Risk off amid modest repricing ahead of US CPI tomorrow

Notes/observations

- Market froth is trimmed as traders weigh up recent bull run and current valuations. Traders are also eyeing up US CPI reading tomorrow and jampacked schedule of rate decisions next week, highlighted by Fed, BOJ and BOE. Overall, a quieter session lacking any major catalysts.

- Aussie dollar underperforms in major FX after RBA left policy on hold with dovish commentary.

- TSMC’s monthly sales accelerated annual growth pace in November.

-Tech innovation explodes, leaving many analysts guessing whether enormous Capex/R&D investments and intensified competition during recent years just starting to bring many key breakthroughs at once. OpenAI releasing AI video generation model Sora in select regions. Google announced a new quantum chip that was able to compute a math equation within 5 mins, which would take current supercomputer technology 10^25 years. Even more fascinating detail is that Google’s chip can reduce errors exponentially as researchers scale up using more qubits, cracking a 30-year challenge in the quantum field. IBM unveiled breakthrough research in optics technology, enabling chips to communicate with each other at speed of light, allowing 80x as much information compared to present day technology. Meanwhile, Microsoft unveiled new data center design featuring a closed-loop water system for cooling for new projects, with this design will avoid the need for more than 125 million liters of water per year per datacenter.

- BOJ futures now pricing less than 30% chance (v 60% w/w) that BOJ to hike rates this month after yesterday BOJ announced Dept Gov Himino to speak on Jan 14th, which some analysts pointed to as unusual timing for a board member to speak.

- Asia closed mixed with KOSPI outperforming +2.4%. EU indices are -0.6% to -0.1%. US futures are -0.1%. Gold +0.2%, DXY +0.2%; Commodity: Brent -0.4%, WTI -0.4%; Crypto: BTC -0.8%, ETH -3.0%.

Asia:

- Reserve Bank of Australia (RBA) left Cash Rate Target unchanged at 4.35% (as expected) for its 9th straight pause in the current phase of it tightening cycle. Statement noted monetary policy remained restrictive and was working as anticipated; remained resolute in determination to return CPI to target. Cautioned that underlying inflation remained too high; to continue to rely on data, risk assessment. Gaining some confidence that inflationary pressures were declining in line with these recent forecasts, but risks remained. (** Note: Prior language of "not ruling anything in or out" not present in statement).

- Australia Nov NAB Business Confidence: -3 v +5 prior.

- China Nov Trade Balance: $97.4B v $93.7Be; Exports Y/Y: 6.7% v 8.9%e; Imports Y/Y: -3.9% v +1.0%e v -2.3% prior.

- University of Tokyo Prof Yoshikawa stated that the BOJ had better move early while it could as it might have already fallen behind the curve (**Note: formerly advised the Japanese Prime Minister).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.27% at 519.80, FTSE -0.60% at 8,301.97, DAX -0.05% at 20,344.65, CAC-40 -0.56% at 7,438.37, IBEX-35 -0.07% at 12,003.59, FTSE MIB -0.03% at 34,549.00, SMI -0.46% at 11,699.90, S&P 500 Futures -0.11%].

Market Focal Points/Key Themes: European indices open lower across the board and remained in the red through the early part of the session; lack of risk appetite being attributed to caution ahead of risk events later in the week; among sectors managing gains are health care and financials; sectors leading the way lower include consumer discretionary and materials; Roche to started its tender offer for Poseida Therapeutics; Spar Nord receives takeover offer from Nykredit Realkredit; reportedly TeamViewer in advanced talks to acquire 1E from Carlyle; among earnings expected in the upcoming US session are Ferguson, AutoZone and Metro AG.

Equities

- Consumer discretionary: Delivery Hero [DHER.DE] -8.5% (lists talabat in Dubai, largest global technology IPO in 2024), Ashtead [AHT.UK] -10.5% (Q2 results, propose move of primary listing to US).

- Financials: Spar Nord [SPNO.DK] +46.5% (receives DKK210/shr offer from Nykredit), Allianz [ALV.DE] -0.5% (provides FY24-27 targets).

- Industrials: Stellantis [STLA.NL] +0.5% (JV with CATL), Rheinmetall [RHM.DE] -1.0% (Russia spy service says Russia is close to reaching all goals in Ukraine).

- Technology: SAP [SAP.DE] +0.5% (readacross Oracle Q2 results and guidance), Teamviewer [TMV.DE] -8.5% (to acquire remote connectivity and digital workplace solution firm 1E at EV of $720M from Carlyle Group), Melexis [MELE.BE] +3.0% (launches €50M share buyback).

Speakers

- Czech Central Bank (CNB) Member Kubicek stated that was leaning toward a pause in Dec due to inflation but leaving door open.

- South Korea Parliament said to pass a downsized 2025 budget. Failed to pass separate taxation on dividend income.

- South Korea ruling-party (PPP) said to be discussing Pres Yoon's potential resignation in Feb-Mar 2025 and snap elections two months later.

- Brazil President Lula reportedly in ICU after brain surgery. Said to be in 'good' condition and being monitored.

Currencies/fixed income

- USD steady during a quiet session with focus on upcoming rate decisions over the next 10 days.

- EUR/USD slightly weaker at 1.0535 as markets expect ECB to cut by 25bps later this week and continue measured easing until next spring.

- USD/JPY at 151.50 as market participants dialed back BOJ rate hike from Dec into Jan period. An announced speech by BOJ Dep Gov Himino on Jan 14th prompted speculation that BOJ would wait until then to deliver its next round of tightening.

- AUD/USD slumped after RBA amended its language and appeared to be more dovish. Market now anticipate easing to commence by next spring.

Economic data

- (NL) Netherlands Oct Manufacturing Production M/M: -0.6% v -2.5% prior; Y/Y: -2.5% v -2.8% prior; Industrial Sales Y/Y: -0.6% v -0.2% prior.

- (NL) Netherlands Nov CPI M/M: -0.6% v +0.5% prior; Y/Y (final): 4.0 v 4.0% prelim.

- (NL) Netherlands Nov Final CPI EU Harmonized M/M: -1.0% v -1.0% prelim; Y/Y: 3.8% v 3.8% prelim.

- (FI) Finland Oct Industrial Production M/M: +0.8% v -1.9% prior; Y/Y: +0.6% v -0.2% prior.

- (DE) Germany Nov Final CPI M/M: -0.2% v -0.2% prelim; Y/Y: 2.2% v 2.2% prelim.

- (DE) Germany Nov Final CPI EU Harmonized M/M: -0.7% v -0.7% prelim; Y/Y: 2.4% v 2.4% prelim.

- (SE) Sweden Oct GDP Indicator M/M: -0.4% v +0.2%e; Y/Y: -0.4% v -0.1% prior.

- (SE) Sweden Oct Household Consumption M/M: -0.3% v -0.3% prior; Y/Y: -1.1% v -0.1% prior.

- (SE) Sweden Oct Private Sector Production M/M: -0.8% v +0.7% prior; Y/Y: 0.2% v 1.4% prior.

- (SE) Sweden Oct Industrial Orders M/M: +1.0% v -3.8% prior; Y/Y: -1.0% v -5.4% prior.

- (SE) Sweden Oct Industry Production Value Y/Y: -2.0% v -0.6% prior; Service Production Value Y/Y: 1.4% v 1.8% prior.

- (NO) Norway Nov CPI M/M: 0.3% v 0.2%e; Y/Y: 2.4% v 2.2%e.

- (NO) Norway Nov CPI Underlying M/M: +0.1% v -0.1%e; Y/Y: 3.0% v 2.8%e.

- (DK) Denmark Nov CPI M/M: -0.3% v +0.6% prior; Y/Y: 1.6% v 1.6% prior.

- (DK) Denmark Nov CPI EU Harmonized M/M: -0.4% v +0.7% prior; Y/Y: 1.6% v 1.6% prior.

- (TR) Turkey Oct Unemployment Rate: 8.8% v 8.7% prior.

- (TR) Turkey Oct Industrial Production M/M: -0.9% v +1.6% prior; Y/Y: -3.1% v -2.3% prior.

- (HU) Hungary Nov CPI M/M: 0.5% v 0.5%e; Y/Y: 3.7% v 3.7%e.

- (CZ) Czech Nov CPI M/M: 0.1% v 0.2%e; Y/Y: 2.8% v 3.0%e.

- (CZ) Czech Oct Import Price Index Y/Y: 0.6% v 0.4% prior; Export Price Index Y/Y: 3.0% v 2.3% prior.

- (AT) Austria Oct Industrial Production M/M: +1.5% v -1.1% prior; Y/Y: -1.3% v -2.4% prior.

- (IS) Iceland Nov Preliminary Trade Balance (ISK): -31.6B v -48.6B prior.

- (IT) Italy Oct Industrial Production M/M: 0.0% v 0.0%e; Y/Y: -3.6% v -3.5%e; Industrial Production NSA (unadj) Y/Y: % v -3.8% prior.

- (ZA) South Africa Nov Sacci Business Confidence: 118.1 v 110.2 prior (Sept).

- (ZA) South Africa Oct Total Mining Production M/M: -3.0% v +4.5% prior; Y/Y: 1.4% v 4.9% prior; Gold Production Y/Y: -3.4% v -3.7% prior; Platinum Production Y/Y: 3.3%% v 6.7% prior.

- (GR) Greece Oct Industrial Production Y/Y: % v 2.5% prior.

- (GR) Greece Nov CPI Y/Y: 2.4% v 2.4% prior; CPI EU Harmonized Y/Y: 3.0% v 3.1% prior.

Fixed income issuance

- (ID) Indonesia sold total IDR22.0T vs. IDR22.0T target in bills and bonds.

- (ES) Spain Debt Agency (Tesoro) sold total €2.58B vs. €1.5-2.5B indicated range in 3-month and 9-month bills.

- (UK) DMO sold £1.5B in 0.75% Nov 2033 inflation-linked Gilts (UKTi); Real Yield: 0.745% v 0.486% prior; bid-to-cover 3.39x v 3.17x prior.

- (AT) Austria Debt Agency (AFFA) sold total €1.15B vs. €1.15B indicated in 2034 and 2053 RAGB Bonds.

- (ZA) South Africa sold total ZAR3.75B vs. ZAR3.75B indicated in 2033, 2038 and 2044 bonds.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:15 (CH) Switzerland to sell 3-month Bills.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell combined €3.4B in 3-month and 12-month bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 05:30 (TR) Turkey to sell Bonds.

- 05:30(RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 06:00 (US) Nov NFIB Small Business Optimism: 94.5e v 93.7 prior.

- 06:00 (IL) Israel Nov Consumer Confidence: No est v 46 prior.

- 06:00 (PT) Portugal Oct Trade Balance: No est v -€2.4B prior.

- 06:00 (ZA) South Africa Oct Manufacturing Production M/M: 0.6%e v 0.0% prior; Y/Y: +0.3%e v -0.8% prior.

- 06:30 (CL) Chile Central Bank Economist Survey.

- 07:00 (IS) Iceland Nov Unemployment Rate: No est v 3.4% prior.

- 07:00 (BR) Brazil Nov IBGE Inflation IPCA M/M: 0.4%e v 0.6% prior; Y/Y: 4.8%e v 4.8% prior.

- 07:00 (MX) Mexico Nov Consumer Confidence: No est v 49.4 prior.

- 07:00 (CZ) Czech Central Bank to comment on CPI data.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Q3 Final Nonfarm Productivity: 2.2%e v 2.2% prelim; Unit Labor Costs 1.4%e v 1.9% prelim.

- 08:30 (UR) Ukraine Nov CPI M/M: 1.5%e v 1.8% prior; Y/Y: 10.4%e v 9.7% prior.

- 08:30 (UR) Ukraine Q3 GDP Q/Q: No est v 0.2% prior; Y/Y: 3.7%e v 3.7% prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 12:00 (US) USDA World Agricultural Supply Demand Estimates (WASDE) Crop Report.

- 13:00 (US) Treasury to sell 3-Year Notes.

- 16:30 (US) Weekly API Oil Inventories.

- 16:45 (NZ) New Zealand Q3 Manufacturing Activity Q/Q: No est v 0.1% prior; Manufacturing Volume Q/Q: No est v 0.6% prior.

- 18:00 (KR) South Korea Nov Unemployment Rate: 2.9%e v 2.7% prior.

- 18:50 (JP) Japan Q4 BSI Large All Industry Q/Q: No est v 5.1% prior; Large Manufacturing Q/Q: No est v 4.5% prior.

- 18:50 (JP) Japan Nov PPI (domestic CGPI) M/M: 0.2%e v 0.2% prior; Y/Y: 3.4%e v 3.4% prior.

- 20:30 (KR) Bank of Korea (BOK) to sell KRW400B in 1-year Bonds.

- 21:35 (CN) China to sell 3-year and 10-year Bonds.

- 22:00 (TH) Thailand to sell THB9.0B in 2050 Bonds.