Daily Brief Macro: HEM: Dec-25 Views & Challenges and more

• Volatile markets and policy guidance washed out, with pricing and forecasts little changed on the month.
• Bailey is biased to ease, but the BoE is awakening to its inflation problem. It should cut less than dovishly priced.
• Higher unemployment could move beyond a structural shift from policy to signal a less elevated neutral rate.

• Global team focusing on what’s new for 2026 in terms of market outlook
• Bullish on Eurodollar, expecting more modest gains due to US resilience
• Dollar maintains yield supremacy, but new cyclical currencies emerging as carry efficient options for hedging volatility shocks

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• Both precious and industrial metals jumped significantly up over the past week. Gold, Silver, Platinum and also Palladium are currently basically in the same trading regime.
• Copper looks a bit different but also bullish, after breaking an H&S pattern to the upside, providing both systematic and discretionary investors with a great setup.
• Bintas built Trafigura’s copper book into the world’s largest. Now at Mercuria, he’s driving a major expansion into metals.

• Macro crew discussed a benign outlook on carry fairly risk on climate for the first half of the year
• FX vols expected to be fairly contained in 2026 due to factors like US growth and central bank activity
• Themes for positioning in 2026 include bullish European growth, antipodean FX, and bearish Yen outlook

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• Korean government is likely to increase the mandatory tender offer from current 50% + 1 share requirement (minimum majority stake) to much higher levels (but below the maximum 100% requirement).
• There is an increasing probability that indeed the Korean government is likely to increase the minimum majority stake requirement to 60% to 75% of total shares in 1H26. 
• If the minimum maximum stake rises to 60%-75% of outstanding shares, this would have a further beneficial impact on the minority shareholders.

• The Bank of Japan’s aggressive purchasing foray in the government bond market under Governor Kuroda now presents legacy issues due to the return of inflation and investors shunning duration risk.
• Japan’s economy faces rising headwinds in 2025. The minority government has responded to slowing growth by announcing an aggressive fiscal stimulus aimed at boosting near-term activity and reducing headline inflation.
• Unwinding of yen carry trades by Japanese investors is unlikely to impact US Treasuries significantly due to healthy demand from domestic investors. Yen-sourced global liquidity has already fallen in 2025.

• In November, FIIs sold a stupendous US$22 bn Asian equities, the second highest in the past 6 years. Bulk of it was in Korea (US$9.7 bn) and Taiwan (US$12 bn). 
• Concerns about sustainability of AI capex and doubts about Fed rate trajectory were the key drivers of FIIs’ worries. The latter also depressed the Asian currencies.
• Study of last 6 years cumulative buying/selling reveals massive selling in Taiwan/Korea. Flows in these markets should recover the most as FIIs play catch-up. India is a more difficult call.

• Unlike the consensus, we weren’t surprised by the 8.2%YoY real GDP growth in Jul-Sep’25, as the sharp moderation in inflation dampened the GDP deflator too. 
• We retain our forecast of 9%YoY growth in Oct’25-Sep’26, led by stronger PCE after the cut in GST rates and likely boost to farm incomes from the strong monsoon-fed crop. 
• With CPI inflation far below the 2-6% RBI target, policy rates will need to steadily decline, boosting GFCF. We expect 8.5% RGDP growth in FY26, and 8.2% in FY27. 

• In Depth: Malaysia Becomes a Lynchpin in U.S.-Led Effort to Break China’s Grip on Rare Earths
• In Depth: Nexperia’s Plight Could Have ‘Severe’ Impact on Global Automakers
• Hong Kong Fire Victims Recount Horror of Being Trapped Without Warn

• Crude oil futures opened firmer after weekend events, including an attack on the key Black Sea port and OPEC+ maintaining its no change policy for Q1, which improved sentiment.
• Front-month Feb26 ICE Brent futures were trading at $63.23/b (2003 GMT) versus Friday’s settle of $63.40/b, while Jan26 NYMEX WTI was at $59.43/b against a previous close of $58.55/b.
• Benchmarks strengthened as CPC suspended crude loadings at Novorossiysk early Saturday after an unmanned-boat strike tore into one of its offshore moorings, the latest in a string of attacks on the Black Sea export hub.