- APAC stocks traded mostly firmer in choppy trade following a similar session on Wall Street, where stocks experienced volatility with low volumes amid the Christmas period.
- China convened a national fiscal work conference in Beijing, according to the Ministry of Finance, and said they will step up fiscal spending and accelerate spending speed in 2025.
- Japanese Finance Minister Kato expressed concern about recent FX moves. USD/JPY gradually dipped under 157.00.
- Eurex is closed for trading and clearing in all derivatives on December 24th, 25th, and 26th.
- Looking ahead, highlights include US Richmond Fed Index, and Supply from US Christmas Eve (Recommend Early Close).
- NOTE: Newsquawk Desk will run until 18:00GMT/13:00EST on Tuesday December 24th.
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US TRADE
EQUITIES
- US stocks were choppy in thin conditions ahead of the Christmas period with indices ultimately closing mixed but with a bias to the upside with only the Russell in the red. There was notable outperformance in the Nasdaq with upside in Nvidia (NVDA) supporting the move with reports suggesting the company has resolved production issues with its Blackwell chip. The Russell and equal weighted S&P lagged while sectors were mixed.
- Outperformance was seen in Communication Services, Technology and Health Care, while underperformance was seen in Consumer Staples, Materials and Industrials. There were little fresh macro drivers on Monday with liquidity/vol thinning out ahead of the Christmas period.
- SPX +0.73% at 5,974, NDX +1.01% at 21,503, DJI +0.16% at 42,907, RUT -0.22% at 2,237.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed announced it would soon seek comment on changes to bank stress tests to improve transparency and reduce volatility, a decision made due to the changing legal landscape, according to Reuters.
- Tesla (TSLA) cuts the price of Model Y in China by CNY 10k
CENTRAL BANKS
- BoC Minutes: The decision to cut by 50bps on 11th Dec was a close call, as members discussed arguments for both a 25 and 50bps reduction. Those in favour of a 50bps cut acknowledged that not all data called for such a reduction; however, this group said it seemed unlikely that a cut of 50bps would take rates lower than they needed to go over the next couple of meetings. Conversely, those in favour of a 25bps cut suggested that policy could be patient while the full effects of past cuts became clearer. Moreover, there was a range of views on how much further the policy rate would need to be reduced and over what period that should happen. Ultimately, the decision to cut by 50bps reflected the weaker-than-expected growth outlook and the fact that monetary policy no longer needed to be clearly restrictive. Members agreed they would likely be considering further reductions in the policy rate at future meetings, emphasising that they would take each decision one meeting at a time.
- RBA Minutes (December meeting): Policy needed to be "sufficiently restrictive" until confidence on inflation was achieved. The Board had gained confidence on inflation since the prior meeting, but risks remained. Members noted that the Board had minimal tolerance for inflation remaining above target for too long. They stated that future data in line with or weaker than forecasts would give more confidence on inflation, at which point it would be appropriate to begin relaxing the degree of policy tightness. However, if data proved stronger than expected, it could indicate a longer period before easing policy. The Board observed signs that policy was not as restrictive as the current cash rate level would suggest. The labour market was resilient, while service inflation remained more persistent. Wages had slowed more than expected, potentially indicating that the labour market was not as tight as previously thought. Monthly CPI data suggested a modest downside risk to Q4 inflation forecasts. Additionally, upside inflation risks had diminished, while downside risks to economic activity had grown. The Board noted that more data and updated forecasts would be available by the February meeting. Members also stated that it was not possible to judge the impact of Trump's policies on Australia until more details were known.
- BoJ October meeting minutes (two meetings ago): A few members said they must scrutinise the impact of the past interest rate hike on the economy and prices when deciding policy. One member said they must take time and be cautious when deciding on the timing of the next rate hike. Members shared the view that the BoJ would keep raising rates if the economy and prices moved in line with its forecast. Additionally, one member noted that it was desirable to gradually raise rates if underlying inflation accelerated as projected. Another member pointed out that market rates could be lower than levels considered appropriate based on the BoJ's economic and price projections, as well as its guidance on monetary policy. Meanwhile, one member stated that it was hard to indicate with confidence the BoJ's medium- to long-term rate hike path due to uncertainty over Japan's neutral rate level and the transmission mechanism of monetary policy.
APAC TRADE
EQUITIES
- APAC stocks traded mostly firmer in choppy trade following a similar session on Wall Street, where stocks experienced volatility with low volumes amid the Christmas period.
- ASX 200 swung between modest gains and losses with earlier downside led by gold miners. The ASX showed little reaction to RBA minutes, which offered no significant new information.
- Nikkei 225 was initially supported by recent JPY weakening, but gains were shortlived as USD/JPY slipped back to session lows and eventually under 157.00.
- Hang Seng and Shanghai Comp were firmer and outperformed regionally despite a lack of significant macro newsflow, although China convened a national fiscal work conference in Beijing, according to the Ministry of Finance, and said they will step up fiscal spending and accelerate spending speed in 2025.
- US equity futures saw flat across the board with a downward bias amid the tentative risk tone in Asia.
- European equity futures are not trading as Eurex is closed for trading and clearing in all derivatives on December 24th, 25th, and 26th.
FX
- DXY traded uneventfully in holiday-thinned conditions, remaining within a narrow 108.05-20 range after Monday's broader 107.68-108.28 parameters.
- EUR/USD hovered flat on either side of 1.0400, staying within Monday's 1.0382-1.0445 range. Some potential resistance was noted around 1.0445-47, corresponding to Monday and Friday's highs
- GBP/USD traded sideways in a tight 1.2526-42 range, showing little momentum after reaching a broader 1.2526-1.2575 range earlier in the week.
- USD/JPY initially rose as APAC traders reacted to rising US bond yields. However, the pair later pulled back and dipped under 157.00, with Japanese Finance Minister Kato jawboning the currency overnight.
- Antipodeans remained subdued, with the Aussie unresponsive to RBA minutes. The minutes expressed confidence in inflation but cautioned that stronger-than-expected data could prolong the period before easing.
- PBoC set USD/CNY mid-point at 7.1876 vs exp. 7.3031 (prev. 7.1870)
- RBI likely sold USD to limit INR fall, according to traders cited by Reuters.
FIXED INCOME
- 10yr UST futures tilted modestly higher as futures took a breather following a 16-tick settlement lower yesterday, with the complex also experiencing bear steepening into the holiday period.
- Bund futures did not trade as Eurex is closed for trading and clearing in all derivatives on December 24, 25, and 26th.
- 10yr JGB futures were softer as traders caught up with price action seen in Western counterparts.
- US sells USD 69bln in 2yr notes; stop-through 0.1bps. High Yield: 4.335% (prev. 4.274%, six-auction average 4.156%). WI: 4.336%. Tail: -0.1bps (prev. -1.8bps, six-auction avg. -0.6bps) id-to-Cover: 2.73x (prev. 2.77x, six-auction avg. 2.68x). Dealers: 11.3% (prev. 9.2%, six-auction avg. 12.4%). Directs: 6.7% (prev. 19.2%, six-auction avg. 19.5%). Indirects: 82.1% (prev. 71.6%, six-auction avg. 68.1%)
COMMODITIES
- Crude futures showed mild upward biases, with recent geopolitical updates suggesting an Israel-Hamas deal may not be as imminent as previously anticipated. Additionally, Israeli press floated the possibility of troops remaining in Southern Lebanon longer than agreed under a separate deal.
- Spot gold consolidated from the prior day's action, holding above the USD 2,600/oz level, possibly underpinned by ongoing geopolitical concerns.
- Copper futures were initially subdued but then rebounded from their worst levels after 3M LME copper found support near USD 8,900/t.
CRYPTO
- Bitcoin was weaker overnight but clambered off worst levels to reclaimed USD 94k+ status after falling under USD 93k yesterday.
NOTABLE ASIA-PAC HEADLINES
- China convened a national fiscal work conference in Beijing, according to the Ministry of Finance, and said they will step up fiscal spending and accelerate spending speed in 2025. Fiscal spending will focus more on people’s livelihood and boosting consumption. The government will arrange a larger scale of government bonds to provide more support for stabilising growth and will make efforts to fend off risks in key areas. Additionally, it will further increase transfer payments to local governments to strengthen their financial capacity and support the expansion of domestic demand. Plans include appropriately increasing the basic pensions for retirees and raising the basic pensions for urban and rural residents. Furthermore, China will improve tariff policies and deepen cooperation with ‘Belt and Road’ countries.
- Chinese authorities agreed to issue CNY 3tln in special bonds in 2025 (vs CNY 1tln in 2024), according to Reuters sources; part of proceeds will be use to recapitalise some large state-owned banks. Plans to use proceeds for consumer goods and industrial equipment trade-in schemes among others.
- Japanese Finance Minister Kato said it is important for currencies to move in a stable manner reflecting fundamentals, noting that there have recently been one-sided, sharp FX moves and expressing concern about recent FX moves. He stated that Japan will continue to coordinate with overseas authorities on forex policies and will take appropriate action against excessive moves, according to Reuters.
- High-level government review board has told White House it is unable to reach consensus on national security risks involved in Nippon Steel’s (5401 JT) acquisition of US Steel (X), according to WaPo. White House spokesperson then said they received the CFIUS evaluation and the President will review it, according to Reuters.
- BoK said it would deploy market stabilising measures should FX volatility increase and noted that the pace of household debt might rise with the easing of policy rates, according to Reuters.
DATA RECAP
- South Korean Consumer Sentiment Ind (Dec) 88.4 (Prev. 100.7).
GEOPOLITICS
MIDDLE EAST
- Israeli officials have begun debating the question: Should Israel fully withdraw from Southern Lebanon by day 60 even if the Lebanese army is not fully deployed in the South, according to Amichai Stein.
- "Jerusalem Post: The slow deployment of the Lebanese army in the south may push the Israeli army to remain in southern Lebanon after the end of the 60-day period", according to Sky News Arabia.
- "Israeli source: There is no real progress in negotiations with Hamas, but they continue", according to Sky News Arabia.
- Hamas's armed wing spokesman said the fate of Israeli hostages depended on advances made by the Israeli military in certain areas experiencing aggression, according to Reuters.
- Israeli Defence Minister claimed responsibility for the first time for Hamas leader Haniyeh's killing in Tehran, according to Reuters.
- US military said it conducted an airstrike in Syria, killing two ISIS operatives and wounding one, according to Reuters.
EU/UK
NOTABLE HEADLINES
- Amelie de Montchalin is to be named French budget minister, via RTL. Retailleau has been re-appointed French interior minister and Lombard named finance and economy minister, according to Reuters.
LATAM
- El Salvador's congress passed the President's bill to overturn a ban on metals mining, granting the government the sole authorisation to explore, exploit, extract, and process mining resources, according to Reuters.
- Chile's environmental regulator filed four charges against Anglo American (AAL LN) Sur's Los Bronces copper mine, according to Reuters.
- BCB announced a spot dollar auction of up to USD 3bln for December 26th, according to a statement.
