EXECUTIVE SUMMARY
- FED'S DALY SAYS NO 'URGENCY' TO LOWER RATES
- BOJ TO ADJUST EASY POLICY CAUTIOUSLY – NAKAMURA
- OIL MARKETS POISED FOR OPEC+ EXTENSION
- CHINA WARNS AGAINST ‘WORSHIP’ OF CHASING FASTER ECONOMIC GROWTH
Figure 1: EUR/USD overnight implied vols above 15% for only third time this year
NEWS
FED (MNI): Fed's Daly Says No 'Urgency' to Lower Rates
San Francisco Fed President Mary Daly said Wednesday she is going to wait until she gets to the December meeting before making a decision about further rate cuts, but stressed there is no urgency to continue to ease policy. "I think we do not need to be urgent. There's no sense of urgency, but we do need to continue to carefully calibrate our policy and make sure it's in line with the economy we have today and the one we expect to have going forward," she said in an interview with PBS NewsHour.
US/UKRAINE (WSJ): Kyiv, Trump Team Begin Discussions
Ukrainian officials are holding high-level talks with the incoming Trump administration, seeking to narrow wide differences on achieving a settlement of Kyiv's war with Russia even before President-elect Donald Trump takes office. A top aide to Ukrainian President Volodymyr Zelensky met Wednesday with Keith Kellogg, Trump's choice as special envoy for Russia and Ukraine, and Mike Waltz, the incoming national-security adviser, according to a Trump transition official and several people familiar with the discussions.
US (WSJ): Hegseth ‘Not Going Anywhere’ as Senators Air Concerns
Pete Hegseth tried to salvage his bid to become President-elect Donald Trump’s defense secretary, as snowballing allegations related to his treatment of women and excessive drinking raised concerns among Republican senators about his fitness for the top Pentagon post. In a series of remarks to reporters in between meetings with lawmakers on Wednesday, Hegseth said he had no plans to drop out and emphasized that Trump still backs him. Trump is considering Florida Gov. Ron DeSantis as a possible replacement for Hegseth, The Wall Street Journal has reported.
BOJ (MNI): BOJ to Adjust Easy Policy Cautiously - Nakamura
Bank of Japan board member Toyoaki Nakamura said on Thursday the BOJ favoured cautious adjustments to its easy policy driven by economic recovery considered against various data, noting the inflation rate will likely not reach 2% in fiscal 2025. “I’m not confident of the sustainability of wage hikes,” Nakamura told business leaders in Hiroshima City. Nakamura, a dovish board member, was against scrapping the negative interest rate policy in March and raising the policy rate to 0.25% in July.
MNI COMMODITY WEEKLY: Oil Markets Poised for OPEC+ Extension
Oil markets await the outcome of the OPEC+ meet on Dec. 5 but a third rollover appears to be the consensus ahead of any official communications. An output hike of 180k b/d is planned for January covering the eight members involved in OPEC+’s recent 2.2m b/d of voluntary cuts at present. This hike was first due in October but has been delayed twice. OPEC+ are holding back 5.86m b/d of output, around 5.7% of global demand.
UK (The Times): Keir Starmer Aims to ‘Galvanise’ Government With Six New Pledges
Sir Keir Starmer will commit to “galvanising” his government behind a series of new promises for voters to judge him against by the time of the next election. On Thursday the prime minister will pledge to meet six explicit “milestones”, including to raise living standards, cut NHS waiting lists and build 1.5 million new homes. Experts have cast doubt on whether he will be able to meet some of the targets but Starmer will argue that they are “purposefully ambitious” and designed to encourage Whitehall to get behind the government’s priorities.
S. KOREA (MNI): 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.
S. KOREA (BBG): Korea Plans to Boost Overnight Won Liquidity Post Spread Blowout
South Korea is planning measures to boost after-hours liquidity in the won, after this week’s political crisis triggered a surge in volatility in the currency. When South Korean President Yoon Suk Yeol late Tuesday night shocked the country by briefly imposing martial law, the gap between bid and offer prices in the spot market widened to as much as 16 won and remained elevated through the night, according to data compiled by Bloomberg. That compared to about 2.5 won for the non-deliverable forward market, another venue for betting on Korea’s currency.
CHINA (BBG): China Warns Against ‘Worship’ of Chasing Faster Economic Growth
Chinese state media warned against blindly chasing faster growth and signaled more focus on boosting consumption in a flurry of articles setting the stage for a key economic meeting next week. While officials have made every effort to hit this year’s expansion goal, coming in “a little to the left or right” of that around 5% target would be “acceptable,” the official Xinhua News Agency wrote in a commentary late Tuesday, in an apparent attempt to manage expectations.
MNI RBI PREVIEW - DECEMBER 2024: No Change, But Easing Bias Likely
The RBI seems focused on ensuring sufficient liquidity is the in the system, rather than cutting rates. Key data metrics mentioned in last RBI statement remain strong, albeit down from prior months. Governor Das has continued to be hawkish in his comments publicly. No cut is expected tomorrow but the narrative to open the door for potential cuts in 2025 remains a possibility.
COLOMBIA (MNI): Finance Minister Resigns Amid Corruption Allegations, Guevara Appointed
Late Wednesday, it was announced that Ricardo Bonilla resigned as finance minister of Colombia amid allegations of corruption. President Gustavo Petro said in a post on X that he expected Bonilla’s resignation “not because I think he is guilty, but because they want to tear him apart for being loyal to the government program.” Later in the session, President Petro promoted Deputy Finance Minister Diego Guevara to the top job, which should help to calm market anxieties. Guevara is recognised by the markets and has been very open to investors over the past few months.
BITCOIN (BBG): Bitcoin Exceeds $100,000 on Trump’s Pro-Crypto Pick for the SEC
President-elect Donald Trump’s pick of a crypto proponent to be the next head of the US securities regulator lifted Bitcoin to $100,000 for the first time as traders warmed to the prospect of relaxed regulations. The digital asset rose as much as 6.1% to $103,801 on Thursday before changing hands at $101,968 as of 6:45 a.m. in London. The crypto market overall has jumped by roughly $1.3 trillion since Trump’s election victory on Nov. 5 on a platform that includes a tight embrace of the crypto sector.
DATA
EUROZONE DATA (MNI): Retail Sales M/M Weaker Expected
- EUROZONE OCT RETAIL SALES -0.5% M/M, +1.9% Y/Y
Eurozone retail trade volumes printed below consensus at -0.5% M/M in October (vs -0.3% consensus, 0.5% prior) - the weakest sequential reading since June. On an annual basis, volume of retail trade rose 1.9% Y/Y (vs 1.7% consensus, 3.0% revised prior from 2.9%). There were mild upward revisions but we believe most of the difference in the miss for the M/M and beat for the Y/Y is down to different analyst estimates (18 responses for M/M vs 10 for Y/Y).
EUROZONE NOVEMBER CONSTRUCTION PMI 42.7 OCT 43.0 (MNI)
GERMANY DATA (MNI): October Factory Orders Solid Given Revisions, Outlook Weak
- GERMANY OCT FACTORY ORDERS -1.5% M/M
German factory orders fell less than expected in October (-1.5% M/M vs -2.0% cons; +7.2% prior, revised from +4.2%). There was also a 3.2ppt upward revision to September data which Destatis notes is "due to a subsequently reported major order in shipbuilding." Destatis also states that "The overall result in October 2024 is also strongly characterised by major orders in the shipbuilding segment." Overall, the level of factory orders in October is even stronger than the 0.5ppt upside surprise to consensus would suggest.
FRANCE DATA (MNI): France IP Weaker Than Expected
- FRANCE OCT INDUSTRIAL PRODUCTION -0.1% M/M, -0.6% Y/Y
- FRANCE OCT MANUFACTURING OUTPUT +0% M/M, -1.4% Y/Y
France Industrial Production was weaker than expected again in October, falling 0.1% M/M (vs 0.3% consensus, -0.8% revised prior from -0.9%) and on an annual basis remained at -0.6% Y/Y (vs -0.2% consensus). The weakness was driven by 'extractive industries' production deteriorating 1.0% M/M (vs -1.3% in September) combined with a flat (0.0% M/M) manufacturing production reading (vs a fall of 0.7% M/M in September).
UK DATA (MNI): Budget Impacts Show in DMP Data; Something for Everyone in the Report
This is the first post-Budget DMP survey (so the first since the National Living Wage and employer NIC increases were confirmed), but note that most of the "headline" numbers are produced on a 3-month rolling basis, so aren't fully accounted for yet. However, looking at the single month prints, it is clear to see a big shift in employment expectations (negative over the next year), expected own-price growth hit a 6 month high but expected wage growth actually decelerated. So it appears that firms will be more reluctant to hire, will be passing on at least some of the costs of the employer NIC increase but wages will be squeezed a little (particularly when you take into account some wages are going to be rising 6.7%).
SPAIN DATA (MNI): Strong Industrial Production Growth in October
Spanish industrial production grew 1.9% Y/Y in October, the third consecutive acceleration from 0.1% in July, 0.5% in August and 1.1% in September (the latter was revised up from an initial 0.6%). Consensus was formed of just four analysts, but looked for a 0.6% Y/Y print. On a 3m/3m basis, production rose 0.6% (vs 0.2% prior). Looking at the major sub-components, consumer goods production remained negative 3m/3m at -0.2%, but this was up from -0.4% in September and -0.6% in August. Durable consumer goods production was 1.6% 3m/3m (vs 0.3% in Sep).
SWEDEN DATA (MNI): Acceleration in Inflation In-Line With Expectations
- SWEDEN FLASH NOV CPIF +1.9% Y/Y
Swedish November CPIF ex-energy was in line with consensus at 2.4% Y/Y (vs 2.1% prior), with the monthly reading a tenth above expectations at -0.2% M/M. Headline CPIF was also in line on an annual basis at 1.9% Y/Y (vs 1.5% prior). The Riksbank projected CPIF ex-energy at 2.0% Y/Y and CPIF at 0.9% in the September MPR. However, this forecast error is unlikely to deter the central bank from easing policy rates again in December. The reason for the 1.0pp wedge between the headline CPIF projection and today's outcome is a sharp increase in electricity prices, which had not been factored into the central bank's forecasts.
SWITZERLAND DATA (MNI): Labour Market Softening Continues But Likely Little SNB Concern
- SWISS NOV UNEMPLOYMENT RATE +2.6%
- SWISS NOV UNEMPLOYMENT +4% M/M, +23.6% Y/Y
The Swiss labour market gradually softened further in November, with the unemployment rate remaining at 2.6% on a seasonally-adjusted basis (analysts had been split between a 2.6% or 2.7% print). Despite remaining at 2.6%, the number of underlying unemployed people ticking up while vacancies decreased. However, the labour market remains reasonably tight overall and should likely not be of major concern for the SNB policy meeting on December 12.
AUSTRALIA DATA (MNI): Surplus Widens But Some Concerning Details
- AUSTRALIA OCT TRADE BALANCE A$+5953
The deterioration in the merchandise trade surplus appears to have stabilised. A small narrowing was expected in October but it actually widened to $5.95bn from $4.53bn as exports outpaced imports. But some of the details were soft with capital goods imports declining for the third straight month, exports weak to China and commodity export volumes generally lower. Exports to Australia's two largest destinations remain weak with shipments to China down 21% y/y in October and to Japan -15.1% y/y, while they're robust to less important markets such as the US, UK, Indonesia and NZ
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.
EGBS: OATs Outperform Following Government Collapse, Regional Data Mixed
The 10-year OAT/Bund spread is over 3bps tighter at ~80bps, with French paper outperforming following the collapse of the minority government yesterday evening.
- This morning’s spread tightening probably stems from far-right leader Le Pen highlighting her desire to find a Budget outcome that works for all. She also stopped short of calling for President Macron’s resignation (though the latest Le Point poll showed 54% of respondents are in favour of such an outcome).
- Broader spreads to Bunds have tightened alongside OATs, with European equities trading higher.
- Bund futures are -14 ticks at 136.59, still within yesterday’s range. German cash yields are 1-2bps higher.
- Spanish and French supply was digested smoothly, though auction sizes were smaller than recent months (in line with December norms).
- German factory orders and Spanish industrial production were stronger than expected in October, though French industrial production and Eurozone retail sales were weaker – none were market movers.
- The remainder of today’s regional calendar is light, leaving focus on this afternoon’s US data and the OPEC+ meeting.
GILTS: Tight Ranges, Yields A Touch Higher, BoE's Greene Due Later
Gilts a little lower alongside core global FI peers, although remain within ranges seen during the first half of the week.
- Futures last -16 at 95.85.
- Initial support and resistance 95.17/96.54.
- A bullish corrective cycle in the contract remains in play and recent gains reinforce short-term conditions.
- Yields 0.5-1.5bp higher, curve a touch flatter.
- 5s30s still 15bp off November closing lows, last ~65bp.
- Gilt/Bunds back to little changed at 218bp, 220bp caps moves higher, but fundamentals limit pullbacks.
- I/L tender passed smoothly enough, with the average price comfortably above prevailing mids, although the cover ratio slipped below 3.00x.
- SONIA futures flat to -1.5.
- BoE-dated OIS flat to 2.5p less dovish on the day, showing 29bp of cuts through March and ~82.5bp of cuts through Dec ’25.
- Little tangible reaction to the latest DMP survey.
- Our macro team noted that the release showed little reason for MPC members to change their views (see earlier bullet for greater colour).
- Comments from BoE MPC member Greene (17:00) due later.
- Greene remains on the hawkish side of the MPC, so dovish inferences would impact the market more than any hawkish comments.
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.
Time: 09:55 GMT
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
Time: 09:55 GMT
| 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 |
| 06/12/2024 | 0700/0800 | ** |  DE | Industrial Production |
| 06/12/2024 | 0700/0700 | * | GB | Halifax House Price Index |
| 06/12/2024 | 0745/0845 | * |  FR | Foreign Trade |
| 06/12/2024 | 1000/1100 | * |  EU | Employment |
| 06/12/2024 | 1000/1100 | * |  IT | Retail Sales |
| 06/12/2024 | 1000/1100 | *** | EU | GDP (final) |
| 06/12/2024 | 1330/0830 | *** | US | Employment Report |
| 06/12/2024 | 1330/0830 | *** | CA | Labour Force Survey |
| 06/12/2024 | 1415/0915 | US | Fed Governor Michelle Bowman | |
| 06/12/2024 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 06/12/2024 | 1530/1030 | US | Chicago Fed's Austan Goolsbee | |
| 06/12/2024 | 1700/1200 | US | BOE's Greene at Financial Times Live | |
| 06/12/2024 | 1700/1200 | US | Cleveland Fed's Beth Hammack | |
| 06/12/2024 | 1800/1300 | US | San Francisco Fed's Mary Daly | |
| 06/12/2024 | 2000/1500 | * | US | Consumer Credit |