Source: MNI - Market News/Bloomberg
EU
ECB (BBG): “European Central Bank Governing Council member Robert Holzmann said any reduction in interest rates at next week’s decision will be “moderate.”
GERMANY (FT/BBG): "The next German government needs to reform its debt brake to address the longer-term economic risks facing the country, Bundesbank president Joachim Nagel says in an interview with the Financial Times."
EU (MNI BRIEF): Eurozone finance ministers will call for "discipline, commitment and respect" for EU fiscal rules when they meet in Brussels on Monday, in a message which while not mentioning France’s government crisis will be meant partly as a plea to that country’s politicians, officials in Brussels told MNI.
FRANCE (BBG): “President Emmanuel Macron called on French lawmakers to set aside their personal ambition and reject a vote that would topple the government and throw the country into political turmoil.”
US
FED (MNI BRIEF): A December interest rate cut is "absolutely not" off the table despite recent bumpy progress in bringing inflation back to 2%, as the Fed's benchmark overnight rate remains well above her estimate of neutral at around 3%, Federal Reserve Bank of San Francisco President Mary Daly said Tuesday.
FED (MNI BRIEF): Federal Reserve Bank of Chicago President Austan Goolsbee reiterated interest rates over the next year need to come down "a fair amount" from where they are now, citing a labor market near full employment and inflation on a path to 2%.
FED (MNI): Federal Reserve policy is in a good place to deal with possible risks to the central bank’s dual mandate of stable prices and maximum employment, Fed Governor Adriana Kugler said Tuesday.
OTHER
JAPAN (MNI): Senior BOJ officials are being influenced by political discourse on rate hikes. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.
JAPAN (BBG): "Yuichiro Tamaki, a kingmaker for Japan’s minority government, will temporarily step down as his party’s leader amid a scandal over an alleged marital infidelity."
SOUTH KOREA (AP): “South Korea’s main opposition party on Wednesday urged President Yoon Suk Yeol to resign immediately or face impeachment, hours after Yoon ended short-lived martial law that prompted troops to encircle parliament before lawmakers voted to lift it.”
SOUTH KOREA (RTRS): “South Korea's finance ministry said on Wednesday it was ready to deploy "unlimited" liquidity into financial markets after President Yoon Suk Yeol lifted a martial law declaration he imposed overnight that pushed the won to multi-year lows.”
AUSTRALIA (MNI BRIEF): The Australian economy grew at 0.3% seasonally-adjusted over Q3, 20 basis points lower than expected, and 0.8% y/y, 30bp below expectations, according to National Accounts data published Wednesday by the Australian Bureau of Statistics.
CHINA
HOUSING (YICAI): “Housing markets in major cities will continue to see considerable sales of second-hand housing into December following the November boom,Yicai.com reported citing analysts.”
SERVICES (BBG): “China’s services activity expanded less than a month earlier, a private survey showed, a sign that consumer demand remains sluggish despite Beijing’s recent stimulus push.”
YUAN (BBG): ‘China increased its support for the yuan by setting a significantly stronger-than-expected daily reference rate, after the managed currency weakened to a one-year low in the previous session.”
CHINA MARKETS
MNI: PBOC Net Drains CNY227 Bln via OMO Wednesday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY41.3 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY227 billion after offsetting the maturity of CNY268.3 billion today, according to Wind Information. The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5635% at 09:34 am local time from the close of 1.6057% on Tuesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 53 on Tuesday, compared with the close of 49 on Monday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1934 Weds; -1.91% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1934 on Wednesday, compared with 7.1996 set on Tuesday. The fixing was estimated at 7.2836 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND NOV ANZ COMMODITY PRICE M/M 2.9%; PRIOR 1.4%
AUSTRALIA S&P NOV F PMI SERVICES 50.5; PRIOR 49.6
AUSTRALIA S&P NOV F PMI COMPOSITE 50.2; PRIOR 49.4
AUSTRALIA Q3 GDP Q/Q 0.3%; MEDIAN 0.5%; PRIOR 0.2%
AUSTRALIA Q3 GDP Y/Y 0.8%; MEDIAN 1.1%; PRIOR 1.0%
JAPAN NOV F JIBUN BANK PMI SERVICES 50.5; PRIOR 50.2
JAPAN NOV F JIBUN BANK PMI COMPOSITE 50.1; PRIOR 49.8
CHINA NOV CAIXIN SERVICES PMI 51.5; MEDIAN 52.4; PRIOR 52.0
CHINA NOV CAIXIN COMPOSITE PMI 52.3; COMPOSITE 51.9
SOUTH KOREA NOV FX RESERVES $415.39BN; PRIOR $415.69
MARKETS
US TSYS: Early Losses Paired Back as Yields Drift Lower.
- After yesterday’s weak close in US time with yields 2-4bp higher into the Asia open, bonds then turned around today to finish lower in yield.
- US 2YR 4.169% (-1.3bp), US 5YR 4.107% (-0.7bp), US 10YR 4.226% (unch) US 30YR 4.407% (+0.4bp)
- Despite the movements in cash, and the uncertainty emanating from Korea, futures had a quiet day opening at 110-31 where they have stayed for most of the day.
- In a week of data that will likely seal the rates decision, tonight sees a raft of data including ADP, PMIs, ISM, Factory Orders and Durable Goods.
- Projected rate cuts into early 2025 look mixed after surging late Monday following Fed Gov Waller's comments but moved higher with the lower yields. Current levels as follows: Dec'24 cumulative -18.4bp, Jan'25 -24bp, Mar'25 -40bp, May'25 -48bp.
JGBS: Sharp Rally As Political Uncertainty Could Delay Tightening
JGB futures are sharply stronger and near session highs, +31 compared to settlement levels, as domestic political uncertainty shifted back to centre stage.
- Yuichiro Tamaki, a kingmaker for Japan’s minority government, will temporarily step down as his party’s leader amid a scandal over an alleged marital infidelity.
- (MNI) The potential political reaction to rate hikes is making senior BOJ officials tend towards normalising policy more slowly, despite data showing it is moving towards achieving its inflation target, MNI understands.
- The Bank’s concerns over politics, and also over how markets might react to higher rates, means that an increase to the 0.25% policy rate at the Dec 18-19 meeting will be unlikely unless the yen weakens to JPY160 against the dollar.
- Cash US tsys are 2bps richer to 1bp cheaper, with a steepening bias, in today’s Asia-Pac session. The focus now turns to ADP private employment and ISM data later today. Fed Powell speaks at a policy discussion.
- Cash JGBs are flat to 3bps richer across benchmarks, with a steepening bias. The benchmark 10-year yield is 3bps lower at 1.051%.
- The swaps curve has twist-steepened, with rates 3bps lower to 1bp higher.
- Tomorrow, the local calendar will see International Investment flows alongside 30-year supply. BOJ Board Nakamura will give a speech in Hiroshima.
AUSSIE BONDS: Weak GDP Sparks A Sharp Rally, US ADP Jobs Later Today
ACGBs (YM +8.0 & XM +5.0) sharply richer after reversing early weakness following weaker-than-expected Q3 GDP.
- The Australian economy grew at 0.3% in Q3, 20bps lower than expected, and 0.8% y/y. Growth was propped up by public sector expenditure, up 1.4%, with government consumption and public investment both contributing to the Q3 result. The RBA forecasts year-ended GDP to print at 1.5% in Q4.
- GDP per hour worked, a measure of productivity which the RBA watches closely, fell 0.5% q/q, from Q2’s 0.8% decline, and was -0.8% y/y. Real unit labour costs, meanwhile, rose 0.5% q/q, down from Q2’s 1.5%.
- Cash US tsys are 2bps richer to 1bp cheaper, with a steepening bias, in today’s Asia-Pac session. The focus now turns to ADP private employment and ISM data later today while Fed Chairman Powell speaks at a moderated policy discussion at 1340ET. US Non-Farm Payrolls are due on Friday.
- Cash ACGBs are 5-9bps richer with the AU-US 10-year yield differential at +3bps.
- Swap rates are 4-9bps lower.
- The bills strip has cheapened, with pricing flat to -1.
- RBA-dated OIS pricing is 5-13bps softer across 2025 meetings. Nevertheless, a 25bps rate cut is still not fully priced until May.
- Tomorrow, the local calendar will see Household Spending and Trade Balance data.
BONDS: NZGBS: Late Session Bull-Steepener In Swap, Positive Spillover From ACGBs
NZGBs closed showing a bear-flattener, with benchmark yields flat to 3bps.
- Swap rates, however, closed flat to 5bps lower, with the 2s10s curve steeper and implied swap spreads significantly tighter.
- Late session strength could be linked to positive spillover from ACGBs, which have rallied strongly following a disappointing Q3 GDP print.
- Governor Adrian Orr told a parliamentary select committee that changing capital rules is unlikely to improve bank competition.
- The ANZ World Commodity Price Index increased 2.9% m/m in November. In NZD terms, the index was up 5.2%. Dairy prices rose 5.4% amid a continued increase in demand and relatively stagnant supply. Notably, butter is at record prices and are up 44% in the past year, as per ANZ.
- RBNZ dated OIS pricing is flat to 7bps softer across meetings, led by late 2025. 42bps of easing is priced for February, with a cumulative 101bps by November 2025.
- The local calendar will see CoreLogic Home Values, Volume of All Buildings and NZ Government 4-Month Financial Statements tomorrow.
- Tomorrow, the NZ Treasury plans to sell NZ$200mn of the 3.00% Apr-29 bond, NZ$250mn of the 4.25% May-34 bond and NZ$50mn of the 2.75% Apr-37 bond.
FOREX: A$ Sinks On Weaker GDP, KRW Up As South Korea Looks To Contain Fallout
The USD BBDXY index is little changed in the first part of Wednesday dealings. The index was last near 1281.25, but the main story has been AUD weakness post weaker than forecast Q3 GDP numbers.
- AUD/USD got too fresh multi month lows of 0.6408. The pair sits slightly higher now, last near 0.6435, still off 0.80% for the session. We have seen a sharp move lower in local yields, while RBA pricing for cuts next year has firmed as well. A cut for the April meeting is now 95% priced. Downside focus for AUD/USD is likely to rest on a target south of 0.6400.
- Q3 GDP for Australia showed flat consumer spending and little private sector growth elsewhere. Government spending boosted the headline of 0.3% growth, but this was still below market expectations.
- NZD/USD got dragged lower as well, the pair last near 0.5855, off around 0.45%.
- USD/JPY got to lows of 149.53, but sits back in the 149.90/95 in latest dealings. The leader of the DPP, Yucihiro Tamaki, will temporarily step down over a scandal related to an affair (per BBG). DPP is a key power broker for the minor led Ishiba government. It remains to be seen if this impacts legislation that needs to be passed by the Ishiba regime.
- Spot USD/KRW is much lower, as the authorities try to contain fallout from the Tuesday martial law episode. It remains to be seen if President Yoon stays on, with the opposition calling for him to be impeached. The pair was last near 1412, up 1.20% for the session in won terms.
- In the cross asset space, US yields have ticked down this afternoon, led by the front end, while US equity futures are higher.
- Looking ahead, we have final PMI reads in the EU and UK. BoE speak, along with ECB speak. In the US the ADP prints, along with the services ISM. There is also Fed speak, headlined by comments from Fed Chair Powell.
ASIA STOCKS: Korea and China In the Red on a Volatile Day.
- The larger markets in the Asean region had a weak day today as Political Uncertainty in Korea boiled over and the outlook for the current President now uncertain.
- The KOSPI fell in early trading and stayed negative all day to be down -1.92%, the largest underperformer of the major indices in the region.
- China followed suit despite the CAIXIN composite PMI being up on prior month, with the CSI300 down -0.20%, Shanghai down -0.07%, Shenzhen down -0.38% and Hang Seng up +0.08%.
- South East Asia bucked the negative trend with Malaysia’s FTSE Malay KLCI up +0.29%.
- Indonesia’s Jakarta Composite rose +1.46% continuing on from yesterdays strong day following remarks from the Central Bank governor indicating rates could be on hold for some time.
- India had a strong day yesterday up +0.75% and has opened strong today to be up +0.44%, marking a fourth successive day of positive returns.
COMMODITIES: OPEC+ Inching Towards an Agreement and Gold Steadies.
- OPEC+ delegates have provided some updates as to the ongoing discussions over the last week on supply for 2025, with an agreement likely to be reached to delay increasing oil production.
- The US announced new sanctions against Iran targeting the shadow oil fleet that illegally transports Iranian oil to foreign markets.
- Shipping firms and their management will be targeted by the new sanctions aimed at ‘imposing additional costs on Iran’s petroleum sector following Iran’s attack on Israel,’ the Treasury Department said in its statement.
- This is the second time in two months the US has widened its approach to sanctions on Iran as the conflict in the Middle East continues.
- Overnight news that Israel attacked and killed Hezbollah’s liaison to the Syrian army according to Israeli defense ministry release.
- WTI had a very strong day in the US trading session yesterday, oil jumped 2.50% to close at US$69.9, and then continued rallying in Asia to be $70.08.
- Brent followed suit up 2.35% to close at US$73.61, before continuing its rally to be $73.80.
- Next week sees a significant gathering of Chinese leaders where it is intended to map out the strategy for the economic revival in 2025. China’s faltering growth has been a significant drag in 2024 on oil prices.
- Gold enjoyed a safe haven bid today with the political turmoil in Korea with both countries facing serious political turmoil that could topple the government.
- Gold rose during the last hours in US trade to a high of US$2,655.63 before giving back some of those gains to trade below $2,640, only to bounce back in the Asia afternoon to be at $2,648.70.
- Gold markets will watch closely the array of data from the US to get a sense of whether the FED will cut rates at their last meeting of the year.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 04/12/2024 | 0815/0915 | ** |  ES | S&P Global Services PMI (f) |
| 04/12/2024 | 0815/0915 | ** | ES | S&P Global Composite PMI (final) |
| 04/12/2024 | 0845/0945 | ** |  IT | S&P Global Services PMI (f) |
| 04/12/2024 | 0845/0945 | ** | IT | S&P Global Composite PMI (final) |
| 04/12/2024 | 0850/0950 | ** |  FR | S&P Global Services PMI (f) |
| 04/12/2024 | 0850/0950 | ** | FR | S&P Global Composite PMI (final) |
| 04/12/2024 | 0855/0955 | ** |  DE | S&P Global Services PMI (f) |
| 04/12/2024 | 0855/0955 | ** | DE | S&P Global Composite PMI (final) |
| 04/12/2024 | 0900/1000 | ** |  EU | S&P Global Services PMI (f) |
| 04/12/2024 | 0900/1000 | ** | EU | S&P Global Composite PMI (final) |
| 04/12/2024 | 0900/1000 | EU | ECB's Cipollone speech on behavioural financial regulations | |
| 04/12/2024 | 0900/0900 |  GB | BOE's Bailey keynote interview at the FT Boardroom | |
| 04/12/2024 | 0930/0930 | ** | GB | S&P Global Services PMI (Final) |
| 04/12/2024 | 0930/0930 | *** | GB | S&P Global/ CIPS UK Final Composite PMI |
| 04/12/2024 | 1000/1100 | ** | EU | PPI |
| 04/12/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 04/12/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 04/12/2024 | 1315/0815 | *** | US | ADP Employment Report |
| 04/12/2024 | 1330/1430 | EU | ECB's Lagarde statement at ECON hearing | |
| 04/12/2024 | 1345/0845 | US | St. Louis Fed's Alberto Musalem | |
| 04/12/2024 | 1400/0900 | US | Richmond Fed's Tom Barkin | |
| 04/12/2024 | 1445/0945 | *** | US | S&P Global Services Index (final) |
| 04/12/2024 | 1445/0945 | *** | US | S&P Global US Final Composite PMI |
| 04/12/2024 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 04/12/2024 | 1500/1000 | ** | US | Factory New Orders |
| 04/12/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 04/12/2024 | 1845/1345 | US | Fed Chair Jerome Powell | |
| 04/12/2024 | 1900/1400 | US | Fed Beige Book | |
| 05/12/2024 | 0030/1130 | ** |  AU | Trade Balance |
| 05/12/2024 | 0645/0745 | ** |  CH | Unemployment |
| 05/12/2024 | 0700/0800 | ** | DE | Manufacturing Orders |
| 05/12/2024 | 0700/0800 |  SE | Flash CPI | |
| 05/12/2024 | 0745/0845 | * | FR | Industrial Production |
| 05/12/2024 | 0800/0900 | ** | ES | Industrial Production |
| 05/12/2024 | 0830/0930 | ** | EU | S&P Global Final Eurozone Construction PMI |
| 05/12/2024 | 0930/0930 | ** | GB | S&P Global/CIPS Construction PMI |
| 05/12/2024 | 0930/0930 | GB | DMP Data | |
| 05/12/2024 | 1000/1100 | ** | EU | Retail Sales |
| 05/12/2024 | 1330/0830 | *** | US | Jobless Claims |
| 05/12/2024 | 1330/0830 | ** | US | Trade Balance |
| 05/12/2024 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 05/12/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |