EXECUTIVE SUMMARY
- PRESIDENT YOON FACES IMPEACHMENT VOTE AFTER MARTIAL LAW CHAOS
- NATIONAL ASSEMBLY TO TAKE UP CENSURE MOTIONS AGAINST PM ~1600CET
- BOJ’S POLITICAL CONCERNS SLOWING HIKES – MNI EXCLUSIVE
- ITALIAN NOVEMBER SERVICES PMI NOTABLY WEAKER THAN EXPECTED
Figure 1: AUD/USD pullback low within range of August bear trigger and YTD low
Source: MNI/Bloomberg
NEWS
US (WSJ): Trump Mulls Replacing Hegseth With DeSantis
President-elect Donald Trump is considering Florida Gov. Ron DeSantis as a possible replacement for Pete Hegseth, his pick to run the Pentagon, according to people familiar with the discussions, amid Republican senators’ concerns over mounting allegations about the former Fox News host’s personal life.
S. KOREA (MNI): President Yoon Faces Impeachment Vote 6/7 Dec After Martial Law Chaos
President Yoon Suk-yeol is set to face an impeachment vote in the National Assembly on Friday 6 or Saturday 7 December following his declaration of martial law and the subsequent political and social chaos caused. In order for the impeachment vote to pass, it needs at least 200 votes in the 300-member National Assembly. The parties of the opposition, dominated by the liberal Democratic Party of Korea (DPK) currently hold 192 seats, compared to 108 for the conservative People Power Party (PPP) of which Yoon is a member.
S. KOREA (BBG): BOK Chief Rhee Says Unlikely to Cut Rates on Political Turmoil
Bank of Korea Governor Rhee Chang-yong said it is unlikely the central bank will cut interest rates in response to a short-lived political event. His comments came after President Yoon Suk Yeol declared martial law late Tuesday night in a shock move that was later nullified by a parliamentary majority that included his own party. The overnight turmoil sent the won plunging against the dollar and rattled foreign investor confidence in the government.
BOE (MNI): Bailey Largely Avoids Explicitly Describing What "Gradual" Means
Bailey has spoken in an interview at an online FT event. Bailey has said inflation has come down faster than he thought it would a year ago (he's said that many times before). He's was asked if "gradual" is consistent with 4 cuts over the next year - he largely avoids the question, but just says that "We always condition what we publish in terms of the projection on market rates, and so as you rightly say, that [100bp] was effectively the view the market had." There's not a lot in the article online published alongside it - he sets out the 3 cases and elaborates on them - but no more than he has in previous appearances. The full FT story can be found here.
FRANCE (MNI): National Assembly to Take Up Censure Motions Against PM ~1600CET
The National Assembly is set to begin debate on two censure motions against PM Michel Barnier's gov't at 1600CET (1000ET, 1500GMT). One motion has been put forward by the leftist New Popular Front (NFP) alliance, and another by the far-right Rassemblement National (RN). The NFP has said that it will not back the RN motion, but the RN confirms that it will support any effort to remove the gov't. The motions will be heard concurrently, with the NFP presenting its motion first then the RN.
ECB (BBG): ECB’s Rehn Sees More Grounds for December Interest-Rate Cut
The European Central Bank will continue to ease policy in the coming months, Governing Council member Olli Rehn told Finnish newspaper Helsingin Sanomat. Inflation has slowed to the targeted 2% and euro-area economic growth is fragile, Rehn said in an interview. “These factors have added to the grounds for cutting the benchmark rate in December and this direction in monetary policy is set to continue into the coming months.”
EU (FT): EU to Crack Down on Asian Online Retailers Temu and Shein
The EU is preparing a crackdown on the growing flood of packages from Asian online retailers such as Temu and Shein, following a big increase in ecommerce that largely evades EU custom checks. Measures under consideration include a new tax on ecommerce platforms’ revenue and an administrative handling fee per item that would make most shipments less competitive, according to five people familiar with the discussions.
BOJ (MNI POLICY): BOJ’s Political Concerns Slowing Hikes
Senior BOJ officials are being influenced by political discourse on rate hikes. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
JAPAN (BBG): Japan DPP Tamaki Temporarily Steps Down as Head Over Scandal
Yuichiro Tamaki, a kingmaker for Japan’s minority government, will temporarily step down as his party’s leader amid a scandal over an alleged marital infidelity. Motohisa Furukawa, the party’s tax chief, will take the leadership role of the Democratic Party for the People for the next three months, with Tamaki set to return as party leader on March 4, according to DPP Secretary General Kazuya Shimba.
CHINA (MNI): China Must Quicken Reforms to Boost Domestic Demand
MNI (Beijing) China will need to boost consumption via structural reforms to offset the possible impact of U.S. tariff increases, said Liu Shijin, former vice president of the Development Research Center of the State Council in Beijing on Wednesday. The central government should increase spending on significantly improving public services for lower income groups, in particular elderly and medical care, and education, said Liu, during the 9th China Global Think Tank Innovation Forum held by Center For China & Globalisation.
GLOBAL (MNI): Central Banks Back to Neutral by 2026 as CPI Settles - OECD
Central banks across the OECD will reduce interest rates back to about neutral by 2026 as inflation settles around official targets, the Paris-based group said Wednesday, with the global economy remaining resilient but facing threats of geopolitical conflict. "Nominal policy rates are likely to remain at higher levels than before the pandemic, provided inflation settles at target. This would increase the room for monetary policy manoeuvre through conventional tools in the event of an unanticipated slowdown," the OECD Economic Outlook report said.
DATA
EUROZONE DATA (MNI): PPI In-Line with Consensus
- EUROZONE OCT PPI +0.4% M/M, -3.2% Y/Y
Eurozone PPI in October printed in-line with consensus again at -3.2% Y/Y (-3.4% prior) and 0.4% M/M (vs -0.6% prior). This is the eighteenth consecutive month of deflation. The in-line reading was driven by Y/Y increases in four out of the five sub-components (some less negative and some more positive). The only exception was capital goods which remained stable at 1.3% Y/Y. Energy producer prices fell at a slower pace of 11.2% Y/Y (vs -11.5% in September) with monthly prices rising 1.4% M/M (vs a fall of 1.9% in September).
EUROZONE FINAL NOV SRVCS PMI 49.5 (FLASH 49.2); OCT 51.6 (MNI)
EUROZONE FINAL NOV COMP PMI 48.3 (FLASH 48.1); OCT 50.0 (MNI)
GERMANY FINAL NOV SRVCS PMI 49.3 (FLASH 49.4); OCT 51.6 (MNI)
FRANCE FINAL NOV SRVCS PMI 46.9 (FLASH 45.7); OCT 49.2 (MNI)
ITALY DATA (MNI): First Contractionary Services PMI Of 2024
- ITALY NOV SRVCS PMI 49.2 (FCAST 50.8); OCT 52.4
The Italian November services PMI was notably weaker than expected at 49.2 (vs 50.8 cons, 52.4 prior). This was the lowest since October 2023, and the first month in contractionary territory this calendar year. Note that despite waning demand both domestically and internationally, firms continued to increase employment. This follows a fresh cycle low for the unemployment rate on Monday, which fell to 5.8% in October. As in Spain, cost pressures intensified in November, but passthrough to final output charges was limited, indicative of weakening firm pricing power.
SPAIN DATA (MNI): Services PMI Expansionary for 15th Consecutive Month
- SPAIN NOV SRVCS PMI 53.1 (FCAST 53.3); OCT 54.9
The Spanish November services PMI fell to its lowest since January at 53.1 (vs 54.9 prior), a little below the 53.3 expected. This still marks the 15th consecutive month in expansionary territory, though. As was also noted in Monday's manufacturing PMI, the recent flooding had a negative impact: "Growth rates did however fall since October, largely due to the adverse impact of flooding in some areas of the country."
UK DATA (MNI): Services PMI Revised Higher and Cost Pressures Remain Concerning
- UK FINAL NOV SRVCS PMI 50.8 (FLASH 50.0); OCT 52.0
Not a lot in the press release to really give away the reason for the 0.8 point revision higher in the services PMI from 50.0 to 50.8 (note the survey is only open an extra 2 days versus the flash). This part on costs still the most important for monetary policy - confirming that firms are passing on cost increases again - which could be a concern with the upcoming employer NIC increase and national living wage increases (both coming in April).
SWEDEN DATA (MNI): Steady Long-term Inflation Expectations In "Big" December Survey
5-year ahead CPIF inflation expectations were steady at 2.0% Y/Y in Prospera's quarterly survey, while shorter horizon expectations were also little changed relative to September. This suggests inflation expectations will continue to play a relatively minor role in shaping near-term Riksbank policy. The quarterly survey interviews purchasing managers and social partners alongside the usual money market participants.
AUSTRALIA DATA (MNI): Aussie Q3 GDP Prints at 0.3% Q/Q
- AUSTRALIA Q3 GDP +0.3% Q/Q
- AUSTRALIA Q3 GDP +0.8% Y/Y
The Australian economy grew at 0.3% seasonally-adjusted over Q3, 20 basis points lower than expected, and 0.8% y/y, 30bp below expectations, according to National Accounts data published Wednesday by the Australian Bureau of Statistics. The Reserve Bank of Australia has forecasted year-ended GDP to print at 1.5% in Q4 within its November Statement on Monetary Policy. Growth was propped up by public sector expenditure, up 1.4%, with Government consumption and public investment both contributing to the Q3 result, the ABS said in a statement.
FOREX: GBP Off Bailey Lows, No New Messaging
- A feature interview with the FT from BoE's Bailey managed to send GBP lower, as wires quoted Bailey as saying that he sees "four UK interest rate cuts next year" - a more aggressive easing path than market pricing - however the GBP losses were swiftly reversed as the details of the interview showed he said little new, and was indeed referring to market pricing, rather than the BoE view.
- As such, GBP/USD's print down at 1.2630 was brief, with the pair rallying well off lows to trade flat-to-higher headed into the NY crossover.
- Antipodean currencies trade poorly, with AUD softer against all others on the back of the Q3 GDP print overnight. Q/Q growth rose by +0.3% vs. Exp. +0.5%, with the Y/Y print also slower than forecast at +0.8% vs. Exp. +1.1%. AUD/USD slipped to 0.6408 pullback lows, with that level again under pressure headed into the US session. Support is seen layered below current levels at 0.6389/63/50.
- The ADP Employment Change print is the calendar highlight Wednesday, with markets expecting 150k jobs added for November - a print swiftly followed by the ISM Services Index, which is expected to broadly match October's 56.0 release.
- The central bank speaker slate is particularly busy. Speeches from ECB's Lagarde, Makhlouf and Nagel are due, as well as Fed's Powell, Daly, Musalem and Barkin.
EGBS: Bund Futures Drift Lower as Equities and Crude Strengthen
Bund futures have drifted a little lower through the morning, currently -24 ticks today at 134.88. Impending Bund supply will be capping upside in futures, with stronger European equities and crude oil also weighing.
- Today's regional data was not market moving. The final Eurozone November services PMI was revised three tenths higher to 49.5, while the Italian print saw a notably lower-than-expected reading (49.2 vs 50.8 cons). October EZ PPI was in line with consensus at 0.4% M/M.
- French PM Barnier’s minority government is set to face a no confidence vote today, with pre-vote debating set to start at 1500GMT/1600CET. The 10-year OAT/Bund spread is 1.5bps tighter today at 83bps ahead of that event.
- German cash yields are 2-3bps higher, with the curve flattening a touch. 10-year Bund supply is due at 1030GMT – Germany’s last issuance operation of the year.
- The bid in equities has left 10-year peripheral spreads to Bunds up to 1.5bps tighter.
- Market focus turns to today’s US data, alongside ECB President Lagarde’s appearance before EU Parliament at 1330GMT/1430CET.
GILTS: PMIs & Soft Demand at Supply Weigh, Knee-Jerk Bailey Reaction Unwound
Firmer-than-expected final services PMI data and continued digestion of BoE Governor Bailey’s comments sees gilts away from session highs.
- Initial headlines suggested that BoE Governor Bailey “sees four interest rate cuts in ’25.” That generated a dovish market reaction.
- However, our macro team has noted that he was asked if "gradual" is consistent with 4 cuts over the next year - he largely avoids the question, noting that "we always condition what we publish in terms of the projection on market rates, and so as you rightly say, that [100bp] was effectively the view the market had."
- That isn’t anywhere near as dovish as the headlines, with the knee-jerk move unwinding
- Futures last -24 at 95.76. Lows of 95.67. Next support at the November 28 low (95.17).
- Yields 2-3bp higher across the curve.
- 4.00% Oct-31 gilt supply was on the softer side, also factoring into the recent move back towards session lows.
- Spreads to Bunds 0.5bp wider at ~219bp, clear break of 220bp would expose the ’22 mini-Budget high (227.5bp).
- BoE-dated OIS prices ~83bp of cuts through ’25, little changed vs. early morning levels after briefing moving to ~88bp in initial reaction to Bailey’s comments
- SONIA futures now little changed to -3.0.
- U.S. data to draw much of the focus from here.
- Comments from BoE’s Green & BoE DMP survey data due tomorrow.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Dec-24 | 4.690 | -1.0 |
Feb-25 | 4.492 | -20.8 |
Mar-25 | 4.402 | -29.8 |
May-25 | 4.235 | -46.5 |
Jun-25 | 4.148 | -55.2 |
Aug-25 | 4.026 | -67.4 |
Sep-25 | 3.978 | -72.2 |
Nov-25 | 3.907 | -79.3 |
Dec-25 | 3.873 | -82.7 |
EQUITIES: E-Mini S&P Trades to Fresh Cycle High, Maintains Bullish Tone
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 4862.20. 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 has again traded to a fresh cycle high, today. 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 6100.00 handle next. Initial support to watch lies at 5979.30, the 20-day EMA.
- Japan's NIKKEI closed higher by 27.53 pts or +0.07% at 39276.39 and the TOPIX ended 12.98 pts lower or -0.47% at 2740.6.
- Elsewhere, in China the SHANGHAI closed lower by 14.156 pts or -0.42% at 3364.65 and the HANG SENG ended 3.86 pts lower or -0.02% at 19742.46.
- Across Europe, Germany's DAX trades higher by 169.58 pts or +0.85% at 20186.67, FTSE 100 lower by 25.84 pts or -0.31% at 8333.65, CAC 40 up 25.32 pts or +0.35% at 7280.74 and Euro Stoxx 50 up 27.62 pts or +0.57% at 4906.13.
- Dow Jones mini up 198 pts or +0.44% at 45006, S&P 500 mini up 13.75 pts or +0.23% at 6077, NASDAQ mini up 113.5 pts or +0.53% at 21394.75.
Time: 09:55 GMT
COMMODITIES: Spot Gold Trading Inside Tight Range, Long-Term Trend Still Bullish
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 is unchanged and is trading 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 $0.26 or +0.37% at $70.19
- Natural Gas down $0.01 or -0.39% at $3.03
- Gold spot down $3.04 or -0.12% at $2640.26
- Copper down $1.35 or -0.32% at $418.7
- Silver down $0.21 or -0.69% at $30.8205
- Platinum down $9.08 or -0.95% at $943.91
Time: 09:55 GMT
| Date | GMT/Local | Impact | Country | Event |
| 04/12/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 04/12/2024 | 1315/0815 | *** | US | ADP Employment Report |
| 04/12/2024 | 1330/1430 |  EU | ECB's Lagarde statement at ECON hearing | |
| 04/12/2024 | 1345/0845 | US | St. Louis Fed's Alberto Musalem | |
| 04/12/2024 | 1400/0900 | US | Richmond Fed's Tom Barkin | |
| 04/12/2024 | 1445/0945 | *** | US | S&P Global Services Index (final) |
| 04/12/2024 | 1445/0945 | *** | US | S&P Global US Final Composite PMI |
| 04/12/2024 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 04/12/2024 | 1500/1000 | ** | US | Factory New Orders |
| 04/12/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 04/12/2024 | 1845/1345 | US | Fed Chair Jerome Powell | |
| 04/12/2024 | 1900/1400 | US | Fed Beige Book | |
| 05/12/2024 | 0030/1130 | ** |  AU | Trade Balance |
| 05/12/2024 | 0645/0745 | ** |  CH | Unemployment |
| 05/12/2024 | 0700/0800 | ** |  DE | Manufacturing Orders |
| 05/12/2024 | 0700/0800 |  SE | Flash CPI | |
| 05/12/2024 | 0745/0845 | * |  FR | Industrial Production |
| 05/12/2024 | 0800/0900 | ** |  ES | Industrial Production |
| 05/12/2024 | 0830/0930 | ** | EU | S&P Global Final Eurozone Construction PMI |
| 05/12/2024 | 0930/0930 | ** |  GB | S&P Global/CIPS Construction PMI |
| 05/12/2024 | 0930/0930 | GB | DMP Data | |
| 05/12/2024 | 1000/1100 | ** | EU | Retail Sales |
| 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 |