US initial jobless claims dropped to 213k vs expectation 218k

    US initial jobless claims dropped -3k to 213k in the week ending January 12, slightly below expectation of 218k. Four week moving average of initial claims dropped -1k to 220.75k.

    Continuing claims rose 18k to 1.737M in the week ending January 5. Four-week moving average of continuing claims rose 8k to 1.7285M.

    Full release here.

    Into US session: Yen strongest but Sterling is catching up

      Entering into US session, Yen is trading generally higher as helped by mild risk aversion today. Sterling is also enjoying some renewed buying. EUR/GBP takes lead by extending recent fall from 0.9101. GBP/USD is also set to take on 1.2930 temporary top very soon.

      New Zealand Dollar is the weakest one for today so far, followed by Canadian and then Swiss Franc. WTI crude oil’s recovery is losing steam after hitting 52.73 earlier this week and is now back at 51.4.

      In European markets, at the time of writing:

      • FTSE is down -0.73%.
      • DAD is down -0.31%.
      • CAC is down -0.46%.
      • German 10-year yield is down -0.0026 at 0.223.

      Earlier in Asia:

      • Nikkei dropped -0.20%.
      • Hong Kong HSI dropped -0.54%.
      • China Shanghai SSE dropped -0.42%.
      • Singapore Strait Times dropped -0.45%.
      • Japan 10-year JGB yield rose 0.0044 to 0.012.

      Brexit: No article 50 extension request, plan B to be voted on Jan 29

        UK Prime Minister Theresa May’s spokesman said to that that she has not raised the idea of extending Article 50 beyond March 29. And the spokesman also noted that “It is not something we have raised with the EU or suggested we wish to do”. On the other hand, European Commission spokesman Margaritis Schinas also said “We have not received such a request from the UK for an extension”. And, “should there be a UK request to extend, this will be decided unanimously by the 27 and of course the request will have to set out the reasons for such an extension,”

        May is expected to “table an amendable motion and to make a statement about the way forward” in the coming Monday. The Conservative Party’s leader in the House of Commons Andrea Leadsom told the parliament today that “A full day’s debate on the motion will take place on Tuesday 29 January, subject to the agreement of the house.”

        Regarding the possibility of a second referendum, opposition Labour leader Jeremy Corbyn said “If a second referendum takes place, then obviously the party will decide what role we will play in that … but I can’t really go along with the idea that it should simply be a re-run of what happened in 2016”. And, “there has to be a discussion about the options that we put forward,”

        Eurozone CPI finalized at 1.6% in Dec, sharply lower from 1.9% in Nov

          Eurozone CPI was finalized at 1.6% yoy in December 2018, sharply lower from 1.9% yoy in November. Headline CPI was just 0.2% higher than 1.4% yoy back in December 2017. Core CPI was finalized at 1.0% yoy , unchanged from prior month.

          The highest contribution to the annual Eurozone inflation rate came from services (+0.58 percentage points, pp), followed by energy (+0.53 pp), food, alcohol & tobacco (+0.34 pp) and non-energy industrial goods (+0.12 pp).

          Full release here.

          ECB Lautenschlaeger still expects 2019 rate hike, but data driven

            ECB Executive Board member Sabine Lautenschlaeger, a known hawk, said the central bank could still raise interest rate in 2019. She told Politico that “I’ll wait for the projections coming in March before I change my view”. She added “I’m data-driven in this, and I think that as we are still in the environment we projected.”

            Also, pointing to recent dip in inflation, she said “It was clear that with the base effects of the energy prices, the inflation rate would drop”. However, “The core inflation rate didn’t dip that much.”

            Japan FM Aso warned protectionism and unfair trade practices lead to instability and perverse economic outcomes

              Japan Finance Minister Taro Aso urged G20 members to renew their commitment against protectionism. He noted in openings of G20 deputy financial leaders meeting that “dissatisfaction with economic inequality is growing. There is a serious risk that we will revert to a closed and fragmented world.”

              And he warned that “Protectionism and unfair trade practices lead to instability and perverse economic outcomes. We must renew our commitment to international cooperation and openness.”

              Into European session: Fresh selling in Swiss and Euro, Sterling firm as May’s position

                Dollar is trading generally higher together with Japanese Yen in Asian markets today. Sterling is also firm after UK Prime Minister Theresa May narrowly won the confidence vote in Commons. Commodity currencies are the weaker ones. But fresh selling is seen in Euro and Swiss Franc entering into European session. We won’t be surprised to see Euro and Swissy overtake Aussie and Kiwi as weakest later in the day. Over the week, Sterling remains the strongest one. It’s followed by Dollar and then Canadian. New Zealand and Australian Dollars are the weakest.

                Stocks markets in Asia are rather quiet.

                • Nikkei is down -0.26%.
                • Hong Kong HSI is up 0.07%.
                • China Shanghai SSE is up 0.30%.
                • Singapore Strait Times is down -0.21%.
                • Japan 10-year JGB yield is down -0.0025 at 0.005, still positive.

                Overnight:

                • DOW rose 0.59%.
                • S&P 500 rose 0.22%.
                • NASDAQ rose 0.15%.
                • All three indices are now facing 55 day EMA resistance.
                • 10-year yield rose 0.20 to 2.731 but 30-year yield rose just 0.006 to 3.077.
                • Yield curve remain inverted from 1-year (2.579) to 2-year (2.545) to 3-year (2.525) and 5-year (2.542). But it’s looking was better than just a few weeks ago.

                BoJ Kuroda: Japan is facing the most aged society in the world

                  In a keynote speech at the G20 symposium in Tokyo, BoJ Governor Haruhiko Kuroda said Japan is “facing the most aged society in the world.” And he discussed the impacts of aging and declining population on macroeconomy, fiscal conditions and social security systems, and monetary policy and financial system.

                  On monetary policy market, Kuroda said “As a low interest rate environment persists and credit demands become stagnant amid declining population, banks might accelerate their search-for-yield activities such as expanding their exposures to overseas assets and increasing loans and investments to firms with higher credit risks. If that were the case, the entire financial system could become less stable. ”

                  His full speech here.

                  Fed’s Beige Book: Contacts had become less optimistic

                    According to Fed’s Beige Book economic report, 8 of 12 districts reported modest to moderate growth in the period through January 7. Two districts reported flat or slight growth. Another two reported slower pace of growth.

                    The report noted that “outlooks generally remained positive, but many districts reported that contacts had become less optimistic in response to increased financial market volatility, rising short-term interest rates, falling energy prices and elevated trade and political uncertainty”.

                    On prices, most Districts indicated that firms’ input costs had risen due to :rising materials and freight prices”. And, “a number of Districts said that higher tariffs were also a factor.”

                    Full Beige Book here.

                    UK PM May won confidence vote, to table way forward for Brexit next Monday

                      UK Prime Minister Theresa May won the confidence vote narrowly by 325-306 in the Commons, a day after her Brexit plan was rejected. Now, she has started meeting some party leaders to “find solutions that are negotiable and command sufficient support” from the House. May also plans to return to the House on Monday to “table an amendable motion and to make a statement about the way forward.” And she reiterated the pledge to deliver Brexit.

                      However, there is no meeting with opposition Labour leader Jeremy Corbyn yet. Corbyn insisted that there will be not talks unless no-deal Brexit is ruled out. His spokesman said “Of course (Labour leader) Jeremy is prepared to meet the prime minister but if we’re talking about substantive talks on how to resolve the crisis over Brexit … then the starting point for that needs to be that no deal comes off the table.”

                      UK PM May maintains her pledge to deliver Brexit ahead of no-confidence vote

                        In the UK, eyes are now first on no-confidence vote on Prime Minister Theresa May at 1900GMT. After yesterday’s humiliating 432 to 202 defeat of her Brexit deal, May told the parliament today that “What the government wants to do is first of all to ensure that we deliver on the result of the referendum”.

                        She added that “We want to do it in a way that ensures we respect the votes of those who voted to leave in that referendum. That means ending free movement, it means getting a fairer deal for farmers and fishermen, it means opening up new opportunities to trade with the rest of the world.”

                        Opposition Labour leader Jeremy Corbyn urged a new election. He said “if a government cannot get its legislation through parliament, it must got to the country for a new mandate”. And, “there can be no doubt that this is indeed a zombie government.”

                        Conservative backbencher Dominic Grieve, proposed two new bills that would enable preparations for a second referendum. He expected the government to disregard it as it controls the time and schedule for debates. But he added “if Parliament seizes control, then I imagine time will be found for it,” and “it’s a marker, so once it’s down it can be used.”

                        German news paper Handelsblatt reported that Germany, the Netherlands and some other EU countries are trying to explore some concessions regarding the issue of Irish border backstop. But we’ll tend not to pay too much attention to rumors, until they’re confirmed.

                        Into US session: Sterling strongest as May’s no-confidence vote awaited, Dollar and Canadian Follow

                          Entering into US session, the markets are relatively steady. Eyes are on no-confidence vote on UK Prime Minister Theresa May, and debate is going on in the parliament. Sterling is somewhat trading firm as chance of a delay in Brexit or even no Brexit increased after yesterday’s meaningful vote. We’d laid out several scenarios here. But we’ll have to see if May is still the Prime Minister tomorrow first.

                          Staying in the currency markets, Canadian and US Dollar are also firm today. The former is helped by recovery in oil price. WTI crude oil is back 51.85. Dollar continues to ignore record government shutdown in the US. At this point, New Zealand and Australian Dollar are the weakest ones. But Euro and Swiss Franc are not performing much better.

                          In other markets, major European indices are mixed:

                          • FTSE is down -0.45%
                          • DAX is up 0.01%
                          • CAC is up 0.20%
                          • German 10 year yield is up 0.022 at 0.2323

                          Earlier in Asia

                          • Nikkei dropped -0.55%
                          • Hong Kong HSI rose 0.27%
                          • China Shanghai SSE was flat
                          • Singapore Strait Times rose 0.52%
                          • Japan 10 year JGB yield dropped -0.0078 to 0.007

                          ECB Nowotny: Brexit uncertainty is a psychological problem for banks, not technical

                            ECB Governing Council member Ewald Nowotny warned that “nothing is as damaging as this long, prolonged uncertainty,” regarding Brexit. However, he added that “from the point of view of the banking side perhaps it’s not so much a technical problem because I think here we are pretty well prepared for whatever outcome there might be”.

                            Nowotny said “it could be a psychological problem … So if that is something that could create some kind of self-fulfilling negative perspectives, that is something that might be really dangerous.”

                            UK CPI slowed to 2.1%, core CPI up to 1.9%

                              UK CPI slowed more than expected to 2.1% yoy in December, down from 2.3% yoy, missed consensus of 2.2% yoy. Core CPI, however, accelerated to 1.9% yoy, up from 1.8% yoy and beat expectation of 1.8% yoy. Full CPI release here.

                              Also from UK, RPI slowed to 2.7% yoy, down from 3.2% yoy and missed expectation of 2.8% yoy. PPI input dropped to 3.7% yoy, down from 5.6% yoy, below expectation of 4.6% yoy. PPI output dropped to 2.5% yoy, down from 3.1% yoy, missed expectation of 2.9% yoy. PPI output core rose to 2.5% yoy, up from 2.4% yoy and beat expectation of 2.4% yoy. House price index rose to accelerated to 2.8% yoy in November, below expectation of 3.0% yoy.

                              BoE Carney talks markets’ initial take on May’s Brexit defeat

                                BoE Governor Mark Carney told the parliament that after yesterday’s vote in the Commons, the risk of a no-deal Brexit has diminished, or the process would be extended.

                                But Carney emphasized that “I’m not giving my view, I’m giving the markets’ initial take”. Also he added “I wouldn’t put much weight on these very short term-moves. The market is waiting.”

                                UK Leadsom said May will survive confidence vote, then seek Brexit consensus

                                  Andrea Leadsom, leader of the UK Conservative Party in the Commons, expressed her confidence that Prime Minister Theresa May will survive the confidence vote today.

                                  She added that, “the prime minister will then not necessarily be looking for brand new ideas that no one has thought of before, but actually seeking a consensus, actually a fresh initiative to find a solution that is negotiable with the European Union and that would command a majority in the House of Commons,”

                                  On what’s next, she emphasized “what we need to do is to find a way that (May’s) deal or some part of it or an alternative deal that is negotiable can then be put to the European Union so that we will get this Brexit through by March 29.”

                                  Separately, United Kingdom Independence Party leader Nigel Farage predicted that in case of the second referendum, “leave” vote will even be bigger. He said “The British may be a very placid people, very laid back but I promise you: if they get pushed too far it’s a lion that will roar. We will be even more defiant if we have to fight a second referendum and we will win it by a bigger majority.”

                                  BoJ might cut inflation forecasts next week

                                    Reuters reported, quoting unnamed source that BoJ will likely lower inflation forecasts at next week’s meeting. It’s noted that oil prices have fallen significantly since the last economic projections back October. And that would have a negative impact on the upcoming projections to be published along with the meeting last week. Though, on growth, BoJ will likely maintain its upbeat assessment.

                                    Back on October, BoJ projects core CPI to hit 1.4% in fiscal 2019 and then 1.5% in fiscal 2020. Such projections would be trimmed to reflect the decline in oil as well as global slowdown.

                                    Asian update: Pound found footing after May’s historic defeat, more upside likely

                                      A lot of volatility is seen in Sterling in the past 12 hours. The Pound was sold off on the historical defeat of Prime Minister Theresa May in the Commons. But it found its footing quickly. For now, there is still prospect of extending recent rebound against Dollar and Euro.

                                      Though, at the time of writing, Yen is the strongest one for today. Australian Dollar is the weakest. But all are bounded in yesterday’s range after all.

                                      For the week, Sterling remains the strongest followed by Yen, Euro is the worst performing followed by Swiss Franc.

                                      In Asian markets, major indices are staying in tight range:

                                      • Nikkei is down -0.65%
                                      • Hong Kong HSI is down -0.13%
                                      • China Shanghai SSE is down -0.08%
                                      • Singapore Strait Times is up 0.21%
                                      • Japan 10 year JGB yield is down -0.0079 at 0.007, still positive

                                      Overnight:

                                      • DOW rose 0.65%
                                      • S&P 500 rose 1.07%
                                      • NASDAQ rose 1.71%

                                      Treasury yields continued to show strength at the long end

                                      • 30-year yield up 0.011 at 3.071
                                      • 10-year yield up 0.001 at 2.711
                                      • 5-year yield down -0.002 at 2.527

                                      PBoC injects record cash as liquidity is falling rapidly

                                        The People’s Bank of China injected record amount of cash into the market to “maintain “reasonably ample” liquidity in the banking system. The central bank said the act was to provide support for the current peak period for tax payments. And it came at a time when “the banking system’s overall liquidity is falling rapidly”.

                                        PBoC injected CNY 350B through 7-day reverse bond repurchases and CNY 220B through 28-day reverse bond repurchases. At the same time, CNY 10B reverse repose are set to mature today. The net CNY 560B, or USD 83B, is the largest daily injection on record.

                                        The act is seen as a sign of consensus in the Chinese government for decisive stimulus to the economy, in light of the ugly trade data as released earlier this week.

                                        EU Juncker urged UK to clarify its intentions asap after Brexit deal defeat

                                          Regarding the outcome of the Brexit meaningful vote in the UK Commons, European Commission responded with a quick statement. President Jean-Claude Juncker warned that “time is almost up”. and urged the UK to “clarify its intentions as soon as possible”. He also noted that “the risk of a disorderly withdrawal of the United Kingdom has increased with this evening’s vote. While we do not want this to happen, the European Commission will continue its contingency work to help ensure the EU is fully prepared.”

                                          European Council President Donald Tusk also tweeted that “If a deal is impossible, and no one wants no deal, then who will finally have the courage to say what the only positive solution is?”

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                                          Here is European Commission’s full statement:

                                          Statement by President Juncker on the outcome of the Meaningful Vote in the United Kingdom House of Commons

                                          I take note with regret of the outcome of the vote in the House of Commons this evening.

                                          On the EU side, the process of ratification of the Withdrawal Agreement continues.

                                          The Withdrawal Agreement is a fair compromise and the best possible deal. It reduces the damage caused by Brexit for citizens and businesses across Europe. It is the only way to ensure an orderly withdrawal of the United Kingdom from the European Union.

                                          The European Commission, and notably our Chief Negotiator Michel Barnier, has invested enormous time and effort to negotiate the Withdrawal Agreement. We have shown creativity and flexibility throughout. I, together with President Tusk, have demonstrated goodwill again by offering additional clarifications and reassurances in an exchange of letters with Prime Minister May earlier this week.

                                          The risk of a disorderly withdrawal of the United Kingdom has increased with this evening’s vote. While we do not want this to happen, the European Commission will continue its contingency work to help ensure the EU is fully prepared.

                                          I urge the United Kingdom to clarify its intentions as soon as possible.

                                          Time is almost up.