- US stocks ultimately traded mixed in which the S&P 500 and Nasdaq posted fresh record highs but the Dow lagged and the small-cap Russell 2000 finished little changed, while the dollar was bid and treasuries flattened as markets reacted to Trump's recent tariff threat against BRICS nations and following encouraging data including a 'Goldilocks' ISM Manufacturing PMI report.
- USD was firmer following President-elect Trump’s tariff threats against BRICS nations to commit to not creating a new currency to challenge the US dollar or they will face 100% tariffs, while participants also digested data releases in which US Manufacturing PMI was revised upwards and ISM Manufacturing PMI surpassed expectations. There were also comments from Fed speakers including Bostic who stated he is not going into the December meeting with a sense that the outcome is preordained with coming data to be important and is keeping his options open, while Waller said he leans towards supporting a rate cut in December, absent of any data shocks, which saw a little bit of dollar pressure and money markets pricing in a greater chance of a 25bps cut at this month's meeting.
- Looking ahead, highlights include South Korean CPI, Australian Current Account & Net Exports Contribution to GDP, Supply from Japan.
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LOOKING AHEAD
- Highlights include South Korean CPI, Australian Current Account & Net Exports Contribution to GDP, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks ultimately traded mixed in which the S&P 500 and Nasdaq posted fresh record highs but the Dow lagged and the small-cap Russell 2000 finished little changed, while the dollar was bid and treasuries flattened as markets reacted to Trump's recent tariff threat against BRICS nations and following encouraging data including a 'Goldilocks' ISM Manufacturing PMI report.
- SPX +0.24% at 6,047, NDX +1.12% at 21,165, DJIA -0.29% at 44,782, RUT -0.02% at 2,434.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Waller (voter) said he leans toward supporting a cut in December but added that one could argue a case for skipping a rate cut in December and will be watching data closely to decide. Waller said the policy rate is restrictive enough that a December rate cut still allows ample scope to slow the pace of cuts later if needed and forecasts show inflation is to continue on a downward path to 2% over the medium term, while he will support holding rates steady in December if the data shows forecasts of slowing inflation are wrong. Furthermore, he said the direction of the policy rate over the medium term is clearly down, as well as noted that monetary policy remains 'significantly restrictive' and there is still 'a ways to go' in reducing the policy rate to neutral, while he expects rate cuts to continue over the next year with the speed and timing of rate cuts to be determined by economic conditions.
- Fed's Bostic (2024 voter) said the base case is that inflation remains on track to reach 2%, while he is not going into the December meeting with a sense that the outcome is preordained and coming data will be important and keeping options open. Bostic added it is still an open question on how fast and by how much rates need to be cut to keep inflation declining while avoiding undue damage to the job market.
DATA RECAP
- US S&P Global Manufacturing PMI Final (Nov) 49.7 (Prev. 48.8)
- US ISM Manufacturing PMI (Nov) 48.4 vs. Exp. 47.5 (Prev. 46.5)
- US ISM Mfg. Prices Paid (Nov) 50.3 (Prev. 54.8)
- US ISM Mfg. New Orders Idx (Nov) 50.4 (Prev. 47.1)
- US ISM Mfg. Employment Idx (Nov) 48.1 (Prev. 44.4)
- US Construction Spending MM (Oct) 0.4% vs. Exp. 0.2% (Prev. 0.1%)
FX
- USD was firmer following President-elect Trump’s tariff threats against BRICS nations to commit to not creating a new currency to challenge the US dollar or they will face 100% tariffs, while participants also digested data releases in which US Manufacturing PMI was revised upwards and ISM Manufacturing PMI surpassed expectations. There were also comments from Fed speakers including Bostic who stated he is not going into the December meeting with a sense that the outcome is preordained with coming data to be important and is keeping his options open, while Waller said he leans towards supporting a rate cut in December, absent of any data shocks, which saw a little bit of dollar pressure and money markets pricing in a greater chance of a 25bps cut at this month's meeting.
- EUR dipped beneath the 1.0500 handle amid a possible collapse of French PM Barnier's government and after disappointing PMI data, while ECB rhetoric continued to point to a cut this month.
- GBP suffered from the broad dollar strength with UK-specific catalysts light and UK Manufacturing PMI also fell short of estimates.
- JPY outperformed against the dollar which saw USD/JPY retreat to beneath the 150.00 level as focus remains on a potential imminent rate hike by the BoJ with money markets currently pricing in a 58% of a 25bps hike in December.
FIXED INCOME
- T-notes settled marginally lower after fluctuating due to fresh Trump tariff threats, a "Goldilocks" ISM Manufacturing PMI, French political instability and dovish comments from Fed's Waller.
COMMODITIES
- Oil prices were choppy and settled with marginal losses as the eventual dollar strength outweighed strong Chinese data and geopolitical tensions.
- There are no considerations among any of the OPEC+ states, big or small, about leaving the producer alliance, according to Energy Intel.
- Iraq exported 3.296mln BPD of crude oil in November (prev. 3.327mln BPD in October).
GEOPOLITICAL
MIDDLE EAST
- Hezbollah said it conducted a defensive strike on an Israeli military post after ceasefire violations. It was reported shortly after that a senior security official said there will be a response to Hezbollah's shooting at Mount Dov, while Israel’s Defence Minister also noted that Israel will respond to Hezbollah fire with a "tough response".
- Hezbollah does not intend, for now, to send fighters to northern Syria to support Assad, according to sources cited by Reuters.
- Israeli military said it attacked dozens of Hezbollah targets but also stated that Israel remains obligated to fulfil the ceasefire.
- IDF spokesman said Iran is sending troops to Syria and Israel will act according to the situation that develops, according to Open Source Intel.
- US and UAE have discussed lifting sanctions on Syria if Assad peels away from Iran and cuts off weapons to Hezbollah, according to Reuters sources.
- US officials are concerned Lebanon ceasefire could unravel, according to Axios' Ravid.
- US President-elect Trump warned there will be all hell to pay in the Middle East if Gaza hostages are not released prior to his January 20th inauguration.
RUSSIA-UKRAINE
- Russian President Putin is likely to reject US President-elect Trump's peace proposal that was outlined recently by envoy-nominee Kellogg, according to FT citing Russian tycoon Malofeyev.
- German Chancellor Scholz said they are to deliver additional air defence systems and howitzers to Ukraine in 2025.
ASIA-PAC
NOTABLE HEADLINES
- PBoC Governor Pan said China will continue to maintain a supportive monetary policy stance and direction next year, while it will strengthen counter-cyclical adjustments and will promote the stable development of real estate and capital markets.
- US Commerce Department announced a new crackdown against Chinese chip manufacturers. It was shortly reported after that China's Commerce Ministry said that they firmly oppose US chip export control measures and China will take necessary measures to safeguard its legitimate rights and interests, while it added that the US move is threatening the stability of global supply chains.
- China’s Foreign Ministry urges the US to stop "aiding and abetting" Taiwan separatist forces.
- UK Chancellor Reeves is reportedly set for mid-January discussions with China, according to Sky News.
EU/UK
NOTABLE HEADLINES
- French PM Barnier said they must have a budget for 2025 and now face the moment of truth, while he added it is up to lawmakers to decide on the budget and decided to use special constitutional powers (i.e. article 49.3) to push through the bill without a vote.
- French Socialist leader Faure said they will vote against PM Barnier in the scenario of a no-confidence vote and LFI leader Panot said they will be launching a no-confidence motion against PM Barnier, while far-right RN will vote against PM Barnier in a no-confidence motion, as expected.
- ECB's Kazaks said the ECB is likely to discuss a bigger December cut but the uncertainty is high.
- ECB's Rehn said there are reasons to continue cutting rates in December.
- ECB's Stournaras said the ECB will probably continue cutting rates in December.
- ECB's Patsalides said that disinflation was proceeding well but services inflation was still an issue, while recent inflation data confirms that the process of disinflation is progressing smoothly and is expected to reach the medium-term target by 2025. Patsalides added that the ECB should stay restrictive for as long as needed to ensure a return to the target and the ECB will take decisions meeting-by-meeting, based on available information and without pre-committing to a rate path.
DATA RECAP
- UK S&P Manufacturing PMI (Nov) 48.0 vs. Exp. 48.6 (Prev. 48.6)
- German HCOB Manufacturing PMI (Nov) 43.0 vs. Exp. 43.2 (Prev. 43.2)
- French HCOB Manufacturing PMI (Nov) 43.1 vs. Exp. 43.2 (Prev. 43.2)
- Italian HCOB Manufacturing PMI (Nov) 44.5 (exp. 45.7, prev. 46.9)
- EU HCOB Manufacturing Final PMI (Nov) 45.2 vs. Exp. 45.2 (Prev. 45.2)
- EU Unemployment Rate (Oct) 6.3% vs. Exp. 6.3% (Prev. 6.3%)
