Markets shifting into holiday-mode

EU mid-market update: Markets shifting into holiday-mode; global yields continue to drift higher; China's Moore Threads claims its future AI chip performance approaching Nvidia’s Blackwell series.

Notes/observations

- Global yields continued to drift higher; Japan bonds at highest level since 1997; spot gold and silver tests fresh record highs.

- Talks in Florida between U.S., European and Ukrainian officials focused on aligning positions to end the war in Ukraine, with U.S. envoy Witkoff calling both those meetings and separate discussions with Russian negotiators productive and constructive.

- As OpenAI valuation could move above $800B, SoftBank said to be moving to fund its $22.5B commitment to OpenAI by year-end, reportedly considering tapping undrawn margin loans backed by its stake in Arm Holdings. It is also weighing a partial sale of its DiDi Global stake and potentially accelerating an IPO of payments app PayPay, which could raise about $20B in Q1.

- China’s Moore Threads unveiled its Huashan AI GPU platform, slated for a 2026 debut, with CEO Zhang claiming performance exceeding Nvidia’s Hopper (H100/H200) and approaching Blackwell across compute, memory bandwidth and scale-out, though no detailed specs were disclosed. The chips support FP4–FP64 with proprietary mixed-precision formats, scale to 100,000+ GPUs via MTLink 4.0, showed DeepSeek V3 results slightly ahead of Hopper in China, and are positioned alongside MUSA software as a CUDA alternative to drive ecosystem lock-in.

- Israel’s PM Netanyahu is reportedly set to brief Donald Trump on potential new strikes against Iran, according to NBC. Israeli officials are said to be increasingly concerned that Iran is expanding and broadening its ballistic missile production capabilities.

- Former BOJ board member Sakurai said the first hike to 1.00% could come around June or July 2026, with the BOJ likely viewing the neutral rate near 1.75%, allowing room to raise rates toward 1.5% while retaining flexibility to cut if needed. He added that the BOJ prefers hiking about once every six months but is cautious about political pushback, noting the yen’s weakness reflects fiscal concerns more than monetary policy.

Asia

- South Korea Dec Exports 20 Days Y/Y: 6.8% v 8.2% prior; Imports 20 Days Y/Y: 0.7% v 3.7% prior.

- China PBOC 1-year and 5-year LPR Setting left both the 1-year and 5-year Loan Prime Rate (LPR) unchanged at 3.00% and 3.55% respectively (as expected).

- Japan Top FX Diplomat Mimura stated that was seeing one-sided, sudden FX moves; Deeply concerned about currency moves. Would take appropriate action against excessive moves.

- Japan Fin Min Katayama stated late last week that was seeing rapid and one-sided moves in the FX market; Would take appropriate action against excessive FX moves.

Global conflict/tensions

- US envoy Witkoff said Trump administration officials held “productive and constructive” meetings with Ukrainian and European counterparts in Florida.

- UK PM Starmer said to have urged the president to ensure any agreement was “just” for Ukraine.

- Iran missile drill alarms Israel as Netanyahu plans Trump meeting.

Americas

- Fed's Hammack [voter in 2026] was inflation-wary, prefers leaving rates unchanged into the spring of 2026.

- White House NEC Dir Hassett said Supreme Court risks creating tariff refund issue.

Energy

- US boarded a 3rd tanker off of Venezuela.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.17% at 586.52, FTSE -0.46% at 9,852.35, DAX -0.01% at 24,293.23, CAC-40 -0.31% at 8,126.05, IBEX-35 -0.14% at 17,146.04, FTSE MIB -0.32% at 44,613.50, SMI -0.41% at 13,117.70, S&P 500 Futures +0.54%]

Market focal points/key themes: European indices opened mixed with a downward bias that became more prominent as the session wore on; loss of momentum in equities attributed to central bank outlook; better performing sectors include energy and technology; among sectors trending lower are utilities and real estate; oil & gas subsector supported after China imports increase, US to seize third tanker off Venezuela; Harbour Energy acquires LLOG exploration; Valmet acquires Severn from Bluewater; no major earnings expected in the upcoming US session.

Equities

- Energy: Harbour Energy [HBR.UK] -6.5% (acquisition).

- Financials: Entra [ENTRA.NO] +0.5% (JV with Skanska).

- Healthcare: Abivax [ABVX.FR] +11.0% (Lilly mulls acquiring Abivax), GSK [GSK.UK] -0.5% (confirms agreement with Trump Admin to lower drug prices).

- Industrials: Rheinmetall [RHM.DE] -1.0% (US-Russia and US-Ukraine talks during the weekend).

- Technology: ASML [ASML.NL] +1.0% (China's Moore Threads CEO claimed that its Huashan chip’s performance exceeded that of Nvidia’s Hopper series, which includes the H100 and H200 chips, in computing power, memory bandwidth and capacity).

Speakers

- ECB's Simkus (Lithuania): Economic growth has improved but remains sluggish. CPI to stay around the 2% target level in the medium term.

- France European Affairs Min Haddad sated that was confident that 2026 budget would be adopted.

- German IFO Survey: Around 26% of German companies expect their business to deteriorate in 2026.

- Former BOJ board member Sakurai: First hike to 1.00% could come around June or July.

Currencies/fixed income

- USD was a touch softer against the major pairs.

- Higher bond yield globally continued. German yields rose 1-2bps, with 30-year yields up 2bps to 3.56%, highest since 2011. Japanese yields hit their highest level since 1999.

- USD/JPY only slightly softer despite higher Japanese bonds yields and verbal currency intervention by Japanese officials. Pair at 157.45 by mid-session. Fiscal concerns continued to outweigh any rate divergence advantages for the JPY currency.

- EUR/USD staying within a tight 1.1700-1.1750 range the past few sessions. ECB speak continued to note that rates were in a good place.

- GBP/USD moved back above the 1.34 level to 1-week highs.

- 10-year German Bund yield at 2.90%, France 10-year Oat at 3.60% and 10-year Gilt yield at 4.53% 10-year Treasury yield: 4.17%; 10-year JGB: 2.07%.

Economic data

- (NL) Netherlands Nov House Price Index M/M: 0.3% v 0.5% prior; Y/Y: 6.1% v 6.6% prior.

- (FI) Finland Nov PPI M/M: 0.3% v 0.3% prior; Y/Y: 0.2% v 0.2% prior.

- (UK) Q3 Final GDP Q/Q: 0.1%e v 0.1% prelim; Y/Y: 1.3%e v 1.3% prelim.

- (UK) Q3 Final Private Consumption Q/Q: 0.3% v 0.2% prelim; Government Spending Q/Q: 0.4% v 0.3% prelim; Gross Fixed Capital Formation Q/Q: 1.3% v 1.8% prelim; Exports Q/Q: +0.2% v -0.1% prelim; Imports Q/Q: +0.3% v -0.3% prelim.

- (UK) Q3 Final Total Business Investment Q/Q: +1.5% v -0.3% prelim; Y/Y: 2.7 v 0.7% prelim.

- (UK) Q3 Current Account Balance: -£12.1B v -£19.0Be.

- (SE) Sweden Oct Non-Manual Workers’ Wages Y/Y: 3.5% v 3.1% prior.

- (NO) Norway Nov Trend Unemployment Rate: 4.5% v 4.5% prior.

- (DK) Denmark Q3 Final GDP Q/Q: 2.2% v 2.3% prelim; Y/Y: 4.0% v 3.9% prelim.

- (MY) Malaysia mid-Dec Foreign Reserves: $124.3B v $124.1B prior.

- (ES) Spain Oct Trade Balance: -€4.7B v -€6.0B prior.

- (CH) Swiss Nov M3 Money Supply Y/Y: 4.8% v 4.8% prior.

- (TW) Taiwan Nov Unemployment Rate: 3.4% v 3.3%e.

- (TR) Turkey Nov Foreign Tourist Arrivals Y/Y: 2.6% v 4.3% prior.

- (HK) Hong Kong Q3 Current Account Balance: $98.2B v $95.8B prior; Overall Balance of Payments (BOP): -$136.5BB v $105.5B prior.

- (HK) Hong Kong Nov CPI Composite Y/Y: 1.2% v 1.3%e.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 462.0B v 463.5B prior; Domestic Sight Deposits: 443.7B v 444.7B prior.

- (IS) Iceland Dec CPI M/M: +1.1% v -0.5% prior; Y/Y: 4.5% v 3.7% prior.

- (PL) Poland Nov Real Retail Sales M/M: -3.3% v -2.9%e; Y/Y: 3.1% v 3.9%e; Retail Sales (current prices) Y/Y: 2.8% v 5.3%e.

- (IT) Italy Nov PPI M/M: +1.3% v -0.4% prior; Y/Y: -0.3% v +0.2% prior.

Fixed income issuance

- None seen.

Looking ahead

- (IL) Israel Dec 12-month ahead CPI Forecast: No est v 2.0% prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 06:00 (IE) Ireland Nov PPI M/M: No est v 0.7% prior; Y/Y: No est v -3.5% prior.

- 06:00 (BR) Brazil Dec FGV Consumer Confidence: No est v 89.8 prior.

- 6:00 (RO) Romania to sell RON600M in 7.1% 2034 Bonds.

- 06:00 (IL) Israel to sell bonds.

- 06:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 06:30 (IN) India Nov Eight (Key) Infrastructure Industries: No est v 0.0% prior.

- 07:00 (MX) Mexico Oct IGAE Economic Activity Index (Monthly GDP) M/M: +0.5%e v -0.6% prior; Y/Y: 0.9%e v 0.7% prior.

- 08:00 (PL) Poland Nov M3 Money Supply M/M: No est v 1.1% prior; Y/Y: No est v 10.6% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 ECB's Kazimir (acting Slovakia member).

- 08:30 (US) Nov Chicago Fed National Activity Index: -0.17e v -0.12 prior (Aug).

- 08:30 (CA) Canada Nov Industrial Product Price M/M: 0.3%e v 1.5% prior; Raw Materials Price Index M/M: 1.0%e v 1.6% prior.

- 08:30 (BR) Brazil Tax Nov Collections (BRL): No est v 261.9B prior.

- 08:30 (US) Fed’s Miran.

- 09:00 (FR) France Debt Agency (AFT) cancelled planned 3-month, 6-month and 12-month bill auction.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 13:00 (US) Treasury to sell 2-year notes.

- 14:00 (AR) Argentina Oct Economic Activity Index M/M: No est v 0.5% prior; Y/Y: 4.2%e v 5.0% prior.

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 81.5 prior.

- 19:01 (UK) Dec Lloyds Business Barometer: No est v 42 prior; Own Price Expectations: No est v 60 prior.

- 19:30 (AU) Australia Central Bank (RBA) Dec Minutes.

- 21:00 (KR) South Korea to sell KRW300B in 20-year Bonds.

- 21:30 (HK) Hong Kong to sell 3-month and 6-month bills.

- 22:00 (TH) Thailand Central bank to sell THB65B in 3-month bills.