MNI EUROPEAN OPEN: Germany Set For Snap Election

MNI (SYDNEY) - EXECUTIVE SUMMARY

• REPUBLICANS NEAR TRIFECTA WITH DEMOCRATS’ HOUSE HOPES FADING - BBG
• GERMANY SET FOR SNAP ELECTION BY END-MARCH - MNI POLITICAL RISK
• MUST SEE US POLICIES BEFORE ASSESSING - EC’s GUINDOS - MNI BRIEF
• JAPAN SEPT NEGATIVE REAL WAGE NARROWS - MNI BRIEF
• XI CONGRATULATES TRUMP ON VICTORY, URDERS STABLE US-CHINA TIES - BBG

Fig. 1: USD/CNY Fixing Surges Back To Late 2023 Levels 

Source: MNI - Market News/Bloomberg

UK 

GEOPOLITICS (BBC): “Sir Keir Starmer said a strong UK-US relationship was "crucial" as he congratulated Donald Trump on his election as US president.”

EU

GERMANY (MNI POLITICAL RISK): The inflation-adjusted real wage, a barometer of households' purchasing power, held within negative territory for the second straight month in September, but narrowed to -0.1% from August’s -0.8%, preliminary data released by the Ministry of Health, Labour and Welfare on Thursday showed.

ECB (MNI BRIEF): ECB policymakers will need to assess the policies of the incoming administration of President Donald Trump before any adjustments to its own policy considerations, ECB vice president Luis de Guindos said Wednesday.

POLITICS (ECONOMIST): “On Thursday European leaders will have their first chance to convene since Donald Trump stormed to victory in America’s presidential election. The occasion is a meeting of the European Political Community in Budapest. This body includes the heads of government of the European Union’s 27 members, plus the leaders of Britain, Turkey, Ukraine and others.”

DEFENCE (POLITICO): “"With the new U.S. president's political outlook diverging from that of his predecessors, we need to manage this situation, prepare for it and underline the efforts we are already making," German Defense Minister Boris Pistorius told reporters after meeting with his French counterpart Sébastien Lecornu following Trump's big victory.”

GEOPOLITICS (POLITICO): “European leaders rushed to speak to Donald Trump on Wednesday evening, as the U.S. president-elect basked in his stunning election victory and the world grappled with potentially seismic ramifications of his second term in office. French President Emmanuel Macron and Trump discussed the war in Ukraine and the crisis in the Middle East in a call on Wednesday, the French presidency said.”

IRELAND (POLITICO): “Prime Minister Simon Harris announced a snap election in Ireland for Friday, Nov. 29, in a bid to extend his Fine Gael party’s record 14-year run in power.”

US

POLITICS (BBG): “Democrats’ hopes for a powerful check on Donald Trump by controlling the US House are fading, with Republicans increasingly confident they will hold unified control in Washington ahead of next year’s big fights over tax cuts and spending.” 

POLITICS (RTRS): “Donald Trump's Republicans looked set on Wednesday to possibly win control of both chambers of Congress, giving them sweeping powers for the first time in eight years to ram through a broad agenda of tax and spending cuts, energy deregulation and border security controls.

FED (MNI): With Jerome Powell's term as Fed Chair up in May 2026, attention now turns to his replacement under the incoming Trump administration as it looks unlikely he will get another term. Scott Bessent - who runs Key Square Group, a macro fund, and as an economic advisor to Trump is considered a leading candidate for Treasury Secretary under the new administration - made some noteworthy comments about the future Fed chair this morning on CNBC, including the notion that a new Fed chair could theoretically be more hawkish on rates than Powell.

OTHER 

JAPAN (MNI BRIEF): The inflation-adjusted real wage, a barometer of households' purchasing power, held within negative territory for the second straight month in September, but narrowed to -0.1% from August’s -0.8%, preliminary data released by the Ministry of Health, Labour and Welfare on Thursday showed.

JAPAN (BBG): “Japan’s chief currency official warned that authorities will take appropriate action against any excessive currency moves, in an apparent attempt to stem the yen slide triggered by Donald Trump’s election win.” 

BRAZIL (MNI EM BCB WATCH): The Central Bank of Brazil's decision to accelerate the pace of rate hikes Wednesday was accompanied by a hawkish message that suggests further increases of at least 50 basis points over its next few meetings -- perhaps even bigger moves if the inflation picture deteriorates further.

CANADA (MNI): Bank of Canada Senior Deputy Governor Carolyn Rogers said Wednesday that interest rates are moving back to normal from the highest in decades while avoiding an economic hard landing and households are able to cope with painful mortgage refinancing over the next two years. 

SAUDI ARABIA (BBG): Saudi Arabia is planning a new artificial intelligence project with backing of as much as $100 billion as it seeks to develop a technological hub to rival the neighboring United Arab Emirates, people familiar with the matter said.

ISRAEL (BBG): “Israeli Prime Minister Benjamin Netanyahu’s shock firing of his defense chief on Tuesday night removed a key cabinet critic, but it also deepened anger among opponents over his handling of the country’s multi-front conflict.” 

CHINA

US/CHINA (BBG): "Chinese President Xi Jinping congratulated Donald Trump on his victory in the presidential election and called for stable ties between the world’s two largest economies." 

STIMULUS (SHANGHAI SECURITIES NEWS): “Local governments have vowed to deploy wide-ranging policies to boost consumption and investment while solving their debt issues to spur growth, Shanghai Securities News reported, citing official documents.” 

HOUSING (SECURITIES TIMES): "China could cut the loan rates of housing provident funds further, after commercial banks lowered their mortgage rates to help revive the domestic property market, Securities Times reported, citing analysts.” 

YUAN (CHOICE DATA): “The Chinese central bank will likely make countercyclical adjustments should the yuan weaken to about 7.3 against the U.S. dollar should U.S. President Elect Donald Trump impose additional tariffs in 2025, said analysts from China Galaxy International Securities.” 

YUAN (BBG): "China slashed the daily reference rate for its currency to a level unseen since late 2023, a sign the central bank is allowing depreciation under the treat of trade tensions with the US under a Donald Trump presidency." 

DEVELOPERS (YICAI): “Private real-estate developers face financing difficulties despite increased housing policy support, Yicai.com reported. The total financing amount of 65 typical real-estate companies was CNY23.19 billion in October, rising 1.9% y/y from a low base, but declining 50.4% m/m, marking the lowest monthly financing this year, data by China Real Estate Information Corp.” 

CHINA MARKETS

MNI: PBOC Net Drains CNY308.4 Bln via OMO Thursday

The People's Bank of China (PBOC) conducted CNY19.2 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY308.4 billion after offsetting the maturity of CNY327.6 billion today, according to Wind Information.

• The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5305% at 09:43 am local time from the close of 1.5525% on Wednesday.
• The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 49 on Wednesday, compared with the close of 48 on Tuesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1659 Thurs; +1.55% Y/Y

The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1659 on Thursday, compared with 7.0993 set on Wednesday. The fixing was estimated at 7.1672 by Bloomberg survey today.

MARKET DATA

AUSTRALIA SEPT. TRADE SURPLUS A$4.61B; EST. +A$5.27B; PRIOR +A$5.28B
AUSTRALIA SEPT. EXPORTS -4.3% M/M; PRIOR -0.6%
AUSTRALIA SEPT. IMPORTS -3.1% M/M; PRIOR -0.2%

JAPAN LABOUR CASH EARNINGS SEPT. +2.8% Y/Y; EST. +3.0%; PRIOR +2.8%
JAPAN CASHE EARNINGS SAME SAMPLE SEPT. +2.9% Y/Y; EST. +3.5%; PRIOR +3.5%
JAPAN SCHEDULED FULL-TIME PAY – SAME SAMPLE SEPT. +2.9% Y/Y; EST. +2.9%; PRIOR +2.8%
JAPAN REAL CASH EARNINGS SEPT. -0.1% Y/Y; EST. +0.1%; PRIOR -0.8%

JAPAN TOKYO OCT. OFFICE VACANCIES FALL TO 4.48%; PRIOR 4.61%

SOUTH KOREA BOP GOODS BALANCE SEPT. $10.67B; PRIOR $6.52B
SOUTH KOREA BOP CURRENT ACCOUNT SEPT. $11.12B; PRIOR $6.52B

CHINA TRADE BALANCE OCT. +$95.72B; EST. +$75.0B; PRIOR +$81.7B
CHINA EXPORTS OCT. +12.7% Y/Y; EST. +5.0%; PRIOR +2.4%
CHINA IMPORTS OCT. -2.3% Y/Y; EST. -2.0%; PRIOR +0.3%
CHINA TRADE BALANCE OCT. +CNY 679.1B; PRIOR +CNY 582.6B
CHINA EXPORTS OCT. CNY +11.2% Y/Y; PRIOR +1.6%
CHINA IMPORTS OCT. CNY -3.7% Y/Y; PRIOR -0.5%

MARKETS

US TSYS: Buyers Driving Yields Lower Across the Curve. 

• UST’s have had their fortunes turnaround with buyers emerging and yields moving lower.
• UST yields were +1 – 1.8bp lower across the curve.
• US 2YR -1bp to 4.256%, US 5YR -1.4bp to 4.262%, US 10YR -1bp to 4.426% and US 30YR -0.8bp to 4.605%.
• US 10YR Dec24 Future didn’t follow the lead from cash and moved up to 109-19 from its 109-16 open.
• It is likely that cash investors now have turned their attention away from the election result with the next focal point the upcoming FED meeting and the accompanying statement.
• Currently this week’s meeting has a cut priced in but for the following meeting on December 18, there is only 19bps priced in. 

JGBS: Cash Bonds Cheaper After A Poor 10Y Auction, Focus On FOMC

JGB futures are weaker and at Tokyo session lows, -24 compared to settlement levels.

• Outside of the previously outlined cash earnings, there hasn't been much by way of domestic drivers to flag other than a poor 10-year auction.
• The 10-year JGB auction showed weaker results, with the low price falling short of expectations. Moreover, the cover ratio declined to 3.133x from last month’s 3.529x, and the tail lengthened to 0.04 from 0.02.
• This was despite the auction offering an outright yield 10-15bps higher than last month’s level and just 10bps below July's cyclical high.
• Weak sentiment toward global long-end bonds impacted today’s auction.
• Attention now turns to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Cash US tsys are 1bp richer in today’s Asia-Pac session after yesterday’s savage post-US election sell-off.
• Cash JGBs are 2-3bps cheaper across benchmarks beyond the 1-year. The benchmark 10-year yield is 3.2bps higher at 1.011% versus the cycle high of 1.101%.
• The swap curve has bear-steepened with rates 1-6bps higher. Swap spreads are mixed.
• Tomorrow, the local calendar will see Household Spending and Weekly International Investment Flow data alongside the Coincident and Leading Indices. 

AUSSIE BONDS: Cheaper, Subdued Session Ahead Of FOMC Decision

ACGBs (YM -1.0 & XM -2.5) are slightly weaker after dealing in narrow ranges in today’s Sydney session. 

• RBA Governor Bullock appeared before the Senate Economics Committee today and reiterated that inflation needs to return “sustainably” to target and that is its focus. She also noted that both survey and market measures of medium-term inflation expectations are around 2.5%, the mid-point of the band.
• Attention now turns to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Cash US tsys are 1bp richer in today’s Asia-Pac session after yesterday’s savage post-US election sell-off.
• Cash ACGBs are flat to 2bps cheaper, with a steepening bias. The AU-US 10-year yield differential is at +22bps.
• Swap rates are 1bp lower to 2bps higher, with the 3s10s steeper.
• The bills strip is weaker, with pricing -1 to -2.
• RBA-dated OIS pricing is flat to 2bps firmer today. 2025 meeting pricing remains 2-9bps higher than pre-RBA levels on Tuesday. No easing is priced for this year, with June 2025 being the first meeting where a 25bp rate cut is fully anticipated.
• Tomorrow, the local calendar is empty apart from the AOFM’s planned sale of A$800mn of the 2.75% 21 June 2035 bond.  

NZGBS: Weaker, Trump Trade Policies To Add To Global Inflation: RBNZ

NZGBs closed on a weak note, with benchmark yields 2-3bps higher. The NZGB 10-year has underperformed since yesterday’s close with the NZ-US and NZ-AU yield differentials 6-7bps tighter.

• Donald Trump’s trade policies will add to global inflation pressures but won’t threaten financial stability unless retaliation spirals out of control, according to the RBNZ. During a briefing on financial stability, RBNZ deputy governor Christian Hawkesby told Parliament independent central banks could easily manage this extra inflation pressure.
• Traders are now shifting attention to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Cash US tsys are ~1bp richer in today’s Asia-pac session after yesterday’s savage post-election sell-off.
• Today’s supply saw decent demand with cover ratios ranging from 2.45x (May-28) to 3.60x (May-54).
• Swap rates closed 3-5bps higher, with the belly underperforming.
• RBNZ dated OIS pricing closed 1-4bps firmer across meetings, with May 2025 leading. A cumulative 91bps of easing is priced by February, with 52bps by year-end.
• The local data calendar is empty until next week's 2-year inflation expectations print.

FOREX: A$ & NZD Outperform Against Yen, To Fresh Multi Month Highs

The USD has given back part of Wednesday's gains in the first part of Thursday trade. The BBDXY index was last near 1268.3, off close to 0.15%. Gains have been dominated by AUD and NZD.

• AUD/USD was last near 0.6620/25, up 0.80%. Note early highs from yesterday, pre US-election results, were around 0.6645, so we aren't too far away from those levels. NZD/USD was close to 0.5980/85 in latest dealings.
• We saw Hong Kong and China equities rebound from early losses. The HSI last up +1.1%, CSI 300 up 0.7%. The real estate index is up nearly 2%. We should hear more about the local government debt relief tomorrow post the NPC meeting.
• Iron ore and copper are both tracking slightly higher.
• China trade data saw exports surge, but imports were -2.3%y/y, close to expectations, with key commodity imports all down m/m.
• USD/JPY has drifted lower as the session has progressed, last near 154.10, off 0.35%. We had a step up in verbal FX rhetoric from FX diplomat Mimura, including that they will take appropriate action against excessive moves. Still, yen only really started moving this afternoon, with these earlier FX comments not providing lasting support.
• US yields have also ticked down, but losses are less than 1bps for the most part at this stage.
• Japan Sep labor earnings were below market expectations, but trends remain positive.
• NZD/JPY has broken above 92.00, getting back to fresh highs since July. AUD/JPY has pushed above 102.00.
• The Fed decision is announced today followed by a press conference with a 25bp rate cut forecast (see MNI Fed Preview). Preliminary Q3 US productivity/ULC, jobless claims and September consumer credit are also released.
• The BoE also announces and 25bp of easing is expected. In addition, September German trade & IP, Q3 French employment and September euro area retail sales print. BoE’s Bailey speaks as well as the ECB’s Lane, Buch, Schnabel and Elderson.

ASIA STOCKS: China Equity Markets Soar, Some SE Asian Markets Lagging.

• Equity markets in general across the region greeted the US Election result positively, trading higher throughout the day.
• China had some very strong data out with Exports jumping +12.7% for October and the trade balance hitting $95bn.
• This saw all of China’s major bourses up with CSI 300 +0.70%, Hang Seng +1.05%, Shanghai +.85% and Shenzhen +0.95%.
• Singapore was the star performer with the FTSE Straits Times up over 2%.
• In Korea, the KOSPI reacted too to the moves in China with the KOSPI up +0.50%.
• However for Malaysia and Indonesia, their fortunes were different both down on the day with the FTSE Malay KLCI down -0.55% and the Jakarta Comp -1.0%.
• The other underperformer on the day was the Philippines which fell -2.7% after data out saw GDP for the third quarter missing expectations.
• With India just opening, it is starting off on a weaker note down -0.22%. 

OIL: Crude Rallies As Impact Of New US Administration Unclear

After falling only moderately on Wednesday in the wake of the US election result, oil prices have rallied today on a slightly weaker US dollar (BBDXY -0.1%) and better risk appetite supported by news of China state banks selling USDCNY onshore. WTI is up 0.7% to $72.20/bbl, close to the intraday high, while Brent is 0.8% higher at $75.52/bbl.

• Today the prospect of additional China demand is offsetting the possibility that there will be an increase in US oil output and Russian exports under a Trump administration. US demand for energy could also be higher if policies designed to boost growth are implemented but that would also strengthen the greenback.
• Last week’s US crude inventory build announced yesterday also doesn’t seem to be weighing on oil prices.
• Hurricane Rafael has passed through Cuba but is expected to wane as it heads to the US coast. Around 1.55mbd of Gulf of Mexico production is now estimated to be affected, down from 1.6mbd, according to Bloomberg.
• The Fed decision is announced today followed by a press conference with a 25bp rate cut forecast (see MNI Fed Preview). Preliminary Q3 US productivity/ULC, jobless claims and September consumer credit are also released.
• The BoE also announces and 25bp of easing is expected. In addition, September German trade & IP, Q3 French employment and September euro area retail sales print. BoE’s Bailey speaks as well as the ECB’s Lane, Buch, Schnabel and Elderson. 

GOLD: Sharp Fall After Trump Victory

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
07/11/2024	0700/0800	**	DE	Trade Balance
07/11/2024	0700/0800	**	DE	Industrial Production
07/11/2024	0700/0800		SE	Flash CPI
07/11/2024	0800/0900	**	ES	Industrial Production
07/11/2024	0810/0910		EU	ECB's Schnabel remarks at Money Market conference
07/11/2024	0830/0930	***	SE	Riksbank Interest Rate Decison
07/11/2024	0830/0930	**	EU	S&P Global Final Eurozone Construction PMI
07/11/2024	0900/1000	***	NO	Norges Bank Rate Decision
07/11/2024	1000/1100	**	EU	Retail Sales
07/11/2024	1045/1145		EU	ECB's Elderson in panel on climate leadership
07/11/2024	1200/1200	***	GB	Bank Of England Interest Rate
07/11/2024	1200/1200	***	GB	Bank Of England Interest Rate
07/11/2024	1230/1230		GB	BoE Press Conference
07/11/2024	1330/0830	***	US	Jobless Claims
07/11/2024	1330/0830	**	US	Preliminary Non-Farm Productivity
07/11/2024	1330/0830	**	US	WASDE Weekly Import/Export
07/11/2024	1330/1430		EU	ECB's Lane speech on Public Debt
07/11/2024	1400/1400		GB	Monthly Decision Maker Panel Data
07/11/2024	1400/0900		CA	BOC Deputy Mendes gives opening remarks before a lecture.
07/11/2024	1430/1530		EU	ECB's Lane in panel on Lesson Learnt in Past Crises
07/11/2024	1500/1000	**	US	Wholesale Trade
07/11/2024	1530/1030	**	US	Natural Gas Stocks
07/11/2024	1630/1130	*	US	US Bill 08 Week Treasury Auction Result
07/11/2024	1630/1130	**	US	US Bill 04 Week Treasury Auction Result
07/11/2024	1900/1400	***	US	FOMC Statement
07/11/2024	2000/1500	*	US	Consumer Credit
08/11/2024	2330/0830	**	JP	Household spending
08/11/2024	0001/0001	**	GB	KPMG/REC Jobs Report
08/11/2024	0230/0230		GB	BOE's Breeden at Singapore Fintech Festival
08/11/2024	0700/0800	**	SE	Private Sector Production m/m
08/11/2024	0745/0845	*	FR	Foreign Trade
08/11/2024	0900/1000	*	IT	Industrial Production
08/11/2024	0900/1000		EU	ECB's Cipollone moderating event on Italy and the World Bank Group
08/11/2024	1000/1100	*	IT	Retail Sales
08/11/2024	1110/0610		CA	BOC Deputy Gravelle speaks on panel at ECB conference.
08/11/2024	1215/1215		GB	BOE's Pill and Shortfall hold MPC Agency briefing
08/11/2024	1330/0830	***	CA	Labour Force Survey