Articles

• Long stocks and gold are the most crowded trades according to BofA’s survey
• USDINR Technical Analysis: Key resistance reached, US NFP in focus next
• Eurozone October trade balance €18.4 billion vs €19.4 billion prior
• Germany December ZEW survey current conditions -81.0 vs -80.0 expected
• Major currencies little changed, eyes on US data
• UK December flash services PMI 52.1 vs 51.6 expected
• Italy November final CPI +1.1% vs +1.2% y/y prelim
• Eurozone December flash services PMI 52.6 vs 53.3 expected
• Germany December flash manufacturing PMI 47.7 vs 48.5 expected
• France December flash services PMI 50.2 vs 51.1 expected
• European indices hold lower at the open amid more cautious market mood
• What are the main events for today?
• Eurostoxx futures -0.5% in early European trading
• UK October ILO unemployment rate 5.1% vs 5.1% expected
• FX option expiries for 16 December 10am New York cut
• US futures keep lower at the tail end of Asia trading
• Reminder: US jobs data will be due today
• US Senate delays crypto market structure bill to 2026, as expected but still disappointing

The main highlight of the session was the UK labour market report. The unemployment rate ticked higher to 5.1% vs 5.0% prior as expected with payrolls declining once again. Wage growth, on the other hand, surprised to the upside, which could validate BoE’s Greene views that wage setting might have indeed changed.

The UK PMIs showed kind of the same with the commentary citing lacklustre growth, worryingly widespread job losses and renewed upturn in selling price inflation across both goods and services. Rising staff costs were reported as the key concern.for businesses. The pound strenghtened on a slightly hawkish repricing as the total easing for 2026 pulled back from 64 bps to 56 bps.

We had also the Eurozone PMIs which surprised to the downside. The main drag was once again Germany as the French PMIs were better than expected. The data didn’t change anything for the ECB though as it’s seen on hold well into 2027.

In the American session, it goes without saying that all eyes will be on the US NFP report and nothing else will matter. In fact, despite having also the US Flash PMIs on the agenda, the market will highly likely trade based on the US jobs report.

The November Non-Farm Payrolls is expected at 50K vs 119K prior, while the Unemployment Rate is expected to remain unchanged at 4.4%. The Average Hourly Earnings Y/Y is expected at 3.6% vs 3.8% prior, while the M/M figure is seen at 0.3% vs 0.2% prior.

There’s been lots of talk that this report could be noisy as the data collection process was affected by the shutdown. Moreover, Fed Chair Powell said in the press conference that they think job gains have been overstated by 60K in recent months and that they think there’s a negative 20K in payrolls per month.

Therefore, the Unemployment Rate will probably be the most important metric to look at in terms of market reaction, but big deviations in payrolls will also catch market’s attention.

This article was written by Giuseppe Dellamotta at investinglive.com.

KEY POINTS:

• Long Mag 7 is the most crowded trade for 54% of participants
• Long gold takes the second spot at 29%
• Global investors are the most bullish in 3 and a half years due to “run it hot” macro and policy expectations
• Allocation to stocks and commodities at the highest since 2022
• BofA says positioning is a “big headwind” for risk assets
• AI bubble remains the biggest tail risk

The Bank of America Fund Manager Survey is a monthly global poll of institutional investors, revealing sentiment, asset allocation and economic expectations to gauge market positioning and potential crowded trades.

THE REASON FOR SUCH EXPECTATIONS:

In the latest survey, we can see that Mag 7 and gold are the most crowded trades driven by the “run it hot” macro and policy expectations. That shouldn’t be surprising given Trump’s expansionary policies and continues attacks on the Fed to lower interest rates.

On the other hand, the Fed is also not doing much to counter the expectations by keeping a dovish reaction function. In fact, Fed Chair Powell in its latest press conference not only downplayed the inflation risk but emphasized the labour market weakness, suggesting that there’s more tolerance for higher inflation than for weaker labour market.

And adding to that, he stated that the debate among FOMC members is just about how much more to cut. This is called a “dovish reaction function” because they will cut rates in case we see more weakness in the data but won’t do anything in case things strengthen.

REPRICING IN RATE CUT BETS INFLUENCES THE SHORT-TERM:

This remains a tailwind for risk assets and gold in the medium-term. In the short-term, the repricing in the dovish expectations is what triggers the pullbacks/corrections.

In fact, the market’s expectations were very dovish going into the October’s FOMC decision, but Powell’s statement that a December cut was not a foregone conclusion triggered a repricing that weighed on risk assets. As soon as Fed’s Williams hinted that a December cut was coming, we saw a strong rebound across the board.

Now, we are in the same situation. We have the market pricing in 58 bps of easing by the end of 2026. That’s 33 bps more than what the Fed projected. This week we get the US NFP and CPI reports. The market might not like strong data as it would trigger a hawkish repricing in interest rate expectations and lead to a deeper pullback. On the other hand, benign or even soft data will highly likely support risk assets.

This article was written by Giuseppe Dellamotta at investinglive.com.

• Prior -78.7
• Economic sentiment 45.8 vs 38.7 expected
• Prior 38.5

The current conditions index might show a slight decline but there is a major beat on the expectations outlook. So, that really outweighs the headline reading here. ZEW notes that expectations have become more positive and that chances for a recovery of the economy are looking good, which is being reflected in the sentiment among investors. The key boon of course being a more expansive fiscal policy, which is expected to provide new momentum to the German economy.

That’s a positive note at least but nothing that will get the ECB moving just yet as German price pressures remain a key sticking point. EUR/USD remains little changed on the day at 1.1757 currently.

This article was written by Justin Low at investinglive.com.

• Prior €19.4 billion; revised to €18.4 billion

Compared to the month of October last year, exports to the US are seen down nearly 15% this October while imports are up just a little over 4%. That sees the trade surplus with the US narrow in October this year to €11.2 billion with it being €19.5 billion in 2024. Something, something tariffs I guess.

This article was written by Justin Low at investinglive.com.

• Prior 51.3
• Manufacturing PMI 51.2 vs 50.4 expected
• Prior 50.2
• Composite PMI 52.1 vs 51.6 expected
• Prior 51.2

These are nice beats, but the commentary isn’t as good. The agency cites lacklustre growth, worryingly widespread job losses and renewed upturn in selling price inflation across both goods and services.

It keeps the BoE on track to cut rates on Thursday, but the central bank will likely sound more cautious on the next moves, remaining highly data-dependent.

Key Findings:

• Output growth accelerates in December, led by
  sharpest rise in new business for 14 months

Comment:

Chris Williamson, Chief Business Economist at S&P
Global Market Intelligence:

“December’s flash PMI surveys brought welcome news on
faster economic growth at the end of the year, with businesses
buoyed in part by the post-Budget lifting of uncertainty. The
PMI is consistent with GDP growth accelerating to 0.2% in
December, albeit with a more modest 0.1% gain signalled for
the fourth quarter as a whole.

“It’s a big relief that business confidence has not slumped in a
repeat of last year’s post-Budget gloom. Instead, companies
have ended the year on a slightly more optimistic note amid
signs of improving demand now that some of the uncertainty
created by the Budget has cleared. New orders are in fact
growing at the fastest rate for over a year.

“However, the overall pace of output and demand growth
remains lacklustre, and the expansion is still very dependent
on technology and financial services activity, with many other
parts of the economy struggling to grow or in decline.

“Job losses are also again worryingly widespread, and it
remains to be seen whether the uptick in orders during
December will persuade more companies to start hiring again,
especially as rising staff costs continue to be reported as one
of the key concerns of businesses. These higher cost pressures
were in turn cited as the key cause of a renewed upturn in
selling price inflation across both goods and services.

“The sluggish growth and worrying jobs data from the flash
PMI data therefore suggest that the odds remain in favour of
a further cut to interest rates at the December MPC meeting,
but that the path to further rate cuts in 2026 remains very data
dependent, as policymakers await confirmation that price
pressures are going to soften materially as the year proceeds.”

This article was written by Giuseppe Dellamotta at investinglive.com.

• Prior 1.2%
• HICP +1.1% vs +1.1% y/y prelim
• Prior +1.3%

Slight delay in the release by the source. Core annual inflation is seen slowing down from 1.9% to 1.7% in November, so that’s something to at least take note of. That said, the sticking point for inflation for the ECB is still very much the German economy at this point. So, that’s going to continue to keep them boxed in the current position of not moving on rates.

As things stand, traders are not anticipating any major moves by the ECB even through to next year. That being said, things can still change depending on data developments in the months ahead. But for now, the outlook seems to be clear that the ECB won’t be afforded much room to make another move in terms of rate cuts. And policymakers are also of the same view with markets at the very least, even if they would like some added flexibility as an option.

EUR/USD trades at 1.1753 currently, having little to do on the day amid a more mixed PMI showing with little to offer before we get to the slew of US data later. Large option expiries at 1.1750 will continue to keep things in check, acting as a magnet for price action in European trading at least.

This article was written by Justin Low at investinglive.com.

• Prior 53.6
• Manufacturing PMI 49.2 vs 49.9 expected
• Prior 49.6
• Composite PMI 51.9 vs 52.7 expected
• Prior 52.8

After the downcast from the German numbers, this was well expected. Both the services and manufacturing prints are softer than estimated, pushing down overall activity in the euro area for December. That said, it still marks another expansion in activity at least to wrap up the year. That won’t change much for the ECB outlook as such. EUR/USD continues to trade near unchanged on the day at 1.1752 with large option expiries seen at 1.1750. HCOB notes that:

“Economic growth slowed at the end of the year due to a slight contraction in the manufacturing sector and weaker
momentum in the service sector. The weaker performance is primarily attributable to German industry, where the downturn
intensified. In France, on the other hand, there are signs of a cautious recovery in industry, although a single monthly figure
should not be overrated. However, the service sector, which had expanded last month, is stagnating there, while Germany’s
service companies saw another solid rise in activity. All in all, the runway into the new year seems pretty unstable.

“Despite a softening of growth, the service sector continues to look relatively robust. Companies have no reason to complain
about new business and are therefore hiring additional staff. Looking ahead, however, companies have become somewhat
more cautious, which is likely due in part to the decline in order backlogs. We expect the service sector to continue to play a
stabilising role for the economy as a whole in the coming year. However, a real upturn will only succeed if the manufacturing
sector regains its footing.

“Cost inflation in the service sector reached its highest rate in nine months in December. The European Central Bank, which
is meeting on December 18 and is monitoring service inflation particularly closely, is likely to see its publicly stated policy of
leaving interest rates unchanged confirmed. It is clear that price pressure, driven in part by wage increases, is still
noticeable.”

This article was written by Justin Low at investinglive.com.

• Prior 48.2
• Services PMI 52.6 vs 53.0 expected
• Prior 53.1
• Composite PMI 51.5 vs 52.4 expected
• Prior 52.4

This is in contrast to the better than expected French PMIs. In fact, the gains seen in the euro following the French release got erased. Overall, this doesn’t change anything for the ECB though. The central bank will likely maintain its neutral stance and keep monitoring economic developments.

Comment:

Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“What a mess, one might exclaim in view of the further downturn in the manufacturing sector. For the second month in a
row, the headline manufacturing PMI has fallen deeper into sub-50 contraction territory, and for the first time in ten months,
production is also declining. The latter comes as no surprise, as order intakes had already slumped in November. This trend
has now continued, which does not bode well for the start of next year.

“Despite warning lights flashing in the industry, there are significantly more manufacturing companies looking ahead to the
coming year with confidence in December. The corresponding index has jumped upwards, possibly reflecting the fact that
the government has launched a number of transport projects, decided on reforms to reduce bureaucracy, and wants to
expand defence capabilities. Only if these measures result in an increase in incoming orders will the industry regain
momentum.

“The service sector is losing momentum for the second month in a row. However, business activity continues to grow visibly,
as evidenced by the stronger expansion of staff. New business has been increasing steadily for three months and overall,
the service sector is stabilizing the economy as a whole and is likely to contribute significantly to positive GDP growth in the
fourth quarter.

“While confidence in the manufacturing sector has increased visibly, the assessment of the next 12 months in the service
sector has weakened in December. It is possible that people believe that the economic stimulus package and higher
defence spending will primarily benefit construction companies, the mechanical engineering sector, and companies that
produce directly or as suppliers in the defence sector, while service providers tend to come away empty-handed.

“However,
this does not have to be the case, because industrial production usually also involves activities that are accompanied by
service providers such as consulting firms, auditors, and software developers. In addition, there are the so-called multiplier
effects, because employees of companies that receive additional (government) orders are more likely to treat themselves to
an extra visit to a restaurant or a concert that they would otherwise have foregone.”

This article was written by Giuseppe Dellamotta at investinglive.com.

• Prior 51.4
• Manufacturing PMI 50.6 vs 48.1 expected
• Prior 47.8
• Composite PMI 50.1 vs 50.3 expected
• Prior 50.4

It’s a polarising release with the French services sector slumping in December while the manufacturing sector posts a beat on activity. At the balance though, it still leads to a bit of a drag to the French economy with overall activity basically stagnating in the final month of the year. Looking at the details, employment conditions held up while price developments were little changed compared to November. HCOB notes that:

“French private sector business conditions appear largely static in December. The HCOB flash PMI remains marginally in
growth territory, yet it signals a softer expansion compared to the prior month, reflecting an economy still weighed down by
uncertainty among households and firms. Beneath the surface, however, sectoral adjustments have occurred: manufacturing
stabilised, whereas services lost momentum, leaving the aggregate picture flat and the overall French economy sluggish.

“The flash Manufacturing PMI managed a modest climb past the 50.0-point mark as the year drew to a close. December
brought encouraging signs in indices for both output and order books, with foreign demand providing a notable lift. Another
optimistic reading of the Future Output Index and a renewed willingness among firms to expand their workforces provides a
positive signal for the outlook.

“However, so long as no budget is passed by the government, political uncertainty will remain a noticeable headwind for
France’s economy. The passage of the social security budget is at least a small victory for Prime Minister Lecornu. However,
subdued consumer sentiment and intense international competitive pressures from the likes of the US and China diminish
growth prospects. The recently robust aviation industry could offer a glimmer of hope for the future by providing additional
impetus to the manufacturing sector more broadly.”

This article was written by Justin Low at investinglive.com.

• Prior 5.0%
• Employment change -17k vs -67k expected
• Prior -22k
• Average weekly earnings +4.7% vs +4.4% 3m/y expected
• Prior +4.8%; revised to +4.9%
• Average weekly earnings (ex bonus) +4.6% vs +4.5% 3m/y expected
• Prior +4.6%; revised to +4.7%
• November payrolls change -38k
• Prior -32k; revised to -22k

The jobless rate in the UK continues to tick higher, with payrolls change for November also declining once more. That continues to reinforce a softening labour market picture, though wages are holding up somewhat still. The BOE will have to be mindful with the unemployment rate creeping up to its highest since February 2021. Meanwhile, the UK employment rate is seen dropping further to 74.9% – down 0.3% on the quarter and keeping well below its pre-pandemic levels.

Real wages (after accounting for CPI) is seen declining but just marginally, with total pay seen at 0.7% and regular pay 0.5% in real-terms in the three months to September.

As for payrolls in general, we are seeing the number of payrolled employees continuing to fall further and now reach its lowest since September 2023.

The data continues to underscore that the UK jobs market is softening and will keep the pressure on the BOE to cut rates down the road. A 25 bps rate cut for this week is very likely, even if the voting intentions might be marginally in favour of a rate cut. The market is pricing in ~92% odds of a move on Thursday.

This article was written by Justin Low at investinglive.com.

So, what’d I miss during the break? 😉

There was no shortage of action in markets in the past week, not least with the Fed delivering one final 25 bps rate cut to wrap up the year. Now, the race for Fed chair is also reportedly heating up with Kevin Warsh pipped to be the favourite – ousting Hassett. A battle between the two Kevins is what’s left now.

But for today, the drama will center on the release of the much delayed US labour market report. That’s right. The non-farm payrolls data for November was not released on the first week of December but instead pushed to today. And to make things more complicated, it will be combined with the October job numbers as well.

If that is already not messy enough for you, the BLS also announced that there will be “higher-than-usual variances” in the jobs data for this month and following months as well.

This comes as they implement statistical weighting changes to account for the missing October panel and also as November saw some data collection issues.

All of this just means it won’t be easy and it might take some time – not necessarily this week or this month – to read into the numbers and make sense of the labour market outlook. The existing narrative is that we should continue to see signs of weakening in the landscape, and it will make more sense for market players to judge that in early next year and not on this mess of a release.

Still, it doesn’t mean traders and investors will not react to the data and brush it aside. There will be volatility and reactions to it for sure. But if you’re expecting any firm conclusions from the numbers today, you might not want to hold your breath on that one.

In any case, headline non-farm payrolls for November is estimated at 50k with the jobless rate at 4.4%. So, those will remain key benchmark figures to be mindful of ahead of the release later.

This article was written by Justin Low at investinglive.com.

• US suspends UK tech deal amid wider trade tensions (earlier Financial Times report)
• Indian rupee fresh record lows on flow pressure
• CBA sees February RBA rate hike as growth runs hot. Citi & NAB also expect February hike.
• NAB sees RBA hiking twice in 2026, clashing with market expectations for extended hold
• China eyes pragmatic 2026 growth target near 5% (while onshore yuan surges higher!)
• ICYMI – Ford takes US$19.5bn EV charge as strategy pivots to hybrids
• New Zealand fiscal outlook darkens as finance minister Willis sticks to discipline
• PBOC sets USD/ CNY reference rate for today at 7.0602 (vs. estimate at 7.0444)
• Japan preliminary December PMI shows modest growth as services offset factory weakness
• New Zealand bonds – NZDMO cuts near-term bond issuance but lifts medium-term outlook
• Australian consumer sentiment falls sharply in December: Westpac
• ECB/NFP preview – Morgan Stanley sees euro gain if ECB avoids rate pushback, 1.30 longterm
• Nasdaq moves toward 24/5 stock trading amid global demand
• Goldman Sachs raises its 2026 copper forecast as tariff odds ease
• Australia preliminary December PMI: Manufacturing 52.2 (prior 51.6) services 51.0 (52.8)
• New Zealand data: November Food Price Index -0.4% m/m (prior -0.3%)
• Tech stocks slide as Broadcom tumbles amid market turbulence

We saw a raft of lower-tier economic data released during the Asia session.

New Zealand kicked things off with data showing food price inflation falling on the month while remaining elevated year on year. The monthly decline in the Food Price Index will be welcomed by the Reserve Bank of New Zealand, offering tentative evidence that one of the stickier components of inflation may be starting to ease. With food prices accounting for nearly a fifth of the CPI basket, even modest monthly declines can have a meaningful impact on headline inflation outcomes.

Later from New Zealand, fresh fiscal projections showed no return to a budget surplus over the next five years, as weak growth and higher debt continue to delay fiscal repair. Net debt is now seen peaking at 46.9% of GDP, despite tentative signs of economic recovery. Separately, the New Zealand Debt Management Office trimmed its near-term bond issuance plans. The NZD was heavy for most of the session.

The AUD also softened before recovering modestly. Australian data showed the headline S&P Global Flash Composite PMI eased to 51.1 in December from 52.6 in November — a seven-month low, but still comfortably above the 50 expansion threshold, extending the growth run to fifteen consecutive months.

The moderation reflected slower momentum across both sectors. Services activity eased, with the Business Activity Index falling to 51.0 from 52.8 as heightened competition and softer export growth weighed. Manufacturing, by contrast, showed relative resilience, with the PMI rising to 52.2 from 51.6 on firmer goods demand and improved export orders.

We also heard from Commonwealth Bank of Australia and National Australia Bank, with analysts at both now expecting a Reserve Bank of Australia cash rate hike at the 2–3 February 2026 meeting. NAB further expects an additional hike in May ’26. AUD/USD dipped to just below 0.6620 before rebounding modestly toward 0.6635, with NZD/USD also ticking higher.

USD/JPY drifted lower, briefly testing below 154.75. Japan’s preliminary December PMI showed modest growth as services offset ongoing manufacturing weakness, with little else of note from the data.

In China, the PBOC once again set USD/CNY above model estimates at the daily fixing, though the market pushed the pair lower regardless, with USD/CNY hitting levels last seen in late September 2024. Meanwhile, China Securities Times reported policymakers are debating whether to set next year’s growth target at around 5% or adopt a more flexible 4.5%–5.0% range, underscoring a pragmatic approach amid a tougher external backdrop.

Asia-Pac
stocks were heavy, following a weak Wall Street:

• Japan
  (Nikkei 225) -1.28%
• Hong
  Kong (Hang Seng) -1.88%
• Shanghai
  Composite -1.29%
• Australia
  (S&P/ASX 200) -0.41%

This article was written by Eamonn Sheridan at investinglive.com.