- APAC stocks were mostly subdued in the absence of a lead from Wall St owing to the National Day of Mourning.
- US President-elect Trump said Russian President Putin wants to meet and ‘we’ are setting it up.
- Fed’s Bowman (voter) said she supported the December rate cut as a final step in policy calibration.
- European equity futures indicate an uneventful cash market open with Euro Stoxx 50 future -0.1% after the cash market closed with gains of 0.4% on Thursday.
- USD is broadly firmer vs. peers, EUR/USD continued to pivot around 1.03, Cable remains sub-1.23.
- Looking ahead, highlights include US & Canadian Jobs, US UoM Survey, Chinese M2 Money Supply, FDI, Loan Growth, earnings from Sainsbury’s, Tilray, Delta Air, Walgreens Boots Alliance & Constellation Brands.
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US TRADE
EQUITIES
NOTABLE HEADLINES
- Fed’s Bowman (voter) said they should be cautious in considering changes to the policy rate and she supported the December rate cut as a final step in policy calibration, while she could have supported taking no action in December given the lack of progress on inflation and strength of the economy. Bowman said she prefers a cautious, gradual approach to adjusting policy and noted the current stance of policy may not be as restrictive as others may see it.
- Fed’s Schmid (2025 voter) said interest rate policy may be near where it needs to be for the longer run and any further rate cuts should be gradual and data-driven. Schmid said the Fed is ‘pretty close’ to meeting both of its mandates and he wants the Fed to shrink its balance sheet further, while he added the Fed should work towards treasuries-only holdings, as well as noted that inflation is moving towards the target and growth is showing momentum. Furthermore, Schmid said the Fed won’t likely get to 2% inflation until 2026% and that the last stage to 2% could be the most challenging for monetary policy, while he added that the Fed’s quantitative tightening is somewhat at odds with rate cuts and he would oppose a move to stop a Fed balance sheet drawdown right now.
- US President Biden said the federal government will cover 100% of the disaster response costs for 180 days for California and noted that three major fires are still burning, while he added Congress will have to step up when they ask for more help on LA fires and that they will go back to Congress for more help on this.
- US Supreme Court declined to halt President-elect Trump’s sentencing in the New York hush money case and the US Appeals Court declined to block the release of the Special Counsel Report on Donald Trump.
- Scott Bessent’s Senate Nomination hearing for US Treasury Secretary is expected on 16th January 2025, according to Politico
APAC TRADE
EQUITIES
- APAC stocks were mostly subdued in the absence of a lead from Wall St owing to the National Day of Mourning and as participants braced for US jobs data.
- ASX 200 was dragged lower by weakness in financials and consumer stocks, while Australian Household Spending data disappointed.
- Nikkei 225 retreated with heavy losses seen in index heavyweight Fast Retailing, despite a jump in Q1 profit, as its China operations suffered a decline in revenue and a sharp contraction in profits, while the better-than-expected Household Spending from Japan did little to spur risk appetite.
- Hang Seng and Shanghai Comp conformed to the downbeat mood but with further downside stemmed after the announcement that the PBoC and China’s FX regulator will hold a briefing on financial support for the economy on January 14th, while heavy losses were seen in property developer Sunac China after it received a liquidation petition in Hong Kong.
- US equity futures (ES -0.3%) were slightly pressured heading into the key US jobs data and after Fed speakers signalled a pause.
- European equity futures indicate an uneventful cash market open with Euro Stoxx 50 future -0.1% after the cash market closed with gains of 0.4% on Thursday.
FX
- DXY is steady with FX markets lacking conviction ahead of the looming NFP data although the dollar had gained yesterday in quiet conditions during the US national mourning day. Nonetheless, there were several recent comments from Fed officials including Harker and Collins who noted stickier inflation than previously expected, while Collins also stated that the December Fed cut was a close call, but provided insurance for the labour market. Furthermore, Bowman said they should be cautious in considering changes to the policy rate and that she supported the December rate cut as a final step in policy calibration, while Schmid said interest rate policy may be near where it needs to be for the longer run and any further rate cuts should be gradual and data-driven.
- EUR/USD traded sideways around the 1.0300 focal point with the single currency not helped by the recent miss on Retail Sales.
- GBP/USD is softer beneath the 1.2300 level following yesterday’s underperformance amid gilt market jitters.
- USD/JPY was initially subdued amid the downbeat risk sentiment across Asia but then rebounded from support near the 158.00 level.
- Antipodeans mirrored the uneventful performance seen in major peers but with early tailwinds in AUD as CNH strengthened after the PBoC announced a temporary halt of government bond purchases. However, the moves were then faded owing to the cautious risk tone and with ANZ forecasting a February RBA rate cut.
- PBoC set USD/CNY mid-point at 7.1891 vs exp. 7.3138 (prev. 7.1886).
FIXED INCOME
- 10yr UST futures lacked direction after the prior day’s shortened bond trading session in the US owing to the National Day of Mourning and after Fed rhetoric suggested a gradual, patient and cautious approach to future rate cuts, while money markets only fully price in one rate cut this year in June.
- 10yr Bund futures remained pressured after yesterday’s price swings and recent supply from the bloc.
- 10yr JGB futures followed suit to the subdued mood in global peers and with prices not helped by the better-than-expected Japanese Household Spending.
COMMODITIES
- Crude futures kept afloat and held on to most of the prior day’s gains with cold weather seen boosting winter fuel demand.
- Spot gold eked mild gains but with demand contained as participants await the latest US jobs data.
- Copper futures extended on this week’s advances with prices unfazed by the cautious risk tone.
CRYPTO
- Bitcoin mildly rebounded overnight and steadily climbed above the USD 93,000 level.
NOTABLE ASIA-PAC HEADLINES
- PBoC is to temporarily suspend purchases of government bonds in the market during January and may resume government bond trading depending on supply and demand, while the decision was made due to short supply of treasury bonds.
- PBoC and China’s SAFE will hold a briefing on financial support for the economy on January 14th at 15:00 local time (07:00GMT/02:00EST) with the PBoC’s Deputy Governors and SAFE’s Deputy Head to speak.
- Chinese economist warned against aggressive easing bets and said should avoid over-interpretation of moderately loose monetary policy in China, according to PBoC-backed Financial News.
- US Commerce Secretary Raimondo said the Biden administration is to finalise Chinese connected vehicle crackdown rules next week.
DATA RECAP
- Japanese All Household Spending MM (Nov) 0.4% vs. Exp. -0.9% (Prev. 2.9%)
- Japanese All Household Spending YY (Nov) -0.4% vs. Exp. -0.6% (Prev. -1.3%)
- Australian Household Spending MM (Nov) 0.4% vs Exp. 0.7% (Prev. 0.8%)
- Australian Household Spending YY (Nov) 2.4% vs Exp. 2.5% (Prev. 2.8%)
GEOPOLITICS
MIDDLE EAST
- US President Biden said they are making progress on a Gaza deal and he is still hopeful there will be a prisoner exchange.
RUSSIA-UKRAINE
- US President-elect Trump said Russian President Putin wants to meet and ‘we’ are setting it up.
- Japan is to impose additional sanctions against Russia-related individuals and entities.
- French President Macron said he and UK PM Starmer reaffirmed commitment to supporting Ukraine, while they also discussed the situation in the Middle East and the UK-EU relationship.
OTHER
- Venezuelan opposition leader Maria Corina Machado was arrested after leaving a march in her first public appearance in months but was later freed after a brief detention, while a White House spokesperson said the US calls for the right of Venezuela’s Machado to speak freely and for President Maduro and representatives to cease harassment of the opposition.
EU/UK
NOTABLE HEADLINES
- BoE’s Breeden said they are monitoring what happens in the gilt market and noted a lot of gilt price moves reflect global factors, while she added that gilt market moves have been orderly, so far so good. Breeden also said she doesn’t have a particular path for the Bank Rate in her mind now.
- UK debt market sell-off threatens mortgage pain for households as around 700k borrowers face a jump in repayments when fixed-rate deals end this year, according to FT.
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