EXECUTIVE SUMMARY
- BIDEN DECIDES TO BLOCK U.S. STEEL SALE TO JAPANESE BUYER
- TRUMP PICKS KEN KIES FOR KEY TREASURY JOB AHEAD OF TAX CUT PUSH
- CHINA LETS YUAN WEAKEN AFTER DEFENDING 7.3 PER DOLLAR FOR WEEKS
- SOUTH KOREA CONSTITUTIONAL COURT SETS IMPEACHMENT TRIAL DATES
Figure 1: USD/CNY trading above 7.30, approaching 2022, 2023 highs
Source: MNI/Bloomberg
NEWS
US (WaPo): Biden Decides to Block U.S. Steel Sale to Japanese Buyer
President Joe Biden has decided to officially block Nippon Steel's proposed purchase of U.S. Steel, a once-iconic American company whose sale to a foreign buyer he publicly opposed for months, according to two administration officials who were not authorized to speak publicly about the matter. Barring an unforeseen change of heart, which the officials do not expect, a White House announcement of the presidential finding is planned as soon as Friday. Biden opted to kill the deal despite intense efforts by some of his senior advisers to sway him in recent days, who warned that rejecting a sizable investment from a top Japanese corporation could damage U.S. relations with Japan.
US (BBG): Trump Picks Ken Kies for Key Treasury Job Ahead of Tax Cut Push
President-elect Donald Trump has announced members of his senior leadership team at the Treasury Department, who’ll work alongside Scott Bessent, his pick for secretary. Ken Kies will be assistant secretary for tax policy, placing him as a point person at the Treasury working on tax cuts Trump has touted as a signature policy issue for 2025. Kies is a longtime Republican tax lobbyist, whose client list has included Microsoft Corp., insurers and financial services groups.
CHINA (BBG): China Lets Yuan Weaken After Defending 7.3 Per Dollar for Weeks
The onshore yuan weakened past a level that China had been defending since late last year, opening up room for the managed currency to slump further amid a sluggish economy. The yuan fell to breach the psychological milestone of 7.3 per dollar for the first time since late 2023, amid concerns over China’s economic struggles and the nation’s widening yield discount to the US. The move came even after the central bank maintained its support for the currency with its daily reference rate on Friday.
CHINA (FT): China’s Central Bank Plans Policy Overhaul as Pressure Mounts on Economy
The People’s Bank of China plans to cut interest rates this year as it makes a historic shift to a more orthodox monetary policy to bring it closer into line with the US Federal Reserve and the European Central Bank. In comments to the Financial Times, the Chinese central bank said it was likely it would cut interest rates from the current level of 1.5 per cent “at an appropriate time” in 2025. It added that it would prioritise “the role of interest rate adjustments” and move away from “quantitative objectives” for loan growth in what would amount to a transformation of Chinese monetary policy.
CHINA (RTRS): China C.Bank Calls in Mutual Funds to Flag Bond Investment Risks, Sources Say
China's central bank summoned some fund managers on Friday to warn against frenzied buying of government bonds that has driven yields to record lows, two sources told Reuters. Such meetings between the People's Bank of China (PBOC) and institutional investors, aimed at flagging bond investment risks, have become regular recently, occurring several times a week, said one of the sources. The scramble for bonds as investors seek safer assets and bet on lower yields not only undercuts Beijing's efforts to channel money into consumption and more productive economic efforts, but also raises the risk of a bubble in debt markets.
CHINA (MNI): Beijing Boosts Consumer Trade-Ins to Cellphones
MNI (Beijing) China will expand the scope of its consumer trade-in scheme from whitegoods to electronic devices, subsidising the purchase of mobile phones, tablets, and smart watches, CCTV News reported citing an official from the National Development and Reform Commission. For enterprises, the equipment upgrade scheme will expand to cover areas such as electronic information, safe production and modern agriculture, as authorities will increase the subsidy standards for the renewal of new energy city buses and batteries as well as agricultural machinery, the NDRC said.
CHINA (BBG): China Flexes Lithium Dominance With Plans for Tech-Export Curbs
China is planning tougher scrutiny on exports of technology to make battery materials, as Beijing looks to protect its grip on a crucial supply chain amid rising global trade tensions. The government has proposed adding various technologies — some used for lithium refining and battery chemicals production — to its list of items that are subject to export controls, according to a notice seeking public opinion from the Ministry of Commerce on Thursday.
AUSTRIA (MNI): Liberal NEOS Leave Coalition Talks Saying 'No Progress Possible"
The liberal NEOS party formally withdrew from coalition talks with Chancellor Karl Nehammer's conservative Austrian People's Party (ÖVP) and the centre-left Social Democrats (SPÖ), citing lack of progress and inflexibility in negotiations. This leaves the ÖVP and SPÖ with the option of seeking to form a gov't with the environmentalist Greens, or forming a two-party 'grand coalition'.
SOUTH KOREA (MNI): Court Sets Impeachment Trial Dates; Standoff Prevents Yoon Arrest
The Constitutional Court has announced the five dates that it will hold hearings as part of the impeachment trial of suspended President Yoon Suk-yeol. In an effort to speed up the process amid political paralysis, the court will hear arguments on Tuesdays and Thursdays starting on 14 January. With the Lunar New Year holidays excluded, the final hearing will take place on Tuesday 4 February. The Court's decision comes in the aftermath of a tense standoff at the presidential palace. Corruption Investigation Office for High-ranking Officials (CIO) officers and police attempted to enforce an arrest warrant against Yoon earlier today. However, Presidential Security Service (PSS) and military personnel blocked their way, leading to a six-hour standoff that resulted in the CIO's withdrawal without executing the warrant.
DATA
GERMAN DATA (MNI): Labour Market Recovered Slightly, Sentiment Suggests Softening
- GERMANY DEC UE RATE (SA) 6.1% (FCST 6.2%); NOV 6.1%
Latest German labour market data on balance showed some signs of revival. Employment recovered for the second month straight, and the unemployment rate unexpectedly remained flat - meaning for the moment conditions remain stable. However, sentiment indicates further softening ahead, and labour demand is well below its 2022 highs. Employment rose by 24k in November vs +12k October on a seasonally adjusted basis, its second consecutive increase (after four declines Jun-Sep) and
strongest sequential rise since December 2023. More timely unemployment data for December rose a little less than expected (10k vs 15k cons) after +6k in November (revised from 7k) on a seasonally-adjusted basis. The unemployment rate remained at 6.1%, below the 6.2% expected.
UK DATA (MNI): Loan Approvals Soften, Consumer Credit Remains Weak
- UK NOV M4 MONEY SUPPLY +0% M/M, +2.9% Y/Y
- UK BOE NOV MORTGAGE APPROVALS 65,720
- UK BOE NOV CONSUMER CREDIT GBP0.88 BLN
- UK BOE NOV SECURED LENDING GBP2.47 BLN
BOE November Money and Credit data indicates loan approvals were softer compared to October and consumer credit remains weak. Net consumer credit was below expectations printing GBP0.9bln in Nov (vs GBP1.2bln consensus, GBP1.0bln revised prior), softening the annual growth rate to 6.6% Y/Y - the lowest since June 2022. Net mortgage approvals for house purchases softened in November for the first time since May 2024 to 65,700 (vs 68,700 consensus, 68,100 revised prior), the biggest decline in M/M approvals since August 2023. This is despite the 'effective' interest rate on new mortgages falling 11bps to 4.50% in November.
TURKEY DATA (MNI): Inflation Lower Than Expected in December, May Support Further Easing
- TURKEY DEC CPI +1.03% M/M
Headline inflation rose by 44.4% Y/Y in December from 47.1% in November, below expectations of a more gradual decline to 45.2%. Core CPI came in at 45.34% - a touch below expectations and the lowest print since May 2023 – while the M/M read more than halved to 1.03% (Est: +1.60%). Given the importance policymakers have previously placed on the latter, the soft print may justify further rate cuts in the months ahead after the CBRT kicked off its easing cycle in December with a 250bp cut while switching to a more data-dependent stance. The central bank meet next on Jan 23.
FOREX: Calmer Market Friday, But Concerns Over Single Currency Remain
- A much calmer market early Friday relative to the sharp sell-off suffered by both EUR/USD and GBP/USD yesterday. Post-mortems of the move see most looking to technical breaks of support (we identified 1.2367 in GBP/USD and 1.0335 in EUR/USD), sprawling growth concerns for Europe that could be worsened by Trump's inauguration and political dissatisfaction across mainland Europe and the UK.
- EUR/USD parity again becomes a focus going forward. Options markets now priced an implied probability of 49% for the pair to touch 1.00 in the coming three months (up from 28% a week ago), and a 21% probability (up from 13% a week ago) of the pair closing below parity at end-Q1.
- The greenback is modestly lower early Friday - however this was also the case for much of Thursday morning - leaving markets watching for any US hours recovery for the greenback. Activity elsewhere remains thin, with the Japanese market holiday keeping volumes light in overnight trade.
- Focus for the remainder of Friday trade turns to the ISM manufacturing release for December, expected to edge slightly lower to 48.2 from 48.4. Particular attention may be paid to this release given the sharp miss for the December Chicago PMI read - and another miss in today's data could set up a string of poor releases headed into the Fed decision at the end of the month.
BONDS: Overnight Rally Fades, Bund & Gilt Futures Stick Within Yesterday's Range
Bonds drift lower in recent trade, with Bunds under the most pressure amongst core global FI markets.
- Yesterday’s low in futures (132.90) presents the initial downside target in the German contract. Lows of 132.95 seen thus far, before a recovery back above 133.05.
- German yields 3bp higher to 1bp lower, twist flattening. 5s30s now ~2bp off yesterday’s multi-month closing high, last 42bp.
- OATs relatively unreactive to the AFTs announcement covering next week’s issuance detailed in the earlier bullet.
- While the amount on offer is relatively large, it still falls within the broader range of expectations given the agency’s ’25 funding requirements and front-loaded issuance norms.
- OAT/Bunds +1.5bp to 86.5bp, ~0.5bp wider since the AFT announcement, nearing ’24 closing highs of 88.4bp.
- Prolonged fiscal and political risks continue to promote OAT widening in early ’25, with the government seemingly on track to table a Budget that will displease the right and left of the political spectrum.
- Remaining EGB spreads to Bunds are little changed to 1.5bp wider.
- ~109bp of ’25 cuts priced into ECB-dated OIS vs. ~112bp early today.
- Early bid in gilts fades, with cues from broader bonds dominating.
- Futures last little changed at 92.40, yesterday’s range intact
- Yields 2-3bp lower, curve flatter.
- 2s10s and 5s30s edge away from yesterday’s multi-month closing highs.
- ~2bp of outperformance for UK 10s vs. Bunds, takes the spread back below 220bp.
- ~60bp of BoE cuts priced for ’25, little changed on the day.
- Comments from ECB’s Lane due later, although more focus will fall on the U.S. ISM m’fing survey.
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Remains Intact
A bull cycle in the Eurostoxx 50 futures contract remains intact, however, the recent move down highlights a corrective phase. Despite the latest bounce, a short-term bear threat remains present - for now. Key short-term support has been defined at 4829.00, the Dec 20 low. A break of it would confirm a resumption of the bear cycle and open 4800.87, a Fibonacci retracement. Initial firm resistance to watch is at 4939.00, the Dec 19 high. A bear threat in the S&P E-Minis contract remains present and the latest move down highlights the end of the recent Dec 20 - 26 corrective bounce. Attention is on 5866.00, the Dec 20 low and a key short-term support. Clearance of this level would strengthen a bearish theme. Initial firm resistance to monitor is 6107.50, the Dec 26 high. A break of this level is required to open key resistance at 6178.75, the Dec 6 high.
- Elsewhere, in China the SHANGHAI closed lower by 51.131 pts or -1.57% at 3211.43 and the HANG SENG ended 136.95 pts higher or +0.7% at 19760.27.
- Across Europe, Germany's DAX trades lower by 60.95 pts or -0.3% at 19963.23, FTSE 100 lower by 5.55 pts or -0.07% at 8254.42, CAC 40 down 48.55 pts or -0.66% at 7345.21 and Euro Stoxx 50 down 17.99 pts or -0.37% at 4899.89.
- Dow Jones mini up 145 pts or +0.34% at 42839, S&P 500 mini up 22.75 pts or +0.38% at 5939.25, NASDAQ mini up 108.25 pts or +0.51% at 21275.75.
Time: 09:50 GMT
COMMODITIES: WTI Futures Breach Initial Resistance, Strenghening Bullish Theme
WTI futures have traded higher this week as the contract extends recent gains. A stronger reversal to the upside has exposed key short-term resistance at $76.41, the Oct 8 high. Initial firm resistance at $71.97, the Nov 7 high, was breached yesterday, strengthening a bullish theme. On the downside, a reversal lower would expose support at the 20-day EMA, at $70.13. This average is seen as a key short-term support. Despite the latest recovery, a bear threat in Gold remains present. 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 continuation higher would instead signal scope for a climb towards resistance at $2726.2, the Dec 12 high.
- WTI Crude down $0.33 or -0.45% at $72.81
- Natural Gas down $0.13 or -3.5% at $3.535
- Gold spot down $4.42 or -0.17% at $2653.94
- Copper up $0.65 or +0.16% at $403.05
- Silver up $0.14 or +0.48% at $29.7091
- Platinum up $9.31 or +1.01% at $933.95
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 03/01/2025 | - | *** |  US | Domestic-Made Vehicle Sales |
| 03/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 03/01/2025 | 1500/1000 | *** | US | ISM Manufacturing Index |
| 03/01/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 03/01/2025 | 1600/1100 | US | Richmond Fed's Tom Barkin | |
| 06/01/2025 | 2200/0900 | * |  AU | S&P Global Final Australia Services PMI |
| 06/01/2025 | 2200/0900 | ** | AU | S&P Global Final Australia Composite PMI |