The ECB meeting (Thu), US CPI (Wed) and PPI (Thu), and China trade data (Tue) all feature this week, and China’s policy makers meet at the closed door Central Economic Work Conference (Wed-Thu) Other events to watch for include the BoE’s Ramsden speech on financial stability, and the ECB President Lagarde’s news conference following the ECB meeting, where a 25bps cut is fully priced in.
Last week, geopolitical tensions and economic indicators dominated market sentiment, given the mixed signals from the US labour market through the week. The yield on the 10-year UST fell for the third consecutive week to 4.15%, while the S&P Index gained a further 0.96%. Meanwhile, the DXY Index gained 0.30%, and Brent crude fell 2.50% to $71.12pb. OPEC+ delayed its planned oil output increases until April 2025 and extended full cut unwinding to the end of 2026, responding to weak global demand and increasing non-OPEC production.
In the US, November nonfarm payrolls increased by 227,000, slightly above expectations, with a two-month net revision adding 56,000 jobs. The unemployment rate rose to 4.2%, and average hourly earnings increased 4.0%yoy. The household survey showed job losses of 335,000, contrasting with the survey’s continued job growth. The Uni. of Michigan consumer sentiment rose in December to 74.0, with current conditions improving to 77.7, but year-ahead inflation expectations increased to 2.9%. Fed officials, including Bowman and Hammack, signalled caution about rate cuts, emphasising persistent inflation risks and suggesting the Fed is near a neutral monetary policy stance. With upcoming CPI, PPI, and retail sales data before the December 18 FOMC decision, the market anticipates a potentially hawkish rate cut. The upcoming FOMC statement and dot plot will therefore be critical in determining potential monetary policy pauses, possibly as early as the January meeting.
Elsewhere, China’s markets rose last week on potential 2025 policy support. The government is favouring domestic industries through new procurement rules and tech restrictions. This morning’s China CPI figure showed the nation’s prices rose at a slower rate (0.2%yoy) in November, driven by declining fresh food prices and ongoing factory deflation. PPI showed some recovery to -2.5% (from -2.9%) supported by a mild improvement in business activity last month. This week features two key events: Premier Li’s “1+10” dialogue with international organisations and the Central Economic Work Conference, where leaders will set 2025 economic targets, aiming for ~5% growth amid US trade tensions. Full details will not be public until March’s parliamentary session. The global economy is expected to grow steadily at 3.2% this year and similar rates in 2025 and 2026, according to the OECD, with lower inflation, job growth, and potential interest rate cuts supporting this outlook. This projection depends on avoiding protectionist policies that could disrupt global trade.
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