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Asian stocks saw a slight increase in a stable trading environment as investors prepared for the Federal Reserve’s last policy decision of the year. The MCSI Asian regional stock index rose by 0.3% after a three-day decline, with gains in Hong Kong and mainland China balancing losses in Japan and Australia. Nissan’s shares soared by as much as 24%, marking the largest increase since at least 1974, amid speculation that the struggling car manufacturer may be contemplating a merger with Honda, whose stock experienced a decline.UK CPI inflation rose to 2.6% y/y in November, exceeding the BoE’s forecast and market expectations. Services inflation remained at 5.0% y/y, slightly below consensus but above BoE predictions. Core CPI at 3.5% y/y surprised markets, influenced by soft airfares. Overall, inflation measures are higher than anticipated, with goods prices shifting from -0.3% y/y deflation to +0.4% y/y inflation. This situation complicates the MPC’s messaging, despite differing employment indicators.While the Fed is largely anticipated to cut interest rates by another 25 basis points on later Wednesday, the focus is on its outlook for the upcoming year, especially in light of Donald Trump’s proposed initiatives that could potentially trigger inflation. Strong retail sales shouldn’t dissuade the Fed from implementing a rate cut. Recently, it has been challenging to find any weak demand indicators in the US, and this holds true for the November retail sales report. Advance sales increased by 0.7% month-over-month, surpassing the 0.6% forecast and building on an upwardly adjusted 0.5% increase from the previous month (previously 0.4%). The core metrics showed more modest growth, with sales excluding autos and gas both rising by 0.2%, falling short of the 0.4% median, while the control group met expectations at 0.4%. Overall, these figures keep year-over-year changes within recent trends—strong but not compelling enough to catch the Fed’s attention. This report aligns well with the soft landing narrative, and with labour market data indicating improved balance, the FOMC should feel confident in executing another 25 basis point rate cut. The recent persistence of inflation is likely to have a more significant impact on the policy outlook for next year as monetary adjustments approach the ‘appropriate’ levels that policymakers are targeting. This ‘neutral’ assumption is expected to continue rising, including projections for the long-term rate.
Overnight Newswire Updates of Note
(Sourced from reliable financial news outlets)
FX Options Expiries For 10am New York Cut (1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
CFTC Data As Of 13/12/24
Technical & Trade ViewsSP500 Bullish Above Bearish Below 6000
EURUSD Bullish Above Bearish Below 1.0450
GBPUSD Bullish Above Bearish Below 1.26
USDJPY Bullish Above Bearish Below 154
XAUUSD Bullish Above Bearish Below 2600
BTCUSD Bullish Above Bearish Below 92000
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