MNI US OPEN - ECB's Guindos Retains Premature Rate Cut Talk

NEWS

US/CHINA (WSJ): Biden Administration Explores Raising Tariffs on Chinese EVs

The Biden administration is discussing raising tariffs on some Chinese goods, including electric vehicles, in an attempt to bolster the U.S. clean-energy industry against cheaper Chinese exports, people familiar with the matter said. Biden administration officials, long divided over trade policy, have left in place Trump-era tariffs on roughly $300 billion of Chinese goods. But officials at the White House and other agencies are debating the levies again, the people said, with an eye on wrapping up a long-running review of the tariffs early next year.

US/CHINA (BBG): US Senator Plans China Sanctions ‘From Hell’ for a Taiwan Attack

Senator Lindsey Graham said he’ll help draft sanctions to impose on China if it tried invading Taiwan. The Republican said Wednesday he’d work with lawmakers from both parties to “create a robust defense supplemental for Taiwan and second, draft pre-invasion sanctions from hell to impose on China if they take action to seize Taiwan.” He added: “To communist China, if you think you can bully your way into destroying world order without consequences, you will be making Putin’s decision to invade Ukraine look wise.”

US (NYT): U.S. Releases Ally of Venezuelan President in Exchange for 10 Americans

The release of Alex Saab, a top ally of Venezuela’s president, comes as the United States is trying to push the authoritarian government to hold fair elections. The United States released a close ally of President Nicolás Maduro of Venezuela on Wednesday in exchange for 10 jailed Americans and a defense contractor known as “Fat Leonard,” who is at the center of one of the U.S. Navy’s largest corruption cases. The Maduro government will also release 20 Venezuelan political prisoners and Roberto Abdul, an opposition leader in Venezuela, U.S. officials said.

ECB (MNI): De Guindos Retains Premature Rate Cut Talk

"Once we see inflation is clearly converging in a stable manner to our target of 2%, monetary policy might then start to ease. But it's still too early for that to happen." de Guindos questioned on rate cuts: "Q: When can we expect to see the first interest rate cuts? If sustained for a sufficiently long period of time, current interest rates will help bring inflation down to 2%. We are data dependent. The data have been favourable but still not enough for us to change our monetary policy. It's therefore too early to talk about a cut in interest rates."

ISRAEL (MNI): UN Ceasefire Vote Looms, But Little Indication of Passage

The UN Security Council is due to hold another vote on a resolution that calls for a suspension of the conflict in Gaza between Israel and Hamas. Intense negotiations have so far failed to come up with a text that would not draw a veto from the United States, which has raised doubts of a UN monitoring system for aid entering Gaza as Israel claims security risks would be posed if its forces were unable to search cargo entering the strip. While the US' tone has changed somewhat in relation to the Israel-Hamas war, with greater focus on advocating Israeli restraint, the Biden administration has vetoed two previous resolutions on a ceasefire and has indicated it would be willing to do the same again.

CHINA (MNI): Large Banks to Cut Deposit Rates for Fourth Time This Year

Guangzhou Daily writes that China's large banks are to cut their deposit rates on Friday. This is not the first time we've seen China's largest banks cut deposit rates this year - in fact this would be the fourth instance. Seen as a step to protect profitability. Back in September, major banks (followed later by rural banks) made a coordinated cut to deposit rates. One-year annualized rate for deposits was lowered by 10 basis points to 1.55%, while the five-year rate was cut by 25 basis points to 2.25%.

CHINA (BBG): China Bans Exports of Some Rare-Earth Processing Technologies

Rare earth extraction, processing and utilization technology is among a list of technologies included in China’s export ban, the Ministry of Commerce says in a statement on its website. List effective Thursday.

CHINA/PHILIPPINES (BBG): China Warns Philippines Ties Face ‘Serious Difficulties’

China’s Foreign Minister Wang Yi told his Philippine counterpart that relations between the two countries are now facing “serious difficulties” amid increased tensions in the South China Sea. The Philippines has changed its stance, reneged on its commitments and continues to “provoke and cause trouble at sea,” Wang told Philippine Foreign Affairs Secretary Enrique Manalo in a phone call on Wednesday, according to a statement from China’s Foreign Ministry.

MNI BOJ REVIEW - DECEMBER 2023: No Hints of Early 2024 Policy Shift

The BoJ December meeting delivered few surprises. All policy parameters were left unchanged, while forward guidance remained dovish. Arguably the latter was more important, as forward guidance may need to change before the BOJ delivers a major policy shift. Hence such a move is unlikely at the January policy meeting. The BoJ statement and Governor Ueda's press conference suggested confidence in hitting the 2% inflation target in a stable and sustainable manner for fiscal year 2025 had risen versus the November policy meeting. However, it still needs to see more evidence around the strength of the wage-price cycle before shifting policy.

JAPAN (BBG): Japan to Unveil $784 Billion Budget, Adding to Debt Burden

Japan is set to propose an annual budget that keeps spending at historically high levels after factoring out the impact of reduced pandemic-related outlays. The initial budget for the fiscal year beginning in April will be ¥112 trillion ($784 billion) compared with the record ¥114.4 trillion for the current year, according to a document obtained by Bloomberg Thursday. The framework will be submitted to the cabinet for approval on Friday.

MNI CBRT PREVIEW - DECEMBER 2023: Slowing Down as Peak Nears

Further tightening from the CBRT is expected, with the benchmark one-week repo rate widely expected to be raised by 250bps to 42.50%, marking a slowdown in pace from the 500bp moves in November, October, September and 750bps in August. Given that inflation is still running above 60% Y/Y, additional tightening may still be required, though recent central bank communication has signalled that the end of the tightening cycle is nearing.

BI (BBG): Bank Indonesia Holds Rate, Signals It’s In No Rush to Ease

Bank Indonesia left its benchmark interest rate unchanged for a second straight meeting to keep inflation under control in the face of surging food costs, even as policymakers signaled they were in no hurry to begin easing policy. The decision to keep the BI rate — formerly called the seven-day reverse repurchase rate — at a four-year high of 6% was predicted by all 29 economists in a Bloomberg survey. Governor Perry Warjiyo, who late last month had hinted that the rate will stay at the current level for some time, told reporters Thursday that the bank need not necessarily follow the US Federal Reserve in cutting rates.

ARGENTINA (BBG): Milei Unveils Broad Reforms to Liberalize Argentina Economy

President Javier Milei announced sweeping reforms to reduce the hand of the state in Argentina’s economy, including steps to privatize companies, facilitate exports and end price controls. The libertarian leader listed 30 initial points of his plan in a televised address Wednesday night, adding they’re part of a broader package containing over 300 measures. “I’m signing an urgent decree that will kick-start the process of economic deregulation that Argentina needs so much,” he said in the speech delivered from the presidential palace, flanked by his entire cabinet.

DATA

UK NOV PSNB GBP+13.41 BN (MNI)
UK NOV PSNCR GBP12.45 BN (MNI)
UK NOV PSNB-X GBP+14.33 BN (MNI)
UK NOV CGNCR GBP17.41 BN (MNI)

FRANCE DEC MANUF SENTIMENT AT 100 (MNI)

GLOBAL POLITICAL RISK: MNI Publishes Political Event Calendar 2024

MNI's Political Risk team has published its Political Event Calendar for 2024. In our Political Risk calendar for 2024 we include details on the major political events scheduled to take place in developed and major emerging markets over the course of the next 12 months. We only include those events that have a set date or period in which they will take place.

• Moreover, in a year that is already packed with major market-moving elections, summits, bilaterals, and conferences, there are a number of potential event that are seen as likely to take place but have no confirmed date, such as snap elections in Japan or the United Kingdom.
• The plethora of dates outlined in the table below, combined with unconfirmed but expected events; ongoing conflicts in Ukraine, the Middle East and elsewhere; continued political, economic, and resource competition between global powers; and the ever-present prospect of ‘black swan’ events will ensure that political risks continue to have a significant impact on financial and commodity markets through 2024.

FOREX: Shaky Equities Could Dictate Dollar Trends into New Year

• The JPY is furtively the firmest performer in G10, rising against all others to put USD/JPY through yesterday's lows and narrow the gap with the levels seen ahead of the BoJ decision earlier in the week. The 142.25 level marks key support ahead, a break below here would be bearish.
• The late sell-off for US equities on Wednesday has reminded markets that price action can remain volatile despite the proximity to the holiday break. US futures are paring losses, indicating a higher open on Wall Street later today, however the e-mini S&P remains a good 50 points off yesterday's highs.
• The USD Index sits modestly lower. Early month-end rebalancing models look to the sharp global stock market rally across December as pointing to greenback sales into month-end, of which flows may be front-loaded due to the staggered nature of market closures across the next week or so.
• GBP trades poorly, with GBP/USD holding the entirety of the post-UK CPI losses. The pair has plumbed a new low at 1.2612, however losses are deemed corrective in nature, as the underlying technical bull trend remains intact. The picture would deteriorate on a move below the 1.2500 handle - the Dec13 low - and the 200-dma of 1.2514.
• US PCE data and the weekly jobless claims numbers take focus during US hours. GDP sees its third revision, meaning markets may pay little attention to the backward-looking release. The Q3 data is expected unrevised at an annualized rate of 5.2%. ECB's Lane is set to speak, however his appearance yesterday may mean fresh policy messaging is unlikely.

BONDS: EGBS/Gilts Off Highs But Remain Firmer on the Day

Core/semi-core EGBs and Gilts are off intraday highs but remain a touch firmer on the day, with little meaningful headline flow/data to note this morning.

• The sharp program-driven sell-off in US equities just before the US close yesterday provided a tailwind for global core FI overnight, and helped instruments off Asia-Pac session lows.
• Bunds are +1 tick at 137.83 and Gilts +18 ticks at 102.96, with dovish impulses from the lower-than-expected UK CPI yesterday still providing some support to the latter.
• The German cash curve twist steepens, pivoting on the 10-year point, with yields -1.1bps lower to 1.2bp higher. Gilt yields are lower across the curve.
• Periphery spreads are broadly unchanged to Bunds. Note that Portugal released its 2024 funding plan this morning (see MNI FI bullets at 0954 GMT for details).
• The remainder of today's docket is light, with ECB's Lane at 1600GMT (participating in an "Economics Winter Workshop") potentially of interest.

EQUITIES: Sharp Sell-Off in E-Mini S&P Deemed Technically Corrective For Now

A bullish theme in Eurostoxx 50 futures remains intact and the latest pullback appears to be a correction. Recent gains confirmed, once again, a resumption of the uptrend and this has maintained the bullish price sequence of higher highs and higher lows. Moving average studies are in a bull-mode position too, signalling a rising cycle. The focus is on 4636.70, a long-term Fibonacci retracement. Support to watch is at 4503.90, the 20-day EMA. A bullish theme in S&P e-minis remains intact and yesterday’s abrupt sell-off appears to be a correction - for now. This week’s fresh trend highs, confirm once again a resumption of the uptrend that started Oct 27. The contract has recently cleared resistance at 4738.50, the Jul 27 high, reinforcing current positive trend conditions. Sights are on 4854.75 next, a Fibonacci projection. On the downside, initial firm support lies at 4681.74, the 20-day EMA.

• Japan's NIKKEI closed lower by 535.47 pts or -1.59% at 33140.47 and the TOPIX ended 23.4 pts lower or -1% at 2325.98.
• Elsewhere, in China the SHANGHAI closed higher by 16.605 pts or +0.57% at 2918.715 and the HANG SENG ended 7.32 pts higher or +0.04% at 16621.13.
• Across Europe, Germany's DAX trades lower by 60.31 pts or -0.36% at 16673.22, FTSE 100 lower by 14.88 pts or -0.19% at 7700.42, CAC 40 down 27.76 pts or -0.37% at 7555.67 and Euro Stoxx 50 down 17.32 pts or -0.38% at 4516.5.
• Dow Jones mini up 181 pts or +0.48% at 37624, S&P 500 mini up 27 pts or +0.57% at 4776.5, NASDAQ mini up 119.75 pts or +0.71% at 16885.5.

COMMODITIES: Recent Gains in WTI Futures Appear Corrective with Bearish Conditions Intact

Bearish conditions in WTI futures remain intact and recent gains still appear to be a correction. Resistance to watch is $76.06, the 50-day EMA. A clear break of this hurdle would strengthen a bullish theme and highlight a stronger reversal. For bears, moving average studies are in a bear-mode position, highlighting a downtrend. The bear trigger lies at $67.98, the Dec 13 low. A break of this level would open $65.24, the May 4 low and a key support. Gold is in consolidation mode. The Dec 13 reversal signals the end of the recent Dec 4 - 13 corrective pullback and highlights a bullish theme. MA studies are in a bull-mode position too, highlighting an uptrend. A continuation higher would signal scope for a climb towards key resistance and the Dec 4 all-time high of $2135.4. A break of this level would resume the primary bull trend. Initial firm support lies at $1973.2, the Dec 13 low.

• WTI Crude up $0.21 or +0.28% at $74.4
• Natural Gas down $0.01 or -0.25% at $2.44
• Gold spot up $3.92 or +0.19% at $2035.8
• Copper down $1.25 or -0.32% at $389
• Silver up $0.08 or +0.35% at $24.235
• Platinum up $0.79 or +0.08% at $964.98