INR: Rupee Onshore-NDF Spread Widens, Local Tech Stocks Rally
USD/INR is trading around 0.1% higher at typing, putting the pair within close proximity to the December highs despite moderate greenback weakness on the session to start the year. The drop in the rupee to a new all-time low prompted aggressive RBI intervention last Friday, with a dip in India's growth rate and a wider trade deficit acting as familiar headwinds for the currency.
- The rally in spot USD/INR over the past month has been outpaced by the rise in the 1-month NDF rate (see chart below). Citing traders, Reuters say heavy demand for the dollar in the NDF market has widened the arbitrage with the Indian onshore market, putting more strain on the rupee as market participants buy the pair in the onshore OTC and sell it in the NDF market.
- Local equities have bucked the trend of other Asian markets, with the Nifty 50 close to 2% higher on the session. The Nifty IT index, a gauge of 10 tech stocks, has risen as much as 2.1%, with some local desks noting that optimism for US growth is likely to boost the sector’s prospects in 2025.
Souce: MNI/Bloomberg
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FRANCE: Censure Motion Set For 1600CET, 4 Dec-BFM TV
BFM TV reporting that the National Assembly will take up a motion of censure against the gov't of PM Michel Barnier at 1600CET (1000ET, 1500GMT) on Wednesday 4 December. Following the gov'ts use of Article 49.3 of the Constitution to force the Social Security Finance Bill (PLFSS) through on 2 Dec without a vote, both the leftist New Popular Front (NFP) and far-right Rassemblement National (National Rally, RN) have said they will submit censure motions to remove the Barnier gov't. The RN has said that it will back censure motions submitted by other parties as well as its own.
- For a censure motion to pass an absolute majority of all 577 deputies - not just those present - is required. This means 289 deputies voting in favour of the motion. The four groups comprising the NFP total 192 deputies. Even with the addition of the regionalist Liberties, Independents, Overseas and Territories (LIOT) group, they would still fall short of the 289 threshold.
- This makes the action of the RN (125 deputies) and its far-right allies in the UDR (16) crucial. If they vote alongside the NFP for censure the Barnier gov't will fall. However, abstentions will cause the censure motion to fail.
- Political betting markets show a high, but seemingly not certain, probability that Barnier will be forced from government in 2024. Data from Polymarket gives a 72% implied probability that Barnier is ousted before year-end.
Chart 1. Betting Market Implied Probability Barnier is Out as PM in 2024, %
Source: Polymarket
COMMODITIES: WTI Futures Recover From Monday's Lows, Conditions Still Bearish
A bearish threat in WTI futures remains present and the Nov 25 move lower reinforces this theme. Attention is on $65.74, the Oct 1 low, and $63.90, the Sep 10 low and key support. For bulls, a stronger reversal to the upside would instead refocus attention on the key short-term resistance at $77.04, the Oct 8 high. Initial firm resistance to watch is unchanged at $72.41, the Nov 7 high. Gold is unchanged. The long-term trend condition remains bullish and the Oct 31 - Nov 14 bear leg appears to have been a correction. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Resistance to watch is $2721.4, the Nov 25 high. Clearance of this level would highlight a bullish short-term development. Key support to monitor is $2536.9, the Nov 14 low.
- WTI Crude up $0.76 or +1.12% at $68.83
- Natural Gas down $0.03 or -0.87% at $3.187
- Gold spot up $6.73 or +0.26% at $2645.69
- Copper up $5.6 or +1.36% at $418.75
- Silver up $0.5 or +1.65% at $31.01
- Platinum up $8.14 or +0.86% at $956.4
EQUITIES: Eurostoxx 50 Futures Extending Monday's Gains, Remain Above 50-Day EMA
Eurostoxx 50 futures traded higher yesterday and the contract is holding on to its recent gains. The latest move higher undermines a recent bearish theme. Price has traded through the 50-day EMA, at 4860.94. A clear break of this average would strengthen a bullish theme and signal scope for a stronger recovery. Key support has been defined at 4699.00, the Nov 19 low. A break of this level would resume the recent bear cycle. On Friday, S&P E-Minis pierced key resistance and the bull trigger at 6053.25, the Nov 11 high. This confirms a resumption of the uptrend and the contract is holding on to its latest gains. Note that moving average studies remain in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. Sights are on 6070.16, a Fibonacci projection point. Initial support to watch lies at 5970.46, the 20-day EMA.
- Japan's NIKKEI closed higher by 735.84 pts or +1.91% at 39248.86 and the TOPIX ended 38.86 pts higher or +1.43% at 2753.58.
- Elsewhere, in China the SHANGHAI closed higher by 14.824 pts or +0.44% at 3378.806 and the HANG SENG ended 196.03 pts higher or +1% at 19746.32.
- Across Europe, Germany's DAX trades higher by 44.94 pts or +0.23% at 19978.61, FTSE 100 higher by 48.52 pts or +0.58% at 8361.34, CAC 40 up 35.97 pts or +0.5% at 7272.86 and Euro Stoxx 50 up 32.72 pts or +0.68% at 4879.45.
- Dow Jones mini down 19 pts or -0.04% at 44886, S&P 500 mini up 1.5 pts or +0.02% at 6063.25, NASDAQ mini down 4 pts or -0.02% at 21214.25.
