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 In Asia, stocks had a mixed performance. The MSCI index tracking Asia-Pacific shares outside Japan dipped by 0.1%, while Japan’s Nikkei fluctuated between positive and negative territory, ultimately ending unchanged. Iron ore futures continued to rise on Wednesday, supported by China’s stronger-than-anticipated credit data, although concerns over increasing trade tensions as U.S. President-elect Donald Trump prepares to take office next week limited the gains. Trump has promised to implement a 60% tariff on products from China. At first glance, China’s December credit data appeared strong, exceeding Bloomberg survey expectations, with year-to-date Total Social Financing reaching RMB 32.226 trillion compared to the median forecast of RMB 31.560 trillion. However, a closer look highlights important nuances. On a monthly basis, credit flow stood at RMB2.585 trillion, up from RMB1.932 trillion during the same period in 2023. This increase was largely driven by a surge in local government bond issuance, which accounted for two-thirds of the monthly total. The rise was motivated by efforts to meet year-end growth targets, bolstered by refinancing measures for local government financing vehicles (LGFVs).  Meanwhile, demand from the private sector remains weak despite lower interest rates and attempts to expand credit access. Additionally, households and corporations are increasing their savings, further reflecting a cautious economic environment. Greater fiscal measures are necessary to restore confidence, though other risks persist, particularly the potential for rising tariffs. With exports playing a crucial role in China’s growth and overinvestment in capacity continuing, a weaker exchange rate may ultimately be required to sustain competitiveness.UK CPI inflation ended 2024 at 2.5% year-on-year, slightly below market expectations and in line with the Bank of England’s November forecast. However, services inflation—a key focus for policymakers—surprised to the downside at 4.4% year-on-year in December, significantly below both BoE and market expectations. The decline was partly due to weak airfares, attributed to seasonal timing quirks, and a notable drag from restaurant and hotel prices, which is more structural and unexpected, given anticipated cost pressures from looming employer NIC increases in April. While some of the weakness is likely noise, the broader downside surprise in services inflation strengthens the case for a February rate cut by the BoE.More than just a CPI beat is needed to revive dovish rate cut expectations.Stateside persistent inflation in the latter half of 2024 had led to a more cautious outlook in the Fed’s price risk assessments. This has been communicated through guidance suggesting two additional cuts in 2025, but the threshold for such cuts appears to be higher, especially as concerns about the labor market have diminished and growth remains above the Fed’s projected trend. In fact, one could argue that the reduction in guidance from four cuts to two was made to avoid damaging credibility by suggesting a complete halt. In this context, the upcoming December CPI report may not hold much significance. At the very least, the Fed will require substantial progress on disinflation before taking further action. Without that, demand remains too strong to justify any additional easing, compounded by uncertainties in trade policy. The headline CPI is expected to rise to 2.9% year-over-year from 2.7% (0.4% month-over-month), while core inflation is anticipated to remain at 3.3% year-over-year (0.3% month-over-month) according to the survey. The positive surprise in Tuesday’s PPI does not significantly alter the situation; producer price pressures have increased recently and are now at the upper limit of what would be acceptable for consumer inflation to stabilize. Market expectations for Fed cuts (28 basis points this year) seem reasonable given the current uncertainties.
 Overnight Newswire Updates of Note

          (Sourced from reliable financial news outlets)
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