Source: MNI - Market News/Bloomberg
UK
BOE (MNI BRIEF): The UK economic outlook is increasingly gloomy and there is growing evidence that demand was weakening, Bank of England Monetary Policy Committee member Alan Taylor said Wednesday as he made the case for pre-emptive rate cuts.
DEBT (MNI INTERVIEW): Gilt Hit Weighs On Inflation - Ex-BOE Saunders
HOUSING (BBG): House price balance at 28 in Dec. vs 24 in Nov.
EU
ECB (BBG): “Inflation in the euro-area is under control, European Central Bank Governing Council member Mario Centeno said.”
US
GEOPOLITICS (BBG): “Maintaining the dollar as the world’s reserve asset is critical to US economic health and the nation’s future, Scott Bessent, Donald Trump’s nominee for Treasury secretary, will tell a Senate committee, according to prepared remarks.”
US/CHINA (WAPO): “President-elect Donald Trump is considering an executive order once in office that would suspend enforcement of the TikTok ban-or-sale law for 60 to 90 days, buying the administration time to negotiate a sale or alternative solution — a legally questionable effort to win a brief reprieve for the Chinese-owned app now scheduled to be banned on Sunday nationwide.”
FED( MNI BRIEF): U.S. economic activity rose "slightly to moderately" from late November through December as consumer spending was boosted by robust holiday shopping that exceeded expectations in most Fed districts, according to the central bank's Beige Book report Wednesday.
US/CHINA (BBG): “The Biden administration has added 37 companies from China’s mining, solar and textile sectors to its list of those banned from exporting to the US due to alleged forced labor practices in the Xinjiang region.”
OTHER
CANADA (BBG): “Canada has drawn up an initial list of C$150 billion ($105 billion) of US-manufactured items that it would hit with tariffs if President-elect Donald Trump decides to levy tariffs against Canadian goods, according to an official familiar with the matter.”
JAPAN (BBG): “ Bank of Japan officials see a good chance of an interest rate hike next week as long as the arrival of Donald Trump at the White House doesn’t trigger too many negative surprises, according to people familiar with the matter.”
JAPAN (MNI BRIEF): Japan's corporate goods price index rose 3.8% y/y in December, unchanged from November’s revised 3.8%, while import price posted their first rise in four months, data released by the Bank of Japan showed on Thursday.
SOUTH KOREA (MNI BRIEF): Bank of Korea Governor Rhee Chang-yong on Thursday failed to offer a clear path for further easing, despite flagging additional cuts ahead, following the board's decision to hold the Base Rate at 3.0%.
AUSTRALIA (MNI BRIEF): “Australia’s unemployment rate rose 10 basis points to 4.0% over December, while the economy added 56,326 jobs, more than the 15,000 expected, data from the Australian Bureau of Statistics showed Thursday.”
MIDDLE EAST (RTRS): “Israel intensified strikes on Gaza hours after a ceasefire and hostage release deal was announced, residents and authorities in the Palestinian enclave said, and mediators sought to quell fighting ahead of the truce's start on Sunday.”
TECH (BBG): “Taiwan’s companies invested a record amount of money in the US and Japan last year while the figure for China stagnated — highlighting supply-chain shifts resulting from tech rivalries and worsening cross-strait ties.”
CHINA
GROWTH (YICAI): “More than 10 provinces have set annual GDP growth targets of around 5% this year, Yicai.com reported. Beijing, Shanghai and Guangdong are targeting about 5%, with Zhejiang province at around 5.5%. Inner Mongolia and Hainan province are aiming for 6% or above.” '
RRR (SHANGHAI SECURITIES NEWS): " The People’s Bank of China might cut the amount of funds banks must hold in reserve to ease funding pressures before the Lunar New Year holiday, which starts Jan. 28, the Shanghai Securities News reported, citing analysts it didn’t identify."
FDI (21st Century Herald): “China will attract foreign investment this year through opening the service sector and expanding promotions in the telecommunications, medical care and education sectors, according to Li Yongyan, deputy representative at the Ministry of Commerce for International Trade Negotiations.”
SHIPPING (MNI BRIEF): China produced 48.2 million deadweight tonnes of shipping vessels last year, up 13.8% y/y, said the Ministry of Industry and Technology on Thursday.
CHINA MARKETS
MNI: PBOC Net Injects CNY336.4 Bln via OMO Thursday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY340.5 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY336.4 billion after offsetting the maturity of CNY4.1 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.7095% at 09:30 am local time from the close of 2.2365% on Wednesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 81 on Wednesday, compared with the close of 40 on Tuesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1881 Thurs; -2.18% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1881 on Thursday, compared with 7.1883 set on Wednesday. The fixing was estimated at 7.3274 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND DEC FOOD PRICES M/M 0.1%; PRIOR -0.1%
AUSTRALIA JAN CONSUMER INFLATION EXPECTATION 4.0%; PRIOR 4.2%
AUSTRALIA DEC EMPLOYMENT CHANGE 56.3k; MEDIAN 15.0k; PRIOR 28.2k
AUSTRALIA DEC FULL TIME EMPLOYMENT CHANGE -23.7k; PRIOR 49.5k
AUSTRALIA DEC PART TIME EMPLOYMENT CHANGE 80k; PRIOR -21.2k
AUSTRALIA DEC UNEMPLOYMENT RATE 4.0%; MEDIAN 4.0%; PRIOR 3.9%
AUSTRALIA DEC PARTICIPATION RATE 67.1%; MEDIAN 67.0%; PRIOR 67.0%
JAPAN DEC PPI M/M 0.3%; MEDIAN 0.4%; PRIOR 0.3%
JAPAN DEC PPI Y/Y 3.8%; MEDIAN 3.8%; PRIOR 3.8%
SOUTH KOREA BOK BASE RATE 3.00%; MEDIAN 2.75%; PRIOR 3.00%
MARKETS
US TSYS: Tsys Hold Onto Overnight Gains, Jobless Claims & Retail Sales Later
- Tsys futures are trading slightly lower after last nights rally, ranges have been narrow and we hold near the overnight highs, while volumes are slightly below recent averages. TU is -01 at 102-23⅛, while TY is -02+ at 108-08.
- Earlier this morning there was a large block seller of TY at 108-09+ for a DV01 of $545k, while overnight In treasury options, continued demand for upside hedges for 10yr notes was seen via a large buyer of March 109.00 calls, which followed heavy buying of the 108.50 calls on Monday; the trades anticipate 10yr yield falling to 4.55% and 4.6% respectively
- Cash tsys curves have flattened slightly today, with yields +/-1bps. The 2yr is +1bps at 4.274% vs 4.255% low made overnight, while the 10yr is +0.2bps at 4.655%. The 2s10s is 0.5bps lower at 37.875 after reaching a high of 42.568 on Tuesday, its steepest levels since June 2022
- Projected rate cuts through mid-2025 moved forward on the calendar with July now fully pricing in a 25bp cut. Current vs. this morning levels* as follows: Jan'25 steady at -0.7bp, Mar'25 at -7.4bp (-4.9bp), May'25 -12.8bp (-10.3bp), Jun'25 -22.2bp (-17.7bp), Jul'25 at -25.7bp (-21.7bp).
- Across the APAC region, BOK kept rates on hold which was against consensus, the market was expecting a 25bps cut, while BoJ officials see a good chance at a rate hike next week, the market currently pricing in about an 85% chance of a 25bps hike.
- A busy data session later with Weekly Jobless Claims, Retail Sales, Import/Export Indexes and regional Fed services and business outlooks all at 0830ET. Business Inventories and NAHB Housing Market Index at 1000ET. No scheduled Fed speakers as yet - Fed enters Blackout period Friday at midnight.
JGBS: Bull-Flattener After Strong 20Y Auction, 82% Chance Of BoJ Hike Next Week
JGB futures remain stronger and at session highs, +35 compared to settlement levels.
- “Nomura analysts bring forward their call for the next BoJ rate hike to January from March, as recent comments suggest it is more confident about factors likely to influence the decision. Citing a BoJ branch managers meeting and speech by Deputy Gov. Himino, the analysts think the BoJ will conclude there is less uncertainty about wage hikes in Japan and US policy.” (per Dow Jones)
- OIS market expectations currently indicate: an 82% probability of a 25bp hike in January; a cumulative 92% chance by May; and a full 25bp increase fully priced in by May 2025.
- Cash US tsys are 1bp cheaper to 1bp richer, with a flattening bias, in today’s Asia-Pac session. Weekly Jobless Claims and Retail Sales highlight today’s US calendar.
- Cash JGBs have bull-flattened following the strong 20-year auction, with benchmark yields 1-5bps richer. The benchmark 20-year yield is 4.8bps lower at 1.972%.
- Notably, today’s 20-year JGB auction featured an outright yield at a cycle high, 10–15bps above last month’s auction.
- Swap rates are flat to 2bps higher, with swap spreads wider.
- Tomorrow, the local calendar will see International Investment Flow data.
AUSSIE BONDS: Sharply Richer Despite Jobs Beat, US Claims & Retail Sales Due
ACGBs (YM +9.0 & XM +11.0) remain sharply richer despite today’s stronger-than-expected December Employment Report.
- Employment growth exceeded expectations, with a net increase of +56.3k jobs. However, the gain was entirely driven by part-time employment (+80k), while full-time jobs declined by -23.7k. The unemployment rate ticked up to 4.0%, aligning with forecasts.
- Economists say there is no urgency for the RBA to deliver a pre-election cash rate cut in February after a bumper jobs report showed the labour market continued to defy expectations of a looming slowdown. (See AFR link)
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s strong post-CPI rally. Weekly Jobless Claims and Retail Sales highlight today’s US calendar.
- Cash ACGBs are 8-11bps richer with the AU-US 10-year yield differential at -14bps.
- Swap rates are 7-9bps lower.
- The bills strip has bull-flattened, with pricing +1 to +10.
- RBA-dated OIS pricing is flat to 8bps softer across meetings today, with late 2025 leading. A 25bp rate cut is fully priced for April (106%), with the probability of a February cut at 69% (based on an effective cash rate of 4.34%).
- Tomorrow, the local calendar is empty apart from the AOFM's planned sale of A$700mn of the 2.75% 21 November 2027 bond.
BONDS: NZGBS: Richer But Off Bests, May-41 Auction Sees Strong Demand
NZGBs closed with a bull-flattening bias, as benchmark yields fell 7–10bps. However, yields ended 2–4bps off their intraday lows, with the 2-year bond showing the largest deviation from its best levels.
- NZGBs underperformed their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials widening by 1–2bps.
- The NZ Treasury’s sale of May 2041 bonds recorded the highest bid-to-cover ratio since the security's launch in 2020, climbing to 5.25 from 3.61 at November's auction. This improvement followed the recent rise in its yield, boosting investor interest.
- Monthly price indicators released today suggest NZ inflation remains contained, even as there are signs that price momentum may have bottomed out. Nevertheless, the data indicates potential downside risks to the RBNZ’s inflation projections.
- Swap rates closed 4-7bps lower, with the 2s10s curve flatter.
- RBNZ-dated OIS pricing closed 1–5bps softer across meetings today, with late 2025 leading the decline. 47bps of easing is priced for February, with a cumulative 108bps by November 2025.
- Despite today’s softness, ois pricing remains 4–25bps firmer compared to pre-US Payrolls levels last Friday.
- Tomorrow, the local calendar will see the BusinessNZ Manufacturing PMI.
FOREX: USD Pares Early Losses, USD/JPY Back Above 156.00, A$ Down To 0.6200
The USD has steadily recovered from early weakness, with the USD BBDXY index pushing back above 1312.45 in latest dealings (earlier lows were just under 1310).
- Yen is the only currency that has rallied against the USD so far today, although gains have been pared. USD/JPY sits near 156.10 currently, up around 0.25% in yen terms. Earlier lows in the pair were at 155.21, which came after BBG headlines crossed that the BoJ sees a good chance to hike rates next week absent a US shock (likely caused by new policies from the Trump administration) (per BBG sources).
- BoJ hike odds sit above 80% for the Jan meeting, but down from intra-session highs. Earlier Japan PPI data was close to expectations, rising 3.8%.
- AUD/USD got close to 0.6250 earlier, after Dec jobs data comfortably beat expectations. Still, the detail showed all of the jobs created were part time (with full time falling), while the unemployment rate edged up to 4.0% as forecast. AUD/USD is back to 0.6200 currently, off 0.45% versus end NY Wednesday levels.
- NZD/USD has been dragged lower as well, last near 0.5600/05, but is only off around 0.25% at this stage. GBP/USD is off by a similar amount, last near 1.2210/15, while EUR/USD is little changed near 1.0285.
- In the cross asset space, US equity futures have lost a little ground, while regional equities have seen tech sensitive plays gain, but more modest gains elsewhere. US yields are up a touch, but haven't shown strong trends.
- Later we get UK data, including monthly GDP, while in the US initial jobless claims, retail sales and Philly Fed survey.
ASIA STOCKS: Asian Equities Rally Following Cooling US CPI Data
Asian stocks extended gains for a third day, supported by cooling US core inflation, which renewed expectations for Federal Reserve easing this year. The MSCI Asia Pacific Index climbed 1.2% at one point, it trades 0.90% now, the yen strengthened on reports of a potential Bank of Japan rate hike next week. US inflation data showed core CPI rising 0.2% in December, its slowest pace in six months, bolstering investor confidence. Fed officials acknowledged progress on disinflation but emphasized the 2% target remains distant. Swap traders now fully price in a Fed rate cut by July.
- Taiwan equities are leading gains as TSMC rallied 4.60% on optimism ahead of its quarterly results due out today. The TAIEX is 2.75% higher.
- South Korea's Kospi rose 1.1%, despite the central bank surprising the market and keeping rates unchanged.
- Japan's Nikkei is trading 0.30%, while the TOPIX is unchanged, even as reports suggested the Bank of Japan may hike rates soon with the market now pricing in 88% chance of a hike in Jan and 94% for March.
- Hong Kong stocks advanced with the HSI +0.80%, while China mainland equities are unchanged to slightly higher, supported by tech and home appliance shares, while RedNote-related stocks extended their rally amid potential TikTok bans.
- Australia's ASX200 is 1.40% higher, after Financials rallied after US lenders reported strong full-year results and notched their second-most profitable year ever in 2024.
- Key upcoming events include ECB meeting minutes, US jobless claims and retail sales data, China’s GDP, and Eurozone CPI.
OIL: After Yesterday’s Surge, Oil Calm with Eyes on Middle East.
- The US has upped the ante on Russia with the most aggressive use of sanctions as outgoing President Biden looks to leave a mark on the outlook for Ukraine.
- The US has targeted known Russian firms that handle more than 20% of Russian exports as well as insurers and market traders in a bid to halt Russian oil deliveries to key ports.
- The Biden administration is seeking to disrupt the Russian oil supply chain with key buyers like India suggesting that they may no longer buy Russian shipments.
- Whilst the sanctions may take some time to be fully in place, there is clear evidence that shipments are idling at sea as ports in China as port owners are now wary of taking Russian deliveries.
- The International Energy Agency has revised down its forecast for the surplus of oil to 725,000 from 950,000 citing new sanctions from the US, in its monthly report.
- This decline in expected output could result in more supply coming on line by those providers currently on hold as prices have halted their increase.
- Crude inventories have been falling and are down now for eight consecutive weeks.
- Oil prices surged yesterday having spent the early part of the trading day doing very little, WTI hit a low of US$77.24 before surging to $80.77 before closing at $80.04.
- On a low volume trading day a late morning surge in prices quickly evaporated to see WTI at $80.30 into the close.
- Brent followed a similar pattern, hitting a low of US$79.62 before closing at $82.03.
- Brent too had a mid morning surge up to $82.57, before backing off into the Asia afternoon to be at a $82.25
- The day ahead will see markets continue to digest the news and impact of the Russian sanctions as well as news of a ceasefire in the Gaza conflict and its potential ramifications for Middle East tensions.
GOLD: US Inflation Data Gives Gold a Boost.
- The US consumer price index rose less than forecast giving bonds and gold a reason to rally overnight.
- The core CPI rose just +0.2%, having languished at +0.03% for four consecutive months.
- Whilst the CPI print may not predicate a cut in January (following recent stronger than expected jobs data), it does re-ignite the discussion as to rate cuts for the year ahead.
- Gold got a boost on the CPI print, having fallen to US$2,669.44 during the trading day to close at $2,696.32.
- Having peaked in late October as interest rate cut expectations grew, gold given back some of those gains and today’s moves takes bullion back to levels of mid-December.
- UBS has released a report yesterday forecasting gold to reach US$2,850 by year end on trade and geopolitical uncertainties driving investors into the safe haven asset.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 16/01/2025 | 0700/0700 | ** |  GB | UK Monthly GDP |
| 16/01/2025 | 0700/0700 | ** | GB | Trade Balance |
| 16/01/2025 | 0700/0700 | ** | GB | Index of Services |
| 16/01/2025 | 0700/0800 | *** |  DE | HICP (f) |
| 16/01/2025 | 0700/0700 | *** | GB | Index of Production |
| 16/01/2025 | 0700/0700 | ** | GB | Output in the Construction Industry |
| 16/01/2025 | 0900/1000 | ** |  IT | Italy Final HICP |
| 16/01/2025 | 1000/1100 | * |  EU | Trade Balance |
| 16/01/2025 | 1230/1330 | EU | Account of Dec 2024 ECB Monetary Policy Meeting | |
| 16/01/2025 | 1315/0815 | ** |  CA | CMHC Housing Starts |
| 16/01/2025 | 1330/0830 | *** |  US | Jobless Claims |
| 16/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 16/01/2025 | 1330/0830 | *** | US | Retail Sales |
| 16/01/2025 | 1330/0830 | ** | US | Import/Export Price Index |
| 16/01/2025 | 1330/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 16/01/2025 | 1500/1000 | * | US | Business Inventories |
| 16/01/2025 | 1500/1000 | ** | US | NAHB Home Builder Index |
| 16/01/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 16/01/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 16/01/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 16/01/2025 | 1730/1230 | CA | BOC Deputy Gravelle speech to women in markets group. | |
| 17/01/2025 | 0200/1000 | *** |  CN | Fixed-Asset Investment |
| 17/01/2025 | 0200/1000 | *** | CN | Retail Sales |
| 17/01/2025 | 0200/1000 | *** | CN | Industrial Output |
| 17/01/2025 | 0200/1000 | *** | CN | GDP |
| 17/01/2025 | 0200/1000 | ** | CN | Surveyed Unemployment Rate M/M |
| 17/01/2025 | 0700/0700 | *** | GB | Retail Sales |
| 17/01/2025 | 0900/1000 | ** | EU | EZ Current Account |
| 17/01/2025 | 1000/1100 | *** | EU | HICP (f) |
| 17/01/2025 | 1100/1200 | EU | ECB's Cipollone lecture at Crypto Asset Lab conference | |
| 17/01/2025 | 1330/0830 | * | CA | International Canadian Transaction in Securities |
| 17/01/2025 | 1330/0830 | *** | US | Housing Starts |