- US stocks saw broad-based weakness on Tuesday with underperformance in the Nasdaq 100 (-1.8%) as yields climbed in the wake of a hot US ISM Services and JOLTS report in which the former beat expectations and was accompanied by a notable upside in the prices paid subcomponent, while JOLTS data surpassed the top end of analysts' forecasts. The data weighed on treasuries and spurred a resurgence of the dollar which recouped its initial losses to the detriment of all G10 FX peers.
- USD strengthened across the FX space and reversed earlier weakness after hot ISM Services PMI data and as JOLTS data topped analysts' forecast range. Furthermore, there were comments from Fed's Barkin which provided very little new fresh insight, while the attention on Wednesday turns to the FOMC Minutes, as well as ADP Employment and Initial Jobless Claims data.
- Looking ahead, highlights include New Zealand ANZ Commodity Prices, Australian Monthly CPI, Japanese Household Confidence.
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LOOKING AHEAD
- Highlights include New Zealand ANZ Commodity Prices, Australian Monthly CPI, Japanese Household Confidence.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks saw broad-based weakness on Tuesday with underperformance in the Nasdaq 100 (-1.8%) as yields climbed in the wake of a hot US ISM Services and JOLTS report in which the former beat expectations and was accompanied by a notable upside in the prices paid subcomponent, while JOLTS data surpassed the top end of analysts' forecasts. The data weighed on treasuries and spurred a resurgence of the dollar which recouped its initial losses to the detriment of all G10 FX peers.
- SPX -1.11% at 5,909, NDX -1.79% at 21,173, DJIA -0.42% at 42,528, RUT -0.74% at 2,250.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Barkin (2027 voter) said they have to be tougher with rates if there are more price pressures and they remain committed to the 2% inflation target.
- Fed Governor Bowman is reportedly the top candidate to replace Fed's Barr as Vice Chair of Supervision, according to Semafor.
- US President-elect Trump said something will have to be done with Canada and Mexico trade and he flagged very serious tariffs on Mexico and Canada. Trump also said that interest rates are far too high and that he is ok with spending cuts, while he does not want to see a default and just wants to see an extension on the debt ceiling.
- US House Majority Leader Scalise said the House aims to pass budget reconciliation by Easter.
DATA RECAP
- US ISM Services PMI (Dec) 54.1 vs. Exp. 53.3 (Prev. 52.1)
- US ISM N-Mfg New Orders Index (Dec) 54.2 (Prev. 53.7)
- US ISM N-Mfg Employment Idx (Dec) 51.4 (Prev. 51.5)
- US ISM N-Mfg Price Paid Idx (Dec) 64.4 (Prev. 58.2)
- US International Trade (USD)(Nov) -78.2B vs. Exp. -78.0B (Prev. -73.8B, Rev. -73.6B)
- US Goods Trade Balance (R)(Nov) -103.5B (Prev. -102.86B)
- US JOLTS Job Openings (Nov) 8.098M vs. Exp. 7.7M (Prev. 7.744M, Rev. 7.839M)
FX
- USD strengthened across the FX space and reversed earlier weakness after hot ISM Services PMI data and as JOLTS data topped analysts' forecast range. Furthermore, there were comments from Fed's Barkin which provided very little new fresh insight, while the attention on Wednesday turns to the FOMC Minutes, as well as ADP Employment and Initial Jobless Claims data.
- EUR failed to sustain early gains and steadily retreated beneath the 1.0400 level as the dollar rebounded, while the somewhat varied/inline EU inflation data had little impact.
- GBP gave up ground to the firmer buck which saw GBP/USD revert to the sub-1.2500 territory amid a lack of fresh UK catalysts.
- JPY softened on the day but was off worst levels after USD/JPY just about gave back the recently reclaimed 158.00 status.
FIXED INCOME
- T-notes were sold across the curve after hot ISM and JOLTS data and as supply continues to weigh.
COMMODITIES
- Oil prices settled with mild gains and managed to hold onto its morning strength from initial dollar weakness, despite a reversal in the buck after a strong ISM Services report.
- Private inventory data (bbls): Crude -4.0mln (exp. -0.2mln), Distillate +3.2mln (exp. +0.6mln), Gasoline +7.3mln (exp. +1.5mln), Cushing -3.1mln.
- OPEC December oil output fell by 50k BPD from November to 26.46mln BPD, led by the UAE and Iran, according to a Reuters survey.
GEOPOLITICAL
MIDDLE EAST
- Senior Israeli Foreign Ministry official said Israel is fully committed to concluding a hostage deal and the only way to get a deal is to put pressure on Hamas.
- Israeli Broadcasting Corporation published some details of the document submitted by Israel to negotiate with Hamas which includes a proposal to withdraw from the "Netzarim Corridor", humanitarian aid, and release of prisoners in stages, according to Sky News Arabia. The aim of the agreement is to release all Israeli hostages held in the Gaza Strip and in exchange for the release of the hostages, Israeli forces will withdraw from the Gaza Strip and the Strip will be reconstructed, while an agreed number of Palestinian prisoners held by Israel would be released and sustainable calm will be restored, leading to a permanent ceasefire.
- Hamas representative in Lebanon said "ceasefire negotiations in Gaza are more serious than ever before", according to Sky News Arabia.
- US President-elect Trump’s Middle East envoy Witkoff said they hope to have good things related to the Gaza hostage talks by the January 20th inauguration.
OTHER
- US President-elect Trump said he can't assure of either of the two when asked for assurance that he will not use military or economic coercion as he tries to get control over Greenland, while he would consider tariffs on Denmark over Greenland and cannot assure not using military or economic coercion on the Panama Canal.
ASIA-PAC
NOTABLE HEADLINES
- China's MOFCOM said it is "extremely irresponsible" of the US to suspect there are security risks in China's drone systems and it firmly opposes the US investigation into these drone systems.
- Japan's Tokyo Stock Exchange will impose stricter rules regarding management buyouts (MBOs) as early as this spring to prevent large shareholders from taking companies private at inappropriately low prices, according to Nikkei.
EU/UK
NOTABLE HEADLINES
- ECB Consumer Expectations Survey (Nov) showed inflation in the next 12 months is seen at 2.6% (prev. 2.5%); 3y ahead at 2.4% (prev. 2.1%), while economic growth expectations for the next 12 months have weakened to -1.3% in November compared with -1.1% in October.
DATA RECAP
- UK S&P Global Construction PMI (Dec) 53.3 vs. Exp. 54.4 (Prev. 55.2)
- French CPI Prelim YY NSA (Dec) 1.3% vs. Exp. 1.5% (Prev. 1.3%)
- French CPI (EU Norm) Prelim YY (Dec) 1.8% vs. Exp. 1.9% (Prev. 1.7%)
- EU HICP Flash YY (Dec) 2.4% vs. Exp. 2.4% (Prev. 2.2%)
- EU HICP-X F&E Flash YY (Dec) 2.8% vs. Exp. 2.7% (Prev. 2.7%)
- EU Unemployment Rate (Nov) 6.3% vs. Exp. 6.3% (Prev. 6.3%)
- EU HCOB Construction PMI (Dec) 42.9 (Prev. 42.7)
