China 2017 GDP grows at a faster annual pace for the 1st time in 7 years

Notes/Observations

- Major Chinese data mixed with GDP YoY beating expectations (6.8% v 6.7%e). Thus GDP has registered an annual reading between 6.7-7.0% in every quarter since the start of 2015

- US 10-year govt bond yield touches above 2.60% (highest since March)

Asia:

- Australia Dec Employment Change registers its 15th consecutive monthly gain) (+34.7K v +15.0Ke) ; Unemployment Rate: 5.5% v 5.4%e

- Bank of Korea (BOK)keeps 7-Day Repo Rate unchanged at 1.50% (as expected) to maintain its accommodative policy stance to ensure economic recovery continued and CPI stabilized at target in mid-term

- Some at BOJ are said to see need for future normalization talks, see the market getting ahead of itself and agree that current stimulus needed for now

- China FX regulator SAFE: Two-way yuan fluctuations will become a 'new normal'. Reiterated that China investment in US Treasury bonds are 'market driven' (**Note: Recent TIC data showed holdings at lowest level since July)

- President Trump declined to confirm reports US was considering possible preemptive strike on North Korea; mulling big damages in probe over alleged China IP theft. Hopes there would not be trade war with China

Europe:

- UK House of Commons approved the EU Withdrawal Bill in 3rd reading (as expected) with vote at 324 to 295. Bill to now be review by the House of Lords, which could ask for more changes

- Bank of Italy says meetings with ECB's Nouy on lenders constructive but believed that ECB's Nouy was 'inflexible' in meeting with Italian banks

- New Eurogroup Chief Centeno: Our common goal is to strengthen the euro; Key to reform is sequencing not quick fixes

Americas:

- US Tic data shows China’s holdings of treasuries slumped to lowest level since July ($1.18T v $1.19B prior)

- Fed's Beige Book: US economy, inflation growing at modest-to-moderate pace- "Most districts said that wages increased at a modest pace,"

- White House says it supported short-term government funding bill

- White House Chief of Staff Kelly believed Congress to pass stopgap bill; GOP leaders had votes to avert government shutdown

- Reports that House Republicans were short of the votes they need to avoid a government shutdown

- Fed's Mester (voter, hawk): US has returned to normal and policy is normalizing; gradual 2018 rate hikes are appropriate

- Fed's Kaplan (moderate, non-voter): three rate rises in 2018 is unlikely to invert the yield curve

- Tech name Apple [AAPL]: anticipates $38B in repatriation tax payments as required by tax bill; expected to invest $30B in capex in US over 5 years

Energy:

- Weekly API Oil Inventories: Crude: -5.1M v -11.2M prior

 

Economic Data:

- (NL) Netherlands Dec Unemployment Rate: 4.4% v 4.4% prior

- (NL) Netherlands Nov Trade Balance: €6.0B v €4.9B prior

- (CN) China Q4 GDP Q/Q: 1.6% v 1.7%e; Y/Y: 6.8% v 6.7%e; GDP YTD: 6.9% v 6.8%e

- (CN) China Dec Industrial Production Y/Y: 6.2% v 6.1%e; Industrial Production YTD Y/Y: 6.6% v 6.6%e

- (CN) China Dec Retail Sales Y/Y: 9.4% v 10.2%e; Retail Sales YTD Y/Y: 10.2% v 10.3%e

- (CN) China Dec YTD Fixed Urban Assets Y/Y:7.2 % v 7.1%e

- (HK) Hong Kong Dec Unemployment Rate: 2.9% v 3.0%e (lowest level in 20 years)

- (IL) Israel Jan CPI 12-month Forecast: 0.7% v 0.7% prior

 

Fixed Income Issuance:

(AT) Austria Debt Agency (AFFA) opened its book to sell EUR-denominated 10-year; guidance seen -17bps to mid-swaps

- (ES) Spain Debt Agency (Tesoro) sold total €4.09B vs. €3.5-4.5B indicated range in 2022, 2033 and 2046 bonds

- Sold €1.05B in 0.45% Oct 2022 SPGB; Avg yield: 0.324% v 0.356% prior, Bid-to-cover: 3.60x v 2.55x prior

- Sold €1.39B in 2.35% July 2033 SPGB; Avg Yield: 2.098% v 2.17% prior; Bid-to-cover: 1.54x v 1.78x prior

- Sold €1.65B in 2.90% Oct 2046 SPGB; Avg Yield: 2.691% v 2.836% prior; Bid-to-cover: 1.40x v 2.07x prior

- (FR) France Debt Agency (AFT) sold total €7.497B vs. €6.5-7.5B indicated range in 2021, 2023 and 2024 bond

- Sold €3.53B in 0.00% Feb 2021 Oat; Avg Yield: -0.24% v -0.39% prior; Bid-to-cover: 2.05x v 2.07x prior

- Sold €2.68B in 0% Mar 2023 Oat; Avg Yield: +0.10% v -0.13% prior; bid-to-cover: 2.14x v 2.28x prior

- Sold €1.287B in 2.25% May 2024 Oat; Avg Yield: 0.23% v 0.16% prior; Bid-to-cover: 2.48x v 1.78x prior

- (SE) Sweden sold SEK 500M in 0.125% I/L 2026 bond; Avg Yield: -1.2792% v -1.4879% prior; Bid-to-cover: 2.33x v 2.57x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.1% at 398.5 , FTSE -0.3 at 7702, DAX +0.4% at 13235, CAC-40 +0.2% at 5504 , IBEX-35 -0.1% at 10463, FTSE MIB +0.3% at 23575 , SMI flat at 9439, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes:

European Indices trade mixed with notable strength in Dax following on from a strong close on Wall Street overnight with the Dow settling above 26K for the first time.
Earnings continue to pick up with Carrefour trading higher in France after Q4 results, Swiss name Geberit trades over 4% higher after beating Rev forecasts. In the UK Associated British Foods trades lower after its trading update, with Royal mail also lower after reporting 9M results.
Elsewhere Countrywide trades sharply lower after lower profits and Revenue while Avanza Bank trades over 10% higher after Q4 results.
Looking ahead we continue to see key banking names report, including Morgan Stanley, Keycorp, BB&T and Bank of new York.

 

Movers

- Consumer Discretionary [Carrefour [CA.FR] +.9% (Q4 results), ABF [ABF.UK] -.0% (Trading update), Royal Mail [RMG.UK] -1.8% (Trading update), Whitbread [WTB.UK] +1.3% (Trading update)]

- Financial [Draper Esprit [GROW.UK] +6.6% (Invests in Ledger), Countrywide [CWD.UK] -16% (Trading update), Avanza Bank [AVA.SE] +14% (Earnings)]

- Industrials [ Geberit [GEBN.CH] +4.9% (Earnings), Chemring [CHG.UK] -2.9% (Earnings, SFO investigation)]

-Technology [Meyer Burger Tech [MBTN.CH] +2.4% (prelim earnings) ]

 

Speakers

- ECB’s Weidmann (Germany): Increase in Germany's trade surplus a consequence of ultra-loose ECB monetary policy

- Norway Central Bank Q4 Lending Survey: Household loan demand unchanged in quarter. Little changed seen in Q1 demand, credit standards or loan conditions

- Thailand Central Bank: GDP growth reduces the need for further interest rate cuts; Reiterated monetary policy should remain accommodative for some time to facilitate economic growth. Headline inflation to rise gradually and return to lower end of the 1.0-4.0% target range in H1

- Philippine Central Bank Deputy Gov Guinigundo stated that saw continued stability in PHP currency (Peso)

 

Currencies

- USD was slightly weaker despite higher Treasury yields against the major pairs. The US 10-year moved above the 2.60% level for 11-month highs

- EUR/USD hovered just above the 1.22 level in a quiet European session as dealers assessed the ECB’s recent rhetoric on the Euro. The pair was off its recent 3-year highs as market participants pondered whether ECB's Draghi would push back against euro strength during his press conference next week following the central bank’s policy meeting. One analyst noted that t would take more euro appreciation than seen so far for the ECB to go as far as adding "more EUR language" into the opening statement.

- The USD/JPY pair hovered around the lower 111 area. Some at BOJ were said to see need for future normalization talks

 

Fixed Income

- Bund Futures trades down 14 ticks at 160.55 as the recent rally takes a break. Continued upside targets 162.00, while a move lower targets the159.56 low.

- Gilt futures trade at 123.70 down 30 ticks as Gilts remained under pressure so far. Support continues to stand at 123.55 then 122.83, with upside resistance at 124.25 then 124.96.

- Thursday’s liquidity report showed Wednesday’s excess liquidity fell to €1.861T from €1.871T prior. Use of the marginal lending facility fell to €135M from €401M prior.

- Corporate issuance saw 5 issuers raise $9.8B in the primary market

 

Looking Ahead

- (ID) Indonesia Central Bank (BI) Interest Rate Decision: Expected to leave 7-Day Reverse Repo rate unchanged at 4.25%

- 05:30 (UK) DMO to sell £2.5B in 0.75% July 2023 Gilts

- 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds (3 tranches)

- 05:45 (IT) Italy Fin Min Padoan at event

- 05:50 (FR) France Debt Agency (AFT) to sell combined €1.25-1.75B in 2024, 2028 and 2030 Inflation-linked binds (Oatei)

- 06:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave Benchmark Repurchase Rate unchanged at 8.00%

- 06:45 OPEC Monthly Report

- 06:45 (US) Daily Libor Fixing

- 08:00 (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to leave Interest Rates unchanged at 6.75%

- 08:00 (RU) Russia Gold and Forex Reserve w/e Jan 12th: No est v $432.6B prior

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) Dec Housing Starts: 1.28Me v 1.297M prior; Building Permits: 1.30Me v 1.303M prior (revised from 1.298M);

- 08:30 (US) Initial Jobless Claims: 249Ke v 261K prior; Continuing Claims: 1.90Me v 1.867M prior

- 08:30 (US) Philadelphia Fed Business Outlook: 25.0e v 27.9 prior (revised from 26.2)

- 08:30 (CA) Canada Dec ADP Employment Report: No est v -5.7K prior

- 09:30 (FR) ECB’s Coeure (France) on panel in Frankfurt

- 10:00 (CO) Colombia Nov Industrial Production Y/Y: -1.1%e v -0.3% prior

- 10:00 (CO) Colombia Nov Retail Sales Y/Y: -1.0%e v -0.6% prior

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:00 (US) Weekly DOE Crude Oil Inventories

- 12:30 (FR) ECB’s Villeroy (France)

- 13:00 (US Treasury to sell $13B in 10-Year TIPS

- 13:00 (US Treasury announcement for upcoming 2-yea, 5-year and 7-year Notes for week of Jan 22nd