EXECUTIVE SUMMARY
- CENSURE MOTION AGAINST PM BARNIER'S GOV'T SET FOR 1600CET
- FED’S WILLIAMS SAYS MORE RATE CUTS LIKELY NEEDED ‘OVER TIME’
- ISRAELI MILITARY STRIKES LEBANESE TARGETS AFTER HEZBOLLAH FIRES ON ISRAEL
- US TARIFFS WOULD HIT GROWTH AND INFLATION, ECB’S CIPOLLONE SAYS
Figure 1: Betting market implied probability Barnier is out as PM in 2024, %
Source: Polymarket.com
NEWS
FED (BBG): Fed’s Williams Says More Rate Cuts Likely Needed ‘Over Time’
Federal Reserve Bank of New York President John Williams said officials will likely need to lower rates further to move policy to a neutral stance now that risks to inflation and employment have become more balanced. But Williams stopped short of saying whether he would back a rate cut when policymakers gather later this month, adding decisions will be made meeting by meeting. “I expect it will be appropriate to continue to move to a more neutral policy setting over time,” Williams said Monday in remarks prepared for an event with the Queens Chamber of Commerce in New York. “The path for policy will depend on the data. If we’ve learned anything over the past five years, it’s that the outlook remains highly uncertain.”
US (BBG): Trump Remains Opposed to US Steel Sale, Pledges Tariff Fix
Donald Trump reiterated his opposition to the sale of United States Steel Corp. to Nippon Steel Corp., saying he’d instead use tariffs and tax incentives to revive the American steelmaker. Trump made the comment in a Truth Social post on Monday night, with the decision on whether it goes forward slated to land on Biden’s desk before Trump’s inauguration. The president opposes it and has said US Steel would remain domestically owned, “guaranteed.” He has stopped short, however, of flatly pledging to kill the acquisition.
US/UKRAINE (NYT): U.S. Sending $725 Million in Arms to Ukraine, Including More Land Mines
The package, the largest since April, comes amid deep concerns in Ukraine that the Trump administration may cut off aid. The president-elect has vowed to end the war quickly, but has not said how. The Pentagon will send Ukraine an additional $725 million in military assistance from its stockpiles, including anti-personnel land mines, drones, portable antiaircraft missiles and anti-tank missiles.
US/CHINA (BBG): China Bans Gallium, Germanium Exports to US In Principle
China decides to ban export of some items that can used for military purposes to the US, such as gallium, germanium, antimony, and superhard materials, according to statement from the Chinese commerce ministry. China will implement stricter screening for graphite exports to the US. China tightens export control over critical materials exports to US in response to US’s sanctions on Chinese firms in the name of national security, according to a separate Q&A statement.
FRANCE (MNI): 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.
FRANCE (MNI): Next Steps for Budget as No Confidence Vote in Gov't Looms
If the gov't falls in a 4 Dec censure motion (no-confidence vote) the adoption of all parts of the budget - the Social Security Finance Bill (PLFSS), the draft finance law (PLF), and the end-of-management finance bill (PLFFG) - would come to a halt. In order to have a budget in place by year-end Article 47 of the constitution might be invoked. This provides for a gov't to enact a budget by ordinance without a vote if it is not passed within 70 days. However, it is unclear if this would be legally possible given that when a gov't falls, all of its bills also fall.
ISRAEL/MIDEAST (WaPo): Israeli Military Strikes Lebanese Targets After Hezbollah Fires on Israel
Israel's military said it was striking "terror targets" in Lebanon on Monday evening. The strikes came after Hezbollah fired toward Israel, with both parties accusing the other of breaching a ceasefire agreement that went into place last week. The dueling claims of breaches came as U.S. officials said publicly that the Washington-brokered deal was holding and that a mechanism set up with the government of France would evaluate any alleged violations.
ECB (BBG): US Tariffs Would Hit Growth and Inflation, ECB’s Cipollone Says
Higher US tariffs will likely lower both economic growth and inflation in the euro region, European Central Bank Executive Board member Piero Cipollone told Corriere della Sera in an video interview. “I think we will have more trouble with foreign demand and greater competition on internal markets,” Cipollone said. “This will put pressure on our companies with a possible reduction of growth.”
ECB (MNI): ECB Should Cut, Remain Gradual, Data Focused - Kazaks
The European Central Bank should cut rates when it meets in December, but policy adjustment should remain gradual and data-dependent, Bank of Latvia Governor Martins Kazaks told an MNI Connect event Tuesday, though he accepted policymakers needed to remain both "agile and flexible" if needed. Kazaks, who sits on the ECB's Governing Council, noted the risks still outstanding for the eurozone economy, not least potential U.S. tariffs. However, he said the ECB needed to react to actually policy decisions from Washington, "not policy expectations."
UK/CHINA (MNI): China-Based UK Firms Facing Challenges
MNI (BEIJING) UK businesses in China continue to find market conditions difficult, according to the British Chamber of Commerce in China, with the Chamber’s 2024-25 sentiment survey showing 58% of members faced tougher operations than last year, down from 60% in 2023’s report. The Chamber highlighted 13% of firms encountered easier business conditions, a noticeable decline from 20% in last year's paper. Of companies that noted a harder business environment, 86% of respondents listed economic conditions as the primary reason.
DATA
SWITZERLAND DATA (MNI): Swiss Nov CPI In Line With Consensus; Below SNB Forecast
- SWISS NOV CPI -0.1% M/M, +0.7% Y/Y
Swiss CPI inflation printed in line with consensus at 0.7% Y/Y in November (vs 0.7% cons; 0.6% prior), and -0.1% M/M (vs -0.1% cons and prior). Core CPI also printed in line with consensus, at 0.9% Y/Y (vs 0.9% cons; 0.8% prior) and 0.0% M/M. Looking at the data in more detail shows that while total services inflation decelerated vs October, this was entirely due to the drop in housing rentals, with the non-rent services contribution increasing for the first time since June (by around 0.06pp).
UK DATA (MNI): BRC-KPMG Sales Skewed By Black Friday Exclusion
- UK BRC NOV BY VALUE SHOP SALES LFL -3.4% YY, TOTAL -3.3% YY
The November survey period for BRC-KPMG retail sales excluded Black Friday (which was included in the November 2023 data). It is therefore almost impossible to really decipher any signal from this release, with the press release noting that the "artificially weaker figures". The data showed that UK total retail sales in November fell 3.3% Y/Y (vs growth of 0.6% in October). Like-for-Like sales fell 3.4% Y/Y (vs 0.3% prior). Food sales rose 2.4% Y/Y in the three months to November (vs 2.9% prior), whilst Non-Food Sales fell 2.1% Y/Y (vs -0.1% prior) - the steepest fall since June 2024.
UK DATA (MNI): Annual Population Survey and APS Reweighting for LFS
The ONS has released an update on TLFS progress alongside the reweighting of the LFS for the Annual Population Survey (the full data for the latter will be in the monthly release). Highlights on the TLFS progress: "TLFS remains the long-term solution for collecting labour market data, and we expect to deliver a more detailed evaluation early next year to inform Spring 2025 decisions on the future design of the TLFS."
AUSTRALIA DATA (MNI): Current Account Trending Down as Goods Surplus Narrows
- AUSTRALIA Q3 CURR ACCT BALANCE -14149M
While the Q3 current account deficit narrowed to $14.15bn, Q2 was revised significantly from $10.7bn to $16.4bn. The improvement was driven by a narrower primary income deficit, as the goods and services surplus declined mainly due to services. The net export contribution to growth was 0.1pp, less than expected, but the strongest public demand contribution since Q1 2022 means that GDP forecasts are likely to be little changed or maybe skewed to the upside.
TURKEY DATA (MNI): CPI Decelerates Less Than Anticipated Amid Surging Food Prices
- TURKEY NOV CPI +2.24% M/M
Turkey’s consumer prices rose 47.1% y/y in November, losing pace from 48.6% in October but slightly above expectations (Est: 46.60%). Month-on-month, prices rose 2.24% (Est: 1.92%; Prior: 2.88%). Among the sub-categories, food and non-alcoholic beverages contributed most to the monthly reading, rising 5.10% m/m in November. The CBRT did warn that “the impact of food prices on consumer inflation will remain prominent in November,” but the scale of food price gains are more than most sell-side analysts had accounted for.
FOREX: EUR Resilient to French Political Prospects
- With a censure motion tabled in French Parliament, focus remains on the fragility of the French government, with betting markets seeing PM Barnier very likely to lose - thereby ensuring a collapse of the Barnier-led coalition. Currency markets are taking the uncertainty in its stride, with the single currency holding up well, and aiding the recovery off yesterday's lows for EUR/GBP - which trades back above the 0.8300 level.
- JPY is the poorest performer in G10, fading against all others as markets take profit on the recent rally. EUR/JPY is off monthly lows but the overarching downtrend remains. A number of retracement points have been cleared on the recent leg lower, and further losses would strengthen the bearish theme to open 155.15, the Sep 16 low.
- The belly of the US yield curve has edged higher through Asia-Pac hours, however the USD is yet to benefit. EUR/USD and GBP/USD are comfortably off lows, with markets looking toward, and gauging expectations for this Friday's payrolls print.
- JOLTS jobs data set for October will be the highlight of the Tuesday session, particularly after yesterday's manufacturing ISM data showed the employment sub-component beating expectations. Fed speakers due today include Daly, Kugler and Goolsbee, while ECB's Panetta appears at a Spain-Italy Forum.
BONDS: EGBs & Gilts Tighten to Bunds as European Equities Rally
Firmer European equities and a contained uptick in crude oil prices apply weight to bonds this morning.
- Bund futures away from yesterday’s high as a result, last -35 at 134.98.
- Initial support and resistance at 134.34/135.46, recent bull cycle intact.
- German yields 3-5bp higher, curve bear flattens, bulls failed to test 2.00% in 10s.
- Schatz supply passed smoothly.
- The bid in equities promotes EGB tightening to Bunds, with BTPs outperforming, ~4bp tighter on the day.
- OATs are nearly 4bp tighter on the session vs. Bunds, we wrote a little more on French paper earlier, with tomorrow’s no-confidence vote against the government looming.
- ECB speak not moving the needle thus far.
- 27.5bp of cuts priced for this month’s meeting vs. 29bp early today, as Bunds weaken. 160bp of cuts priced through Dec ’25. We may get some pre-meeting steer from President Lagarde tomorrow.
- Gilts relatively resilient, futures stick in the upper end of yesterday’s range, last -1 at 96.11.
- Initial support and resistance at 95.78/96.31, bullish corrective cycle in the contract remains in play.
- UK yields 1-2bp higher on the day.
- 30-Year gilt supply was absorbed smoothly.
- 10-Year spread to Bunds ~2bp tighter on the day at 215.5bp, after registering a fresh cycle closing high Monday.
- BoE pricing little changed on the day, last showing 30.5bp of cuts through March and 83bp through Dec ’25.
- Comments from ECB’s Panetta and U.S. JOLTS data eyed this afternoon, as well as Fedspeak from Daly, Kugler & Goolsbee.
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.
Time: 09:50 GMT
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
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 03/12/2024 | - | *** |  US | Domestic-Made Vehicle Sales |
| 03/12/2024 | 1355/0855 | ** |  US | Redbook Retail Sales Index |
| 03/12/2024 | 1500/1000 | *** |  US | JOLTS jobs opening level |
| 03/12/2024 | 1500/1000 | *** |  US | JOLTS quits Rate |
| 03/12/2024 | 1630/1130 | * |  US | US Treasury Auction Result for Cash Management Bill |
| 03/12/2024 | 1735/1235 |  US | Fed Governor Adriana Kugler | |
| 03/12/2024 | 1830/1330 |  US | Chicago Fed's Austan Goolsbee | |
| 03/12/2024 | 2045/1545 |  US | Chicago Fed's Austan Goolsbee | |
| 04/12/2024 | 2200/0900 | * |  AU | S&P Global Final Australia Services PMI |
| 04/12/2024 | 2200/0900 | ** |  AU | S&P Global Final Australia Composite PMI |
| 04/12/2024 | 0030/1130 | *** |  AU | Quarterly GDP |
| 04/12/2024 | 0030/0930 | ** |  JP | S&P Global Final Japan Services PMI |
| 04/12/2024 | 0030/0930 | ** |  JP | S&P Global Final Japan Composite PMI |
| 04/12/2024 | 0145/0945 | ** |  CN | S&P Global Final China Services PMI |
| 04/12/2024 | 0145/0945 | ** |  CN | S&P Global Final China Composite PMI |
| 04/12/2024 | 0815/0915 | ** |  ES | S&P Global Services PMI (f) |
| 04/12/2024 | 0815/0915 | ** |  ES | S&P Global Composite PMI (final) |
| 04/12/2024 | 0845/0945 | ** |  IT | S&P Global Services PMI (f) |
| 04/12/2024 | 0845/0945 | ** |  IT | S&P Global Composite PMI (final) |
| 04/12/2024 | 0850/0950 | ** |  FR | S&P Global Services PMI (f) |
| 04/12/2024 | 0850/0950 | ** |  FR | S&P Global Composite PMI (final) |
| 04/12/2024 | 0855/0955 | ** |  DE | S&P Global Services PMI (f) |
| 04/12/2024 | 0855/0955 | ** |  DE | S&P Global Composite PMI (final) |
| 04/12/2024 | 0900/1000 | ** |  EU | S&P Global Services PMI (f) |
| 04/12/2024 | 0900/1000 | ** |  EU | S&P Global Composite PMI (final) |
| 04/12/2024 | 0900/1000 |  EU | ECB's Cipollone speech on behavioural financial regulations | |
| 04/12/2024 | 0900/0900 |  GB | BOE's Bailey keynote interview at the FT Boardroom | |
| 04/12/2024 | 0930/0930 | ** |  GB | S&P Global Services PMI (Final) |
| 04/12/2024 | 0930/0930 | *** |  GB | S&P Global/ CIPS UK Final Composite PMI |
| 04/12/2024 | 1000/1100 | ** |  EU | PPI |
| 04/12/2024 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 04/12/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 04/12/2024 | 1315/0815 | *** |  US | ADP Employment Report |
| 04/12/2024 | 1330/1430 |  EU | ECB's Lagarde statement at ECON hearing | |
| 04/12/2024 | 1345/0845 |  US | St. Louis Fed's Alberto Musalem | |
| 04/12/2024 | 1400/0900 |  US | Richmond Fed's Tom Barkin | |
| 04/12/2024 | 1445/0945 | *** |  US | S&P Global Services Index (final) |
| 04/12/2024 | 1445/0945 | *** |  US | S&P Global US Final Composite PMI |
| 04/12/2024 | 1500/1000 | *** |  US | ISM Non-Manufacturing Index |
| 04/12/2024 | 1500/1000 | ** |  US | Factory New Orders |
| 04/12/2024 | 1530/1030 | ** |  US | DOE Weekly Crude Oil Stocks |
| 04/12/2024 | 1845/1345 |  US | Fed Chair Jerome Powell | |
| 04/12/2024 | 1900/1400 |  US | Fed Beige Book |
