on “investment-side reform,” changes in the capital market’s basic rules and improvement in the quality of listed companies to be rolled out in 2024, China Securities Journal reports, citing analysts at brokerages.
CHINA MARKETS
MNI: PBOC Injects Net CNY800 Bln Via MLF Fri; Rates Unchanged
The People's Bank of China (PBOC) conducted CNY1.45 trillion via 1-year MLF and CNY50 billion via 7-day reverse repo on Friday, with the rates unchanged at 2.50% and 1.80%, respectively. Today's MLF has led to a net injection of CNY800 billion after offsetting the maturity of CNY650 billion, which marks the biggest daily injection on record. The reverse repo operation has led to a net drain of CNY147 billion reverse repos today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.7406% at 09:48 am local time from the close of 1.8239% on Thursday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 47 on Thursday, compared with the close of 46 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
PBOC Yuan Parity lower at 7.0957 Friday vs 7.1090 Thursday
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0957 on Friday, compared with 7.1090 set on Thursday. The fixing was estimated at 7.1178 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND NOV BUSINESSNZ MANUFACTURING PMI 46.7; PRIOR 42.9
AUSTRALIA DEC P JUDO BANK PMI MFG 47.8; PRIOR 47.7
AUSTRALIA DEC P JUDO BANK PMI SERVICES 47.6; PRIOR 46.0
AUSTRALIA DEC P JUDO BANK PMI COMPOSITE 47.4; PRIOR 46.2
UK DEC GFK CONSUMER CONFIDENCE -22; MEDIAN -22; PRIOR -24
JAPAN DEC P JIBUN BANK PMI MFG 47.7; PRIOR 48.3
JAPAN DEC P JIBUN BANK PMI SERVICES 52.0; PRIOR 50.8
JAPAN DEC P JIBUN BANK PMI COMPOSITE 50.4; PRIOR 49.6
CHINA DEC 15 1YR MLF RATE 2.5%; MEDIAN 2.5%; PRIOR 2.50%
CHINA DEC 15 1YR MLF VOLUME 1450BN; MEDIAN 975BN YUAN; PRIOR 1450BN YUAN
CHINA NOV NEW HOME PRICES M/M -0.37%: PRIOR -0.38%
CHINA NOV IP Y/Y 6.6%; MEDIAN 5.7%; PRIOR 4.6%
CHINA NOV IP YTD Y/Y 4.3%; MEDIAN 4.2%; PRIOR 4.1%
CHINA NOV RETAIL SALES Y/Y 10.1%; MEDIAN 12.5%; PRIOR 7.6%
CHINA NOV RETAIL SALES Y/Y YTD 7.2%; MEDIAN 7.4%; PRIOR 6.9%
CHINA NOV FIXED ASSETS EX RURAL YTD Y/Y 2.9%; MEDIAN 3.0%; PRIOR 2.9%
CHINA NOV PROPERTY INVESTMENT YTD Y/Y -9.4%; MEDIAN -9.5%; PRIOR -9.3%
CHINA NOV RESIDENTIAL PROPERTY SALES YTD Y/Y -4.3%; PRIOR -3.7%
CHINA NOV SURVEYED JOBLESS RATE 5.0%; MEDIAN 5.0%; PRIOR 5.0%
MARKETS
US TSYS: Profit Taking After A Massive Post-FOMC Rally
TYH4 is trading at 112-12+, -0-04 from NY closing levels.
- So far today, there has been no noteworthy news flow.
- Cash US tsys are sitting 3bps cheaper so far in the Asia-Pac session, with local participants possibly profit-taking following an assertive post-FOMC rally.
- Considering that the US STIR market has priced 130bps of easing by November 2024, compared to the dot plot median easing of 75bps for 2024, a cautious view towards the near-term outlook for the market probably makes sense.
- Later today the US calendar sees Empire Manufacturing, Industrial Production, Flash S&P Global US Manufacturing PMIs and TIC Flow data. Fed's Williams is also due to speak on CNBC.
JGBS: Cheaper Across The Curve, BOJ Policy Decision Next Tuesday
JGB futures are holding cheaper, -38 compared to the settlement levels, and marginally above the session’s worst level.
- There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Flash Jibun Bank PMIs. The Tertiary Industry Index has recently printed -0.8% m/m in October versus a +0.1% estimate and a revised -1.2% prior.
- Cash US tsys are sitting 3bps cheaper so far in the Asia-Pac session, with local participants possibly profit-taking following an assertive post-FOMC rally. Considering that the US STIR market has priced 130bps of easing by November 2024, compared to the dot plot median easing of 75bps for 2024, a cautious view towards the near-term outlook for the market probably makes sense.
- Cash JGBs are cheaper, with the futures-linked 7-year (3.5bps higher) underperforming. The benchmark 10-year yield is 2.7bps higher at 0.701%. The 20-year is 3.4bps higher at 1.437% versus yesterday’s pre-auction low of 1.36%.
- Swap rates are 1-4bps higher across maturities.
- On Monday, the local calendar is empty, ahead of the BOJ Policy Decision on Tuesday. While certain investors interpreted recent statements from BOJ officials as a sign of an imminent policy shift, we are inclined to view it as a step in the extended process of preparing for a seamless transition.
- The BOJ will also conduct Rinban operations covering 1- to 25-year JGBs on Monday.
AUSSIE BONDS: Cheaper, Light Calendar, Subdued Session, RBA Minutes On Tuesday
ACGBs (YMH4 -3.8 & XMH4 -0.9) are cheaper and near Sydney session lows after a subdued data-light local session. With US tsys paring their post-FOMC gains in today’s Asia-Pac session, local participants appear to have been content to sit on the sidelines. Considering that the market has priced 130bps of easing by November 2024, compared to the dot plot median easing of 75bps for 2024, a cautious view towards the near-term outlook for the market makes sense. Cash US tsys are currently dealing 3-4bps cheaper.
- There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Judo Bank Flash PMIs.
- Cash ACGBs have reversed early strength to be 1-4bps cheaper, with the 3/10 curve flatter and the AU-US 10-year yield differential 2bps wider at +19bps.
- Swap rates are 2-5bps higher, with EFPs tighter.
- The bills strip has cheapened, with pricing -4 to -6.
- RBA-dated OIS pricing is 2-6bps firmer across meetings, with 57bps of easing priced by Feb’25.
- The local calendar is empty on Monday, ahead of the RBA Minutes for the December Policy Meeting on Tuesday.
- The AOFM plans to provide further details on issuance plans (including any new planned bond lines) for the second half of 2023-24 on 5 January 2024.
NZGBS: Closed Little Changed, Narrow Ranges
NZGB benchmarks closed little changed after dealing in narrow ranges in today’s local session. Following a positive lead from US tsys overnight, which extended their post-FOMC rally, there has been a slight cheapening of 3-4 basis points in today's Asia-Pac session. Local participants may be engaging in profit-taking after the robust post-FOMC rally.
- There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined manufacturing PMI.
- Swap rates closed flat to 5bps higher, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed 1-4bps firmer across meetings. The market still has 100bps of easing priced by Nov’24.
- "We think it’s likely, absent any further surprises, that the RBNZ will revert to something like their August 2023 view that the OCR will remain at 5.5% until the latter part of 2024. We continue to see them as remaining much more cautious than markets on the prospects for lower rates. All going well, we can see a path to where they get that confidence by the time of the August 2024 Monetary Policy Statement.": Westpac
- On Monday, the local calendar sees Westpac Consumer Confidence and the Performance Services Index.
FOREX: Dollar Upticks Sold, A$ Outperforms Modestly
Dollar upticks have generally been sold through Friday's Asia Pac session. The BBDXY last tracked just under 1221, which is right on Thursday lows for the index. Earlier highs were at 1223.60.
- Some early USD support was evident, as US TSY futures ticked lower. This saw USD/JPY get back to 147.47, but we now sit back at 141.85/90. There wasn't much follow through to the US Tsy move. Cash US Tsys sit around 3-4bps firmer in yield terms.
- Elsewhere, Japan FinMin Suzuki stated its important FX markets reflect fundamentals and that FX moves are being watched closely. The comments didn't impact FX sentiment.
- AUD/USD has grinded higher, last near 0.6720, up 0.30% for the session. The better tone to Hong Kong and China equities, following property easing measures and more liquidity support have been A$ positives.
- NZD/USD is trailing modestly but still higher, last in the 0.6215/20 region. Both currencies remain sub early Thursday highs.
- EUR/USD hasn't been able to meaningfully breach the 1.1000 handle.
- Looking ahead, we have PMIs on tap for the UK and EU, likewise for the US later.
EQUITIES: Property Support Aids HK/China Market Rebound
Regional Asia Pac equities are up strongly across most of the major markets. Hong Kong markets are the standout (+3% for the HSI), as China easing housing restrictions late yesterday. US equity futures have ticked higher as the session has progressed, albeit ranges have been fairly tight. Eminis were last near 4779, +0.10%, while Nasdaq futures were 0.16% higher.
- At the break, Hong Kong's HSI is +3% higher, slightly down from session best levels. The mainland properties sub index is up nearly 4.7%.
- China announced late yesterday easing curbs for housing markets in both Beijing and Shanghai, (see this link for more details). Elsewhere as expected the 1yr MLF rate was held steady at 2.5%, but we saw larger liquidity injection (800bn yuan). Nov activity data was mixed.
- The latest piece from the MNI China Policy team suggests a growth target of around 5% next year, with a narrower fiscal deficit compared to this year (see this link).
- The CSI 300 is up nearly 0.7% to the break, also off session highs.
- The Kospi is +0.80%, away from session bests, while the Taiex is only just above flat at this stage. Japan's Nikkei 225 has rebounded, up nearly 1.2%.
- The ASX 200 is up nearly 1%, led by the materials sector following firmer commodity prices.
- In SEA, most markets are higher, with the Thailand SET rebounding further (+1.25%).
OIL: Set For The First Weekly Gain Since October
Oil has built on Thursday's impressive rally, with gains extending in the first part of Friday trade. Brent crude was last just above $77/bbl, +0.57% higher for the session. At this stage we are tracking +1.60% firmer for the week, which would be the first gain since mid October. For WTI we were last near $72/bbl (tracking +1% firmer for the week).
- The sharp USD sell-off, along with the plunge in US yields in the past week, has clearly aided the oil recovery. Firmer risk appetite in the equity space has also been a positive.
- On the demand outlook, global oil demand growth forecast for 2024 has been revised up by 130kbpd to 1.1mbpd. Still, expectations for this year’s demand growth have been lowered as the weakening economic climate is slowing down oil demand growth, according to the IEA Monthly Oil Market Report.
GOLD: Primed For A Weekly Gain After FOMC’s Change Of Heart
Gold is little changed in the Asia-Pac session, after closing 0.4% higher at $2036.36 on Thursday.
- Bullion is headed for a weekly gain after the Federal Reserve sent its strongest indication yet that it will pivot to easing monetary policy next year. While the Fed held the funds rate steady, as expected, Fed Chair Powell delivered little to no pushback to market expectations of significant rate cuts next year.
- The Dot Plot pointed to a 2024 median of 75bp of rate cuts, a sharper pace than indicated in September’s projections, with reductions expected by 17 of 19 members.
- US Treasuries extended their post-FOMC rally on Thursday on heavy volume. The 10-year yield fell to a 5-month low of 3.88%.
- That said, cash US Treasuries are sitting 3-4bps cheaper so far in the Asia-Pac session, with local participants possibly profit-taking following an assertive post-FOMC rally.
- According to MNI’s technicals team, recent strength in gold has signalled the end of the corrective Dec 4-13 pullback. A continuation higher would signal scope for a climb toward key resistance and the Dec 4 all-time high at $2135.39.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 15/12/2023 | 0700/0800 | ** |  | SE | Unemployment |
| 15/12/2023 | 0745/0845 | *** |  | FR | HICP (f) |
| 15/12/2023 | 0815/0915 | ** | | FR | S&P Global Services PMI (p) |
| 15/12/2023 | 0815/0915 | ** | | FR | S&P Global Manufacturing PMI (p) |
| 15/12/2023 | 0830/0930 | ** |  | DE | S&P Global Services PMI (p) |
| 15/12/2023 | 0830/0930 | ** | | DE | S&P Global Manufacturing PMI (p) |
| 15/12/2023 | 0900/1000 | ** |  | IT | Italy Final HICP |
| 15/12/2023 | 0900/1000 | ** |  | EU | S&P Global Services PMI (p) |
| 15/12/2023 | 0900/1000 | ** | | EU | S&P Global Manufacturing PMI (p) |
| 15/12/2023 | 0900/1000 | ** | | EU | S&P Global Composite PMI (p) |
| 15/12/2023 | 0930/0930 | *** |  | UK | S&P Global Manufacturing PMI flash |
| 15/12/2023 | 0930/0930 | *** | | UK | S&P Global Services PMI flash |
| 15/12/2023 | 0930/0930 | *** | | UK | S&P Global Composite PMI flash |
| 15/12/2023 | 1000/1100 | * | | EU | Trade Balance |
| 15/12/2023 | 1000/1000 | | UK | BOE's Ramsden Speech at Deloitte on Bank resolution regime | |
| 15/12/2023 | 1315/0815 | ** |  | CA | CMHC Housing Starts |
| 15/12/2023 | 1330/0830 | * | | CA | International Canadian Transaction in Securities |
| 15/12/2023 | 1330/0830 | ** | | CA | Wholesale Trade |
| 15/12/2023 | 1330/0830 | ** |  | US | Empire State Manufacturing Survey |
| 15/12/2023 | 1415/0915 | *** | | US | Industrial Production |
| 15/12/2023 | 1445/0945 | *** | | US | IHS Markit Manufacturing Index (flash) |
| 15/12/2023 | 1445/0945 | *** | | US | S&P Global Services Index (flash) |
| 15/12/2023 | 1630/1630 | | UK | BoE announce APF Sales schedule for Q124 | |
| 15/12/2023 | 1725/1225 | | CA | BOC Governor Macklem speech/press conference | |
| 15/12/2023 | 1800/1300 | ** | | US | Baker Hughes Rig Count Overview - Weekly |
| 15/12/2023 | 2100/1600 | ** | | US | TICS |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.