- US stocks ultimately finished higher after whipsawing throughout the day as participants digested Nvidia (NVDA) earnings, geopolitical updates and mixed US data releases. There were early geopolitical escalation fears after Russia attacked Ukraine with what was initially reported as an ICBM although Western officials and Russian President Putin later stated it was an intermediate-range missile and the US also said it was not a game changer which facilitated the improvement in risk appetite. Furthermore, there were several data releases which printed mixed, while the latest comments from Fed speakers provided little to shift the dial.
- USD strengthened with the DXY at the 107.00 level in a continuation of its recent upward momentum amid upside in short-term yields and increased concerns regarding the Russia-Ukraine war. There was a slew of data releases which were mixed as US Leading Index and the Philly Fed Business Index disappointed but Existing Home Sales topped forecasts, while Initial Jobless Claims surprisingly declined but Continued Claims rose.
- Looking ahead, highlights include Australian & Japanese Flash PMIs, Japanese & Malaysian CPI, Supply from Australia.
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LOOKING AHEAD
- Highlights include Australian & Japanese Flash PMIs, Japanese & Malaysian CPI, Supply from Australia.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks ultimately finished higher after whipsawing throughout the day as participants digested Nvidia (NVDA) earnings, geopolitical updates and mixed US data releases. There were early geopolitical escalation fears after Russia attacked Ukraine with what was initially reported as an ICBM although Western officials and Russian President Putin later stated it was an intermediate-range missile and the US also said it was not a game changer which facilitated the improvement in risk appetite. Furthermore, there were several data releases which printed mixed, while the latest comments from Fed speakers provided little to shift the dial.
- SPX +0.53% at 5,949, NDX +0.36% at 20,741, DJIA +1.06% at 43,870, RUT +1.65% at 2,364
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Barkin (2024 Voter) said the Fed should not pre-emptively adjust monetary policy ahead of possible changes in economic policy and the US is more vulnerable to inflation shocks, while the forthcoming rate decision would depend on data and the data currently suggests the economy is "quite prosperous", according to FT.
- Fed's Goolsbee (2025 voter) said it makes sense to slow the pace of interest rate cuts as the Fed gets close to where rates will settle, while he added that over the next year, it feels like rates will end up a fair bit lower than where they are today. Furthermore, he said inflation is on its way down to 2% and the labour market is close to stable full employment.
- Fed's Schmid (2025 voter) said the Fed will wait to react to fiscal policy and he does not believe current rates are overly restrictive.
- US President-elect Trump's search for a Treasury Secretary remains "in flux" and Trump is yet to be entirely sold on the candidates he has interviewed thus far, according to Bloomberg.
- Apollo CEO Rowan told people he has been meeting with President-elect Trump in recent days and these meetings have reportedly gone well as "the two have jelled on Trump’s fiscal policy mandates", according to FBN’s Gasparino citing sources.
- Matt Gaetz withdrew himself for consideration as Attorney General.
- US SEC Chair Gensler plans to step down from the agency in January, while it was also reported that former SEC commissioner Paul Atkins is said to be in the lead position to replace Gensler, according to FBN's Gasparino.
DATA RECAP
- US Leading Index Change MM (Oct) -0.4% vs. Exp. -0.3% (Prev. -0.5%, Rev. -0.3%)
- US Existing Home Sales (Oct) 3.96M vs. Exp. 3.93M (Prev. 3.84M, Rev. 3.83M)
- US Philly Fed Business Index (Nov) -5.5 vs. Exp. 8.0 (Prev. 10.3)
- US KC Fed Manufacturing (Nov) -4.0 (Prev. 0.0)
- US KC Fed Composite Index (Nov) -2.0 (Prev. -4.0)
- US Initial Jobless Claims w/e 213.0k vs. Exp. 220.0k (Prev. 217.0k, Rev. 219k)
- US Continued Jobless Claims w/e 1.908M vs. Exp. 1.873M (Prev. 1.873M, Rev. 1.872M)
FX
- USD strengthened with the DXY at the 107.00 level in a continuation of its recent upward momentum amid upside in short-term yields and increased concerns regarding the Russia-Ukraine war. There was a slew of data releases which were mixed as US Leading Index and the Philly Fed Business Index disappointed but Existing Home Sales topped forecasts, while Initial Jobless Claims surprisingly declined but Continued Claims rose.
- EUR underperformed and fell beneath the 1.0500 handle against the stronger dollar, while the contraction in EU Consumer Confidence was worse than feared and ECB rhetoric continued to suggest looming cuts.
- GBP was pressured which saw GBP/USD retreat to sub-1.2600 territory despite hawkish rhetoric from BoE's Mann and with attention for GBP now shifting to the upcoming UK Retail Sales data.
- JPY gained against the dollar amid heightened geopolitical concerns and with participants awaiting the latest Japanese inflation numbers.
- South African Repo Rate (Nov) 7.75% vs. Exp. 7.75% (Prev. 8.0%), while the decision was unanimous and it stated that it still expects a sustained improvement in growth over the medium term and inflation appears well contained in the near term.
- Turkish CBT Weekly Repo Rate (Nov) 50.0% vs. Exp. 50.0% (Prev. 50.0%). CBRT stated the underlying trend of inflation registered a decline in October and indicators for the last quarter suggested that domestic demand continues to slow down, reaching disinflationary levels, while core goods inflation remains low and signs for an improvement in services inflation have become more apparent.
FIXED INCOME
- T-notes were choppy amid geopolitics, mixed US data and as stocks whipsawed.
COMMODITIES
- Oil prices settled firmer with upside driven by continued escalations in the Ukraine-Russia war after Russia fired a new medium-range ballistic missile at Ukraine which was initially suspected to be an ICBM.
- Russian President Putin discussed OPEC+ with Iraq's PM, according to TASS.
GEOPOLITICAL
MIDDLE EAST
- Lebanese officials requested changes to the US ceasefire proposal to guarantee a speedier withdrawal of Israeli troops from south Lebanon and provide parties with a right to self-defence, according to Reuters citing sources.
- Senior Israeli defence officials said the conditions for a hostage deal have changed and Hamas is under huge pressure, while it has not surrendered but is likely interested in an agreement. Furthermore, an official added that it is not impossible that a hostage deal will be carried out even before the new US administration takes office, according to Kann's Stein.
- IAEA's board of governors passed a resolution ordering Iran to urgently improve cooperation with the IAEA, while the board asked the IAEA to produce a 'comprehensive' report on Iran by the spring of 2025.
- Walla website cited an Israeli security official stating that Tel Aviv will not allow a nuclear situation for Iran, so it continues to prepare to attack its nuclear project, according to Sky News Arabia.
- US lawmakers introduced measures seeking to halt the sale of some weapons to the UAE, citing Sudan concerns.
RUSSIA-UKRAINE
- Ukraine's airforce said Russia launched intercontinental ballistic missiles from the Astrakhan region on Thursday morning, while Ukrainian President Zelensky said Russia used a new missile in the attack in which the speed and altitude showed it was an ICBM and an expert review is ongoing. However, a US official said Russia fired an intermediate-range ballistic missile at Ukraine not an ICBM.
- Ukrainian President Zelenskiy said Russian President Putin's missile strike on Thursday is a clear and severe escalation in the scale and brutality of the war, while he added the missile use shows Putin is not interested in peace and the world must respond. Furthermore, he said a lack of response sends the message that such behaviour is acceptable.
- US official said the US was pre-notified by Russia before Thursday's missile strike through nuclear risk reduction channels. US official said Russia likely only possesses a handful of experimental intermediate-range ballistic missiles used for the strike on Thursday and the missile use seeks to intimidate Ukraine but does not mark a game-changer in the conflict.
- North Korea’s entry into the Ukraine war and Donald Trump's election win factored into the US decision to relax Ukraine missile controls and Biden aides see easing of controls on Ukraine missiles as part of an effort to 'Trump-proof' Ukraine policy, according to sources cited by Reuters.
- Russian President Putin said after long-range strikes from Ukraine, the regional conflict gained elements of a global one and the enemy didn't achieve its goals, while he added that such actions won't influence the situation in Ukraine and that Russia fired a new medium-range ballistic missile which was conducted in response to Western aggression. Furthermore, he said Russia will respond symmetrically in the case of escalation and if Russia does use the hypersonic weapon against Ukraine, they will warn civilians.
- Russian Foreign Ministry said Russia is open to talks on Ukraine and is ready to look at realistic initiatives, while a Russian Foreign Ministry spokesperson said regarding the US missile base in Poland, that this results in an increase to the overall level of nuclear danger and the base has long been a priority target, which can be hit with "Russian new weapons".
- Russia’s Kremlin spokesperson said the storm shadow attack on Russia is a new escalation and Russia is making "maximum effort" to avoid nuclear conflict, according to TASS.
ASIA-PAC
NOTABLE HEADLINES
- China’s MOFCOM said it is to issue policies to increase trade growth and will enhance financing support for trade companies, while it will expand exports of commodities such as agricultural products and support imports of core equipment for energy products.
- China's Defence Ministry said the US should immediately correct its mistakes and respect China's core interests, while it urges the US to halt weapon sales to Taiwan. It also stated that a failure to hold a meeting between Chinese and US defence ministers in Laos is "entirely the responsibility of the US side".
EU/UK
NOTABLE HEADLINES
- BoE's Mann said the BoE should hold rates longer to evaluate persistence and can make larger changes when justified by evidence. Mann said she is waiting for a change in underlying inflation dynamics and is still seeing a tremendous amount of persistence, while she added that 100 basis points of cuts are too aggressive for her.
- BoE's Ramsden said inflation is close to the target, according to Yorkshire Post.
- ECB's Chief Economist Lane said trade fragmentation entails sizeable output losses and inflationary effects of trade fragmentation subside gradually.
- ECB's Holzmann said warnings of undershooting 2% are not warranted and policy needs to stay restrictive amid price risks, while he added a cut is the most likely outcome in December but is not certain.
- ECB's Pastalides said the approach to rate cuts must be gradual and if December projections confirm the baseline, there will be room to cut rates.
- ECB's Stournaras said a 25bps December rate cut is the right response and they should cut every meeting until they reach 2%, while he added that the neutral rate on average is about 2% and the jump in Q3 wage data "was a blip", according to Bloomberg TV.
- Germany's SPD leadership will propose the nomination of Olaf Scholz as their party's candidate for Chancellor on Monday.
DATA RECAP
- EU Consumer Confidence Flash (Nov) -13.7 vs. Exp. -12.4 (Prev. -12.5)
