Fig. 1: AU-US 10Y Diff Hovering At Lowest Level Since June
Source: MNI - Market News/Bloomberg
EU
GERMANY (RTRS): “Chancellor Olaf Scholz appealed to his fellow Germans to vote in snap elections in February as the country argues over immigration and the rise of the far-right Alternative for Germany (AfD), according to a New Year's speech seen in advance.”
GERMANY (POLITICO): “Tech billionaire Elon Musk is attempting to interfere with Germany’s upcoming national election in February, a government spokesperson said Monday.”
GERMANY (DW): “A man believed to be a veteran of a pro-Russian militia in Ukraine and two other suspects planned attacks on military and industrial sites, according to German prosecutors. All three are dual German-Russian nationals.”
UKRAINE/RUSSIA (BBC): “Russia and Ukraine have exchanged hundreds of prisoners of war in a deal brokered by the United Arab Emirates (UAE). The Russian defence ministry said it had swapped 150 Ukrainian soldiers held captive for an equal number of Russian troops. Ukrainian President Volodymyr Zelenksy said 189 Ukrainians had returned home.”
US
GEOPOLITICS (BBC): “A Chinese state-sponsored hacker has broken into the US Treasury Department's systems, accessing employee workstations and some unclassified documents, American officials said on Monday. The breach occurred in early December.”
MARKETS (BBG): “US stock markets will close Jan. 9, in observance of a national day of mourning for former President Jimmy Carter.”
OTHER
SOUTH KOREA (YONHAP): “A Seoul court on Tuesday approved a request from law enforcement authorities to detain impeached President Yoon Suk Yeol over his brief martial law imposition, making him the first sitting South Korean president to face an arrest.”
SOUTH KOREA (BBG): “South Korea’s consumer inflation gained pace as political turmoil weighs on the local currency, threatening price stability in a country heavily reliant on imports for food and energy.”
AUSTRALIA (BBG): “Australia’s fast-growing A$4.1 trillion ($2.6 trillion) pension industry posted double-digit returns in the 2024 calendar year, buoyed by the strong rally in global share markets, according to estimates from research house SuperRatings.”
AUSTRALIA (BBG): “Australia’s stock benchmark is on track to become the biggest laggard among Asia Pacific peers this month, weighed by uncertainty around the central bank’s timeline for rate cuts and China’s subdued recovery.”
NORTH KOREA (RTRS): “North Korean leader Kim Jong Un pledged to solidify the country's comprehensive strategic partnership with Russia in his letter to President Vladimir Putin on Monday, state media KCNA reported on Tuesday.”
HONG KONG (BBG): “A slew of companies have announced plans to list shares in Hong Kong over the next month in a further sign the city’s IPO market is reviving.”
LNG (BBG): “Global liquefied natural gas exports grew at the slowest pace since 2015, threatening to keep prices elevated until new supply comes online to meet rising demand.”
CHINA
ECONOMY (MNI): “China’s Manufacturing Purchasing Managers Index fell by 0.2 point to 50.1 in December, though staying above the 50 mark for the third month, data from the national Bureau of Statistics showed Tuesday.”
FINANCE (SCMP/BBG): “Three institutions are slapped with multimillion-dollar penalties for bypassing regulatory requirements - the first such action taken after PBOC warnings this year.”
FINANCE (BBG): “Chinese stocks are closing in on their first annual advance since the pandemic, and more gains could be in store if Beijing offers further growth support. The onshore benchmark CSI 300 Index has climbed almost 17% since end-2023 to halt an unprecedented three-year losing streak.”
RUSSIA (BBG): “Chinese President Xi Jinping says in a new year greeting to his Russian counterpart Vladimir Putin that political trust and strategic cooperation between the two countries are reaching higher levels, Xinhua News Agency reports.”
CHINA MARKETS
MNI: PBOC Net Injects CNY93.6 Bln via OMO Tuesday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY157.7 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY93.6 billion after offsetting the maturity of CNY64.1 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6932% at 09:27 am local time from the close of 1.9195% on Monday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 48 on Monday, compared with the close of 45 on Friday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1884 Tues; -2.65% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1884 on Tuesday, compared with 7.1889 set on Monday. The fixing was estimated at 7.3078 by Bloomberg survey today.
MARKET DATA
SOUTH KOREA DEC. CONSUMER PRICES +1.9% Y/Y; EST. +1.7%; PRIOR +1.5%
SOUTH KOREA DEC. CONSUMER PRICES +0.4% M/M; EST. +0.2%; PRIOR -0.3%
SOUTH KOREA DEC. CPI EX FOOD & ENERGY +1.8% Y/Y; EST. +1.9%; PRIOR +1.9%
CHINA DEC. MANUFACTURING PMI 50.1; EST. 50.2; NOV 50.3
CHINA DEC. NON-MANUFACTURING PMI 52.2; EST. 50.2; NOV 50
CHINA DEC. COMPOSITE PMI 52.2; NOV 50.8
MARKETS
US TSYS: Futures Stronger, National Day of Mourning on Jan 9
TYH5 is +0-05 firmer at 109-04 after Monday’s solid gains.
- There has been no cash dealing in US tsys today with Japan out for a bank holiday. Today’s US data (prior, est) includes FHFA House Price Index MoM (0.7%, 0.4%) and S&P CoreLogic CS 20-City MoM SA (0.18%, 0.20%) at 0900ET, Dallas Fed Services Activity (9.8, --) at 1030ET.
- Reminder for Tuesday's session: Rate futures have a full session (1600ET close) while cash Tsys close at 1400ET.
- While the NYSE Group markets will close on January 9 in observance of the National Day of Mourning for President Carter (New York Stock Exchange, NYSE American Equities, NYSE American Options, NYSE Arca Equities, NYSE Arca Options, NYSE Chicago and NYSE National), the CME Group has opted for early close, link HERE
- FI open outcry will close at 1300ET, and GLOBEX after at 1315ET.
- More to follow, but economic data expected that day is likely to proceed as normal (weekly jobless claims at 0930ET, Wholesale trade & inventories at 1000ET).
- Treasury auctions scheduled for January 9 remain uncertain (4- & 8W bills at 1130ET, 30Y bond re-open at 1300ET).
AUSSIE BONDS: Strong Close To the Year
ACGBs (YM +8.0 & XM +9.5) closed sharply richer on a shortened data-light session ahead of tomorrow’s New Year’s Day holiday.
- There has been no cash dealing in US tsys today with Japan out for a bank holiday. TYH5 is +0-05 firmer at 109-04 after Monday’s solid gains. Today’s US data (prior, est) includes FHFA House Price Index MoM (0.7%, 0.4%) and S&P CoreLogic CS 20-City MoM SA (0.18%, 0.20%) at 0900ET, Dallas Fed Services Activity (9.8, --) at 1030ET.
- Today, the local calendar was empty. The next data releases are CoreLogic Home Value and S&P Global PMI Mfg on January 2.
- Cash ACGBs are 8-9bps richer, and the AU-US 10-year yield differential is at -17bps, around the lowest level since June.
- Swap rates are 7-10bps lower, with the 3s10s curve flatter.
- The bills strip is stronger, with contracts +1 to +5.
- RBA-dated OIS pricing is 1-5bps softer across meetings, with late 2025 leading. A 25bps rate cut is more than fully priced by April (128%), with a 63% probability of a February cut.
BONDS: NZGBS: Closed Richer On A Shortened Pre-Holiday Session
On an abbreviated last session of the year, NZGBs closed richer, with benchmark yields 4-8bps lower.
- The local calendar was empty today. CoreLogic Home Values will be released on January 2.
- There has been no cash dealing in US tsys today with Japan out for a bank holiday. TYH5 is +0-03+ firmer at 109-02+ after Monday’s solid gains. Today’s US data (prior, est) includes FHFA House Price Index MoM (0.7%, 0.4%) and S&P CoreLogic CS 20-City MoM SA (0.18%, 0.20%) at 0900ET, Dallas Fed Services Activity (9.8, --) at 1030ET.
- Swap rates closed 5-7bps lower, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed little changed across meetings. 55bps of easing is priced for February, with a cumulative 123bps by November 2025.
FOREX: Yen Continues To Benefit From Risk Pullback
Currency moves have been muted during today’s APAC trading given Japan, South Korea and Thailand are closed and volumes are generally light. The USD BBDXY index is off its intraday low to be down moderately. A deterioration in risk appetite has weighed on Aussie and Kiwi while benefiting the yen, as China’s December manufacturing PMI printed below expectations and is only just above the breakeven-50 mark.
- The yen outperformed the G10 on Monday and today USDJPY is down 0.3% to 156.40, close to the intraday low.
- AUDUSD is down 0.1% to 0.6215 after a low of 0.6211 earlier as the softer China manufacturing PMI and commodity/equity prices weigh. AUDJPY is 0.4% lower at 97.20.
- Kiwi has underperformed Aussie with NZDUSD down 0.2% to 0.5630 after a low of 0.5627. AUDNZD is 0.1% higher at 1.1040 after falling to 1.1024 early in trading.
- European currencies are little changed with EURUSD at 1.0407 and GBPUSD 1.2549.
- USDCNH fell to 7.3053 after the yuan fixing below Monday’s level. It is now flat on the day.
- Equities are generally weaker with the CSI 300 down 0.6%, ASX -0.9% but Hang Seng up 0.1%. The S&P e-mini is slightly lower. Copper is down 0.3% and iron ore down towards $100/t.
- Germany, Italy, Switzerland, Sweden and Norway have holidays, the UK closes at 12:30 and France at 14:05.
- US October house price data and December Dallas Fed print later.
EQUITIES: APAC Lower, US Futures Continue Monday’s Sell Off
APAC equity markets are generally lower in holiday-thinned trading as risk sentiment deteriorated following disappointing China manufacturing PMI data, although non-manufacturing surprised to the upside. US S&P and NASDAQ futures are down around 0.1% after the main indices fell on Monday. The USD index is slightly lower.
- The Hang Seng is the only main index that is higher today rising 0.1%. China’s CSI 300 fell 0.6%.
- The ASX closed down 0.9% driven by real estate and consumer durables, while energy was one of only two sectors to rise. NZ was also weak with the NZX 50 down 1.2%.
- Malaysia, Singapore and India are all lower.
- Japan, South Korea and Thailand are closed. New Zealand and Australia shut early.
- Other early finishes include Hong Kong at 12:00, Philippines at 11:55 and Singapore at 12:00.
- Germany, Italy, Switzerland, Sweden and Norway have holidays, the UK closes at 12:30 and France at 14:05.
- US October house price data and December Dallas Fed print later.
OIL: Crude Supported By China Data, Heading For December Rise
Oil prices have continued to move higher during APAC trading today and look set to finish December higher. They were boosted yesterday by forecasts for colder weather in the US and Europe, which also drove natural gas prices higher. Brent is up 0.5% to $74.38/bbl after a high of $74.59 earlier, and WTI is also 0.5% higher at $71.36/bbl after reaching $71.60. The USD index is down around 0.1%.
- Brent is currently up 4% in December, while WTI is 5.5% higher. Both benchmarks are likely to be little changed over the year with Brent currently up 0.3% and WTI +2.6%.
- Oil prices have found support from China’s manufacturing PMI remaining above 50 in December even though it was down 0.2 points and slightly lower than expected. The composite rose to 52.2 from 50.8 driven by non-manufacturing. Oil markets have been concerned about the strength of China’s demand for some time and are watching closely for any impact from policy stimulus.
- The supply outlook remains unclear but a market surplus is expected for 2025. US industry-based inventory data is published later today. There have been crude drawdowns but gasoline stocks have continued to build.
- Germany, Italy, Switzerland, Sweden and Norway have holidays, the UK closes at 12:30 and France at 14:05.
- US October house price data and December Dallas Fed print later.
GOLD: Heading For One Of The Best Annual Gains This Century
Gold is little changed in today’s Asia-Pac session, after closing 0.6% lower at $2606.50 on Monday.
- Gold is on track for one of its most significant annual gains this century, rising 26% amid a combination of persistent geopolitical risks and a surge in central bank purchases.
- Lower interest rates have also been a key driver, as gold — being a non-yielding asset — becomes more attractive in such an environment.
- While bullion has edged lower since Donald Trump’s decisive victory in November’s US presidential election, its performance in 2024 remains ahead of most other commodities.
- According to MNI’s technicals team, Monday’s move down undermined the recent bullish theme. A resumption of weakness would signal scope for an extension towards the key support at $2536.9, the Nov 14 low. Moving average studies are in a bull mode position.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 31/12/2024 | 1355/0855 | ** |  US | Redbook Retail Sales Index |
| 31/12/2024 | 1400/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 31/12/2024 | 1400/0900 | ** | US | FHFA Home Price Index |
| 31/12/2024 | 1400/0900 | ** | US | FHFA Home Price Index |
| 31/12/2024 | 1500/1000 | *** | US | Conference Board Consumer Confidence |
| 31/12/2024 | 1530/1030 | ** | US | Dallas Fed Services Survey |