Focus turn to upcoming central bank speak, issuance front remains heavy

Notes/Observations

- European equities decline on faded optimism for slower rate hikes, following several officials’ hawkish commentary, including Fed's Bostic and BOE's Pill overnight. Recent stronger economic data and less recession fears have added to concerns Central Banks will not be forced to leave monetary tightening as soon as expected.

- Early signs of emerging Europe potentially resuming tightening at Central Banks which have paused, after Poland Central Bank's Kotecki denies confirming rate hikes are over and predicts inflation to still climb further. Poland has paused during last 4 rate decisions.

- France Nov Industrial Production outperforms rest of Europe with beat on MoM and YoY, Misses or lower comparable readings for Austria, Denmark, Turkey, Finland and Netherlands.

- Asia closed mixed to flat. EU indices are -0.2% to -0.8%. US futures are mixed to flat. Gold +0.2%, DXY +0.1%; Commodity: Brent -0.1%, WTI +0.1%, TTF -0.4%; Crypto: BTC 0.0%, ETH 1.0%.

Asia

- Japan Dec Tokyo CPI Y/Y: 4.0% v 4.0%e (40-year high); CPI (Ex-Fresh Food) Y/Y: 4.0% v 3.8%e.

- Japan Nov Household Spending Y/Y: -1.2% v +0.5%e (1st drop in 6 months).

- China Ambassador to Australia Xiao expressed hope that both countries would return to 'normal' trade relationship; Australia and China could cooperate on climate change and Lithium.

- China Beige Book International noted that deflationary pressures increased in Q4 as the economy slumped and price growth was subdued.

Europe

- BOE Pill (chief economist) noted that UK inflation might be more persistent even if energy prices fell because the labor market was close to capacity and firms could afford to increase prices.

- UK Foreign Min Cleverly and EU's Sefcovic joint statement noted that some critical issues needed to be resolved. Announced an agreement on EU's access to UK IT systems.

- UK government to cut business energy aid by about 85% to £5.5B. Businesses rather than government will have to pay the extra costs if energy prices surge (incuded extra support for some energy-intensive businesses, mostly in manufacturing).

- UK Dec BRC Sales LFL Y/Y: 6.5% v 4.1% prior.

Americas

- Fed's Daly (non-voter) stated that absolutely expected US economy to continue slowing. Noted that 25bps or 50bps were on the table for the next FED meeting; reasonable to assume 5.00-5.25%.

- Fed's Bostic (non-voter): Inflation is to high and was favoring getting rates to 5.00-5.25% and pausing. Favored that the Fed held rates above 5% for a 'long time', well into 2024.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.61% at 445.64, FTSE -0.27% at 7,703.71, DAX -0.47% at 14,723.35, CAC-40 -0.50% at 6,872.52, IBEX-35 -0.15% at 8,681.50, FTSE MIB -0.24% at 25,324.00, SMI -0.80% at 11,122.80, S&P 500 Futures -0.06%].

Market Focal Points/Key Themes: European indices open lower across the board and remained under pressure as the session wore on; better performing sectors include energy and utilities; sectors leading into the red are materials and consumer discretionary; Triton enters competing bid for Caverion; earnings expected in the upcoming US session includes TD Synnex and Bed Bath & Beyond.

Equities

- Consumer discretionary: Caverion [CAV1V.FI] +17.0% (receives offer from Triton Fund V at €8.00/shr), AO World [AO.UK] +6.0% (raises outlook), Card Factory [CARD.UK] +3.5% (trading update - ahead of expectations), About You [YOU.DE] -12.0% (Q3 - cuts FY22/23 Rev and Adj EBITDA), Games Workshop [GAW.UK] -5.5% (reports H1).

- Energy: Frontline [FRON.NO] +18.0% (terminates combination with Euronav), Euronav [EURN.BE] -20.0% (Frontline terminates combination), PGS [PGS.NO] -7.0% (prelim Q4), SFC Energy [F3C.DE] -1.0% (receives C$5.3M follow up order), CGG [CGG.FR] +1% (prelim Q4 - raises FY22 segment rev).

- Materials: SIG [SHI.UK] -1.0% (trading update - underlying op in line with expectations).

Speakers

- EU Economic Commissioner Gentiloni (Italy) stated that inflation apparently has peaked in the EU. Also believed that a deep recession was likely to be avoided.

- Poland Central Bank (NBP) Kotecki stated that Inflation might climb to 20% in Feb.

- Goldman Sachs analyst no longer predict a Euro Zone recession. Region proved more resilient at the end of 2022, natural gas prices fell sharply and China abandoned Covid-19 restrictions earlier than anticipated.

Currencies/fixed income

- USD was steady during the session after a bout of recent weakness on sentiment that the Fed would not have to take interest rates above 5% to cool inflation. Greenback was aided by some Fed speak that reiterated view that rates both have further to go and to stay at elevated levels.

- EUR/USD off its 7-month high and at 1.0740 by mid-session.

- USD/JPY staying below the 132 handle.

Economic data

- (NL) Netherlands Dec Final CPI M/M: +0.5% v -3.0% prior; Y/Y: 9.6 v 9.6% prelim.

- (NL) Netherlands Dec Final CPI EU Harmonized M/M: 0.7% v 0.7% prelim; Y/Y: 11.0% v 11.0% prelim.

- (NL) Netherlands Nov Consumer Spending Y/Y: 2.7 v 0.9% prior.

- (NL) Netherlands Nov Manufacturing Production M/M: -2.0% v -0.3% prior; Y/Y: -0.2% v +3.5% prior; Industrial Sales Y/Y: 11.5 v 16.3% prior.

- (FI) Finland Nov Industrial Production M/M: -1.2% v -2.3% prior; Y/Y: -3.1% v -0.2% prior.

- (SE) Sweden Nov GDP Indicator M/M: -0.5% v +0.7% prior; Y/Y: 0.7% v 2.0% prior.

- (SE) Sweden Nov Private Sector Production M/M: -1.1% v +0.5% prior; Y/Y: 0.9% v 3.5% prior.

- (SE) Sweden Nov Industrial Orders M/M: -0.6% v -4.2% prior; Y/Y: -6.8% v -7.3% prior.

- (SE) Sweden Nov Industry Production Value Y/Y: -0.5% v +3.4% prior; Service Production Value Y/Y: 1.9% v 4.4% prior.

- (SE) Sweden Nov Household Consumption M/M: +0.4% v -0.2% prior; Y/Y: -0.3% v 0.0% prior.

- (SE) Sweden Dec Budget Balance (SEK): -78.5B v +36.7B prior.

- (NO) Norway Dec CPI M/M: 0.1% v 0.3%e; Y/Y: 5.9% v 6.1%e.

- (NO) Norway Dec CPI Underlying M/M: 0.4% v 0.3%e; Y/Y: 5.8% v 5.7%e.

- (NO) Norway Dec PPI (including oil) M/M: 4.9% v 5.2% prior; Y/Y: 18.7% v 22.3% prior.

- (DK) Denmark Dec CPI M/M: -0.6% v -0.9% prior; Y/Y: 8.7% v 8.9% prior.

- (DK) Denmark Dec CPI EU Harmonized M/M: -0.7% v -1.1% prior; Y/Y: 9.6% v 9.7% prior.

- (DK) Denmark Nov Industrial Production M/M: +2.4% v -2.3% prior.

- (TR) Turkey Nov Unemployment Rate: 10.2% v 10.2% prior.

- (TR) Turkey Nov Industrial Production M/M: -1.1% v -0.9%e; Y/Y: -1.3% v -1.0%e.

- (FR) France Nov Industrial Production M/M: 2.0% v 0.8%e; Y/Y: +0.7% v -1.3%e.

- (FR) France Nov Manufacturing Production M/M: 2.4% v 0.7%e; Y/Y: 4.2% v 0.8%e.

- (AT) Austria Nov Industrial Production M/M: 0.3% v 0.8% prior; Y/Y: 3.9% v 5.5% prior.

- (CN) China Dec Aggregate Financing (CNY): 1.31T v 1.85Te - (CN) China Dec New Yuan Loans (CNY): 1.4T v 1.20Te.

- (CN) China Dec M2 Money Supply Y/Y: 11.8% v 12.4%e; M1 Money Supply Y/Y: 4.8%e v 4.6% prior; M0 Money Supply Y/Y: No est v 14.1% prior.

- (GR) Greece Nov Industrial Production Y/Y: -0.9% v -2.7% prior.

- (GR) Greece Nov Unemployment Rate: 11.4% v 11.6% prior.

Fixed income issuance

- (IT) Italy Debt Agency (Tesoro) opened its book to sell Sept 2043 BTP bond via syndicate; guidance seen +14bps to Mar 2041 BTP.

- (BE) Belgium Debt Agency (BDA) opened book to sell EUR-denominated 10-year OLO bond via syndicate; guidance seen +12bps to mid-swap.

- (SA) Saudi Arabia to sell USD-denominated 5-year, 10-year and 30-year bonds.

- (ID) Indonesia sold total IDR13.85T in Islamic bills and bonds (sukuk).

- (NL) Netherlands Debt Agency (DSTA) sold €3.485B vs. €2.5-3.5B indicated range in 0% Jan 2026 DSL Bonds; Avg Yield: 2.578% v 0.761% prior.

- (ES) Spain Debt Agency (Tesoro) sold total €4.89B vs. €4.5-5.5B indicated range in 6-month and 12-month bills.

- (ZA) South Africa sold total ZAR3.9B vs. ZAR3.9B indicated in 2030, 2031 and 2035 bonds.

- (UK) DMO sold £3.0B in new 3.25% Jan 2033 Gilts; Avg Yield: 3.697% v 3.333% prior; bid-to-cover: 2.77x v 2.21x prior; Tail: 0.3bps v 1.1bps prior.

- (AT) Austria Debt Agency (AFFA) sold total €1.15B vs. €1.15B indicated in 2026 and 2047 RAGB bonds.

Looking ahead

- (SE) Fed Chair Powell with BOE Gov Bailey and ECB’s Schnabel (Germany) in Stockholm.

- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to raise Interest Rates by 25bps to 7.00%.

- (MX) Mexico Dec Nominal Wages: No est v 8.2% prior.

- 05:15 (CH) Switzerland to sell 3-month Bills.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (DE) Germany to sell €500M in 0.1% Apr 2033 I/L bonds Bonds (Bundei).

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 12-month bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:00 (US) Dec NFIB Small Business Optimism: 91.5e v 91.9 prior.

- 06:00 (IL) Israel Dec Consumer Confidence: No est v 94.0 prior.

- 06:00 (ZA) South Africa Nov Manufacturing Production M/M: +1.1%e v -6.3% prior; Y/Y: -3.5%e v +1.0% prior.

- 06:00 (FI) Finland to sell combined €2.0B in 6-month and 9-month bills.

- 06:30 (CL) Chile Central Bank Economist Survey.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 07:00 (BR) Brazil Dec IBGE Inflation IPCA M/M: 0.4%e v 0.4% prior; Y/Y: 5.6%e v 5.9% prior.

- 07:00 (MX) Mexico Oct Gross Fixed Investment: No est v 3.3% prior.

- 07:00 (IS) Iceland Dec Unemployment Rate: No est v 3.3% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (UR) Ukraine Dec CPI M/M: 1.2%e v 0.7% prior; Y/Y: 27.4%e v 26.5% prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 Fed Chair Powell Powell discuses Central Bank Independence at Riksbank Event.

- 10:00 (US) Nov Final Wholesale Inventories M/M: 1.0%e v 1.0% prelim; Wholesale Trade Sales M/M: 0.2%e v 0.4% prior.

- 10:35 (ES) ECB's de Cos (Spain) at central bank event in Sweden.

- 13:00 (US) Treasury to sell 3-Year Notes.

- 16:30 (US) Weekly API Oil Inventories.

- 18:00 (KR) South Korea Dec Unemployment Rate: 2.9%e v 2.9% prior.

- 19:00 (NZ) New Zealand Dec ANZ Commodity Price M/M: No est v -3.9% prior.

- 19:30 (AU) Australia Nov Retail Sales M/M: +0.6%e v -0.2% prior.

- 19:30 (AU) Australia Nov CPI Y/Y: 7.2%e v 6.9% prior; CPI Trimmed Mean Y/Y: 5.5%e v 5.3% prior.

- 19:30 (AU) Australia Q3 Job Vacancies Q/Q: No est v -2.1% prior.

- 20:30 (KR) Bank of Korea (BOK) to sell KRW90B in 1-year Bonds.

- 21:35 (CN) China to sell 1-month and 2-month Bills.

- 21:35 (CN) China to sell 2025 and 2029 Bonds.

- 22:00 (TH) Thailand to sell THB30B in 2028 Bonds.

- 22:35 (JP) Japan to sell 30-Year JGB Bonds.

- 23:00 (MY) Malaysia Nov Industrial Production Y/Y: 2.9%e v 4.6% prior; Manufacturing Sales Value Y/Y: No est v 12.9% prior.