EXECUTIVE SUMMARY
- TRUMP IS SET TO ELEVATE CHINA HAWKS, DEEPENING BEIJING RIFT
- ISRAEL SEES PROGRESS IN LEBANON TRUCE TALKS DESPITE HURDLES
- GERMAN LAWMAKERS PROPOSE TO HOLD ELECTION IN FEBRUARY
- UK LABOUR MARKET DATA BROADLY IN LINE WITH EXPECTATIONS
Figure 1: Bloomberg dollar index rallies towards 2023 high
Source: MNI/Bloomberg
NEWS
US (BBG): Trump Is Set to Elevate China Hawks, Deepening Beijing Rift
President-elect Donald Trump is poised to pick two men with track records of harshly criticizing China for key posts in his new administration, a sign relations between the superpowers may deteriorate further in coming years. Senator Marco Rubio - who has taken an aggressive stance on China’s emergence as an economic power - is set to become the first sitting secretary of state to have been sanctioned by Beijing. Florida Representative Mike Waltz, who has called China a “greater threat” to the US than any other nation, is in line to be national security adviser.
US (BBG): Trump Picks Kristi Noem to Lead Homeland Security, CNN Reports
Donald Trump is tapping South Dakota Governor Kristi Noem to head the Department of Homeland Security, CNN said, selecting a loyalist once seen as a potential vice presidential candidate for a job that includes securing the US border and carrying out a promised mass deportation. Noem would join Tom Homan, Trump’s pick for White House “border czar,” and Stephen Miller, an immigration hardliner, in the administration after the president-elect takes office Jan. 20, CNN said, citing two people familiar with the decision who it didn’t identify.
US (WSJ): Exxon Says Trump Should Keep U.S. in Paris Climate Pact
The chief executive of Exxon Mobil says President-elect Donald Trump shouldn’t pull the U.S. from an international pledge to mitigate climate change, putting the oil giant at odds with the incoming administration on a key policy issue.
ISRAEL/MIDEAST (BBG): Israel Sees Progress in Lebanon Truce Talks Despite Hurdles
Israel said headway was being made in US-mediated efforts to achieve a cease-fire in Lebanon, but that it still needed guarantees on resuming military operations if there are any infractions by Hezbollah. “There is a certain progress. We are working with the Americans on the issue,” Israeli Foreign Minister Gideon Sa’ar told reporters on Monday. Russia could help with the enforcement of such a deal, he added.
ECB (MNI): Could Be Time to Revisit ECB Language - Rehn
With disinflation on track and headline inflation stabilising at the 2% target, it could be time for the ECB to discuss its statement language of returning inflation to target in a timely fashion and policy remaining restrictive, Governing Council member lOlli Rehn said Tuesday. Rehn said communications for a central bank needed to remain consistent, at least until the circunstances changed. "For me, that is an empirical question and I await the December forecasts to look at it," he told a UBS conference in London.
BOE (MNI): Restriction to Be Removed Gradually - Pill
The direction of travel for UK rates is clear and there will be an ongoing reduction of restriction, but policy easing will be gradual, Bank of England Chief Economist Huw Pill said on Tuesday, pointing to the latest earnings data as a sign of stickiness of wage growth. Speaking at a UBS conference in London, Pill said communication was a challenge for the BOE, as the wider Monetary Policy Committee tried to accomodate the nine individual voices of the committee members.
GERMANY (MNI): 23 Feb Proposed for Snap Federal Election - Handelsblatt
Handelsblatt reporting that lawmakers from Chancellor Olaf Scholz's Social Democrats (SPD), Vice Chancellor Robert Habeck's Greens, and the opposition Christian Democratic Union (CDU) have agreed on 23 February as the date for a snap general election according to unnamed CDU insiders. As part of the agreement, Scholz will call a confidence vote in the Bundestag on 18 December. The report suggests the SPD parliamentary executive group supports 23 Feb as a date. The CDU's Federal Executive Board will meet this evening to 'discuss further action'.
FRANCE (BBG): France’s Government to Soften Plan to Raise Employer Taxes
France’s government plans to reduce the scale of proposed tax increases for employers as it seeks to preserve pro-business policies while also plugging holes in public finances, budget minister Laurent Saint-Martin said. Reducing tax breaks for employing low-income workers was a key plank of the 2025 budget bill presented last month that aims to make €60 billion ($63.8 billion) of tax increases and spending cuts to reduce the deficit. The changes to levies paid by employers were expected to contribute around €4 billion to the effort.
COMMODITIES (BBG): Iron Ore Futures Slump Below $100 a Ton on China Demand Concerns
Iron ore sank below $100 a ton, hitting the lowest level in more than two weeks, as China’s efforts to support growth underwhelmed investors, and miners continued to ramp up operations. Futures fell as much as 0.9% in Singapore, declining for a third day. China’s latest measures to kick-start its economy - a debt-swap plan - stopped short of direct stimulus, and inflation remains weak in the top iron ore user.
DATA
UK DATA (MNI): Labour Market Data Broadly In Line With Expectations
- UK SEP AVE WEEKLY EARNINGS +4.3% YY
- UK SEP AVE WEEKLY EARNINGS EX-BONUS +4.8% YY
- UK OCT CLAIMANT RATE +4.7%
Looking at private regular AWE in more detail, there was an upward revision to the single month reading for August from 4.51% Y/Y to 4.59% Y/Y. The September single month print came in at 4.89% Y/Y - which with the exception of the low August print, is the lowest Y/Y single month reading since April 2022 - but more in line with the readings seen between May-July which were between 4.94-4.98% Y/Y. Looking at this individual cohort, however, there is very little progress here. On the comparable single month figures we have moved from 4.98% Y/Y in June to 4.89% Y/Y in September over a 3-month period.
The total pay numbers and public sector pay numbers we don't pay too much attention to here - they are skewed by one-off payments and don't really give much predictive power. On the unemployment side, there was very little in terms of revisions. To sum up - wage data marginally stronger, quantities data marginally weaker, but this shouldn't really change anyone's voting intentions.
GERMANY DATA (MNI): German Inflation Breadth Continues Reversal in October
- GERMANY OCTOBER FINAL HICP +2.4% Y/Y
- GERMANY OCTOBER FINAL HICP +0.4% M/M
- GERMAN OCT CPI +2 % Y/Y
German final October HICP was unrevised from the flash readings at 2.4% Y/Y (1.8% prior) and +0.4% M/M (-0.1% prior). The final reading to CPI was also unrevised at 2.0% Y/Y (1.6% prior) and 0.4% M/M (0.0% prior). Core CPI printed at +2.9% Y/Y (2.7% prior) in its first uptick since June 2023. Overall, the data shows the uptick in October was quite broad-based: while around half the upward contribution vs September came from energy (and another quarter from food), also services contributed 0.08pp more than before. Only the core goods categories remained largely unchanged in their contribution to headline Y/Y.
GERMANY ZEW NOV ECONOMIC EXPECTATIONS 7.4 (MNI)
GERMANY NOV ZEW CURRENT CONDITIONS -91.4 (MNI)
AUSTRALIA DATA (MNI): Tentative Signs Economy Stabilising, Price Pressures Moderate
NAB October business confidence rose to +5 from -2, the highest since January 2023. Conditions were stable at +7, slightly above the series average, signalling that the economy continues to grow. Unchanged RBA rates for a year appears to be helping sentiment stabilise with Westpac's latest consumer confidence reading also rising, while NAB business prices and costs moderated further with some measures now below historical averages.
FOREX: USD Higher Again as Firmer Yields Underpin Currency Markets
- The greenback is firmer once again early Tuesday, with the USD Index adding to recent gains, with the re-opening of US rates after yesterday's holiday allowing US yields to drift higher and underpin the greenback once again.
- GBP failed to find support from this morning's wages numbers, which came in ahead of expectations, allowing EUR/GBP to continue to straddle the 0.83 handle - a key long-term level. Should the cross recover off these lows, GBP/USD could come under further pressure, prompting markets to consider medium-term support. Today's spot weakness has pressed GBP/USD below the 200-dma on an intraday basis for the first time since May, after the level held well as support in August. 1.2799 undercuts as modest support, but seen stronger into 1.2665.
- German's ZEW investor sentiment data came in well below forecast, with sentiment heavily weighed upon by both the US Presidential election and the collapse of the German governing coalition
- AUD is the poorest performer in G10, pressing AUD/USD back below the $0.6550 mark,
- The NFIB Small Business Optimism data is followed by the NY Fed's latest inflation expectations release. The speaker slate will likely be of more interest, with Fed's Waller, Barkin, Harker and Kashkari all set to make appearances. Waller and Barkin should prove the most consequential.
BONDS: EGBs Outperform on Soft ZEW, Gilts Wider
Softer-than-expected German ZEW data drives EGB outperformance vs. peers.
- Political headwinds from the U.S. weighed on the data, with the domestic political situation also impacting sentiment covering the immediate term (although optimism over the longer run in recent days was noted).
- Bund futures +8 at 132.59, recovering from lows of 132.24.
- German yields 1.5-3.0bp lower, flatter. Dip in cover at Schatz auction counters some of the rally in the front end.
- EGBs a little wider vs. Bunds after yesterday’s general, modest narrowing. Weakness in equities helps explain peripheral underperformance
- ECB’s Rehn reaffirmed the easing direction evident in policy settings, with the speed contingent on future data developments.
- Little net movement in ECB pricing on the day, 125bp of cuts priced across the next 5 meetings, with risks of 50bp moves priced through March.
- Gilts lag German peers, with cues from Tsys eyed.
- Futures -21 at 94.10 vs. lows of 93.96. Bearish theme intact.
- Yields little changed to +3.5bp, curve bear flattens.
- 10s ~3bp wider to Bunds, spread last 213bp, a handful of bp off last week’s cycle wides.
- BoE chief economist Pill provided little of note, with initial comments reaffirming his hawkish leanings, before some more centrist comments (playing down feedthrough from the Budget, for instance) became apparent.
- Oct-43 gilt supply passed smoothly.
- BoE pricing shows 3bp of cuts for Dec, 28bp through March, 47bp through June and 64bp through Dec ’25. 1-3.5bp less dovish on the day.
- Little of note on the European & UK calendars this afternoon, leaving focus on cross-market moves and the U.S. return from holiday.
EQUITIES: Bearish Conditions in Eurostoxx 50 Futures Remain Intact
A bearish condition in Eurostoxx 50 futures remains intact and last week’s fresh cycle lows reinforce current conditions, having confirmed a resumption of the bear cycle. The contract has pierced 4815.50, the 50.0% retracement of the Aug 5 - Sep 30 bull cycle. This exposes 4757.00, the Sep 6 / 10 low and a key support. Initial firm resistance has been defined at 5015.00, the Oct 29 high, where a break would instead highlight a reversal. Bullish conditions in S&P E-Minis remain intact and last week’s gains reinforce current conditions. A key short-term support has been defined at 5724.25, Nov 4 low. The latest rally resulted in a breach of the bull trigger at 5927.25, Oct 17 high, confirming a resumption of the primary uptrend. The 6000.0 psychological handle has been pierced. Sights are on 6070.16, a Fibonacci projection. Initial support is at 5927.25, the Oct 17 high.
- Japan's NIKKEI closed lower by 157.23 pts or -0.4% at 39376.09 and the TOPIX ended 1.84 pts higher or +0.07% at 2741.52.
- Elsewhere, in China the SHANGHAI closed lower by 48.096 pts or -1.39% at 3421.97 and the HANG SENG ended 580.05 pts lower or -2.84% at 19846.88.
- Across Europe, Germany's DAX trades lower by 120.98 pts or -0.62% at 19326.54, FTSE 100 lower by 55.22 pts or -0.68% at 8069.98, CAC 40 down 74.69 pts or -1.01% at 7352.19 and Euro Stoxx 50 down 30.7 pts or -0.63% at 4823.33.
- Dow Jones mini down 45 pts or -0.1% at 44401, S&P 500 mini down 8.5 pts or -0.14% at 6024, NASDAQ mini down 15 pts or -0.07% at 21203.75.
Time: 09:55 GMT
COMMODITIES: Weakness in WTI Futures Monday Reinforces Bearish Theme
A bearish theme in WTI futures remains intact and Monday’s bearish start to the week reinforces current conditions. An extension lower would expose $65.99, the Oct 1 low, and $64.16, the Sep 10 low and key support. For bulls, a clear reversal to the upside would instead refocus attention on the key short-term resistance at $77.70, the Oct 8 high. Clearance of this level would resume the recent uptrend. Initial resistance is $72.88, the Nov 7 high. The trend condition in Gold is unchanged, it remains bullish and the latest pullback appears corrective. However, recent weakness has resulted in a breach of the 20-day EMA, and yesterday’s sell-off delivered a print below the 50-day EMA, at $2646.3. The breach signals scope for a deeper retracement towards $2547.0 the Sep 18 low. Firm resistance is seen at $2699.1, the 20-day EMA. Clearance of this average is required to signal a reversal.
- WTI Crude up $0.35 or +0.51% at $68.39
- Natural Gas up $0.02 or +0.75% at $2.943
- Gold spot down $23.27 or -0.89% at $2595.04
- Copper down $7.8 or -1.84% at $415.25
- Silver down $0.38 or -1.24% at $30.287
- Platinum down $14.29 or -1.48% at $952.4
Time: 09:55 GMT
| Date | GMT/Local | Impact | Country | Event |
| 12/11/2024 | 1100/0600 | ** |  US | NFIB Small Business Optimism Index |
| 12/11/2024 | 1200/1200 |  GB | Asset Purchase Facility Quarterly Report | |
| 12/11/2024 | 1330/0830 | * |  CA | Building Permits |
| 12/11/2024 | 1400/1500 |  EU | ECB's Cipollone chairing policy panel on financial sanctions | |
| 12/11/2024 | 1500/1000 | US | Fed Governor Christopher Waller | |
| 12/11/2024 | 1515/1015 | US | Richmond Fed's Tom Barkin | |
| 12/11/2024 | 1600/1100 | ** | US | NY Fed Survey of Consumer Expectations |
| 12/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 12/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 12/11/2024 | 1800/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 12/11/2024 | 1900/1400 | US | Minneapolis Fed's Neel Kashkari | |
| 12/11/2024 | 2130/1630 | US | New York Fed's Roberto Perli | |
| 12/11/2024 | 2200/1700 | US | Philly Fed's Pat Harker | |
| 13/11/2024 | 0030/1130 | *** |  AU | Quarterly wage price index |
| 13/11/2024 | 0945/0945 | GB | BOE's Mann at Female Central Bankers panel | |
| 13/11/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 13/11/2024 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 13/11/2024 | 1330/0830 | *** | US | CPI |
| 13/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 13/11/2024 | 1445/0945 | US | Dallas Fed's Lorie Logan | |
| 13/11/2024 | 1800/1300 | US | St. Louis Fed's Alberto Musalem | |
| 13/11/2024 | 1830/1330 | US | Kansas City Fed's Jeffrey Schmid | |
| 13/11/2024 | 1900/1400 | ** | US | Treasury Budget |