FRANCE AUCTION RESULTS: IL OATs

Today sees long-awaited Q3 GDP data at 0830ET, in “initial” release form that replaces what would have been the second GDP and the preliminary corporate profits estimates (the advance release was cancelled). This will be the first GDP release since the third Q2 report on Sep 25. 

• The extended tracking window of the Atlanta Fed’s GDPNow points to strong real GDP growth of 3.5% annualized after an average 1.6% in 1H25 (-0.65% in Q1 before 3.84% in Q2). Bloomberg consensus is a little softer at 3.3% annualized.
• Expect continued close attention on private demand, best seen by Powell’s preferred PDFP category, which is currently tracking at ~2.4% annualized to match the 2.4% averaged in 1H25 (1.9% Q1 before 2.9% in Q2).
• Consumption dynamics remain important, seen at a healthy 2.7% annualized by both GDPNow and Bloomberg consensus, but there’s less scope to surprise this time having received the September PCE data on Dec 5.
• Investment will continue to be watched closely, with further strong increases expected for IP products and equipment. It follows a very strong 1H25, including software alone adding 0.6pps in Q2 and 0.4pps in Q1 to quarterly GDP growth and computers & peripheral equipment adding 0.4pps in Q2 and 0.5pp in Q1.
• As for the more volatile GDP components, GDPNow eyes a net export boost of 1.0pps (after a huge +4.8pp in Q2 and -4.7pps in Q1) along with broadly neutral changes in inventories at 0.1pps (after -3.4pp in Q2 and +2.6pp in Q1) in some stabilization after major tariff distortions.
• The “third” Q3 GDP release has been confirmed for Jan 22 whilst there’s no current set date for the Q4 advance originally planned for Jan 29. 

• STR usage was GBP98.162bln in today's operation. This is a GBP0.873bln increase relative to Thursday's operation and record take up. Note that this operation is a 16-day operation maturing on 8 January (to cover the year-end period). Bigger picture, it is broadly in line with recent usage (barring a dip to GBP93.1bln on 11 December).
• There is not ILTR operation this week. Gross takeup for last week's operation (which was the final of the year) was GBP2.493bln but there were two operations rolling off and this led to a GBP0.969bln net reduction - the largest net reduction since May 2023.
• Overall, this puts repo-led balances at GBP159.707bln, up from GBP155.657bln last week and a new record high but less than GBP1.0bln higher than seen two weeks ago (GBP158.826bln).

• In the equity space, the recent pullback in S&P E-Minis appears to have been a correction. A key short-term support has been defined at 6771.50, the Dec 18 low. A break of this level would signal scope for a deeper retracement of the recent bull phase between Nov 21 - Dec 11. This would open 6737.71, the 61.8% retracement of the Nov 21 - Dec 11 rally. For bulls a stronger resumption of gains would refocus attention on key resistance at 7014.00, the Oct 30 high.
• A bull cycle in EUROSTOXX 50 futures remains intact and the latest pullback appears to have been a correction. The first key support to watch lies at 5685.07, the 50-day EMA. A clear break of the EMA would highlight a potential short-term reversal. This would open 5622.00, the Nov 26 low. For bulls, sights are on key resistance at 5847.00, the Nov 13 high. The price pattern on Dec 18 is a bullish engulfing candle - a reversal signal.