MNI EUROPEAN OPEN: China CPI Inflation Falls Further

Dec-09 05:27By: Maxine Koster

EXECUTIVE SUMMARY

SYRIA’S ASSAD FLEES TO RUSSIA AS REBELS TAKE CONTROL - RTRS
S KOREA’S PRESIDENT YOON SURVIVES IMPEACHMENT, UNDER INVESTIGATION - RTRS
TRUMP SAYS HE DOESN’T PLAN TO REPLACE FED’S POWELL - BBG
TRUMP CALLS ON UKRAINE/RUSSIA TO LIST THEIR CEASEFIRE CONDITIONS - RTRS
CHINA’S INFLATION SLOWS TO 5-MONTH LOW IN NOVEMBER - MNI

Fig. 1: China CPI inflation y/y%

Source: MNI - Market News/Bloomberg

EU (BBC): “In the first address by a British chancellor to the Eurogroup since Brexit, Reeves will say resetting relations means "breaking down barriers to trade" as well as helping "businesses sell in each other's markets". While Labour has ruled out rejoining the bloc, it has repeatedly said it wants the UK to "deepen ties" with the EU.”

POLITICS (BBC): “The state needs to become "more like a start-up", a senior minister will say as the government seeks to change how public services are delivered. Pat McFadden, who oversees the Cabinet Office, wants the civil service to adopt the "test and learn" culture used by many tech companies.”

FRANCE (POLITICO): “French President Emmanuel Macron achieved a diplomatic milestone Saturday, hosting the first in-person meeting between Ukrainian President Volodymyr Zelenskyy and United States President-elect Donald Trump since he won the election in November. This was Trump’s first trip abroad since securing a second presidential term.”

GERMANY (RTRS): “The far-right Alternative for Germany (AfD) on Saturday nominated co-leader Alice Weidel as its first chancellor candidate in the party's 11-year history, setting out its bid for power ahead of a snap election due in February.”

GEORGIA (RTRS): “Georgia's President Salome Zourabichvili said she talked with U.S. President-elect Donald Trump and French President Emmanuel Macron about the parliamentary election last month in her country that she and the opposition say was rigged.”

FED (BBG): “President-elect Donald Trump said he has no plans to replace Federal Reserve Chair Jerome Powell once he returns to the White House, saying “I don’t see it.””

FED (MNI): “The time is near or perhaps now to slow the pace of interest rate cuts because it's unclear how restrictive monetary policy actually is and the neutral rate could be higher, Cleveland Fed President Beth Hammack said Friday.”

FED (MNI): “San Francisco Fed President Mary Daly said an interest-rate cut is on the table for this month but isn’t a certainty, while also suggesting the need for further recalibration that will eventually slow as the economy moves back towards the bank’s inflation and employment goals.”

FED (MNI): “Federal Reserve Bank of Chicago President Austan Goolsbee said Friday the pace of interest rate reductions over the next year should slow as rates approach the 2.5% to 3.5% zone that Fed officials estimate to be neutral policy.”

MIDDLE EAST (POLITICO): “The U.S. carried out a major round of airstrikes on Islamic State targets on Sunday, and warned the terror group against trying to regain strength in the country after rebels took over the government.”

UKRAINE (RTRS): “U.S. President-elect Donald Trump called on Sunday for an immediate ceasefire and negotiations between Ukraine and Russia to end "the madness", prompting Ukrainian President Volodymr Zelenskiy and the Kremlin to list their conditions. Trump made his comments just hours after meeting Zelenskiy in Paris for their first face-to-face talks since Trump won last month's U.S. election.”

UKRAINE (POLITICO): “Defense Secretary Lloyd Austin unveiled a new $1 billion military aid package for Ukraine on Saturday in one of his last major speeches before leaving office next month. The package won’t arrive in Ukraine immediately but will consist of contracts with U.S. defense companies to build new drones and air defense munitions.”

POLITICS (BBG): “President-elect Donald Trump announced that his personal lawyer Alina Habba will join his White House team and serve as counselor to the president.”

OTHER

SOUTH KOREA (RTRS): “South Korea's leadership crisis deepened on Sunday as prosecutors named President Yoon Suk Yeol as a subject of a criminal investigation over last week's martial law attempt, a media report said, and his former defence minister was arrested.”

SOUTH KOREA (RTRS): “South Korean President Yoon Suk Yeol survived an impeachment vote in parliament on Saturday prompted by his short-lived attempt to impose martial law this week, but the leader of his own party said the president would eventually step down.”

SOUTH KOREA (BBG): “South Korea’s police says it could seek an emergency arrest of President Yoon Suk Yeol, if conditions are met, Yonhap News says without further details.”

JAPAN (MNI): “Japan’s economy for Q3 grew at a faster pace as net exports and private inventories were revised up from its preliminary estimates, although private consumption was revised down, preliminary data released by the Cabinet Office showed on Monday.”

JAPAN (BBG): “Communication from the Bank of Japan along with key data support a quarter-point interest hike in December, despite a retreat in market expectations for the meeting, write JPMorgan economists including Benjamin Shatil and Ayako Fujita in a note.”

SYRIA (RTRS): “Syrian rebels seized the capital Damascus unopposed on Sunday after a lightning advance that sent President Bashar al-Assad fleeing to Russia after a 13-year civil war and six decades of his family's autocratic rule.”

SYRIA (BBG): “The world is still grasping the speed of events in recent days, and the collapse of a ruling dynasty that laid waste to the country during a catastrophic civil war. But the implications are also quickly sinking in — and not least the prospect of more upheaval and violence as groups tussle for control.”

ISRAEL (BBC): “Israel's prime minister has announced its military has temporarily seized control of a demilitarized buffer zone in the Golan Heights, saying the 1974 disengagement agreement with Syria had "collapsed" with the rebel takeover of the country.”

AUSTRALIA (MNI EXCLUSIVE): “Low productivity to extend RBA CPI Timeline - ex staff.”

CHINA

INFLATION (MNI): “China’s Consumer Price Index rose 0.2% y/y in November, slowing for the third straight month from October’s 0.3% and reaching a five month low, underperforming expectations by 20 basis points, while core CPI continued to rebound to 0.3%, data from the National Bureau of Statistics showed Monday.”

PBOC (MNI): “The People’s Bank of China increased gold holdings in November after a six-month pause, while China’s forex reserves rose to USD3.27 trillion, according to the State Administration of Foreign Exchange.”

PROPERTY (PEOPLE’S DAILY): “The real-estate market requires a combination of long- and short-term measures to bottom out, aimed at digesting housing inventory and delivery, and releasing potential demand, said the Party-run People’s Daily in a commentary.”

ECONOMY (MNI): “China must accelerate structural transformation towards domestic demand to best deal with a second Donald Trump presidency, according to Zhu Min, vice chairman at the China Centre for International Economic Exchanges and former deputy managing director at the IMF.”

PBOC (MNI): “The People’s Bank of China has maintained reasonable market liquidity through new policy tools such as the open-market trading of treasury bonds and outright reverse repos, which saw net purchases of CNY500 billion from August to October, and CNY800 billion in November respectively, making a short-term reduction of the reserve requirement ratio less likely, according to Guan Tao, a former director at the State Administration of Foreign Exchange.”

CHINA MARKETS

MNI: PBOC Net Injects CNY13.8 Bln via OMO Monday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY47.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY13.8 billion after offsetting the maturity of CNY33.3 billion today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6614% at 09:32 am local time from the close of 1.6626% on Friday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 59 on Friday, compared with the close of 53 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1870 Mon; -1.39% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1870 on Monday, compared with 7.1848 set on Friday. The fixing was estimated at 7.2614 by Bloomberg survey today.

MARKET DATA

JAPAN OCT. CURRENT ACCOUNT SURPLUS Y2.457T; EST. +Y2.347T; PRIOR +Y1.717T
JAPAN OCT. ADJUSTED CURRENT ACCOUNT SURPLUS Y2.409T; EST. +Y2.26T; PRIOR +Y1.27T
JAPAN OCT. TRADE DEFICIT Y155.7B; EST. -Y295.0B; PRIOR –Y315.2B

JAPAN Q3 F GDP 1.2% ANNUALIZED BASIS; EST. 1.0%; Q2 +2.2%
JAPAN Q3 F GDP +0.3% Q/Q; EST. +0.3%; Q2 +0.5%
JAPAN Q3 F PRIVATE CONSUMPTION +0.7% Q/Q; EST. +0.9%; Q2 +0.6%
JAPAN Q3 F BUSINESS SPENDING -0.1% Q/Q; EST. +0.1%; Q2 +1.1%
JAPAN Q3 F INVENTORY +0.2 PPTS TO Q/Q GDP; EST. +0.1 PPTS; Q2 -0.1 PPTS
JAPAN Q3 F NET EXPORTS -0.2 PPTS OFF Q/Q GDP; EST. -0.4 PPTS; Q2 -0.4 PPTS

JAPAN NOV. BANK LENDING INCLUDING TRUSTS +3.0% Y/Y; PRIOR +2.6%
JAPAN NOV. BANK LENDING EXCLUDING TRUSTS +3.3% Y/Y; PRIOR +2.9%

JAPAN NOV. ADJ. ECO WATCHERS CURRENT INDEX 49.4; EST. 47.4; PRIOR 47.5
JAPAN NOV. ADJ. ECO WATCHERS OUTLOOK INDEX 49.4; EST. 48.7; PRIOR 48.3

CHINA NOV. CONSUMER PRICES +0.2% Y/Y; EST. +0.4%; PRIOR +0.3%
CHINA NOV. PRODUCER PRICES -2.5% Y/Y; EST. -2.8%; PRIOR -2.9%

MARKETS
US TSYS: Slightly Richer To Start The Week

TYH5 is trading at 111-13, +0-02+ from NY closing levels.

According to MNI’s technical team, a bull cycle in TY remains in play and Friday’s gains reinforced current bullish conditions. The contract has traded through resistance at the 50-day EMA, at 111-12. A clear break of this average would strengthen a bullish theme and signal scope for a stronger recovery. Sights are on 111-24 next, a Fibonacci retracement. For bears, a reversal lower would highlight the end of the bull cycle and open the key support at 109-02+, the Nov 15 low.
Cash bonds are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest post-payrolls gains.
The focus is this week's CPI and PPI inflation data on Wednesday and Thursday respectively.
As a reminder, the Federal Reserve entered its self-imposed blackout at midnight Friday through December 19.

JGBS: Richer But Off Bests, 5Y Supply Tomorrow

JGB futures are stronger but off session highs, +15 compared to the settlement levels.

Outside of the previously outlined GDP, Trade Balance and Bank Lending data, there hasn't been much by way of domestic drivers to flag.
BOJ Governor Kazuo Ueda is expected to closely examine economic data including its Tankan survey on Dec. 13 before the central bank’s Dec. 19 policy decision. Most economists surveyed last month foresaw an interest rate hike by January, while Ueda said in a recent interview with the Nikkei newspaper that the timing for a hike is “nearing,” fueling speculation that the bank may increase rates this month. (per BBG)
Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest post-payrolls gains. The focus is this week's CPI and PPI inflation data on Wednesday and Thursday respectively. As a reminder, the Federal Reserve entered its self-imposed blackout at midnight Friday through December 19.
Cash JGBs are 1-2bps richer across benchmarks, with the futures linked 7-year leading. The benchmark 10-year yield is 1.3bps lower at 1.047% versus the cycle high of 1.108%.
Swap rates are 1-3bps lower out to the 10-year and 2bps higher in the 20-30-year zone. Swap spreads are mixed.
Tomorrow, the local calendar will see M2 & M3 Money Stock and Machine Tool Orders data alongside 5-year supply.

AUSSIE BONDS: Slightly Richer Ahead Of RBA Policy Decision Tomorrow

ACGBs (YM +2.0 & XM +0.5) are holding stronger after dealing in narrow ranges on a data-light Sydney session.

The domestic focus of this week will be tomorrow’s RBA decision and Thursday’s November jobs data after October disappointed. The cash rate is unanimously forecast to remain at 4.35% and so the guidance will be monitored closely for any changes. The RBA meeting will be followed by Governor Bullock’s press conference.
Bloomberg consensus is again forecasting a 25k increase in employment in November with the unemployment rate rising 0.1pp to 4.2%. The RBA is projecting it to rise to 4.3% in Q4 2024.
Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest post-payrolls gains. The focus is this week's CPI and PPI inflation data on Wednesday and Thursday respectively.
Cash ACGBs are 1-2bps richer with the AU-US 10-year yield differential at +6bps.
Swap rates are 1-2bps lower.
The bills strip has twist-flattened, with pricing -2 to +3.
RBA-dated OIS pricing is flat to 3bps softer across 2025 meetings. A 25bps rate cut is still not fully anticipated until May. The probability of a rate cut at tomorrow's meeting remains low, with markets assigning only a 9% chance.

BONDS: NZGBS: Bull-Flattener To Start The Week

NZGBs closed flat to 4bps richer, with a flatter 2/10 curve, after a data-light local session. The next key release is Mfg Activity Volume on Wednesday. Across the ditch, the RBA will deliver its policy decision tomorrow.

New Zealand government is pushing ahead with moves to increase banking competition by boosting Kiwibank and taking steps to ensure the Reserve Bank places greater importance on competition in the sector, Finance Minister Nicola Willis says. (per BBG)
“New Zealand is often seen as the little brother against the Aussies. We’re trying to give that little brother a little bit more muscle to get a fairer deal for Kiwis”: Willis
Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest post-payrolls gains. As a reminder, the Federal Reserve entered its self-imposed blackout at midnight Friday through December 19.
Swap rates closed 2-4bps lower.
RBNZ dated OIS pricing closed flat to 2bps softer across meetings. 44bps of easing is priced for February, with a cumulative 105bps by November 2025.
On Thursday, the NZ Treasury plans to sell NZ$250mn of the 0.25% May-28 bond, NZ$225mn of the 4.50% May-35 bond and NZ$25mn of the 2.75% Apr-37 bond.

FOREX: US Dollar Stronger Again, Yen Outperforming G10

The US dollar has continued to strengthen during APAC trading with the BBDXY USD up 0.2% and close to its intraday high. Thus the G10 has seen broad-based weakness against the greenback except for the yen, as was the case on Friday. NZD, NOK and EUR have depreciated the most.

NZDUSD is down 0.3% to 0.5813, close to the intraday low. The government announced that it would go ahead with a capital injection into Kiwibank of around NZ$500bn. It wants to increase competition in the banking sector.
Ahead of Tuesday’s RBA decision, AUDNZD is 0.2% higher at 1.0983. The RBA is unanimously expected to leave rates at 4.35%, whereas the RBNZ has eased 125bp this year to 4.25%. AUDUSD is down 0.1% to 0.6384, close to the intraday trough.
USDJPY has range traded between 149.70 and 150.10. The pair is currently little changed at 149.95. AUDJPY is down 0.1% to 95.74.
EURUSD is down 0.3% to 1.0537, close to the intraday low. NOK and SEK are also lower leaving the crosses against the euro little changed. EURCHF is down 0.1% to 0.9274 and EURGBP -0.1% to 0.8282.
Equities are generally lower with the Hang Seng down 0.6%, ASX -0.2% but Nikkei up 0.2% and S&P e-mini flat. Oil prices are moderately higher with WTI +0.4% to $67.46/bbl. Copper is slightly lower and iron ore is steady around $104/t.
Later November NY Fed 1-year inflation expectations print and ECB’s Cipollone and BoE’s Ramsden speak. The Fed is in its pre-meeting blackout period.

ASIA FX: Won Weakens Further as Korean Uncertainty Continues.

The weekend has shed limited clarity on the immediate fix for Korean politics as Yoon escapes impeachment but the pressure for him to steps down grows stronger.
The Korean Won again is the underperformer versus the USD, down -0.875% in this morning’s trade, to be over 2% down in the last five trading sessions.
The USD/CNY fix printed at 7.1870, versus a Bloomberg consensus of 7.2614 as November CPI came in weaker than expected and the November PPI remains firmly in negative territory.
Indonesia’s rupiah has had a very quiet start to the week opening at 15,851 in line with where it closed on Friday, touching the 20-day EMA.
The Ringgit too has had a quiet start to the week opening in line with Friday’s close at 4.4230. Having been weak in recent months, the last week has seen a somewhat more stable MYR which will be welcomed by the Central Bank.
In India, the ongoing support of the Rupee by the Central Bank resulted in a fairly stable week last week ahead of the decision on monetary policy on Friday where the RBI kept rates steady, but reduced the cash deposit ratio for banks.
The Thai Baht and Philippines Peso have been one of the stronger stories for currencies in the region over the last month, standing resolute in front of the USD strength to put in a +1.7% and +0.9% positive return.
The Baht is opening stronger today up +0.36%, but the Peso is down -0.52%.

ASIA STOCKS: China Down Again as Stimulus Hopes Fade.

Last week’s strong finish for China’s major indices faded today as hopes about more stimulus recede.
Having finished Friday up very strongly, delivering a positive week, the CSI 300 declined -0.50%, Hang Seng -0.54%, Shanghai -0.40% and Shenzhen -0.80%.
The ongoing uncertainty in Korea continued to weigh heavy on the KOSPI , again making it the worst performer in the region, down -2.50% in today’s trading, following last week’s decline.
Malaysia’s FTSE KLCI took lead from the other major markets too today and in the absence of any key news, the path of least resistance was to fall and was down -0.30%.
The Jakarta Composite was one of the few positive stories today rising +0.36% as news breaks on potential VAT changes coming.
India’s has been a shining star amongst it’s Asia peers in terms of inflows, having turned what was a torrid period of outflows into the last week of strong inflows. The NIFTY 50 had a very good week last week up +2.2% and is starting off the week post no change from the RBI flat as the market digests the implications of the change in the cash deposit rate for banks.

OIL: Crude Moderately Higher Following Syrian Turmoil

Oil prices are moderately higher during APAC trading today after falling sharply on Friday. Brent is up 0.3% to $71.34/bbl after a high of $71.49, and WTI is 0.5% higher at $67.50 after rising to $67.59. The USD index is up around 0.1%.

The outlook for both Brent and WTI is bearish. Initial support is at $69.95 and $66.32 respectively. Bear triggers are at $67.89 and $63.90.
OPEC pushed out the planned start of its output normalisation to April at its meeting last week. Now Saudi Arabia has cut prices for shipments to Asia with the premium falling to its lowest in four years, more than expected, according to Bloomberg. It also reduced prices for Europe but not to North America. Expected excess supply in 2025 continues to weigh on prices.
Geopolitics in the Middle East remain in focus with the Iranian- and Russian-backed Assad regime in Syria being toppled by Turkish-supported rebel groups on the weekend. The spread of instability in the region to major oil-producer Iran remains the market’s key concern. Today’s restrained rise in oil prices implies that crude is not yet too worried about the developments.
Later November NY Fed 1-year inflation expectations print and ECB’s Cipollone and BoE’s Ramsden speak. The Fed is in its pre-meeting blackout period.

GOLD: China Resumes Purchases Spurring Prices.

Gold prices rose as the PBOC included gold bullion to its reserves for the first time in six months.
Gold reserves with the PBOC rose 160,000 ounces in November according to data released over the weekend.
In a move suggesting possible measures are being implemented to ward off currency depreciation, the resumption occurs at a time when prices are expensive levels.
The PBOC had added to its reserves until April, before a pause.
Prices got a bump today from the news up +0.19% to US$2,638.31.
Stocks of Gold miners rallied throughout the region on the news.

STIR: RBA Dated OIS Easing Expectations Strengthen But Not For Tomorrow

RBA-dated OIS pricing has eased by 1–3bps across 2025 meetings ahead of tomorrow’s RBA policy decision.

A 25bps rate cut is now nearly fully priced for April, with the probability rising to 95%. However, a full rate cut is not anticipated until May.
Market expectations for the September meeting have softened by approximately 40bps since mid-November, driven by concerns over weakening domestic economic growth. Notably, in mid-November, a full 25bps cut wasn’t expected until August, marking a significant shift toward earlier rate cuts.
Despite the broader repricing, the probability of a rate cut at the December meeting remains low, with markets assigning only a 9% chance.

Figure 1: RBA-Dated OIS – Today Vs. Mid-November

Source: MNI – Market News / Bloomberg

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
09/12/2024	1300/1300		GB	BOE's Ramsden speech at OMFIF "Financial stability and the Bank of England's toolkit"
09/12/2024	-		JP	Economy Watchers Survey
09/12/2024	-		EU	ECB's Cipollone in Eurogroup meeting
09/12/2024	1500/1000	**	US	Wholesale Trade
09/12/2024	1600/1100	**	US	NY Fed Survey of Consumer Expectations
09/12/2024	1630/1130	*	US	US Treasury Auction Result for 26 Week Bill
09/12/2024	1630/1130	*	US	US Treasury Auction Result for 13 Week Bill
10/12/2024	0330/1430	***	AU	RBA Rate Decision
10/12/2024	0700/0800	***	DE	HICP (f)
10/12/2024	0700/0800	***	NO	CPI Norway
10/12/2024	0700/0800	**	SE	Private Sector Production m/m
10/12/2024	0900/1000	*	IT	Industrial Production
10/12/2024	1000/1000	*	GB	Index Linked Gilt Outright Auction Result
10/12/2024	1100/0600	**	US	NFIB Small Business Optimism Index
10/12/2024	-	***	CN	Trade
10/12/2024	-	***	CN	Money Supply
10/12/2024	-	***	CN	New Loans
10/12/2024	-	***	CN	Social Financing
10/12/2024	-		EU	ECB's De Guindos in ECOFIN meeting
10/12/2024	1330/0830	**	US	Non-Farm Productivity (f)
10/12/2024	1355/0855	**	US	Redbook Retail Sales Index