Global Stock Rally Hits A Pause, German Jan CPI Improves Significantly

Notes/Observations

• Germany Jan CPI data accelerated significantly but remain far from target
• Global stock rally hits a pause following worries about corporate earnings, and delays in coronavirus vaccinations
• Greenback was aided by concerns over excessive valuations on stocks after a one-way rise in risk assets

Asia

• Japan Dec Retail Sales M/M: -0.8% v -0.7%e; Y/Y: -0.3% v -0.5%e
• Japan PM Suga and President Biden agreed to strengthen bilateral alliance and hold state visits as soon as feasible in light of the pandemic. Leaders discussed regional security issues, including China and North Korea
• China PBoC continued with its liquidity withdrawal this week; drained most liquidity since October.

Coronavirus:

• Total global cases 100.9M (+0.6% d/d); total deaths: 2.17M (+0.8% d/d)

Europe:

• ECB’s Lane (Ireland, chief economist) saw recovery to pre-pandemic levels by end of summer 2022
• ECB’s Centeno (Portugal) Coronavirus crisis cannot be allowed to become a financial crisis
• Italy Five Star Party said to plan to propose that caretaker PM Conte to head new govt

Americas:

• FOMC left its policy unchanged (as expected) with decision to keep rates on hold being unanimous. Pace of the recovery in economic activity and employment had moderated in recent months. Reiterated economy’s path depended on progress of the coronavirus
• Fed Chair Powell post rate decision press conference reiterated stance that Fed was strongly committed to achieving dual mandate; path ahead remained highly uncertain. Focus on exit was premature as US was a long way from a full recovery

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -1.45% at 397.12, FTSE -1.31% at 6,481.25, DAX -1.48% at 13,422.25, CAC-40 % at #, IBEX-35 -0.99% at 7,772.00, FTSE MIB -0.84% at 21,481.50, SMI -1.39% at 10,752.88, S&P 500 Futures -0.68%]
• Market Focal Points/Key Themes: European indices open broadly lower and stayed in the red as the session wore on; loss of risk appetite attributed to increasing tension between EU authorities and AstraZeneca over covid vaccine distribution; better performing sectors include telecom and consumer discretionary; emergy and materials sectors among underperformers; Recipharm receives increased bid; Volvo trucks announces new EV division; Bankinter results higher than expected, supports Caixa shares; Fincantieri disists in merger with STX; focus on release of US GDP later; earnings expected during the upcoming US session include Altria, American Airlines, McDonald’s and Danaher

Equities

• Consumer discretionary: Diageo [DGE.UK] +4% (earnings)
• Financials: Bankia [BKIA.SE] +2% (earnings), Prudential [PRU.UK] -9% (equity raise)
• Industrials: Elior [ELIOR.FI] -12% (sales)
• Technology: STMicroelectronics [STM.FR] +2% (earnings)
• Telecom: Nokia [NOKIA.FI] +1% (continued short squeeze), Elisa [ELISA.FI] +5% (earnings)

Speakers

• ECB Rehn (Finland) reiterated Council view of monitoring FX developments ‘very closely’; prepared to use all instruments as needed. Inflation outlook might be a factor behind Euro currency strength
• ECB Board of Single Supervisory Mechanism (SSM): Banking sector needed to address credit risks as 2021 would continue to challenge the sector’s strategic plans.
• ECB SSM chief Enria: Banking sector profits to moderately rebound in 2021. New stress tests to begin shortly. Big banks to comply with dividend request; saw €10.5-11B worth of dividend by banks. Not enough loans were classified as forborne and not reflecting reality
• Ireland Fin Min Donohoe (Eurogroup chief): vaccine delays would impact the economic recovery in the region
• Sweden Fin Min Andersson stressed that it was critical not to cut stimulus too soon
• Turkey Central Bank (CBRT) Gov Agbal pledged to front-loaded tightening if CPI risks warranted it
• Turkey Central Bank (CBRT) Quarterly Inflation Report (QIR) maintained itss end-2021 inflation forecast at 9.4% and set 2022 inflation at 7.0%
• Taiwan Central Bank (CBC) Dec Minuteshad one member note that: 2021 GDP would register mild growth. One member noted that could consider timing of ending SME loans. One member: Must watch long-term impact from low rates
• China govt said to again avoid setting a GDP growth target for 2021 citing it would encourage an unhealthy debt buildup. To use employment and other measures as implicit GDP goal.
• Iran said to be ahead of schedule for 20% uranium enrichment

Currencies/Fixed Income

• USD held on to its recent gains as a global stock market rout prompting some safe-haven flows. Greenback sentiment aided by concerns over excessive valuations
• EUR/USD hovered around the 1.21 area and could not get any strong bounce from German inflation data. Germany Jan CPI data accelerated significantly mainly due to energy prices but remain far from ECB’s target
• Italy 10-year BTP yield was steady as Five Star Party was said planning to propose that caretaker PM Conte would again form a govt.

Economic data

• (NL) Netherlands Jan Producer Confidence Index: +0.6 v -0.4 prior
• (FI) Finland Dec Unemployment Rate: 7.8% v 6.9% prior
• (FI) Finland Dec Preliminary Retail Sales Volume Y/Y: -0.3% v +7.9% prior
• (FI) Finland Dec House Price Index M/M: +0.1% v -0.6% prior; Y/Y: 2.3% v 3.0% prior
• (CH) Swiss Dec Trade Balance (CHF): 2.9B v 4.5B prior; Real Exports M/M: -6.4% v 5.6% prior; Real Imports M/M: -6.7% v 4.7% prior; Watch Exports Y/Y: -2.5% v 3.2% prior
• (NO) Norway Nov AKU Unemployment Rate: 5.0% v 5.2%e
• (NO) Norway Dec Retail Sales (includes auto/fuel) M/M: -5.7% v +2.9% prior
• (TR) Turkey Jan Economic Confidence: 96.2 v 94.7 prior
• (DE) Germany Jan CPI Saxony M/M: 0.5% v 0.5% prior; Y/Y: 1.0% v 0.0% prior
• (ES) Spain Q4 Unemployment Rate: 16.1% v 16.7%e
• (SE) Sweden Jan Consumer Confidence: 93.1 v 92.0 prior; Manufacturing Confidence: 113.3 v 107.6prior; Economic Tendency Survey: 100.0 v 93.6e
• (HU) Hungary Dec Unemployment Rate: 4.2% v 4.4%e
• (SE) Sweden Dec Unemployment Rate: 8.2% v 7.7% prior; Unemployment Rate (seasonally adj): 8.7% v 8.6%e; Trend Unemployment Rate: 8.6% v 8.6% prior
• (SE) Sweden Dec Retail Sales M/M: -4.9% v -1.0%e; Y/Y: -0.6% v +6.7% prior
• (DE) Germany Jan CPI Brandenburg M/M: 0.9% v 0.7% prior; Y/Y: +1.3% v -0.1% prior
• (DE) Germany Jan CPI Hesse M/M: 0.7% v 0.6% prior; Y/Y: +0.9% v -0.5% prior
• (DE) Germany Jan CPI Bavaria M/M: 0.9% v 0.4% prior; Y/Y: +1.4% v -0.3% prior
• (IT) Italy Jan Consumer Confidence Index: 100.7 v 100.1e; Manufacturing Confidence: 95.1 v 95.8e; Economic Sentiment: 87,9 v 87.7 prior
• (PT) Portugal Jan Consumer Confidence Index: -25.7 v -26.2 prior; Economic Climate Indicator: # v -0.1 prior
• (ZA) South Africa Dec PPI M/M: 0.2% v 0.2%e; Y/Y: 3.0% v 3.1%e
• (EU) Euro Zone Jan Economic Confidence: 91.5 v 89.5e; Industrial Confidence: -5.9 v -7.2; Services Confidence: -17.8 v -18.3e; Consumer Confidence (final reading): -15.5 v -15.5 advance

Fixed income Issuance

• (IS) Iceland opened book to sell EUR-denominated 7-year bonds via syndicate; guidance seen+50 bps to mid-swaps; order book over €3.0B
• (DK) Denmark sold total DKK2.0B in 3-month, 6-month, 9-month and 12-month Bills
• (IT) Italy Debt Agency (Tesoro) sold total €7.25B vs. €6.25-7.25B in 5-year and 10-year BTP Bonds
• Sold €3.5B vs. €3.0-3.5B indicated range in 0.50% Feb 2026 BTP bonds; Avg Yield: 0.06% v 0.01% prior; Bid-to-cover: 1.48x v 1.91x prior
• Sold €3.75B vs. €3.25-3.75B indicated range in 0.90% Apr 2031 BTP; Avg Yield: 0.65% v 0.59% prior; bid-to-cover: 1.38x v 1.57x prior
• (IT) Italy Debt Agency (Tesoro) sold €1.5B vs. €1.0-1.5B indicated range in Apr 2026 CCTeu (floating rate Notes); Avg Yield: % v -0.02% prior; Bid-to-cover: 1.52x v 1.56x prior

Looking Ahead

• (BE) Belgium Jan CPI M/M: No est v 0.0% prior; Y/Y: No est v 0.4% prior
• (DE) Germany Jan CPI Baden Wuerttemberg M/M: No est v 0.6% prior; Y/Y: No est v 0.1% prior
• (EU) Daily ECB Liquidity Stats
• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds
• 05:50 (HU) Hungary Central Bank One-Week Deposit Rate Tender
• 06:00 (IE) Ireland Dec Retail Sales Volume M/M: No est v -12.8% prior; Y/Y: No est v -4.7% prior
• 06:00 (IL) Israel Dec Chain Store Sales M/M: No est v -0.1% prior
• 06:00 (BR) Brazil Jan FGV Inflation IGPM M/M: 2.4%e v 1.0% prior; Y/Y: 25.5%e v 23.1% prior
• 06:00 (CA) Canada Jan CFIB Business Barometer: No est v 58.2 prior
• 07:00 (BR) Brazil Nov National Unemployment Rate: 14.0%e v 14.3% prior
• 07:00 (MX) Mexico Dec Trade Balance: $4.6Be v $3.0B prior
• 07:30 (BR) Brazil Dec Total Outstanding Loans (BRL): 4.021Te v 3.954T prior; M/M: 1.8%e v 2.0% prior; Personal Loan Default Rate: No est v 4.3% prior
• 08:00 (DE) Germany Jan Preliminary CPI M/M: 0.4%e v 0.5% prior; Y/Y: +0.7%e v -0.3% prior
• 08:00 (DE) Germany Jan Preliminary CPI EU Harmonized M/M: 0.3%e v 0.6% prior; Y/Y: +0.5%e v -0.7% prior
• 08:00 (RU) Russia Gold and Forex Reserve w/e Jan 22nd: No est v $590.4B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Q4 Advance GDP Annualized Q/Q: 4.2%e v 33.4% prior; Personal Consumption: 3.1%e v 41.0% prior
• 08:30 (US) Q4 Advance GDP Price Index: 2.2%e v 3.5% prior; Core PCE Q/Q: 1.2%e v 3.4% prior
• 08:30 (US) Dec Advance Goods Trade Balance: -$84.0Be v -$84.8B prior
• 08:30 (US) Initial Jobless Claims: 875Ke v 900K prior; Continuing Claims: 5.09Me v 5.054M prior
• 08:30 (US) Dec Preliminary Wholesale Inventories M/M: 0.5%e v 0.0% prior; Retail Inventories M/M: 0.6%e v 0.7% prior
• 08:30 (CA) Canada Dec Building Permits M/M: -5.0%e v +12.9% prior
• 08:30 (US) Weekly USDA Net Export Sales
• 10:00 (US) Dec Leading Index: 0.3%e v 0.6% prior
• 10:00 (US) Dec New Home Sales: 866Ke v 841K prior
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:00 (US) Jan Kansas City Fed Manufacturing Activity: 12e v 14 prior
• 11:00 (RU) Russia Dec Unemployment Rate: 6.1%e v 6.1% prior
• 11:00 (RU) Russia Nov Real Wages Y/Y: 0.1%e v 0.5% prior
• 11:00 (RU) Russia Dec Real Retail Sales Y/Y: -3.0%e v -3.1% prior
• 11:30 (US) Treasury to sell 4-week and 8-week Bills
• 12:15 (DE) ECB’s Schnabel (Germany)
• 13:00 (US) Treasury to sell 7-Year Notes
• 13:00 (BR) Brazil Dec Total Formal Job Creation: -140.0Ke v +414.6K prior
• 16:00 (NZ) New Zealand Jan Consumer Confidence Index: No est v 112 prior
• 18:00 (KR) South Korea Dec Industrial Production M/M: 0.9%e v 0.3% prior; Y/Y: -0.2%e v +0.5% prior
• 18:30 (JP) Japan Jan Tokyo CPI Y/Y: -0.9%e v -1.2% prior (revised from -1.3%); CPI (ex-fresh food) Y/Y: -0.6%e v -0.9% prior; CPI (ex-fresh food/energy) Y/Y: 0.0%e v -0.4% prior
• 18:30 (JP) Japan Dec Jobless Rate: 3.0%e v 2.9% prior; Job-To-Applicant Ratio: 1.05e v 1.06 prior
• 18:30 (JP) Japan Dec Preliminary Industrial Production M/M: -1.5%e v -0.5% prior; Y/Y: -3.1%e v -3.9% prior
• 19:01 (UK) Jan Lloyds Business Barometer: No est v -4 prior
• 19:30 (AU) Australia Q4 PPI Q/Q: No est v 0.4% prior; Y/Y: No est v -0.4% prior
• 19:30 (AU) Australia Dec Private Sector Credit M/M: 0.2%e v 0.1% prior; Y/Y: 1.7%e v 1.7% prior
• 20:10 (JP) BOJ Outright Bond Purchase Operation for 3~5 Years; 5~10 Years and 25 Years~ maturities
• 21:00 (SG) Singapore Dec M2 Money Supply Y/Y: No est v 12.6% prior; Y/Y: No est v 31.8% prior
• 22:30 (JP) Japan to sell 3-Month Bills
• 23:00 (MY) Malaysia Dec Trade Balance (MYR): 20.3Be v 16.8B prior; Exports Y/Y: 3.6%e v 4.3% prior; Imports Y/Y: -7.3%e v -9.0% prior