China bans US exports of key rare earth metals

EU mid-market update: Doubt in political scene putting French financial stability in question; Awaiting no-confidence vote tomorrow; China bans US exports of key rare earth metals.

Notes/observations

- European markets sit on edge of seats in a state of limbo waiting for next move in French politics. As anticipated, French PM Barnier declared he will use a constitutional ruling to slide part of the budget through parliament without a vote, despite objections from far-right and far-left parties. The move has opened up chance for no-confidence vote which Le Pen has the votes to back and press this morning said they are calling it tomorrow, Dec 4th at 10:00 ET (15:00 GMT). Pres Macron would have to put in a ‘caretaker’ PM until a new cabinet is formed if the motion is called and passed. Pres Macron cannot call for new snap parliamentary elections before July 2025, while political analysts suggest Le Pen might even declare her intention to bring down every govt until Macron steps aside.

- China’s Ministry of Commerce (MOFCOM) announced export bans on germanium, gallium, antimony, and superhard materials to the U.S., effective from today, alongside stricter reviews of graphite exports. These materials are critical for semiconductors, military systems, EV batteries, and solar technology, with China essentially dominating their global production and refining.

- Fed futures now pricing slightly higher chance for 25bps cut this month following Fed’s Waller and Williams comments; Fed Chair Powell to be interviewed at the DealBook Summit on Wed, Dec 4th.

- JOLTs job openings expected at 10:00 ET ahead of ADP tomorrow and Nonfarm Payrolls on Friday.

- Asia closed higher with KOSPI outperforming +1.8%. EU indices are +0.2-1.2%. US futures are little changed. Gold +0.2%, DXY -0.2%; Commodity: Brent +0.9%, WTI +1.0%; Crypto: BTC -0.2%, ETH -0.3%.

Asia

- South Korea Nov CPI M/M: -0.3% v -0.1%e; Y/Y: 1.5% v 1.7%e; CPI Core Y/Y: 1.9% v 1.9%e.

- Australia Q3 Current Account Balance (A$): -14.1B v -10.9Be (6th straight quarterly deficit and widest since 2018).

- China PBOC Gov Pan Gongsheng vowed supportive policy in 2025.

- China said to hold its Central Economic Work Conference (CEWC) between Dec 11-12th.

Mid-East

- Israel/Lebanon told the White house they’re committed to a ceasefire. Reports of continued violations of ceasefire agreement between Israel and Hezbollah.

- President-elect Trump warned that if the hostages were not released prior to January 20, 2025, there would be hell to pay in the Middle East.

Europe

- France PM Barnier exposed to a no-confidence ballot over budget matters. Analysts noted that such a motion would pass with the votes of Le Pen’s party.

- UK Nov BRC LFL Sales Y/Y: -3.4% v +0.6%e (1st drop since July and largest decline since Apr).

Americas

- Fed's Waller (voter for 2024 and 2025) noted that recent data had raised concerns that inflation progress was stalling meaningfully above 2.0%. Would lean toward supporting a cut in Dec, but worried about inflation.

- Fed's Bostic (hawk, voter for 2024; non-voter for 2025) noted that if were going to err, it would be on the side of being more restrictive; Had not decided yet on pace or extent of cuts in 2025.

- Fed's Williams (voter): Job market unlikely to be source of higher inflation. Would be appropriate to continue to move to a more neutral policy setting over time.

Energy

- OPEC upcoming meeting (Thur) said to likely extend its latest oil output production cuts until end of Q1 ’25.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.52% at 516.28, FTSE +0.69% at 8,370.11, DAX +0.55% at 20,017.95, CAC-40 +0.60% at 7,280.16, IBEX-35 +0.88% at 11,838.04, FTSE MIB +1.25% at 33,901.00, SMI +0.26% at 11,866.30, S&P 500 Futures +0.05%].

Market focal points/key themes: European indices open generally higher and maintained modest gains through the early part of the session; European markets seen drifting upwards in line with global trend; financials and materials sectors among those leading the way higher; lagging sectors include real estate and telecom; Saverex intends to launch voluntary takeover of Exmar; Condor Gold receives takeover offer from Metals Exploration; reportedly TotalEnergies to acquire VSB from Partners Group; corporate events expected in the upcoming US session include Salesforce earnings and AT&T investor day.

Equities

- Consumer discretionary: SSP Group [SSPG.UK] +12.0% (earnings), Valeo [FR.FR] -4.0% (UBS cuts to neutral), Greencore Group [GNC.UK] +9.5% (FY results).

- Industrials: Forvia [EO.FR] -5.5% (new CEO, analyst action - UBS cuts to neutral), Exmar [EXM.BE] +27.0% (offered to be acquired), BMW [BMW.DE] +1.0% (UBS raised to buy), Mercedes-Benz [MBG.DE] -2.5% (UBS cuts to neutral), Victrex [VCT.UK] +14.0% (prelim FY results), Ferrovial [FER.ES] +3.5% (Tier1 firm raised to buy) - Technology: ASML [ASML.NL] +2.5% (Exane BNP Paribas initiates with outperform; China bans exports of gallium, germanium, antimony to US), Atos [ATO.FR] -19.0% (agreement reached regarding the lawsuit filed by Unisys against Atos and two Atos employees; French political uncertainty).

Speakers

- ECB’s Cipollone (Italy) stated that tariffs would lower growth and cause inflation.

- France said to examine no-confidence motion on Wed, Dec 4th around 10:00 ET (15:00 GMT).

- Russia Central Bank (CBR) Dep Gov Zabotkin noted that RUB currency weakening was a significant inflationary factor.

- China Commerce Ministry (MOFCOM) banned germanium, gallium, antimony and superhard material exports to the US; effective immediately [**Note: Germanium and gallium are critical for semiconductors, military applications, solar panels, and telecommunications equipment; China refined more than 90% of the world’s natural graphite - used in virtually all EV battery anodes].

- China Semiconductor Industry Association (CSAI): US chips were no longer safe and reliable.

Currencies/fixed income

- USD was slightly softer during a quiet EU session. Focus was on upcoming US JOLT Job Opening data and upcoming ADP and Non-farm payroll reports later in the week.

- EUR/USD moved back above the 1.05 level but likely faced headwinds as French government faced a potential collapse in a dispute over its budget.

- GBP/USD steady at 1.2680.

- USD/JPY hovering back and forth around the 150 level.

Economic data

- (TR) Turkey Nov CPI M/M: 2.2% v 1.9%e; Y/Y: 47.1% v 46.6%e; CPI Core Index Y/Y: 47.1% v 47.3%e.

- (TR) Turkey Nov PPI M/M: 0.7% v 1.3% prior; Y/Y: 29.5% v 32.2% prior.

- (CH) Swiss Nov CPI M/M: -0.1% v -0.1%e; Y/Y: 0.7% v 0.7%e; CPI Core Y/Y: 0.9% v 0.9%e.

- (CH) Swiss Nov CPI EU Harmonized M/M: -0.5 v 0.0% prior; Y/Y: 0.7% v 0.8%e.

- (HU) Hungary Q3 Final GDP Q/Q: -0.7% v -0.7% prelim; Y/Y: -0.8% v -0.8% prelim.

- (ES) Spain Nov Unemployment Change: -16.0K v +26.8K prior; Net Change In Employment M/M:+13.1 K v +67.8K prior.

- (BR) Brazil Nov FIPE CPI (Sao Paulo) M/M: 1.2% v 1.0%e.

- (IS) Iceland Q3 Current Account Balance (ISK): +45.7B v -38.8B prior.

- (ZA) South Africa Q3 GDP Q/Q: -0.3% v +0.4%e; Y/Y: 0.3% v 1.1%e.

Fixed income issuance

- (ID) Indonesia sold total IDR8.0T vs. IDR9.0T target in Islamic bills and bonds (sukuk).

- (ES) Spain Debt Agency (Tesoro) sold total €4.78B vs. €4.5-5.5B indicated range in 6-month and 12-month bills.

- (ZA) South Africa sold total ZAR3.75B vs. ZAR3.75B indicated in 2033, 2038 and 2053 bonds.

- (UK) DMO sold £2.25B in 4.375% July 2054 Gilts; Avg Yield: 4.747% v 4.735% prior; bid-to-cover: 3.00x v 3.08x prior; Tail: 0.4bps v 0.3bps prior.

Looking ahead

- (FR) France Oct YTD Budget Balance: -€B v -€173.8B prior.

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

- 05:15 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €4.5B in 2.0% Dec 2026 Schatz.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.0B in 3-month bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:30 (EU) ESM to sell €1.1B in 3-month bills.

- 06:30 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 07:00 (BR) Brazil Q3 GDP Q/Q: 0.8%e v 1.4% prior; Y/Y: 3.9%e v 3.3% prior; GDP Four Quarters Accumulated: 3.0%e v 2.5% prior.

- 07:00 (MX) Mexico Oct Unemployment Rate: 2.9%e v 2.9% prior.

- 07:00 (MX) Mexico Sept Gross Fixed Investment M/M: +0.5%e v -1.9% prior; Y/Y: -1.0%e v -1.9% prior; Private Consumption Y/Y: 1.5%e v 2.3% prior.

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

- 08:55 (US) Weekly Redbook LFL Sales data.

- 10:00 (US) Oct JOLTS Job Openings: 7.470Me v 7.443M prior.

- 11:00 (DK) Denmark Nov Foreign Reserves (DKK): No est v 650.0B prior.

- 12:35 (US) Fed’s Kugler.

- 15:45 (US) Fed’s Goolsbee.

- 16:00 (KR) South Korea Nov Foreign Reserves: No est v $415.7B prior.

- 16:30 (US) Weekly API Oil Inventories.

- 17:00 (AU) Australia Nov Final PMI Services: No est v 49.6 prelim; Composite PMI: No est v 49.4 prelim.

- 19:00 (NZ) New Zealand Nov ANZ Commodity Price M/M: No est v 1.4% prior.

- 19:30 (AU) Australia Q3 GDP Q/Q: 0.5%e v 0.2% prior; Y/Y: 1.1%e v 1.0% prior.

- 19:30 (JP) Japan Nov Final PMI Services: No est v 50.2 prelim; PMI Composite: No est v 49.8 prelim.

- 19:30 (HK) Hong Kong Nov PMI (whole economy): No est v 52.2 prior.

- 19:30 (SG) Singapore Nov PMI (whole economy): No est v 55.5 prior.

- 20:00 (NZ) Various RBNZ members testify in Parliament.

- 20:01 (IE) Ireland Nov PMI Services: No est v 53.8 prior; Composite PMI: No est v 52.6 prior.

- 20:45 (CN) China Nov Caixin PMI Services: 52.4e v 52.0 prior; PMI Composite: No est v 51.9 prior.

- 21:35 (CN) China to sell 5-year Bonds.

- 22:30 (TH) Thailand Nov CPI M/M: +0.2%e v -0.1% prior; Y/Y: 1.1%e v 0.8% prior; CPI Core Y/Y: 0.8%e v 0.8% prior.