ON DECK FOR TUESDAY, DECEMBER 10
KEY POINTS:
- Defensive market tone ahead of the week’s key events
- RBA pivots, inches toward cutting
- Norway’s inflation surprises higher
- US small business confidence soars post-election…
- ...but how will it stand up to tighter immigration and tariffs?
Despite a soft tone for global risk appetite, there really isn't much to consider this morning. Australian markets dovish reacted to the RBA's tweaks and the local rates curve (the kiwi curve) outperformed others. Norway's curve went the other direction on CPI.
RBA Pivot Drives Weaker AUD, Lower Yields
The RBA delivered a bit more of a dovish jolt. The A$ depreciated and the Australian rates curve rallied in bull steepener fashion. The policy rate was held at 4.35% as universally expected. The three main tweaks to the statement were "deliberate" as Governor Bullock put it, and included:
"Some of the upside risks to inflation appear to have eased,"
and "...the Board is gaining some confidence that inflation is moving sustainably toward target."
And gone is reference to "...the Board is not ruling anything in or out" by way of policy options which finally appears to be ruling out further tightening.
The market translation is that they are teeing up a pivot toward easing as soon as the next decision in February. Bullock did not comment further on timing. Markets added a couple of basis points to the chance of a cut on February 18th that now sits at about 15bps, but expect a full cut (and then some, -31bps) at the somewhat unfortunately timed April 1st meeting.
Onto tomorrow's Australian jobs report, but in the context of a very strong Australian labour market to date.
Norway’s Inflation Drives Higher Yields
Other overnight releases were minor. Chinese trade figures disappointed at softer levels. Norway's CPI (0.3% m/m, 0.2% consensus) and core CPI (0.1% m/m, -0.1% consensus) surprised a touch higher than expected for November and drove Norwegian yields higher by about 5–6bps across the curve as NOK mildly outperforms other majors.
US Small Business Confidence Jumps Post-Election
There is nothing material on the N.A. calendar today. US NFIB small business confidence spiked higher in November (101.7, 93.7 prior) as the ‘expect better economy’ subindex soared by 41 points to +36 which is its highest reading since late 2020 (chart 1). I’m thinking let’s see how they feel upon arrival of tariffs and tightened immigration that removes a lot of the labour used by small businesses and hits their business input costs.
The US will also revise Q3 productivity and unit labour cost figures (8:30amET) as a teaser ahead of tomorrow’s CPI.
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