EXECUTIVE SUMMARY
- ECB’S KAZAKS SAYS BIGGER INTEREST-RATE CUT POSSIBLE IF NEEDED
- ENCOURAGING SIGNS OF GAZA CEASEFIRE TEMPERED BY ELEVATED IRAN RISK
- UK ECONOMY CONTRACTS FOR SECOND STRAIGHT MONTH
- BOJ’S TANKAN SURVEY SHOWS SOLID BUSINESS INFLATION EXPECTATIONS
Figure 1: Contributions to monthly UK GDP growth
Source: ONS
NEWS
US (MNI): Hill's Selection to Chair House Financial Services Committee Bullish for Crypto
The Republican Steering Committee endorsed Rep French Hill (R-AK) to serve as chair of the House Financial Services Committee. The moderate Congressman was a surprise choice, defeating Rep Andy Barr (R-KY), House Majority Leader Steve Scalise's (R-LA) preferred option. The GOP conference must ratify the selection, usually considered a formality. Hill's likely elevation to the top banking job in the House is another bullish signal for crypto. He sponsored a bill this year to regulate digital assets and has worked closely with outgoing Committee Chair Patrick McHenry (R-NC), "arguably the crypto industry's most important advocate in the U.S. Congress," according to Coindesk.
US (WSJ): Trump Team Weighs Options, Including Airstrikes, to Stop Iran’s Nuclear Program
President-elect Donald Trump is weighing options for stopping Iran from being able to build a nuclear weapon, including the possibility of preventive airstrikes, a move that would break with the longstanding policy of containing Tehran with diplomacy and sanctions. The military-strike option against nuclear facilities is now under more serious review by some members of his transition team, who are weighing the fall of the regime of President Bashar al-Assad - Tehran’s ally - in Syria, the future of U.S. troops in the region, and Israel’s decimation of regime proxy militias Hezbollah and Hamas.
US (WSJ): Trump Advisers Seek to Shrink or Eliminate Bank Regulators
The Trump transition team has started to explore pathways to dramatically shrink, consolidate or even eliminate the top bank watchdogs in Washington. In recent interviews with potential nominees to lead bank regulatory agencies, Trump advisers and officials from his newfound Department of Government Efficiency have, for example, asked whether the president-elect could abolish the Federal Deposit Insurance Corp., people familiar with the matter said.
ECB (BBG): ECB’s Kazaks Says Bigger Interest-Rate Cut Possible If Needed
European Central Bank Governing Council member Martins Kazaks said the size of interest-rate reductions could be increased should economic developments warrant it. While the Latvian official sees a gradual, step-by-step approach as appropriate, he warned that shocks from geopolitics to wars could yet give inflation a “new impetus.”
ECB (RTRS): ECB's Holzmann Says Rates Will Head Towards Neutral Level Around 2%
European Central Bank interest rates will fall towards a neutral level of around 2% and markets have a similar assessment to the central bank's, ECB policymaker Robert Holzmann said on Friday. Asked to confirm after a news conference that he believes the neutral rate is roughly 2%, he told reporters: "I said around 2%, so I agree (with ECB President Christine Lagarde's comment on that on Thursday)". "Interest rates will go in that direction," he added.
ECB (BBG): ECB’s Villeroy Is Comfortable With Market View on Rate Cuts
European Central Bank will lower borrowing costs further in 2025 and investors’ bets on more than 100 basis points of easing look reasonable, according to Governing Council member Francois Villeroy de Galhau. “There will be more rate cuts next year, more rate cuts plural,” he said on BFM Business television on Friday. While the central bank isn’t pre-committed to a specific rate trajectory, it’s “rather comfortable with financial markets’ forecasts,” he said.
ECB (BBG): ECB Rates Still High Considering Economic Situation, Muller Says
The European Central Bank’s borrowing costs are probably too elevated given the backdrop of weak growth, according to Governing Council member Madis Muller. “Right now it could be thought that we are at the boundary where interest rates are still more likely to be high considering the economic situation,” the Estonian central-bank chief told Äripäev radio on Friday.
ECB (MNI): Logic Says ECB Will Cut In Next Meetings - Escriva
If incoming data in the Eurozone continue to converge to the 2% inflation target, “its logic that we will continue to lower rates in the next meetings,” Bank of Spain Governor Jose Luis Escriva said on Friday. In an interview with an Spanish TV, Escriva said that the Governing Council agreed to continue to have a “gradual approach” with 25 basis points movements that allows a moderate effect on the economy and inflation.
SECURITY (MNI): Encouraging Signs of Gaza Ceasefire Tempered by Elevated Iran Risk
US Secretary of State Antony Blinken said there are "encouraging signs that Gaza ceasefire is possible," after a meeting with Turkish Foreign Minister Hakan Fidan in Ankara, Turkey today. Blinken added that he discussed with Fidan the role the US and Turkey will play in Syria's future, noting "there's broad agreement on what we would like to see in Syria," including, "the imperative of continuing efforts to keep ISIS down" The comments come as optimism for a Gaza ceasefire is at its highest level in months, although previous negotiations that have stalled during the final stages of talks have moderated that optimism.
RUSSIA/UKRAINE (RTRS): Russia Launches Major Missile Attack on Ukrainian Power Facilities, Kyiv Says
Russia launched a large-scale missile attack on Ukrainian energy facilities during the morning rush hour on Friday, Kyiv said, while explosions were heard in the Black Sea port of Odesa and other cities in western Ukraine. Russian forces have been targeting Ukraine's electricity system for most of the year and it renewed its strike campaign last month, causing lengthy power cuts for millions of civilians as the war with Russia nears the 34-month mark.
GERMANY (MNI): Finance Minister Kukies Says Tax Relief Plans Not Possible in 2024
German finance minster Kukies was interviewed by Die Welt and noted that plans to pass a bill countering inflation-induced tax creep (which initially was to be passed under the now-collapsed traffic light coalition) will not be possible in 2024. Kukies says this is due to time constraints and the door for passing remains open ahead of the election on 23 February. However, a passing of any tax creep relief before then appears unlikely after the CDU opposition leader appeared to withdraw support for the measures last weekend.
GERMANY (MNI): Bundesbank Downwardly Revises 2025 Growth Projection by 0.9pp to 0.2%
The Bundesbank downwardly revised their Germany growth projections, by 0.9pp to 0.2% for 2025 and by 0.6pp to 0.8% for 2026. This compares to IFO's 2025 growth projection of 0.4-1.1% released earlier this week. A notable change in the drivers behind the growth projection appears to be the labour market, which the Bundesbank now does not see becoming an "engine for economic recovery" - as private consumption rises slower than expected before.
CHINA (MNI): PBOC to Curb Any Yuan Overshot - PBOC Zou
MNI (Beijing) The People’s Bank of China will focus on preventing excessive volatility of the yuan exchange rate from external shocks, and increase treasury bonds trade to coordinate the proactive fiscal policy in 2025, said Zou Lan, head of the Bank’s monetary policy department, according to CCTV News.
RBA (MNI): RBA Details Hypothetical Monetary Policy Paths
The Reserve Bank of Australia has laid out hypothetical scenarios for monetary policy should demand either weaken or remain strong and hinder its target of returning underlying inflation to the 2.5% midpoint by the second half of 2026. “While the policy paths shown in these charts are not necessarily ones the Board would follow, the two scenarios are illustrative of how the strategy may need to be adapted as conditions unfold,” said Sarah Hunter, assistant governor at the RBA.
DATA
EUROZONE DATA (MNI): Industrial Production In-Line With MNI Tracking & Consensus
Eurozone October industrial production was in-line with consensus and our tracking estimate at 0.0% M/M. The prior was revised up to -1.5% M/M from -2.0% as we had estimated also. Ex-Ireland we estimate IP to have fallen -0.5%M/M. In terms of subcomponents, developments were mixed with three of five subcomponents falling: Energy production fell 1.9% M/M (vs -1.1% prior). Durable consumer goods production fell 1.8% M/M (vs a rise of 1.0% in September) and Non-durable consumer goods production declined 2.3% M/M (reversing the gain of 1.9% in September).
UK DATA (MNI): UK Economy Contracts For Second Straight Month
UK GDP contracted modestly in October for a second consectutive month, with anecdotal signs consumers were holding back ahead of the new Labour government's first budget, the Office for National Statistics said Friday. GDP fell 0.1% in October, the same as in September for the first two back-to-back monthly declines since March and April 2020, the first two months of the pandemic lockdowns in the UK, although the ONS did caution on the volatility of monthly data.
UK DATA (MNI): BOE/Ipsos Survey Shows Pick Up in Consumer Inflation Expectations
The quarterly November BOE/Ipsos Inflation Attitudes Survey showed that year-ahead inflation expectations picked up for the first time since August 2023 to 3.0%Y/Y (from 2.7% in August 2024). This was the first release since the Autumn Budget so may indicate that consumers expect inflationary pressures from the increased employer NIC contributions and national living wage increases (as has been covered by many mainstream press reports).
GERMAN DATA (MNI): October Trade Surplus Decreases Amid Drop in Exports to US
- GERMANY OCT TRADE BALANCE +E13.4BLN (VS FCST 15.7BLN)
- GERMANY OCT EXPORTS -2.8% M/M (VS FCST -2.6%)
- GERMANY OCT IMPORTS -0.1% M/M (VS FCST -1.0%)
The German trade balance fell notably short of expectations in October at E13.4bln (seasonally-adjusted, vs E15.7bln cons; E16.9bln prior). This was driven by a smaller 0.1% fall in imports than expected (-1.0% cons; 2.0% revised prior) and a 2.8% fall in exports (-2.6% cons; -1.8% revised prior). This means that the trade surplus fell to 5.7% of nominal GDP on a 12-month rolling basis (5.8% Oct) - the series recovered after its Nov 2022 low of 2.0% but recently growth tapered out vs the 2015 high of 7.9%.
FRANCE DATA (MNI): French CPI Inflation Momentum Eases Further
French final November HICP inflation was unrevised from the flash print on a rounded basis at 1.7% Y/Y (vs 1.59% in October). On an unrounded basis, HICP inflation was 1.68% Y/Y, 3 hundredths softer than the flash reading of 1.71% Y/Y. CPI inflation was also unrevised from flash at 1.3% Y/Y (vs 1.2% in October). On a unrounded basis it was 8 hundredths below flash at 1.26% Y/Y (vs 1.34% flash, 1.23% prior). Core CPI rose marginally to 1.5% Y/Y (vs 1.4% in October). Services was revised down 2 tenths from flash to 2.3% Y/Y (2.3% in Oct) while core services rose to 2.8% Y/Y from 2.6% Y/Y in Oct (there is no flash for that series).
SPAIN DATA (MNI): Spanish Core HICP Steady in November
Spanish November final HICP confirmed flash estimates at 2.4% Y/Y (vs 1.8% prior). Core HICP (excluding energy and unprocessed foods) was steady at 2.5% Y/Y, with services unchanged at 3.5% and core goods easing a touch to 0.2% Y/Y (vs 0.4% prior). The fall in core goods inflation is consistent with the dip in industry expected prices in the EC survey over the past two months.
SWEDEN DATA (MNI): LFS Unemployment Rate Below Consensus, But Conditions Still Weak
The Swedish November LFS unemployment rate was 3 tenths below consensus at 8.3% (vs 8.4% prior). The 3mma of the rate was steady at 8.4%, a little below the cycle high of 8.5% in September. The fall in the unemployment rate was due to a slight decline in the labour force. Employment growth was negative for the second consecutive month at -0.2% M/M, with 3m/3m growth at -0.6%, its weakest since October 2023.
JAPAN DATA (MNI): Business Inflation Expectations Solid - BOJ Tankan
Japanese company inflation expectations one-, three- and five-years out remained solid over the last three months, supporting the Bank of Japan's view that the relationship between prices and wages continues to change, the BOJ December Tankan survey released on Friday showed. Bank officials were heartened by solid inflation expectations and sales prices, and they are focused on how pass-through of cost increases, including high labour costs, continue in or after January. On average, companies saw the annual consumer inflation rate at 2.4% in December, unchanged from September.
FOREX: JPY Offered, Helping USD/JPY to New Dec High
- JPY has cemented its position as the poorest performing currency on the day - pressing USD/JPY closer to the Y153.50 level and new December highs. Gains accelerating here on the break of uptrendline resistance posted off the Dec04 high on the 15min candle chart.
- The JPY move certainly initially isolated to FX - evident in the spike in JPY futures volumes at 0940GMT, but is being partially aided by the uptick here in the US 10y yield, which remains below yesterday's closing high. A show above 4.3356% could bolster the move, opening 153.66, the 61.8% retracement for the Nov15 - Dec3 pullback.
- GBP trades poorly, softer against most others and prompting a 1.2619 print in GBP/USD, after the GDP release this morning showed another month of negative economic growth. While the 3M/3M figure remains positive, the poor momentum in the early months of the government may be causing some concern in cabinet.
- NOK trades well, supported by firmer oil prices today, helping extend the recovery off December lows for NOK/SEK, which holds just below 0.99. Both Norway and Sweden are set to hold rate decisions next week, at which the rate differential is expected to grow by a further 25bps thanks to an unchanged Norges Bank and a further 25bps cut at the Riksbank.
- Consequential datapoints are few and far between for the Friday session, although US Import/Export price indices could draw focus. ECB speak has been plentiful this morning following the rate decision yesterday, most of which continue to point toward the high likelihood of further rate cuts headed through the first half of 2025. Centeno is still set to speak later today, but the Fed remain inside their pre-decision media blackout period.
BONDS: Bunds Underperform Gilts, French PM Announcement Expected Today
Bund futures are -58 ticks today at 134.77. Yesterday’s low (134.82) has been pierced, exposing the 50% retracement of the Nov 6 - Dec 2 bull leg at 134.59. A break of this level would strengthen the current downleg.
- Downside momentum in EGBs has continued following yesterday’s ECB decision, with OAT (-39 ticks) and BTP (-47 ticks) futures also weaker today.
- The 10-year BTP/Bund spread is off yesterday’s widest levels, 2bps tighter today at 112.5bps.
- French President Macron is expected to name a new PM today. François Bayrou is the current favourite in betting markets (Polymarket assigns a 66% implied probability, though this is down from 87% earlier this morning).
- Eurozone industrial production was unchanged M/M but saw an upward revision, in line with MNI’s tracking.
- Several ECB speakers (including the hawkish Holzmann) have noted that rates will continue to fall, with policy still in restrictive territory (in line with President Lagarde’s press conference yesterday).
- Gilt futures have been dragged lower by German counterparts, now -28 ticks today at 94.69. The Nov 25 low at 94.66 was briefly pierced earlier, with next support below that level at 93.96 (November 22 low).
- Monthly UK GDP data was softer-than-expected at -0.1% M/M (vs 0.1% cons), but the opening rally in Gilt futures quickly faded.
- Cross-market cues and macro headline flow is eyed for the remainder of the day, with little of note on the UK calendar. In the Eurozone, the dovish Centeno is scheduled to speak at 1100GMT.
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Remains Intact
A bull cycle in the Eurostoxx 50 futures contract remains intact and price is trading closer to its recent highs. The contract has recently breached the 50-day EMA. The clear break of this average strengthens a bullish theme and note that 4961.00, the Nov 6 high, has also been cleared. Sights are on 5015.00 next, the Oct 29 high. Key support is 4699.00, the Nov 19 low. Initial support to watch lies at 4896.15, the 20-day EMA. The S&P E-Minis contract remains bullish and the latest pullback is considered corrective. Recent gains confirm a resumption of the uptrend and signal scope for a continuation near-term. Note that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. A resumption of the uptrend would open 6145.26, a Fibonacci projection. Initial support to watch lies at 6028.33 the 20-day EMA.
- Japan's NIKKEI closed lower by 378.7 pts or -0.95% at 39470.44 and the TOPIX ended 26.47 pts lower or -0.95% at 2746.56.
- Elsewhere, in China the SHANGHAI closed lower by 69.622 pts or -2.01% at 3391.878 and the HANG SENG ended 425.81 pts lower or -2.09% at 19971.24.
- Across Europe, Germany's DAX trades higher by 47.84 pts or +0.23% at 20474.48, FTSE 100 higher by 4.47 pts or +0.05% at 8316.32, CAC 40 up 5.3 pts or +0.07% at 7424.87 and Euro Stoxx 50 up 11.96 pts or +0.24% at 4976.85.
- Dow Jones mini up 84 pts or +0.19% at 44061, S&P 500 mini up 15.5 pts or +0.26% at 6076.25, NASDAQ mini up 114.25 pts or +0.53% at 21765.25.
Time: 09:50 GMT
COMMODITIES: Recent Recovery in WTI Futures Still Deemed Corrective
A bearish threat in WTI futures remains present and this week’s gains are - for now - considered corrective. A resumption of the bear cycle would open $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. Gold has traded higher this week. A key short-term resistance at $2721.4, the Nov 25 high, has been pierced and this represents a positive development. A continuation higher would expose key resistance at $2790.1, the Oct 31 high. Clearance of this level would confirm a resumption of the primary uptrend. On the downside key support to monitor is $2536.9, the Nov 14 low. First support is $2646.4, the 50-day EMA, ahead of $2605.3, the Nov 26 low.
- WTI Crude up $0.27 or +0.39% at $70.31
- Natural Gas down $0 or -0.06% at $3.452
- Gold spot down $9.67 or -0.36% at $2671.54
- Copper down $2.1 or -0.49% at $422.55
- Silver down $0.31 or -0.99% at $30.7115
- Platinum down $1.38 or -0.15% at $932.47
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 13/12/2024 | - | *** |  CN | Money Supply |
| 13/12/2024 | - | *** | CN | New Loans |
| 13/12/2024 | - | *** | CN | Social Financing |
| 13/12/2024 | 1330/0830 | ** |  US | Import/Export Price Index |
| 13/12/2024 | 1330/0830 | ** |  CA | Monthly Survey of Manufacturing |
| 13/12/2024 | 1330/0830 | ** | CA | Wholesale Trade |