- APAC stocks began the week with a mildly positive following last Friday's tech-led declines on Wall St.
- European equity futures are indicative of a marginally positive cash open with the Euro Stoxx 50 future +0.1% after the cash market closed lower by 0.8% on Friday.
- FX markets are broadly contained with DXY, EUR/USD and USD/JPY on 106, 1.05 and 154 handles respectively.
- US President Biden’s administration lifted restrictions on Ukraine using US-made long-range missiles to strike deep inside Russia.
- Looking ahead, highlights include ECB’s Lagarde, de Guindos, Lane & Fed’s Goolsbee.
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US TRADE
EQUITIES
- US stocks were notably lower on Friday with selling seen throughout the session amid distinct underperformance in the tech-heavy Nasdaq 100 (-2.4%) owing to broad-based losses in mega-cap names and as the focus was on hot US data in which headline retail sales surpassed expectations and NY Fed Manufacturing surged above all analyst expectations. As such, there was a broad-based hawkish reaction seen with selling in US equity futures and Treasuries, while the dollar was bid and market pricing for a December Fed rate cut marginally eased.
- SPX -1.32% at 5,871, NDX -2.40% at 20,394, DJIA -0.70% at 43,445, RUT -1.42% at 2,304.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Barkin (2024 voter) said on Friday that he always expected core PCE would stay in the ‘high twos’ in H2 and is still seeing progress on inflation, while he added that pricing power is getting more limited, according to a Yahoo Finance interview. Furthermore, Barkin said he hopes and expects that inflation numbers will come down in Q1, as well as noted that they are a long way from knowing what will happen with tariffs and it is hard to know the impact.
- Fed’s Collins (2025 voter) said on Friday that there is not a moment where policy forward guidance is a good idea and Fed policy is well positioned for what lies ahead in the economy, while she added it is too soon to say the impact of the election on the economic policy and the Fed needs to see data before deciding on the December FOMC. Furthermore, Collins said they do not need the labour market to soften further and they are not seeing signs of fresh inflation pressures, while she added the data suggests more room to run on the balance sheet rundown, as well as noted that monetary policy is restrictive and will need to ease over time.
- Fed's Goolsbee (2025 voter) said on Friday that he does not like tying the Fed's hands and there is still more data to come when asked about a December rate cut or pause, while he added that markets react immediately and in most extreme terms. Goolsbee also said the Fed needs to focus on longer trends and he will be looking at rate cuts along the lines of the September Fed policymaker projections.
- US President-elect Trump picked Chris Wright to be Energy Secretary and named Commissioner Brendan Carr as the Chairman of the FCC. It was also reported that Trump is considering Kevin Warsh and Marc Rowan for US Treasury Secretary, according to NYT, while Trump was reportedly seeking a pledge that his Treasury Secretary will enact tough tariffs, according to FT.
APAC TRADE
EQUITIES
- APAC stocks began the week with a mildly positive following last Friday's tech-led declines on Wall St which were triggered by hot US data and with quiet newsflow from over the weekend aside from Russian geopolitical-related headlines.
- ASX 200 was contained as losses in tech, healthcare and financials offset gains in utilities, commodities and consumer stocks.
- Nikkei 225 declined at the open after last Friday's currency strength and with a surprise contraction in Machinery Orders, although was off today's worst level with some mild support seen as the yen weakened following BoJ Governor Ueda's comments.
- Hang Seng and Shanghai Comp traded higher amid a focus on recent earnings releases and after the PBoC continued its liquidity efforts, while Chinese President Xi said that China is 'ready to work' with Trump during a meeting with US President Biden.
- US equity futures (ES +0.2%, NQ +0.7%) nursed some of last week's losses with the Emini Nasdaq 100 leading the rebound after Friday's tech underperformance.
- European equity futures are indicative of a marginally positive cash open with the Euro Stoxx 50 future +0.1% after the cash market closed lower by 0.8% on Friday.
FX
- DXY was rangebound amid the lack of major fresh catalysts to spur price action and after comments last Friday from Fed officials provided little in the way of fresh insights including Collins who said the Fed needs to see data before deciding on the December FOMC, while Goolsbee responded that there is still more data to come when asked about a December rate cut or pause.
- EUR/USD traded little changed and was contained beneath the 1.0550 level amid light newsflow and a quiet calendar.
- GBP/USD attempted to regain some composure after slipping to fresh multi-month lows last Friday in the aftermath of the slower-than-expected UK economic growth in Q3 which dragged the pair to test the 1.2600 level where support held.
- USD/JPY saw two-way trade with early downside reversed after BoJ Governor Ueda continued to signal a lack of urgency to hike rates but reiterated they will continue to adjust monetary support if the economy and prices move in line with their forecasts, while he later warned they could be forced to hike rapidly if they don't adjust the degree of monetary support appropriately.
- Antipodeans were mixed and lacked firm directions although AUD mildly outperformed its trans-Tasman counterpart amid cross-related flows after AUD/NZD rebounded from a floor just beneath the psychological 1.1000 level.
FIXED INCOME
- 10yr UST futures lacked demand after last week's whipsawing and with quiet newsflow from the US aside from headlines regarding Trump-related nominations and comments from Fed officials on Friday.
- Bund futures traded quietly amid the absence of any major catalysts from Europe, while the German Buba Monthly Report and a 12-month German auction are scheduled later today.
- 10yr JGB futures were choppy after disappointing Japanese Machinery Orders data and reiterations from BoJ Governor Ueda who repeated the familiar line that the BoJ will continue to hike rates if the economy and prices continue to move towards its target but also continued to suggest a lack of urgency for immediate hikes with money markets pricing nearly a coin flip between a hike and a pause at the next meeting in December.
COMMODITIES
- Crude futures nursed some losses after last Friday's selling pressure although price action was rangebound amid light oil-specific newsflow and the lack of geopolitical escalation in the Middle East during the weekend.
- US President Biden’s administration plans on releasing a study on LNG environmental impacts and hopes to finalise a clean fuel bill before the January 20th Inauguration Day, according to the White House.
- Goldman Sachs sees Brent crude trading USD 70-85/bbl but could climb on harsher Trump sanctions on Iran, while it reiterated its gold target of USD 3,000/oz by December 2025.
- Spot gold rallied in tandem with the advances in silver despite the absence of any obvious catalysts but coincided with the opening of Shanghai commodities trading, although gold is off intraday highs after stalling just shy of the USD 2,600/oz level.
- Copper futures eked mild gains with prices helped by the mostly positive risk sentiment.
CRYPTO
- Bitcoin climbed overnight and returned to above the USD 90,000 level.
NOTABLE ASIA-PAC HEADLINES
- US President Biden told Chinese President Xi that keeping open lines of leader-to-leader communication is vital through transition and beyond, while they agreed that AI will not ever take control of nuclear weapons and Biden raised concerns about unfair, non-market economic practices by China and issues in the South China Sea.
- Chinese President Xi told US President Biden that China’s commitment to a stable, healthy and sustainable development of China-US relations remains unchanged and China is willing to maintain dialogue, expand cooperation and manage differences with the US government in an effort to realise a smooth transition period in China-US relations. Xi also told Biden that common interests between their countries are expanding rather than shrinking and that containing China is unwise, unacceptable and bound to fail. Furthermore, Xi said the China-US relationship would make considerable progress when the two countries treat each other as a partner and a friend and that he is ready to work with Donald Trump to manage ties.
- Chinese President Xi told US President Biden the Taiwan question, democracy and human rights, the system, and rights to development are China’s four red lines which allow no challenge, while Xi said the US should refrain from making any moves that have a chilling effect and told Biden to deal with the Taiwan issue with “extreme caution”, according to state media.
- China’s Commerce Minister met with the Canadian Minister for International Trade in Peru and discussed the tariff situation.
- China's securities regulator said it is to improve the coordination mechanism for overseas listing supervision and regulation, while it will expand the scope of eligible stocks under the stock connect.
- China and the EU are said to have reached a “technical consensus” in talks regarding tariffs the bloc applied to Chinese electrical vehicles, according to a Weibo account affiliated with the state-run China Central Television cited by Automotive News.
- BoJ Governor Ueda said they will continue to raise the policy rate and adjust the degree of monetary support if the economy and prices move in line with their forecasts, while he also stated there is no change to BoJ's stance to underpin economic activity and the timing of rate hike will depend on economic, price, and financial outlook. Ueda said they will make a policy decision by updating the economic and price outlook with data and information available at the time, while he noted that gradually adjusting the degree of monetary support will contribute to durably achieving the price target through sustained economic growth and they must be vigilant to various risks including overseas and market developments. Furthermore, Ueda said there are numerous factors they want to check including on US economy but won't necessarily wait until there is clarity for all of them and if they don't adjust the degree of monetary support appropriately, they could be forced to hike rates rapidly.
DATA RECAP
- Japanese Machinery Orders MM (Sep) -0.7% vs. Exp. 1.9% (Prev. -1.9%)
- Japanese Machinery Orders YY (Sep) -4.8% vs. Exp. 2.2% (Prev. -3.4%)
- Singapore Non-Oil Exports MM (Oct) -7.4% vs. Exp. 2.3% (Prev. 1.1%)
- Singapore Non-Oil Exports YY (Oct) -4.6% vs. Exp. 4.0% (Prev. 2.7%)
GEOPOLITICS
MIDDLE EAST
- Israel conducted a strike on Beirut which killed Hezbollah’s media relations chief Mohammad Afif, according to security sources cited by Reuters.
- Tens were killed in an Israeli strike on a residential building in northern Gaza’s Beit Lahiya, according to Reuters.
- Iranian Foreign Minister Araqchi said he strongly denies the reported meeting between Iran’s envoy and Elon Musk, while he added if the IAEA Board of Governors passes a resolution against Iran, Tehran will take reciprocal action and implement new measures in its nuclear program.
- Iran reportedly keeps the door open to talks with US President-elect Trump and its Deputy Foreign Minister noted that Tehran favours negotiations but will not yield to maximum pressure strategy, according to FT.
OTHER
- US President Biden’s administration lifted restrictions on Ukraine using US-made weapons to strike deep inside Russia, according to sources familiar with the decision cited by Reuters. NYT also reported that President Biden allowed Ukraine to strike Russia with long-range US missiles, while Ukrainian President Zelensky said missiles speak for themselves and such things are not announced regarding long-range strikes.
- US President Biden's decision to allow Ukraine to use long-range missiles to hit the Russian depth was communicated to Kyiv about 3 days ago, while the motive behind the decision is to deter North Korea from sending more troops to Russia, according to a source cited by Axios.
- Russian upper house’s international affairs committee deputy head Dzhabarov said the decision to allow Ukraine to strike inside of Russia with US missiles is an unprecedented step that could lead to World War Three and will receive a swift response, according to TASS. Furthermore, it was also reported that a senior Russian senator said the US decision to allow Kyiv to strike Russia with long-range weapons represents escalation and could result in the Ukrainian statehood being in complete ruins by the morning.
- Ukrainian President Zelensky said Russia launched around 120 missiles and 90 drones in a massive combined air strike on Ukraine’s energy infrastructure early on Sunday morning, while Ukraine’s largest private power company said the Russian air strike damaged thermal power stations, according to Reuters. Furthermore, Russia’s Defence Ministry said Russian forces launched a massive strike on Ukraine’s critical energy infrastructure facilities that support the defence industry and military enterprises, according to RIA.
- Russian forces struck critical infrastructure in Ukraine’s Zaporizhzhia region and western Ukraine’s Rivne region, while Russia’s missile attack damaged energy infrastructure in Ukraine’s north-western Volyn region.
- Poland activated aircraft to ensure airspace security after Russia launched a missile attack on Ukraine.
- French President Macron said the massive Russian attack on Ukraine shows Russian President Putin does not want peace and they must continue helping Ukraine defend itself.
- Australia’s Defence Minister Marles said Japanese troops are to have regular deployment in Australia and focus on cooperation between Australian and US Marines.
- North Korean leader Kim urged the military to improve capabilities for fighting an actual war, while he added that threats by the US and allies brought tensions and calls for war preparations, according to KCNA.
- North Korea said Russia’s delegation led by the national resources minister arrived in North Korea, according to KCNA. It was separately reported that North Korea may end up sending 100k troops to Russian President Putin to support Russia’s war in Ukraine although it was also stated that the move is not imminent and troops could rotate in batches, according to Bloomberg.
EU/UK
NOTABLE HEADLINES
- UK government confirmed the spread of bird flu in commercial poultry at premises near Rosudgeon, St. Ives, Cornwall, according to Reuters.
DATA RECAP
- UK Rightmove House Price Index MM (Nov) -1.4% (Prev. 0.3%)
- UK Rightmove House Price Index YY (Nov) 1.2% (Prev. 1.0%)
