GGMA Morning Comment

Main News · By ·

Good morning,

I hope all is well.

Here are the main overnight stories:

Japanese bond yields continue to edge higher, but this time around, it also seems to have an effect on the Yen, which is appreciating (finally!).

As traders pile into bets on an interest-rate hike from the Bank of Japan this month, they’re still missing the risk that Japanese interest rates will need to march even higher to quell inflation, according to Vanguard Group Inc. (BBG). I tend to agree. Still, the BOJ will likely move only at a snail's pace, so patience is needed. However, on a more negative note, Japan's households cut spending for the first time in six months, with outlays adjusted for inflation falling 3% in October from a year earlier. (BBG)

Meanwhile, Japan's life insurers left their hedging against the risk of a stronger yen near a 13-year low in the fiscal first half through end-September, covering 45.7% of their overseas portfolios. Hedge ratios are expected to increase over the coming quarters, which could support a stronger yen, according to Aroop Chatterjee, macro strategist at Wells Fargo in New York. (BBG)

Yesterday, US bond futures came under pressure after lower-than-expected US jobless claims, indicating that the labour market is not as weak as many market participants believe. However, Fed Chair candidate Kevin Hassett said the Federal Reserve should cut interest rates at its meeting next week and predicted a reduction of 25 basis points. Hassett said he wanted to "get to a much lower rate" over the long run and that if there's consensus around 25 basis points, then he'll take it. (BBG)

Copper prices are still on the rise. Yesterday, I mentioned a bearish piece from Goldman Sachs, but Citigroup thinks we are going higher still. (BBG) I guess we have a market.

The Reserve Bank of Australia will hold its cash rate at 3.60% on Tuesday and keep it there through 2026, according to a Reuters poll, a shift from last month when a majority of economists expected at least one rate cut next year.

ð The Australian dollar has been appreciating since the end of November. Part of the reason is the market’s reassessment of the RBA’s outlook.

We are nearing the end of the year, when major banks unveil their S&P 500 targets for 2026:

The main events today will be:

ð Canadian labour market report (14:30 CET)

ð US PCE inflation report (16:00 CET)

ð University of Michigan consumer confidence (16:00 CET)

ð ECB Chief Economist participates in a panel discussion (16:10 CET)

Feel free to ping me in the chat if you would like to discuss markets.

Good luck today,

Günter