EXECUTIVE SUMMARY
- GOVERNMENT SHUTDOWN LOOMS AS HOUSE REJECTS GOP FUNDING BILL
- TRUMP THREATENS TARIFFS UNLESS EU BUYS MORE US OIL AND GAS
- JAPAN RAMPS UP ITS WARNINGS AGAINST CURRENCY SPECULATION
- ECB’S NAGEL SEES RATES AT NEUTRAL IN FIRST HALF OF 2025
Figure 1: Recent Core PCE inflation trends
NEWS
US (WaPo): Government Shutdown Looms as House Rejects GOP Funding Bill
CHINA (MNI): China's LPR Holds Steady in Dec
China's Loan Prime Rate remained unchanged on Friday according to a People's Bank of China statement, in line with expectations and following the central bank's decision to hold its key 7-day reverse repo rate stable. LPR was held at 3.1% for the one-year maturity and 3.6% for the over five-year tenor. Both fell 25 basis points in October, the largest reduction since authorities reformed the LPR pricing system in 2019.
JAPAN (BBG): Japan Warns on Yen After BOJ’s Dovish Message Extends Slide
Japan ramped up its warnings against currency speculation Friday after the yen slid to a five-month low following a hint from the central bank chief that he may wait longer than expected before raising interest rates. “The government’s deeply concerned about recent currency moves, including those driven by speculators,” Katsunobu Kato said on Friday. “We will take appropriate action if there are excessive moves in the currency market.”
BRAZIL (BBG): Brazil Congress Close to Deliver a Diluted Spending Cut Plan
After three days of late night votes, Brazil’s congress inched closer to delivering weakened key provisions of a spending cut package meant to ease investor fears about the country’s deteriorating fiscal situation. Lawmakers of both chambers of congress Thursday voted in favor of a proposed constitutional amendment that forms part of the package, but made changes that could dent its impact on public accounts. Senators are expected on Friday to vote on another bill that’s set to be far weaker than the government-proposed version.
PHILIPPINES (BBG): Philippines May Open 2025 With Rate Cut, Central Banker Says
The Philippine central bank is open to delivering another rate cut in its first monetary policy meeting next year, Governor Eli Remolona said Friday. Shares gained. While the Federal Reserve is less dovish now, the Bangko Sentral ng Pilipinas is “still at the same trajectory as before” on monetary easing, Remolona said in an interview with Bloomberg Television’s David Ingles and Annabelle Droulers.
DATA
GERMANY DATA (MNI): Slight Acceleration in November PPI, Steady on 3m/3m Basis
- GERMANY NOV PRODUCER PRICES +0.1% Y/Y
German November PPI was a little stronger than consensus at 0.5% M/M (vs 0.3% cons, 0.2% prior) and 0.1% Y/Y (vs -0.3% cons, -1.1% prior). Excluding energy, PPI rose 1.3% Y/Y for the second consecutive month. Core goods HICP inflation has gradually recovered back towards 1.0% Y/Y in the last two months, but the PPI data does not signal a sharp acceleration in the months ahead.
FRANCE DATA (MNI): France M/M PPI Highest Since March 2022
- FRANCE NOV PPI +3.2% M/M, -5.2% Y/Y
France November PPI rose 3.2% M/M (vs 0.9% prior), the highest sequential reading since March 2022. However, do note that this is non-seasonally adjusted data and November typically sees the largest sequential increase of the year. On an annual basis it has now been in negative territory for 15 out of the past 16 month, and fell in November 2024 by 5.2% Y/Y (vs a revised fall of 6.0% from -5.7% in October).
UK DATA (MNI): Retail Sales a Bit Softer Than Expected - No Real Market/MonPol Impact
- UK NOV RETAIL SALES EX-FUEL +0.3% M/M, +0.1% Y/Y
Retail sales a little softer than expected. This year Black Friday was not included in the sample period but it was this year. However, the ONS has noted that its seasonal adjustment accounts for the shift in timing. We wouldn't really place too much weight on this reading though - we don't think any seasonal adjustments for things like Black Friday capture the event perfectly so we prefer to look at Nov+Dec combined (which the BOE will have by the time of the February MPC meeting).
UK NOV PSNB-X GBP+11.25 BN (MNI)
UK NOV PSNB GBP+11.25 BN (MNI)
UK NOV PSNCR GBP12.98 BN (MNI)
UK NOV CGNCR GBP16.21 BN (MNI)
SWEDEN (MNI): Retail Sales Momentum Continues to Accelerate
- SWEDEN NOV RETAIL SALES +1.6% Y/Y
Consistent with the improving retail confidence noted above, Swedish retail sales momentum continues to slowly accelerate, a nascent signal that consumption is picking up heading into 2025. November retail sales fell 0.2% M/M, though October's reading was revised 5 tenths higher to 0.9%. On a 3m/3m basis, sales rose 1.0% (vs 0.8% prior), the third consecutive acceleration.
JAPAN DATA (MNI): CPI Close to Expectations, Softer Detail Outside of Utility Spike
Japan National CPI for Nov was fairly close to market expectations. The headline rose 2.9%y/y, in line, and against a prior 2.3%. The core ex fresh food measure was slightly above market forecast at 2.7% y/y (2.6% expected and 2.3% prior). The ex fresh food and energy measure was 2.4%, in line and against a prior 2.3% outcome. In terms of the detail, headline rose 0.6%m/m, while the core measures were also positive in m/m terms. Good prices rose 0.9%m/m, while services gained 0.2%, although these are typically revised back to flat.
FOREX: JPY Recoups Lost Ground, Softer Equities Drain Risk Appetite
- JPY is on the front foot early Friday, with the currency undergoing a small corrective recovery after Thursday's acute sell-off. As a result, USD/JPY has faded back below Y157.00 to mark a 100 pip gap with the cycle high posted yesterday. We wrote yesterday that while the Thursday price action strongly resembled the USD/JPY rally prior to the April intervention, official intervention to stem losses is unlikely at this stage - given the the rally was underpinned by the confluence of the Fed and BoJ.
- CHF is similarly firm, improving alongside the JPY, while equity sentiment remains poor. Core European indices are lower by 1% or more, with Germany's DAX a particular source of weakness; off 1.3%. US equity futures are similarly weak, with the e-mini S&P showing below the overnight low as well as the post-Fed low ahead of the NY crossover.
- The greenback is flat-to-lower, with markets look ahead to the first post-Fed decision commentary from Daly and Williams - who both appear on television later today.
- Focus for the session ahead turns to personal income and spending stats for November as well as the core PCE price index numbers - making for the final major US release before the holiday break. The final Michigan sentiment stats are also set to cross. October retail sales from Canada are also due, seen improving on the headline, but deteriorating on the ex-Autos figure.
EGBS: Tight Range for Bund Futures Ahead of US PCE Report
Bund futures have traded in a tight 29 tick range this morning, currently 12 ticks higher today at 134.03. The majority of Wednesday’s post-FOMC sell-off has held, keeping the current bearish cycle in play.
- 133.98, the 61.8% of the Nov 6 - Dec 2 bull cycle, has been pierced. A clear break of this price point would signal scope for a move towards 133.22, the 76.4% retracement level.
- First key resistance to watch is 135.11, the 20-day EMA. A move above this level would signal a possible reversal.
- German yields are flat to 3bps lower today, with the curve bull steepening.
- 10-year EGB spreads to Bunds are up to 1bp wider today. Weakness in equities playing into the widening theme intraday.
- French PM Bayrou aims to formalise a Budget by around mid-February, although he conceded that he is “not sure we’ll get there.” Continued fiscal uncertainty is set to limit any relief rallies in OATs.
- Broader market focus turns to the US PCE report at 1330GMT/1430CET, the last major macro data release of the year.
GILTS: Off Lows, Curve Twist Steepens
Gilts sticking to narrow ranges, following cross-market cues.
- Weakness in equities seems to be providing some background support in recent trade.
- Bearish technical theme intact in the contract, initial support & resistance at yesterday’s extremes (91.87/92.84), last +9 at 92.51.
- Yields 2bp lower to 1bp higher, curve twist steepens.
- 2s10s & 5s30s set for the highest closes since August.
- Gil/Bunds unwinds initial widening, last little changed at 227.5bp.
- That comes after yesterday’s dovish BoE hold allowed the spread to tighten by ~3bp following a multi-decade closing high above 230bp.
- Clearer pricing in BoE-dated OIS shows ~60bp of cuts through end of ’25bp as the dovish move following the yesterday’s BoE decision holds.
- We still expect BoE cuts in February and May.
- SONIA futures flat to +5.0.
- U.S. PCE data headlines the global macro docket today.
- The BoE will announce its Q125 APF schedule at 16:30.
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Intact Despite Recent Pullback
A bull cycle in the Eurostoxx 50 futures contract remains intact, however, the latest pullback highlights a corrective cycle and the contract is again trading lower, today. Price has traded through the 50-day EMA, at 4897.73. A continuation lower would open 4819.33, a Fibonacci retracement. On the upside, key short-term resistance has been defined at 5014.00, the Dec 9 high. A break of this hurdle would confirm a resumption of the recent uptrend. A sharp sell-off in the S&P E-Minis contract on Wednesday highlights a possible short-term top. The move down has resulted in a breach of both the 20- and 50-day EMAs. A continuation lower would open 5811.65, a Fibonacci retracement level. Note that support at 5921.00, the Nov 19 low, has been pierced. A clear break of this level would strengthen a bearish threat. Initial resistance is at 6008.80, the 50-day EMA.
- Japan's NIKKEI closed lower by 111.68 pts or -0.29% at 38701.9 and the TOPIX ended 11.84 pts lower or -0.44% at 2701.99.
- Elsewhere, in China the SHANGHAI closed lower by 1.964 pts or -0.06% at 3368.069 and the HANG SENG ended 31.81 pts lower or -0.16% at 19720.7.
- Across Europe, Germany's DAX trades lower by 222.17 pts or -1.11% at 19746.63, FTSE 100 lower by 43.46 pts or -0.54% at 8061.9, CAC 40 down 77.93 pts or -1.07% at 7216.44 and Euro Stoxx 50 down 57.27 pts or -1.17% at 4821.73.
- Dow Jones mini down 222 pts or -0.52% at 42138, S&P 500 mini down 45.5 pts or -0.78% at 5823.25, NASDAQ mini down 243 pts or -1.15% at 20869.75.
Time: 09:50 GMT
COMMODITIES: Recent Move Lower in Gold Undermines a Bullish Theme
A bearish threat in WTI futures remains present and recent gains are - for now - considered corrective. A resumption of the bear cycle would open $65.57, the Oct 1 low, and $63.73, 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 $76.41, the Oct 8 high. Initial firm resistance to watch is unchanged at $71.97, the Nov 7 high. Gold traded lower Wednesday. The move down undermines a recent bullish theme. A resumption of weakness would signal scope for an extension towards the key support at $2536.9, the Nov 14 low. Moving average studies are in a bull mode position highlighting a medium-term uptrend and this suggests that the latest sell-off is likely a correction. Initial pivot resistance is $2645.0, the 20-day EMA. A breach of it would be positive for bulls.
- WTI Crude down $0.55 or -0.79% at $68.77
- Natural Gas up $0.06 or +1.7% at $3.643
- Gold spot up $11.4 or +0.44% at $2605.67
- Copper up $1.75 or +0.43% at $409.2
- Silver down $0.19 or -0.64% at $28.8685
- Platinum down $0.38 or -0.04% at $924.35
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 20/12/2024 | 1100/1200 | ** |  IT | PPI |
| 20/12/2024 | 1100/1100 | ** |  GB | CBI Distributive Trades |
| 20/12/2024 | 1330/0830 | *** |  US | Personal Income and Consumption |
| 20/12/2024 | 1330/0830 | ** |  CA | Retail Trade |
| 20/12/2024 | 1330/0830 | ** | CA | Retail Trade |
| 20/12/2024 | 1330/0830 | *** | US | Personal Income and Consumption |
| 20/12/2024 | 1400/1500 | ** |  BE | BNB Business Confidence |
| 20/12/2024 | 1500/1600 | ** |  EU | Consumer Confidence Indicator (p) |
| 20/12/2024 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 20/12/2024 | 1630/1630 | GB | BOE to announce Q1-25 APF sales schedule |