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Weak La Niña expected to develop during winter... ENSO-neutral continued in November, but models continue to predict a weak and short-lived La Niña this winter, according to the U.S. Climate Prediction Center (CPC). The latest CPC forecast puts 59% odds a weak La Niña event will develop in the November-January period, rising above 70% during December-February, with 61% odds conditions will transition to ENSO-neutral by March-May.
CPC said, “Weak La Niña conditions would be less likely to result in conventional winter impacts, though predictable signals could still influence the forecast guidance.”
The Australian Bureau of Meteorology forecasts ENSO will remain in the neutral range throughout the forecast period to April 2025, noting this is consistent with four of the six other international climate models it surveyed.
Japan’s weather bureau said characteristics of La Niña will become clearer during the winter, while there is a 70% chance of conditions returning to neutral toward spring.
U.S. producer prices jump in November... The U.S. producer price index rose 0.4% from the previous month in November, the biggest monthly gain since June, led by a 54.6% jump in egg prices. On an annual basis, producer prices increased 3.0%, the biggest rise since February 2023. Core prices, minus food and energy costs, rose 0.2% from October and 3.4% from year-ago.
Despite the producer price data and consumer inflation, which also ticked up last month, traders expect the Fed to cut interest rates another 25 basis points following next week’s two-day monetary policy meeting.
Trump administration likely to revise IRA provisions... The incoming administration of President-elect Donald Trump may scale back certain elements of President Joe Biden’s Inflation Reduction Act (IRA), according to Seiho Kim, head of research at LG Business Research. Speaking at an SNE Research conference in Seoul, Kim suggested Trump might eliminate the $7,500 tax credit for some electric vehicle (EV) models but could retain or adjust the Advanced Manufacturing Production Credit (AMPC), which supports U.S.-based battery manufacturing.
Congress would need to approve Trump’s plan. This tax credit is embedded in the IRA, which was enacted under President Biden. To repeal or amend the tax credit, legislative action by Congress would be required, either through a standalone bill or as part of broader tax reform legislation. Such changes would involve passing a new law, which requires approval by both the House and Senate, and then being signed into law by the president.
While Trump cannot unilaterally revoke these credits, his administration could take regulatory actions to limit their scope. For example, it could issue new rules to restrict eligibility criteria or remove credits for leased vehicles. However, a complete repeal of the tax credit would necessitate congressional action.
ING: Commodities face headwinds, gold will shine in 2025... Tensions between the U.S. and China may weigh on energy and other commodity markets next year, while the outlook remains bright for gold, ING Groep NV said. President-elect Donald Trump’s pledge to slap tariffs on trading partners, and possible retaliation, could roil markets including oil, metals and agricultural commodities as traders also look to stimulus measures from China to boost consumption, ING said in its 2025 outlook.
Gold is set to continue this year’s streak of hitting consecutive records on geopolitical concerns, ING said, with prices averaging $2,760 an ounce in 2025 from current levels of around $2,713. Most of the buying will come from central banks looking to diversify their foreign reserves, while increased trade and geopolitical friction could add to bullion’s haven appeal.
The outlook for industrial metals is murkier, with trade moves, potential changes to Biden’s climate laws and Chinese demand all likely to play a role, ING said. Copper is set to average $8,900 a ton in 2025, versus current levels above $9,200.
Grains are likely to be a key target in any disputes, while weather concerns continue to put pressure on soft commodities, with prices of cocoa and coffee set to fluctuate further next year.
Crude oil is set to come under pressure from strong non-OPEC supply growth, and ING sees Brent slipping to an average of $71 a barrel next year, from current levels around $74.
China’s Xi unlikely to attend Trump inauguration despite invitation... Chinese President Xi Jinping is unlikely to accept president-elect Donald Trump’s invitation to attend his inauguration on Jan. 20, given diplomatic norms and historical precedent. Foreign heads of state have never participated in U.S. presidential inaugurations, with China typically sending special representatives or envoys. Trump extended the invitation shortly after winning the election, according to CBS News, but diplomatic protocols and time constraints make Xi’s attendance improbable. Experts note that such visits require extensive preparation, which may be unrealistic during the U.S. government’s transition period.
Brazil’s chicken meat, pork production to hit records in 2025... Brazil’s chicken meat production is set to reach a record 15.3 MMT in 2025, growing as much as 2.7% on a yearly basis, while exports could rise to 5.4 MMT, a 1.9% increase from this year, meat lobby ABPA said.
For pork, production could rise as much as 2% to 5.45 MMT next year, with shipments jumping up to 7.4% to 1.45 MMT, the group said.
ABPA said it expects new export markets in Central America and Africa to be opened next year.
ECB lowers rates, keeps door open to further cuts... The European Central Bank cut interest rates for the fourth time this year on Thursday and kept the door open to more as growth is hit by political instability at home and the threat of a fresh U.S. trade war. ECB lowered its deposit rate to 3% from 3.25% as expected. ECB President Christine Lagarde acknowledged “there were some discussions” about cutting by 50 basis points but said the consensus had been for a 25-basis-point move.
“The disinflation process is well on track,” Lagarde said. “In 2025 we shall be at 2%.”