EXECUTIVE SUMMARY
- LATEST US STRIKE ON CHINA'S CHIPS HITS SEMICONDUCTOR TOOLMAKERS
- TRUMP DEMANDS ‘COMMITMENT’ FROM BRICS ON USING US DOLLAR
- ECB TO CUT RATES AS INFLATION PROBLEM NEARLY SOLVED, KAZAKS SAYS
- BOJ'S UEDA SAYS WEAK YEN MIGHT PROMPT ACTION
Figure 1: EUR/JPY extends post-US election pullback, narrows gap to YTD low
Source: MNI/Bloomberg
NEWS
US/CHINA (RTRS): Latest US Strike on China's Chips Hits Semiconductor Toolmakers
The U.S. will launch on Monday its third crackdown in three years on China's semiconductor industry, curbing exports to 140 companies including chip equipment maker Naura Technology Group, among other moves, said two people familiar with the matter. The effort to hobble Beijing's chipmaking ambitions will also hit Chinese chip toolmakers Piotech and SiCarrier Technology with new export restrictions as part of the package, which also takes aim at shipments of advanced memory chips and more chipmaking tools to China.
US/BRICS (BBG): Trump Demands ‘Commitment’ From BRICS on Using US Dollar
US President-elect Donald Trump warned the so-called BRICS nations that he would require commitments that they would not move to create a new currency as an alternative to using the US dollar and repeated threats to levy a 100% tariff. “The idea that the BRICS Countries are trying to move away from the dollar while we stand by and watch is OVER,” Trump said in a post to his Truth Social network on Saturday.
US/BRICS (MNI): Kremlin Talks Up De-Dollarisation, But Other BRICS Wary
State media reporting comments from Kremlin spox Dmitry Peskov regarding threats from US President-elect Donald Trump made on 30 Nov that if the BRICS countries seek to create a new currency to reduce reliance on the US dollar. Peskov says that "any attempt to force dollar use will backfire". Peskov says the dollar "is losing its appeal as a reserve currency for many countries", and that the trend [against the dollar] "is gathering pace".
ECB (BBG): ECB to Cut Rates as Inflation Problem Nearly Solved, Kazaks Says
The European Central Bank should continue to cut borrowing costs as consumer-price growth is nearly in check, according to Governing Council member Martins Kazaks. “Next week we have the next ECB council meeting and in my view we have to take a decision to lower interest rates,” he told Latvia’s TV3 on Monday. “We see that the inflation problem will soon end, and that means that we can lower rates.”
ECB (FT): ECB’s Lane Says Monetary Policy Remains Restrictive: FT Podcast
The European Central Bank’s monetary policy remains restrictive, according to Chief Economist Philip Lane. “The European economy has been running below trend for a while now,” he told the Financial Times in a podcast aired Monday. “But it’s also the case by design, our monetary policy has been restrictive, is restrictive.”
FRANCE (MNI): PM to Meet w/Gov't Party Leaders ~1345CET as Censure Motion Looms
PM Michel Barnier is set to hold meetings with the leaders of parties in his minority gov't today at 1345CET (0745ET, 1245GMT) as he seeks a way to pass the social security budget without triggering a censure motion against his administration. It had initially been viewed that the crunch time for the Barnier gov't would come between 18-20 Dec with the vote on the main state budget for 2025. However, the far-right Rassemblement National (RN, National Rally) has voiced its opposition to measures included in the social security budget (PLFSS), an associated but separate piece of legislation.
FRANCE (BBG): French Far Right’s Threat to Topple Barnier Deepens Crisis
The far-right National Rally indicated in the strongest language yet that it could topple the French government as soon as this week, hours after Finance Minister Antoine Armand said his administration wouldn’t be blackmailed. Marine Le Pen and her party have threatened to support a no-confidence motion unless Prime Minister Michel Barnier tweaks his 2025 budget to index pensions to inflation among other asks. Le Pen told Barnier he needs to make the changes by Monday, which is when opposition lawmakers are expected to initiate the process to call the vote of no-confidence.
BOJ (MNI): BOJ's Ueda Says Weak Yen Might Prompt Action
Bank of Japan Governor Kazuo Ueda said further yen weakening with inflation above 2% might prompt the BOJ to take countermeasures, according to an interview with the Nikkei published on Saturday. Ueda made no comment as to the timing of the next rate hike and warned of major uncertainties around the U.S. economy. “As far as wages are concerned, I would like to see what kind of momentum the fiscal 2025 spring wage offensive creates,” he added.
CHINA (BBG): China Skips Politburo Readout as Investors Await Stimulus
The Communist Party’s elite decision-making body skipped releasing a readout for its regular November meeting, leaving investors hungry for signs of stimulus waiting for the conclusion of two major economic huddles this month. The 24-man Politburo that President Xi Jinping leads appeared to have missed its huddle last month, the first time the group failed to publicly convene since May 2023. It’s the latest example of China’s top leaders disrupting the party’s political calendar, after a key meeting on long-term reforms was delayed by about a year.
SYRIA (BBG): Syria Flares Up With Russia, Iran Fighting Other Conflicts
The biggest challenge to Bashar al-Assad’s regime seemingly came out of nowhere, and as the city of Aleppo fell to rebels in a matter of days, the Syrian president reportedly flew to Moscow. Russia’s intervention in Syria’s civil war almost a decade ago turned the tide in Assad’s favor, but this time around his two biggest backers are stretched. Vladimir Putin’s invasion of Ukraine is consuming Russian resources while Iran finds itself weakened by Israel’s sustained attacks on Hezbollah, the Tehran-backed militants in neighboring Lebanon.
ROMANIA (MNI): Social Democrats Win Election Marked by Far-Right Challenge
Early vote count suggested that the ruling Social Democratic Party (PSD) was set to grab the largest share of votes in a parliamentary election held on Sunday. The contest saw mainstream parties try to fend off challenge from anti-establishment far-right parties, emboldened by the unexpected victory of ultranationalist candidate in the first round of the presidential election just a week earlier. The PSD was on course to capture around 22% of the vote according to the preliminary count of more than 99% of votes. The far-right Alliance for the Union of Romanians (AUR) is poised to take second place, with 18% of the vote.
IRELAND (BBG): Irish Incumbents Set to Hold Power, Bucking Global Vote Trend
Ireland’s dominant political parties appear to have bucked the global trend of frustrated voters ousting incumbents, helped in part by a large pile of cash at their disposal to back election promises. Coalition partners Fianna Fail and Fine Gael look almost certain to form the next government, on track to get close to the 88 seats needed for a majority in the 174-seat Dail, or parliament, according to the latest figures. With the backing of a smaller third party, or independent lawmakers, they should be able to get over the line.
GEORGIA (BBG): Georgian President Pledges to Stay On After Violent Clashes
Georgian President Salome Zourabichvili vowed to stay in office and defy the ruling party’s plan to replace her, saying the October parliamentary elections were illegitimate. “There is no legitimate parliament therefore there is no legitimate president or inauguration. This is why I am staying as your president,” Zourabichvili said in televised address on Saturday after a second night of clashes between protesters and police in the capital, Tbilisi.
DATA
EUROZONE DATA (MNI): Unemployment Rate Stable at 6.3%
- EUROZONE OCT UNEMPLOYMENT RATE 6.3%
The Eurozone unemployment rate for October printed in-line with consensus at 6.3% (SA), unchanged from September and therefore remaining at the series
low. This latest unchanged figure came despite the youth unemployment rate (for those under 25 years old) rising a tenth to 15.0%. Youths are bearing some of the brunt in softer labour market conditions on a relative basis, with this unemployment rate above the series low of 14.0% in early 2023.
SPAIN DATA (MNI): Flooding Impact Shows in PMI, But New Export Orders Growth Very Strong
- SPAIN NOV MANUF PMI 53.1 (FCST 54.0); OCT 54.5
From the slightly softer-than-expected Spanish PMI - in which flooding had a noteworthy impact: "Output and new order growth both weakened, in part reflective of the heavy flooding that hit areas of Spain from late October onwards" and ""Despite slowing, growth rates remained positive and underlying demand was reported to be strong. This was especially the case for international sales, with new export orders increasing to the greatest degree since September 2021. Neighbouring European countries were noted as sources of positive external demand."
ITALY DATA (MNI): PMI Flags Muted Demand, Soft New Orders and Easing Cost Pressures
- ITALY NOV MANUF PMI 44.5 (FCST 46.0); OCT 46.9
Incoming new orders contracted at fastest pace so far this year. Work-outstanding sub-index drops at fastest pace in 15 years. Manufacturers that responded to the survey flagged the downturn in Germany, specifically, as being a trigger for the "steep" fall in new export orders. Lastly, the release flags the automotive industry as being particularly hit - mentions competition from China, as well as low demand for electric vehicles.
ITALY DATA (MNI): Unemployment Rate Sets Multi-Decade Low
The unemployment rate saw a surprisingly large decline in October to 5.8% (sa, cons 6.1) after a downward revised 6.0% (initial 6.1%). The 5.80% preliminary reading pushes below the 5.85% from April 2007 for a new multi-decade low. The Istat press release shows a particularly large contribution from the youth unemployment rate (-1.1pps to 17.7%) but all other main categories saw declines as well: 25-34 (-0.1pp to 8.6%), 35-49 (-0.1pp to 5.2%) and 50-64 (-0.3pps to 3.4%).
EUROZONE NOV FINAL MANUF PMI 45.2 (FLASH 45.2); OCT 46.0 (MNI)
GERMANY NOV FINAL MANUF PMI 43.0 (FLASH 43.2); OCT 43.0 (MNI)
FRANCE NOV FINAL MANUF PMI 43.1 (FLASH 43.2); OCT 44.5 (MNI)
UK DATA (MNI): Manufacturing PMI Contains Concerning Details; Not Enough for Dec Cut
- UK NOV FINAL MANUF PMI 48.0 (FLASH 48.6); OCT 49.9
Some interesting details in the UK manufacturing PMI. Output prices are at a nine-month low and employment also looks soft. The main weakness that the press release highlights is that small businesses and B2B businesses are the most impacted at present. The manufacturing sector of the UK economy is of course rather small, but the details in this report are concerning. Not enough to change any MPC member's view of how they will vote in December, and not enough to outweigh concerns about the inflationary impact of the national living wage and employer national insurance increases.
CHINA DATA (MNI): Caixin Nov Manufacturing PMI Hits Four-Month High
MNI (Sydney) China's Caixin manufacturing PMI registered 51.5 in November, up from October's 50.3, its highest level since August, staying in the expansionary zone above the 50 mark for the second month, the financial publisher said on Monday. The production and new orders sub-indices rose in the expansion range and hit their highest level since July 2024 and March 2023, respectively, as manufacturers reported improved demand supported by the release of new products.
JAPAN DATA (MNI): Japan Q3 Capex Up Q/Q; GDP Revised Lower
Third quarter Combined capital investment by non-financial Japanese companies excluding software rose 0.8% q/q, slowing from 1.5% growht in Q2, a quarterly revised survey released by the Ministry of Finance Monday showed. The demand-side survey is used to calculate Q3 GDP revisions due Dec 9 and indicated that capex will be revised lower from the preliminary -0.2%. Based on the MOF data on capex and inventories, the government is likely to revise lower from its estimate of Q3 real GDP from the preliminary 0.2% q/q, or an annualised 0.9%, unless other components are revised upward.
AUSTRALIA DATA (MNI): Retail Spending Higher Than Expected, Trending Higher Again
- AUSTRALIA OCT RETAIL SALES +0.6% M/M
October retail sales rose 0.6% m/m, stronger than expected, to be up 3.4% y/y, the highest growth rate since May 2023. 3-month momentum also increased. The ABS said that there was discounting ahead of November's Black Friday sales to encourage consumers. In 2024 to date, only March saw a drop in retail sales. Rising real incomes and discounting have supported spending this year. The RBA seems firmly on hold for now and the start of easing may be at least almost six months away.
AUSTRALIA OCT BUILDING APPROVALS +4.2% M/M, +6.1% Y/Y (MNI)
RATINGS: France Avoids Negative Action from S&P, Spain Upgraded at DBRS
Sovereign rating reviews of note from after hours on Friday include:
- Moody's affirmed Hungary at Baa2, outlook changed to negative from stable
- S&P affirmed France at AA-; Outlook Stable
- Morningstar DBRS confirmed Germany at AAA, Stable Trend
- Morningstar DBRS upgraded Spain to A (high), Stable Trend
FOREX: French Politics Undermines EUR, USD Stronger as Trump Targets BRICS
- Focus for the session ahead remains on French politics, with PM Barnier holding discussions with ministers from his minority government today, ahead of a possible censure motion brought by the far-right RN party which, if held, would be primed for Wednesday/Thursday, and could theoretically lead to a collapse of the current governing regime.
- EUR has traded weaker as a result, with the pair showing below $1.0500 at the European open, putting EUR/USD within range of next support at 1.0474, the Nov27 low - but it's EUR/JPY that's seeing more notable price action here, as the cross breaks to multi-month lows as 158.11 support gives way. The morning's price action shows markets remain sensitive to headline risk and French politics could be the dominant theme outside of US data this week.
- The greenback is firmer against all others in G10, with the dollar benefiting from the downleg in equities from the open as well as Trump's warnings over the weekend that a unified BRICS currency positioned to replace the dollar would result in member states facing 100% tariffs for goods headed to the US, and Trump requires a "commitment" from the countries as an assurance. The USD Index bounce has topped both the Friday and Thursday highs to make 106.924 the next level above. The formation of a golden cross late last week also defines the near-term momentum, the first since March this year.
- US data set for release Monday includes the final manufacturing PMI for November and the Manufacturing ISM, at which markets expected an uptick to 47.6 from 46.5 and a more notable uptick in prices paid, to 56.0 from 54.8 previously. The data will be watched carefully for any indications ahead of Friday's Payrolls release - at which markets expect 200k jobs added, and an unchanged unemployment rate at 4.1%.
BONDS: Bunds Outperform on French Risk, Gilt Futures Respect Resistance
Bunds outperform peers, driven-by cross-market demand stemming from increased French political and fiscal risks.
- The French far-right is posed to deliver a no confidence motion against the government.
- Marginally softer-than-flash final German m’fing PMI also noted.
- Bund futures +42 at 135.20 vs. highs of 135.40.
- Next resistance of note not seen until the October 2 high (135.92), with the recent bullish cycle extending.
- German yields ~3.5bp lower across the curve. 10s last 2.055%, ~2bp off lows after hitting the lowest level seen since early October.
- While the initial risk-off move surrounding France has eased (Stoxx 50 now trades positive on the day, after fading an early sell off, 10-Year OAT yields little changed), OATs still widen vs. all EGB peers.
- OATs 3.5bp wider to Bunds on the day, last 84bp, back from opening wides of ~86bp, with last week’s intraday cycle high of ~89bp intact.
- ECB Governing Council member Kazaks recently pointed to discussions surrounding a bigger rate cut in December, which has been taken dovishly by markets given his usual hawkish leaning and current market pricing.
- ECB-dated OIS now shows 30bp of cuts for December, 63bp of easing through January and 161bp of cuts through December ’25.
- Gilt futures +4 at 95.93, after bulls failed to push the contract above Friday’s high (95.25).
- Yields 0.5-2.5bp lower, curve flattens.
- 10s near 220bp vs. Bunds, eying the ’22 mini-budget closing high, 227.6bp.
- News of a long-end tender consultation from the DMO has little impact.
- BoE-dated OIS little changed on the day, showing 81bp of cuts through ’25.
- U.S. ISM m’fing survey headlines the macro calendar today.
EQUITIES: E-Mini S&P Remains Close to Key Resistance and Bull Trigger
Eurostoxx 50 futures are in consolidation mode. A bear trend remains intact and a fresh cycle low on Nov 19 marked a resumption of the downtrend that started Sep 30. Price has traded through 4746.94, 61.8% of the Aug 5 - Sep 30 bull cycle. This exposes 4662.12 next, 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 4861.43, the 50-day EMA. On Friday, S&P E-Minis pierced key resistance and the bull trigger at 6053.25, the Nov 11 high. This confirms a fresh cycle high and marks a resumption of the uptrend. Note that moving average studies remain in a bull-mode set-up and this set-up highlights a dominant uptrend and positive market sentiment. Sights are on 6070.16, a Fibonacci projection. Initial support to watch lies at 5960.85, the 20-day EMA.
- Japan's NIKKEI closed higher by 304.99 pts or +0.8% at 38513.02 and the TOPIX ended 34.01 pts higher or +1.27% at 2714.72.
- Elsewhere, in China the SHANGHAI closed higher by 37.526 pts or +1.13% at 3363.982 and the HANG SENG ended 126.68 pts higher or +0.65% at 19550.29.
- Across Europe, Germany's DAX trades lower by 22.44 pts or -0.11% at 19604.45, FTSE 100 lower by 1.9 pts or -0.02% at 8285.28, CAC 40 down 68.62 pts or -0.95% at 7167.05 and Euro Stoxx 50 down 25.3 pts or -0.53% at 4779.14.
- Dow Jones mini down 71 pts or -0.16% at 44984, S&P 500 mini down 11.5 pts or -0.19% at 6040, NASDAQ mini down 34.5 pts or -0.16% at 20958.75.
Time: 09:50 GMT
COMMODITIES: Move Lower in WTI Futures Last Week Reinforces Bearish Theme
A bearish threat in WTI futures remains present and the Nov 25 move lower reinforces this theme. 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. Initial firm resistance to watch is unchanged at $72.41, the Nov 7 high. The long-term trend condition in Gold is unchanged and remains bullish. The Oct 31 - Nov 14 bear leg appears to have been a correction. Moving average studies remain 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 $0.57 or +0.84% at $68.59
- Natural Gas down $0.2 or -5.86% at $3.167
- Gold spot down $9.15 or -0.35% at $2633.39
- Copper down $1.9 or -0.46% at $412.2
- Silver down $0.38 or -1.24% at $30.2345
- Platinum down $5.83 or -0.61% at $943.37
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 02/12/2024 | 1445/0945 | *** |  US | S&P Global Manufacturing Index (final) |
| 02/12/2024 | 1500/1000 | *** | US | ISM Manufacturing Index |
| 02/12/2024 | 1500/1000 | * | US | Construction Spending |
| 02/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 02/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 02/12/2024 | 2015/1515 | US | Fed Governor Christopher Waller | |
| 02/12/2024 | 2130/1630 | US | New York Fed's John Williams | |
| 03/12/2024 | 0001/0001 | * |  GB | BRC-KPMG Shop Sales Monitor |
| 03/12/2024 | 0030/1130 |  AU | Balance of Payments: Current Account | |
| 03/12/2024 | 0700/0200 | * |  TR | Turkey CPI |
| 03/12/2024 | 0730/0830 | *** |  CH | CPI |
| 03/12/2024 | 0800/0900 |  EU | ECB's Cipollone at GeoEconomy Talk | |
| 03/12/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 03/12/2024 | - | *** | US | Domestic-Made Vehicle Sales |
| 03/12/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 03/12/2024 | 1500/1000 | *** | US | JOLTS jobs opening level |
| 03/12/2024 | 1500/1000 | *** | US | JOLTS quits Rate |
| 03/12/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 03/12/2024 | 1735/1235 | US | Fed Governor Adriana Kugler | |
| 03/12/2024 | 1830/1330 | US | Chicago Fed's Austan Goolsbee | |
| 03/12/2024 | 2045/1545 | US | Chicago Fed's Austan Goolsbee | |
| 04/12/2024 | 2200/0900 | * | AU | S&P Global Final Australia Services PMI |
| 04/12/2024 | 2200/0900 | ** | AU | S&P Global Final Australia Composite PMI |