Highlights:
- Ouster of French government leaves little dent in EUR
- Two-way risk remains for Dec BoJ as dove claims hike not ruled out
- Weekly claims provides last look at jobs markets ahead of Friday NFP
- Treasuries have pared earlier losses to leave them only modestly lower on the day, ahead of a session that’s headlined by jobless claims as a stepping stone before tomorrow’s NFP report (MNI preview here).
- Cash yields are 0.8-2.0bp higher with 3s leading the day’s increase.
- 2s10s at 5.5bp (-0.1bp) have pulled back off yesterday’s brief post-Bessent pick highs of 9.5bps.
- TYH5 trades at 111-03 (-05) having kept to narrow ranges that consolidate yesterday’s rally. Volumes are very low at 230k.
- Yesterday’s high of 111-09 stopped just short of resistance at 111-11 (Dec 3 high) and 111-12+ (50- day EMA). A more concerted push higher could open 111-26 (Oct 22 high).
- Fed Funds futures cumulative cuts from 4.58% effective: 18.5bp Dec, 24bp Jan, 40bp Mar and 62bp Jun.
- Data: Challenger jobs report Nov (0730ET), Weekly jobless claims (0830ET), Trade bal Oct (0830ET)
- Fedspeak: Barkin (’24) speaks on economic outlook in remarks first delivered Nov 12 (1215ET, no Q&A or livestream)
- Bill issuance: US Tsy $85B 4W, $80B 8W bill auctions (1130ET)
MNI US Payrolls Preview: Soft Report Should Cement Dec Cut
Executive Summary
- Nonfarm payrolls growth is expected to bounce sharply to 215k in November in the reversal of October’s strike and weather-related disruption saw a much weaker than expected 12k.
- Revisions will be watched particularly closely after a historically low initial response rate last month, with broad expectations for an upward revision.
- The reversal of strike impact is well known but there’s a wide range of estimates for the initial hit weather, with analyst estimates for a rebound this month ranging from 25k to 110k.
- Analysts are split down the middle in calling for a 4.1% or 4.2% unemployment rate in November after the 4.145% in October. It looks likely the FOMC’s dovish shift to a 4.4% forecast for 4Q24 will be undershot.
- Governor Waller this week made about as explicit an indication as we've received that the base case for the FOMC is to cut again, unless incoming data surprises to the strong side.
- We expect a soft payrolls report to cement expectations of a 25bp cut from the FOMC on Dec 18 (currently 18.5bp priced in Fed Funds futures) whilst a strong report would see next week’s CPI as the decider.
PLEASE FIND THE FULL REPORT HERE: USNFPDec2024Preview.pdf
STIR: Net Short Cover Seen In Front End Of SOFR Strip On Wednesday
OI data points to net short cover through the front 8 SOFR futures during Wednesday’s rally.
- Beyond there saw a mix of net long setting and short cover.
- Upcoming bullet will provide greater colour on STIR markets, including the latest Fed pricing run.
| 04-Dec-24 | 03-Dec-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,261,305 | 1,262,805 | -1,500 | Whites | -27,690 |
SFRZ4 | 1,291,363 | 1,298,572 | -7,209 | Reds | -28,682 |
SFRH5 | 1,064,935 | 1,075,775 | -10,840 | Greens | +2,524 |
SFRM5 | 973,031 | 981,172 | -8,141 | Blues | -8,708 |
SFRU5 | 803,336 | 811,886 | -8,550 |
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SFRZ5 | 939,483 | 946,524 | -7,041 |
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SFRH6 | 554,130 | 566,063 | -11,933 |
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SFRM6 | 596,528 | 597,686 | -1,158 |
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SFRU6 | 637,867 | 634,923 | +2,944 |
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SFRZ6 | 694,541 | 691,795 | +2,746 |
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SFRH7 | 418,787 | 422,758 | -3,971 |
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SFRM7 | 354,208 | 353,403 | +805 |
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SFRU7 | 288,627 | 285,897 | +2,730 |
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SFRZ7 | 287,292 | 291,399 | -4,107 |
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SFRH8 | 199,006 | 205,094 | -6,088 |
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SFRM8 | 153,972 | 155,215 | -1,243 |
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US TSY FUTURES: Net Long Setting In The Wings Dominated On Wednesday
OI data suggests net long setting in the wings of the curve (TU, US & WN futures) provided the largest positioning swings during Wednesday’s rally.
- A mix of more modest long setting and short cover was seen in FV through UXY futures.
| 04-Dec-24 | 03-Dec-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,333,447 | 4,285,006 | +48,441 | +1,919,722 |
FV | 6,021,012 | 6,028,127 | -7,115 | -308,260 |
TY | 4,491,622 | 4,481,803 | +9,819 | +648,484 |
UXY | 2,149,227 | 2,156,416 | -7,189 | -656,880 |
US | 1,850,284 | 1,841,205 | +9,079 | +1,211,254 |
WN | 1,757,856 | 1,742,783 | +15,073 | +3,137,843 |
|
| Total | +68,108 | +5,952,162 |
UK: PM Delivers Major Policy Speech On 'Plan For Change'
Prime Minister Sir Keir Starmer is delivering a major policy speech in the coming minutes titled 'Plan for Chance'. Livestream here. In the speech, Starmer is set to outline specific targets intended to improving life in the UK focused on areas including policing, housing, education, and energy. Some headlines for the policy document: 'We will measure living standards through real household disposable income per person and GDP per capita by the end of parliament'
- Document 'repeats long-term mission to deliver the highest sustained growth in the G7.' Policy doc: 'Autumn budget was once-in-a-parliament budget to wipe the slate clean', but also says 'we will need to make tough decisions'. The document targets working people 'having more money in their pocket'. Included in the doc is the 1.5mn house-building target and pledges to fast track planning decisions on 150 infrastructure projects.
- The opposition centre-right Conservatives have claimed that the package marks an “emergency relaunch” amid declining polling numbers, saying that Starmer's centre-left Labour party has "no plan for government".
- On energy policy, The Daily Telegraph reports, "Sir Keir Starmer has watered down his clean energy promise. The document accompanying the Prime Minister’s “plan for change” speech said the UK will be “on track to at least 95 per cent clean power by 2030”. In November 2023 Labour promised the nation would be “leading the world with 100 per cent clean power by 2030”. The party’s manifesto promised “clean power by 2030” with no conditions."
SOUTH KOREA: Impeachment Vote On 7 Dec, Police To Investigate Yoon 'Sedition'
Prosecutor-General Shim Woo-jung has instructed police to investigate President Yoon Suk-yeol for potential sedition in relation to his declaration of martial law on 3 December. Alongside the investigation into Yoon authorities have barred former Minister of National Defense Kim Yong-hyun, who resigned on 4 Dec, from leaving the country as he also faces an investigation into potential sedition. Woo Jong-soo, head of the National Investigation Headquarters of the National Police Agency, confirmed to the National Assembly's Public Administration and Security Committee that the case against Yoon had been assigned and will continue according to procedure.
- Under South Korean law, the most serious cases of sedition/insurrection can carry the punishment of life imprisonment or even the death penalty.
- Separately, lawmakers are set to hold an impeachment vote on Saturday 7 December at around 1900KST (0500ET, 1000GMT). In order to strip Yoon of his powers and refer impeachment to the constitutional court, two-thirds of the National Assembly's 300 members must vote in favour.
- Han Dong-hoon, leader of the conservative People Power Party (PPP) from which Yoon hails, has said his lawmakers will block impeachment but that he has asked Yoon to resign from the party. It would only need eight of the PPP's 108 lawmakers to defect to see Yoon impeached.
- In the same session as the impeachment vote, the opposition liberal Democratic Party of Korea could look to hold another vote on the special prosecutor's bill regarding a corruption investigation into First Lady Kim Keon-hee. The initial vote on Kim passed in November, but President Yoon exercised his right to force a re-vote.
- There has been speculation the PPP could boycott the impeachment vote given that two-thirds of all members are required for passage. However, if they do so, they risk the special prosecutor's bill against the first lady passing as it only needs the support of two-thirds of members with an overall majority (151+) members present.
FOREX: JPY on Front Foot, Vols Show Market Gearing for Payrolls
- JPY trades well early Thursday, stronger against most others in G10 as markets continue to speculate over the likelihood of a December hike at the Bank of Japan. Pricing for a 25bps rate hike backtracked sharply yesterday on the back of an MNI policy report that pointed to political pressures potentially delaying an imminent tightening cycle. Overnight, BoJ's Nakamura injected further two-way risk, by not ruling out a rate hike in December - counter to his usually dovish stance on rates.
- USD/JPY was marked lower to 149.66 overnight, before rebounding well to trade in only minor negative territory headed through to the NY crossover. The greenback is generally weaker, providing some reprieve for EUR/USD, GBP/USD and others, but recent ranges are largely being respected, with volumes on the light side of average.
- In vol space, overnight implied G10 rates have been creeping higher - particularly in the EUR. EUR/USD overnight implied printed above 15 points this morning for only the third time this year (ahead of the Presidential election, and amid French political uncertainty).
- Markets look toward the US and Canadian trade balance data, as well as weekly claims and the Canadian Ivey PMI for November. The speaker schedule sees BoE's Greene and Fed's Barkin.
- Beyond that, markets creep toward the November payrolls print at which consensus expects 215k jobs added over the month, and the whisper number has been creeping higher toward that mark this week - last at 200k, from 170k at the beginning of December.
OPTIONS: Expiries for Dec05 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0450(E1.5bln), $1.0475-85(E1.1bln), $1.0495-05(E1.8bln), $1.0525(E915mln), $1.0550-65(E2.6bln), $1.0580-00(E1.8bln)
- USD/JPY: Y150.00($731mln),
- GBP/USD: $1.2600(Gbp594mln)
- AUD/USD: $0.6590-00(A$1.7bln)
- USD/CAD: C$1.4215($644mln)
- USD/CNY: Cny7.1900($1.3bln), Cny7.2000($1.5bln), Cny7.2500($1.8bln)
EQUITIES: E-Mini S&P Targets Fibonacci Projection Level at $6106.36 Next
Eurostoxx 50 futures have traded higher this week and the contract is holding on to its recent gains. The latest move higher undermines a recent bearish theme. Price has traded through the 50-day EMA, at 4864.78. The clear breach of this average strengthens a bullish theme and signals scope for a stronger recovery, opening 4961.00, the Nov 6 high. Key support lies at 4699.00, the Nov 19 low. A break of it would resume the recent bear cycle. The S&P E-Minis contract maintains a bullish tone and continues to appreciate. This confirms a resumption of the uptrend and signals scope for a continuation near-term. Note that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. Sights are on the 6106.36 next, a Fibonacci projection. Initial support to watch lies at 5990.65, the 20-day EMA.
- Japan's NIKKEI closed higher by 119.21 pts or +0.3% at 39395.6 and the TOPIX ended 1.64 pts higher or +0.06% at 2742.24.
- Elsewhere, in China the SHANGHAI closed higher by 4.205 pts or +0.13% at 3368.855 and the HANG SENG ended 182.02 pts lower or -0.92% at 19560.44.
- Across Europe, Germany's DAX trades higher by 37.51 pts or +0.19% at 20268.58, FTSE 100 higher by 7.12 pts or +0.09% at 8342.51, CAC 40 up 24.17 pts or +0.33% at 7326.85 and Euro Stoxx 50 up 22.81 pts or +0.46% at 4941.3.
- Dow Jones mini down 1 pts or 0% at 45105, S&P 500 mini down 3.5 pts or -0.06% at 6095, NASDAQ mini down 33.5 pts or -0.16% at 21502.75.
COMMODITIES: Bearish Threat in WTI Futures Present, Tuesday's Gains Mostly Pared
Despite Tuesday’s gains, a bearish threat in WTI futures remains present and the Nov 25 move lower reinforces this theme. A resumption of bearish price action would open $65.74, the Oct 1 low, and $63.90, the Sep 10 low and key support. For bulls, a stronger reversal to the upside would instead refocus attention on the key short-term resistance at $77.04, the Oct 8 high. Initial firm resistance to watch is unchanged at $72.41, the Nov 7 high. Gold 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, highlighting a dominant uptrend. Resistance to watch is $2721.4, the Nov 25 high. Clearance of this level would highlight a bullish short-term development. Key support to monitor is $2536.9, the Nov 14 low.
- WTI Crude up $0.41 or +0.6% at $68.98
- Natural Gas up $0.06 or +2.1% at $3.107
- Gold spot down $4.69 or -0.18% at $2645.24
- Copper up $1.1 or +0.26% at $421.5
- Silver up $0.01 or +0.04% at $31.3132
- Platinum up $7.85 or +0.83% at $948.7
| Date | GMT/Local | Impact | Country | Event |
| 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 |
| 05/12/2024 | 1500/1000 | * | CA | Ivey PMI |
| 05/12/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 05/12/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 05/12/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 05/12/2024 | 1700/1700 |  GB | BOE's Greene panellist at the FT Boardroom "global economics: what is the path to sustained growth?" | |
| 05/12/2024 | 1715/1215 | US | Richmond Fed's Tom Barkin | |
| 06/12/2024 | 2330/0830 | ** |  JP | average wages (p) |
| 06/12/2024 | 2330/0830 | ** | JP | Household spending |