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Asian markets ex Japan sink as Chinese official once again fail to deliver on stimulus hopes, however, a miscommunication on wire reports regarding the scale of local debt reduction offers some minor relief as local markets recover from lows, the local hidden debt will be reduced from 14.3 trillion yuan to 2.3 trillion yuan, mainland markets trade just shy of 5% down on the session, According to a report by the Xinhua News Agency, China would increase the debt ceiling for local governments to 35.52 trillion yuan. This will enable them to issue six trillion yuan in additional special bonds over a three-year period in order to swap concealed debt. As China looks to reduce financial risks and support growth, the plan that was approved by the National People’s Congress Standing Committee is mostly in line with what markets anticipated.At the November meeting, the Fed Funds target rate was as anticipated lowered by 25 basis points to a range of 4.5 to 4.75%. What will happen next? The only important thing that changed in the FOMC statement was that everyone agreed to cut rates this time (last time, Bowman was against a 50bp cut and wanted only a 25bps cut). Powell’s press conference gave a lot of hints that he wanted to ease again in December, but there is no “set path.” In December, Powell was asked what would make the Fed stop raising rates. He replied with what would make the Fed cut rates. It was not a surprise that the answer was weak employment figures, but he would not say if they would wait if good news about the job market came out between now and then. Powell also said that they would be more likely to stop raising rates when they got closer to neutral, but his words showed that they did not think that point had been reached yet. The USD OIS market-implied odds of a ~55% chance of a 25bps December cut reflect both how uncertain the outcome really is and how slightly more likely it seems that something else will happen. Going back to watching info.Following a hectic week that included important central bank meetings, the U.S. election, and the fall of the German government, euro zone bond rates dipped lower on Friday. This week, they were expected to climb slightly. Last week, Germany’s 10-year yield was up by one basis point, down 2 basis points at 2.42%. The U.S. 10-year yield ended a tumultuous Thursday down 8 basis points and was slightly lower on Friday at 4.34%, suggesting that Friday’s decline was partially a catch-up with U.S. treasuries. Italy’s 10-year yield was 5 basis points lower at 3.69%, while Germany’s two-year yield was 2 basis points lower at 2.41%.
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 1/11/24
Technical & Trade ViewsSP500 Bullish Above Bearish Below 5880
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EURUSD Bullish Above Bearish Below 1.09
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GBPUSD Bullish Above Bearish Below 1.3050
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USDJPY Bullish Above Bearish Below 151
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XAUUSD Bullish Above Bearish Below 2680
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BTCUSD Bullish Above Bearish Below 71500
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