Breakfast Bites - New

Rise and shine everyone.

It’s a quiet start to the holiday week.

Asian equity markets gained, mirroring Wall Street’s positive momentum following the passage of a three-month U.S. government funding bill, which included disaster relief and agricultural aid. The FX market remained quiet after Japan’s Finance Minister Kato expressed concerns about sharp and one-sided currency moves earlier in the week.

Japanese government bonds saw a subdued trading session, while China’s bond yields continued their decline, with the 1-year yield dropping below 1.00% for the first time since May 2009. Honda and Nissan’s merger talks remained in focus, with additional details emerging in recent reports. BOJ Governor Ueda is scheduled to speak on December 25th.

European Central Bank (ECB) President Christine Lagarde has expressed optimism about achieving the ECB’s medium-term inflation target of 2%. She noted that the eurozone is “very close” to declaring that inflation has been sustainably brought to this level. However, Lagarde emphasized the need for vigilance regarding services inflation, which remains elevated at 3.9% .

In the United States, President-elect Donald Trump has threatened to reclaim control of the Panama Canal unless Panama reduces what he describes as “exorbitant” fees charged to American vessels. Trump’s statements, made on Truth Social, have been firmly rejected by Panamanian President José Raúl Mulino, who asserts that the canal is sovereign Panamanian territory and that its fees are determined by experts .

Additionally, Trump has announced key appointments for his administration. Bo Hines is to serve as Executive Director of the Presidential Council of Advisers for Digital Assets, known as the ‘Crypto Council.’ Sriram Krishnan has been named Senior Policy Advisor for Artificial Intelligence at the White House Office of Science and Technology Policy. Stephen Feinberg is selected as Deputy Defense Secretary, and Stephen Miran, a former U.S. Treasury official, is nominated to lead the Council of Economic Advisers.

In legislative developments, the U.S. House of Representatives has passed a three-month government funding bill that includes provisions for disaster relief and agricultural aid, as anticipated. The bill was approved by the Senate with an 85-11 vote and signed by President Biden, averting a government shutdown.

Meanwhile, Federal Reserve Vice Chair for Supervision Michael Barr has reportedly sought legal advice concerning potential efforts by President-elect Trump to remove him from his position. This development underscores the uncertainties surrounding the future composition of the Federal Reserve’s leadership.

The FTSE 100 slipped on Monday as data revealed the UK economy stalled in Q3, with no quarterly growth and a 0.9% year-on-year increase, missing expectations. Revised Q2 growth figures, down from 0.5% to 0.4%, deepened concerns over an economic slowdown. Trading volumes were light as investors began winding down for the Christmas season.

Chart of the Day

Valuations in the US are stretched. This is not a surprise… but many are now seeing this as a danger sign for a reversal. (Source: Datastream / SocGen)

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)