- US stocks were choppy with SPX and Dow flat after the mega losses seen on Wednesday while Russell and Nasdaq were sold
- USD was relatively flat as volatility reduced post-FOMC. Dollar price action was mixed, with gains seen versus the GBP, and JPY, due to BoJ and BoE specifics
- T-notes steepen in wake of Fed and as Trump calls for the abolishment of the debt limit
- Oil prices were choppy on Thursday but settled red on reports the G7 looks to firm up the price cap on Russian oil
- Looking ahead highlights include Japanese CPI, Australia AGB Auction, Chinese LPR
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SNAPSHOT
US TRADE
- US stocks were choppy with SPX and Dow flat after the mega losses seen on Wednesday while Russell and Nasdaq were sold.
- Sectors were mixed with Utilities, Financials and Tech outperforming, while Real Estate, Materials and Energy lagged.
- SPX -0.09% at 5,867, NDX -0.47% at 21,111, DJIA +0.04% at 42,342, RUT -0.45% at 2,221
- Click here for a detailed summary.
NOTABLE HEADLINES
- US President-Elect Trump says House Speaker Johnson and the House have come to a very good deal for the American people; urges Republicans and Dems to vote yes. Trump earlier said he would support abolishing the debt ceiling entirely.
- New Republican stopgap US funding bill extends funding for three months, via Reuters sources.
- House Republicans are eyeing a package to extend government funding for three months, and suspend the debt limit until January 2027. Additionally, USD 110bln in disaster aid, health extenders with no PBM reform, no E16 changes, Paygo scorecard wiped to 0 and an extension of the farm bill.
- Republican deal reportedly includes a potential debt limit increase, via Politico.
- Intel (INTC) has shortlisted a number of buyout firms for the next round of bidding for its Altera unit, via Bloomberg.
DATA RECAP
- US Initial Jobless Claims 220.0k vs. Exp. 230.0k (Prev. 242.0k)
- US Continued Jobless Claims 1.874M vs. Exp. 1.89M (Prev. 1.886M, Rev. 1.879M)
- US Jobless Claims 4-Wk Avg 225.5k (Prev. 224.25k)
- US GDP Final (Q3) 3.1% vs. Exp. 2.8% (Prev. 2.8%)
- US GDP Sales Final (Q3) 3.3% vs. Exp. 3.1% (Prev. 3.0%)
- US GDP Cons Spending Final (Q3) 3.7% (Prev. 3.5%)
- US GDP Deflator Final (Q3) 1.9% vs. Exp. 1.9% (Prev. 1.9%)
- US Core PCE Prices Fnal (Q3) 2.2% vs. Exp. 2.1% (Prev. 2.1%)
- US PCE Prices Final (Q3) 1.5% (Prev. 1.5%)
- US Philly Fed Business Indx (Dec) -16.4 vs. Exp. 3.0 (Prev. -5.5)
- US Philly Fed 6M Index (Dec) 30.7 (Prev. 56.6)
- US Philly Fed Capex Index (Dec) 18.8 (Prev. 24.9)
- US Philly Fed Employment (Dec) 6.6 (Prev. 8.6)
- US Philly Fed Prices Paid (Dec) 31.2 (Prev. 26.6)
- US Philly Fed New Orders (Dec) -4.3 (Prev. 8.9)
FX
- USD was relatively flat as volatility reduced post-FOMC. Dollar price action was mixed, with gains seen versus the GBP, and JPY, due to BoJ and BoE specifics.
- GBP and Yen were hit on Thursday as central bank drivers weighed. Regarding the Yen, losses were augmented post-FOMC by the BoJ's decision to hold rates as expected at 0.25% via an 8-1 vote, where Tamura dissented, calling for a 25bps hike to 0.50%.
- CAD, CHF, and EUR all gained some relief on Thursday, with gains varying across pairs. EUR/USD bounced after Wednesday's dump, to highs of 1.0422, before paring most of the move, being back below 1.04 as newsflow was light. Next for the Euro, is EZ Consumer Confidence Flash, where forecasts point to a further drop in December. The Kiwi underperformed its neighbour, the Aussie, modestly gaining when compared as overnight GDP (Q3) data fell short of expectations.
FIXED INCOME
- T-notes steepen in wake of Fed and as Trump calls for the abolishment of the debt limit.
- US Treasury sells USD 22bln in 5yr TIPS at 2.121%, B/C 2.10x. High Yield: 2.121% (prev. 1.67%, six auction average 1.99%). Tail: 5.6bps (prev. 1.5bps, six auction average -0.9bps); 5yr TIPS was trading at c. 2.065% at 13:00 EST. Bid-to-Cover: 2.10x (prev. 2.40x, six auction average 2.50x). Dealer: 25.42% (prev. 7.9%, six auction average 5.55%). Direct: 23.15% (prev. 17.30%, six auction average 16.73%). Indirect: 51.43% (prev. 74.8%, six auction average 77.7%).
COMMODITIES
- Oil prices were choppy on Thursday but settled red on reports the G7 looks to firm up the price cap on Russian oil.
- G7 is reportedly looking at measures to firm up the price cap on Russian oil, according to Bloomberg.
- US EIA- Nat Gas, Change Bcf w/e -125.0bcf vs. Exp. -126.0bcf (Prev. -190.0bcf)
CENTRAL BANKS
- BoE holds rates at 4.75% as expected in 6-3 vote split (exp. 8-1), Dhingra, Ramsden and Taylor voted to cut rates by 25bps. Maintains language that "A gradual approach to removing monetary policy restraint remains appropriate." Maintains language that "Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further". Due to heightened uncertainty in the economy, BoE cannot commit to when or by how much they will cut rates in 2025.
- Riksbank Rate 2.50% vs. Exp. 2.50% (Prev. 2.75%); if the outlook for inflation/activity remains unchanged, the rate could be cut again during H1-2025 (reiteration). Click for details.. Riksbank's Thedeen says they are somewhere near the neutral rate, this justifies going forward a little more carefully. If the situation is unclear, will wait with rate changes.
- Norwegian Key Policy Rate 4.50% (exp. 4.50%, prev. 4.50%); "the policy rate will most likely be reduced in March 2025".
- ECB's Simkus says "best to keep consistent pace toward neutral; economic environment to determine terminal rate; downward direction monetary policy is clear; 1.75% is below the neutral rate. Inflation risks are balanced for the next year."
- ECB's Patsalides says prefers smaller and gradual rate cuts. Larger 50bps move would require projections showing persistent undershooting of the inflation target. Does not see persistent economic stagnation or inflation undershooting. Does not see a situation where rates would need to go below neutral. EUR softness is not creating inflationary issues.
- Czech CNB Repo Rate 4.0% (Prev. 4.0%). CNB says board voted 5-2 for no change to rates; two members voted for a 25bps reduction; assessed risks and uncertainties of outlook for fulfilment of inflation target as modestly inflationary overall.
- BCB's Neto says FX interventions are being made on the principle that we always act, FX floats; "we understand that there was a larger and atypical outflow at the end of the year".
- Mexican Interest Rate (Dec) 10.0% vs. Exp. 10.0% (Prev. 10.25%); Vote was unamious.
GEOPOLITICAL
MIDDLE EAST
- Yemen's Houthis say they targeted Tel Aviv with two ballistic missiles.
- "There is no ceasefire deal between Turkey and the US-backed Syrian Democratic Forces (SDF) in northern Syria, contrary to a US announcement on the issue, a Turkish defense ministry official says", via Ragip Soylu on X.
- Russian President Putin says "lets stage a technological duel with the US on missiles".
- Russian President Putin says he has not spoken to US President-elect Trump in four years but is ready to talk to him.
- Russian President Putin says "we are ready for talks with Ukrainian President Zelenskiy if he is elected".
- US Secretary of State Blinken says US is "looking at getting people on the ground" in Syria.
ASIA-PAC
BOJ PRESS CONFERENCE
- For the next rate hike need "one more notch" to decide on tightening. Want to see next year's wage negotiation momentum.
- Hard to say if the January outlook report and various info are sufficient as "one more notch".
- If they decide not to hike, will consider whether this decision is a safe one. A risk of falling behind the curve while waiting. Will consider the risks, if they were to decide to skip rate hike.
- Need more data on the wage outlook; needs a little bit more information on wage trends.
- Will need considerable time to see the full picture of wage hikes and Trump policies. Need to gauge the situation for quite a while.
- Large picture on wage trends will become clearer in March and April. Will have to combine other data to make rate decisions until then.
- In totality, Ueda's remarks have a dovish and cautious skew with Ueda expressing a desire for "one more notch" to decide on tightening. Overall, the presser has increased the odds of rates being left unchanged at the January 24th meeting with focus on the March 19th gathering as details on Spring wage negotiations will have begun filtering through by then.
DATA RECAP
- South Korea PPI Growth YY (Nov) 1.4% (Prev. 1.0%, Rev. 1.0%)
- South Korea PPI Growth MM (Nov) 0.1% (Prev. -0.1%, Rev. -0.1%)
EU/UK
NOTABLE HEADLINES
- BoE's Bailey says cannot say when particular rate cuts will take place; market rate pricing for February is in a reasonable place; should not over interpret the latest wage data.
- French PM Bayrou says they will present a new cabinet before December 25th
LATAM
- Brazil lower house approves main text of constitutional amendment from government fiscal package in second round.
