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Australia’s Hawkish Pivot, Germany’s Military, Trump Permits Sale of Nvidia H200 Chips to China

Morning Macro 9th December

Australia’s hawkish pivot is ripping through global rates. Bullock’s “no cuts for the foreseeable future” stance has catapulted AU 10-year yields to the top of the developed-market league table, widening the AU–US spread to the highest since early 2022. With Q4 CPI now the swing factor for a potential RBA hike in May, divergence versus a Fed still cutting has become the dominant theme. The 10-year differential (Figure 1) shows Australia breaking away, dragging AUD higher.

Meanwhile, the Fed is set for a third cut tomorrow, but support for more easing is thinning out, now only 72bps of cuts priced in the next 12 months, compared to over 90 bps at the end of November (Figure 2). USTs cheapened a little ahead of FOMC with 10yr pinned in its 4.00–4.20% range. NY Fed survey shows inflation expectations steady but household sentiment souring.

Germany is accelerating its military build-out, with Merz vowing to turn the Bundeswehr into Europe’s strongest army and committing to hit NATO’s new 3.5%-of-GDP defence target by 2029 – six years early. Berlin is leaning heavily on Rheinmetall, KNDS and the US–Israeli Arrow 3 system as it rewires Europe’s security architecture.

RBI launches unprecedented FX operation, with traders reportedly selling $100 million USD per minute, in an attempt to curb record depreciation without draining liquidity. Governor Malhotra is embracing a more flexible, two-way regime to deter speculation, but a widening trade deficit, 50% US tariffs and foreign outflows keep pressure intense as the rupee now holds just below the psychologically critical 90 level.

Trump permits sales of Nvidia H200 chips to China, though Nvidia share price reaction was muted, up 1.7% yesterday. Nvidia shares are still 12.5% down from record high at end of October, while S&P 500 index is just 1.1% off its late-October high. Globally, indices remain near record highs: Kopsi just 2% down, Nikkei 3.3% down.

Data today: JOLTS, ADP weekly, NFIB business optimism, BoE Bailey speech.

Key Trends Continue, US Heavy Truck Sales Plunge, Surprise Surge in Canadian Employment

Morning Macro 8th December

Key trends continue, copper rises another 0.5%, AUDUSD rallies for its 12th consecutive day, and Japanese yield continue their uptrend, dragging global long end yield with them.

Three notable data points from the US on Friday:

• Consumer Confidence: While current conditions fell to the lowest levels since 1930’s, sentiment rose for the first time in nearly six months, climbing from 51 to 53.3 (above the consensus estimate of 52).
• Inflation Expectations: Consumers now expect inflation at 4.1% over the next year and 3.2% over the next 5–10 years.
• September Core PCE: The Fed’s preferred inflation gauge eased to 2.8% from 2.9%, coming in slightly cooler than expected. The headline PCE measure ticked up from 2.7% to 2.8%, matching consensus.

September PCE Price Index +2.8% y/y vs. +2.8% est. & +2.7% prior … core +2.8% vs. +2.8% est. & +2.9% prior (Chart 1, Bloomberg)

December Uni Mich Consumer Sentiment Index up to 53.3 vs. 51 prior; Current Conditions down to 50.7 vs. 51.1 prior (Chart 2, Augur Infinity) an all-time low and worst perception of the US economy since the 1930s Great Depression.

Meanwhile, Expectations up to 55 vs. 51 prior and short- and long-run inflation expectations fall to 11-month lows

Wall Street banks expect US stocks to post another year of double-digit gains in 2026.(Chart 3, FT)

Soon all commodity charts will look like gold – BofA’s Harnett

US heavy truck sales have plunged -47% over the last 3 months compared to the prior 3 months, to an annualized rate of 363,000, the lowest since the 2020 pandemic. Truck sales have now declined in 4 out of the last 5 months. (Chart 4, RenMac ,Haver Analytics, Bureau of Economic Analysis)

On appositive note, another surprise surge in Canadian employment for a third month in a row Canada added 53,600 jobs in November compared to estimated loss of 2,500 jobs The unemployment down CAME DOWN to 6.5% from 6.9%

Data this week:

Monday – US consumer inflation expectations

Tuesday – UK retail sales, RBA rate decision, US ADP, retail sales.

Wednesday – China inflation, FOMC rate decision

Thursday – SNB rate decision

Friday – UK GDP & IP

Copper Rallies Again, India’s Rate Cuts, Secondary US Employment Data, Oklo Up

Morning Macro 5th December

Copper rallies another +2.3% to new all-time highs as the markets new favourite trade. Silver and Japanese yields continue trending higher too. Global yields starting to grind higher too with the U.S. 2s/10s curve steepening to 58bp. While the dollar finally has a positive day after its 9-day decline – matching the longest slide in 30 years.

US PLANS MORE STAKES IN MINERALS COMPANIES, TRUMP OFFICIAL SAYS

First Google, now Amazon – *AMAZON SAYS NEW CHIPS ARE MORE COST EFFECTIVE THAN NVIDIA’S

UK NOV. CONSTRUCTION PMI FALLS TO 39.4; FORECAST 44.6

India cuts rates to 5.25% as expected as central bank flags ‘weakness in some key economic indicators.

Mixed signals from secondary U.S. employment data:

1. U.S. small businesses shed 120,000 jobs in November, the steepest decline since May 2020, per ADP.
2. US Layoffs are running at crisis pace. U.S. companies announced 153,074 job cuts in October, nearly TRIPLING from 2024. It was the WORST October in 22 years. YTD, layoffs have reached 1,099,500, up +65% YoY, nearing GREAT FINANCIAL CRISIS levels
3. Jobless claims fall to 191k, estimated 220k, much stronger than expected.
4. U.S. temporary hiring has re-accelerated, perhaps an early signal we may be coming out of the slowdown. (Chart 1, Steno Research, Macrobond, Bloomberg)

Russell 2000 Index +15% ytd, Profitable Russell: +9.7%, Unprofitable Russell: +45% ….hhmmm!

Pay more, get less: “US sales on Black Friday hit $18 billion, up 3% compared with a year earlier…. But US shoppers purchased 2% fewer items at checkout, and with average prices up 7%, shoppers made 1% fewer online orders.” (Chart 2, Census Bureau, Bianco Research)

ANTHROPIC’S CEO WARNS THAT SOME AI GIANTS ARE TAKING RECKLESS, HUNDREDS-OF-BILLIONS SPENDING RISKS ON DATA CENTERS AND CHIPS, SAYING THE INDUSTRY IS GAMBLING ON UNCERTAIN ECONOMIC PAYOFFS.

Oklo, is now up +24% this week after Jensen Huang said the future of AI will be powered by “small nuclear reactors.”

Data today – US PCE deflator (inflation), UniMich consumer confidence

Copper Makes New All-Time High, Job Losses, ISM Services PMI Rises, Australian OIS

Morning Macro 4th December

Copper makes another new all-time high as the dollar trends lower (unable to break the magic 100 level Chart 1, Bloomberg) on news ultra dove, Trump puppet Hassett is the likely new Fed chair and ADP payrolls come in significantly weaker than expected. In Japan 10-year JGB’s rise another 4bp, highest since 2008.

The ADP report for November shows the largest monthly job losses (32,000) since early 2023, undershooting the consensus forecast gain of +10,000 jobs. Notable distribution: Small firms are the ones shedding workers, according to the latest ADP. Over the last three months, small businesses have cut 178,000 off their payroll ranks. By contrast, large firms have added 143,000. (Chart 2, @RenMacLLC)

The ISM Services PMI rose 0.2 points to 52.6, beating expectations by 0.5 points and marking the ninth consecutive month of sector expansion in 2025. The index now sits 0.9 points above its 12-month average of 51.7, indicating steady, modest growth. Business Activity (54.5%) and New Orders (52.9%) remained firmly in expansion territory, while Employment (48.9%) continued to contract for a sixth straight month. The Prices Index eased to 65.4%, down 4.6 points from October, signalling ongoing but moderating inflationary pressure.

TRUMP: “I guess a potential Fed Chair is here too…I don’t know, are we allowed to say that? Thank you, Kevin.” Kevin Hassett has consistently called for lower interest rates to stimulate economic growth and criticized the Federal Reserve for being too slow to ease monetary policy.

The S&P 500’s 5-day historical range is now 1.2%, the lowest level of the year. Markets are quiet after Thanksgiving but plenty of event risk ahead with Fed, BOE and BOJ rate meetings all pricing moves (cut, cut, hike) plus a resumption of key US payroll data, and the expected Santa Claus rally. All in low volume.

$IBM CEO says that at today’s costs it takes about $80B to build & fill a 1 GW AI data centre, so the ~100 GW of announced capacity implies roughly $8T of capex & “no way you’re going to get a return on that,” since you’d need “about $800B of profit just to pay for the interest” (Charles-Henry Monchau)

Gold is a mere 2.8% of investors AUM (Chart 3, The Market Ear, Charles-Henry Manchau)

Commodities are breaking out slowly (Chart 4, Bloomberg)

The Australian OIS is pricing one full HIKE over the next 12 months. AUDUSD up 2.5% over the last 2 weeks.

Here’s the cumulative real GDP growth for Europe’s four biggest economies since Q1 2020: 9%, 7.5%, 6.2%, 2.1%…. trending!

Another shocking stat of the day: Interest costs on US debt are now equal to 24% of every $1 in government tax revenue. The interest expense as % of collected taxes has nearly DOUBLED over the last 4 years.

Data today – EZ retail sales, US weekly jobless claims

Copper & Silver Trend Higher, US Yield Curve Steepens, Bitcoin Falls, US Foreclosures Up 20%

Morning Macro 3rd December

Copper & Silver continue their trend higher, making new all-time closing highs, While UK 2-year yields break support and close in on new cycle lows based on concerns around the economy, with the OIS pricing 65bp cuts over the next 12 months.

While silver surged, gold pulled back on news of Russian central bank selling, its reserves falling 57%, a clear sign of financial stress within the economy due to the war. Meanwhile …. PUTIN: IF EUROPE WANTS TO FIGHT WAR, WE ARE READY NOW

The US yield curve is starting to steepen, 2’s/10’s now at 57bp, no doubt being led by the huge move in Japanese long end yields, with the Japanese 30-year grinding up another 3bp today.

Bitcoin fell 4.5% on Monday and has since rallied 7.8%. Anyone who trades this is braver than me, I don’t see any clear fundamentals and price action is clearly manipulated by the whales. Good luck!

Manufacturing PMI’s (Purchasing Managers Index) continue to show contraction, with the U.S. falling the most in 4 months to 48.2 (last 48.7) with employment a woeful 44 and new orders 47.4. (Chart 1, Bloomberg)

U.S. foreclosures have risen 20% as more homeowners fall behind on their mortgage payments, according to ATTOM.

TRUMP: WE ARE GOING TO GIVE REFUNDS OUT OF THE TARIFFS. I BELIEVE IN THE NEAR FUTURE YOU WON’T HAVE INCOME TAX TO PAY. (Chart 2, Eliant Capital)

Germany, what went wrong? The Left and the Green party. Industrial production collapses. (Chart 3, TheBoomBustReport)

Switzerland November CPI 0.0% vs +0.1% y/y expected

Data today – Global services PMIs, US ADP employment

Sell-off in Treasuries, JGB 10-yr Auction, US Manufacturing, Precious Metals Pull Back

Morning Macro 2nd December

Post-Thanksgiving trading saw selloff in Treasuries, with long end up most. 10-year yield rose to 4.1% this morning, up from 3.99% at the close before the holiday. Japanese bonds are also continuing to sell off, as 10-year yield hit its highest since 2008.

Today’s JGB 10-year auction brought some relief to the market after jitters regarding Japan mounting debt concerns. The auction saw a bid-to-cover ratio of 3.59, higher than the previous offering in November, as elevated yields lured buyers despite rising expectations for a near-term BOJ rate hike. The yield on the 10-year JGB is now trading to its highest in 17 years! USD/JPY and interest rate differentials remain stubbornly deanchored (Figure 1).

In the UK, OBR chair Richard Hughes quit after the “inadvertent” leak of November 26 Budget forecasts. London struck a deal with Washington to keep US pharma tariffs at 0% for three years, though the UK will pay more for medicines via the NHS. Shop-price inflation cooled to 0.6% YoY in November (from 1%) thanks to early Black Friday discounting. Starmer says the UK will be more pro-business toward China but won’t trade security for market access.

Europe remains Ukraine-focused: the EU says Belgium’s concerns over the €140bn Ukraine loan can be managed, while Zelensky reiterated that sovereignty and security guarantees are non-negotiable and territorial concessions off the table. Macron says a peace deal is still “far off”. The EU may also delay its review of the 2035 combustion-engine ban.

US manufacturing is stuck in contraction, with ISM warning trade uncertainty “kills us”, while Washington approved up to $150mn subsidy for chip start-up xLight. Canada is set to join the EU’s €150bn defence procurement fund.

China’s Vanke rattled markets again with fresh debt-delay details, while the PBOC drained CNY145.8bn net via OMO and fixed the yuan at 7.0794. China’s onshore yuan reaches its strongest close since 11 October.

Precious metals pull back from their highs, with silver down 1.5% this morning, now below $58/oz. Gold down less, trading just above $4.2k/oz. Crypto keeps crashing, as Bitcoin dropped to under $84k yesterday (figure 2) and Ethereum is now below $3k. As a whole, the crypto market saw nearly $1bn in leveraged longs liquidated on Monday, Korea CPI stayed at 2.4% YoY, and Japanese markets priced an 80% chance of a December BoJ hike.

Data today: Euro inflation