Nomura Fired Bond Trader Sawada After Japanese Spoofing Probe

Economic

Summary:

Nomura Holdings Inc., Japan’s biggest brokerage, dismissed senior trader Takushi Sawada after regulators concluded that he had arranged the manipulative transactions that have tipped the firm into scandal.

Sawada’s employment at Nomura was “terminated” Sept. 30 after a Japanese markets watchdog found that he had “engaged in manipulative trading” of derivatives tied to the country’s sovereign debt, according to a filing with the US Financial Industry Regulatory Authority. The transactions amounted to “layering,” a version of an illicit practice known as spoofing, the filing shows.

Nomura Chief Executive Officer Kentaro Okuda has been under pressure to restore the bank’s reputation since Japanese authorities disclosed the trades in September. The firm’s role in state bond auctions was crimped while corporate clients such as Toyota Finance Corp. and Sumitomo Mitsui Trust Holdings Inc. took some of their business elsewhere.

“All trading staff are trained repeatedly by Nomura and Finra that spoofing is unacceptable and sign many acknowledgements and attestations of compliance,” a Nomura spokesperson said. “All staff bear obligations to escalate any concerns of impropriety.”

Sawada first joined Nomura in Tokyo in 2002, according to the Finra filing. He rose to become one of the most senior traders in Japanese government bonds, a market almost $8 trillion in size where the bank has considerable clout.

The Securities and Exchange Surveillance Commission, the investigative arm of Japan’s Financial Services Agency, disclosed Sept. 25 that an unidentified Nomura trader had manipulated the market for derivatives tied to 10-year government bonds. The employee arranged a series of buy-and-sell orders and then canceled them, the watchdog said.

An SESC official declined to comment on the Finra filing. Sawada couldn’t immediately be contacted for comment.

This kind of trading can manipulate a market by creating a false impression of supply or demand. Regulators in the US have clamped down on the practice since the 2010 Dodd-Frank Act and pursued multiple banks. In September, Toronto-Dominion Bank agreed to pay more than $20 million to resolve allegations that a former trader had placed “hundreds of fraudulent spoof orders” in the market for US Treasury securities.

Some clients have returned to Nomura after the brokerage explained to them measures it is taking to prevent a recurrence of the breach, Bloomberg previously reported. The country’s megabanks have resumed trading activities with the lender and at least four insurers that had halted their equity or bond dealings with Nomura are also restarting these activities.

Source:Bloomberg

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Justin

Central Bank

India’s central bank expectedly kept the benchmark interest rate unchanged at 6.50% on Friday as it struggles to contain rising inflation without hurting growth in Asia’s third-largest economy.

The decision came in line with economists’ expectation in a Reuters poll, as India’s consumer prices inflation surged to a 14-month high of 6.21% in October, significantly higher than the central bank’s target of 4% and also above its tolerance ceiling of 6%.

Reserve Bank of India Governor Shaktikanta Das said the central bank had revised India’s GDP growth outlook for fiscal year 2025 down to 6.6% — RBI had forecast 7.2% growth in October — adding that the slowdown in the domestic economy had “bottomed out” in the September quarter.

The central bank also announced a cut to banks’ cash reserve ratio by 50 basis points to 4.0% to bolster liquidity in the economy.

The RBI has held the interest rate steady since February last year, however, a sharper-than-anticipated slowdown in India’s economic growth has made the central bank’s task tougher.

In the July to September period, India’s economy grew 5.4% from a year ago, drastically missing Reuters-polled economists’ expectation of 6.5%, and marked the slowest pace in nearly two years.

The slowdown has prompted worries that the RBI’s restrictive policies may be putting the economy at risk of missing its forecast of 7.2% growth for the year through March 2025.

Both Finance Minister Nirmala Sitharaman and Trade Minister Piyush Goyal have reportedly called for lower borrowing costs to bolster lending demand and support a slowing economy.

“At a time when we want industries to ramp up and build capacities, bank interest rates will have to be far more affordable,” the finance minister said at an event in Mumbai last month.

The RBI chief Shaktikanta Das, however, has ruled out an immediate rate cut, though the central bank shifted its policy stance to “neutral” from a more restrictive “withdrawal of accommodation” in the October meeting.

Das, whose second term leading the central bank will end later this month, had said in October that an immediate interest rate cut can be “very premature” and “very, very risky”, and that he was in no hurry to join the global central banks in easing.

Indian rupee fell to record lows against the U.S. dollar earlier this week, LSEG data showed, and any monetary easing measures would likely put further pressure on the currency and likely trigger capital outflows.

Following the announcement on Friday, the rupee was little changed at 84.666 against the greenback. Nifty 50 index erased earlier losses to trade nearly flat.

The benchmark index has risen modestly since the GDP release last Friday and is up 13.7% since the start of the year. For comparison, the MSCI Asia ex Japan index — which allocates nearly 23% of its funds to India — is down around 12% so far this year.

Indian bonds have rallied over the past few days with the 10-year benchmark yield dropping to 6.677% on Thursday, its lowest level since February 2022, according to LSEG data.

Source:CNBC

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Owen Li

Economic

Bank of England policymaker Swati Dhingra warned that high interest rates are bearing down too heavily on the economy by curbing consumer spending and business investment.

“We have a very restrictive stance at the moment,” the external member of the Monetary Policy Committee said in an interview with Bloomberg TV Friday. “The weak consumption, the weak investment, and possible damage to supply capacity is what I would worry about, and that’s why I think we should be easing policy more.”

Dhingra is the MPC’s most dovish member, voting for rate cuts since February. The BOE lowered borrowing costs by a quarter-point first in August to 5% and again last month to 4.75% as it reverses policy now that inflation has dropped back close to the 2% target.

Dhingra said she prefers “gradual” rate cuts and expects policy to settle at between 2.5% and 3.5%, which is her estimate of the “neutral rate” that is neither restrictive nor stimulatory. “I’m willing to buy the argument that the neutral rate has risen to some degree” since the BOE’s last estimate of 2%-3% in 2018, she said.

The BOE’s next policy decision is on Dec. 19, when markets expect the committee to leave rates unchanged. They put an 80% chance of another quarter-point cut in February. “We’ve actually seen wage pressures come down, we’re seen services continuing to ease,” Dhingra said. “Bank Rate has to ease as a result.”

She added that high interest rates are “weighing on living standards, on supply capacity and investments, and that’s why we need to start to take that away to some degree, so that we start to get normalization back into the economy.”

Dhingra, a trade expert and associate professor at the London School of Economics, also warned that a re-escalation in the global trade war with Donald Trump as US president would hit productivity. Trump plans tariffs on Mexico, China and Canada and has threatened them on the European Union.

Productivity Loss

A global trade war would hit UK productivity and undo any benefits from cheaper goods being diverted from China and elsewhere to Britain, she said. Because weaker productivity reduces the capacity of the economy, lower prices would prove just as inflationary as at present, she explained.

A trade war “might come at a pretty substantial productivity loss,” Dhingra said. “In that case, expecting businesses to rewire so quickly is asking a lot. So I don’t think it necessarily is going to make my job easier. It might make my job easier for a month or two months, but not necessarily over a two or three year horizon.”

A trade war would have only a “limited” direct impact on the UK in growth and inflation but the indirect effects would be far more damaging.

“In principle, we could be beneficiaries in terms of lower prices,” she said. “But equally, if all of us start rushing to the same alternative exporters - if we want to move away from, say, Chinese exporters supplying us those products - then we all end up basically crowding to one source of supply and could end up in very much the same kind of world we’ve seen in the past few years of supply chain disruptions.”

Source:Bloomberg

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FxPro

Cryptocurrency

Thursday’s US session saw a strong wave of profit-taking, which quickly turned into a liquidation of marginal long positions. Both bullish and bearish liquidation created a swing range of almost 13% in less than 24 hours. At its lowest point, the price of Bitcoin was down to $91,000. By early European trading, it had stabilised just below $98,000, back to where it started the day on Thursday.

Other stars of recent flights are also cooling off. Tron has stabilised around $0.32, roughly in the middle of this week’s range. XRP is cooling off, pulling back to $2.30, which is near the 76.4% level from the early November lows.

News Background

There is a strong correlation between Bitcoin’s rise above $100,000 and Tether’s increased supply of USDT stablecoin, said CEO Paolo Ardoino. Over the past 20 days, the stablecoin’s capitalisation has increased by approximately $16 billion.

CryptoQuant identified significant institutional demand from US investors based on Coinbase’s premium dynamics.

Mining company Hut 8 will sell $500 million worth of shares. The funds will be used to expand the company’s data centre infrastructure and to purchase Bitcoin as a strategic reserve.

Venture capital firm Andreessen Horowitz (a16z) sees the integration of AI with blockchain, tokenisation and stablecoins as key areas of development for the crypto industry in 2025.

Justin Drake, one of Ethereum’s core developers, said the Solana network, touted as a “killer” of Ethereum, is not really a threat or even a direct competitor.

Arkham Intelligence noted that the bankrupt Mt. Gox exchange moved 24,052 BTC ($2.47 billion) to an unknown address. This is the first major move of the exchange’s assets since 12 November, when the platform sent 2,500 BTC to two unknown addresses.

Source:FxPro

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Justin

Economic

The Canadian labour market gained 50.5k positions in November. Most of them were full-time jobs, which rose 54.2k, while part-time employment fell 3.6k.

The unemployment rate rose 0.3 percentage points to 6.8% as more people joined the labour force (+138k). The labour force participation rate rebounded 0.3 percentage points to 65.1% after two months of decline.

Employment by sector showed gains in trade (+39k), construction (+18k), and professional, scientific and technical services (+17k). Declines were seen in manufacturing (-29k) and transportation and warehousing (-19k).

Lastly, despite so many new jobs, total hours worked fell 0.2% month-on-month due to labour disputes. Wages were up 4.1% year-on-year (from 4.9% in October).

Key Implications

Today’s jobs report had a lot of moving parts. Yes, the unemployment rate rose significantly, but this was due to a massive increase in the labour force rather than outright job losses. Remember that Statcan has cautioned people on using its jobs report population figures, which don’t match recent demographic data (also means caution of labour force figures). So, we should be taking this with a heavy hand of salt. Rather, we focus on the trend, where employment growth has held up well, with cyclically sensitive sectors driving gains over the last few months.

The Bank of Canada will make an interest rate announcement next Wednesday and markets are still on the fence as to whether the bank will cut by 50 or 25 bps. Recall that the BoC accelerated its rate cutting cycle with a 50 beeper in October as weak growth and an inflation undershoot raised fears that it was behind the curve. But since then, economic data have shown more resilience, with consumer spending, the real estate market, and price pressures rebounding. Even with the messiness of today’s employment report, the economy continues to add jobs, reinforcing our view that the labour market is on solid foundations. We think this should be enough to convince the central bank to revert to a 25 bp cut next week, but it will remain a close call for the central bank.

Source:Bank Financial Group

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Warren Takunda

Economic

A political vacuum in France and Germany, the EU’s two biggest and most influential players, spells trouble for an already ailing European economy.

Yesterday the French Parliament voted no confidence in the Prime Minister, making Michel Barnier the shortest-serving head of government under the Fifth Republic.

President Emmanuel Macron will now be under pressure to appoint a replacement – and is even facing calls to resign himself.

The political dispute which tipped Barnier over the edge, over the 2025 annual budget, suggests it will now be even harder to address the country’s economic woes. With a deficit of 6.2% of GDP, France already has the worst budget imbalance in the eurozone.

Barnier’s plan sought to address that longstanding shortfall – using the maximum, seven-year timeframe that new EU fiscal rules allow.

Whoever forms the new government will now have great difficulty pushing tax and spending proposals through. There can be no new elections until the middle of next year, and none of the three blocs in France's National Assembly can muster a majority.

Many on the left have called to unwind wider reforms to the pension system which were a centrepiece of Macron’s liberal agenda; in the immediate term, the far-right Marine Le Pen was calling for the costly policy of indexing pensions in line with inflation.

Worse still, the crisis in Paris comes alongside a malaise in the EU’s other economic and political powerhouse – Germany.

The bloc’s biggest member will next year also be its economically worst performing: Germany is predicted by the European Commission to grow 0.7% next year, after shrinking in 2024.

And Berlin is facing political troubles of its own. The ruling three-party coalition collapsed in November, following disagreements on fiscal policy between socialist leader Olaf Scholz and his liberal finance minister Christian Lindner.

Scholz has called early elections for February. During the intervening governance chaos, Berlin has not sent the EU any plan for how it will address its deficit over the coming years – despite having led the political call for Brussels to have strict fiscal rules.

Europe’s gloomy economic picture isn’t likely to get rosier.

There are increasingly frosty relations with major trading partner China, as the EU seeks to “derisk” from an increasing geopolitical foe.

US President Donald Trump’s campaign pledge to impose 10% tariffs on European goods will pose a further headache – imposing both a direct economic cost on EU exporters, and a tough choice for national leaders as to how to retaliate.

The threat of Russian aggression, and possible US turn away from NATO, will also mean Europe needs to reach into their pockets to invest in the military.

And the political vacuum threatens to hamper

wider efforts to address a sluggish European economy.

In recent months, two former Italian Prime Ministers Draghi, Letta have issued gloomy warnings about European competitiveness, which has been far outpaced by the US.

But with little guidance from Paris and Berlin, the two capitals seen as the motors of the European project, it’s not clear if their proposed solutions will be heeded.

Draghi and Letta have proposed some politically difficult ideas: common borrowing via euroboonds, building up capital markets, or a new pan-European investment fund, matching the US’s massive green tech subsidies.

In practice those ideas could involve risk sharing with other governments, increased financial contributions to Brussels, further reform pensions systems or sweeping away national financial watchdogs. That’s a toxic political mix for any national government to champion; still less a fatally weakened one.

Source: Euronews

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ING

Central Bank

227k jobs added, but remember to factor in strikes and Hurricane Milton haha

US non-farm payrolls have come in at 227k for November, very close to the 220k consensus. There were 56k of upward revisions to the past two months. Private sector payrolls are weaker though, posting an increase of 194k versus a 205k consensus figure while the usual suspects of government, leisure & hospitality and private education & healthcare services accounted for 165k of the total 227k figure. Moreover, this report has to be viewed in the context of the returning Boeing workers who had been on strike through October and return of workers not counted due to Hurricane Milton impacting the number count in Florida and other states. Therefore the “true” payrolls figure is closer to 115k. If we take an average of October and November to account for the distortions it is 131.5k, so the cooling trend remains very much in place.

Monthly change in US non-farm payrolls (000s)

Softish US Jobs Report Favours a December Rate Cut_1

Market momentum builds for a 25bp cut on 18 December

The household survey was weaker, showing that employment on that basis fell 355k after a 368k drop in October. This has led the unemployment rate to rise to 4.2% from 4.1% (consensus was for it to stay at 4.1%). In fact we weren't too far from getting a 4.3% figure on rounding since to 3 decimal places it was 4.246%. We also see that the number of full-time workers fell again while part-time employment continues to rise. This yet again suggests that the quality of jobs that the US economy is generating is not especially great.

On balance this report keeps the 25bp December rate cut narrative in favour over a no change outcome – the market is currently pricing 23bp of a 25bp cut versus 16bp just ahead of the data release. We continue to think the Fed will indeed cut by 25bp, just to keep policy moving from restrictive territory towards neutral. However they are set to signal a slowing in the pace of cuts with a pause at the January FOMC meeting looking likely. This risk to that view is next week’s core CPI print coming in hot. The consensus is 0.3%, but so long as that is closer to 0.25% rather than 0.349% we think they will indeed opt to cut on 18 December.