JAPAN: Apathy Toward LDP Could Hinder PM In Election Despite High Gov't Approval

Eurozone labour cost index growth (calendar, not seasonally adjusted) eased to 3.3% Y/Y in Q3, down from a three tenth upwardly revised 3.9% in Q2. That provides some dovish offset to the stronger-than-expected compensation per employee reading in the Q3 national accounts (4.0% Y/Y vs 3.2% ECB projections, 4.0% prior). 

• However, as indicated by the Q2 reading, the labour cost index can be revision prone, so we are hesitant to lean on it too much for now. We will be interested to see how the ECB revises its compensation per employee forecasts in tomorrow’s updated forecast round.
• Eurostat estimates that wages and salaries growth was 3.0% Y/Y (vs 3.8% prior), and non-salary related labour cost growth was 4.0% Y/Y (vs 4.3% prior).
• Labour costs eased in Germany, Spain and Italy, and ticked up a tenth in France.

Tech continues to lead the decline in U.S. equities, with the NASDAQ 100 e-mini trading -1.3% lower, registering the lowest level seen since late November.

• Some of the weakness stemmed from a RTRS sources report noting that “Chinese scientists have built what Washington has spent years trying to prevent: a prototype of a machine capable of producing the cutting-edge semiconductor chips that power artificial intelligence, smartphones and weapons central to Western military dominance”. ASML’s U.S. listing is 4.3% lower on the day following the story.
• Further weight comes from an FT report noting that “Oracle’s largest data centre partner Blue Owl Capital will not back a $10bn deal for its next facility, as the software group faces increased concerns about its rising debt and artificial intelligence spending”. Oracle shares are 6.4% lower in early NY trade.
• S&P 500 e-minis have breached several support levels (50-day EMA at 6,831.93, the Dec 16 low at 6,817.50 and Fibo support at 6,785.50).
• Next Fibo support is located at 6,737.71, with protects the November 24 low at 6,684.50. Key support lies some distance below the latter (6,583.00). 

The election of left-winger Andrea Egan as the next general secretary of Unison, the UK's largest trade union, comes as another political blow to embattled Prime Minister Sir Keir Starmer. Egan won 60% of the vote to 40% for incumbent Christina McAnea, seen as a close ally of Starmer, on a turnout of 7%. Egan will take up a position on the Labour Party's National Executive Committee (NEC), despite her own membership of the party being revoked in 2022 after sharing articles from the extreme-left Social Appeal on social media. 

• Unison is one of 11 trade unions officially affiliated with the Labour Party. These unions pay an annual fee to Labour in exchange for 13 of the 39 seats on the NEC, and send 50% of the delegates to the annual party conference.
• The most extreme step Egan could look to take would be formal disaffiliation, denying Labour one of its largest single sources of income. The LabourList news site outlines the notable procedural difficulties this would entail.
• Egan could look to either undermine Starmer's leadership in favour of a replacement that leans further to the left. Ahead of the contest, Egan spoke to the left-leaning New Statesman about both Mayor of Greater Manchester Andy Burnham and former Deputy PM Angela Rayner, two of the frontrunners to oust Starmer, in positive terms.
• Even if Unison does not disaffiliate or formally back a change in leadership, it will now have a more vocal position on dragging party policy further to the left, notably on issues of the tax/spend and workers' rights.