25bps cut by Fed all but guaranteed with market focus on staff projections and Powell comments

Notes/observations

- All eyes on Fed decision, expected to cut by 25bps. Extra focus is on SEP and dot plot charts, including comments from Chair Powell at the post-decision presser.

- UK inflation did rise from prior month but came in below expectations. Failed to change rate cut expectations substantially, especially in short term, with tomorrows BOE decision baked in at a hold. Some analysts point out that most components of reaccelerating UK CPI pace actually decelerate, thus BOE futures markets slightly increased pricing for 3 rate cuts in 2025. Cable is slightly lower at 1.269.

- Mostly quiet session following on from dead Asia trade as market waits for the Fed and BOJ, in a pre-holiday environment. Worth noting Dow continued to decline yesterday for 9th straight day, the longest daily streak since 1978, but overall drawdown from ATH at a reasonable ~4%. Futures point upwards.

- TrendForce published its report on NVDA saying that production of Blackwell GPU chips is progressing largely as expected, while NVIDIA’s GB200 rack-mounted solution may require additional time for optimization and adjustment.

- On M&A front, Renault (Nissan’s top shareholder) said to be open to potential Nissan-Honda merger.

- Anthropic Chief Product Officer admitted that AI agents are still "at least a year away" from being able to work autonomously.

- Asia closed mixed with Nikkei underperforming -0.7%. EU indices are +0.1-0.4%. US futures are +0.2%. Gold +0.1%, DXY +0.1%; Commodity: Brent +0.7%, WTI +0.1%; Crypto: BTC -2.8%, ETH -3.7%.

Asia

- Japan Nov Trade Balance: -¥117.6B v -¥687.9Be; Exports Y/Y: 3.8% v 2.5%e; Imports Y/Y: -3.8% v +0.8%e.

- New Zealand Q4 Consumer Confidence: 97.5 v 90.8 prior.

- New Zealand Q3 Current Account Balance (NZD): -10.6B v -10.4Be.

- Australia releases mid-year economic and fiscal outlook cut the FY25 real GDP from 2.0% to 1.75% while maintaining FY26 GDP forecast at 2.25%. Budget was not expected to return to surplus for at least a decade.

Europe

- Times Shadow MPC votes 8-1 for the Bank of England to leave rates unchanged; Robson supported a 25bps cut.

Americas

- Federal Reserve likely to lower interest rates for a 3rd straight meeting.

- US Congressional leaders released text of short-term government funding measure: The US government is funded through Mar 14 2025 in stopgap; the measure averts a partial shutdown starting on Sat [Dec 21st].

- Congress are set to vote in the coming days on legislation which would restrict US investments in China.

-US Dept of Commerce, Defense and Justice open investigations into China's router manufacturer TP-Link; Could ban the sale of TP-Link routers in the US next year.

- Chile Central Bank (BccH) cut Overnight Rate Target by 25bps to 5.25% (as expected) for its 11th straight cut in the current easing cycle. Statement noted that benchmark rate would follow a downward trajectory on the policy horizon if Staff Projections were realized.

- Brazil budget rapporteur Bulhoes noted that Congress was considering weakening Pres Lula's fiscal plan over social concerns.

Energy

- Weekly API Crude Oil Inventories: -4.7M v +0.5M prior.

- Britain, France and Germany have accused Iran of growing its stockpile of high enriched uranium to “unprecedented levels” without “credible civilian justification.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.17% at 514.54, FTSE +0.38% at 8,226.05, DAX +0.06% at 20,265.99, CAC-40 +0.19% at 7,379.40, IBEX-35 +0.35% at 11,641.00, FTSE MIB +0.20% at 34,385.00, SMI -0.46% at 11,680.70, S&P 500 Futures +0.21%].

Market Focal Points/Key Themes: European indices open mixed with a modest upward bias that became more pronounced through the early hours of trading; among sectors leading in the gains are energy and communication services; lagging sectors include materials and consumer discretionary; Orsted sells half stake in three US solar and battery storage projects to Energy Capital Partners; Unicredit raises stake in Commerzbank; reportedly Kering considering selling off real estate assets; focus on FOMC rate decision later in the day; earnings expected in the upcoming US session include Micron, Lennar, and General Mills.

Equities

- Consumer discretionary: Shoe Zone [SHOE.UK] -42.5% (trading update; dividend halt), Ceconomy [CEC.DE] +7.5% (final FY24 results, initial FY25 guidance), Ubisoft [UBI.FR] -2.0% (Stifel cuts to hold), Kering [KER.FR] -0.5% (reportedly mulls real estate assets spinoff worth up to €4B).

- Financials: Commerzbank [CBK.DE] +3.0% (Unicredit raises stake to ~28%; Now holds 9.5% direct and 18.5% derivative stake in Commerzbank; Formally submits documentation to acquire up to 29.9% stake in Commerzbank), IntegraFin Holdings [IHP.UK] -7.5% (FY results) - Healthcare: Astrazeneca [AZN.UK] -1.0% (FT article notes company might see sales dip in China following arrest of Wang) - Industrials: Renault [RNO.FR] +5.0% (related Honda and Nissan expected to make formal merger announcement on Dec 23rd) - Technology: Fingerprint Cards [FINGB.SE] -47.5% (rights issue).

- Telecom: Nokia [NOKIA.FI] +1.5% (DNB raised to buy).

Speakers

- ECB's Lane (Ireland, chief economist) reiterated that disinflation process remained 'well' on track; Prudent to maintain agility. Reiterated not pre-committing to a particular rate path. Domestic inflation should come down and determined to ensure inflation stabilized at 2%.

- ECB's Wunsch (Belgium) noted that impact from tariffs depended on reaction on FX. EUR depreciation would cushion tariffs impact on growth but make inflation larger. Saw rates moving lower to around 2% area.

- EU Commission Pres Von Der Leyen noted that EU membership talks with Ukraine was possible in early 2025.

- Thailand Central Bank Policy Statement noted that the decision to keep policy steady was unanimous. Key rate close to economic potential. Inflation expectations were well anchored and within target. Domestic economy driven by tourism, exports and consumption.

- Thailand Central Bank updated its Staff Projections which cut 2025 Headline CPI from 1.2% to 1.1% while raising 2025 Core CPI from 0.9% to 1.0%. Maintained 2025 GDP growth at 2.9%.

- Indonesia Central Bank (BI) Gov Warjiyo pre-rate decision press conference noted that all monetary instruments would be optimized to attract capital flows and support currency. IDR currency (Rupiah) depreciation remained manageable; seen stabilizing going forward. The domestic growth was being maintained. Global inflation expected to be higher on supply chain disruption.

- Indonesia Central Bank (BI) Policy Statement noted decision to keep policy steady was consistent with efforts to keep inflation within target for both 2024 and 2025. Policy focus to be on strengthening IDR currency (Rupiah) stability.

Currencies/fixed income

- FX market was awaiting a slew of rate decisions over the next 24 hours that include the Fed, BOE and BOJ.

- EUR/USD drifted below the 1.05 level as more ECB members continue to talk about the need for further easing. ECB’s Wunsch noted that EUR depreciation would cushion tariffs impact on growth.

- GBP/USD was steady as Nov CPI reading came in as expected and remained above BOE inflation target for the 2nd straight month. Focus on Thursday’s BOE rate decisions and markets remain that BOE would keep its policy steady this time around and resume its easing in early 2025.

- USD/JPY continued to retrace its weekly highs ahead of BOJ rate decision on Thursday. Markets remain that BOJ would keep its policy steady this time around and resume its easing in early 2025.

Economic data

- (UK) Nov CPI M/M: 0.1% v 0.1%e; Y/Y: 2.6% v 2.6%e (8-month high); CPI Core Y/Y: 3.5% v 3.6%e; CPI Services Y/Y: 5.0% v 5.1%e; CPIH Y/Y: 3.5% v 3.5%e.

- (UK) Nov RPI M/M: 0.1% v 0.2%e; Y/Y: 3.6% v 3.7%e; RPI (ex-mortgage payments) Y/Y: 3.0% v 2.8% prior; Retail Price Index: 390.9 v 391.4e.

- (UK) Nov PPI Input M/M: 0.0% v 0.2%e; Y/Y: -1.9% v -1.6%e.

- (UK) Nov PPI Output M/M: 0.3% v 0.2%e; Y/Y: -0.6% v -0.6%e.

- (TH) Thailand Central Bank (BoT) left Benchmark Interest Rate unchanged at 2.25% (as expected).

- (ID) Indonesia Central Bank (BI) left Bi-Rate unchanged at 6.00%.

- (AT) Austria Nov Final CPI M/M: 0.3% v 0.3% prelim; Y/Y: 1.9% v 1.9% prelim.

- (PL) Poland Dec Consumer Confidence: -16.7 v -17.0e.

- (UK) Oct ONS House Price Index Y/Y: 3.4% v 2.8% prior.

- (EU) Euro Zone Nov Final CPI Y/Y: 2.2% v 2.3% advance; CPI Core Y/Y: 2.7% v 2.7% advance; CPI M/M: % v -0.3% advance.

- (EU) Euro Zone Oct Construction Output M/M: +1.0% v -0.3% prior; Y/Y: +0.2% v -2.0% prior.

- (CY) Cyprus Nov CPI EU Harmonized M/M: -1.0% v -0.2% prior; Y/Y: 2.2% v 1.6% prior.

Fixed income issuance

- (IN) India sold total INR190B vs. INR190B indicated in 3-month, 6-month and 12-month bills.

- (SE) Sweden sold total SEK4.0B vs. SEK4.0B indicated in 2026 and 2035 Bonds.

Looking ahead

- (MX) Mexico Citi Survey of Economists.

- (AR) Argentina UTDT Nov Leading Indicator: No est v 0.8% prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- (EU) ECB TLTRO III repayments.

- 05:30 (PL Poland to sell Bonds.

- 06:00 (UK) Dec CBI Industrial Trends Total Orders: -22e v -19 prior; Selling Prices: 13e v 11 prior.

- 06:00 (PT) Portugal Nov PPI M/M: No est v -0.8% prior; Y/Y: No est v 0.1% prior.

- 06:00 (IE) Ireland Oct Property Prices M/M: No est v 0.9% prior; Y/Y: No est v 10.0% prior.

- 06:00 (IL) Israel Nov Trade Balance: No est v -$2.7B prior.

- 06:00 (CZ) Czech Republic to sell variable Aug 2043 bonds.

- 06:00 (RU) Russia to sell OFZ Bonds.

- 06:00 (DE) German Bundesbank Monthly Report.

- 07:00 (US) MBA Mortgage Applications w/e Dec 13th: No est v 5.4% prior.

- 07:00 (MX) Mexico Q3 Aggregate Supply and Demand: 2.3%e v 2.1% prior.

- 07:00 (UK) Weekly PM Question time in House.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Nov Housing Starts: 1.345Me v 1.311M prior; Building Permits: 1.430Me v 1.416M prior; Housing Starts M/M: +2.6%e v -3.1% prior; Building Permits M/M: +1.0%e v -0.4% prior (revised from -0.6%).

- 08:30 (US) Q3 Current Account Balance: -$287.1Be v -$266.8B prior.

- 10:00 (CO) Colombia Oct Trade Balance: -$1.0Be v -$0.7B prior; Total Imports: $5.7Be v $5.2B prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (CO) Colombia Oct Economic Activity Index (Monthly GDP) Y/Y: 2.3%e v 1.2% prior.

- 11:00 (RU) Russia Nov PPI M/M: No est v -0.6% prior; Y/Y: No est v 2.7% prior.

- 11:00 (RU) Russia Q4 Consumer Confidence: No est v -7 prior.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 14:00 (US) FOMC Interest Rate Decision: Expected to cut Target Range by 25bps to 4.25-4.50%.

- 14:00 (AR) Argentina Nov Trade Balance: $0.8Be v $0.9B prior; Exports: No est v $7.0B prior; Imports: No est v $6.1B prior.

- 14:00 (AR) Argentina Q3 Unemployment Rate: No est v 7.6% prior.

- 14:30 (US) Fed Chair Powell post rate decision press conference.

- 16:45 (NZ) New Zealand Q3 GDP Q/Q: -0.2%e v -0.2% prior; Y/Y: -0.4%e v -0.5% prior.

- 19:00 (AU) Australia Dec Consumer Inflation Expectation: No est v 3.8% prior.

- 19:00 (NZ) New Zealand Dec ANZ Business Confidence: No est v 64.9 prior; Activity Outlook: No est v 48.0 prior.

- 20:00 (CN) China Nov Swift Global Payments (CNY): No est v 2.9% prior.

- 22:00 (TH) Thailand to sell THB25B in 2029 Bonds.

- (JP) Bank of Japan (BoJ) Interest Rate Decision: Expected to leave Target Rate unchanged at 0.25% (no set time).