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MNI US OPEN - UK Still at Risk of Technical Recession as Q3 GDP Revised Lower


Figure 1: UK real GDP data revised down to 0% and -0.1% for Q2 and Q3, respectively

Source: GDP quarterly national accounts from the Office for National Statistics


US/ISRAEL (BBG): US Signals Support for UN Resolution to Boost Aid for Gaza

The US signaled it could support a resolution at the United Nations Security Council that would increase aid flowing to Gaza after drawn out negotiations had threatened to defeat the measure. “We have worked hard and diligently over the course of the past week with the Emiratis, with others, with Egypt, to come up with a resolution that we can support,” US Ambassador to the UN Linda Thomas-Greenfield said late Thursday in New York. “And we do have that resolution now. We’re ready to vote on it.”

US/CHINA (BBG): US Seeks Intelligence on China Chipmakers as It Eyes Tariffs

The US Commerce Department will begin gathering information on Chinese production of legacy semiconductors — chips that aren’t cutting-edge but are still vital to the global economy — as it looks to track how deeply reliant US companies have become on the technology from China. In January, the agency’s Bureau of Industry and Security will survey more than 100 companies in autos, aerospace, defense and other sectors to understand how they procure and use legacy chips, according to a Commerce official.

US/JAPAN (BBG): Japan to Sell Missiles to US in Easing of Arms Export Rules

Japan loosened its restrictions on arms exports on Friday and officially approved a plan to export Patriot missiles to the US, fulfilling a request from its ally, the government said. Prime Minister Fumio Kishida’s government agreed to allow completed defense equipment manufactured under license in Japan to be exported back to the country of origin. The government is planning to sell PAC-2 and some more advanced PAC-3 interceptors made in Japan to the US, according to officials who asked not to be identified in line with government custom.

UK (BBG): London Tube Workers Vote to Strike in January, RMT Union Says

London Underground workers will go on a “rolling strike” in the new year after more than 90% of union members voted against a 5% pay offer, RMT said in a statement on Friday. Divisions including engineering and control center workers will take strike actions between Jan. 5-12.

CHINA (BBG): China Mega Banks Cut Deposit Rates, Signaling More Policy Easing

China’s biggest state-owned banks are slashing deposit rates again, fueling expectations this will create more wiggle room for the central bank to cut lending rates early next year. Five major banks including the Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. lowered the rates for a slew of products including time deposits on Friday. The cuts would be the third such reduction this year, following previous rounds in June and September.

CHINA (MNI): China Home Sale Volumes to Rebound, Prices Remain Weak

MNI (Beijing) Beijing and Shanghai’s latest round of house-market relaxations may help boost volumes and revive the ailing property sector over the next few months, but price weakness will likely persist as over-leveraged developers offer discounts to boost sales, policy advisors told MNI. The top two tier-one cities rolled out a fresh round of housing stimulus last week, which included cuts to down-payment ratios and mortgage rates, relaxation of non-luxury house definitions and loan repayment deadline extensions.

CHINA STOCKS (MNI): CSI 300 Lodges Longest Run of Weekly Losses in Over a Decade

The CSI 300 finished 0.2% higher on Friday, but still registered a sixth straight week of losses, which equates to the longest losing run seen in over a decade. Weakness in HK-listed tech names provided the most notable swing, with the Hang Seng Tech index losing over 4% on the back headlines noting that Chinese regulators will implement fresh curbs re: online gaming.

JAPAN (MNI): Government Backs JPY112trn Budget for FY24

The Japanese gov't has trimmed the budget for FY2024, the first annual decrease in 12 years. PM Fumio Kishida's cabinet approved the JPY112.07trn (USD787bn)budget package earlier today. The total is the second-highest in Japan's history, but comes in lower than FY2023's budget due to a decrease in COVID-related emergency funding.

JAPAN (BBG): Japan Plans 10% Reduction in Debt Sales Next Fiscal Year

Japan plans to cut debt sales by about 10% in the fiscal year starting April 1 as the government tries to reduce the world’s biggest debt load for a developed nation. The finance ministry aims to issue ¥171t of debt to the market, marking a fourth straight year of planned decreases in sales, with 20-year bonds and shorter notes seeing big cuts.

RUSSIA (MNI): Kremlin Warns Against Seizure of Assets in West

Wires carrying comments from Kremlin spox Dmitri Peskov. States that 'Any Western move to seize Russian assets abroad would deal a serious blow to the international financial system.' In the event of such a seizure, 'Russia would defend its rights through the courts and by other means...Russia would never leave those responsible for such an asset seizure in peace.' Kremlin says it, 'Would look to see what Western assets Russia could seize in retaliation.'


UK DATA (MNI): UK Misses Technical Recession as Data Revised Lower

  • UK Q3 GDP -0.1% Q/Q (0%), 0.3% Y/Y (0.6%)
  • UK NOV RETAIL SALES +1.3% M/M, +0.1% Y/Y
  • UK NOV RETAIL SALES EX-FUEL +1.3% M/M, +0.3% Y/Y

The UK narrowly avoided a recession across the summer months as the Office for National Statistics revised to GDP data for Q2 and Q3 lower to 0% and -0.1% respectively -- the revised Q2 data came in at +0.04%, just on the positive side of zero. The data was lower than expected by the Bank of England and City analysts, and again raises fears of a sharply slowing economy as higher interest rates high home. However, the BOE's MPC will see the data broadly in line with its thinking of a flatlining economy, even if slightly below the actual expectation.

FRANCE NOV PPI +2.4% M/M, +0.3% Y/Y (MNI)



JAPAN DATA (MNI): Japan Nov Core CPI Rises 2.5% vs. Oct's 2.9%

  • JAPAN NOV CORE CPI +2.5% Y/Y; OCT +2.9%
  • JAPAN NOV CORE-CORE CPI +3.8% Y/Y; OCT +4.0%

Japan's annual core consumer inflation rate decelerated to 2.5% y/y in November from October's 2.9%, the first slowdown in two months but remaining above the Bank of Japan's 2% target for the 20th straight month, data released by the Ministry of Internal Affairs and Communications showed on Friday. The underlying inflation rate measured by the core-core CPI (excluding fresh food and energy) rose 3.8% y/y in November, also slowing from October's 4.0%, the third straight monthly deceleration. The negative contribution from energy items on CPI widened to -0.87 percentage points in November from -0.75 pp in October.


MNI's December 2023 Global Macro Outlook meeting surveyed the consensus outlook for the year ahead - PDF available here

  • Market pricing overwhelmingly expects a “soft landing” in 2024; analysts agree but less so
  • Global growth is seen below potential in 2024, with the US and Eurozone at stall speed
  • Inflation is set to remain above 2% in most developed countries by well down and closed to target by 2025
  • Modest fiscal drag is seen on 2024 growth vs 2023; historically low unemployment rates are seen ticking higher
  • Manufacturing appears to be bottoming out, but services will be the key to 2024 growth and inflation outcomes
  • Amid large-scale central bank rate cuts in 2024, consensus is for US dollar weakness

MNI POLITICAL RISK ANALYSIS - Political Event Calendar 2024

  • In our Political Risk calendar for 2024 we include details on the major political events scheduled to take place in developed and major emerging markets over the course of the next 12 months. We only include those events that have a set date or period in which they will take place.
  • Moreover, in a year that is already packed with major market-moving elections, summits, bilaterals, and conferences, there are a number of potential event that are seen as likely to take place but have no confirmed date, such as snap elections in Japan or the United Kingdom.
  • The plethora of dates outlined in the table below, combined with unconfirmed but expected events; ongoing conflicts in Ukraine, the Middle East and elsewhere; continued political, economic, and resource competition between global powers; and the ever-present prospect of ‘black swan’ events will ensure that political risks continue to have a significant impact on financial and commodity markets through 2024.
  • Full PDF here.

FOREX: USD Index Weakness Puts Greenback at New Multi-month Lows

  • The USD Index's weakness into NY hours has put the currency at the lowest levels since late July, mirroring the pullback in the bellow of the US yield curve. Greenback weakness is most notable against NOK and GBP, both of which trade firmer on the session.
  • EUR/USD has matched yesterday's high, led by the slippage in Treasury yields mentioned above. Should momentum pick up on any break of the 1.1013 level, the next upside level crosses at 1.1017 - the Nov 29 high and bull trigger. Clearance here puts the pair at highest level since mid-August.
  • The brings the more notable expiries for today's cut into play, with E699mln rolling off at the $1.1020 strike - which could come into focus should today's PCE/durable goods/new home sales data fail to move prices meaningfully.
  • Recall the solid equity rally this month may prompt month-end FX rebalancing flows to be USD negative - an effect that could be brought forward given the staggered nature of market opening/closings across the next week or so.
  • EUR/GBP slippage followed a mixed set of UK data releases, with retail sales topping expectations with growth of 1.3% on the month vs. Exp. 0.4%. GDP, however, fared more poorly - with Q3 growth revised lower to -0.1%. Another negative quarter would tip the economy into recession.
  • November’s PCE data headlines the NY docket ahead of the weekend, with ~23.5bp of cuts priced into the Fed funds futures strip through the March FOMC and a cumulative ~157bp of cuts showing through ’24.
  • Note that final UoM sentiment survey prints, preliminary durable goods data and new home sales readings will also cross in NY hours.

BONDS: Early Pressure Reversed, Generally a Little Firmer on the Day

Late NY/Asia Tsy & JGB weakness helped bias Bund futures lower before the old Eurex open. UK data and a modest downtick for European equities seems to have helped stabilise wider core global FI markets since, with some light richening now seen on core bond curves. Tsy and Bund futures had a limited look below Thursday lows in Asia, before bouncing.

  • Cash Tsy yields run 2-3bp lower across the curve, with TYH4 just off the top of a 0-10+ range. PCE data presents the major risk event ahead of the elongated Christmas weekend, while durable goods, new home sales and final UoM sentiment data will also be eyed during NY hours. Fed Funds futures show ~158bp of cuts through ’24, with ~23.5bp of easing priced through the end of the Mar ’24 FOMC.
  • German yields are little changed to 1.5bp lower on the day, with a light bull steepening move seen on the curve. Bund futures have reversed overnight losses and now sit a handful of ticks above unchanged levels. EGB spreads vs. Bunds are little changed on the day generally sitting within -/+1bp of yesterday’s closing levels.
  • Mixed UK economic data presented two-way trade at the London open, but it seems that the negative revisions in the final Q3 GDP prints had more meaningful market feedthrough than the firmer-than-expected retail sales data. Cash yields are 1-3bp lower on the day, with some bull steepening seen. Futures are +25, sticking within yesterday’s range thus far. BoE-dated OIS hovers just off recent dovish extremes, showing ~145bp of cuts for ’24.
  • We have flagged closing times/Christmas holiday operating hours for various exchanges elsewhere.

EQUITIES: Bullish Theme in E-Mini S&P Intact, Wednesday's Sell-Off Considered Corrective

A bullish theme in Eurostoxx 50 futures remains intact and the latest pullback appears to be a correction. Recent gains confirmed, once again, a resumption of the uptrend and this has maintained the bullish price sequence of higher highs and higher lows. Moving average studies are in a bull-mode position too, signalling a rising cycle. The focus is on 4636.70, a long-term Fibonacci retracement. Support to watch is at 4509.10, the 20-day EMA. A bullish theme in S&P e-minis remains intact and Wednesday’s abrupt sell-off appears to be a correction. This week’s fresh trend highs, confirm once again a resumption of the uptrend that started Oct 27. The contract has recently cleared resistance at 4738.50, the Jul 27 high, reinforcing current positive trend conditions. Sights are on 4854.75 next, a Fibonacci projection. On the downside, initial firm support lies at 4692.70, the 20-day EMA.

  • Japan's NIKKEI closed higher by 28.58 pts or +0.09% at 33169.05 and the TOPIX ended 10.45 pts higher or +0.45% at 2336.43.
  • Elsewhere, in China the SHANGHAI closed lower by 3.94 pts or -0.14% at 2914.775 and the HANG SENG ended 280.72 pts lower or -1.69% at 16340.41.
  • Across Europe, Germany's DAX trades lower by 6.47 pts or -0.04% at 16680.75, FTSE 100 higher by 3.4 pts or +0.04% at 7698.18, CAC 40 up 3.7 pts or +0.05% at 7575.1 and Euro Stoxx 50 down 8.38 pts or -0.19% at 4516.48.
  • Dow Jones mini down 107 pts or -0.28% at 37647, S&P 500 mini down 5.25 pts or -0.11% at 4791.5, NASDAQ mini down 42 pts or -0.25% at 16914.5.

COMMODITIES: Gold Moving Average Studies Remain in Bull-Mode Position

Bearish conditions in WTI futures remain intact and recent gains still appear to be a correction. Resistance to watch is $75.98, the 50-day EMA. A clear break of this hurdle would strengthen a bullish theme and highlight a stronger reversal. For bears, moving average studies are in a bear-mode position, highlighting a downtrend. The bear trigger lies at $67.98, the Dec 13 low. A break of this level would open $65.24, the May 4 low and a key support. The Dec 13 reversal in Gold signals the end of the recent Dec 4 - 13 corrective pullback and highlights a bullish theme. Moving average studies are in a bull-mode position too, highlighting an uptrend. A continuation of gains would signal scope for a climb towards key resistance and the Dec 4 all-time high of $2135.4. A break of this level would resume the primary bull trend. Initial firm support lies at $1973.2, the Dec 13 low.

  • WTI Crude up $0.97 or +1.31% at $74.86
  • Natural Gas up $0.01 or +0.35% at $2.581
  • Gold spot up $7.63 or +0.37% at $2053.97
  • Copper up $0.05 or +0.01% at $391.8
  • Silver up $0.07 or +0.3% at $24.487
  • Platinum up $2.03 or +0.21% at $970.35

22/12/20231330/0830***CAGross Domestic Product by Industry
22/12/20231330/0830**USDurable Goods New Orders
22/12/20231330/0830**USPersonal Income and Consumption
22/12/20231400/1500**BEBNB Business Sentiment
22/12/20231500/1000***USNew Home Sales
22/12/20231500/1000**USU. Mich. Survey of Consumers
22/12/20231530/1530UKPublication of the Treasury Bill Calendar for January - March 2024
22/12/20231800/1300**USBaker Hughes Rig Count Overview - Weekly

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