EXECUTIVE SUMMARY
- MNI US PAYROLLS PREVIEW - TEST FOR FADING RATE CUT EXPECTATIONS
- BOJ IS SAID TO WEIGH RAISING INFLATION FORECAST ON RICE, YEN
- KREMLIN 'WELCOMES' PROSPECT OF TRUMP-PUTIN TALKS
- CHINA VOWS TO ADOPT “VERY PROACTIVE” FISCAL POLICY
Figure 1: Recent US labour market developments
NEWS
MNI US PAYROLLS PREVIEW: Test for Fading Rate Cut Expectations
Nonfarm payrolls growth is seen at circa 160k in December as some recent distortions from hurricanes and strikes are increasingly in the rear-view mirror, and with a relatively narrow range to analyst estimates. The initial response rate to the establishment payroll survey increased notably back last month but we don’t rule out further large two-month downward revisions. The unemployment rate is broadly seen holding at 4.2%, although at an unrounded 4.246% in November it wouldn’t surprise if it rounded to 4.3%. A ‘high’ 4.3% would still be notable, though, for a fresh recent high.
BOJ (MNI): BOJ Is Said to Weigh Raising Inflation Forecast on Rice, Yen
Bank of Japan officials are likely to discuss raising their inflation outlook at a policy meeting later this month, although no rate decision has been made yet at this point, according to people familiar with the matter. The officials will probably talk about upgrading projections for inflation excluding fresh food and energy for this fiscal year and next, according to the people. That’s mainly due to a recent surge in the cost of rice and the weakening of the yen since the last outlook report in October, the people said.
US (MNI): Senate Hearing for Trump's Treasury Sec Nominee Bessent Teed Up for Jan 16
The Senate Finance Committee is expected to hold a confirmation hearing for President-elect Donald Trump’s Treasury Secretary nominee, Scott Bessent, on January 16. The hearing will be followed by an executive session where lawmakers may discharge Bessent's nomination for full Senate confirmation. Betting markets see few obstacles to Bessent’s path to Trump’s Cabinet, with Polymarket showing an implied probability of 95% that Bessent passes Senate confirmation.
US/CANADA (BBG): Canada Plots Broad Tariff Retaliation If Trump Starts Trade War
Canada is drawing up plans for extensive tariffs against US products if Donald Trump follows through on his threat to put 25% levies on Canadian goods, according to people familiar with the matter. The Canadian government’s draft plans for trade retaliation go well beyond the narrow list of US-made items on which it placed counter-tariffs during a 2018 dispute, according to government officials.
US/EU (FT): EU Fears Donald Trump Rolling Back Biden-Era Measures
EU officials are analysing hundreds of executive orders and sanctions imposed by US President Joe Biden amid growing concern that Donald Trump will rescind them, potentially upending foreign relations and trade. Brussels is worried that Trump could seek to overturn his predecessor’s decisions simply because they were taken by Biden, without much consideration about the impact of such moves on European allies.
US/RUSSIA (MNI): Kremlin 'Welcomes' Prospect of Trump-Putin Talks
Reuters reporting comments from Kremlin spox Dmitry Peskov. In response to US President-elect Donald Trump's remarks on 9 Jan that "[Putin] wants to meet and we are setting it up," Peskov says that President Vladimir Putin "has repeatedly said that he is open to contacts with Trump," but that there are no details on a possible meeting yet. Says a "mutual desire to talk and solve problems is needed along with political will," and that Russia "welcomes Trump's stated desire to solve problems through talks." Peskov says "it looks like there will be developments on a possible Trump-Putin meeting once Trump takes office on 20 Jan." Peskov: "Russia's negotiating stance on Ukraine is well known."
US/CHINA (FT): Xi Jinping to Send Top-Level China Envoy to Donald Trump’s Inauguration
China’s President Xi Jinping will send a high-level envoy to Donald Trump’s inauguration, in an unprecedented move designed to reduce friction between the countries at the start of the new US administration. Beijing told Trump’s transition team that the top official would attend instead of Xi, according to several people familiar with the talks. The envoy would also hold talks with Trump’s team, several people said.
ECB (BBG): ECB Weighs Tougher Risk Model Approach That May Hit Bank Capital
The European Central Bank is considering pushing banks to use loan data from the region’s historic banking crisis when predicting future credit defaults, a move that could result in lower capital strength for some of the affected lenders. Europe’s top financial regulator floated the idea at a presentation in November, when it announced how it seeks to enforce a new piece of regulation ordering banks to use credit data that includes times of stress in their risk models, people familiar with the matter said.
CHINA (MNI): China to Adopt Very Proactive Fiscal Policy - Official
MNI (Beijing) China’s fiscal policy this year will be "very proactive", fully taking into account the need to increase countercyclical adjustment, Liao Min, Vice Minister of Finance told a press conference on Friday. The deficit size will increase significantly, and total fiscal expenditure will expand further, providing strong support for the continued recovery of the economy, said Liao, adding that exact figures will be announced after going through legal procedures.
CHINA (MNI): PBOC Suspends Bonds Trades as Yields Drop
MNI (Beijing) The People’s Bank of China has suspended bond purchases as treasury yields continue to fall fuelled by policy easing expectations. According to a statement on the PBOC’s website on Thursday, the Bank will suspend bond purchases in its open market operations starting from January 2025 considering “the persistent supply shortage in the government bond market” and the resumption of the operations will be considered based on the supply and demand situation in future.
S. KOREA (BBG): South Korean Opposition’s Support Slides as Yoon Defies Arrest
The support rate for South Korea’s main opposition that has been leading the impeachment campaign against President Yoon Suk Yeol dived, as investigators struggle to arrest the embattled leader. The approval rate for the opposition Democratic Party fell to 36% in a poll released Friday by Gallup Korea, down 12 percentage points from the previous survey released in December. The support rate for Yoon’s People Power Party rose to 34% from 24% during the same period, rising above the level of support reported days before Yoon’s martial law decree.
BRAZIL (BBG): Lula Disapproval Hits New High on Brazilians’ Economic Pessimism
Disapproval of Brazil’s Luiz Inacio Lula da Silva reached the highest level of his term in December on growing frustration with the leftist president’s economic stewardship. Nearly half of respondents - 49.8% - said they disapprove of the president, up from 47.3% the previous month, according to LatAm Pulse, a survey conducted by AtlasIntel for Bloomberg News. Almost 48% said they approve, statistically unchanged from November.
DATA
FRANCE DATA (MNI): France IP Firmer Than Expected; Vehicle Production M/M Strengthens
- FRANCE NOV INDUSTRIAL PRODUCTION +0.2% M/M, -1.1% Y/Y
- FRANCE NOV MANUFACTURING OUTPUT +0.2% M/M, -1.5% Y/Y
- FRANCE NOV CONSUMER SPENDING +0.3% M/M, +0.3% Y/Y
- FRANCE NOV CONSUMER MANUF SPENDING +0.4% M/M, +0.5% Y/Y
France Industrial Production was firmer than expected in November at 0.2% M/M (vs -0.1% consensus, -0.3% revised prior from -0.1%) - the first positive sequential print after two consecutive months of decline, and -1.1% Y/Y (vs -1.3% consensus, -0.9% revised prior from -0.6%) - though the annual reading has worsened for the third successive month.
SPAIN DATA (MNI): Weak November IP, But Broader Manufacturing Sentiment Still Solid
Although Spanish November industrial production fell 0.4% Y/Y (versus a three-analyst consensus of 1.5%, and a four tenth downwardly revised 1.5% prior), production momentum rose for a second consecutive month to 0.4% (vs 0.3% prior). Manufacturing sentiment remains solid, suggesting the trend in production should remain positive in early 2025.
ITALY DATA (MNI): Retail Sales Grow 0.3% 3m/3m for Third Consecutive Month
Italian retail sales fell on a nominal and real basis in November, though real 3m/3m sales grew 0.3% for the third consecutive month. This suggests Italian household consumption is on track for another quarter of sequential growth in Q4. Household consumption contributed 0.8pp to quarterly GDP growth in Q3 (overall Q/Q GDP growth was flat overall). In Q4 2024 and through to Q2 2026, analysts expect consumption growth to grow around 1.0% Y/Y (vs 0.4% in Q3).
NORWAY DATA (MNI): Inflation Momentum Climbs in December, Imported Goods Soft Again
- NORWAY DEC CPI -0.1% M/M, +2.2% Y/Y
- NORWAY DEC CORE CPI -0.1% M/M, +2.7% Y/Y
The December inflation data is unlikely to shift expectations away from a Norges Bank cut in March. Inflation momentum (on a 3m/3m SAAR using Statistics Norway data) ticked up to 3.0% from 2.5% in December, its second consecutive acceleration. This was largely a result of the soft September reading (0.08% M/M) falling out of the numerator calculation. On a sequential monthly basis, December inflation at 0.15% M/M is consistent with the 2% target.
SWEDEN DATA (MNI): Broad-Based Rise in Nov Activity, But GDP Indicator Momentum Still Soft
The increase in Swedish November economic activity was broad based (a reminder that monthly GDP was 1.4% M/M vs a three-analyst consensus of 0.4% and -0.4% prior). Statistics Sweden cites "growth in both goods- and service producing industries as well as in general government production". However, on a 3m/3m basis, the GDP indicator fell 0.7% in November (vs -0.2% prior). As such, overall economic momentum remains on the soft side, and more data is required to clearly signal that a recovery is underway.
SWISS DEC UNEMPLOYMENT RATE +2.6% (MNI)
JAPAN DATA (MNI): Real Household Spending Higher Than Forecast, But Still Negative Y/Y
- JAPAN NOV HOUSEHOLD SPENDING -0.4% Y/Y; OCT -1.3%
- JAPAN NOV HOUSEHOLD SPENDING +0.4% M/M; OCT +2.9%
Japan household spending was -0.4% y/y for Nov, still negative but above market expectations of a -0.9% dip. The prior Oct outcome was 1.3%y/y. In m/m terms spending rose 0.4%. All of these figures are in real terms. In nominal terms spending was up 3.0%y/y. Nominal income rose 4.1%, while real incomes were up 0.7%y/y. This was down from Oct's +1.1% y/y pace.
AUSTRALIA DATA (MNI): Household Spending Sub Expectations, But Above Recent Y/Y Lows
Like yesterday's retail sales print, the Nov household spending update was also below expectations. We rose 0.4%m/m (+0.7% was the forecast). In y/y terms we were 2.4% (against a 2.5% forecast). Oct's rise was nudged up to 0.9% m/m versus originally reported as a 0.8% gain. In y/y terms Oct's rise was 3.3% (original estimate of 2.8%). The ABS noted 6 out of 9 categories rose in Nov, boosted by Black Friday sales. Recreational spending was also firmer, while SUV sales were also strong.
FOREX: JPY Volatility in Focus as US Employment Report Awaited
- Volatility for the Japanese Yen has been in focus early Friday following a Bloomberg sources piece suggesting that BoJ officials will discuss raising inflation forecasts at its January meeting. USDJPY traded from around 158.40 down to 157.63 on the back of the report, highlighting the growing intervention risks at these levels and the short-term fragility of holding JPY shorts.
- USDJPY fell just shy of the Thursday lows at 157.58, however the weekly lows remain much further out at 156.24 should non-farm payrolls disappoint. A collection of highs between 158.40-55 represent a building area of short-term resistance, ahead of 159.45, the Jul 12 high.
- For EURJPY, the 165.00 pivot capped the price action into year-end and the recent move down appears technically corrective at this juncture. The next support to watch lies at 160.54, 50.0% of the Dec 3 - 30 bull cycle.
- GBPJPY took a hit down to 193.69, just 20pips shy of the 193.49 lows on Thursday. The cross has been consolidating recent weakness, bolstered by a break of trendline support on the rising fiscal concerns in the UK.
- Elsewhere, the dollar index is unchanged as we approach the key labour market data in the US, with EURUSD holding close to 1.0300 into the NY session open. There has been some underperformance for Antipodean FX, with AUDUSD holding below 0.6200, and NZD/USD consolidating beneath 0.5600 as well, just above most recent lows of 0.5572. The October 2022 low at 0.5512 is the medium-term target for the move.
- US Nonfarm payrolls growth is seen at circa 160k in December as some recent distortions from hurricanes and strikes are increasingly in the rear-view mirror. The unemployment rate is broadly seen holding at 4.2%. Canadian jobs numbers are also due.
EGBS: Crude Oil Rally Keeps the Pressure on Bund Futures
The bear cycle in Bund futures has extended this morning, with RXH5 -28 ticks today at 131.20. The latest extension higher in crude oil futures has kept the pressure on core FI, with this morning’s regional data not moving the needle. Broader macro focus remains on this afternoon’s US labour market report.
- The 131.00 handle provides initial firm support in Bund futures, though downside has seemingly been capped by 131.06 (equating to the 2.60% 10-year Bund yield).
- The German curve has bear flattened, with 2-year yields 2bps higher and 30-year yields up 1.5bps.
- This morning, French industrial production was a little stronger than expected, while the Spanish reading was weaker.
- There was limited reaction in short-end German swap spreads and Euribor futures to reports that the ECB is considering a more stringent framework for banks in assessing future credit default risk.
- 10-year peripheral spreads to Bunds are little changed, while the OAT/Bund spread has unwound ~1bp of yesterday’s widening.
- In France, attention is on developments ahead of PM Bayrou's general policy speech to the National Assembly on Tuesday 14 Jan, where a budget is expected to be presented shortly after.
GILTS: Weaker, But Yesterday's Cycle Extremes Are Untested
Gilts under pressure alongside global peers this morning before a recovery from worst levels in recent trade, yesterday’s lows untested across the curve.
- A bid in oil adds to cross-market pressure.
- Futures as low as 89.53 before a move back to 89.70, initial support at 89.00, bearish technical trend intact.
- Yields little changed to 2.5bp higher, 10s under the most pressure.
- 5s30s registered fresh cycle closing highs above 85bp yesterday, the July ’24 intraday high (87.5bp) presents the next upside target.
- 10-Year spread to Bunds ~1.5bp wider at 225.5bp.
- There doesn’t seem to be much of a bullish case for gilts in the very short term.
- Fiscal risks and inflationary pressures continue to provide fundamental headwinds, while the reassessment of global term premia and issuance dynamics also weighing.
- BoE Deputy Governor Breeden pushed back against the idea of intervention late Thursday, stressing that gilt moves have been orderly at this stage.
- A reminder that we flagged a low likelihood of BoE intervention at this juncture ahead of Breeden’s comments, with relatively orderly markets one factor contributing to that view.
- BoE-dated OIS shows 47bp of cuts through ’25 vs. 49bp late yesterday. The market briefly priced 39bp of cuts over that horizon on Thursday.
- SONIA futures flat to -4.0, yesterday’s lows unchallenged.
- U.S. NFP data headlines ahead of the weekend, with little of note on the UK schedule.
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Intact, Price Near Recent Highs
A bull cycle in the Eurostoxx 50 futures contract remains intact and price is trading at its recent highs. This week’s rally highlights a reversal of the recent corrective pullback. Resistance at 5040.00, the Dec 9 high, has been pierced. A clear break of this hurdle would confirm a resumption of the bull cycle that started on Nov 21 last year and open 5068.13, a Fibonacci projection. On the downside, initial firm support lies at 4933.29, the 50-day EMA. A bear threat in the S&P E-Minis contract remains present. The reversal lower from the Dec 26 high, highlights the end of the Dec 20 - 26 correction. Attention is on 5866.00, Dec 20 low and a key short-term 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 lower by 414.69 pts or -1.05% at 39190.4 and the TOPIX ended 21.8 pts lower or -0.8% at 2714.12.
- Elsewhere, in China the SHANGHAI closed lower by 42.869 pts or -1.33% at 3168.524 and the HANG SENG ended 176.6 pts lower or -0.92% at 19064.29.
- Across Europe, Germany's DAX trades higher by 0.14 pts or +0% at 20317.91, FTSE 100 lower by 11.59 pts or -0.14% at 8307.96, CAC 40 down 3.59 pts or -0.05% at 7486.88 and Euro Stoxx 50 down 8.06 pts or -0.16% at 5009.85.
- Dow Jones mini down 25 pts or -0.06% at 42799, S&P 500 mini down 17.75 pts or -0.05% at 5941.25, NASDAQ mini down 78.25 pts or -0.09% at 21282.5.
Time: 09:50 GMT
COMMODITIES: Recent Gains in Gold Appear Corrective for Now
The trend structure in WTI futures remains bullish and the contract traded to a fresh cycle high again, on Wednesday. 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 $71.57. This average is seen as a key short-term support. Recent gains in Gold appear corrective - for now. However, the yellow metal is holding on to this week’s gains and scope is seen for a continuation higher near-term. A stronger recovery would open $2726.2, the Dec 12 high and an important short-term resistance. Clearance of this level would be a bullish development. On the downside, a reversal lower would expose $2583.6, the Dec 19 low. Initial support is at $2640.2, the 50-day EMA.
- WTI Crude up $1.54 or +2.08% at $75.39
- Natural Gas up $0.14 or +3.67% at $3.837
- Gold spot up $13.05 or +0.49% at $2680.2
- Copper up $1.35 or +0.31% at $432.35
- Silver up $0.2 or +0.67% at $30.3345
- Platinum up $3.53 or +0.37% at $965.69
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 10/01/2025 | - | *** |  CN | Money Supply |
| 10/01/2025 | - | *** | CN | Social Financing |
| 10/01/2025 | - | *** | CN | New Loans |
| 10/01/2025 | 1330/0830 | * |  CA | Building Permits |
| 10/01/2025 | 1330/0830 | *** | CA | Labour Force Survey |
| 10/01/2025 | 1330/0830 | *** |  US | Employment Report |
| 10/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 10/01/2025 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 10/01/2025 | 1700/1200 | *** | US | USDA Crop Estimates - WASDE |
| 10/01/2025 | 1700/1200 | ** | US | USDA GrainStock - NASS |
| 10/01/2025 | 1700/1200 | *** | US | USDA Winter Wheat |
| 10/01/2025 | 1900/1400 | ** | US | Treasury Budget |