- US stocks were mixed as were 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 day progressed, Treasuries and stocks managed to pare most of the losses in a choppy session.
- USD continued its recent strength with the DXY back above the 109.00 level following an early risk-off tone on the account of fixed income weakness amid 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. There were several data releases including ADP Employment which printed beneath expectations although Initial Jobless Claims unexpectedly fell to an 11-month low, and there were comments from Fed's Waller who stated he does not think there will be a huge impact on inflation from tariffs and that he will support further cuts in 2025 but the pace will depend on further inflation progress. Furthermore, the FOMC Minutes were widely as expected but strongly signalled a January pause, while there are several Fed speakers scheduled for Thursday including Barkin, Bowman, Harker, Collins and Schmid with volumes expected to be lower owing to the US market closures on a National Day of Mourning for former President Jimmy Carter.
- 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.
- Looking ahead, highlights include Japanese Average Cash Earnings, Australian Trade Data & Retail Sales, Chinese CPI & PPI, Supply from Japan.
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LOOKING AHEAD
- Highlights include Japanese Average Cash Earnings, Australian Trade Data & Retail Sales, Chinese CPI & PPI, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were mixed as were 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 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-elect Trump is reportedly considering a national economic emergency declaration to allow for a new tariff program, via CNN citing sources. The declaration would allow Trump to construct a new tariff program by using the International Economic Emergency Powers Act which unilaterally authorises a president to manage imports during a national emergency, while Trump’s advisers are evaluating the possibility of using section 338 of US trade law and are also considering revisiting the trade law – known as section 301 – that ushered in Trump’s initial tariffs on China on national security grounds. Furthermore, sources said “nothing is off the table”, while the article noted no final decision has been made on whether to declare a national emergency and it’s unclear what evidence he would cite in declaring a national emergency.
- 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.
- Fed's Waller (voter) said inflation will continue to make progress towards 2% and he will support further cuts in 2025 but the pace will depend on further inflation progress, while he does not expect tariffs to produce persistent inflation and thus are not likely to influence views on appropriate monetary policy. Waller said long-term yields may have more of an inflation premium, but the Fed will fix that and US deficits may also be driving long-term yields higher. He also noted tremendous uncertainty about what will happen with tariffs and he does not think Draconian tariffs will be implemented, while he also does not think there will be a huge impact on inflation from tariffs in the near term.
- US Treasury Secretary Yellen said we have not seen too much progress on inflation during the past couple of months and the labour market has cooled but it is in a good state, while she added the path of interest rates may be higher than people expected.
DATA RECAP
- US Initial Jobless Claims w/e 201.0k vs. Exp. 218.0k (Prev. 211.0k)
- US Continued Jobless Claims w/e 1.867M vs. Exp. 1.867M (Prev. 1.844M, Rev. 1.834M)
- US ADP National Employment (Dec) 122.0k vs. Exp. 140.0k (Prev. 146.0k)
- US Wholesale Sales MM (Nov) 0.6% (Prev. -0.1%, Rev. -0.3%)
- US Wholesale Inventories MM (Nov) -0.2% vs. Exp. -0.2% (Prev. -0.2%)
- US Consumer Credit (Nov) -7.49B vs. Exp. 10.5B (Prev. 19.24B, Rev. 17.32B)
FX
- USD continued its recent strength with the DXY back above the 109.00 level following an early risk-off tone on the account of fixed income weakness amid 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. There were several data releases including ADP Employment which printed beneath expectations although Initial Jobless Claims unexpectedly fell to an 11-month low, and there were comments from Fed's Waller who stated he does not think there will be a huge impact on inflation from tariffs and that he will support further cuts in 2025 but the pace will depend on further inflation progress. Furthermore, the FOMC Minutes were widely as expected but strongly signalled a January pause, while there are several Fed speakers scheduled for Thursday including Barkin, Bowman, Harker, Collins, and Schmid with volumes expected to be lower owing to the US market closures on a National Day of Mourning for former President Jimmy Carter.
- EUR ended the session modestly lower amid a set of mixed European data and the Trump tariff-related report.
- GBP underperformed amid the sell-off seen in gilts with the 10yr gilt yield surpassing 2023 highs and the 30yr hitting levels not seen since 1998.
- JPY was softer on the day after USD/JPY returned to above the 158.00 level earlier in the day.
FIXED INCOME
- T-notes were choppy with early weakness seen as Gilts plummetted although treasuries gradually pared losses following dovish remarks from Fed's Waller.
COMMODITIES
- Oil prices were pressured with headwinds from a firmer dollar and broader risk-off sentiment, as opposed to anything energy-specific.
- US EIA Weekly Crude Stocks w/e -0.959M vs. Exp. -0.6M (Prev. -1.178M).
- Slovak PM Fico secured gas for domestic consumption during talks in Moscow last month.
- China may trim fuel imports amid the 2025 tax hike, according to Reuters sources.
- India cut November gold imports by USD 5bln in the biggest revision which was revised to USD 9.84bln (prev. estimated 14.86bln), according to Reuters citing sources.
GEOPOLITICAL
MIDDLE EAST
- US Secretary of State Blinken said they are very close to a hostage and ceasefire agreement in the Middle East and he hopes to get it over the line in the time they have left.
- US Central Command announced the bombing of Houthi weapon depots in Yemen, according to Al Arabiya.
RUSSIA-UKRAINE
- Ukraine hit a Russian oil depot which served the military airfield, according to a Ukrainian presidential adviser.
ASIA-PAC
NOTABLE HEADLINES
- China’s Agricultural Ministry said it will step up the promotion of stable and increased production of grains, as well as ensure a stable and safe supply of key grains and agricultural products.
EU/UK
NOTABLE HEADLINES
- BoE's Woods said the government wants to encourage more responsible risk-taking and is taking an informed risk on bonus cap and deferred period reforms.
- 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 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
- EU Economic Sentiment (Dec) 93.7 vs. Exp. 95.6 (Prev. 95.8, Rev. 95.6)
- EU Services Sentiment (Dec) 5.9 vs. Exp. 5.8 (Prev. 5.3)
- EU Consumer Confidence Final (Dec) -14.5 vs. Exp. -14.5 (Prev. -14.5)
- EU Consumer Inflation Expectations (Dec) 21.0 (Prev. 17.7, Rev. 17.8)
- EU Industrial Sentiment (Dec) -14.1 vs. Exp. -11.7 (Prev. -11.1, Rev. -11.4)
- EU Producer Prices MM (Nov) 1.6% vs. Exp. 1.5% (Prev. 0.4%)
- EU Producer Prices YY (Nov) -1.2% vs. Exp. -1.3% (Prev. -3.2%, Rev. -3.3%)
- German Retail Sales MM Real (Nov) -0.6% vs. Exp. 0.5% (Prev. -1.5%)
- German Retail Sales YY Real (Nov) 2.5% vs. Exp. 1.9% (Prev. 1.0%)
- German Industrial Orders MM (Nov) -5.4% vs. Exp. 0.0% (Prev. -1.5%)
