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November PPI higher than expected! How to view the interest rate cut prospects for 2026?
真灼财经
joined discussion · Jan 16 09:32

[Zhenzhuo Finance] The Fed's hawkish tone rises; China's central bank says there is room for reserve requirement ratio and interest rate cuts

Several Fed officials hinted at supporting a pause this month. The US and Taiwan reached an agreement to reduce tariffs. China’s new yuan loans last year dropped to the lowest in seven years. The central bank announced a cut in various relending tool rates, stating that there is still room for reductions in reserve requirements and interest rates this year.
Overnight Highlights
– US stocks rose on Thursday as Morgan Stanley (MS.US) and Goldman Sachs (GS.US) reported optimistic quarterly earnings, driving their share prices up significantly. Meanwhile, Taiwan Semiconductor (TSM.US) posted strong results, boosting US chip stocks. Most US Treasury yields edged higher following the release of stronger-than-expected economic data, slightly weakening expectations that the Fed would cut interest rates in the short term. The dollar hit a six-week high after data showed that initial jobless claims in the US unexpectedly fell last week, further strengthening expectations that the Fed will keep interest rates unchanged in the coming months. Oil prices closed down about 4%, ending a five-day rally. Gold prices fell as President Trump's easing tone on Iran further dampened the safe-haven demand for gold.
Several Fed officials hinted at supporting a pause this month. The US and Taiwan reached an agreement to reduce tariffs. China’s new yuan loans last year dropped to the lowest in seven years. The central bank announced a cut in various relending tool rates, stating that there is still room for reductions in reserve requirements and interest rates this year. Overnight Highlights – US stocks rose on Thursday as Morgan Stanley (MS.US) and Goldman Sachs (GS.US) reported optimistic quarterly earnings, driving their share prices up significantly. Meanwhile, Taiwan Semiconductor (TSM.US) posted strong results, boosting US chip stocks. Most US Treasury yields edged higher following the release of stronger-than-expected economic data, slightly weakening expectations that the Fed would cut interest rates in the short term. The dollar hit a six-week high after data showed that initial jobless claims in the US unexpectedly fell last week, further strengthening expectations that the Fed will keep interest rates unchanged in the coming months. Oil prices closed down about 4%, ending a five-day rally. Gold prices fell as President Trump's easing tone on Iran further dampened the safe-haven demand for gold. International News – Fed Governor Barr and five regional Fed presidents signaled support for standing pat this month as the labor market appears to have stabilized while inflationary pressures persist. – Last week’s initial jobless claims in the US were below all economists’ forecasts in the Bloomberg survey, slightly weakening market bets on the Fed cutting interest rates this year. – Foreign holdings of US Treasuries rose to a record high in November, with Norway, Canada, and Saudi Arabia...
Several Fed officials hinted at supporting a pause this month. The US and Taiwan reached an agreement to reduce tariffs. China’s new yuan loans last year dropped to the lowest in seven years. The central bank announced a cut in various relending tool rates, stating that there is still room for reductions in reserve requirements and interest rates this year. Overnight Highlights – US stocks rose on Thursday as Morgan Stanley (MS.US) and Goldman Sachs (GS.US) reported optimistic quarterly earnings, driving their share prices up significantly. Meanwhile, Taiwan Semiconductor (TSM.US) posted strong results, boosting US chip stocks. Most US Treasury yields edged higher following the release of stronger-than-expected economic data, slightly weakening expectations that the Fed would cut interest rates in the short term. The dollar hit a six-week high after data showed that initial jobless claims in the US unexpectedly fell last week, further strengthening expectations that the Fed will keep interest rates unchanged in the coming months. Oil prices closed down about 4%, ending a five-day rally. Gold prices fell as President Trump's easing tone on Iran further dampened the safe-haven demand for gold. International News – Fed Governor Barr and five regional Fed presidents signaled support for standing pat this month as the labor market appears to have stabilized while inflationary pressures persist. – Last week’s initial jobless claims in the US were below all economists’ forecasts in the Bloomberg survey, slightly weakening market bets on the Fed cutting interest rates this year. – Foreign holdings of US Treasuries rose to a record high in November, with Norway, Canada, and Saudi Arabia...
International News
– Fed Governor Barr and five regional Fed presidents signaled support for standing pat this month as the labor market appears to have stabilized while inflationary pressures persist.
– The number of initial jobless claims in the US last week was lower than expected by all economists surveyed by Bloomberg, slightly weakening the market's bets on the Federal Reserve cutting interest rates this year.
– Foreign holdings of US Treasuries rose to a record high in November last year, with significant increases from Norway, Canada, and Saudi Arabia, while China continued to sell off against the trend.
– The US is reportedly convening dozens of foreign ministers from allied countries next month in an effort to reach an agreement aimed at helping nations reduce their reliance on China for critical minerals.
– A US federal court has allowed California to use a new congressional district map favorable to Democrats in the midterm elections, which could help offset potential House seat gains for Republicans due to newly drawn districts in Texas.
– Iranian authorities have pledged not to execute protesters, but according to Fox News, the US is deploying troops to the Middle East.
– Several European countries have decided to establish a military presence in Greenland, with Germany stating that NATO will deter China and Russia in the Arctic.
– The Bank of Japan is reportedly paying increasing attention to the inflationary effects of a weak yen, a stance that may influence future interest rate hike timing.
– Goldman Sachs (GS.US) broke Wall Street records for equity trading revenue in the fourth quarter and will raise $16 billion through issuing investment-grade bonds, the largest amount ever for a Wall Street bank. Morgan Stanley (MS.US) reported a record annual net profit.
– In 2025, the six major Wall Street banks set record highs for dividend payouts and stock buybacks, but also saw the largest drop in employee numbers in nearly a decade.
Greater China News
– Starting next week, the People’s Bank of China will cut the annual interest rate on various relending tools by 0.25 percentage points to promote targeted lending. Deputy Governor Zou Lan stated there is still room for further reserve requirement ratio (RRR) cuts and interest rate reductions this year.
– China’s Ministry of Finance announced that from August 8, 2025 to December 31, 2027, interest income from bonds issued by China in overseas markets and held by foreign institutions will be exempt from value-added tax.
– Due to weak borrowing demand, new renminbi loans in China fell to their lowest level in seven years for the whole of last year. However, figures for December rose above expectations.
– A surge in year-end forex conversion by Chinese exporters at the end of 2025 resulted in nearly $100 billion in net customer conversions, highlighting a shift in exchange rate expectations. Goldman Sachs (GS.US) noted that indicators showed record foreign exchange inflows in December, while central bank vice governor Zou Lan's remarks on Thursday suggested increased tolerance for RMB appreciation.
– The US and Taiwan have reached an agreement to reduce tariffs on Taiwan from 20% to 15%, while Taiwan’s semiconductor firms committed to increasing investments and credit lines in the US totaling $500 billion. US Commerce Secretary Lutnick stated that if Taiwan does not build factories in the US, tariffs could reach 100%.
– Taiwan Semiconductor (TSM.US) provided a capital expenditure and sales outlook for 2026 that exceeded analysts' expectations, reflecting confidence in a sustained global AI boom.
– Canada signed an energy trade cooperation agreement with China. Prime Minister Chrystia Freeland hopes to export more oil and gas to China to reduce reliance on the US. She is set to meet with ** ** on Friday.
– The chairman of the US House of Representatives’ China Committee stated that a shortage of memory chips would limit the issuance of export licenses for NVIDIA’s (NVDA.US) H200 chips to China.
- According to reports$BYD COMPANY (01211.HK)$ is reportedly negotiating the sale of hybrid vehicle batteries to Ford Motor (F.US), but White House trade advisor Navarro has raised questions about the matter.
– $CHINA VANKE (02202.HK)$ submitted two additional proposals to holders of '21 Vanke 02', one of which mentioned a 40% principal repayment in January.
Commodities and Forex Markets
The Bloomberg Dollar Index rose, with jobless claims data dampening expectations for a Federal Reserve rate cut.
A reduction in Iran risk weighed on oil prices, causing the largest drop since June. With risk aversion easing, gold prices retreated.
Focus on Earnings Reports and Economic Data
US Industrial Production Month-over-Month for December (Previous: 0.2%, Forecast: 0.1%)
US NAHB Housing Market Index for January (Previous: 39, Forecast: 40)
Several Fed officials hinted at supporting a pause this month. The US and Taiwan reached an agreement to reduce tariffs. China’s new yuan loans last year dropped to the lowest in seven years. The central bank announced a cut in various relending tool rates, stating that there is still room for reductions in reserve requirements and interest rates this year. Overnight Highlights – US stocks rose on Thursday as Morgan Stanley (MS.US) and Goldman Sachs (GS.US) reported optimistic quarterly earnings, driving their share prices up significantly. Meanwhile, Taiwan Semiconductor (TSM.US) posted strong results, boosting US chip stocks. Most US Treasury yields edged higher following the release of stronger-than-expected economic data, slightly weakening expectations that the Fed would cut interest rates in the short term. The dollar hit a six-week high after data showed that initial jobless claims in the US unexpectedly fell last week, further strengthening expectations that the Fed will keep interest rates unchanged in the coming months. Oil prices closed down about 4%, ending a five-day rally. Gold prices fell as President Trump's easing tone on Iran further dampened the safe-haven demand for gold. International News – Fed Governor Barr and five regional Fed presidents signaled support for standing pat this month as the labor market appears to have stabilized while inflationary pressures persist. – Last week’s initial jobless claims in the US were below all economists’ forecasts in the Bloomberg survey, slightly weakening market bets on the Fed cutting interest rates this year. – Foreign holdings of US Treasuries rose to a record high in November, with Norway, Canada, and Saudi Arabia...
Source: Jinma Capital Management (Hong Kong) Limited
Author: Terry Chow
Proofread by: Emily
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
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