ON DECK FOR TUESDAY, DECEMBER 30
KEY POINTS:
- Global markets mixed on the last full trading day of 2025
- Firm Spanish core inflation reinforces prolonged ECB rate hold
- US ADP tracking close to 50k pending today’s weekly refresh
- FOMC minutes will be as stale as three-day old turkey stuffing
- US repeat-sale house prices are falling in real terms…
- …which means a negative wealth effect on consumption for most Americans
- Won tumbles as factory production retreats
Global markets are mixed on the last full trading day of 2025 before tomorrow’s half day for bonds and, let’s face it, everything else. US equity futures are flat, TSX futures are up a smidge along with European cash markets after Asian equities fell in Japan and Seoul but held relatively firmer in China. Sovereign bonds have a tiny cheapening bias. Currencies are mostly little changed except for a drop by the won after a small monthly gain in industrial output disappointed expectations for December after a large plunge in November.
I’ll put out a short Global Week Ahead later today and then regular publishing will resume on Monday.
FIRM SPANISH CORE CPI REINFORCES LONG ECB HOLD
Spain’s core CPI inflation held firmer than expected at 2.6% y/y (2.5% consensus, 2.6% prior). On a month-over-month basis it was up by about 0.4% in seasonally unadjusted terms. Since it’s seasonally unadjusted data, we need to compare December to all prior Decembers as done in chart 1 which shows this one was among the warmest on record. Readings for other major Eurozone economies and the Eurozone tally will be available next week.
Markets barely reacted with only a mild cheapening bias across EGBs, probably because markets already expect no policy rate changes by the ECB through the coming year with rate cuts done for the cycle.
US ADP PAYROLL ARE TRACKING A MODEST GAIN
The US weekly 4-week MA ADP private payrolls gauge (8:15amET) will inform expectations for next week’s monthly ADP reading. Up to the week of December 5th this measure was running at about 46k converted to a monthly equivalent from the 11.5k/week average. Depending upon what we see into this morning’s reference week measure, that could reinforce the recent oscillating pattern of changes (chart 2).
STALE FOMC MINUTES ON TAP
FOMC minutes will arrive as stale as three-day old turkey stuffing (2pmET). Watch discussions around the forward rate path and the rationale for US$40B/mth of liquidity injections and the discussions around the path forward for the balance sheet including after April tax filings. Remember that the minutes are not vote weighted and so they reflect opinions that will overweight some of the dissenting regional Presidents. Also recall that we’ve gotten a lot of data on jobs and inflation since then, much of which has been fabricated. Next week’s nonfarm payrolls matter more than today’s minutes.
US HOUSE PRICES ARE DRIVING A NEGATIVE WEALTH EFFECT FOR MOST
The US also refreshes repeat-sale measures of house prices in October (9amET). What’s important here is that they are falling in real terms (ie: adjusted for inflation). This implies a negative wealth effect for the majority of US consumers who own little by way of equities.
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