Source: MNI - Market News/Bloomberg
UK
POLITICS (BBC): “Reform UK is in "open negotiations" with US billionaire Elon Musk about him donating to the party, Nigel Farage has told the BBC.”
EU
UKRAINE (BBG): “North Korean forces deployed in Russia’s Kursk region have suffered several hundred casualties in clashes with Ukrainian troops, US officials said Tuesday.”
GAS (BBG): “European natural gas prices posted their biggest gain in a month as the European Union repeated it has no interest in continued flows from Russia via Ukraine, following a public plea for support from a group of key companies from central Europe.”
EU (ECONOMIST): “On Wednesday leaders from the six western Balkan countries hoping to join the European Union meet their counterparts from the bloc’s member states. They will discuss the EU’s “growth plan”, which aims to absorb the countries into individual aspects of the union, such as its single market, before they become full members.”
POLAND (POLITICO): “Poland's Prime Minister Donald Tusk reaffirmed Warsaw’s commitment to Ukraine’s defense in its war with Russia during a surprise visit to Lviv on Tuesday, but cautioned that his government would not be able to “give everything” to its neighbor as Poland itself faces increasing threats from the Kremlin.”
UKRAINE (POLITICO): “Ukraine is studying European models of electoral law, including electronic voting, with an eye toward holding elections soon after the end of its war with Russia. “We need to understand how we can democratically hold elections using the best and most effective practices,” Olena Shuliak, chair of the Organization of State Power Committee in the Ukrainian parliament, told POLITICO.”
US
FED (MNI): Bumps along the road to disinflation are likely raising concern inside the Federal Reserve that the swift return to price stability which looked all but assured a few months ago is now drifting from view, former Fed officials and staffers told MNI.
UKRAINE/RUSSIA (BBG): “ President-elect Donald Trump’s special envoy for Ukraine and Russia plans to visit Kyiv next month and would be open to meetings in Moscow if invited, as the incoming administration seeks to end the nearly three-year war.”
US/CHINA (BBG): “President Joe Biden’s administration is set to initiate a trade investigation into Chinese semiconductors in the coming days, as part of a push to reduce reliance on a technology that US officials believe pose national security risks.”
OTHER
JAPAN (MNI BRIEF): Japan’s exports posted their second straight rise in November, up 3.8% vs. 3.1% in October, thanks to the 32.1% increase of semiconductor manufacturing equipment orders, down from 42.6%, and despite declining automobile shipments, which dropped 5.2% from the prior month's 0.9% decrease, data released by the Ministry of Finance showed on Wednesday.
JAPAN (MNI BRIEF): The balance of financial assets held by Japanese households stood at JPY2,179 trillion at the end of September, up 2.8% y/y and for the 18th straight quarterly rise, preliminary fund circulation data released by the Bank of Japan on Wednesday showed.
JAPAN (BBG): “Honda Motor Co. and Nissan Motor Co. are exploring a potential merger, according to people familiar with the matter, which would create a singular rival to Toyota Motor Corp. in Japan and better position the combined company to face competitive challenges around the world.”
CANADA (BBC): “Canada has promised to implement a set of sweeping new security measures along the country's US border, including strengthened surveillance and a joint "strike force" to target transnational organised crime.”
CANADA (MNI BRIEF): Canadian Prime Minister Justin Trudeau on Tuesday joked about his finance minister's resignation a day earlier when Chrystia Freeland refused to introduce a fiscal plan she said contained gimmicks and failed to prepare for a potential U.S. trade war, signaling he's keen to fight the next election as other lawmakers say he must step aside.
AUSTRALIA (BBG): “Australia’s budget is expected to slip deeper into deficit in the years ahead due to rising government spending and a weakening in key trade partner China, a mid-year fiscal update showed, with a national election due in less than six months.”
CHINA
ECONOMY (CCTV): “Chinese President Xi Jinping urges the southern island province of Hainan to boost free-trade port development, during a visit to Sanya city on Tuesday, China Central Television reports.”
MARKETS (21ST CENTURY BUSINESS HERALD): “The Shanghai and Shenzhen stock exchanges will halve dividend handling fees for listed companies to 0.5%₀ starting in in 2025 and waive the portion exceeding CNY1.5 million, 21st Century Business Herald reported, citing a China Securities Depository and Clearing Corporation statement.”
MARKETS (BBG): “Shares of China’s state-owned enterprises advanced following a regulator’s guidelines emphasizing that their top management would be partly assessed based on stock performance.”
TRAVEL (NIA): “China has extended foreigner’s transit visa stay time to 240 hours from 144 hours and added 21 entry-and-exit ports for transit usage, the National Immigration Administration has announced.”
CHINA MARKETS
MNI: PBOC Net Injects CNY309 Bln via OMO Wednesday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY387.6 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY309 billion after offsetting the maturity of CNY78.6 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5755% at 09:39 am local time from the close of 1.8648% on Tuesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 49 on Tuesday, compared with the close of 62 on Monday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1880 Weds; -2.54% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1880 on Wednesday, compared with 7.1891 set on Tuesday. The fixing was estimated at 7.2845 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND Q3 YTD CURRENT ACCOUNT DEFICIT 6.4% OF GDP; PRIOR 6.6%
NZ Q3 CURRENT ACCOUNT DEFICIT NZ$10.581B NSA; EST. -NZ$10.40B; PRIOR –NZ$4.70B
NEW ZEALAND WESTPAC CONSUMER CONFIDENCE Q4 97.5; PRIOR 90.8
AUSTRALIA NOV. WESTPAC LEADING INDEX +0.05% M/M; PRIOR +0.16%
JAPAN NOV. TRADE BALANCE -Y117.6B; EST. -Y687.9B; PRIOR –Y462.1B
JAPAN NOV. ADJUSTED TRADE -Y384.24B; EST. -Y432.8B; PRIOR –Y229.2B
JAPAN NOV. EXPORTS +3.8% Y/Y; EST. 2.5%; PRIOR +3.1%
JAPAN NOV. IMPORTS -3.8% Y/Y; EST. +0.8%; PRIOR +0.4%
MARKETS
US TSYS: Tsys Futures Steady Ahead Of FOMC Later
- It has been another very quiet Asian session for US tsys, futures are little changed, volumes are well below recent averages. TU +00¼ and 102-28⅛, while TY is trading unchanged at 109-29.
- A bearish short-term theme in tsys futures remains intact despite Tuesday’s bounce. It is still possible that the latest pullback is a correction. Initial resistance for TY to watch is 110-19+, the 20-day EMA. A break would highlight an early bullish development. For bears, 109-22, 76.4% of the Nov 15 - Dec 6 upleg, has been pierced. A continuation lower would expose 109-02+, the Nov 15 low and key support.
- Options activity suggests rising yields, with expectations that the 10yr yield could hit 5% in Q1, driven by persistent core inflation and a higher neutral rate. T. Rowe Price have recently raised the chances the 10yr may hit 6%, citing higher budget deficits as Trump cuts taxes, the last time the 10yr hit 6% was back in 2000. Franklin Templeton & JPM Asset Management has recently stated they see the 10yr at 5%, while ING Group see the 10yr between 5-5.5% next year.
- Cash tsys curves are trading slightly steeper today with yields 1bps to 1.5bps lower across the curve. The 2yr is currently -1.3bps at 4.232%, while 10yr -1.2bps at 4.387%.
- Focus is now on tonight's FOMC rate decision, it is wildly expected there will be a 25bps cut, see MNI's Fed Preview ( here )
- Fed fund futures are currently pricing in a 95% chance of a 25bps cut today, with the next full cut not priced in until June 2025 (56.5bps), looking further out the curve the market has priced in a cumulative 72.6bps of cuts through to December 2025.
- Ahead of FOMC tonight we have MBA Mortgage Applications, Housing Starts & Building Permits.
JGBS: Little Changed, FOMC Tonight, BoJ Policy Decision Tomorrow
JGB futures are stronger, +10 compared to settlement levels.
- Outside of the previously outlined trade balance data, there hasn't been much by way of domestic drivers to flag.
- The focus remains on tomorrow’s BoJ policy decision, with the broad consensus expecting no change to policy settings.
- Towards late November, market pricing for the meeting outcome stood at over 60% in terms of a 25bps hike priced in. This has fallen back sharply though as we have gotten closer to the meeting date, last around 14% probability priced for a full rate hike.
- In terms of what has shifted sentiment around the likely meeting outcome, it has more reflected press articles, along with BoJ commentary, as opposed to shifts in data outcomes. (See MNI BoJ Preview here)
- Cash US tsys are ~1bp richer in today’s Asia-Pac session ahead of today's FOMC policy decision.
- Cash JGBs are slightly richer across benchmarks. The benchmark 10-year yield is 0.1bp lower at 1.083% versus the cycle high of 1.108%.
- The swaps curve has twist-steepened, pivoting at the 20-year, with rates 1bp lower to 3bps higher.
- Tomorrow, the local calendar will also see Weekly International Flow and Tokyo Condominiums For Sale data.
AUSSIE BONDS: Slightly Richer After MYEFO Ahead Of FOMC
ACGBs (YM +1.0 & XM +1.0) are slightly richer after the release of the Federal Government’s MYEFO.
- There are few changes to the economic forecasts with them focused on the current financial year reflecting actual data outcomes. The deficit in FY25 has been revised slightly lower but remains at 1% of GDP. However, the subsequent years are showing a worse deficit trajectory and as a result higher debt ratios.
- From FY26 the deficit is now forecast to be larger. FY26 has been revised up 0.1pp to 1.6% of GDP, FY27 0.4pp to 1.3% and FY28 0.2pp to 1.0%. This is predominantly due to policy decisions with them accounting for around 80% of the aggregate $21.7bn deterioration in the budget to FY28.
- The headline inflation outlook is unchanged at 2.75% in FY25 and FY26 but wage increases have been revised lower.
- Cash US tsys are ~1bp richer in today’s Asia-Pac session ahead of today's FOMC policy decision.
- Cash ACGBs are 1-3bps richer with the 3/10 curve steeper and the AU-US 10-year yield differential at -10bps.
- The bills strip is slightly richer, with pricing +1 to +3.
- RBA-dated OIS pricing shows a 25bp rate cut more than fully priced by April (118%).
- Tomorrow, the local calendar will see Consumer Inflation Expectations data.
BONDS: NZGBS: Bull-Flattener Ahead Of FOMC, Q3 GDP Tomorrow
NZGBs closed showing a modest bull-flattener, with yields flat to 3bps lower across benchmarks.
- NZ Q3 GDP is released tomorrow with the production measure forecast to fall 0.2% q/q, the second consecutive quarterly decline. This would leave the annual rate at -0.4% slightly better than Q2’s -0.5%. While consensus is in line with the RBNZ’s November forecast, local banks are more pessimistic. Either way, further monetary easing is likely, including a possible 50bp at the February 19 meeting.
- Projections from analysts surveyed by Bloomberg are between +0.1% and -0.4% q/q with annual growth +0.1% to -0.5%. Most are forecasting a contraction of 0.2-0.4% q/q.
- ASB, ANZ, BNZ and Westpac all expect an outcome worse than consensus at -0.4% q/q & -0.5% y/y, while Kiwibank is projecting -0.3% q/q and -0.4% y/y. This trend in domestic forecasts signals a possible downside surprise to Bloomberg consensus.
- If GDP is in line with consensus, then the NZ economy would be in a technical recession, which last occurred over Q4 2022/Q1 2023. Growth has stagnated since then.
- Swap rates closed 2-3bps lower.
- RBNZ dated OIS pricing shows 45bps of easing is priced for February, with a cumulative 110bps by November 2025.
- Tomorrow, the local calendar will also see ANZ Business Confidence.
FOREX: AUD & NZD Weakness Continues, Fresh Cycle Lows
AUD and NZD weakness has again been a feature of G10 FX trade today. Both pairs have made fresh cycle lows. The BBDXY index is little changed and is holding above 1289 at this stage.
- AUD/USD has fallen to 0.6310/15, fresh lows back to oct last year. We are off around 0.30% versus end Tuesday levels in NY. We had the Mid-Year Economic and Fiscal Outlook, the FY26 deficit has been revised up 0.1pp to 1.6% of GDP, FY27 0.4pp to 1.3% and FY28 0.2pp to 1.0%. This, along with soft growth expectations is a likely AUD negative.
- The metals backdrop is softer, with iron ore and copper weaker, continuing the recent softness in this space.
- Regional equity sentiment is mixed, China/HK markets are higher but this isn't helping the higher beta plays. For AUD/USD next support will be eyed at 0.6300.
- NZD/USD is back to 0.5740, off by the same amount as AUD. NZD/USD appears stuck in a falling wedge within a broader bearish trend, showing mixed signals with Monday’s morning star pattern followed by Tuesday’s bearish reversal. There isn't much support for the pair until 0.5600.
- USD/JPY has drifted lower this afternoon, last back around 153.40/45, little changed for the session. We are still above intra-session lows from Tuesday (153.16). EUR/USD has edged up slightly, last back above 1.0500.
- US yields have ticked down, losses a little beyond 1bps at this stage, which may helping EUR and JPY. US equity futures opened lower but are now modestly higher.
- Looking ahead, the Fed decision is announced and a 25bp rate cut is widely expected. There are also US November housing starts/building permits and Q3 current account data, as well as UK November CPI/PPI. The ECB’s Lane speaks.
EQUITIES: Asian Equities Trade Mixed, Nissan Surges On Merger Talks
Asian markets traded mixed today as investors await the Fed's final policy decision of the year. The MSCI Asia Pacific Index rose 0.5% before paring gains, led by rebounds in Hong Kong and South Korea, while Japan and Australia saw small declines. Hong Kong-listed Chinese tech stocks gained over 1%, shrugging off news of a US trade investigation into Chinese semiconductors, while Chinese state-owned stocks rose on new regulatory guidelines linking management assessments to stock performance.
- Japan’s Nissan Motor surged 24% on reports of a possible merger with Honda, though broader Japanese equities remained mixed with the Nikkei -0.55%, while the TOPIX is -0.20% lower. South Korea’s Kospi jumped 1%, supported by gains in tech giants like Samsung, Taiwan's TAIEX is trading flat.
- China & Hong Kong equities are higher today, small-caps are playing catch up after underperforming yesterday, while gains were also supported by regulatory guidelines tying Chinese state-owned firms' management performance to stock value, boosting central state-owned equities, the CSI Central SOE Index is trading 1.20% higher, elsewhere the CSI 300 is 0.50% higher, while the HSI is trading 0.60%
- US equity futures are slightly higher today after the S&P 500 and Nasdaq 100 both fell 0.4% overnight.
- Traders are cautious ahead of the Fed’s decision, it's wild expected there will be a 25bps rate cut, main focus will be on guidance for 2025 amid economic uncertainty and inflation concerns. Meanwhile, Indonesia’s & Thailand's central banks are set to announce its policy decision later today, followed by the BoJ tomorrow.
OIL: Crude Steady Ahead Of Fed Decision Later
Oil prices are little changed today ahead of the Fed decision and are holding onto this week’s losses driven by soft China data and weaker risk appetite. They have found some support from an earlier reported US inventory drawdown. WTI is up 0.1% to $70.13/bbl after a low of $70.05 and a high of $70.34. Brent is slightly higher at $73.23 following a peak of $73.43. The USD index is flat.
- With attention on the supply side, Bloomberg reported that there was a US crude inventory drawdown of 4.7 million barrels last week, larger than expected, according to people familiar with the API data. Product stocks continued to rise though with gasoline 2.4mn barrels higher and distillate +744k. The official EIA data is out later today.
- Sanctions are tightening on Russian crude exports with the EU adding over 50 ships to its blacklist and now the UK has announced measures aimed at key players in Russia’s oil industry and also its shadow fleet. The US is also looking to lower its price cap.
- The effect of the incoming Trump administration on oil prices remains unclear with increased US supply likely but also increased sanctions on Iran reducing its ability to export. The uncertainty is contributing to crude’s current range trading, according to Westpac.
- Later the Fed decision is announced and a 25bp rate cut is widely expected (see MNI Fed Preview). There are also US November housing starts/building permits and Q3 current account data, as well as UK November CPI/PPI. The ECB’s Lane speaks.
GOLD: Steady Ahead Of FOMC Decision
Gold is slightly weaker ahead of the Federal Reserve’s upcoming rate decision, with traders watching for clues about next year’s monetary policy path. Gold is 0.1% lower in today’s Asia-Pac session , after closing 0.2% lower at $2646.83 on Tuesday.
- While markets widely expect officials to announce another quarter-point cut, what will happen in 2025 isn’t clear as policies by the incoming Donald Trump administration may hinder further easing. Lower rates are typically positive for gold, which doesn’t pay interest.
- There are varying opinions on the path of rates ahead and the number of cuts that the Fed will signal in its Dot Plot for 2025. We go through what to watch for in detail in our MNI Fed Preview here.
- The precious metal has risen by more than 28% this year, putting it on track for its biggest annual gain since 2010. Its strength has been supported by monetary easing in the US, safe-haven demand and sustained buying by the world’s central banks.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 18/12/2024 | 0700/0700 | *** |  GB | Consumer inflation report |
| 18/12/2024 | 0700/0700 | *** | GB | Producer Prices |
| 18/12/2024 | 0700/1500 | ** |  CN | MNI China Money Market Index (MMI) |
| 18/12/2024 | 0900/1000 |  EU | ECB's Lane in fireside chat at MNI Connect Event | |
| 18/12/2024 | 1000/1100 | *** | EU | HICP (f) |
| 18/12/2024 | 1000/1100 | ** | EU | Construction Production |
| 18/12/2024 | 1100/1100 | ** | GB | CBI Industrial Trends |
| 18/12/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 18/12/2024 | 1330/0830 | * | US | Current Account Balance |
| 18/12/2024 | 1330/0830 | *** | US | Housing Starts |
| 18/12/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 18/12/2024 | 1900/1400 | *** | US | FOMC Statement |
| 19/12/2024 | 2145/1045 | *** |  NZ | GDP |
| 19/12/2024 | - |  NO | NorgesBank Meeting | |
| 19/12/2024 | 0001/0001 | * | GB | Brightmine pay deals for whole economy |
| 19/12/2024 | 0300/1200 | *** |  JP | BOJ Policy Rate Announcement |
| 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 |