Notes/ObservationsAsia
- Italy PM Conte appeals to Senate to back his govt ahead of key confidence vote
- Germany Jan ZEW Survey beats consensus and improves from Dec levels
- Sovereign and corporate issuance remains heavy
- PBOC Survey showed major sentiment indices improved in 4Q
- Focus on Yellen testimony in Senate regarding Biden’s stimulus plans and her USD policy
Asia:
- BOJ said to plan to discuss ways to scale back its ETF buying program at its March review but did not want to raise concerns of a full exit from its loose monetary policy
- China PBOC Open Market Operation (OMO) injected CNY80B in 7-day reverse repos v CNY2.0B in 7-day reverse repos prior; Net injection CNY75B
Coronavirus:
- Total cases 95.5M (+0.5% d/d); total deaths: 2.04M (+0.5% d/d)
- California halted administering Moderna’s Covid-19 vaccine after a higher than usual number of adverse events
Europe:
- Italy PM Conte won a key confidence vote in Chamber of Deputies (lower House) to back his plan to relaunch the economy. Vote was 321 to 259. (Note: today’s Senate vote said to be a harder challenge to win)
- EU Economic Commissioner Gentiloni (Italy) stated that the Italian recovery plans broadly conformed with EU policies and targets but needed to be strengthened
- Ireland Fin Min Donohoe (Eurogroup chief): Finance ministers reconfirm effort to maintain very supportive fiscal stance amid the challenges from the coronavirus outbreak
- UK Govt said to be under mounting pressure from business leaders to provide more support to the economy before the budget in early March
- UK Treasury Min Norman stated that the UK could avoid tax increases if economy rebounded fast enough
Americas:
- Biden Adviser Psaki stated that the Biden administration was not planning to lift travel restrictions on the UK, EU and Brazil on Jan 26th (Note: refutes announcement from Trump administration)
- Treasury Sec nominee Yellen speech notes ahead of her hearing stressed that it was time to act big for recovery with rates low. She will highlight US inequality stressing the economy was K-shaped before COVID
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.19% at 409.46, FTSE +0.20% at 6,734.15, DAX +0.34% at 13,895.00, CAC-40 +0.07% at 5,620.91, IBEX-35 -0.09% at 8,247.00, FTSE MIB +0.34% at 22,576.50, SMI 0.00% at 10,888.26, S&P 500 Futures +0.71%]
- Market Focal Points/Key Themes: European indices open higher across the board but moderated gains later in the session; sectors trending higher include materials and financials; consumer discretionary sector among underperformers; press reports UK Chancellor looking to raise business taxes; reportedly Rolls Royce looking to divest ITP unit; reportedly Engie looking to split into two divisions, and spin off assets; focus on upcoming US Tresury Secretary Yellen Sentate confirmation hearing; earnings expected during the upcoming US session include Bank of America, State Street and Netflix; new Stellantis chief Carlos Tavares to present company outlook and strategy
Equities
- Consumer discretionary: Experian [EXP.UK] +1.5% (trading update), Superdry [SDRY.UK] -9% (earnings), EasyJet [EZJ.UK] +5% (data on bookings), AO World [AO.UK] -6% (trading update)
- Industrials: Kier [KIE.UK] +14% (trading update), Rolls Royce [RR.UK] +4% (potential divestment)
- Technology: Logitech [LOGN.CH] +3% (earnings)
Speakers
- ECB Q4 Lending Survey: Credit standards tightened across all loan categories in Q4. Banks expect a moderate net increase in firms’ loan demand in Q1
- German Chancellor Merkel said to seek to extend lockdown measures until Feb 15th (2-week extension)
- Italy PM Conte stated in the Senate that Italy needed a govt that can steer the recovery. Domestic economy to need support for all of 2021
- Romania Central Bank official Popa stated that was currently in a pause mode before considering any additional rate cuts
- German ZEW Economists commented that export expectations had increased significantly. Domestic economy had improved slightly despite lockdown uncertainty
- China PBoC Q4 Survey: Business Climate Index (BCI): 34.4% v 28.0% q/q
Currencies/Fixed Income
- USD gave some of its recent gains back in a quiet session. Focus was on Treasury Sec nominee Yellen upcoming testimony in Senate later today. Markets will focus on her course for the USD and the level of government stimulus measures. Yellen seen as likely refraining from making any market-moving comments.
- EUR/USD back above the 1.21 level as markets await the Italian confidence vote in the Italian Senate. Dealers note that PM Conte facing a harder challenge to win backing for his economic plan here. A loss of confidence could mean snap elections (again) for Italy. Key range for the pair remains 1.20-1.24. ECB rate decision on Thursday but little is expected after the December bump up in stimulus measures.
Economic data
- (DE) Germany Dec Final CPI M/M: 0.5% v 0.5%e; Y/Y: -0.3% v -0.3%e
- (DE) Germany Dec Final CPI EU Harmonized M/M: 0.6% v 0.6%e; Y/Y: -0.7% v -0.7%e
- (EU) EU27 Dec Car Registrations Y/Y: -3.3% v -12.0% prior
- (CH) Swiss Dec Producer & Import Prices M/M: +0.5% v -0.1% prior; Y/Y: -2.3% v -2.7% prior
- (CZ) Czech Dec PPI Industrial M/M: 0.2% v 0.2%e; Y/Y: 0.0% v 0.0%e
- (HK) Hong Kong Dec Unemployment Rate: 6.6% v 6.4%e (highest level since 2005)
- (EU) Euro Zone Nov Current Account Balance: €24.6B v €25.6B prior
- (IT) Italy Nov Total Trade Balance: €6.8B v €7.6B prior; Trade Balance EU: €0.1B v €0.4B prior
- (UK) Q3 Final Output Per Hour Y/Y: 4.0% v 3.0% prelim; Unit Labor Costs Y/Y: 5.9% v 10.6% prior (revised from 27.4%)
- (GR) Greece Nov Current Account Balance: -€1.3B v -€0.8B prior
- (IT) Italy Nov Current Account Balance: €7.1B v €8.1B prior
- (ZA) South Africa Nov Total Mining Production M/M: -5.7% v +0.8%e; Y/Y: -11.6% v -5.0%e; Gold Production Y/Y: -7.0% v -4.0% prior; Platinum Production Y/Y:
- 16.1% v -2.0% prior
- (DE) Germany Jan ZEW Current Situation Survey: -66.4 v -68.3e; Expectations Survey: 61.8 v 59.4e
- (EU) Euro Zone Jan ZEW Expectations Survey: 58.3 v 54.4 prior
- (EU) Euro Zone Nov Construction Output M/M: 1.4% v 0.5% prior; Y/Y: -1.3% v -1.9% prior
Fixed income Issuance
- (FR) France Debt Agency (AFT) opened itss book to sell EUR-denominated May 2072 Oat (50-year bond) guidance seen +7bps to Oats; order book above €60B
- (UK) DMO opened its book to sell Jan 2046 Gilts; guidance seen +2.5bps to Jan 2045 Gilt; order book over £60B
- (ZA) South Africa sold total ZAR6.6B vs. ZAR6.6B indicated in 2026, 2030 and 2048 bonds
- (ES) Spain Debt Agency (Tesoro) sold total €2.035B vs. €1.5-2.5B indicated range in 3-month and 9-month bills
- (ID) Indonesia sold total IDR24.45T vs. IDR35.0T target in bill and bonds
Looking Ahead
- (EU) EU Finance Ministers (EcoFin) meeting
- 05:10 (EU) Daily ECB Liquidity Stats
- 05:15 (CH) Switzerland to sell 3-month Bills
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
- 06:00 (IE) Ireland Nov Property Prices M/M: No est v -0.5% prior; Y/Y: No est v -0.4% prior
- 06:00 (PT) Portugal Dec PPI M/M: No est v -0.5% prior; Y/Y: No est v -4.7% prior
- 06:00 (BR) Brazil Jan IGP-M Inflation (2nd Preview): 1.5%e v 1.2% prior
- 06:00 (FI) Finland to sell €1.0B in 0% Sept 2030 RFGB Bonds
- 06:30 (EU) ESM to sell €1.5B in 6-month bills
- 07:00 (TR) Turkey to sell Floating 2026 Bonds
- 08:00 (RU) Russia Q4 Preliminary Current Account Balance: $8.8Be v $$3.2B prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
- 08:30 (CA) Canada Nov Wholesale Trade Sales M/M: 0.9%e v 1.0% prior; Manufacturing Sales M/M: -0.2%e v +0.3% prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:45 (UK) BOE to buy £1.48B in APF Gilt purchase operation (over 20-years)
- 10:00 (MX) Mexico Weekly International Reserve data
- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills
- 11:00 (RU) Russia Q4 Consumer Confidence Index: No est v -22 prior
- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills
- 13:00 (UK) BOE’s Haldane (chief economist)
- 16:00 (US) Nov Total Net TIC Flows: No est v -$10.4B prior; Net Long-term TIC Flows: No est v $51.9B prior
- 18:30 (AU) Australia Jan Westpac Consumer Confidence Index: No est v 112.0 prior
- 19:00 (AU) Australia to sell A$1.8B in 1.5% 2031 Bonds
- 20:10 (JP) BOJ Outright Bond Purchase Operation for 3~5 Years; 1~3 Years and ~10 Years maturities
- 20:30 (CN) China Month LPR Operation: Expected to leave 1-Year Loan Prime Rate unchanged at 3.85% and leave 5-Year Loan Prime Rate unchanged at 4.65%
- 20:30 (CN) China PBoC Monthly 1-Year and 5-Year Loan Prime Rate Tender
- 20:30 (KR) Bank of Korea to sell 2.2 T in 2-Year Bonds
- 21:35 (CN) China to sell 1-year and 10-year Upsized Bonds
- 22:00 (TH) Thailand Central Bank to sell 3-year and 15-year bonds
- 22:30 (JP) Japan to sell 6-Month Bills
