Source: MNI - Market News/Bloomberg
UK
ECONOMY (BBC): “Confidence among UK firms has "slumped" as they face a "pressure cooker of rising costs and taxes", according to a business group. The British Chambers of Commerce (BCC) said its survey of more than 4,800 firms suggested confidence had fallen to its lowest level for two years.”
POLITICS (BBC): “Elon Musk has called for Nigel Farage to be replaced as leader of Reform UK, just weeks after reports the multi-billionaire was in talks to donate to the party.”
EU
AUSTRIA (BBG): “More than three months after winning the most seats at federal elections, far-right leader Herbert Kickl is on track to become the Freedom Party’s first Austrian chancellor in a tie-up with the conservative People’s Party.”
ITALY (POLITICO): “Italy’s Prime Minister Giorgia Meloni made a whirlwind visit to Donald Trump at his Florida retreat on Saturday, as European leaders attempt to bolster ties with the incoming United States president.”
ITALY (BBG): “Italy is in advanced talks with Elon Musk’s SpaceX for a deal to provide secure telecommunications for the nation’s government — the largest such project in Europe, people with knowledge of the matter said Sunday.”
GERMANY (POLITICO): ““There are a lot of people on social media who want to attract attention with snappy slogans,” Scholz told German weekly Stern in an interview published on Saturday. “I don’t believe in courting Mr. Musk’s favor. I’m happy to leave that to others,” he said.”
UKRAINE (FRANCE24): “In an interview with US podcaster Lex Fridman, Ukrainian President Volodymyr Zelensky expressed confidence in President-elect Donald Trump's ability to broker peace talks with Russia, emphasising a cooperative approach with Europe for Ukraine's security and a potential settlement.”
UKRAINE (BBC): “Ukraine has launched a fresh offensive in Russia's Kursk region, the Russian defence ministry says. In a statement, the ministry said efforts to destroy the Ukrainian attack groups were ongoing. Officials in Ukraine have also suggested an operation is under way.”
RUSSIA (POLITICO): “Moscow threatened to retaliate after claiming to have downed eight U.S.-manufactured missiles fired from Ukraine toward Russia's southwestern Belgorod region.”
US
FED (BBG): “Two Federal Reserve officials on Saturday emphasized the US central bank must finish off its fight against the post-pandemic price surge and reach its 2% inflation target.”
FED (MNI BRIEF): Federal Reserve Bank of Richmond President Tom Barkin said Friday he would keep interest rates restrictive for longer if inflation gets stuck but so far the path has been toward 2%.
MANUFACTURING (MNI INTERVIEW): Improving demand is set to propel U.S. factories into expansionary territory but how long that will be sustained depends on whether inflation picks up again, the Institute for Supply Management's report on manufacturing chief Timothy Fiore told MNI Friday.
OTHER
CANADA (GLOBE/BBG): “Canadian Prime Minister Justin Trudeau is expected to announce his resignation as leader of the Liberal Party this week, the Globe and Mail reported, citing information from three people it didn’t name.”
MIDDLE EAST (RTRS): “Israel and Hamas wrangled on Sunday over the details of a deal to halt fighting in the Gaza Strip and return hostages home, as Palestinian officials said intensified Israeli bombardments had killed more than 100 people over the weekend.”
CHINA
YUAN (FINANCIAL NEWS): “China central bank’s quarterly monetary policy meeting shows strong resolution to stabilize yuan exchange rate, the PBOC-backed Financial News says in a commentary.”
BILLS (YICAI): “The People’s Bank of China will be issuing extra yuan bills in Hong Kong in January, Yicai reports, citing people close to the Chinese central bank.”
BONDS ( SECURITIES TIMES): “China’s bond market is expected to experience increased volatility this year while its upward potential is relatively limited, the Securities Times reports Monday, citing analysts and traders.”
SERVICES (RTRS): "China's services activity expanded at the fastest pace in seven months in December, driven by a surge in domestic demand, but orders from abroad declined, reflecting growing trade risks to the economy, a private sector survey showed on Monday."
CHINA MARKETS
MNI: PBOC Net Drains CNY75.0 Bln via OMO Monday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY14.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY75.0 billion after offsetting the maturity of CNY89.1 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5930% at 10:00 am local time from the close of 1.6815% on Friday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 38 on Friday, compared with the close of 46 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1876 Mon; -2.27% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1876 on Monday, compared with 7.1878 set on Friday. The fixing was estimated at 7.3057 by Bloomberg survey today.
MARKET DATA
AUSTRALIA S&P GLOBAL DEC. SERVICES PMI 50.8L NOV. 50.5
AUSTRALIA S&P GLOBAL DEC. COMPOSITE PMI 50.2; NOV. 50.2
CHINA DEC. CAIXIN SERVICES PMI 52.2; EST. 51.4; NOV. 51.5
CHINA DEC. CAIXIN COMPOSITE PMI 51.4; NOV. 52.3
JAPAN JIBUN BANK COMPOSITE PMI DEC F 50.5; NOV. 50.1
JAPAN JIBUN BANK SERVICES PMI DEC F 50.9; NOV. 50.5
SOUTH KOREA FOREIGN RESERVES DEC. $415.60B; PRIOR $415.39B
MARKETS
US TSYS: Cash Bonds Dealing Cheaper But Off Worst Levels
TYH5 is 108-16, -0-04+ from NY closing levels.
- Cash bonds are ~1bp cheaper in today’s Asia-Pac session after Friday’s heavy close.
- On Friday, US projected rate cuts through mid-2025 were as follows: Jan'25 steady at -2.8bp, Mar'25 -13.2bp, May'25 -17.8bp, Jun'25 -26.5bp.
- US economic data and Treasury supply are being brought forward this week to accommodate Thursday's "day of mourning" to honour President Carter. The Federal holiday sees most markets closed; the exception so far is CME rates, which will operate on a shortened session.
- Thursday's weekly jobless and continuing claims will be released on Wednesday according to the Dept of Labor site.
- Later today, the US calendar will see S&P Global Services & Composite PMIs, Factory Orders and Durable Goods Orders.
JGBS: Cheaper, BoJ Ueda Reiterates Hikes Coming, 10Y Supply Tomorrow
JGB futures are holding weaker but off session lows, -16 compared to settlement levels, on the first day of trading since 30 December.
- According to MNI’s technicals team, medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.56, a Fibonacci projection point on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high.
- BoJ Governor Ueda sent a fresh reminder that he’s going to raise the benchmark rate if the economy continues to improve this year.
- “Our stance is that we will raise the policy interest rate to adjust the degree of monetary easing if economic and price conditions keep improving,” Ueda said. The governor spoke at a conference held by the Japanese Bankers Association. (See BBG link)
- Cash US tsys are ~1bp cheaper in today’s Asia-Pac session.
- Cash JGBs are 1-3bps cheaper across benchmarks beyond the 1-year (+3.4bps). The benchmark 10-year yield is 2.3bps higher at 1.123% after earlier testing the cycle high of 1.134% set on 30 December 2024.
- Swap rates are 1-5bps higher, with the 20-30-year zone leading. Swap spreads are mixed.
- Tomorrow will see Monetary Base data and 10-year supply.
AUSSIE BONDS: Cheaper With US Tsys, Focus On CPI Wednesday
ACGBs (YM -7.0 & XM -7.5) are cheaper after extending weakness induced by US tsys’ heavy close on Friday. This movement aligns with today's Asia-Pac session, where cash US tsys are 1-2bps cheaper, showing a slight steepening bias.
- Cash ACGBs are 7-12bps cheaper, with the 5-year underperforming. The AU-US 10-year yield differential is at -16bps.
- Outside of the previously outlined S&P Global Dec. PMIs, there hasn't been much by way of domestic drivers to flag.
- Swap rates are 6-7bps higher.
- The bills strip is showing -3 to -6 across contracts.
- RBA-dated OIS pricing is flat to 6bps firmer across meetings. A 25bp rate cut is more than fully priced by April (114%), with a February cut at a 57% chance.
- Tomorrow, the local calendar will see Building Approvals data. However, the highlights of the week are likely to be November CPI on Wednesday and retail sales on Thursday.
- November CPI is likely to be watched closely ahead of Q4 data on January 29. It will also include more updates for services components than the October release. Bloomberg consensus is forecasting headline to pickup 0.1pp to 2.2%. Trimmed mean was 3.5% the previous month.
- AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.
BONDS: NZGBS: Yields Closed Higher But Slightly Outperformed $-Bloc
NZGBs closed cheaper, with the 10-year yield 4bps higher at 4.46%, the day's high. However, on a relative basis, the NZ 10-year outperformed its $-bloc counterparts, with the NZ-US and NZ-AU differentials closing 1-2bps wider.
- It was offshore factors that drove the local market, with the local calendar light again this week. Tomorrow’s release of ANZ Commodity Prices is the sole release for the week.
- On that front, cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after Friday’s heavy close.
- Swap rates closed 3-7bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed 1-4bps firmer for meetings out to July. 52bps of easing is priced for February, with a cumulative 127bps by November 2025.
FOREX: Safe Havens Weaken As US Yields Firm, CAD Higher On Trudeau Headlines
FX trends have been mixed in the first part of Monday trade. The USD indices sit down a touch, off earlier highs, with JPY and CHF underperforming other G10 currencies. The BBDXY index was last just under 1312, still within striking distance of recent cycle highs above 1316.
- USD/JPY has firmed but hasn't tested above 158.00. We were last near 157.70/75, around 0.30% weaker in yen terms. USD/CHF was close to 0.9100.
- US yields have firmed, following on from recent US data beats and cautious Fed commentary around the inflation outlook. We are away from best levels from a yield standpoint, up a little over 1.5bps at the back end of the curve. The 10yr at 4.61% is short of late 2024 highs near 4.64%.
- Comments from BoJ Governor Ueda crossed the wires earlier. The were consistent with remarks from late Dec, around the timing of the next rate move is dependent on the growth/inflation outlook and wages are a key variable.
- We had final PMI reads for the Japan and Australian PMIs (services) but they didn't shift sentiment. China's Caixin services PMI printed stronger than forecast, but also didn't shift sentiment greatly. Regional equity trends are mixed.
- AUD and NZD sit higher, but still close to recent lows. AUD/USD around 0.6225, while NZD/USD is in the 0.5620/25 region.
- EUR/USD has been supported sub 1.0300.
- CAD is around 0.30% firmer, with USD/CAD last near 1.4400. Session lows in the pair were at 1.4388. Support for CAD was evident post local news wire headlines that PM Trudeau may resign this week ahead of a caucus meeting on Wednesday.
- Later the Fed’s Cook speaks. US & European December services/composite PMIs and preliminary December German CPI data are released.
ASIA STOCKS: Tech Outperforms, Japan Markets Down After Break
Asian stock trends are mixed in the first part of Monday trade. Japan markets have returned after a 3 day break and are tracking lower. The major indices off over 1% at this stage. Electronics are autos are underperforming post the break. The positives have been in tech focused plays, with South Korea and Taiwan outperforming.
- China and Hong Kong markets have been mixed, but sit weaker at the break, albeit only modestly. The better than expected Caixin services PMI print did little to lift sentiment. Markets are waiting fresh stimulus details, with the PBoC stating it will cut the RRR and interest rates at an appropriate time.
- The CSI 300 is sub 3800, the HSI still under 20000.
- The Taiex is up 2.65% to 23500 in Taiwan, while the Kospi is up over 1.5%. In US trade on Friday the SOX surged over 3%. Positive investment commitments from Microsoft is aiding sentiment in the tech related space.
- Other markets are showing more mixed trends, but aggregate moves remain modest.
OIL: Crude Off Intraday Highs, PMIs Released Later Today
Oil prices are off their intraday high to be down slightly during APAC trading today but are still close to the three-month high. Brent rose to $76.89/bbl but is now down 0.1% to $76.47. WTI reached $74.39/bbl before trending down to $73.90. The USD index is down 0.1% but off its intraday low.
- Some Middle Eastern pricing is signalling that demand has picked up from Asia and markets are waiting for prices from Saudi Arabia to confirm this. Crude from sanction-hit Iran and Russia has become scarcer, as sanctions target their shadow fleets.
- The market continues to expect excess supply in 2025 with demand from China likely to remain soft and non-OPEC supply forecast to rise with the risk OPEC+ decides to begin output normalisation. Morgan Stanley is projecting a surplus of around 700kbd this year. But there is a lot of uncertainty surrounding the new US administration and geopolitics.
- Later the Fed’s Cook speaks. US & European December services/composite PMIs and preliminary December German CPI data are released.
GOLD: Holding Friday Losses, But Above 20 & 50-Day EMA Support Points
Gold is a touch higher in the first part of Monday dealings, last near $2641. This follows Friday's 0.67% loss, amid a generally supported US yield backdrop and caution from Fed officials around the inflation outlook. Bullion is still up from end 2024 levels ($2624.5).
- US yields have pushed higher today (+1-2bps firmer), although hasn't weighed materially on gold at this stage.
- Spot gold is close to the 20 and 50-day EMA support zones, although the 100-day, which sits near $2600, is arguably more important. We tested sub this support zone on a number of occasions through late 2024 but each time the dip was supported.
- A fresh cycle high in the US 10yr real yield may see gold revisit these lows. On the topside, gold has found selling interest above $2700 since late November.
- Focus will rest on the FOMC minutes and US NFP print later this week.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 06/01/2025 | 0730/0830 | ** |  CH | Retail Sales |
| 06/01/2025 | 0815/0915 | ** |  ES | S&P Global Services PMI (f) |
| 06/01/2025 | 0815/0915 | ** | ES | S&P Global Composite PMI (final) |
| 06/01/2025 | 0845/0945 | ** |  IT | S&P Global Services PMI (f) |
| 06/01/2025 | 0845/0945 | ** | IT | S&P Global Composite PMI (final) |
| 06/01/2025 | 0850/0950 | ** |  FR | S&P Global Services PMI (f) |
| 06/01/2025 | 0850/0950 | ** | FR | S&P Global Composite PMI (final) |
| 06/01/2025 | 0855/0955 | ** |  DE | S&P Global Services PMI (f) |
| 06/01/2025 | 0855/0955 | ** | DE | S&P Global Composite PMI (final) |
| 06/01/2025 | 0900/1000 | ** |  EU | S&P Global Services PMI (f) |
| 06/01/2025 | 0900/1000 | ** | EU | S&P Global Composite PMI (final) |
| 06/01/2025 | 0930/0930 | ** |  GB | S&P Global Services PMI (Final) |
| 06/01/2025 | 0930/0930 | *** | GB | S&P Global/ CIPS UK Final Composite PMI |
| 06/01/2025 | 1300/1400 | *** | DE | HICP (p) |
| 06/01/2025 | 1445/0945 | *** |  US | S&P Global Services Index (final) |
| 06/01/2025 | 1445/0945 | *** | US | S&P Global US Final Composite PMI |
| 06/01/2025 | 1500/1000 | ** | US | Factory New Orders |
| 06/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 06/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 06/01/2025 | 1800/1300 | *** | US | US Note 03 Year Treasury Auction Result |
| 07/01/2025 | 0001/0001 | * | GB | BRC-KPMG Shop Sales Monitor |
| 07/01/2025 | 0030/1130 | * |  AU | Building Approvals |
| 07/01/2025 | 0730/0830 | *** | CH | CPI |
| 07/01/2025 | 0745/0845 | *** | FR | HICP (p) |
| 07/01/2025 | 0830/0930 | ** | EU | S&P Global Final Eurozone Construction PMI |
| 07/01/2025 | 0900/1000 | ** | EU | ECB Consumer Expectations Survey |
| 07/01/2025 | 0900/1000 | *** | DE | Bavaria CPI |
| 07/01/2025 | 0930/0930 | ** | GB | S&P Global/CIPS Construction PMI |
| 07/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 07/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 07/01/2025 | 1000/1100 | *** | EU | HICP (p) |
| 07/01/2025 | 1000/1100 | ** | EU | Unemployment |
| 07/01/2025 | 1000/1100 | *** | IT | HICP (p) |
| 07/01/2025 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 07/01/2025 | 1330/0830 | ** | US | Trade Balance |
| 07/01/2025 | 1330/0830 | ** | CA | International Merchandise Trade (Trade Balance) |
| 07/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |