Highlights:
- PBOC stance switch is first major policy shift in over 10 years
- Markets narrow in on US inflation, core CPI seen printing 0.28%
- Fed inside pre-meeting media blackout
US TSYS: PBOC Stimulus Sees Bear Steepening But On Low Volumes
- Treasuries are mostly lower on the day after selling impetus following a dovish monetary policy tweak from the PBOC, although volumes have been light as US CPI on Wednesday and approaching year-end seems to weigh on activity.
- Cash yields are unchanged (2s) to 2bp higher (30s).
- 2s10s has steepened to 6.3bps (+1.2bp) but remains within last week’s range.
- TYH5 trades at 111-13 (- 01+) off session highs of 111-18+ but has remained within Friday’s range throughout the overnight session, all on very low cumulative volumes of 235k.
- Friday’s post-payrolls high of 111-20+ cleared the 50-day EMA and strengthens a bull cycle. It’s now an initial resistance level after which lies 111-23 (38.2% retrace of Sep 11 – Nov 15 bear leg). To the downside, support at 110-18 (Dec 4 low).
- Data: Wholesale inventories, trade sales Oct F/Oct (1000ET), NY Fed 1-Yr Inflation Nov (1100ET)
- Fedspeak: FOMC media blackout
- Bill issuance: US Tsy $81B 13W & $72B 26W bill auctions (1130ET)
STIR: Fed Rate Path Consolidates Payrolls Dovish Tilt
- Fed Funds implied rates broadly consolidate Friday’s dovish tilt after the nonfarm payrolls report saw the unemployment rate surprise higher along with arguably underwhelming revisions to the prior two months.
- Cumulative cuts from 4.58% effective: 22bp Dec, 29bp Jan, 46bp Mar and 67bp Jun.
- SOFR terminal yields at 3.58% (looking out to end-2027) are only 3.5bp lower since the payrolls report but have added an entire 25bp cut since the high seen in the week after the presidential election.
- Today sees a quiet macro docket, with data limited to the October wholesale release and NY Fed inflation expectations whilst the FOMC is now in blackout.
- See our recap of Friday’s payrolls report here and a broader review of last week’s data and notable Fedspeak here.
- Wednesday’s US CPI report remains in focus – see our earlier summary table of analyst unrounded core CPI estimates ahead of the full MNI US CPI preview that will be published later today.
US OUTLOOK/OPINION: Core CPI Seen At Another 0.28% In Nov, But Softer Core PCE
- We currently see analyst unrounded estimates looking for core CPI inflation of 0.28% M/M in November for the same pace as in October.
- Headline CPI inflation is seen at a similar rate of 0.27% M/M in Nov after 0.24% M/M in Oct (i.e. a milder acceleration than a rounded 0.3 after 0.2 would suggest).
- Note that whilst core CPI inflation is expected to continue at the same pace in November, early tracking for core PCE points to a moderation to ~0.22% M/M after the 0.27% M/M in October (Nov released Dec 20).
- The full MNI US CPI Preview will be published later today ahead of Wednesday's release.
CHINA: Politburo Provides Dovish Monetary Policy Tweak, First Change In Stance in a decade
The readout following the Chinese Politburo’s latest meeting on the economy provides the first tweak in the country’s monetary policy stance since ’11, as the body points to a “moderate loosening” in monetary policy.
- The Politburo also pointed to more proactive fiscal policy, extending the recent theme there.
- The body then went on to stress that it will strengthen counter-cyclical policy adjustments and boost consumption forcefully.
- Focus areas for the support measures are familiar at first glance, although the language is more forceful in some instances.
- Chinese equities higher following the headlines, while USD/CNH falls around 100 pips to ~7.2750.
- Broader G10 FX trade sees modest pressure on the USD via the rest-of-the-world growth channel, AUD now the outperformer on the day, while NZD pares some losses against G10 peers.
- Broader equity index futures edge higher.
US TSY FUTURES: Long Setting Dominated After NFPs
OI data points to net long setting across the curve in reaction to Friday’s NFP print, with the largest net DV01 equivalent positioning swings coming in UXY, FV & WN futures.
- Adjustments elsewhere were more modest, suggesting that short cover provided a bit more of an offset in TU, TY & US futures.
| 06-Dec-24 | 05-Dec-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,313,988 | 4,313,117 | +871 | +34,368 |
FV | 6,019,575 | 5,975,692 | +43,883 | +1,901,734 |
TY | 4,463,366 | 4,463,120 | +246 | +16,445 |
UXY | 2,219,147 | 2,187,606 | +31,541 | +2,889,644 |
US | 1,852,861 | 1,848,750 | +4,111 | +549,894 |
WN | 1,769,306 | 1,761,836 | +7,470 | +1,556,939 |
|
| Total | +88,122 | +6,949,024 |
STIR: Net Long Setting Further Out The Strip Dominated Following NFP Data
OI data suggests that net long setting in SFRH6 through SFRU7 dominated from a positioning standpoint in the wake of Friday’s NFP release, although it was net short cover in SFRZ5 that provided the single largest net positioning swing.
- We will provide greater colour on STIRs and the latest Fed pricing run in an upcoming STIR bullet.
| 06-Dec-24 | 05-Dec-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,232,323 | 1,260,057 | -27,734 | Whites | -6,892 |
SFRZ4 | 1,310,083 | 1,297,497 | +12,586 | Reds | +5,002 |
SFRH5 | 1,075,487 | 1,068,155 | +7,332 | Greens | +40,099 |
SFRM5 | 987,585 | 986,661 | +924 | Blues | +8,361 |
SFRU5 | 824,651 | 805,361 | +19,290 |
|
|
SFRZ5 | 896,402 | 922,725 | -26,323 |
|
|
SFRH6 | 560,493 | 555,083 | +5,410 |
|
|
SFRM6 | 605,644 | 599,019 | +6,625 |
|
|
SFRU6 | 642,550 | 632,506 | +10,044 |
|
|
SFRZ6 | 714,210 | 692,399 | +21,811 |
|
|
SFRH7 | 419,262 | 416,715 | +2,547 |
|
|
SFRM7 | 358,155 | 352,458 | +5,697 |
|
|
SFRU7 | 293,220 | 286,526 | +6,694 |
|
|
SFRZ7 | 287,297 | 288,898 | -1,601 |
|
|
SFRH8 | 200,859 | 198,380 | +2,479 |
|
|
SFRM8 | 154,546 | 153,757 | +789 |
|
|
US TSY FUTURES: Asset Managers Add to Net Long, Hedge Funds Trim Net Short
The latest CFTC CoT report revealed that asset managers added to their overall net long position in DV01 equivalent terms, as net long setting in UXY and US futures outweighed long cover in all other contracts. The cohort remains net long across all contracts.
- Meanwhile rounds of hedge fund short setting (UXY & US) were outweighed by short cover elsewhere (in DV01 equivalent terms). The cohort remains net short across all contracts.
- Overall non-commercial positioning remains net short across all contracts.
- CFTC CoT positioning metrics will be skewed by the presence of basis trades.
Source: MNI - Market News/CFTC/Bloomberg
FOREX: AUD Firms, JPY Slips on China Policy Tweak
- The greenback is slightly softer, with the JPY similarly backtracking after risk sentiment saw support on the back of China headlines alongside the European open. China's Politburo meeting ended with a firmer commitment to easing and propping up the economy next year, with the central bank also making a major dovish shift to monetary policy for the first time since 2011.
- As such, equity markets are firmer in Europe, however US futures are yet to receive the full benefits, pointing to a modestly lower open on Wall Street later today. AUD and NZD are the session's best performers in the interim.
- News from China this morning has provided a boost to risk sentiment across FX543wf markets, with AUD (+0.88) leading the G10 charge. We noted the monetary policy stance tweak and fiscal language used today reduces the odds of a meaningful move lower in the country's GDP growth target for '25. Despite AUDUSD’s advance, trend conditions remain bearish and resistance is at 0.6497, the 20-day EMA. This average has capped gains well in recent weeks.
- Focus for the remainder of Monday trade turns to the NY Fed's 1-year inflation expectations print as well as an appearance from BoE's Ramsden. The Fed have entered the their pre-meeting media blackout - leaving the speaker schedule more quiet than usual.
OPTIONS: Expiries for Dec09 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0600(E960mln), $1.0625(E602mln)
- USD/JPY: Y152.50($1.0bln)
- AUD/USD: $0.6425-40($595mln)
- USD/CAD: C$1.3980-00($585mln)
- USD/CNY: Cny7.1900($580mln)
EQUITIES: S&P 500 & NASDAQ 100 E-minis Tick Lower As China Probes Nvidia
Fresh session lows for S&P 500 & NASDAQ 100 e-minis following news that Nvidia is being probed by the Chinese authorities on anti-monopoly grounds.
- The tech giant is now indicated 2.1% lower pre-market.
- E-mini moves are relatively limited at this stage.
- Contracts had already traded away from session highs as optimism surrounding the dovish tweak in the Chinese monetary policy stance proved short-lived.
- Marginal outperformance in the DJIA e-mini since the headlines, given relative sensitivity to tech.
The S&P E-Minis contract maintains a bullish tone and price is trading at its latest highs. Recent gains confirm a resumption of the uptrend and signal scope for a continuation near-term. Note that moving average studies are in a bull-mode set-up. Eurostoxx 50 futures traded higher last week and the contract is holding on to its latest gains. The move higher undermines a recent bearish theme. Price has traded through the 50-day EMA, at 4873.27.
COMMODITIES: Bearish WTI Threat Remains
Gold is unchanged and continues to trade inside a tight range, for now. The long-term trend condition remains bullish and the Oct 31 - Nov 14 bear leg appears to have been a correction. Moving average studies are in a bull-mode position. A bearish threat in WTI futures remains present and recent weakness reinforces this theme. A continuation down would open $65.74, the Oct 1 low, and $63.90, the Sep 10 low and key support.
| Date | GMT/Local | Impact | Country | Event |
| 09/12/2024 | 1300/1300 |  GB | BOE's Ramsden speech at OMFIF "Financial stability and the Bank of England's toolkit" | |
| 09/12/2024 | - |  JP | Economy Watchers Survey | |
| 09/12/2024 | - |  EU | ECB's Cipollone in Eurogroup meeting | |
| 09/12/2024 | 1500/1000 | ** |  US | Wholesale Trade |
| 09/12/2024 | 1600/1100 | ** | US | NY Fed Survey of Consumer Expectations |
| 09/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 09/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 10/12/2024 | 0330/1430 | *** |  AU | RBA Rate Decision |
| 10/12/2024 | 0700/0800 | *** |  DE | HICP (f) |
| 10/12/2024 | 0700/0800 | *** |  NO | CPI Norway |
| 10/12/2024 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 10/12/2024 | 0900/1000 | * |  IT | Industrial Production |
| 10/12/2024 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 10/12/2024 | 1100/0600 | ** | US | NFIB Small Business Optimism Index |
| 10/12/2024 | - | *** |  CN | Trade |
| 10/12/2024 | - | *** | CN | Money Supply |
| 10/12/2024 | - | *** | CN | New Loans |
| 10/12/2024 | - | *** | CN | Social Financing |
| 10/12/2024 | - | EU | ECB's De Guindos in ECOFIN meeting | |
| 10/12/2024 | 1330/0830 | ** | US | Non-Farm Productivity (f) |
| 10/12/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 10/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 10/12/2024 | 1700/1200 | *** | US | USDA Crop Estimates - WASDE |
| 10/12/2024 | 1800/1300 | *** | US | US Note 03 Year Treasury Auction Result |