EXECUTIVE SUMMARY
- TRUMP CONSIDERS WARSH SERVING AS TREASURY SECRETARY AND THEN FED CHAIR
- BONDI PICK FOR AG LOOKS TO HAVE MORE CHANCE OF CONFIRMATION
- ECB’S GUINDOS SAYS RATE-CUT SIZE IS LESS IMPORTANT THAN PATH
- GERMAN SERVICES PMI SLIPS INTO CONTRACTIONARY TERRITORY, WEAKEST SINCE MARCH
Figure 1: EUR/USD hits new pullback low, weakest level since 2022
Source: MNI/Bloomberg
NEWS
US (WSJ): Trump Considers Warsh Serving as Treasury Secretary -- and Then Fed Chair
President-elect Donald Trump has floated selecting financier Kevin Warsh as his Treasury secretary with the understanding that he could later be nominated to lead the Federal Reserve when Jerome Powell's term as chair ends in 2026, according to people familiar with the matter. Trump discussed the potential arrangement with Warsh during a meeting Wednesday at Mar-a-Lago, the president-elect's private club in Florida, some of the people said.
Warsh is a front-runner to lead the Treasury Department, but as of Thursday evening, Trump hadn't decided whom he would choose for the pivotal cabinet position. The people familiar with the matter said Trump was still weighing how he would approach the Fed vacancy and likely wouldn't make a final decision until closer to when Powell's term as chair ends in May 2026.
US (MNI): Bondi Pick for AG Looks to Have More Chance of Confirmation
Following the withdrawal of former Rep. Matt Gaetz from the process to become the next US Attorney General, President-elect Donald Trump moved swiftly in nominating former Florida AG Pam Bondi for the role. Bondi, who served in the Florida AG role from 2011-19, sat on Trump's legal team during his first impeachment process and became an increasingly prominent figure on the campaign trail ahead of the Nov 5 election. Like Trump's other prominent Cabinet picks, Bondi is viewed as a loyalist to the president-elect, but does not come with the sizeable political baggage of Gaetz and as such is much more likely to make it through the Senate confirmation process.
US/RUSSIA (BBG): US Sanctions Gazprombank to Squeeze Russian Gas Exports
The US sanctioned Gazprombank, the last major Russian financial institution exempt from penalties, closing a loophole that Washington kept open over the course of the war in Ukraine because the lender is key for energy markets. The Biden administration had previously decided not to levy sanctions against the bank, which European nations use to pay for the gas they still buy from Russia, for fear of causing turmoil in global commodity markets. The sanctions increase the risk of a cut-off of some of the remaining Russian natural gas flows to a handful of central European nations.
UKRAINE (BBG): Ukraine’s Parliament Cancels Session Amid New Attack Threat
Ukraine’s parliament canceled Friday’s plenary session due to the threat of a possible attack on Kyiv’s government district, according to lawmakers. While the Ukrainian capital is attacked near-daily by Russian forces, this is the first such move by the legislature in recent months. It follows alerts issued by several embassies this week due to extraordinary threats, which were followed by Moscow’s Thursday attack on Dnipro, one of the country’s largest cities, with an experimental intermediate-range ballistic missile.
RUSSIA/N.KOREA (BBC): Satellite Images Show Russia Giving N Korea Oil, Breaking Sanctions
Russia is estimated to have supplied North Korea with more than a million barrels of oil since March this year, according to satellite imagery analysis from the Open Source Centre, a non-profit research group based in the UK. The oil is payment for the weapons and troops Pyongyang has sent Moscow to fuel its war in Ukraine, leading experts and UK Foreign Secretary, David Lammy, have told the BBC. These transfers violate UN sanctions, which ban countries from selling oil to North Korea, except in small quantities, in an attempt to stifle its economy to prevent it from further developing nuclear weapons.
ISRAEL (BBG): Netanyahu Says Israel Won’t Back Down After ICC Arrest Warrants
Israel’s Prime Minister Benjamin Netanyahu severely criticized the International Criminal Court for issuing arrest warrants against him and a former minister, and said his government won’t be deterred from continuing its war against Hamas in Gaza. The Hague-based court’s announcement on Thursday was “anti-Semitic” and Israel will keep “defending its citizens,” Netanyahu said in his first direct comments.
ECB (BBG): ECB’s Guindos Says Rate-Cut Size Is Less Important Than Path
The European Central Bank is clearly on a path of lowering interest rates, but how much it cuts at each monetary policy meeting is not as important, Vice President Luis de Guindos said. He added that wage growth will slow next year and that the ECB expects the pace of consumer-price rises to converge toward its 2% target. “If our inflation projections for next year are indeed met, the path of monetary policy is clear,” he told a conference in Madrid on Friday. “The question of whether we cut 50 or 25 basis points is much less important.”
ECB (BBG): Lagarde Sounds Alarm on EU’s Inertia Over Capital Markets
European Central Bank President Christine Lagarde said Europe’s continuing struggle to innovate and the souring geopolitical backdrop make it even more imperative to unite its capital markets. Addressing the Frankfurt European Banking Congress on Friday, she said the region’s inaction has cost it valuable time since she appeared at that same event in 2023 with much the same message.
UK (MNI): Ofgem Price Cap to Rise 1.2% in Q1; Broadly In-Line with Expectations
Ofgem has announced that the energy price cap (which impacts the prices paid by the majority of UK consumers for gas and electricity) will rise by 1.2% for the period 1 January to 31 March to GBP1,738 per year (from GBP1,717 in Oct-Dec). Note that due to base effects, gas and electricity prices are still contributing negatively to headline Y/Y CPI. This is despite that negative
contribution reducing by 0.57ppt in the October print published this week as the Ofgem price cap rose 9.5% on 1 October.
CHINA (MNI): PBOC to Keep Yuan Flexible, Monitor Overshoot Risk
MNI (Beijing) The People's Bank of China will continue to maintain the yuan exchange rate's flexibility while preventing any risk of excessive currency moves, said Liu Ye, an official within the international department, during a briefing on Friday. The PBOC will strengthen the management of expectations to curb the formation of one-way speculation in the foreign exchange market, she said, noting the yuan is likely to exhibit a two-way fluctuation in the future due to factors, including divergent economic trends across countries, geopolitical changes, and swings in international financial markets.
JAPAN (BBG): Japan’s Cabinet Approves Stimulus in Show of Policy Progress
Japan’s cabinet approved a stimulus package that’s slightly bigger than last year’s, as Prime Minister Shigeru Ishiba followed up on a pledge to ramp up support for households and businesses struggling to cope with higher costs. “The most important thing is to raise wages for all generations,” Ishiba told reporters earlier Friday. “This needs to happen now and in the future.”
DATA
EUROZONE DATA (MNI): EZ ex-France and Germany Outperforms Again
- EUROZONE NOV FLASH MANUF PMI 45.2 (FCST: 46.0); OCT 46.0
- EUROZONE NOV FLASH SERVICES PMI 49.2 (FCST: 51.6); OCT 51.6
Not surprising to see the Eurozone November flash PMIs weaker than expected following the German/French data earlier this morning. This was nonetheless the weakest composite PMI since January this year at 48.1 (vs 50.0 cons and prior), and the first time in 10-months that the services component was contractionary (49.2 vs 51.6 cons and prior). Once again, the two largest Eurozone economy were the main drags on growth. According to the report: "The rest of the Eurozone continued to see business
activity increase, albeit the rate of expansion was only slight and the slowest in the current 11-month sequence of growth".
GERMANY DATA (MNI): Services PMI Weakest Since March
- GERMANY NOV FLASH MANUF PMI 43.2 (FCST: 43.0); OCT 43.0
- GERMANY NOV FLASH SERVICES PMI 49.4 (FCST: 51.7); OCT 51.6
As in France, the German services PMI was much weaker-than-expected, slipping into contractionary territory for the first time since February at 49.4 (vs 51.7 cons, 51.6 prior). The manufacturing PMI, although two tenths better than expected at 43.2, remained deeply contractionary. Uncertainty was prevalent amongst respondents as in the French data. On the inflation side, sticky services inflation signals remained prevalent.
GERMANY DATA (MNI): Deeper Q3 GDP Data Shows Public Sector Strongest
- GERMANY Q3 FINAL GDP 0.1% Q/Q (VS FCST 0.2%)
A deeper view into the German Q3 GDP data suggests broad-based weakness in the German private sector, as without a strong print in the public sector, growth might have been negative again. Gross value added (GVA) by industry broadly affirms the prevailing narrative: weak industry (IP excl. construction -1.4% Q/Q vs -0.8% prior, worst quarter since Q3'23), also weak construction (-1.2% Q/Q vs -3.4% prior). Additionally, a set of services subsectors was declining: Information and communication (-0.4% Q/Q vs -0.4% prior), finance and insurance (-0.9% vs -0.8% prior), corporate services (-0.3% vs +0.3% prior).
FRANCE DATA (MNI): Political and Economic Uncertainty Weighs on Flash PMI
- FRANCE NOV FLASH MANUF PMI 43.2 (FCST:44.5); OCT 44.5
- FRANCE NOV FLASH SERVICES PMI 45.7 (FCST:49.0); OCT 49.2
The French November flash PMIs were much weaker than expected, with the composite reading reaching its lowest since January at 44.8 (vs 48.3 cons, 48.1 prior). Services saw a notable miss at 45.7 (vs 49.0 cons, 49.2 prior), with political and economic uncertainty cited by respondents - a risk we had flagged in our preview. There was also an "intensification of cost pressures across France", with services firms passing these increases onto output charges.
UK DATA (MNI): Very Little Positive in the PMI Report; Services Sentiment Hit Hard
- UK NOV FLASH MANUF PMI 48.6 (FCST: 50.0); OCT 49.9
- UK NOV FLASH SERVICES PMI 50.0 (FCST: 52.0); OCT 52.0
Very little positive in the UK flash PMI report with the one exception being prices changed coming in a bit lower (in spite of cost pressures increasing). Despite that, firms are already starting to increase prices to maintain margins ahead of next year's employer NIC and minimum wage increases. And they are looking to not hire replacements to reduce their headcount (but that isn't translating into large outright redundancies yet). Concerningly, services sentiment was the lowest since December 2022.
UK DATA (MNI): Retail Sales Softer Than Expected
- UK OCT RETAIL SALES -0.7% M/M, +2.4% Y/Y
- UK OCT RETAIL SALES EX-FUEL -0.9% M/M, +2% Y/Y
Retail sales softer than expected in October with downward revisions to September. The ONS press release points to uncertainty ahead of the Budget impacting sales, particularly for non-food stores (the risks of which we flagged in our preview). The biggest fall was within clothing stores which fell 3.1%M/M (although this is after some strong performance over the past few months). As we often note, this is a volatile series so in spite of the disappointing print today and the downward revision to prior data, we don't think there are any notable implications for monetary policy here, or anything here to make any MPC member change their vote or question their thought process.
UK DATA (MNI): GfK Consumer Confidence Slightly Above Expectations
- UK NOV GFK CONSUMER CONFIDENCE INDEX -18
UK GfK Consumer Confidence printed slightly higher than expected at -18 in November (vs -22 consensus, -21 prior), making it the highest reading since August 2024 and broadly in-line with the year-to date average. All 5 subcomponents rose, with major purchase index seeing the largest rise of 5 points to -16 which the release highlights is "in the run-up to Black Friday".
JAPAN DATA (MNI): Japan Oct Core CPI Rises 2.3%, Services Rise
- JAPAN OCT CORE CPI +2.3% Y/Y; SEPT +2.4%
- JAPAN OCT CORE-CORE CPI +2.3% Y/Y; SEPT +2.1%
The year-on-year rise of Japan's annual core consumer inflation rate slowed to 2.3% in October from September’s 2.4%, 10 basis points higher than expected, due to lower energy, but corporate price revisions boosted services prices, data released by the Ministry of Internal Affairs and Communications showed on Friday. Services rose 1.5% y/y and 0.4% m/m against September's 1.3% and -0.4% as firms transferred higher labour costs to retail prices. The increase was largely in line with the lower end of the Bank of Japan's forecast. Officials are closely watching the services result to gauge the strength of the wage-price cycle.
FOREX: PMIs Drill EUR to Multi-Year Lows
- Having traded poorly through the week, Friday's prelim PMI numbers were seen as critical for near-term trade in the single currency and the particularly soft releases for both France and Germany weighed heavily across the EUR into the NY crossover.
- Fallout from the PMIs prompted EUR/USD to trade fresh pullback lows at 1.0335 - that's the lowest print since 2022, and saw very solid participation on the move: Z4 EUR futures traded well over double what you'd normally see at this time of day.
- The break here puts prices at the lowest since '22 and will again re-raise speculation that EUR/USD could revisit parity in the coming months - the options-implied likelihood of touching 1.00 before year-end has spiked - now 9.7%, up from 0.4% in the session before the US election.
- Heavy EUR selling underpinned the broad USD rally, which is shrugging off the pullback in US yields, and prompting GBP/USD to show below $1.25. This narrows the gap with key levels below at 1.2446 and the firm bear trigger at 1.2300 - the mid-April low.
- Focus for the duration of the Friday session turns to Canadian retail sales, prelim US PMI numbers for November and the final UMich sentiment print. ECB speak scheduled today includes Schnabel, Villeroy and Nagel.
EGBS: Curves Bull Steepen After Weak November Flash PMIs
EGB curves bull steepened after the November flash PMIs printed below consensus expectations. The German 2s10s curve has steepened almost 5bps to 25.6bps, sitting just off multi-year highs.
- PMI weakness was particularly prevalent in the services components, a concerning signal given the importance of the services sector in supporting the Eurozone economy post-covid.
- Schatz yields are over 12bps lower today, driven by a sharp dovish repricing in EUR STIRs. ECB-dated OIS now price a ~60% implied probability of a 50bp cut in December, up from ~20% this morning.
- Bund futures trade close to intraday highs, currently +80 ticks at 133.28. The Nov 19 high at 132.99 has been breached, exposing 133.39 (38.2% retracement of the Oct 1 - Nov 6 bear leg).
- 10-year EGB spreads to Bunds trade a little wider, with weak growth signals from the PMIs weighing on equities.
- Focus turns to ECB-speak from Nagel and Villeroy (1300GMT) and Schnabel (1545GMT) for any post-PMI reactions. This morning, ECB Vice President de Guindos has already played down the difference between a 25bp or 50bp cut on the ECB’s overall policy trajectory.
- US PMIs at 1445GMT will also be of interest.
GILTS: Off Post-PMI Highs, Still Well Bid on the Day
Gilts off highs after softer-than-expected European & UK PMI data pushed both futures and 10-Year yields to fresh November lows.
- Upside risks to inflation noted within PMI report helped temper the rally.
- Futures last +53 at 94.58 vs. session highs of 94.90.
- November 1 high (94.73) pierced, fresh extension higher would target round number resistance (95.00) then the October 10 low (95.83).
- Yields 5-6bp lower on the day, curve a little steeper.
- 10s as low as 4.363% before a move back to 4.385%, next downside level of interest at the October 29 high (4.317%).
- BoE-dated OIS off dovish session extremes.
- 2.5bp of BoE cuts priced for December, 21bp through February, 30bp through March, 53.5bp through June and 76bp of easing through Dec ’25 (60bp of easing was priced through Dec ’25 at one stage on Wednesday).
- Fresh November highs across many SONIA futures, last flat to +5.0.
- We still believe that rate cuts in February and May presents the most likely BoE policy path from here, although today’s data does increase the odds of a more aggressive cutting cycle during ‘25.
- Soft retail sales data seen pre-open but had little impact given its volatile nature.
- Watch for cross-market drivers and macro headline flow into the weekend, with little of note left on the UK calendar.
EQUITIES: Bearish Theme in Eurostoxx 50 Futures Remains Intact
A bearish theme in the Eurostoxx 50 futures contract remains intact. A fresh cycle low this week marks a resumption of the downtrend that started Sep 30. Price has breached 4746.94, 61.8% of the Aug 5 - Sep 30 bull cycle. This exposes 4662.12, the 76.4% retracement point. Initial firm resistance has been defined at 4961.00, the Nov 6 high, where a break would highlight a reversal. First resistance is at 4831.33, the 20-day EMA. S&P E-Minis remain above Tuesday’s low. Recent weakness in the contract appears to have been a correction. Medium-term trend signals such as MA studies, continue to highlight a dominant uptrend. The contract has recently traded through support at the 20-day EMA and the next key support to monitor is 5843.83, the 50-day EMA. A clear break of this EMA would signal scope for a deeper retracement. The bull trigger is 6053.25, the Nov 11 high.
- Japan's NIKKEI closed higher by 257.68 pts or +0.68% at 38283.85 and the TOPIX ended 13.72 pts higher or +0.51% at 2696.53.
- Elsewhere, in China the SHANGHAI closed lower by 103.212 pts or -3.06% at 3267.192 and the HANG SENG ended 371.14 pts lower or -1.89% at 19229.97.
- Across Europe, Germany's DAX trades lower by 94.51 pts or -0.49% at 19048.24, FTSE 100 higher by 31.6 pts or +0.39% at 8180.96, CAC 40 down 54.04 pts or -0.75% at 7159.43 and Euro Stoxx 50 down 31.02 pts or -0.65% at 4725.33.
- Dow Jones mini down 163 pts or -0.37% at 43824, S&P 500 mini down 27.75 pts or -0.46% at 5941.75, NASDAQ mini down 126.75 pts or -0.61% at 20698.75.
Time: 09:50 GMT
COMMODITIES: WTI Futures Trade Higher Wednesday, But Conditions Still Bearish
WTI futures have traded higher this week. However, a bearish theme remains intact. Attention is on $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. Clearance of this level would resume the recent uptrend. Initial firm resistance is $72.41, the Nov 7 high. The long-term trend condition in Gold is unchanged, it remains bullish and the latest move down appears to have been a correction. Price has recovered from its recent lows and the metal is again trading higher, today. The 20-day EMA at $2653.0, has been breached. This highlights a stronger reversal and signals the end of the recent bearish corrective cycle, opening $2730.4, a Fibonacci retracement. Initial support is at $2636.6, the 50-day EMA.
- WTI Crude up $0.04 or +0.06% at $70.17
- Natural Gas up $0.04 or +1.23% at $3.384
- Gold spot up $33.39 or +1.25% at $2703.18
- Copper down $4.1 or -0.98% at $412.4
- Silver up $0.45 or +1.45% at $31.237
- Platinum down $3 or -0.31% at $962.2EQUITIES
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 22/11/2024 | 1330/0830 | ** |  CA | Retail Trade |
| 22/11/2024 | 1330/0830 | ** | CA | Retail Trade |
| 22/11/2024 | 1445/0945 | *** |  US | S&P Global Manufacturing Index (Flash) |
| 22/11/2024 | 1445/0945 | *** | US | S&P Global Services Index (flash) |
| 22/11/2024 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 22/11/2024 | 1545/1645 |  EU | ECB's Schnabel in panel on MonPol | |
| 22/11/2024 | 2315/1815 | US | Fed Governor Michelle Bowman |