- APAC stocks were mostly negative following the cautious mood in global counterparts amid the recent UK bond market turmoil and Trump tariff reports.
- FOMC Minutes stated that participants indicated the Fed was at or near a point at which it would be appropriate to slow the pace of easing.
- European equity futures indicate a flat cash market open with Euro Stoxx 50 futures unchanged after the cash market closed with losses of 0.3% on Wednesday.
- USD is firmer vs peers (ex-JPY), GBP remains on the backfoot in the wake of bond market pressure, EUR/USD eyes 1.03 to the upside.
- Looking ahead, highlights include German Industrial Output, BoE DMP, EZ Retail Sales, Fed's Harker, Collins, Barkin, Schmid, Bowman and BoE's Breeden, Supply from Spain & France.
- National Day of Mourning - The desk will close at 19:00GMT/14:00EST on Thursday 9th January, upon which the desk will close and re-open at 22:00GMT/17:00EST the same day due to US market closures.
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US TRADE
EQUITIES
- US stocks were mixed as were the sectors with Health and Consumer Staples the relative outperformers, while Communication Services, Energy, and Health all sat in the red. Risk sentiment was initially hit in the European morning, on a couple of factors; firstly it was by weakness in the fixed income space, led by Gilts plummeting, before being further weighed on by CNN sources noting President-elect Trump is reportedly considering a national economic emergency declaration to allow for new tariff programme. However, as the US day progressed Treasuries and stocks managed to pare most of the losses in a choppy session.
- SPX +0.16% at 5,918, NDX +0.04% at 21,181, DJIA +0.25% at 42,635, RUT -0.48% at 2,239.
- Click here for a detailed summary.
FOMC MINUTES
- FOMC Minutes stated that participants indicated the Fed was at or near a point at which it would be appropriate to slow the pace of easing and participants indicated if data came in about as expected, it would be appropriate to continue to move gradually toward a more neutral policy stance. The vast majority of participants forecast it as appropriate to lower the target range by 25bps at the December meeting although some participants noted there was merit in keeping rates unchanged at the December meeting, citing a higher risk of persistently elevated inflation. The Minutes also stated that a number of participants indicated they had incorporated 'placeholder assumptions' regarding potential trade and immigration policy changes into their projections, while Fed staff projected slightly lower GDP growth and 'a bit' higher unemployment rate than the previous baseline forecast after incorporating recent data and placeholder assumptions of potential policy changes from the incoming administration.
NOTABLE HEADLINES
- US President Biden declared California wildfires to be a major disaster and he cancelled his upcoming trip to Italy due to the California wildfires, while it was also reported that a mandatory evacuation order was imposed on Hollywood after a new fire erupted, according to AFP.
- US President-elect Trump says after meeting with Republicans in Congress that whether it is one or two bills to pass his agenda, something will be done, while he added that China is running the Panama Canal and "that's not going to happen either".
- US President-elect Trump’s advisers are reportedly considering Kevin Hassett, Larry Lindsey, Marc Sumerlin, Kevin Warsh, David Malpass and Michelle Bowman as potential successors to Fed Chair Powell at the end of Powell's term in 2026, according to Bloomberg citing sources. Furthermore, Cleveland Fed President Beth Hammack is said to be in the mix for a possible seat on the Board during Trump's second term.
- US dockworkers and port employers reached an agreement to avert a strike, according to Bloomberg.
APAC TRADE
EQUITIES
- APAC stocks were mostly negative following the cautious mood in global counterparts amid the recent UK bond market turmoil and Trump tariff reports.
- ASX 200 was dragged lower amid pressure in industrials, tech and the consumer sectors, while the data was mixed with a larger-than-expected Trade Surplus and an improvement in both monthly Exports and Imports, although Retail Sales disappointed.
- Nikkei 225 underperformed following firmer-than-expected labour cash earnings which supports the case for the BoJ to resume rate hikes, while participants also awaited after-market earnings releases including from index heavyweight Fast Retailing.
- Hang Seng and Shanghai Comp were ultimately subdued but with price action indecisive amid ongoing trade-related concerns, while participants digested the latest Chinese inflation data in which Consumer Prices matched forecasts but printed at a 9-month low and factory gate prices remained in deflation territory albeit at a slightly slower-than-expected pace of decline.
- US equity futures (ES -0.2%) marginally weakened amid the risk aversion in Asia and with US stock markets closed on Thursday for a National Day of Mourning.
- European equity futures indicate a flat cash market open with Euro Stoxx 50 futures unchanged after the cash market closed with losses of 0.1% on Wednesday.
FX
- DXY paused overnight around the 109.00 level after gaining yesterday alongside the risk-off tone which was triggered by a sell-off in Gilts and a report that US President-elect Trump is considering a national economic emergency declaration to allow for a new tariff programme. Attention was also on Fed rhetoric as Waller noted he would support further cuts in 2025 but the pace will depend on further inflation progress, and the FOMC Minutes were widely as expected and signalled a January pause, while there are several Fed speakers scheduled today including Barkin, Bowman, Harker, Collins, and Schmid although volumes are expected to be lower owing to the US market closure for the National Day of Mourning for former President Jimmy Carter.
- EUR/USD was contained after a recent brief dip beneath the 1.0300 handle with the single currency not helped by mixed European data and the Trump tariff report.
- GBP/USD remained pressured and is eyeing 1.23 to the downside after underperforming yesterday amid the gilt market turmoil.
- USD/JPY mildly pulled back overnight following the firmer-than-expected labour cash earnings data and just about retained the 158.00 status.
- Antipodeans were confined within a narrow range amid the mostly negative risk appetite and after mixed data from Australia including disappointing Retail Sales.
- PBoC set USD/CNY mid-point at 7.1886 vs exp. 7.3159 (prev. 7.1887).
FIXED INCOME
- 10yr UST futures kept afloat after clawing back yesterday's initial losses with the help of dovish comments from Fed's Waller and a strong 30yr auction.
- Bund futures languished near a six-month low beneath the 132.00 level ahead of German Industrial Production and Trade data.
- 10yr JGB futures were restricted after firmer-than-expected wage data and despite stronger-than-previous results from the 30yr JGB auction.
COMMODITIES
- Crude futures were subdued after the prior day's losses owing to headwinds from the downbeat risk tone and recent dollar strength.
- Slovak PM Fico secured gas for domestic consumption during talks in Moscow last month.
- Citi sees US Henry Hub prices likely to be supported by an extended cold wave in the short-term with upside potential for Q2-Q4 2025 and said prices are likely to rise further to mid-USD 4/mmbtu range in Q2-Q4 2025.
- Spot gold struggled for direction after yesterday's price swings and with a lack of major fireworks from the FOMC Minutes.
- Copper futures remained underpinned following yesterday's advances and after Chinese CPI data printed in line with expectations.
- Chile's Codelco copper production reached 1.328mln metric tonnes in 2024.
CRYPTO
- Bitcoin remained on the back foot and retreated back to beneath the USD 95,000 level.
- US President-elect Trump's transition team has interviewed at least a half dozen candidates to fill the role of chairman of the CFTC which will likely be the lead regulator of the USD 3.5tln crypto industry, according to Fox Business's Gasparino.
NOTABLE ASIA-PAC HEADLINES
- US President Biden's administration plans additional curbs on exports of AI chips from Nvidia (NVDA) and AMD (AMD) in the final days of the administration, while it was also reported that the White House is rushing to finish cyber order after China hacks, according to Bloomberg.
- China's MOFCOM said regarding the investigation into unfair EU trade barriers that it concluded EU's measures constitute trade and investment barriers.
DATA RECAP
- Chinese CPI MM (Dec) 0.0% vs. Exp. 0.0% (Prev. -0.6%)
- Chinese CPI YY (Dec) 0.1% vs. Exp. 0.1% (Prev. 0.2%)
- Chinese PPI YY (Dec) -2.3% vs. Exp. -2.4% (Prev. -2.5%)
- Japanese Overall Lab Cash Earnings (Nov) 3.0% vs. Exp. 2.7% (Prev. 2.6%, Rev. 2.2%)
- Australian Trade Balance (AUD)(Nov) 7079M vs. Exp. 5750M (Prev. 5953M)
- Australian Goods/Services Exports (Nov) 4.8% (Prev. 3.6%)
- Australian Goods/Services Imports (Nov) 1.7% (Prev. 0.1%)
- Australian Retail Sales MM Final (Nov) 0.8% vs. Exp. 1.0% (Prev. 0.6%)
GEOPOLITICS
MIDDLE EAST
- Houthi media reported US-British bombing of targets in Sanaa, Amran and Hodeidah with six raids, while the Pentagon later confirmed that Central Command carried out strikes against two Houthi facilities and said that strikes were carried out in Yemen as part of efforts to weaken Houthi capabilities.
EU/UK
NOTABLE HEADLINES
- UK Chancellor Reeves reportedly eyes more spending cuts if the UK bond rout eats up headroom, according to Bloomberg citing sources. Furthermore, Reeves will favour fresh cuts to public spending over tax hikes if soaring UK borrowing costs wipe out her fiscal headroom, while Reeves later stated that meeting the government's fiscal rules is non-negotiable and the government will have an iron grip on public finances, according to Sky News.
- ECB's Cipollone said monetary policy should let Euro zone economy run at potential, according to Corriere.
- ECB's Villeroy said a slight increase in Eurozone inflation in December was expected and does not call into question their victory over inflation, while he added if the inflation pullback is confirmed, ECB rates are to head towards neutral by Summer.
DATA RECAP
- UK BRC Shop Price Index YY (Dec) -1.0% vs Exp. -0.4% (Prev. -0.6%)
