EU core inflation remains a concern, focus on FOMC rate decision

(TradeTheNews.com Staff)

Notes/Observations

– Focus on FOMC rate decision with hopes for a continued slower pace of tightening; a Less hawkish outcome would be welcomed by markets.

– EU Jan flash CPI cooler on the headline but Core CPI stickiness continues to show with a slight upside surprise on YoY.

– UK Nationwide House Prices registered their fifth consecutive decline.

– EU Major PMI Manufacturing readings continued to highlight a less severe economic contraction (Beats: Germany, Italy, Spain, UK; Misses: France; In-line: Euro Zone).

– No production changes are expected at the OPEC+ meeting.

– Asia closed higher with Hang Seng outperforming at +1.1%%. EU indices are mixed between -0.3% to +0.5%. US futures are lower by -0.3%. Gold -0.3%, DXY -0.2%; Commodity: Brent -0.2%, WTI 0.0%, TTF -0.5%; Crypto: BTC +0.7%, ETH +0.4%.

Asia

– China Jan Caixin PMI Manufacturing: 49.2 v 49.8e (6th straight contraction).

– Australia Jan Final PMI Manufacturing avoids contraction for its 33rd month of expansion (50.0 v 49.8 prelims).

– Japan Jan Final PMI Manufacturing confirms 3rd straight contraction] (48.9 v 48.9 prelims).

– New Zealand Q4 Unemployment Rate: 3.4% v 3.3%e.

– South Korea Jan Trade Balance: -$12.7B v -$9.3Be [record monthly deficit].

– RBA Kohler reiterated the belief that the peak of inflation was in Q4.

Europe

– Renewed speculation that UK and EU had reached a breakthrough customs agreement that could help end the post-Brexit dispute over Northern Ireland trade protocols. EU has reportedly accepted a proposal that would avert the need for routine checks on shipments bound for N.I.

– UK Jan BRC Shop Price Index Y/Y: 8.0% v 7.3% prior.

– Spain PM Sanchez stated that the govt was increasing the national minimum wage by 8%.

– France pension unions said to plan new strikes on Feb 7th and 11th against pension reform.

Americas

– President Biden in a State of the Union address next week will discuss the challenges posed by Russia and China **Note: Sec of State Blinken to visit Beijing on Sunday, Feb 5th).

Energy

– Weekly API Crude Oil Inventories: +6.3M v +3.4M prior (5th straight weekly build).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.23% at 454.26, FTSE +0.10% at 7,779.40, DAX +0.07% at 15,139.45, CAC-40 +0.05% at 7,085.87, IBEX-35 +0.56% at 9,084.43, FTSE MIB +0.35% at 26,694.00, SMI -0.22% at 11,260.90, S&P 500 Futures -0.38%].

Market Focal Points/Key Themes: European indices open generally higher and remained marginally in the green through the early part of the session; sectors leading the way higher include real estate and materials; lagging sectors include consumer discretionary and telecom; Savills acquires One New Street on behalf of Chinachem; reportedly FL Entertainment interested in ITV; focus on upcoming FOMC monetary policy decision; earnings expected in the upcoming US session include Boston Scientific, T-Mobile, Meta, and AmerisourceBergen.

Equities

– Consumer discretionary: Entain [ENT.UK] +2.5% (Q4 trading update – ahead of expectations), Axfood [AXFO.SE] -4.0% (reports Q4 – misses estimates).

– Real Estate: Vonovia [VNA.DE] +2.0% (analyst action – cut to neutral at a Tier1 firm).

– Energy: Orsted [ORSTED.DK] +2.0% (reports Q4).

– Financials: BBVA [BBVA.ES] +1.0% (earnings), Raiffeisen [RBI.AT] -1.0% (reports Q4 – guides initial FY23), Hannover Rueck [HNR1.DE] -5.0% (prelim FY22, guides initial FY23).

– Healthcare: GSK [GSK.UK] +1.0% (reports Q4 – top line beat), Novartis [NOVN.CH] -2.0% (earnings), Novo Nordisk [NOVN.CH] -1.0% (reports FY22 – initiates buyback).

– Materials: Glencore [GLEN.UK] +1.0% (FY22 production metrics).

– Technology: Teamviewer [TMV.DE] -7.0% (analyst action – cut to underweight at JPMorgan Chase), Darktrace [DARK.UK] +3.0% (buyback).

– Telecom: Vodafone [VOD.UK] -1.0% (Q3 trading update – Germany metrics miss).

Speakers

– India Fin Min Sitharaman’s budget speech set the FY23/24 fiscal deficit at 5.9% of GDP vs. 6.4% target for the current fiscal year. FY23/24 Net market borrowing set at INR11.8T with gross borrowing at INR15.4T.

– China President Xi stated that was focusing on the real economy for development.

Currencies/fixed income

– FX markets were little changed and on cautious footing ahead of the Federal Reserve’s policy decision later in the session. The focus on the post-meeting statement would likely reiterate that further rate rises were likely. Dealers noted that recent progress on inflation had encouraged participants to expect the Fed could quickly pivot from interest rate hikes to interest rate cuts/ Recent US ECI data reinforce such sentiment as it showed moderating wage pressure.

– EUR/USD at the 1.0880 area as participants were nervous over a possible hawkish policy surprise from ECB this week.

– GBP/USD at 1.2320 as UK Nationwide House Prices registered their fifth consecutive decline. Data pointed to sustained weakness regarding the UK economic outlook. Nonetheless, the BOE is expected to hike by 50bps at its MPC on Thursday to address inflation.

Economic data

– (NL) Netherlands Jan Preliminary CPI EU Harmonized M/M: -1.9% v -2.2%e; Y/Y: 8.4% v 8.2%e.

– (RU) Russia Jan Manufacturing PMI: 52.6 v 53.0 prior (9th month of expansion).

– (NL) Netherlands Jan Manufacturing PMI: 49.6 v 49.5e (5th month of contraction).

– (UK) Jan Nationwide House Price Index M/M: -0.6% v -0.4%e; Y/Y: 1.1% v 1.9%e.

– (TR) Turkey Jan Manufacturing PMI: 50.1 v 48.1 prior (1st expansion in 11 months).

– (HU) Hungary Nov Final Trade Balance: -€1.4B v -€1.3B prelim.

– (SE) Sweden Jan PMI Manufacturing: 46.8 v 45.9 prior (5th straight contraction).

– (TH) Thailand Jan Business Sentiment Index: 49.8 v 48.4 prior.

– (AT) Austria Jan Preliminary CPI M/M: 0.8% v 0.2% prior; Y/Y: 11.1% v 10.2% prior.

– (PL) Poland Jan Manufacturing PMI: 47.5 v 46.4e (9th straight contraction).

– (HU) Hungary Jan Manufacturing PMI: 58.0e v 63.1 prior.

– (TW) Taiwan Dec Industrial Production Y/Y: % v -6.1%e.

– (ES) Spain Jan Manufacturing PMI: 48.4 v 48.0e (7th straight contraction).

– (CH) Swiss Jan PMI Manufacturing: 49.3 v 54.2e (1st contraction in 30 months).

– (CZ) Czech Republic Jan Manufacturing PMI: 44.6 v 43.4e (8th straight contraction).

– (HK) Hong Kong Q4 Advance GDP Q/Q: 0.0% v 2.0%e; Y/Y: % v -2.9%e.

– (NG) Nigeria Jan PMI Manufacturing: 53.5 v 54.6 prior.

– (IT) Italy Jan Manufacturing PMI: 50.4 v 49.5e (1st expansion in 7 months).

– (FR) France Jan Final Manufacturing PMI: 50.5 v 50.8 prelim (confirmed 1st expansion in 5 months).

– (DE) Germany Jan Final Manufacturing PMI: 47.3 v 47.0 prelims (confirmed 7th straight contraction).

– (EU) Euro Zone Jan Final Manufacturing PMI: 48.8 v 48.8 prelims (confirmed 7th straight contraction).

– (GR) Greece Jan Manufacturing PMI: 49.2 v 47.2 prior (7th straight contraction).

– (ZA) South Africa Jan Manufacturing PMI: 53.0 v 52.1e (4th straight expansion).

– (NO) Norway Jan PMI Manufacturing: 50.0 v 50.0 prior (29th month of expansion).

– (IC) Iceland Q4 Unemployment Rate: 3.3% v 3.4% prior.

– 04:30 (UK) Jan Final Manufacturing PMI: 46.7 v 46.7 prelims (confirmed the 6th straight contraction).

– (EU) Euro Zone Jan CPI Estimate Y/Y: 8.5% v 8.9%e; CPI Core Y/Y: 5.2% v 5.1%e.

– (EU) Euro Zone Dec Unemployment Rate: 6.6% v 6.5 %e.

– (IT) Italy Jan Preliminary CPI M/M: 0.2% v 0.0%e; Y/Y: 10.1% v 10.2%e.

– (IT) Italy Jan Preliminary CPI EU Harmonized M/M: -1.3% v -1.5%e; Y/Y: 10.9% v 10.7%e.

– (BE) Belgium Dec Unemployment Rate: 5.5% v 5.5% prior.

– (DK) Denmark Jan PMI Survey: 54.9 v 51.2 prior.

Fixed income issuance

– (IN) India sold total INR290B vs. INR290B indicated in 3-month, 6-month and 12-month.

– (SE) Sweden sold a total of SEK2.0B vs. SEK2.0B indicated in 2028 and 2033 Bonds.

– (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 1.75% Feb 2027 Bonds; Avg Yield: 2.89% v 2.74% prior; Bid-to-cover: 2.84x v 9.31x prior.

– (UK) DMO sold £3.0B in 0.875% 2033 green Gilts; Avg Yield: 3.428% v 3.712% prior; bid-to-cover: 2.22x v 2.25x prior; Tail: 0.7bps v 1.1bps prior.

Looking ahead

– (ZA) South Africa Jan Naamsa Vehicle Sales Y/Y: 7.5%e v 16.2% prior.

– (RO) Romania Jan International Reserves: No est v €52.3B prior.

– (IT) Italy Jan Budget Balance: No est v -€3.2B prior.

– (US) Jan Total Vehicle Sales (SAAR): No est v 13.31M prior.

– OPEC Monthly meeting.

– 05:25 (EU) Daily ECB Liquidity Stats.

– 05:30 (DE) Germany to sell €5.0B in 2.3% Feb 2033 Bunds.

– 05:30 (GR) Greece Debt Agency (PDMA) to sell €625M in 13-week Bills.

– 06:00 (IE) Ireland Jan Unemployment Rate: No est v 4.3% prior.

– 06:00 (EU) European Union to sell combined €2.5B in 3-month and 6-month bills.

– 06:00 (RU) Russia to sell OFZ Bonds (3 tranches).

– 06:30 (CL) Chile Dec Economic Activity Index (Monthly GDP) M/M: No est v -0.8% prior; Y/Y: -2.4%e v -2.5% prior.

– 06:45 (US) Daily Libor Fixing.

– 07:00 (US) MBA Mortgage Applications w/e Jan 27th: No est v 7.0% prior.

– 07:00 (UK) Weekly PM Question time in House.

– 08:00 (BR) Brazil Jan Manufacturing PMI: No est v 44.2 prior.

– 08:00 (CZ) Czech Jan Budget Balance (CZK): No est v -360.4B prior.

– 08:00 (UK) Daily Baltic Dry Bulk Index.

– 08:15 (US) Jan ADP Employment Change: +180Ke v +235K prior.

– 08:30 (US) Treasury quarterly refunding Announcement.

– 09:30 (CA) Canada Jan Manufacturing PMI: No est v 49.2 prior.

– 09:45 (US) Jan Final S&P/Markit Manufacturing PMI: 46.8e v 46.8 prelims.

– 10:00 (US) Jan ISM Manufacturing: 48.0e v 48.4 prior; Prices Paid: 40.4e v 39.4 prior.

– 10:00 (US) Dec JOLTS Job Openings: 10.300Me v 10.458M prior.

– 10:00 (US) Dec Construction Spending M/M: 0.0%e v 0.2% prior.

– 10:00 (MX) Mexico Dec Total Remittances: $5.0Be v $4.8B prior.

– 10:00 (MX) Mexico Central Bank Economist Survey.

– 10:00 (CO) Colombia Jan PMI Manufacturing: No est v 51.1 prior.

– 10:00 (PE) Peru Jan CPI M/M: 0.5%e v 0.8% prior; Y/Y: 9.0%e v 8.5% prior.

– 10:30 (US) Weekly DOE Oil Inventories.

– 10:30 (MX) Mexico Jan Manufacturing PMI: No est v 51.3 prior.

– 11:00 (RU) Russia Dec Industrial Production Y/Y: No est v -1.8% prior.

– 11:30 (US) Treasury to sell 17-Week Bills.

– 12:00 (IT) Italy Jan New Car Registrations Y/Y: No est v 21.0% prior.

– 13:00 (BR) Brazil Jan Trade Balance: $3.0Be v $4.8B prior; Exports: $24.1Be v $26.6B prior; Imports: $21.3Be v $21.9B prior.

– 13:00 (MX) Mexico Jan IMEF Manufacturing Index: No est v 51.8 prior; Non-Manufacturing Index: No est v 53.5 prior.

– 14:00 (US) FOMC Interest Rate Decision: Expected to raise Target Range by 25bps to 4.50-4.75%.

– 14:30 (US) Fed Chair Powell post rate decision press conference.

– 16:30 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to leave Selic Target Rate unchanged at 13.75%.

– 16:45 (NZ) New Zealand Dec Building Permits M/M: No est v 7.0% prior.

– 18:00 (KR) South Korea Jan CPI M/M: 0.7%e v 0.2% prior; Y/Y: 5.0%e v 5.0% prior; CPI Core Y/Y: No est v 4.8% prior.

– 18:50 (JP) Japan Jan Monetary Base Y/Y: No est v -6.1% prior; End of period monetary base: No est v ¥632.4T prior.

– 19:30 (AU) Australia Dec Building Approvals M/M: +1.0%e v -9.0% prior; Private Sector Houses Approvals M/M: No est v -2.5% prior.

– 19:30 (AU) Australia Q4 NAB Business Confidence: No est v 9 prior.

– 21:00 (KR) South Korea Dec Retail Sales Y/Y: No est v 8.4% prior.

– 21:00 (KR) South Korea Dec Department Store Sales Y/Y: No est v 3.7% prior; Discount Store Sales Y/Y: No est v 9.2% prior.

– 22:35 (JP) Japan to sell 10-Year JGB Bonds.

Read Rates Spark: It’s not all about the Fed today