- US stocks were ultimately mixed in which the major indices gained and large caps outperformed driven by strength in Communications and Utilities, while Materials and Energy lagged and the small-cap Russell 2000 was pressured by a higher US yield environment in response to the latest tariff threat by US President-elect Trump on all products from Canada, Mexico and China.
- USD softened on the day after fading the initial Trump-tariff boost and the DXY retreated beneath the 107.00 level despite the greenback gaining versus the majority of major peers as notable yen strength offset any potential upside. The attention was also on the release of the FOMC Minutes which proved to be a non-event and noted that many members said uncertainty over the neutral rate level makes it appropriate to reduce restraint gradually, while some said the Fed could pause easing and hold rates at restrictive levels if inflation remains elevated although some also said that easing could be accelerated if the labour market weakened or activity faltered.
- Looking ahead, highlights include Australian Monthly CPI & Q3 Construction Work Done, RBNZ Rate Decision & Press Conference, Supply from Australia & Japan.
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LOOKING AHEAD
- Highlights include Australian Monthly CPI & Q3 Construction Work Done, RBNZ Rate Decision & Press Conference, Supply from Australia & Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were ultimately mixed in which the major indices gained and large caps outperformed driven by strength in Communications and Utilities, while Materials and Energy lagged and the small-cap Russell 2000 was pressured by a higher US yield environment in response to the latest tariff threat by US President-elect Trump on all products from Canada, Mexico and China.
- SPX +0.57% at 6,022, NDX +0.57% at 20,923, DJIA +0.28% at 44,861, RUT -0.73% at 2,424.
- Click here for a detailed summary.
FOMC MINUTES
- FOMC Minutes noted that many said uncertainty over the neutral rate level makes it appropriate to reduce restraint gradually and participants anticipated it would be appropriate to move gradually towards a more neutral stance, while some said the Fed could pause easing and hold rates at restrictive levels if inflation remains elevated. However, some also said that easing could be accelerated if the labour market weakened or activity faltered, and almost all agreed that the risks to achieving dual mandate goals remain roughly in balance. Furthermore, participants continued to observe that inflation had eased substantially from its peak, although core inflation remained somewhat elevated.
NOTABLE HEADLINES
- US President-elect Trump is poised to name Kevin Hassett as his NEC director, according to Bloomberg.
- Fed's Goolsbee (2025 Voter) said it makes sense to slow cuts as rates approach r-star, according to an Overshoot interview on November 19th.
DATA RECAP
- US Consumer Confidence (Nov) 111.7 vs. Exp. 111.3 (Prev. 108.7, Rev. 109.6)
- US New Home Sales-Units (Oct) 0.61M vs. Exp. 0.725M (Prev. 0.738M)
- US Rich Fed Comp. Index (Nov) -14.0 (Prev. -14.0)
- US Rich Fed Mfg Shipments (Nov) -12.0 (Prev. -8.0)
- US Rich Fed, Services Index (Nov) 9.0 (Prev. 3.0)
- US CaseShiller 20 YY NSA (Sep) 4.6% vs. Exp. 4.8% (Prev. 5.2%)
FX
- USD softened on the day after fading the initial Trump-tariff boost and the DXY retreated beneath the 107.00 level despite the greenback gaining versus the majority of major peers as notable yen strength offset any potential upside. The attention was also on the release of the FOMC Minutes which proved to be a non-event and noted that many members said uncertainty over the neutral rate level makes it appropriate to reduce restraint gradually, while some said the Fed could pause easing and hold rates at restrictive levels if inflation remains elevated although some also said that easing could be accelerated if the labour market weakened or activity faltered.
- EUR marginally softened on the day with very few catalysts for the single currency, while rhetoric from ECB officials provided very little incrementally with ECB's Rehn noting that they should continue to cut rates if fresh data and forecasts support the current inflation and growth view.
- GBP was ultimately flat on the day in the absence of any major data releases from the UK and after comments from BoE's Pill and Lombardelli did little to shift the dial.
- JPY outperformed and was the only G10 currency to gain against the buck with USD/JPY testing 153.00 to the downside following the recent firmer-than-expected Services PPI data which supports the case for the BoJ to resume hikes.
FIXED INCOME
- T-notes settled lower with pressure seen across the curve after Trump announced tariff plans for Mexico, China and Canada.
COMMODITIES
- Oil prices were lower the Israel-Hezbollah ceasefire deal although there was some choppy price action surrounding updates on Ukraine/Russia, OPEC+ and Trump tariffs.
- US Private Inventory Data: Crude -5.9mln (exp. -0.6mln), Distillates +2.5mln (exp. +0.1mln), Gasoline +1.8mln (exp. -0.1mln), Cushing -0.7mln
- OPEC+ is reportedly beginning talks on delaying an oil production restart again, according to Bloomberg.
- Iraqi PM, Saudi Energy Minister and Russian Deputy PM stressed the importance of maintaining the stability of global oil markets.
- Iraq's total oil exports rose to 103.1mln barrels in October (prev. 99.3mln in September), according to the Oil Ministry.
- Libya NOC said oil and gas production indicators continue to rise daily and reached 1.57mln bbls of total oil, gas and condensate production today.
- Exports of the four key Nigerian crude oil grades are to reach 841k BPD in January vs 770k in December's preliminary programme.
- US President-elect Trump's plan to impose 25% tariffs on Canadian and Mexican imports does not exempt crude oil, according to Reuters citing sources.
GEOPOLITICAL
MIDDLE EAST
- It was initially reported that the ceasefire between Israel and Lebanon's Hezbollah is due to begin on November 27th at 08:00GMT/03:00EST. However, it was later reported that two senior Lebanese officials said the US informed them that the ceasefire between Israel and Hezbollah will take effect from 02:00GMT on Wednesday.
- Israel’s cabinet approved the ceasefire deal with Lebanon. Israeli PM Netanyahu said they will return all citizens in the north to their homes and are determined to prevent Iran from having nuclear arms, while he added the war won't end until residents return to the north. Furthermore, Netanyahu said they have set Hezbollah back decades and if Hezbollah breaks the deal, they will strike at them, while he also stated that a ceasefire deal now means they will focus on the Iranian threat.
- US President Biden confirmed Israel and Hezbollah have agreed to a ceasefire deal with the deal to take effect at 04:00 local time on Wednesday (02:00GMT/21:00EST), while he added that over the next 60 days, the Lebanese army will take control of their own territory again and Israel will gradually withdraw and civilians will return home. Biden said there will be no US troops in southern Lebanon and the US will make another push over the coming days with Turkey, Qatar and others for a ceasefire in Gaza. Furthermore, he said the US remains ready to conclude historic deals with Saudi Arabia and it is possible for normalisation of relations between Israel and Saudi Arabia.
- Israel issued an evacuation warning for 20 locations in the Beirut suburbs on Tuesday which was the largest warning issued yet, while an Israeli military spokesperson said evacuation warnings have been issued for the first time within central Beirut.
- Israeli military said on Tuesday it was attacking Hezbollah targets in the Beirut area on a large scale.
- Hezbollah MP said Hezbollah will remain after the war ends and that Lebanon was in dangerous, sensitive hours before the ceasefire.
OTHER
- US Secretary of State Blinken said the US is continuing to surge security assistance to bolster Ukraine's defences in the east, and the involvement of North Korean troops in the Ukrainian conflict was a matter of grave concern for all G7. Blinken said they are finalising "getting out the door" the USD 50bln that has been secured on the basis of frozen Russian sovereign assets and going into 2025, Ukraine has the money, munitions and forces to fight effectively or negotiate.
- Ukraine reportedly hit Russia with US-made ATACMS twice in the last three days and the Russian Defence Ministry is preparing retaliatory measures, according to Interfax.
- Russia’s new missile fired at the Ukrainian city of Dnipro last week carried warheads without explosives causing limited damage, according to Reuters citing sources.
- Russia's spy chief said Russia is completely against a freeze in the conflict and needs a long-lasting peace, according to IFAX.
- Russia's Kremlin said the possibility of Western countries giving Ukraine nuclear weapons is "absolutely irresponsible" and the West should carefully listen to Putin, while it added that it is important to develop contacts with the Taliban leadership.
- US President-elect Trump’s team weighs direct talks with North Korea's Leader Kim Jong Un, according to Reuters citing sources.
ASIA-PAC
NOTABLE HEADLINES
- China's Vice President said China is willing to work with other nations to promote the construction of an open world economic system and maintain the stability of the global industrial chain, according to Xinhua.
- China's Finance Ministry said China's end-2024 debt ceiling for local government special purpose bonds was revised to CNY 35.5tln (prev. 29.5tln).
- China's Commerce Ministry said regarding the US blacklisting of Chinese companies over alleged forced labour in Xinjiang, that it urges the US to immediately stop 'political manipulation and smear attacks' and stop 'unreasonable suppression' of Chinese companies.
- China's Foreign Ministry said Fentanyl is a US issue and China has previously supported the US in addressing these challenges, while it added that China is willing to continue anti-drug cooperation with the US.
- Chinese officials asked TSMC (2330 TT) about the US investigation and a potential tightening of export controls, while TSMC conducted a sweeping review of Chinese customers since a US investigation into possible Huawei links, according to The Information.
EU/UK
NOTABLE HEADLINES
- BoE's Pill said the UK outlook is still governed by an unwinding of shocks and he does not wish to overstate the impact of the budget on UK CPI, while he added that national insurance changes will have a small, positive impact on CPI and the change will weigh on the labour market at the margin.
- BoE's Lombardelli said US tariffs would pose a risk to UK economic growth and it is unclear what impact tariffs would have on UK inflation, while she added that a tight UK labour market remains a problem and is worried that services inflation remains above pre-COVID levels.
- ECB's Centeno said Europe must avoid inflation returning to levels well below target as in the recent past.
- ECB's Rehn said salary and services inflation remain persistent which maintains the risk of inflation moderating more slowly than expected. Rehn said the EZ economy will grow slowly and recover gradually, while he added they should continue to cut rates if fresh data and forecasts support the current inflation and growth view.
- ECB's Villeroy said the effect of Trump's economic policies on inflation is likely to be limited but interest rates could be impacted.
- EU Commission said the French 2025 draft budget and medium-term fiscal consolidation plan are credible and in line with EU rules, while the Eurozone fiscal stance will be slightly tighter, which is appropriate.
