EXECUTIVE SUMMARY
- MNI US CPI PREVIEW - SETTING THE TONE FOR 2025
- MACRON AIMS TO DETER FRENCH FAR RIGHT WITH BID TO AVOID VOTE
- BOJ SAID TO SEE LITTLE COST TO WAITING FOR NEXT RATE HIKE: BBG
- CHINESE AUTHORITIES CONSIDERING A WEAKER YUAN: RTRS
Figure 1: Recent US inflation developments
NEWS
MNI US CPI PREVIEW - DECEMBER 2024: Setting the Tone for 2025
Analysts’ forecasts for November CPI imply remarkably steady sequential inflation versus October, with the MNI median and average for core expected to show an unchanged 0.28% M/M. Combined with Thursday’s estimates for PPI inputs, core PCE is in turn seen moderating to between 0.18-0.25% M/M in November, vs 0.27% in October. Headline inflation is seen picking up slightly, to 0.27% (median) from 0.24% prior, with both food and energy prices accelerating slightly on a sequential basis.
MNI ECB PREVIEW - DECEMBER 2024: Back-to-Back Cuts Continue
The ECB will cut by 25bp, marking the third back-to-back cut, and the fourth reduction this year. Given that the ECB has previously shown some flexibility in following its self-prescribed data dependent and meeting-by-meeting approach, future meetings carry some degree of uncertainty over policy outcomes. This time around, the prospect of a 50bp cut, although appearing unlikely, cannot be entirely discounted.
MNI BOC PREVIEW - DECEMBER 2024: Eyeing a ‘Hawkish’ 50bp Cut
The BoC is mostly priced to cut its policy rate by 50bps for a second consecutive meeting, with last week’s strong increase in the unemployment rate playing a significant role. We expect the statements to point to a need for further rate cuts ahead but will be keenly watching for any more explicit signs that the pace of easing could slow.
MNI SNB PREVIEW - DECEMBER 2024: Further Easing Coming
The SNB is expected to cut its policy rate again, with a regular 25bps cut to 0.75% appearing the most likely outcome but an outsized 50bps move also remains possible. Market pricing between the two remains finely split. There will therefore likely be a downward revision to September’s updated inflation projection, regardless of it being conditional on any new policy rate.
US/CHINA (FT): Joe Biden to Hit Chinese Cleantech Imports with More Tariffs
The Biden administration is poised to unveil steep new tariffs on imports of critical materials from China in its final effort to protect US manufacturing from the Asian superpower’s dominant cleantech industry. The US trade representative’s office will on Wednesday announce a doubling to 50 per cent of the tariff on Chinese solar wafers and polysilicon, and hit tungsten products with a 25 per cent levy, according to people familiar with the plans. The new tariffs, which will take effect on January 1, just weeks before Donald Trump replaces Joe Biden in the White House, mark an effort to shelter the US’s fast-growing solar energy sector from cheap Chinese suppliers.
US/RUSSIA (BBG): US Mulls New Russia Oil Sanctions to Weaken Putin Ahead of Trump
The Biden administration is weighing new, harsher sanctions against Russia’s lucrative oil trade, seeking to tighten the squeeze on the Kremlin’s war machine just weeks before Donald Trump returns to the White House. Details of the possible new measures were still being worked out, but President Joe Biden’s team was considering restrictions that might target some Russian oil exports, according to people familiar with the matter who asked not to be identified discussing private deliberations.
BOJ (BBG): BOJ Is Said to See Little Cost to Waiting for Next Rate Hike
Bank of Japan officials see little cost to waiting before raising interest rates while still being open to a hike next week depending on data and market developments, according to people familiar with the matter. Even if the BOJ decides to wait until January or a little longer, authorities see it as not entailing a huge cost because signs point to little risk that inflation might overshoot, the people said. At the same time, some officials are not against a rate hike at this meeting if it is proposed, according to the people.
FRANCE (BBG): Macron Aims to Deter French Far Right With Bid to Avoid Vote
French President Emmanuel Macron is seeking to free his government from the stranglehold of National Rally leader Marine Le Pen by piecing together a coalition of moderates that will last until 2027. Macron will aim to avoid a new legislative election for more than two years, which is when his term ends, according to an official close to the president. That would defy most expectations for a fresh ballot as soon as July to break France’s political impasse.
GERMANY (BBG): Scholz to Request Confidence Vote Triggering February Election
German Chancellor Olaf Scholz plans to file a petition with the lower house of parliament on Wednesday requesting a confidence vote next Monday that will trigger a snap election in late February. Scholz lost his Bundestag majority last month when he sacked Finance Minister Christian Lindner of the Free Democrats due to a budget dispute, pulling the plug on his three-party governing coalition.
CHINA (RTRS): Chinese Authorities Considering a Weaker Yuan as Trump Trade Risks Loom, Sources Say
China's top leaders and policymakers are considering allowing the yuan to weaken in 2025 as they brace for higher U.S. trade tariffs in a second Donald Trump presidency. The contemplated move reflects China's recognition that it needs bigger economic stimulus to combat Trump's threat of bigger tariffs, people with knowledge of the matter said. Trump has said he plans to impose a 10% universal import tariff, and a 60% tariff on Chinese imports into the United States.
RBA (MNI): Hauser Points to Uncertain Impact of Tariffs
Initial comments from RBA Deputy Governor Hauser are geared towards the impact of any potential tariff/trade wars during incoming U.S. President Trump's second term. Little of note when it comes to market feedthrough, with Hauser seemingly deploying a wait & see approach when it comes to assessing the inflationary impact of any tariffs, although his first instinct is that "the direct impact of any tariffs on such trade would be limited." Hauser stresses that "given this uncertainty, it is important that we don't prejudge the implications of tariffs for policy but monitor developments closely and stand ready to respond appropriately as the facts emerge."
S. KOREA (BBG): South Korea’s Yoon Seeks to Fight On as Probes Mount
South Korean President Yoon Suk Yeol looks determined to battle on rather than step down early even as probes deepen into his martial law declaration and more members of his party say they will back impeachment. Yoon will likely fight any bid to impeach him and appears to have rejected the idea of quitting early in February or March, according to Kim Jong-hyuk, a senior ruling party member, speaking in an SBS radio show on Wednesday.
MIDEAST (MNI): Khamenei Vows Expanded Axis of Resistance Amid Major Regional Setbacks
Posting on X, Iran's Supreme Leader Ayatollah Ali Khamenei vowed that the Iranian-backed 'axis of resistance' will be expanded in the Middle East. It remains to be seen how this is possible, at least in the short-to-medium term given the major blows dealt to Tehran's influence within the region via proxies in recent months. The near-destruction of Hamas in Gaza, the end of Hezbollah's existence as a major fighting force in Lebanon, and now the fall of Bashar al-Assad in Syria have all come as significant blows to Tehran.
DATA
CHINA DATA (MNI): Chinese Rail Passenger Numbers Break Record
MNI (Beijing) Chinese rail passenger volumes reached 4.01 billion between January and November this year, up 12.6% y/y and the highest on record, according to the National Railway Administration on Wednesday. National rail freight volume hit 4.70 billion tonnes, a y/y increase of 2.5%, the Administration added. Fixed-asset investment in the national railway totalled CNY711.7 billion during the first 11 months, up 11.1% y/y, with 2,298 kilometres of new railway lines put into production, the Administration said.
JAPAN DATA (MNI): Japan Nov CGPI Rises 3.7% Y/Y, Import Prices Drop
- JAPAN NOV CORP GOODS PRICE INDEX +3.7% Y/Y; OCT REV +3.6%
Japan's corporate goods price index rose 3.7% y/y in November, accelerating from October’s revised 3.6%, but import prices posted their third straight drop, data released by the Bank of Japan showed on Wednesday. The November index was boosted by high agriculture, forestry and fishery products (+31.0% vs. +38.1%) and electric power, gas and water (+9.2% vs. +5.9%). The CGPI rose 0.3% m/m in November after rising 0.3% in October.
FOREX: USD/JPY Surges Off Lows as Mixed BoJ Headlines Favour JPY Sales
- USD/JPY has rallied well off lows, with the pair north of Y152.50 headed into the NY crossover. USD/JPY rallied hard off 151.02 lows on a Bloomberg sources report that flagged that while some officials are "not against" a rate hike in December, the Bank are said to see little cost in waiting for the next hike. The headlines prompted a flurry of activity, with over $1.3bln in JPY futures trading within a minute - comfortably the best participation of the session so far.
- As a result, the USD is firmer Wednesday, with only the AUD and NZD underperforming the JPY. Antipodean currencies came under pressure amid raised speculation that Chinese officials are considering a weaker CNY path across 2025 to counteract the potential impact of US tariffs. The Reuters piece tipped USD/CNH toward Monday highs of 7.2927 in response.
- EUR vols being marked notably higher today, as the overnight contracts now capture the fallout of both the US CPI print later today as well as the ECB rate decision tomorrow. Overnight implied has touched 18.5 points for the second highest reading of 2024 (after the US Presidential election results), which blows out the break-even on an ATM straddle to around 80 pips, over double the YTD average.
- US CPI is the data highlight ahead, with markets expecting the Y/Y print to tick up to 2.7%, and the M/M to 0.3% - an increase of 0.1ppts across both readings. The datapoint is last consequential release ahead of the Fed decision next week.
- The Bank of Canada decision is a key focus Wednesday, with markets expecting another follow-up 50bps rate cut, putting the policy rate at 3.25%. Ahead of the decision, USD/CAD is in minor positive territory and well within range of the cycle high and bull trigger of 1.4195. The pace of the uptrend is typified by the growing premium of the 50-dma over the 200-dma today, which has topped 200 pips - the highest since late 2022.
EGBS: Bund Futures Move Back Towards Session Highs
Bund futures are +24 ticks today at 136.19, moving back towards session highs. Early support stemmed from a RTRS sources piece, which flagged the potential for a weaker CNY going forwards.
- A bull cycle in Bund futures remains intact and the pullback from last Monday’s highs appears corrective.
- Initial support lies at 135.75 (Nov 29 low), which shields the 20-day EMA at 135.46.
- German yields are up to 1.5bps lower across the curve.
- EU-bond spreads to Bunds are up to 1bp wider through 5 to 30-year maturities, following the release of the EU's H1-25 issuance plan after yesterday's close. The EU plans to sell E90bln of bonds in H1. This was likely larger (and more front-loaded) than markets had been expecting.
- The 10-year OAT/Bund spread is 1bp wider at ~76.5bps, with President Macron still trying to appoint a Prime Minister that will satisfy France’s fragmented National Assembly.
- Today’s market focus is the November US CPI report and the BoC decision, with the ECB decision headlining tomorrow’s regional calendar.
GILTS: Off Lows, Spread to Bunds Registers Fresh Cycle High
Gilt futures flat at 95.22 off lows of 95.07.
- A reminder that Tuesday saw the contract break support at 95.49 and 95.17.
- Support at yesterday’s low (95.13) also breached, switching focus to the November 25 low (94.66)
- Bears ultimately need to break key support at the Nov 18 low (93.40) to reignite downside momentum.
- Yields within -/+1bp of yesterday’s close. 10s & 50s have registered highest levels of December after closes above their 50-DMAs yesterday.
- Spread to Bunds now 222bp, registering a fresh cycle high this morning. Eyes on the mini-Budget ’22 closing high at 227.5bp.
- An uptick in oil prices helped apply pressure, countering the early bid that was driven by speculation surrounding the PBoC weakening the yuan further down the line & read through into inflation.
- Hedging ahead of the GBP4.0bln 4.25% Jul-34 Gilt auction then applied a little more weight.
- The auction itself generated a slightly wider-than-average tail and lower-than-average cover ratio, although there was only limited impact given the cheapening seen ahead of supply.
- SONIA futures flat to +2.0.
- BoE-dated OIS also little changed on the day, showing ~80bp of cuts through ’25.
- Little of note on the UK calendar for the remainder of the day, which will leave focus on cross-market cues and U.S. CPI data.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Dec-24 | 4.700 | -0.0 |
Feb-25 | 4.499 | -20.1 |
Mar-25 | 4.414 | -28.6 |
May-25 | 4.241 | -45.9 |
Jun-25 | 4.162 | -53.8 |
Aug-25 | 4.034 | -66.6 |
Sep-25 | 4.004 | -69.6 |
Nov-25 | 3.927 | -77.3 |
Dec-25 | 3.895 | -80.5 |
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Remains Intact
A bull cycle in the Eurostoxx 50 futures contract remains intact. Price has recently traded through the 50-day EMA, at 4881.26. The clear breach 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 488653, the 20-day EMA. The S&P E-Minis contract maintains a bullish tone 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. Resumption of the uptrend would open 6145.26, a Fibonacci projection. Initial support to watch lies at 6017.78, the 20-day EMA.
- Japan's NIKKEI closed higher by 4.65 pts or +0.01% at 39372.23 and the TOPIX ended 7.9 pts higher or +0.29% at 2749.31.
- Elsewhere, in China the SHANGHAI closed higher by 9.829 pts or +0.29% at 3432.49 and the HANG SENG ended 156.23 pts lower or -0.77% at 20155.05.
- Across Europe, Germany's DAX trades higher by 17.98 pts or +0.09% at 20346.92, FTSE 100 lower by 16.35 pts or -0.2% at 8263.92, CAC 40 up 5.67 pts or +0.08% at 7400.45 and Euro Stoxx 50 up 0.61 pts or +0.01% at 4952.35.
- Dow Jones mini down 44 pts or -0.1% at 44291, S&P 500 mini up 6.25 pts or +0.1% at 6052.5, NASDAQ mini up 46.5 pts or +0.22% at 21451.75.
Time: 09:50 GMT
COMMODITIES: Bear Threat in WTI Futures Remains, Support Seen at $65.74
A bearish threat in WTI futures remains present and the contract is trading closer to its recent lows. A continuation 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 traded higher again yesterday. The long-term trend condition remains bullish and the Oct 31 - Nov 14 bear leg appears to have been a correction. Moving average studies are 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. First support is $2605.3, the Nov 26 low.
- WTI Crude up $0.77 or +1.12% at $69.32
- Natural Gas up $0.06 or +1.99% at $3.226
- Gold spot down $0.75 or -0.03% at $2693.43
- Copper down $2.65 or -0.62% at $424.4
- Silver down $0.24 or -0.75% at $31.664
- Platinum down $8.41 or -0.89% at $933.66
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 11/12/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 11/12/2024 | - | *** |  CN | Money Supply |
| 11/12/2024 | - | *** | CN | New Loans |
| 11/12/2024 | - | *** | CN | Social Financing |
| 11/12/2024 | 1330/0830 | *** | US | CPI |
| 11/12/2024 | 1330/0830 | * |  CA | Intl Investment Position |
| 11/12/2024 | 1445/0945 | *** | CA | Bank of Canada Policy Decision |
| 11/12/2024 | 1530/1030 | CA | BOC Governor Press Conference | |
| 11/12/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 11/12/2024 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 11/12/2024 | 1900/1400 | ** | US | Treasury Budget |
| 12/12/2024 | - |  EU | European Central Bank Meeting | |
| 12/12/2024 | - |  CH | Swiss National Bank Meeting | |
| 12/12/2024 | 0030/1130 | *** |  AU | Labor Force Survey |
| 12/12/2024 | 0700/0800 | *** |  SE | Inflation Report |
| 12/12/2024 | 0830/0930 | *** | CH | SNB PolicyRate |
| 12/12/2024 | 0830/0930 | *** | CH | SNB Interest Rate Decision |
| 12/12/2024 | 1315/1415 | *** | EU | ECB Deposit Rate |
| 12/12/2024 | 1315/1415 | *** | EU | ECB Main Refi Rate |
| 12/12/2024 | 1315/1415 | *** | EU | ECB Marginal Lending Rate |
| 12/12/2024 | 1330/0830 | *** | US | Jobless Claims |
| 12/12/2024 | 1330/0830 | *** | US | PPI |
| 12/12/2024 | 1330/0830 | * | CA | Building Permits |
| 12/12/2024 | 1330/0830 | * | CA | Household debt-to-income |
| 12/12/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 12/12/2024 | 1345/1445 | EU | ECB Monetary Policy Press Conference | |
| 12/12/2024 | 1500/1000 | * | US | Services Revenues |
| 12/12/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
| 12/12/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 12/12/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 12/12/2024 | 1800/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |
| 13/12/2024 | 2350/0850 | *** |  JP | Tankan |