Daily Brief Macro: UK Backloads A Tax Trap and more

• The UK’s fiscal hole was even smaller than we thought (£6bn), allowing the government to backload a fiscal tightening that is unsurprisingly focused on tax increases.
• Delaying prudence to an election year is implausible. There will be a substantial deficit in 2029-30, not the current budget surplus in the OBR forecasts based on existing policy.
• Labour is setting up a tax trap for Reform and the Conservatives to say how they’d avoid tax increases, similar to the backloaded spending cuts they myopically ignored in 2024.

Highlights

• MOFCOM imposes steep tariffs on Canadian, Japanese HIIR

• Domestic and Indian firms gain, but Indian gain may be short-lived

• Sinopec bets big on green high-end rubber materials

MOFCOM’s inquiry, launched in September 2024 at the request of domestic producers, found preliminary evidence that imported HIIR from the two nations had been sold in China at unfairly low prices, inflicting “substantial harm” on local manufacturers.

• In Depth: Where China Stands in the Nuclear Medicine Gold Rush 
• China Approves New Asset Investment Arms for CITIC Bank, China Merchants Bank 
• Top Sovereign Lending Official at Exim Bank Under Investigation

• Refining margins surged as diesel shortages deepened, driven by outages, sanctions, and shrinking Western capacity. Diesel-led product strength lifted refining margins even as crude stayed weak.
• The U.S. crack spread hit its 2025 high in November. Despite a brief correction, Europe’s structural tightness will keep the demand for diesel high.
• Europe’s sanctions, limited capacity, and winter demand will boost U.S. exports, keeping gasoline and distillate inventories tight despite temporary price corrections.

• Crude oil futures fell on Tuesday after Ukraine agreed to an amended peace deal following negotiations with the US, although Russia’s reaction to the new terms remains unclear.
• Front-month Jan26 ICE  Brent  futures were trading at  $62.42/b (1951 GMT) versus Monday’s settle of $63.37/b, while Jan26 NYMEX WTI was at  $57.91/b against a previous close of $58.84/b.
• The original 28-point blueprint was widely viewed as too lopsided in favour of Moscow, but following weekend talks in Geneva, the proposals have been reduced to 19 points, removing some of the more onerous conditions that were backed by Russia.

• Crude oil futures closed higher Wednesday amid volatile trade, with investors waiting for a response from Russia after Ukraine backed the revised US-brokered peace deal.
• Front-month Jan26 ICE Brent  futures were trading at  $63.05/b (1951 GMT) versus Tuesday’s settle of $62.48/b, while Jan26 NYMEX WTI  was at  $58.57/b against a previous close of $57.95/b.
• Benchmarks recovered after closing at the lowest levels in a month as investors priced in what was seen as significant progress towards a peace deal.

• The RBNZ surprised some economists by lowering the OCR 25bps to 2.25%, prioritising support for a hesitant economic recovery.
• The policy outlook will hinge on real-time inflation, labour, and external data, with macro risks remaining broadly balanced.
• Cautious, flexible monetary policy is expected, with future interest rate moves highly data-dependent and state-contingent.