Today, in the Calculated Risk Real Estate Newsletter: The "Home ATM" Mostly Closed in Q3

A brief excerpt:

During the housing bubble, many homeowners borrowed heavily against their perceived home equity - jokingly calling it the “Home ATM” - and this contributed to the subsequent housing bust, since so many homeowners had negative equity in their homes when house prices declined.
...
Here is the quarterly increase in mortgage debt from the Federal Reserve’s Financial Accounts of the United States - Z.1 (sometimes called the Flow of Funds report) released today. In the mid ‘00s, there was a large increase in mortgage debt associated with the housing bubble.

In Q3 2025, mortgage debt increased $108 billion, unchanged from $108 billion in Q2. Note the almost 7 years of declining mortgage debt as distressed sales (foreclosures and short sales) wiped out a significant amount of debt.

However, some of this debt is being used to increase the housing stock (purchase new homes), so this isn’t all Mortgage Equity Withdrawal (MEW).

Seattle Judge Blocks Health Department From Rejecting Head Start Grants With DEI Terms

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The Department of Health and Human Services (HHS) must stop requiring that grant applications not include terms related to diversity, equity, and inclusion (DEI), including the term “pregnant people,” under a new order from a federal judge.

Health Secretary Robert F. Kennedy Jr. delivers remarks during an event in the Oval Office of the White House on Oct. 16, 2025. Kevin Dietsch/Getty Images

They are also enjoined from firing any more Office of Head Start employees and closing regional offices.

HHS has said it does not comment on litigation.

The decision “ensures that Head Start providers can provide early education to children from diverse communities and backgrounds without the constant threat of being punished simply for following the requirements of the law,” Jennie Mauer, executive director of the Wisconsin Head Start Association, said in a statement.

Head Start is a federally funded program that provides care across some 17,711 centers to about 750,000 children from low-income families.

The lawsuit was filed by the American Civil Liberties Union over several actions taken by HHS in response to President Donald Trump’s Jan. 20, 2025, executive order banning “diversity, equity, inclusion, and accessibility“ and the “indoctrination of gender ideology.”

HHS, in an updated policy on grants, required applicants to certify they would not operate programs that advance DEI or discriminatory ideology.

According to court filings, HHS later returned applications with instructions to remove certain terms, including the terms “pregnant people,” “chestfeeding,” and “diversity.”

HHS also said that a Head Start center on an American Indian reservation in Washington state should remove eligibility criteria, which prioritized children from Indian families.

“Based on these instructions from the Office of Head Start, the program does not know what criteria it is supposed to use to determine enrollment for the program going forward,” Joel Ryan, executive director of the Washington State Association of Head Start and Early Childhood Assistance and Education Program, said in a filing.

The defendants told Martinez that they withdrew the certification requirement, making that challenge moot, and that plaintiffs had not shown the requirement, the mandated removal of DEI terms, and layoffs at the Office of Head Start caused the plaintiffs harm.

Tyler Durden Fri, 01/09/2026 - 13:25

The Federal Reserve released the Q3 2025 Flow of Funds report today: Financial Accounts of the United States.

The net worth of households and nonprofits rose to $181.6 trillion during the third quarter of 2025. The value of directly and indirectly held corporate equities increased $5.5 trillion and the value of real estate decreased $0.3 trillion.
...
Household debt increased 4.1 percent at an annual rate in the third quarter of 2025. Consumer credit grew at an annual rate of 2.3 percent, while mortgage debt (excluding charge-offs) grew at an annual rate of 3.2 percent.

Click on graph for larger image.

The first graph shows Households and Nonprofit net worth as a percent of GDP.  
Net worth increased $6.1 trillion in Q3.  As a percent of GDP, net worth increased in Q3 but is still below the peak in 2021.
This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc.) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

The second graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q3 2025, household percent equity (of household real estate) was at 71.6% - down from 72.0% in Q2, 2025

Note: This includes households with no mortgage debt.

The third graph shows household real estate assets and mortgage debt as a percent of GDP.  

Mortgage debt increased by $108 billion in Q3.

Mortgage debt is up $2.99 trillion from the peak during the housing bubble, but, as a percent of GDP is at 43.9% - down from Q2 - and down from a peak of 73.1% of GDP during the housing bust.

The value of real estate, as a percent of GDP, decreased in Q3 and is below the recent peak in Q2 2022, but is well above the median of the last 30 years.

"Screwing Us Over... Again": Shale Producers Furious Over Trump's Venezuela Plan To Lower Crude Prices

President Trump is meeting with oil bosses on Friday, but shale producers aren't necessarily happy about the development of driving crude prices down via expanding into Venezuela. 

In fact, independent U.S. drillers are warning President Donald Trump that his push to revive Venezuela’s oil industry — and drive prices lower — could cripple American production, according to FT.

Many shale leaders, excluded from that meeting, say the White House is abandoning domestic producers by opening the door to a flood of Venezuelan crude. “We’re talking about this administration screwing us over again,” one senior executive said, calling the strategy “against American producers.” Another warned: “If the US government starts providing guarantees to oil companies to produce or grow oil production in Venezuela I’m going to be . . . pissed.”

The anger is deep in Texas, where many executives backed Trump’s return and now describe the shift as a “betrayal.”

Kirk Edwards, chief executive of Latigo Petroleum, said:

“To me, the signal from the administration is: we’d rather spend our American money on propping up a Venezuelan oil business than supporting our current independent businesses.”

FT writes that pressure is already building. The number of active U.S. rigs has fallen to 412, down 15% in a year, and the Energy Information Administration expects U.S. output to drop in 2026 — the first annual decline since the pandemic. With West Texas Intermediate below $56 a barrel and many shale producers needing prices above $60 to break even, the industry is under strain.

Meanwhile, new supply risks loom. OPEC producers are adding output, and Trump has made clear he wants cheaper oil and gasoline as the midterms approach. U.S. Energy Secretary Chris Wright said Venezuela’s production could jump 50% within a year. “I think you’ll see more downward pressure on the price of gasoline,” he told Fox News.

Executives say Wright is now “just toeing the party line,” and the frustration ultimately lands on Trump. “He’s definitely not pro oil as far as independent oil companies’ survival and vibrancy,” one Midland executive said. “The message will have to come in US production declining.”

Markets are reacting. Shares of Diamondback Energy, APA Corp and Devon Energy each fell as much as 9% this week. “Somebody’s looking at these stocks today going, why would I own this if in a few years, they’re going to be competing against Venezuela for oil, for our refineries in the United States?” Edwards said.

Outrage intensified after Trump suggested taxpayers could help reimburse companies investing in Venezuela. “We should not subsidise the big companies in trying to retool Venezuela’s infrastructure and develop their reserves for them,” another shale executive said, adding Trump does not “give a damn if they went bankrupt” and is content to see them “drill their way into oblivion.”

Analysts say the divide favors the largest firms. “All of this points to the advantage of being larger,” said Maynard Holt of Veriten. “Because many of the opportunities that are coming — whether it’s Venezuela or Algeria or some other complicated place — you will be able to consider them more seriously the larger you are.”

Tyler Durden Fri, 01/09/2026 - 12:45

The Price Of Trump's "Greenland New Deal": $100,000 Per Person

By Bas van Geffen, Senior Macro Strategist at Rabobank

President Trump has called for a 50% increase of the US defense budget, to $1.5 trillion by next year. This should suffice to build a “Dream Military.” The president argues this is required to keep the US safe and secure, but will it keep his own political position safe? Trump’s new military focus is creating more friction in Congress, as well as between the US and its allies.

Trump argued that tariff revenues can “easily” pay for a bigger defense budget, but the CBO has estimated that tariff revenues will only generate about half of the president’s planned increase in military expenditures. And that assumes these revenues will keep flowing. Trump could face a setback on that front as early as today (see below).

Even if tariff revenues keep coming in, Trump’s plans could renew concerns about the sustainability of the US’ finances. Cuts in other parts of government might be an option on paper, but Trump does need congressional support for this. And the House of Representatives has just passed legislation on a spending bill that waters down many of Trump’s budget cuts – including restoring Obamacare subsidies for three years – as lawmakers seek to avoid another shutdown by the end of the month.

In international political circles, there is less alarm about the US’ fiscal prudence than there are concerns about what the president may want to use such an expanded military apparatus for. Despite his platform of noninterventionism, Trump has already been more active on the world stage than during his first term.

Yesterday, the US president suggested that military operations in Venezuela – or the wider region? – are not over after the quick capture of President Maduro last weekend: “we’ve knocked out 97% of the drugs coming in by water, and we are going to start now hitting the land.”

Congress is pushing back against further strikes. Five Republican senators joined with the Democrats to advance a bill that would limit Trump’s ability to take further military action in Venezuela without congressional approval.

However, for the war powers resolution to have any effect, it must first pass a final vote in Senate and it must then still pass the House – and with support from more than a handful of Republicans: President Trump could veto the bill unless it gets a two-thirds majority in both houses of Congress. More importantly, the bill focuses on military operations in Venezuela.

That still leaves countries like Mexico, which “is being run by cartels” according to Trump, or Colombia at risk. Several senators have said they plan to introduce similar resolutions for other countries (e.g., Greenland, Colombia, Cuba, Mexico, and Nigeria). However, these have not been included in the current resolution due to Senate rules requiring country-specific legislation.

And then there is the Arctic. At the start of this week, Trump reiterated his plans to acquire Greenland, and he has since not let go of the idea. The US president may prefer to buy the country. According to Reuters’ sources, US officials have discussed lump sum payments of $10,000 to $100,000 per Greenlander in order to convince them to become part of the United States. However, that’s just one plan, and Trump has not ruled out military means to get what he wants.

"with a population of only around 50,000, one might imagine a thought experiment where, for the low, low price of $50 billion, Trump offers every Greenlander $1 million in exchange for their country. That might prove more attractive." - Rabobank

— zerohedge (@zerohedge) January 6, 2026

European deterrence is limited. In fact, the EU must be careful not to alienate the country that they still need to safeguard their own security. Zelenskyy had just claimed an agreement on security guarantees, which was ready for finalization with the US president, but Russia has already rejected a European peacekeeping force in the country –a key part of the proposal– as an immediate threat to Russian security.

So, the EU may still try to change Trump’s mind through diplomacy. Denmark has already agreed to give the US military extensive access to Greenland. Perhaps a buildup of EU military presence in the Arctic could reassure the US that Europe can help to keep the region safe. But that would be another drain on the EU’s limited resources, and it remains to be seen whether this is enough to convince the US president. Canada will probably be watching this space anxiously too.

Tyler Durden Fri, 01/09/2026 - 12:25

Trump Cancels 2nd Wave Of Strikes On 'Cooperative' Venezuela - Political Prisoners Freed

The post-Maduro Venezuelan government has begun releasing political prisoners as a gesture of 'good will' to the United States, signaling that the new Delcy Rodriguez government is ready to play nice with Trump. There are reasons to believe that this former Maduro number two (as his vice president) had cooperated with the CIA to hand the longtime Venezuelan president and socialist strongman over to invading American forces during last Friday night's raid.

President Trump said early Friday that he had cancelled a "previously expected" second wave of attacks on the Latin American country as Caracas is now cooperating with the US. It must be recalled that soon after the attack which ousted Maduro and brought him into US custody, Trump had warned, "We are ready to stage a second and much larger attack if we need to do so. He added: "We actually assumed that a second wave would be necessary, but now it’s probably not." Presumably this meant cartel targets, but this brings up the question: where are all the 'narco-terrorists' and did they magically disappear now that Maduro was taken out?

via AP

In a Friday Truth Social post, the president emphasized the White House and new Caracas authorities are "working well together, especially as it pertains to rebuilding, in a much bigger, better, and more modern form, their oil and gas infrastructure."

"Because of this cooperation, I have cancelled the previously expected second Wave of Attacks, which looks like it will not be needed, however, all ships will stay in place for safety and security purposes," he added.

Trump confirmed that the government is busy "releasing large numbers of political prisoners as a sign of ‘Seeking Peace,'" adding, "This is a very important and smart gesture." Local news footage also appeared to verify this - a longtime demand of Washington and its allies in Europe.

AFP reports: Venezuela begins releasing a "large number" of political prisoners, including several foreigners, in an apparent concession to the United States after its ouster of ruler Nicolas Maduro

Venezuela begins releasing a "large number" of political prisoners, including several foreigners, in an apparent concession to the United States after its ouster of ruler Nicolas Madurohttps://t.co/EWfcPTLkzq pic.twitter.com/LZtPaZRgA1

— AFP News Agency (@AFP) January 9, 2026

The head of the country's National Assembly, Jorge Rodríguez, announced the release of a "significant number" of political prisoners, which is being taken to mean by outside observers that this is most, if not all, political prisoners which the US has demanded the release of.

One prominent name among those reportedly freed is the following:

Rocío San Miguel, a vocal critic of Maduro and a defense expert, was the first prisoner confirmed to be freed. Her family told the New York Times that she was taken to the Spanish embassy in Caracas.

Arrested in 2024, she was accused of being involved in a plot to kill the then-president and faced charges of treason, conspiracy and terrorism. Her arrest shocked human rights activists and, because her whereabouts were unknown, was labelled as potential "enforced disappearance" by the UN Human Rights Office.

As for Trump's claim that he has called off a 'second strike' - there's as yet no real evidence that the Pentagon was actually preparing such a new offensive, but heavy US assets are certainly still in the region and in regional waters. Trump could be bluffing on this, and very likely is, in order to keep Caracas on edge and cooperative.

Tyler Durden Fri, 01/09/2026 - 12:05

GM Cuts EV Exposure After Policy Shift, Takes $6B Charge

Imagine all of the malinvestment that took place in autos, on EVs, thank to the government distorting markets and forcing EV adoption when genuine demand may not have been robust. Now, we're seeing the consequences of returning to a freer market.

General Motors will record a $6 billion charge after scaling back several electric-vehicle projects, reflecting both weaker demand and the impact of new federal policies under President Donald Trump, according to Reuters.

Most of the charge — $4.2 billion in cash — stems from terminating contracts and compensating suppliers that had prepared for higher EV production. GM said the charge will appear as a special item in its fourth-quarter earnings. Additional costs are expected in 2026 but will be smaller than the current year’s EV-related charges.

Despite the pullback, the company said its U.S. lineup of about a dozen EVs remains intact: “We plan to continue to make these models available to consumers.”

GM’s announcement follows Ford’s much larger move in December, when it revealed a $19.5 billion writedown after canceling several EV programs. Ford CEO Jim Farley said at the time: “When the market really changed over the last couple of months, that was really the impetus for us to make the call.”

Automakers across the industry began retreating from aggressive EV expansion last summer after a sweeping Trump tax and spending package and the elimination on September 30 of the $7,500 federal EV tax credit, which triggered a sharp drop in sales. GM’s EV deliveries fell 43% in the fourth quarter, after customers had rushed purchases before the credit expired.

Reuters writes that while GM once pledged to phase out gasoline vehicles by 2035, analysts have since lowered long-term EV forecasts. GM CEO Mary Barra has said the company will adjust based on customer demand.

The company has already slowed EV operations: halting battery production at two joint-venture plants, cutting shifts at its Detroit EV factory, and repurposing a planned Michigan EV facility to build gas-powered pickups and the Cadillac Escalade. GM also disclosed a separate $1.1 billion charge tied to restructuring its China joint venture.

Some analysts question GM’s heavy focus on fully electric vehicles. CFRA analyst Garrett Nelson warned: "GM’s lack of hybrid exposure could partially reverse recent market share gains," citing surging hybrid demand.

Industrywide, EV sales growth has slowed dramatically. Research firm Omdia reported U.S. EV sales rose just 1.2% in 2025, and Edmunds projects EVs will represent about 6% of U.S. vehicle sales in 2026, down from 7.4% last year.

Tyler Durden Fri, 01/09/2026 - 10:40

Today, in the Calculated Risk Real Estate Newsletter: Housing Starts Decreased to 1.246 million Annual Rate in October

A brief excerpt:

Note: The Census Bureau is still catching up. They released Start data for September and October today, but we are still missing November data.
...
The third graph shows the month-to-month comparison for total starts between 2024 (blue) and 2025 (red).

Total starts were down 7.8% in October compared to October 2024.

Year-to-date (YTD) starts are down 0.7% compared to the same period in 2024. Single family starts are down 7.0% YTD and multi-family up 18.0% YTD.

There is much more in the article.

UMich Confidence Rebounds In January Off Record Lows As Tariff Fears Abate

Having ended 2025 at the lowest Current Conditions Sentiment levels in, well, ever... expectations for preliminary January data were for a modest rebound... and it did (very modestly).

• The preliminary January sentiment index climbed to 54 from 52.9 in December, according to the University of Michigan (better than the 53.5 expected).

• The expectations index rose to a five-month high of 55. The survey reflected improvements in both the short- and long-term economic outlooks.

• The current conditions gauge climbed to a three-month high after slipping to a record-low in December. Consumers’ perception of their current financial situation improved in January, while expectations declined.

Source: Bloomberg

Short-term inflation expectations were flat while longer-term rebounded modestly...

Source: Bloomberg

Democrats appear to be slowly but surely realizing all the Trump tariff fears projected up on them were just wrong. Republicans appear to be primed for deflation - but the gap remains huge (1% vs 5%)...

Source: Bloomberg

On a longer term basis, Democrats really abandoned their fears... Rather oddly, all of the political cohorts saw longer-term inflation expectations lower BUT overall inflation expectations rose on the month?

Source: Bloomberg

If Democrats are right, shit's about to get real...

Source: Bloomberg

The always unbiased UMich commentary makes sure to balance the positives of an admission that tariffs fears tumbled with some subjective view of the economy (as sentiment improved)

“Although consumers’ worries about tariffs appear to be gradually receding, they remain guarded about the overall strength of business conditions and labor markets,’’ Joanne Hsu, director of the survey, said in a statement.

The Michigan survey showed consumer views on the labor market remain soft, with nearly two-thirds expecting unemployment to rise in the year ahead. Concerns about joblessness have been worse among higher-educated and higher-income Americans than for other consumers.

UMich also makes a point of noting that more than 90% of interviews for this release were collected prior to the capture of Maduro in Venezuela.

Tyler Durden Fri, 01/09/2026 - 10:17

Happening Today: Trump Meeting With US Oil Execs From Exxon, Shell, Others, To Discuss Venezuela

President Trump is convening top oil executives at the White House on Friday as part of a push to steer U.S. companies toward investing in Venezuela’s struggling oil industry, CBS reported today.

Leaders from Chevron, Exxon, ConocoPhillips, Continental, Halliburton, HKN, Valero, Marathon, Shell, Trafigura, Vitol Americas, Repsol, Eni, Aspect Holdings, Tallgrass, Raisa Energy and Hilcorp are expected to attend, along with Secretary of State Marco Rubio, Energy Secretary Chris Wright and Interior Secretary Doug Burgum. Wright has already held separate talks with several executives earlier in the week.

According to the White House, the discussions will center on “investment opportunities that will restore Venezuelan oil infrastructure.”

Trump has argued that Venezuela’s vast oil reserves could help revive its economy while also benefiting U.S. consumers and energy companies. In a recent interview, he said he wants companies to commit at least $100 billion to “rebuild the whole oil infrastructure” in the country.

The administration has tightened pressure on Venezuela through a new oil “quarantine,” including the seizure of another tanker Friday, the fifth such action in recent weeks. Rubio said the strategy gives the U.S. “tremendous leverage” and that Washington plans to sell up to 50 million barrels of sanctioned crude on the open market, with the proceeds under U.S. control.

Chevron remains the only major U.S. oil producer still operating in Venezuela after the industry was nationalized under Hugo Chávez, and it is unclear how quickly other firms would move in. Analysts caution that high costs, political uncertainty and Venezuela’s history of asset seizures could slow new investment. Venezuelan crude is also heavy and more difficult to refine, though some Gulf Coast refineries are equipped to handle it.

Recall, we wrote Energy Sec. Chris Wright will be in Miami for the Goldman Sachs Energy, Clean Tech & Utilities Conference, a major industry gathering that will bring together executives from Chevron, ConocoPhillips and other producers. Chevron remains the only global oil supermajor maintaining operations inside Venezuela.

Bloomberg writes that despite Venezuela holding the world’s largest proven crude reserves, experts estimate restoring its oil system would require approximately $10 billion in investment every year for the next decade.

Industry participants say interest in the country is real, but the recent removal of President Nicolás Maduro alone is not enough to unlock capital. Companies want clarity on whether a durable government will emerge, whether contracts and the rule of law will be respected, and whether US political support for their presence in Venezuela will extend beyond Trump’s term in office.

Earlier this week we wrote that President Donald Trump said the US may subsidize American oil companies to help rebuild Venezuela’s energy sector, arguing the plan would strengthen Venezuela’s recovery and protect US economic interests after the removal of Nicolás Maduro.

In an interview with NBC News on Monday, Trump said US firms could have expanded operations in the country “up and running” in less than 18 months — a timeline that sharply conflicts with expert estimates that reconstruction could take a decade and cost more than $100 billion.

“I think we can do it in less time than that, but it’ll be a lot of money,” Trump said. “A tremendous amount of money will have to be spent and the oil companies will spend it, and then they’ll get reimbursed by us or through revenue.”

Tyler Durden Fri, 01/09/2026 - 10:05

US Adds Only 50K Jobs In December, Missing Estimates, But Unemployment Rate Drops To 4.4%

Ahead of today's jobs report, expectations were that the NFP number would show another rebound from the terrible Sept/Oct prints, but remain muted (or else spark fears about reheating and an end to the Fed's easing cycle). Well, that's precisely what we got moments ago when the BLS reported that in December the US gained 50K jobs, a modest miss to estimates of 50K, but smack in the middle of JPM's sweet spot range of 35K-75K (as previewed earlier) which would be best for the market.

The change in total nonfarm payroll employment for October was revised down by 68,000, from -105,000 to -173,000, and the change for November was revised down by 8,000, from +64,000 to +56,000. With these revisions, employment in October and November combined is 76,000 lower than previously reported. Notably, as shown in the chart below, the initial NFP print has now been revised lower in every single month of 2025.

While there was NFP print was on the weak side, there was a modest improvement in the unemployment rate, which dipped from a downward revised 4.5% (was 4.6% originally) to 4.4%, which still is the highest since 2021, save for Nov 2025. Among the major worker groups, the unemployment rates for adult men was 3.9%, adult women 3.9%, teenagers 15.7%, Whites 3.8%, Blacks 7.5%, Asians 3.6%, and Hispanics 4.9%.

Labor force participation dipped fractionally from 62.5% to 62.4%, in line with estimates. The employment-population ratio,  at 59.7%, was also unchanged in December. These measures have shown little change over the year.

While jobs came on the cool side, hourly earnings came slightly hot: rising 0.3% MoM, up from 0.2% in November (and in line with estimates), this translates to a 3.8% increase YoY, up from 3.6% and above the 3.6% expected.

Some more details from the report:

• The number of people jobless less than 5 weeks edged down to 2.3 million in December. The number of long-term unemployed (those jobless for 27 weeks or more) changed little over the month at 1.9 million but is up by 397,000 over the year. The long-term unemployed accounted for 26.0 percent of all unemployed people in December. 
• The number of people employed part time for economic reasons, at 5.3 million, changed little in December but is up by 980,000 over the year. These individuals would have preferred full-time employment but were working part time because their hours had been reduced or they were unable to find full-time jobs. 
• The number of people not in the labor force who currently want a job was little changed at 6.2 million in December but is up by 684,000 over the year. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job. 
• Among those not in the labor force who wanted a job, the number of people marginally attached to the labor force changed little at 1.8 million in December. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, decreased by 183,000 in December to 461,000. 

Taking a closer look at the Establishment survey, we find that employment continued to trend up in food services and drinking places, health care, and social assistance. Retail trade lost jobs. Payroll employment rose by 584,000 in 2025 (an average monthly gain of 49,000), less than the increase of 2.0 million in 2024 (an average monthly gain of 168,000). Here is the breakdown:

• Employment in food services and drinking places continued to trend up in December (+27,000). Food services and drinking places added an average of 12,000 jobs per month in 2025, similar to the average increase of 11,000 jobs per month in 2024.
• Health care employment continued its upward trend in December (+21,000), with a gain of 16,000 jobs in hospitals. Health care employment rose by an average of 34,000 per month in 2025, less than the average monthly gain of 56,000 in 2024.
• In December, employment in social assistance continued to trend up (+17,000), mostly in individual and family services (+13,000). 
• Retail trade lost 25,000 jobs in December. Over the month, employment declined in warehouse clubs, supercenters, and other general merchandise retailers (-19,000) and in food and beverage retailers (-9,000). Electronics and appliance retailers added 5,000 jobs. Retail  trade employment showed little net change in both 2024 and 2025. 
• Federal government employment was little changed in December (+2,000). Since reaching a peak in January, federal government employment is down by 277,000, or 9.2 percent. (Employees on paid leave or receiving ongoing severance pay are counted as employed in the establishment survey.) 
• Employment showed little or no change over the month in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; transportation and warehousing; information; financial activities; professional and business services; and other services.

And the visual breakdown:

Elsewhere, there were some notable improvements in other qualitative metrics we track, including the full/part-time breakdown, where last month's ugly push to Part-Time jobs was almost entirely reversed as full-time jobs rose 890K to 135.215MM, offset by a 740K plunge in part-time jobs -740K to 28.712MM...

... while the number of multiple jobholders slumped by 444K - the second biggest drop since Covid - to 8.848MM.

And one red flag: the number of native-born workers dropped by 656K to 132.6 million, while foreign-born workers rose by 310K to 32.426 million, a modest reversal of the trends observed in 2025.

Commenting on the data, TradeStation's head of market strategy, David Russell said that "the labor market has reached an equilibrium after a year of policy shocks. There are no red flags compelling the Fed to cut now. Inflation is a bigger factor on rates than employment, which focuses attention on next week’s CPI. Investors may see less impact from macro-level data in the next few months and more impact from company-level events like earnings."

Overall, this was a goldilocks report: neither too hot (with NFP missing) nor too cold (as unemp rate dropped), which leaves the Fed on autopilot and likely to cut at least 2 more times this year, absent any major changes.

Tyler Durden Fri, 01/09/2026 - 10:00

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,246,000. This is 4.6 percent below the revised September estimate of 1,306,000 and is 7.8 percent below the October 2024 rate of 1,352,000. Single-family housing starts in October were at a rate of 874,000; this is 5.4 percent above the revised September figure of 829,000. The October rate for units in buildings with five units or more was 347,000.

Building Permits:
Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,412,000. This is 0.2 percent below the revised September rate of 1,415,000 and is 1.1 percent below the October 2024 rate of 1,428,000. Single-family authorizations in October were at a rate of 876,000; this is 0.5 percent below the revised September figure of 880,000. Authorizations of units in buildings with five units or more were at a rate of 481,000 in October.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts since 2000.

Multi-family starts (blue, 2+ units) decreased month-over-month in October.   Multi-family starts were down 7.9% year-over-year.

Single-family starts (red) increased in October and were down 7.8% year-over-year.

The second graph shows single and multi-family housing starts since 1968.

Total housing starts in October were well below expectations.   We are still missing data for November due to the government shutdown.

I'll have more later …

Supreme Court Skips Tariff Ruling

Update (1004ET): The USSC did not rule on tariffs Monday, instead issuing a ruling on Bowe vs. United States - concerning whether federal prisoners can ask the Supreme Court to review their sentences. The case was sent back to a lower court.

And so, we wait. Wednesday is scheduled for the next round of opinions.

*  *  *

The US Supreme Court may rule today on the legality of President Trump's sweeping global tariffs, marking a major test of presidential powers. Specifically, the Court is considering whether Trump's use of the 1977 International Emergency Economic Powers Act (IEEPA) - which constitute about half of the tariffs we've seen under Trump.

As we noted yesterday, the court never says in advance which decisions are ready for release, only that rulings in argued cases are possible when the justices take the bench at 10:00 a.m. Washington time. That said, a tariff decision is a possibility given the court’s expedited handling of the case so far.

Trump invoked IEEPA to impose his 'reciprocal' tariffs on nearly every foreign trade partner to address what he called a national emergency over US trade deficits. He invoked it again to impose tariffs on China, Canada and Mexico over fentanyl trafficking into the United States. 

During arguments on Nov. 5, the court seemed skeptical over Trump's authority to use IEEPA, leading most observers observers, including betting markets, to conclude a high probability they're struck down at least in part. The Trump administration is appealing lower court rulings that he overstepped his authority, while Trump himself said a Supreme Court ruling against the tariffs would be a "terrible blow" to the United States.

That said, even if that happens, the Trump administration has several other legal avenues they can pursue. As Deutsche Bank notes; 

For instance, the sectoral tariffs (e.g. on steel and aluminum) aren’t covered by the court ruling, whilst another option would be to use Section 122 of the 1974 Trade Act, which permits temporary 15% tariffs for 150 days. 

 And Goldman:

This won’t be the end of tariffs… the administration will almost certainly roll out alternative legal frameworks. Net result is probably slightly fewer tariffs, materially more trade uncertainty, and some incremental deficit concerns. Net-net, that’s mildly supportive for equities and mildly negative for bonds… but largely priced for both.

The cases under consideration by the Supremes were brought by businesses affected by the tariffs and 12 mostly blue US states. 

The opinions will be available here.

Customs Gets Ready

In anticipation of a ruling against the tariffs, US Customs has set a new deadline for US importers to file for electronic refunds: February 6th.

The agency also published details of a new process on Jan. 2, which was established as part of a March 24 Trump executive order on modernizing government payments and phasing out physical checks, CNBC reports.

The new digital Customs system is called ACE (Automated Commercial Environment), a secure electronic portal allowing businesses to file import/export data, manage trade information, and comply with regulations. ACE will manage the ACH refunds.

Prior to this, importers had to manually set up an account in the ACH network with Customs to pay duties or receive funds by email. Once that email was received by Customs, someone in the agency had to enter the data and then confirm the account had been set up, according to Lori Mullins, director of operations at Rogers & Brown Custom Brokers.

The Court is also considering cases involving the 1965 Voting Rights Act, and a Colorado law banning psychotherapists from conducting "conversion therapy" to try and un-gay a child. 

Tyler Durden Fri, 01/09/2026 - 09:55

"World's Criminals On Notice": Trump's Gunboat Diplomacy Seizes Another Tanker In Caribbean

Update (0930ET):

Homeland Security Secretary Kristi Noem confirmed that U.S. Coast Guard forces "executed a boarding and seizure" of the motor tanker Olina in international waters east of the Caribbean Sea.

Noem said Olina was part of a vast network of so-called "ghost fleet" tankers suspected of carrying embargoed oil. She stated that the ship had departed Venezuela and was attempting to evade U.S. forces.

She added that the operation was conducted in close coordination with the Department of Defense, the State Department, and the Department of Justice.

"The ghost fleets will not outrun justice. They will not hide under false claims of nationality. The Coast Guard will seize sanctioned oil tankers, enforce U.S. and international law, and eliminate these funding streams for illicit activity, including narco-terrorism," Noem said.

The world’s criminals are on notice.

Early this morning, the @USCG executed a boarding and seizure of the Motor Tanker Olina in international waters east of the Caribbean Sea. As another "ghost fleet" tanker ship suspected of carrying embargoed oil, this vessel had departed… pic.twitter.com/vvS3u3nrvl

— Secretary Kristi Noem (@Sec_Noem) January 9, 2026

U.S. forces, under President Trump's Western Hemisphere reposturing and gunboat diplomacy against Venezuela, have now seized five tankers. We expect these seizures to increase as efforts to dismantle this tanker network expand.

Trump has requested a 50% increase in the U.S. military budget to $1.5 trillion by 2027, suggesting that pushing China and Russia out of the Western Hemisphere and asserting control in what is called 'Donroe Doctrine' will come at high cost.

*   *   * 

The foreign policy move to dismantle the so-called "dark fleet" of crude oil tankers moving Venezuela's oil around the world, through President Trump's gunboat diplomacy to secure the Western Hemisphere, was once again on full display on Friday morning.

The Wall Street Journal reported that the U.S. Coast Guard forces boarded a fifth oil tanker, Olina, as part of a widening blockade targeting sanctioned dark-fleet vessels.

Olina, previously sanctioned for transporting Russian oil, was last tracked near Venezuela.

OLINA (9282479) belongs to an extremely exclusive club of naughty tankers. pic.twitter.com/9yKRziKvat

— TankerTrackers.com, Inc. (@TankerTrackers) January 9, 2026

The seizure of Olina is likely to further ignite tensions between Washington and Moscow, days after the US seized Marinera (formerly Bella 1) in the North Atlantic. Russia previously told the US not to seize Bella 1, which was shadowed by Russian Navy assets.

Latest from the Western Hemisphere:

• Donroe Doctrine: US Seizes Russian-Flagged Tanker In Atlantic, Intercepts Dark-Fleet Ship In Caribbean

• Chevron Contracts 11 Tankers For Venezuela Port Calls As Don-Roe Doctrine Begins

• The "Don-Roe Doctrine" Has Already Set The Tone For 2026

• White House Mulls Payments Up To $100,000 Per Greenlander To Join US

• US Plans To Keep Troops In Caribbean Through 2028, Planning Docs Show

The Trump administration is using these seizures to dismantle Venezuela's dark fleet of about 1,000 tankers that evade sanctions - a network that carries about 70% of the country's oil exports, much of which ends up in Asia.

Marco Rubio said earlier this week that the blockade provides maximum leverage over Caracas, while also warning Russia, China, and Iran against backing Venezuela. This gunboat diplomacy is supported by the U.S. Navy, including the USS Gerald R. Ford, and backed by Justice Department resources, signaling that more tanker seizures are just ahead.

Tyler Durden Fri, 01/09/2026 - 09:30

Meta Signs Massive Nuclear Energy Deal

Meta revealed this morning a slew of new agreements with key players in the nuclear power industry, in an urgent bid to provide clean energy for its rapidly expanding data center empire.

The initial plan is to offtake over 2000 MW of power from nuclear power plants owned by Vistra energy in Ohio, assist with fast tracking two reactors from TerraPower, and send a pre-payment to Oklo for securing nuclear fuel and advancing the first stage of a project in Ohio.

Shares of VST and OKLO spiked about 10% and 20%, respectively, in the premarket.

As we’ve noted repeatedly over the past year, there never seems to be enough power for data centers, which is why today's agreement is likely just the first step of many such deals. This latest plan unveils a roadmap for upwards of 6.6 GW of power, enough to power about 5 million American homes.

Instead, Meta will thankfully be using this new power for a higher calling: ensuring you get just the right ads on your Instagram feed coupled with more AI slop videos. Why pay for rent when you can have targeted advertising, sending you power bills sharply higher?

Impressively claiming that multiple gigawatts of nuclear energy isn’t enough, the 20-year power purchase agreement with Vistra will be used to finance over 400 MW of power up rates at existing nuclear plants in Ohio in Pennsylvania.

While keeping to the nuclear theme but executing a heavy shift from time-tested light water reactors to comparatively untested liquid sodium reactors, Meta has also signed deals for additional expansion plans with Oklo and TerraPower after the initial phase described above.

Bill Gates' TerraPower will provide up to six additional reactor plants, which hold power peeking abilities of about 500 MW each, for Meta’s data centers. Oklo will also commence the development of their newly announced nuclear energy campus in Ohio with a goal of 1200 MW of sodium cooled reactor power production.

There seems to be an interesting split in the preference of technology between hyperscalers and the US government. The Department of Energy recently dumped $400 million each for light water reactor developers GE Vernova and Holtec for their 300 MW designs, while hyperscalers seem to be preferring light water only when they are already built and operating. Outside of the existing plants, the tech giants like Google, Amazon, and Meta have signed major agreements with the more novel plant designers with reactors in the liquid sodium and molten salt categories.

Even taking in account the billions of dollars invested in advanced nuclear, only half the headaches are addressed by conquering the engineering headaches of designing and constructing these novel plants. Consistent operations with high uptime could take years to master, as evidenced by how many decades it took the large light water reactor fleet to reach their golden 90%+capacity factor.

Tyler Durden Fri, 01/09/2026 - 09:26

The headline jobs number in the December employment report was slightly below expectations, however October and November were revised down by 76,000. The unemployment rate decreased to 4.4%.
Earlier: December Employment Report: 50 thousand Jobs, 4.4% Unemployment Rate
Prime (25 to 54 Years Old) Participation

Since the overall participation rate is impacted by both cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

The 25 to 54 years old participation rate was unchanged in December at 83.8%% from 83.8% in November.
The 25 to 54 employment population ratio increased to 80.7% from 80.6% the previous month.
Both are down slightly from the recent peaks, but still near the highest level this millennium.

Average Hourly Wages

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees from the Current Employment Statistics (CES).  
There was a huge increase at the beginning of the pandemic as lower paid employees were let go, and then the pandemic related spike reversed a year later.

Wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 3.8% YoY in December, up from 3.6% YoY in November. 
Part Time for Economic Reasons

From the BLS report:

"The number of people employed part time for economic reasons, at 5.3 million, changed little in December but is up by 980,000 over the year. These individuals would have preferred full-time employment but were working part time because their hours had been reduced or they were unable to find full-time jobs."

The number of persons working part time for economic reasons decreased in December to 5.34 million from 5.49 million in November.  This is well above the pre-pandemic levels and near the highest levels since mid-2021.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 8.4% from 8.7% in November. This is down from the record high in April 2020 of 22.9% and up from the lowest level on record (seasonally adjusted) in December 2022 (6.6%). (This series started in 1994). This measure is well above the 7.0% level in February 2020 (pre-pandemic).

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.95 million workers who have been unemployed for more than 26 weeks and still want a job, up from 1.91 million in November.
This is down from post-pandemic high of 4.171 million, and up from the recent low of 1.056 million.

This is above pre-pandemic levels.

Summary:

The headline jobs number in the December employment report was slightly below expectations, however October and November were revised down by 76,000.  The unemployment rate decreased to 4.4%.
This was another weak employment report.  

Ukraine Hit With Oreshnik Hypersonic As Retaliation For Attempted 'Terror Attack' On Putin Residence

Russia launched another massive overnight strike on Ukraine using its hypersonic Oreshnik missile as part of a large-scale assault said to be retaliation for the alleged Ukrainian attempt to drone strike Putin's residence last month.

Kiev was hit hard in the fresh missile and drone attack which set apartment buildings on fire and killed at least four people. Importantly, Ukrainian officials said a ballistic missile traveling at hypersonic speed hit an "infrastructure facility" near the far western city of Lviv.

via AFP

Russia's Defense Ministry followed by confirming that it sent an Oreshnik hypersonic missile at "strategic targets" overnight, and specifically described that it was retaliation for the December drone strike on one of the residences of President Vladimir Putin.

Ukraine has rejected that it targeted the residence, and President Trump recently flipped his initial position that it happened. The White House now says it has more intelligence information, and Trump has expressed that while drones were in the area that night, Putin's residence was not directly targeted.

Former career State Dept official highlights the timing of the rare hypersonic missile strike on Ukraine, linking it with the latest Russian 'dark fleet' tanker seizure in the Atlantic:

Reports of #Oreshnik attacks in Lvov oblast, presumably is response to US seizure of a Russian ship & drone attacks on strategic targets in Russia.

The Russians are sending a message: See what we can do! Better back off! Are you listening now? Don't make us angry!

But the…

— Jim Jatras (@JimJatras) January 9, 2026

The Ukrainian Air Force reported that the ballistic missile traveled at roughly 13,000 kilometers (8,000 miles) per hour and was observed shortly before midnight (local).

NEW: Video reportedly showing the “Oreshnik” attack on Lviv. pic.twitter.com/FaCzTD461Z

— Clash Report (@clashreport) January 8, 2026

The last well-publicized use of an Oreshnik missile with a conventional warhead by Russia had reportedly hit the central Ukrainian city of Dnipro in late 2024. Its use has marked a significant milestone in the war.

This new, rare hypersonic attack on Lviv - a city not very often targeted - also seems aimed at the West and NATO. The Kremlin is warning that it will not tolerate any 'peace plan' which features Western boots on the ground in Ukraine to 'monitor' a future ceasefire.

Any such deployment would be "considered legitimate military targets" - according to Russian Foreign Ministry spokeswoman Maria Zakharova, who also charged that Zelensky's American and European are forming an "axis of war."

Drones were observed flying low over Kiev for much of the night, terrifying residents...

Three people killed and six more injured by the Russian attack on Kyiv tonight.

The attack continues, Russian drones are all over the city, Kalibr missiles expected to strike soon. https://t.co/XSOLNpb4U9 pic.twitter.com/jrnRNa3Vpx

— Anton Gerashchenko (@Gerashchenko_en) January 9, 2026

Ukrainian Mayor Vitali Klitschko called the damage in Kiev the result of a "massive enemy missile attack." According to the statement carried in Russian media:

The overnight bombardment was carried out in response to an attempted “terrorist attack by the Kiev regime” on the residence of Russian President Vladimir Putin in Novgorod Region, the ministry said in a statement on Friday.

Further the Russian Defense Ministry said "The objectives of the strike have been achieved," adding that "None of the terrorist actions by the criminal Ukrainian regime will go unanswered." This puts peace on a far back seat, despite the latest Paris summit of European and world leaders.

Tyler Durden Fri, 01/09/2026 - 09:15

The post Jobs Report and Remembering Renee Good appeared first on CEPR.

From the BLS: Employment Situation

Both total nonfarm payroll employment (+50,000) and the unemployment rate (4.4 percent) changed little in December, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in food services and drinking places, health care, and social assistance. Retail trade lost jobs.
...
The change in total nonfarm payroll employment for October was revised down by 68,000, from -105,000 to -173,000, and the change for November was revised down by 8,000, from +64,000 to +56,000. With these revisions, employment in October and November combined is 76,000 lower than previously reported.
emphasis added

Click on graph for larger image.

The first graph shows the jobs added per month since January 2021.

Total payrolls increased by 50 thousand in December.  Private payrolls increased by37 thousand, and public payrolls increased 13 thousand.

Payrolls for October and November were revised down by 76 thousand, combined.  The economy has only added 93 thousand jobs since April (8 months).
The second graph shows the year-over-year change in total non-farm employment since 1968.

In December, the year-over-year change was 0.594 million jobs.  
Year-over-year employment growth has slowed sharply.



The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate decreased to 62.4% in December, from 62.5% in November. This is the percentage of the working age population in the labor force.

The Employment-Population ratio increased to 59.7% from 59.6% in November (blue line).
I'll post the 25 to 54 age group employment-population ratio graph later.



The fourth graph shows the unemployment rate.

The unemployment rate was decreased to 4.4% in December from 4.5% in November.  

This was slightly below consensus expectations, however, October and November payrolls were revised down by 76,000 combined.
Overall another weak report.
I'll have more later ...

Futures Muted Ahead Of Two Key Events

Stock futures are muted, with traders awaiting two major catalysts: A possible Supreme Court ruling on whether Trump’s tariffs are legal and December payrolls — a key datapoint for the trajectory of interest rates. As of 8:00amm, S&P 500 futures are up 0.1%, with Nasdaq 100 contracts +0.2% with Mag 7 stocks mixed premarket. Mortgage stocks jump after President Donald Trump said on his social media platform that he was directing the purchase of $200 billion in mortgage bonds. LoanDepot (LDI) +16%,  Rocket Cos (RKT) +5%. A four-day streak of gains set the greenback on course for its best week since November, with the yen losing the most ground among major peers. Treasuries extended Thursday’s slide, with the 10-year rate rising two basis points to 4.18% as investors braced for Friday’s payrolls report and a possible Supreme Court ruling on President Donald Trump’s tariffs. Commodities are mixed: oil and silver rallied 0.5% and 1.3%, respectively, while base metals are mostly lower this morning. Today's US economic calendar includes December jobs report and October housing starts (8:30am), January preliminary University of Michigan sentiment (10am) and 3Q household change in net worth (12pm). Scheduled Fed speakers include Kashkari (10am), Bostic (12pm) and Barkin (1:35pm). We also get the Supreme Court ruling on Trump’s tariffs, typically released at 10am New York time.  

In premarket trading,  Mag 7 stocks are mixed (Alphabet +0.8%, Nvidia +0.3%, Apple +0.08%, Tesla +0.4%, Meta -0.2%, Microsoft -0.4%, Amazon -0.4%). 

• Mortgage stocks jump after President Donald Trump said on his social media platform that he was directing the purchase of $200 billion in mortgage bonds. LoanDepot (LDI) +16%,  Rocket Cos (RKT) +5%.
• Aquestive Therapeutics (AQST) slumps 47% after flagging an FDA saying the agency has identified deficiencies that preclude labeling discussions for Anaphylm at this time.
• AXT Inc. (AXTI) slides 14% after the semiconductor company’s fourth-quarter revenue forecast disappointed. The firm said revenue was impacted by fewer-than-expected export control permits for indium phosphide being issued by China’s Ministry of Commerce.
• Intel (INTC) is up 2% after President Donald Trump praised Intel CEO Lip-Bu Tan on social media after a meeting between the two.
• Oklo (OKLO) rises 19% and Vistra (VST) rallies 14% as Meta Platforms agreed to a series of electricity deals for its data centers that will make it the biggest buyer of nuclear power among its hyperscaler peers.
• Olin (OLN) is down 8% after the chemicals company forecast adjusted Ebitda for the fourth quarter that missed the average analyst estimate.
• Revolution Medicines (RVMD) gains 13% after the Financial Times reported that Merck is in talks to buy the cancer drugmaker.
• WD-40 Co. (WDFC) slumps 7% after the lubricant spray maker posted disappointing earnings per share for the first fiscal quarter, where sales increased only 1% from the year-ago period.

In other corporate news, Rio Tinto is in talks to buy Glencore to create the world’s biggest mining company with a combined market value of more than $200 billion. In tech, TSMC’s quarterly sales beat estimates, bolstering hopes for sustained global AI spending in 2026. Elon Musk’s AI startup xAI burned $7.8 billion in cash in the first nine months of the year, according to internal documents. General Motors shares are lower in premarket trading after it announced another $6 billion in charges tied to cutbacks in its electric vehicle and battery operations. And Johnson & Johnson, one of 17 companies Trump called on last summer to cut drug prices, reached a deal with the government to do so for some Americans.

The S&P 500’s early-year rally has gone off the boil over the past two sessions. The period has been marked by rotation away from some of the past years’ biggest artificial-intelligence names toward a broader set of tech players and sectors, with investors largely united in seeing the bull run continue.

Meanwhile, traders are preparing for two back-to-back risk events on Friday that may offer global equities their biggest test since a rebound from April’s tariff-driven slump. The payrolls data for December is particularly important for the clues it will offer on the outlook for US interest rates. Also on Friday we get the SCOTUS ruling on Trump tariffs: If the Supreme Court rules against Trump’s tariffs — with betting markets seeing a good chance of this — there are two schools of thought on how markets will react.

Stocks could rip on the prospect of a boost to company profits and consumer spending, while there may also be some relief that Trump’s excesses can be curbed. In the week since the US raid on Venezuela, Trump has threatened military strikes against drug cartels, told defense contractors to end buybacks and dividends, pledged to stop institutional investors buying more homes, and told Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds. Conversely, stocks may not like the prospect of lower Federal revenues and a wider deficit that pushes Treasury yields higher at a time when economic data give the Fed little reason to cut rates again anytime soon. See our Trader’s Guide to the decision.

“Returning those funds would weigh heavily on investor sentiment and could reignite a US bond selloff,” wrote Ipek Ozkardeskaya, senior analyst at Swissquote. “That said, US budget concerns have a long track record of being forgotten quickly. With or without tariffs, US debt continues to balloon.”

According to Goldman, NFP matters more. with Goldman expecting around 70k, in line with consensus. There are signs of labor-market stabilization. The Challenger data yesterday stood out… “The year closed with the fewest announced layoff plans all year… while December is typically slow, this coupled with higher hiring plans is a positive sign after a year of high job cutting plans.” If unemployment ticks down and NFP prints north of ~125k, that’s where rate volatility reawakens (bond vol small uptick). The sanguine rates view has been anchored on labor deceleration… but despite secular AI forces, overall GDP strength may matter more.

“The market is hoping for the jobs data to land on the fairway. Too much job creation would hint the economy is getting hot while a number close to zero would point, in contrast, to a slump,” said David Kruk, head of trading at La Financiere de l’Echiquier. “Neither option is good.”

The options market is signaling a muted S&P 500 reaction, with about a 0.6% move expected in either direction. JPMorgan’s head of global market intelligence, Andrew Tyler, expects the print to be in line or slightly stronger than consensus, triggering modest stock-index gains. Here is JPM's reaction matrix (full preview here).

• Above 105k. SPX is down 0.5% – 1%: probability 5%
• Between 75k – 100k. SPX gains 0.25% to 1%: probability 25%
• Between 35k – 75k. SPX gains 0.25% – 0.75%; probability 40%
• Between 0k – 35k. SPX loses 0.25% to gains 0.5%: probability 25%
• Below 0k. SPX is down 0.5% to 1.25%: Probability 5%

The tariff decision and jobs data will land in a surprisingly calm backdrop. The VIX — historically volatile in the first quarter — has been remarkably subdued amid a whirlwind of geopolitical news in the first week of 2026. In flows, money market funds attracted their third-largest weekly inflows ever, with the first week of the year typically strong for these funds, while US equities had outflows, Bank of America said.

In Europe, Stoxx 600 is up 0.5% with mining shares among the biggest gainers, after Rio Tinto and Glencore held talks to form the world’s largest miner. Technology and consumer stocks outperform, while insurers lag.Here are some of the biggest movers on Friday:

• Glencore shares rise as much as 9.9% in London, hitting the highest since July 2024, after the miner confirmed it is in talks with Rio Tinto for a potential combination of some or all of their businesses including an all-share takeover, which would create the world’s biggest mining company.
• Tecan shares rise as much as 9%, the most since August, after the Swiss maker of laboratory equipment reported order growth in the second half of 2025 that was better than expected.
• L’Oreal shares rise as much as 5.1%, the most since July, as UBS upgrades the cosmetics group to buy from neutral, predicting an improvement in industry growth and the cosmetics group’s like-for-like sales outperformance.
• TeamViewer shares rise as much as 8.4%, the most since September, after the software company reported FY25 sales in line with lowered estimates following a profit warning in October.
• Yara International shares climb as much as 2.8% after the fertilizer company outlined ambitions to grow free cashflow by $600m by 2030, compared to 2024 levels, ahead of its capital markets day.
• Sainsbury’s shares drop as much as 6.4% after the UK grocer reported disappointing sales for the holiday period. Analysts noted that while food sales were good, the non-food units (general merchandise, clothing and Argos) were weaker than expected and indicate ongoing consumer uncertainty.
• Sartorius shares drop as much as 2.9% after RBC Capital Markets cut its rating on the stock to sector perform from outperform, citing “likely cautious industry commentary and strong share outperformance.”
• SocGen shares fall as much as 2.6% after Kepler Cheuvreux cut its recommendation to reduce from buy following a rally over the past three months.
• Euronext shares fall as much as 3.8% after BofA Global Research cut its rating to neutral due to high trading comps in 1H as volatility subsides.

Asian stocks fluctuated, with Japan outperforming regional peers, as investors awaited key US economic data and a possible US Supreme Court ruling on US tariffs.
The MSCI Asia Pacific Index rose as much as 0.4% before paring gains, putting it on track for a weekly gain of about 1.6%, which would mark its best full week at the start of a year since 2023. Japanese stocks climbed as the yen weakened against the dollar and Fast Retailing reported strong earnings. Benchmarks also rose in South Korea, Hong Kong and China, while Taiwan slipped. Asian equities have had a mostly strong start in 2026, helped by continued enthusiasm over artificial intelligence, though geopolitical tensions have sparked some concerns. Investors are now focused on a potential decision by the top US court as early as Friday on the legality of President Donald Trump’s tariffs, with large implications for Asian exporters. Next week, results are due from companies including TSMC and Tata Consultancy Services. Investors also await South Korea’s monetary policy meeting and Japan’s producer price data. 

In FX, the dollar rises for a fourth consecutive session to the highest in a month, up against most major currencies ahead of payrolls data and a potential Supreme Court decision on President’s Trump’s tariffs. The yen is underperforming.

In rates, treasuries are weaker, with 10-year yields up about two basis points. Bonds across Europe and the UK little changed, though gilts are on track for the best week in months. Treasuries futures hold small losses in early US trading, near session lows with yields 1bp-2bp higher, underperforming European bond markets slightly. Move unwinds the late Thursday rally for long-end tenors — and related move in swap spreads — that followed Trump’s directive that Fannie Mae and Freddie Mac purchase $200 billion in mortgage bonds.  US 10-year yield near 4.185% is about 2bp higher on the day with German and UK counterparts little changed. Curve spreads are little changed, with 5s30s around 110bp, holding Thursday’s flattening move. Ahead of jobs report, swap contracts price in about 10bp of Fed easing is price in over January and March policy meetings; median economist estimate is for 70k nonfarm payrolls increase vs 64k in November; crowd-sourced whisper number is 69k. Focal point’s of Friday’s US session include December jobs report and potential Supreme Court ruling on Trump’s tariffs, typically released at 10am New York time.  

In commodities, oil held onto its biggest daily gain since October, as Iran attempted to quell escalating protests while Trump threatened repercussions if demonstrators were targeted. Trump also said that a second wave of attacks on Venezuela was called off due to improved cooperation from the authorities. Brent now up 0.9%, trading above $62/barrel. Gold prices little changed, silver rebounding and copper pushing closer to $13,000/ton.

Today's US economic calendar includes December jobs report and October housing starts (8:30am), January preliminary University of Michigan sentiment (10am) and 3Q household change in net worth (12pm). Scheduled Fed speakers include Kashkari (10am), Bostic (12pm) and Barkin (1:35pm). We also get the Supreme Court ruling on Trump’s tariffs, typically released at 10am New York time.  

Market Snapshot

• S&P 500 mini little changed
• Nasdaq 100 mini +0.2%
• Russell 2000 mini +0.1%
• Stoxx Europe 600 +0.4%
• DAX little changed, CAC 40 +0.6%
• 10-year Treasury yield +2 basis points at 4.19%
• VIX +0.2 points at 15.65
• Bloomberg Dollar Index +0.2% at 1211.28
• euro -0.2% at $1.164
• WTI crude +0.5% at $58.02/barrel

Central Banks

• BoJ officials are set to keep rates on hold this month, Bloomberg reported citing sources; adds that officials have no preconceptions on the pace of hiking rates. Officials see little need to shift underlying inflation view. Will closely watch impact of weakening JPY. Likely to raise economic growth outlook on stimulus. The Bank is said to weigh downgrade of CPI outlook on government measures.
• ECB's Radev said the current level of rates is appropriate.
• TD is now expecting the RBA to raise rates by 25bps at its next meeting in February.
• Thai Central Bank Chief said gold trading has significant impact on Thai Baht.

Top Overnight News

• Trump directed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds to bring down housing-loan rates. Mortgage debt and US home-lender stocks rose premarket. BBG
• The US Supreme Court will probably rule that the Trump administration’s fentanyl and reciprocal trade tariffs are unlawful, in a decision that may come today. But any refunds probably wouldn’t be immediate and other statutes may be used to recreate the levies. BBG
• Trump on Venezuela: "I cancelled the previously expected second Wave of Attacks, which looks like it will not be needed, however, all ships will stay in place for safety and security purposes". Trump also said Thursday that the world’s largest oil companies had pledged to spend $100 billion to fulfill his promise of reviving Venezuela’s flagging oil sector. Politico
• US shale bosses have warned Trump that his mission to seize Venezuela’s oil sector and drive down crude prices will put American output on the chopping  block. Trump is set to meet US Big Oil chiefs on Friday, and said Venezuela is cooperating and “cancelled” a second wave of attacks on the country. FT, BBG
• Treasury Secretary Bessent said US won't force institutional investors to divest from home buying, also said lowering the suspicious activity report threshold to USD 3,000 and noted probe related to money services businesses in Minnesota.
• Meta signed a series of electricity deals for its data centers, making it the biggest buyer of nuclear power among its peers. BBG
• Majority of US House voted to support the bill to renew health insurance subsidies for three years.
• China’s consumer inflation picked up modestly in December, while factory-gate prices remained in contraction, capping another year marked by persistent deflationary pressures amid weak domestic demand. Dec CPI comes in at +0.8% (inline w/the Street and up from +0.7% in Nov) while the PPI improved to -1.9% (up from -2.2% in Nov and vs. the Street -2%) WSJ
• Chinese crackdowns on chemicals used to make illicit fentanyl may have played a significant role in the sharp reduction of US overdose deaths. WaPo
• Hedge funds made their largest asset gains on record in 2025, as investors shift away from struggling private equity investments and seek to offset exposure to equities amid concerns about a bubble. The size of the global HF industry increased by about $628 bn in 2025. FT
• South Korean Finance Ministry said will allow around-the-clock FX trading from July. said: To explore the possibility of joining CPTPP. To bring in various improvements to stock and forex markets for MSCI upgrade. To prepare policy support for semiconductor defence, biopharmaceutical, petrochemical, steel and steel industries. To introduce digital asset spot ETFs. USD 350bln in US investment package is to bolster shipbuilding and nuclear energy sectors.

Trade/Tariffs

• US GOP is reportedly pushing ahead to prevent China from getting access to US tech such as chips, via Axios.
• EU decision on Mercosur should come before 16:00GMT, Politico reported. Examination of the safeguard text will begin at around 10:00GMT. Italy is reportedly still weighing how much backlash it can absorb before agreeing to the deal, according to the diplomats cited. Italy continues to edge closer to supporting the agreement.
• Japan's Finance Minister Katayama will meet counterparts in Washington between January 11th to 14th on rare earth supplies.
• US President Trump posted that data shows the US has the lowest trade deficit since 2009, and is going even lower, adds GDP is predicted to come in at over 5%, and success of the country is due to tariffs.
• Japanese food and alcohol products are reportedly seeing customs delays in China, according to Nikkei.
• UK PM Starmer will exclude the City of London from his push for “closer alignment” with the EU, following lobbying by financial services firms against any return to Brussels rule, FT reported.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks followed suit to the mixed performance on Wall Street with the regional bourses predominantly in the green, albeit with traders bracing for the US Non-Farm Payrolls report and a potential Supreme Court's ruling on tariffs. ASX 200 was ultimately flat as strength in energy and consumer stocks was offset by losses in financials, tech and mining, while Rio Tinto shares fell by more than 6% after reports that the Co. and Glencore revived merger talks. Nikkei 225 outperformed following the stronger-than-expected Household Spending data from Japan, which showed surprise Y/Y growth of 2.9% (exp. -0.9%), while the gains were led by index heavyweight Fast  Retailing after it posted higher profits and upgraded its guidance. Hang Seng and Shanghai Comp were indecisive after mixed inflation data from China and the substantial weekly liquidity drain by the PBoC, while there was a mixed reaction in tech stocks following reports that China is to approve some NVIDIA (NVDA) H200 purchases as soon as this quarter.

Top Asian News

• Japan megabanks are to jointly lend USD 1.5bln to the Saudi government.
• Capital Economics said regarding China's inflation that the recent pickup in consumer inflation in China was driven by temporary factors like weather-related food price hikes and not successful policy measures. said:With these disruptions easing, headline inflation could turn negative again.
• South Korea's Blue House said President Lee and Japanese PM Takeichi are to discuss regional peace and stability and rapidly changing global politics, while the sides may discuss China-Japan disputes at their summit next week.
• China's Vice Premier Ding Xuexiang met with Disney's (DIS) CEO in Beijing and said they welcome companies to invest in China, according to Xinhua.
• Mediatek (2454 TT) 2025 Revenue +12.3% Y/Y.
• Acer (2353 TT) - FY25 (TWD): Revenue 28.5bln (prev. 24.5bln Y/Y).
• TSMC (2330 TT) December (TWD) rev. 335.0bln (prev. 343.6bln M/M), 2025 rev. rose 32% Y/Y to 3.81tln.

European equities (STOXX 600 +0.4%) have opened mostly on a strong footing, tracking tailwind from APAC which finished higher after tentative trade during most part of the session. European sectors have opened slightly skewed to the green. Basic Resources is boosted by upside in Glencore (+8%) after the Co. and Rio Tinto (-2%) resumed talks on a mining megadeal. Elsewhere, ASML (+4.4%) jumps following strong Q4 TSMC (+0.7% pre-market) earnings, where its revenue jumped 20%.

Top European News

• German Industrial Production MoM (Nov) M/M 0.8% vs. Exp. -0.4% (Prev. 1.8%); driven mainly by autos.
• German Balance of Trade (Nov) 13.1B vs. Exp. 16.5B (Prev. 16.9B, Rev. 16.9B).
• German Imports MoM (Nov) M/M 0.8% vs. Exp. 0.2% (Prev. -1.2%).
• German Exports MoM (Nov) M/M -2.5% vs. Exp. 0% (Prev. 0.1%).

FX

• DXY has been edging higher since APAC trade as traders position for the US jobs report, with the US data yesterday also pointing to no imminent meltdown in the labour market (with the 4-week initial claims average hitting its lowest level since April 2024, while Revelio estimated growth of 71k jobs). Headline nonfarm payrolls are expected to be relatively in line with the prior. Consensus looks for 60k nonfarm payrolls to be added to the economy vs the 64k in November.
• JPY is the laggard amid a double-whammy from the firmer USD alongside net-dovish BoJ sources, via Bloomberg, which suggests BoJ officials are set to keep rates on hold this month, and that officials have no pre-conceptions on the pace of hiking rates. USD/JPY looks set to test a couple of resistance levels (19th Dec high at 157.76 and the 20th Nov peak at 157.89) ahead of 158.00.
• Elsewhere, G10s are broadly lower with the antipodeans among the worst performers despite firmer copper prices and positive risk sentiment, but after Chinese CPI Y/Y missed forecasts. European FX are mildly pressured by the USD with region-specific catalysts on the lighter end. EUR/USD saw no reaction to above-forecast November Retail Sales or commentary from ECB’s newest member Radev, who joined as Bulgaria officially adopted the EUR.

Fixed Income

• A contained session for fixed income as we count down to US NFP.
• Into that, USTs are holding in a narrow 112-05 to 112-12+ band. As it stands, markets ascribe around a 13% chance of a cut in January, with a move not implied until the June meeting, where there are c. 22% implied odds for a hold. For 2026 as a whole, pricing currently looks for the Fed Funds Rate to end the year in a 3.00-3.25% band vs the current 3.50-3.75%, according to CME FedWatch.
• Bunds are also rangebound. No move to the morning's very strong November Industrial Production, a series that was driven primarily by 7.8% M/M growth in autos. That aside, specifics for EGBs are a little light with all eyes on NFP. For the bloc, we await the EU-Mercosur deal vote; it should pass; however, the support of Italy is not guaranteed, but is needed to hit the 'qualified majority' rule. On that point, France is set to vote against the Mercosur deal, as things currently stand with the safeguards.
• China's Finance Ministry sold 10-year bonds with the yield at 1.8627%. Into this, the OAT-Bund 10yr yield spread remains steady around the 70bps mark.
• US FHFA Director Pulte said President Trump's USD 200bln mortgage bond order can be executed quickly and that Fannie Mae and Freddie Mac have cash to buy.
• US President Trump instructing representatives to buy USD 200bln in Mortgage Bonds to drive down mortgage rates and make cost of owning a home more affordable.

Commodities

• Following Thursday’s bid higher, which saw WTI Feb return above USD 58/bbl and Brent Mar briefly topping beyond USD 62/bbl, benchmarks have fallen back lower at the start of Friday’s European session. WTI and Brent extended the lower bound of APAC’s USD 0.55/bbl range to trough at USD 57.62/bbl and USD 61.83/bbl respectively before rebounding to USD 58/bbl and USD 62.20/bbl.
• Spot XAU started the Asia-Pac session on the backfoot, slowly falling from USD 4484/oz to USD 4453/oz, before oscillating in a tight c. USD 25/oz band as the European morning continues as markets await the highly-anticipated NFP report and the potential SCOTUS tariff decision.
• After 2 days of selling from its ATH at USD 13.39k/t, 3M LME Copper has started to rebound from Thursday’s trough of USD 12.52k/t and is currently trading at USD 12.92k/t as the European session continues. The recent selloff in red metal comes amid a selloff in the tech-heavy NQ, with copper being a much-needed material in the semiconductor space.
• Senior Thai Financial Official said they are looking into potential tax measures on gold trading and/or imports.
• US shale chiefs warned that Venezuelan oil will hobble US drillers and that the President’s effort to reduce crude prices will hurt the sector struggling to sustain production growth, according to FT.
• US President Trump said companies will spend at least USD 100bln in Venezuela and he is meeting with oil executives on Friday.
• Marathon Petroleum (MPC) reportedly interested in Venezuelan oil and plans to submit a bid.
• US Interior Secretary Burgum said the US is ending the discount on Venezuelan oil for China. Knocking Russia out of the Venezuelan oil market. Venezuela won't use Russian diluent anymore.
• Russian crude oil production came in at 9.33mln BPD in December, Bloomberg reports; over 100k BPD below November's level due to drone activity and the impact of sanctions.

Geopolitics: Ukraine 

• Russian drone attack on Kyiv causes explosions and triggers a fire, according to the mayor.
• US Interior Secretary Burgum said the US is ending discount on Venezuelan oil for China. Knocking Russia out of the Venezuelan oil market. Venezuela won't use Russian diluent anymore.

Geopolitics: Middle-East

• Iran Supreme Leader Khamenei said US President Trump should focus on running his own country. Iran won't back down in the face of vandalism. Will not tolerate foreign-backed operatives.
• Iran's Supreme Leader Khamenei is to give a speech about protests momentarily, according to state media.
• Iranian state media claimed that terrorist agents from the US and Israel set fires and sparked violence on the streets amid unrest, according to Sky News.
• Palestinian media reported Israeli raids continue on various areas of the Gaza Strip, according to Sky News Arabia.
• Israel rejected Lebanon's claim that Hezbollah has been disarmed, saying the effort is far from sufficient and that the group is rearming with Iranian support.

Geopolitics: Other

• Iran Supreme Leader Khamenei said US President Trump should focus on running his own country. Iran won't back down in the face of vandalism. Will not tolerate foreign-backed operatives.
• China's Foreign Ministry, on US President Trump's remarks on Taiwan, said there is no room for any external interference and the issue is purely an internal matter.
• Iranian state media claimed that terrorist agents from the US and Israel set fires and sparked violence on the streets amid unrest, according to Sky News.
• South Korea's Blue House said President Lee and Japanese PM Takeichi are to discuss regional peace and stability and rapidly changing global politics, while the sides may discuss China-Japan disputes at their summit next week.
• US President Trump said they will start hitting cartels on land and he has asked Venezuela to free political prisoners.
• Palestinian media reported Israeli raids continue on various areas of the Gaza Strip, according to Sky News Arabia.
• Israel rejected Lebanon's claim that Hezbollah has been disarmed, saying the effort is far from sufficient and that the group is rearming with Iranian support.
• Russian drone attack on Kyiv causes explosions and triggers a fire, according to the mayor.

US Event Calendar

• 8:30 am: Dec Change in Nonfarm Payrolls, est. 70k, prior 64k
• 8:30 am: Dec Change in Private Payrolls, est. 75k, prior 69k
• 8:30 am: Dec Change in Manufact. Payrolls, est. -5k, prior -5k
• 8:30 am: Dec Average Hourly Earnings MoM, est. 0.3%, prior 0.1%
• 8:30 am: Dec Average Hourly Earnings YoY, est. 3.6%, prior 3.5%
• 8:30 am: Dec Unemployment Rate, est. 4.5%, prior 4.6%
• 8:30 am: Oct Housing Starts, est. 1330k
• 8:30 am: Oct P Building Permits, est. 1350k
• 8:30 am: Oct Housing Starts MoM, est. 1.76%
• 10:00 am: Jan P U. of Mich. Sentiment, est. 53.5, prior 52.9

DB's Jim Reid concludes the overnight wrap

Markets took a bit of a breather yesterday, though headline stability for the S&P 500 (+0.01%) masked a sizable sectoral rotation, with tech underperforming. Meanwhile, bonds continued to lose ground on both sides of the Atlantic, with a combination of solid US data and a rebound in oil prices raising prospects of a more hawkish Fed and pushing 10yr Treasury yields +1.8bps higher to 4.17%.

However, before we get onto all that, it’s worth noting that today is the first day we could find out the Supreme Court’s ruling on the Trump administration’s tariffs. As a reminder, the Court are ruling on whether the use of the International Emergency Economic Powers Act (IEEPA) permits the imposition of widespread tariffs, and these IEEPA tariffs make up around half of the increases we’ve seen under Trump. The previous legal challenges in the lower courts were successful against the tariffs, but they’ve been appealed by the Trump administration, hence we’re waiting for the Supreme Court ruling now. As it stands, prediction markets think the Supreme Court is likely to rule against the tariffs, with Polymarket giving just a 25% chance they rule in favour. However, even if the tariffs are struck down by the Court, remember that the administration have several other legal avenues they can pursue. For instance, the sectoral tariffs (e.g. on steel and aluminum) aren’t covered by the court ruling, whilst another option would be to use Section 122 of the 1974 Trade Act, which permits temporary 15% tariffs for 150 days. Generally our house view on tariffs this year is that they'll likely consistently come in below the headline rates as the administration has to deal with cost of living issues ahead of mid-terms. However the path could still be volatile with the IEEPA decision probably the greatest potential source of this.   

Irrespective of whether we get a court ruling today, we’ll definitely get the US jobs report for December, which is out at 13:30 London time. In terms of what to expect, this will be a more “normal” report again, as the last one was delayed by the shutdown and saw the release of two months of payrolls at once. For today, our US economists think that nonfarm payrolls would be up by +50k, and the unemployment rate would tick down to 4.5%, reversing the consistent upward trend since the summer. But they caution there’s elevated uncertainty around their unemployment forecast, given that the previous month’s estimates from the BLS were associated with slightly higher than usual standard errors. Moreover, the BLS are incorporating annual revisions to the seasonally adjusted household survey data for the most recent 5 years. So the random number generator that is the initial payrolls print could be even more random than normal. 

Ahead of all that, yesterday actually brought another strong batch of US data, which followed on from the ISM services on Wednesday that hit a 14-month high. For instance, the weekly jobless claims came in beneath expectations at 208k (vs. 212k expected), whilst the October trade deficit was smaller than expected at $29.4bn (vs. $58.7bn expected). So that helped lift the Atlanta Fed’s GDPNow estimate, which now sees Q4 growth at an annualised pace of +5.4%. This will be flattered by gold exports though, but Q4's print could still grab attention. 

However, that strong data wasn’t entirely welcomed by markets, as it led investors to price in a slightly more hawkish path for the Fed this year. Indeed, the amount of rate cuts priced by the December meeting was down to 57bps by the close, -2.1bps on the day. And in turn, that helped to lift Treasury yields across the curve, with the 2yr yield (+1.7bps) up to 3.49%, whilst the 10yr yield (+1.8bps) rose to 4.17%. Matters also weren’t helped by the latest rise in oil prices, with Brent crude rising +3.39% to $61.99/bbl, its biggest daily rise since October. That meant inflationary concerns were also back in focus after a topsy turvy week for oil, albeit in a relatively narrow range post the weekend's Venezualen news. Indeed, the US 2yr inflation swap (+4.0bps) moved up to 2.38%, its biggest daily jump since July.

In Fed-related news, the New York Times quoted Trump as saying in an interview that “I have in my mind a decision” on the next Fed Chair, but that “I haven’t talked about it with anybody.” However, Treasury Secretary Bessent later said that Trump hasn’t yet interviewed one of the four final candidates and that the President could make the announcement either side of his visit to Davos in two weeks’ time.

For equities it was a very mixed bag yesterday. The S&P 500 (+0.01%) was essentially unchanged by the close, but this masked some sharply divergent performances. The main theme was a rotation away from tech, with the information technology sector (-1.54%) the worst performer in the S&P but energy (+3.20%) and consumer staples (+2.26%) stocks posting outsized gains. So while the NASDAQ fell -0.44% with Nvidia down -2.15%, 70% of the S&P 500 constituents were higher on the day and the small cap Russell 2000 (+1.11%) reached a new all-time high.

Defence stocks did well after Trump’s post after Wednesday night's close that the military budget should increase to $1.5tn in 2027 which came hot on the heels - just before that close - of him suggesting that defence companies would have to halt dividends and buybacks until federal contractors expedite production and delivery times. The likes of Lockheed Martin (+4.34%) almost erased the previous day’s decline, though the overall S&P 500 Aerospace & Defense index was only +0.18% by the close after a +4% opening gain. Defence companies also benefited globally, as BAE Systems (+5.04%) was the second best performer in the FTSE 100.

Shortly after the equity close, we saw further headlines on housing policy as Trump posted that he was directing Fannie Mae and Freddie Mac to buy $200bn of mortgage bonds to help bring mortgage rates down. While this figure needs to be viewed in the context of a roughly $9trn agency MBS market, spreads between mortgage bonds and Treasuries tightened by nearly 10bps on the news with home-lender stocks gaining in after-hours trading.

Over in Europe, bonds and equities were on the softer side for the most part. So the STOXX 600 (-0.19%) lost ground for a second day running, with the STOXX Technology Index (-2.52%) leading the declines. Nevertheless, the German DAX (+0.02%) continued its outperformance of 2026 so far, inching up to another record high, whilst Spain’s IBEX 35 (+0.33%) also hit a new record. Otherwise, yields on 10yr bund (+1.3bps) and OATs (+0.6bps) both moved up a bit. Germany manufacturing orders were the highest YoY rate for 15 years if you exclude the Covid bounce back period, and as I said in my CoTD yesterday here, I'm still surprised how negative global sentiment is towards Germany. When the US spends big, everyone only talks about the growth impulse regardless of how inefficient the spending might be. However for Germany everyone is talking about the potential inefficiencies, and less about the obvious growth impact. Germany Industrial Production today is the next data point to watch on this front.  

In Asia the Nikkei (+1.56%) and the Topix (+0.88%) are leading the way, supported by a weaker yen.  The KOSPI is +0.39%, marking its sixth consecutive session of gains, while the S&P/ASX 200 is flat as I type. The Hang Seng (+0.10%) is edging up but the Shanghai Composite (+0.59%) is stronger, following a modest rise in China’s consumer inflation in December, although factory-gate prices continue to contract (details below). US equity futures are flat.  

Turning back to China, consumer prices increased by +0.8% y/y as anticipated, reaching their highest level since February 2023 and marking a third consecutive month of growth in December. This rise follows a +0.7% increase in November. In contrast, producer prices have decreased by -1.9% y/y, slightly better than the expected -2.0% decline, and easing from November’s -2.2% drop. This data extends China’s streak of factory-gate deflation beyond three years, underscoring persistent excess capacity and weak pricing power within the industrial sector. However our economists think PPI does turn positive later this year. See their reflections on the number this morning here.

Looking at the day ahead, data releases include the US jobs report for December, the University of Michigan’s preliminary consumer sentiment index for January, German industrial production and Euro Area retail sales for November. Central bank speakers include the ECB’s Lane, and the Fed’s Kashkari and Barkin.

Tyler Durden Fri, 01/09/2026 - 08:28