- European bourses climb modestly into the green after opening around flat, US futures gain.
- DXY continues its rebound ahead of front-loaded US data, currently eyeing 109.00 to the upside.
- Fixed benchmarks contained into a packed US session and 30yr supply.
- Upside in crude, precious metals, and copper, despite a firmer Dollar.
- Looking ahead, Highlights include US Jobless Claims, Wholesale Inventory and EIA Nat Gas Change (brought forward on account of the US Day of Mourning), ADP National Employment, Comments from Fed’s Waller, FOMC Minutes, Supply from the US, Earnings from Jefferies.
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EQUITIES
- European bourses initially opened with a slight negative bias, taking impetus from a mostly negative APAC session. Soon after the cash open, sentiment improved in Europe, to currently display a modestly firmer picture, with only a couple of indices residing in the red.
- European sectors are mixed, with no clear out/underperformer in the session thus far. Financial Services lead, followed closely by Banks. Energy is found at the foot of the pile, with losses fuelled by Shell after it trimmed its Q4 production guidance.
- US equity futures are modestly firmer across the board, in an attempt to recoup some of the hefty losses seen in the prior session, which were sparked by hotter-than-expected US ISM Services and JOLTS Job Openings figures.
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FX
- USD is continuing the strength from Tuesday which was facilitated by the hot ISM Services PMI data and as JOLTS data topped analysts’ forecast range. DXY re-approaches 109.00 to the upside (in a current 108.55-96 range). Attention now turns to the FOMC Minutes, ADP Employment and Initial Jobless Claims data.
- EUR attempted to regain some composure overnight after its slide beneath the 1.0400 level before feeling more pressure from the continued rebound in the USD. German Retail Sales were mixed, whilst Industrial Orders were downbeat, but did have some caveats (details in the data section below). EUR/USD resides in a 1.0311-57 range with downside levels including the 6th Jan low (1.0294).
- JPY traded indecisively overnight with USD/JPY on both sides of the 158.00 level amid a quiet data calendar for Japan and the mixed risk tone. Similar price action in Europe with the current intraday parameter between 157.91-158.32, with the pair eyeing yesterday’s highs (158.42).
- GBP is subdued in tandem with G10 counterparts on the back of the stronger USD. GBP/USD resides in a current 1.2441-94 range with the next downside level the 6th Jan low (1.2410).
- Antipodeans are feeling pressure from the firmer greenback and in the absence of major newsflow this morning. AUD/USD was choppy following the latest monthly inflation data from Australia in which the Weighted CPI printed firmer than expected but the annual trimmed mean CPI softened from the previous. AUD/USD trades within 0.6213-42 and NZD/USD within 0.5613-41.
- SEK is modestly weaker after softer-than-expected consumer inflation metrics across the board. Following December’s CPIF (cooler than expected) and the Minutes from the December meeting CapEco now expects the Riksbank to cut by 25bps in January (prev. exp. March).
- PBoC set USD/CNY mid-point at 7.1887 vs exp. 7.3435 (prev. 7.1879).
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FIXED INCOME
- USTs are contained into a front-loaded US session on account of the Federal Holiday for Carter on Thursday. As such, we get ADP, Jobless Claims, FOMC Minutes and 30yr supply in today’s session. Into those events, USTs trade within a slim 108-04 to 108-09+ band which is entirely and comfortably within Tuesday’s 108-01 to 108-20 parameters. Ahead, US ADP, Jobless Claims ahead of speak from Fed’s Waller and then the release of the FOMC Minutes. Additionally, we await a 30yr supply which follows a tepid 3yr tap on Monday and a relatively soft 10yr outing last night.
- Bunds are similarly contained but with a slightly larger 131.90-132.14 range thus far with modest but ultimately fleeting action spurred by data this morning. A particularly soft Industrial Orders release and a mixed but largely weak Retail Sales report out of Germany sparked upside in Bunds early doors, to a retest of the above overnight peak; however, the move proved fleeting given large-order caveats to the Industrial Orders series. A 2035 outing had limited impact on Bunds.
- BTPs are the relative outperformers today after lagging yesterday on the announcement of two new syndications; this morning, we have seen marketing commence for a new 10yr BTP and a new 20yr Green BTP with orders in excess of EUR 125bln and EUR 110bln respectively.
- Gilts traded off highs in a 91.29-58 range ahead of a new 2030 auction; an outing which was mixed, with the b/c printing bang on 3.0 whilst the avg. yield is relatively high and a modestly wider tail, but ultimately had little impact on Gilts.
- UK sells GBP 4.25bln 4.375% 2030 Gilt Auction: b/c 3.0x, average yield 4.490% & tail 0.5bps.
- Germany sells EUR 3.781bln vs exp. EUR 5bln 2.00% 2035 Bund Auction: b/c 2.1x, average yield 2.51% & retention 24.38%
- Orders for Italy’s new 10yr BTP bond over EUR 125bln, for 20yr Green BTP over EUR 110bln, via Reuters citing leads; spread for 10yr +7bps, for 20yr +5bps.
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COMMODITIES
- Firmer trade in the crude complex despite the stronger Dollar, and extended on the prior day’s gains with upside seen after the latest private sector inventory data showed a larger-than-expected draw in headline crude. The complex saw additional upside in the European morning after reports that Ukraine had hit a Russian oil depot which served a military airfield, according to Ukraine’s Presidential Advisor. Brent Mar is currently just off highs in a USD 77.23-77.89/bbl parameter.
- Mixed trade across precious metals with spot gold and silver firmer whilst palladium trades flat/subdued. Spot gold trades in a current USD 2,645.40-2,654.90/oz range.
- Copper is on a firmer footing despite the stronger Dollar after the red metal lacked firm direction amid the mixed risk appetite in Asia and the subdued mood in China. 3M LME copper currently resides in a USD 8,983.00-9,056.00/t range.
- Private inventory data (bbls): Crude -4.0mln (exp. -0.2mln), Distillate +3.2mln (exp. +0.6mln), Gasoline +7.3mln (exp. +1.5mln), Cushing -3.1mln.
- Qatar set February Marine Crude OSP at Oman/Dubai + USD 0.45/bbl and Land Crude OSP at Oman/Dubai + USD 0.30/bbl.
- Shell (SHEL LN) Cuts Q4 Integrated Gas Production 880-820k boepd (prev. guided 900-960k boepd), LNG Volumes 6.8-7.2Mt (prev. guided 6.9-7.5Mt); optimisation results are exp. to be significantly lower than Q3’24. Guides Q4 Upstream: Production 1.79-1.89mln boepd, Underlying Opex USD 2.2-2.8bln. Guides Q4 Chemicals and Products: Refining Utilisation 74-78%.
- India has cut November gold imports by USD 5bln in the biggest revision, via Reuters citing sources; revised to USD 9.84bln (prev. estimated 14.86bln)
- China may trim fuel imports amid the 2025 tax hike, according to Reuters sources.
- India are looking at 2 new blocks in Jammu and Kashmir for Lithium exploration, according to Govt. sources.
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NOTABLE DATA RECAP
- German Industrial Orders MM (Nov) -5.4% vs. Exp. 0.0% (Prev. -1.5%); Excluding large orders, incoming orders were 0.2% higher M/M.
- German Retail Sales MM Real (Nov) -0.6% vs. Exp. 0.5% (Prev. -1.5%); YY Real (Nov) 2.5% vs. Exp. 1.9% (Prev. 1.0%)
- Swedish CPIF Flash YY (Dec) 1.5% vs. Exp. 1.7% (Prev. 1.8%); Ex Energy Flash YY (Dec) 2.1% vs. Exp. 2.2% (Prev. 2.4%)
- EU Economic Sentiment (Dec) 93.7 vs. Exp. 95.6 (Prev. 95.8, Rev. 95.6); Services Sentiment (Dec) 5.9 vs. Exp. 5.8 (Prev. 5.3); Consumer Confidence. Final (Dec) -14.5 vs. Exp. -14.5 (Prev. -14.5); Industrial Sentiment (Dec) -14.1 vs. Exp. -11.7 (Prev. -11.1, Rev. -11.4); Selling Price Expec (Dec) 7.6 (Prev. 7.1); Cons Infl Expec (Dec) 21.0 (Prev. 17.7, Rev. 17.8); Producer Prices YY (Nov) -1.2% vs. Exp. -1.3% (Prev. -3.2%, Rev. -3.3%); Producer Prices MM (Nov) 1.6% vs. Exp. 1.5% (Prev. 0.4%)
GEOPOLITICS
- Venezuelan President Maduro said two US nationals were arrested as part of a group of seven mercenaries. It was separately reported that the Biden administration is set to roll out new sanctions against Venezuelan President Maduro’s regime this week ahead of the Venezuelan Presidential Inauguration, according to an Axios reporter.
CRYPTO
- Bitcoin continues to slip and currently holds around the USD 95.5k mark; ETH also moved lower in tandem, currently USD 3.3k.
APAC TRADE
- APAC stocks traded mixed following the weak handover from Wall St where tech underperformed as yields climbed after the hot ISM Services and strong JOLTS data.
- ASX 200 gained amid strength in mining stocks and the top-weighted financial sector, while participants digested mixed monthly inflation data in which the Weighted CPI reading topped forecasts, but the annual trimmed mean figure softened. Capital Economics suggested would provide greater confidence the RBA is on track to meet its inflation mandate if it the result is replicated in the quarterly figures due later this month.
- Nikkei 225 gradually nursed the majority of its opening losses and reclaimed the key 40,000 level.
- Hang Seng and Shanghai Comp were pressured with market participants underwhelmed by the latest press briefing in Beijing where the NDRC announced to expand the scope of home appliance trade-ins eligible for subsidies, while frictions lingered with China’s MOFCOM voicing criticism over recent US restrictions on Chinese companies.
NOTABLE ASIA-PAC HEADLINES
- NDRC Vice Chairman announces loan discounts for equipment upgrades and expansion of trade-in program to include more consumer goods, while the number of types of household appliances eligible for recycling subsidies to increase from 8 to 12 with a maximum subsidy of 20% of the sales price for each item. NDRC said it will allocate special funds to support the recycling and treatment of waste electrical and electronic products, as well as include microwaves, water purifiers, dish-washing machines and rice cookers in the consumer goods trade-in subsidy scope. Furthermore, it will subsidise smartphones for up to 15% of the price and will support equipment upgrades of information technology, safe production and agriculture equipment.
- Chinese Finance Ministry official said the government has allocated CNY 81bln for consumer goods trade-ins so far this year, while a PBoC official stated they will step up financial support for private and small firms in equipment upgrades with the central bank allocating CNY 100bln of loans for select small technology firms.
- China condemned the US military blacklisting of Chinese companies and called on the US to immediately address its misconduct, while it said the US is endangering the stability of the global supply chain.
- China PCA December Prelim Retail Passenger Vehicle Sales +9% M/M (prev. +7.1%); +11% Y/Y (prev. 16.5%)
DATA RECAP
- Australian Weighted CPI YY (Nov) 2.3% vs. Exp. 2.2% (Prev. 2.1%)
- Australian CPI Annual Trimmed Mean YY (Nov) 3.2% (Prev. 3.5%)
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