MNI US OPEN - Euro Area Annual Inflation Up to 2.4% in Dec
EXECUTIVE SUMMARY
- US ADDS TENCENT AND TESLA’S CHINA BATTERY MAKER TO BLACKLIST
- CARNEY & FREELAND SEEN AS EARLY FRONTRUNNERS FOR LIBERAL LEADERSHIP
- CHINA’S CENTRAL BANK BUYS MORE GOLD AS PRICES TRADE NEAR RECORD
- EUROZONE DECEMBER INFLATION HIGHER, CORE UNCHANGED
Figure 1: Euro area annual inflation up to 2.4% in December
Source: Eurostat
NEWS
US (BBG): US Dockworkers to Restart Talks With Jobs-for-Automation Offer
A US dockworkers’ union and their employer group will meet in New Jersey on Tuesday with just over a week to hammer out a deal on a new labor contract or risk halting roughly half of all the country’s container volumes. A strike that would shut every major US East and Gulf coast port is all but certain if the two sides can’t clear the highest hurdles before a Jan. 15 deadline - or agree on another extension.
US (FT): US Corporate Bankruptcies Hit 14-Year High as Interest Rates Take Toll
US corporate bankruptcies have hit their highest level since the aftermath of the global financial crisis as elevated interest rates and weakened consumer demand punish struggling groups. At least 686 US companies filed for bankruptcy in 2024, up about 8 per cent from 2023 and higher than any year since the 828 filings in 2010, according to data from S&P Global Market Intelligence.
US/CHINA (BBG): US Adds Tencent and Tesla’s China Battery Maker to Blacklist
The US has blacklisted Tencent Holdings Ltd. and Contemporary Amperex Technology Co. Ltd. for alleged links to the Chinese military, targeting the world’s biggest gaming publisher and top electric-vehicle battery maker in a surprise move weeks before Donald Trump takes office. CATL, a major supplier to Tesla Inc., joined Tencent on a Federal Register of entities deemed to have ties with the People’s Liberation Army. Both companies protested their inclusion as a mistake, saying they have no ties with the military.
US/CHINA (BBG): Yellen Tells China’s Vice Premier Hacks Raise ‘Serious Concern’
US Treasury Secretary Janet Yellen told China’s Vice Premier He Lifeng of her “serious concern” regarding “malicious cyber activity” a week after the US said Chinese state-sponsored hackers had breached the Treasury Department’s computer networks. Yellen also warned of consequences for Chinese companies that support Russia in its invasion of Ukraine and discussed Chinese industrial policies, including overcapacity, that she said have harmed US companies and workers, according to a Treasury Department account of the virtual meeting on Monday.
CANADA (MNI): Carney & Freeland Seen as Early Frontrunners for Liberal Leadership
Following the 6 Jan announcement by PM Justin Trudeau that he would be resigning as leader of the governing centre-left Liberal Party of Canada (LPC), focus has turned to who could emerge as his successor as LPC leader and as such prime minister. While nobody has even yet declared their candidacy, political betting markets are showing two early favourites in the form of former finance minister and deputy PM Chrystia Freeland and former BoC and BoE governor Mark Carney. Data from Polymarket shows bettors assigning a 44% implied probability Carney wins the LPC leadership, with Freeland a little behind on 37%. In third and fourth place respectively are incumbent Finance Minister Dominic LeBlanc (10%) and Foreign Minister Melanie Joly (4.6%).
CHINA (BBG): China’s Central Bank Buys More Gold as Prices Trade Near Record
China’s central bank expanded its gold reserves for a second month in December, signaling renewed appetite after temporarily pausing purchases last year as prices soared. Bullion held by the People’s Bank of China rose to 73.29 million fine troy ounces in December, from 72.96 million in the previous month, according to data released Tuesday. The central bank resumed adding to its gold reserves in November after a 6-month pause.
AUSTRIA (MNI): FPÖ's Kickl to Hold 1st Presser Since Taking Mandate at 1500CET
Herbert Kickl, leader of the right-wing populist Freedom Party of Austria (FPÖ) will hold a press conference at 1500CET (0900ET, 1400GMT) to deliver his first public comments since being tasked by President Alexander van der Bellen with forming a new governing coalition. The slogan for the address will be "Governing Austria honestly." Kickl met with van der Bellen on 6 Jan and was instructed to seek agreement with the conservative Austrian People's Party (ÖVP) and its new chairman Christian Stocker.
DATA
EUROZONE DATA (MNI): Eurozone December Inflation Higher, Core Unchanged
- EUROZONE DEC FLASH HICP +2.4% Y/Y
- EUROZONE DEC FLASH CORE HICP +2.7% Y/Y
Euro area inflation rose again in December, the data from Eurostat showed, but it was at the lower end of economists' expectations. The headline inflation number rose to a preliminary 2.4% year-on-year, up from 2.2% in November. Core inflation rose 2.7% y/y, unchanged on the level last month. Although the rise in the headline number was the third consecutive uptick from September's 3-year low at 1.7% - ECB policymakers are confident the 2% target rate will be hit in a "sustainable manner" from some point in 2025.
EUROZONE DATA (MNI): Euro Area Consumer Inflation Expectations Edge Up
- ECB 1-YEAR CONSUMER INFLATION EXPECTATIONS 2.6%
- ECB 3-YEAR CONSUMER INFLATION EXPECTATIONS 2.4%
Consumer expectations for euro area inflation over the next 12 months edged up for the second month in a row in November to 2.6% from 2.5% in the previous month, the ECB's latest consumer expectations survey shows. The inflation outlook over the next three years ahead also increased in November, to 2.4% – a level last recorded in July 2024 – from 2.1% in October. However, expectations at the one-year and three-year horizons both remain below the perceived past inflation rate, the survey showed.
EUROZONE NOV UNEMPLOYMENT RATE 6.3% (MNI)
EUROZONE DECEMBER CONSTRUCTION PMI 42.9 (NOV 42.7) (MNI)
FRANCE DEC HICP +0.2% M/M, +1.8% Y/Y (MNI)
FRANCE DEC CPI +0.2% M/M, +1.3% Y/Y (MNI)
ITALY DEC FLASH HICP +0.1% M/M, +1.4% Y/Y (MNI)
SWISS DEC CPI -0.1% M/M, +0.6% Y/Y (MNI)
UK DATA (MNI): BRC-KPMG Sales Boosted by Black Friday Inclusion
- UK BRC DEC BY VALUE SHOP SALES LFL +3.1% YY, TOTAL +3.2% YY
BRC-KPMG retail sales increased 3.2% Y/Y in December, reversing nearly all of November's -3.3% Y/Y, but it should be taken with a pinch of salt as the survey period included Black Friday this time around (it wasn't included in Dec'23). This is technically the highest reading since March 2024 (which was boosted by the earlier timing of Easter) whilst Like-for-Like sales increased 3.1% Y/Y (vs a fall of 3.4% in November). Food sales rose 1.7% Y/Y in December after 2.2% Y/Y in Nov whilst non-food sales jumped 4.4% Y/Y after -7.9% Y/Y on the same Black Friday distortion.
UK DATA (BBG): UK House Prices in First Drop for Nine Months, Halifax Says
UK house prices slipped back for the first time in nine months even as the property market enjoyed its best year since the pandemic, according to one of the country’s largest mortgage lenders. Average house prices dropped 0.2% in December from a record high to £297,166 ($372,630), Halifax said Tuesday. For the year as a whole, prices were up 3.3%
AUSTRALIA DATA (MNI): Private House Approvals Softening
- AUSTRALIA NOV BUILDING APPROVALS -3.6% M/M, +3.2% Y/Y
The number of building approvals in November was very weak falling 3.6% m/m after an upwardly-revised 5.2% m/m. The weakness was across both private houses and non-house dwellings with them down 1.7% m/m and 10.8% m/m respectively. Through the volatility total approvals continue to trend gradually higher. Total approvals are now up 3.2% y/y down from 6.8% in October with the level still slightly below the Q4 2019 average. While November was soft, the data is volatile and 3-month momentum picked up to its highest in almost 18 months driven by multi-dwellings.
FOREX: US Dollar Remains on Back Foot, NZD Outperforming
- Despite yesterday’s rejection of the WaPo Tariff article by President-Elect Trump, the greenback is under pressure once again Tuesday, with markets taking a more cautious view of the underlying bullish dollar trend.
- While some analysts believe there may be some truth behind the details of the tariff article, others believe the resignation of Fed's Michael Barr may also be contributing to the softer greenback, assisted by the initial rally for the US KBW regional banks index in anticipation of less stringent regulations on banks' balance sheets.
- This risk on sentiment has been present in currency markets early Tuesday, with the likes of NZD and AUD outperforming. NZDUSD has now extended the bounce from multi year lows to around 1.75%, and hovers just below the 0.5700 handle. In similar vein EURUSD is back above 1.04, with German inflation data on Monday continuing to underpin a more hawkish short-term reaction for the single currency.
- USDJPY traded multi month highs of 158.42 overnight, however the pair now trades around 80 pips off this level as intervention rhetoric returns. Comments from the Japanese Finance Minister around excessive FX moves and being prepared to act have halted the yen’s decline, although the remarks don't appear to represent an escalation on what has been said recently by officials.
- The Swiss franc is a touch softer on the session following a lower-than-expected core inflation print, with EURCHF trading around 0.9430, close to 2-month highs for the cross.
- US November trade, JOLTS job openings, December services ISM highlight the economic calendar. FOMC Member Barkin is due to speak at the Raleigh Chamber of Commerce.
BONDS: EGBs & Gilts Off Lows, GGB Outperformance Extends
Swelling €IG supply and EGB syndications continue to weigh on EGBs, with the halt of the ECB’s PEPP reinvestments also a background negative in early ‘25.
- Softer-than-expected French and Italian CPI meant that Eurozone CPI data matched expectations, negating the upside risks provided by Monday’s German reading.
- Bund futures -4 at 132.22 vs. lows of 123.13, yesterday’s range intact.
- German yields flat to 3bp higher, curve steepens. 2s10s and 5s30s remain below cycle highs.
- EGB spreads to Bunds little changed to ~1bp wider in the main, OATs under the most pressure.
- The exception comes via GGBs, which continue their run of early ’25 outperformance. GGB spreads to Bunds and OATs on for fresh cycle closing lows (~75bp and -5bp, respectively).
- A conservative PDMA issuance target factors into early ’25 GGB tightening.
- ECB-dated OIS little changed to a couple of bp more dovish, showing 101.5bp of cuts for ’25, with a 25bp cut later this month near fully discounted.
- Gilt futures -25 at 91.70 vs. lows of 91.68. Initial support at 91.64 untested.
- Yields 2-3bp higher, curve steeper.
- 10s as high as 4.645%, Dec high at 4.651%. Spread to Bunds 2bp wider at 218bp.
- The presence of 30-Year gilt supply weighed on gilts in early trade.
- 30-Year gilt yields hit the highest level seen since 1998 ahead of the auction.
- The auction was taken down smoothly, which allowed UK paper to stabilise.
- Issuance should dominate locally, with no major European & UK risk events scheduled through the close.
- Elsewhere, U.S. ISM services & JOLTS data due later, Fedspeak from Barkin also slated.
EQUITIES: Bear Threat in E-Mini S&P Remains Present Despite Most Recent Gains
A bull cycle in the Eurostoxx 50 futures contract remains intact. Yesterday’s strong rally highlights a reversal of the recent corrective pullback and attention is on resistance at 5040.00, the Dec 9 high. Clearance of this level would confirm a resumption of the bull cycle that started on Nov 21 last year. On the downside, initial firm support lies at 4921.43, the 50-day EMA. A break of 4829.00, the Dec 20 low would reinstate a bearish theme. A bear threat in the S&P E-Minis contract remains present despite the most recent gains. The reversal lower from the Dec 26 high, highlights the end of the Dec 20 - 26 correction. Attention is on 5866.00, the Dec 20 low and a key S/T support. Clearance of this level would strengthen a bearish theme. Initial firm resistance is 6107.50, the Dec 26 high. A breach of this hurdle would highlight a bull reversal and open key resistance at 6178.75, the Dec 6 high.
- Japan's NIKKEI closed higher by 776.25 pts or +1.97% at 40083.3 and the TOPIX ended 30.19 pts higher or +1.1% at 2786.57.
- Elsewhere, in China the SHANGHAI closed higher by 22.721 pts or +0.71% at 3229.644 and the HANG SENG ended 240.71 pts lower or -1.22% at 19447.58.
- Across Europe, Germany's DAX trades higher by 42.85 pts or +0.21% at 20258.86, FTSE 100 lower by 21.85 pts or -0.26% at 8227.86, CAC 40 up 23.73 pts or +0.32% at 7469.42 and Euro Stoxx 50 up 10.53 pts or +0.21% at 4997.17.
- Dow Jones mini up 4 pts or +0.01% at 42984, S&P 500 mini up 5 pts or +0.08% at 6025.25, NASDAQ mini up 17.75 pts or +0.08% at 21762.25.
Time: 09:50 GMT
COMMODITIES: WTI Futures Holding on to Bulk of Recent Gains
WTI futures are holding on to the bulk of their recent gains. A stronger reversal to the upside has exposed key short-term resistance at $76.41, the Oct 8 high. A firm resistance at $71.97, the Nov 7 high, has been breached, strengthening a bullish theme. On the downside, a reversal lower would expose support at the 20-day EMA, at $70.78. This average is seen as a key short-term support. A bear threat in Gold remains present despite the latest recovery. The yellow metal traded sharply lower on Dec 18 and the move undermines a recent bull theme. A resumption of weakness would open key support at $2536.9, the Nov 14 low. The first firm support to watch is $2583.6, the Dec 19 low. On the upside, a resumption of gains would instead signal scope for a climb towards resistance at $2726.2, the Dec 12 high.
- WTI Crude down $0.34 or -0.46% at $73.32
- Natural Gas down $0.15 or -4.09% at $3.524
- Gold spot up $5.34 or +0.2% at $2641.45
- Copper up $3.15 or +0.76% at $419.45
- Silver up $0.24 or +0.8% at $30.1951
- Platinum up $10.36 or +1.11% at $946.97
Time: 09:50 GMT
Date | GMT/Local | Impact | Country | Event |
07/01/2025 | 1330/0830 | ** | CA | International Merchandise Trade (Trade Balance) |
07/01/2025 | 1330/0830 | ** | US | Trade Balance |
07/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
07/01/2025 | 1500/1000 | * | CA | Ivey PMI |
07/01/2025 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
07/01/2025 | 1500/1000 | *** | US | JOLTS Jobs Opening Level |
07/01/2025 | 1500/1000 | *** | US | JOLTS Quits Rate |
07/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
07/01/2025 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
08/01/2025 | 0030/1130 | *** | AU | CPI Inflation Monthly |
08/01/2025 | 0700/0800 | SE | Flash CPI | |
08/01/2025 | 0700/0800 | ** | DE | Retail Sales |
08/01/2025 | 0700/0800 | ** | DE | Manufacturing Orders |
08/01/2025 | 0745/0845 | ** | FR | Consumer Sentiment |
08/01/2025 | 0745/0845 | * | FR | Foreign Trade |
08/01/2025 | 1000/1100 | ** | EU | EZ Economic Sentiment Indicator |
08/01/2025 | 1000/1100 | * | EU | Consumer Confidence, Industrial Sentiment |
08/01/2025 | 1000/1100 | ** | EU | PPI |
08/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
08/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
08/01/2025 | 1005/1005 | GB | BOE's Woods Financial Services Regulation hearing | |
08/01/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
08/01/2025 | 1315/0815 | *** | US | ADP Employment Report |
08/01/2025 | 1330/0830 | *** | US | Jobless Claims |
08/01/2025 | 1330/0830 | US | Fed Gov Waller | |
08/01/2025 | 1500/1000 | ** | US | Wholesale Trade |
08/01/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
08/01/2025 | 1700/1200 | ** | US | Natural Gas Stocks |
08/01/2025 | 1800/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |
08/01/2025 | 1900/1400 | *** | US | FOMC Minutes |
08/01/2025 | 2000/1500 | * | US | Consumer Credit |
09/01/2025 | 2330/0830 | ** | JP | Average Wages (p) |