Market to read tea leaves of Fed decision

EU mid-market update: Market to read tea leaves of Fed decision and Powell comments to see if expectations of a March rate cut are valid; Quarterly Refunding announcement also in focus.

Notes/observations

- Macro focus on upcoming FOMC decision and Treasury Quarterly Refunding Announcement. CME Futures price in 98% of leaving policy unchanged, with just under 50% chance of first cut at the following meeting on Mar 20th.

- Busy EU data session was centered on CPI readings from France and Germany. Lower than expected inflation from France dropped Euro and bond yields on belief that it reinforces a clear path of rate cuts for ECB this year.

- NDAQ futures are lower after Alphabet reported after close yesterday with Ad and Search revenue disappointing. Global chipmakers are down after AMD earnings and Samsung final results.

- Australia and Japan indices saw bid overnight after data showed declining demand in CPI and Retail Sales.

- Key EU results from: Novartis, Banco Santander, KPN, Novo Nordisk, DNB, GSK and H&M.

- Upcoming US Premarket Earnings: ADP, AVT, BA, BSX, COR, HES, MA, NDAQ, PSX, ROK.

- Asia closed mixed with Shanghai composite under-performing at -1.5%. EU indices are -0.6% to +0.9%. US futures are -1.2% (Nasdaq) to +0.1%. Gold +0.1%, DXY +0.2%; Commodity: Brent -1.2%, WTI -1.3%, TTF +2.1%; Crypto: BTC -1.5%, ETH +0.1%.

Asia

- Japan Dec Preliminary Industrial Production M/M: 1.8% v 2.5%e; Y/Y: -0.7% v 0.2%e.

- Japan Dec Retail Sales M/M: -2.9% v 0.2%e; Y/Y: 2.1% v 5.1%e.

- BOJ Jan Summary of Opinions: Now is a 'golden opportunity', as shifts in monetary policies of overseas central banks could reduce the flexibility of the BOJ's monetary policy.

- Japan to provide support for joint Capex in EV batteries - Japan press.

- Bank of Japan (BOJ) has been scaling back its bond purchases for the third time since the 2016 launch of its yield curve control (YCC) policy; Some analysts seeing this 3rd stealth taper as a sign BOJ sets stage for normalization.

- Japan Finance Ministry (MOF): Did not intervene in currency market from Dec 28th to Jan 29th.

- China Jan Manufacturing PMI (Govt Official): 49.2 v 49.3e(fourth month of contraction).

- China bond rally to continue on rate cut prospects - China Securities Journal.

- IMF Official: China authorities need to give clear and consistent set of messages to address the property sector ‘woes’; Would prefer more policy rate cuts in China versus RRR cuts.

- New Zealand Foreign Min Peters: Washington needs to do more in the Pacific to counter other political influences; NZ economy at or near bottom of cycle.

- Australia Q4 CPI Q/Q: 0.6% v 0.8%e; Y/Y: 4.1% v 4.3%e; Dec CPI Y/Y: 3.4% v 3.7%e.

- India govt reduces import duty for phone components from 15% to 10%.

- Citi analysts see China's first loan prime (LPR) rate cut could be as early as Feb as mixed PMI performance indicates the need for further policy intervention.

- China Finance Ministry: Warns local govts against using funds designated for science and tech development for debt repayments and paying retirees.

Global conflict/tensions

- US CENTCOM: Successfully shot down anti-ship cruise missile fired by the Yemen Houthis; the missile was fired toward the Red Sea.

- Iran Envoy to UN says any attack on Iran or its interests or nationals outside its borders will be met with definitive response - Iran press.

Europe

- UK Jan Lloyds Business Barometer: 44 v 35 prior.

- UK Times Shadow MPC says BOE should leave rates unchanged, resist forward guidance; calls for caution from the BOE.

- France Fin Min Le Maire: Will launch 500 controls on 5 big retailers to check if they comply with Egalim Law.

- EU Foreign Policy Chief Borrell: Hope EU Red Sea mission can be launched on Feb 17th; Ukraine needs more ammunition; Gap on fire capacity needs to be filled.

- European yields and EUR/USD briefly tick lower following faster deceleration in French CPI Y/Y pace in January.

Americas

-WSJ's Timiraos: Some Fed officials were surprised by how much investors dialed up their bets on rate cuts in 2024 in response to Powell's Dec press conference; Some analysts believe that could lead Powell to be more cautious today.

-Pres Biden reportedly being pressed on Qatar roles in Israel/Hamas hostage talks - Axios.

-Brazil Government to take measures to ensure the country grows by 2%.

Energy

-Russia Dep PM Novak said current oil prices adequately reflect market situation.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.08% at 486.02, FTSE -0.10% at 7,658.70, DAX -0.14% at 16,947.91, CAC-40 +0.06% at 7,681.80, IBEX-35 +0.38% at 10,077.50, FTSE MIB +0.65% at 30,823.00, SMI -0.58% at 11,376.50, S&P 500 Futures -0.49%].

Market focal points/key themes: European indices open generally higher but took on a downward bias after the first hours of trading; better performing sectors include real estate and financials; while sectors inclined to the downside include consumer discretionary and technology; apparel subsector dragged by disappointing results from H&M; Vodafone confirms merger talks with Iliad have ended; focus on Fed rate decision later in the day; earnings expected in the upcoming US session include Thermo Fisher, Boston Scientific, Teva and Boeing.

Equities

- Consumer discretionary: H&M [HMB.SE] -7.5% (earnings; new CEO).

- Financials: Santander [SAN.ES] +1.0% (earnings), Deutsche Bank [DBK.DE] -0.5% (analyst downgrade).

- Healthcare: Novo Nordisk [NOVOB.DK] +1.5% (earnings; buyback), GSK [GSK.UK] -1.0% (earnings; outlook), Novartis [NOVN.CH] -3.5% (earnings).

- Technology: Infineon Technologies [IFX.DE] -1.0% (Samsung final results and outlook; AMD guidance).

- Telecom: Vodafone Group [VOD.UK] -3.5% (confirms merger talks for Italian unit with Iliad have ended; discussions with others will continue), Ericsson [ERICB.SE] -2.5% (analyst downgrade).

Speakers

-Bank of Indonesia (BI) Gov Warjiyo still sees window for a rate cut in H2.

-Japan PM KIshida will ensure disposable income will rise faster than prices.

-Former Bank of Japan (BOJ) Dep Gov Nakaso: Japan is nearing a return to an economy with a positive interest rate and it’s clearly coming into sight for the first time in a long while.

Currencies/fixed income

-USD is weaker ahead of FOMC decision. EUR initially dipped with yields after French CPI was below consensus but later bounced back with German State CPIs coming in ahead of national reading at 08:00 ET. Little changed overall with EUR/USD 1.083.

-GBP/USD (cable) waits for BOE decision tomorrow, amid lack of catalysts today.

-USD/JPY popped higher after Japan MOF announced they did NOT intervene in currency markets during Jan.

Economic data

-(NL) Netherlands Dec Retail Sales Y/Y: 1.9% v 3.7% prior.

-(UK) Jan Nationwide House Price Index M/M: 0.7% v 0.1%e; Y/Y: -0.2% v -0.9%e.

-(DK) Denmark Dec Unemployment Rate: 2.5% v 2.5% prior.

-(DE) Germany Dec Retail Sales M/M: -1.6% v +0.6%e; Y/Y: -4.4% v -1.9%e.

-(TR) Turkey Dec Trade Balance: -$6.0B v -$6.1Be.

-(TH) Thailand Dec Current Account: $2.1B v $1.1Be.

-(DE) Germany Dec Import Price Index M/M: -1.1% v -0.6%e; Y/Y: -8.5% v -8.2%e.

-(CH) Swiss Dec Real Retail Sales Y/Y: -0.8% v -1.5% prior.

-(HU) Hungary Dec PPI M/M: -0.7% v -0.8% prior; Y/Y: -7.2% v -6.6% prior.

-(FR) France Jan Preliminary CPI M/M: -0.2% v 0.0%e; Y/Y: 3.1% v 3.3%e (slowest annual pace since early 2022 and 2nd negative M/M print in 3 months); CPI EU Harmonized M/M: -0.2% v -0.1%e; Y/Y: 3.4% v 3.6%e.

-(FR) France Dec PPI M/M: 0.1% v 2.3% prior; Y/Y: -0.9% v +0.3% prior.

-(TW) Taiwan Q4 Advance GDP Y/Y: 5.1% v 4.2%e; Overall 2023 GDP Y/Y: 1.4% v 1.3%e.

-(ES) Spain Dec Adjusted Retail Sales Y/Y: 3.1% v 5.0% prior; Retail Sales (unadj) Y/Y: 3.4% v 5.9% prior.

-(HK) Hong Kong Q4 Advance GDP Q/Q: 0.5% v 0.5%e; Y/Y: 4.3% v 4.7%e; Overall 2023 GDP Y/Y: 3.2% v 3.4%e.

-(DE) Germany Jan Net Unemployment Change: -2.0K v +11.0Ke; Unemployment Claims Rate: 5.8% v 5.9%e.

-(IT) Italy Dec Unemployment Rate: 7.2% v 7.5%e.

-(DE) Germany Jan CPI Bavaria M/M: 0.2% v 0.1% prior; Y/Y: 2.9% v 3.4% prior.

-(DE) Germany Jan CPI Hesse M/M: 0.0% v 0.0% prior; Y/Y: 2.2% v 3.5% prior.

-(DE) Germany Jan CPI Brandenburg M/M: 0.1% v 0.0% prior; Y/Y: 3.7% v 4.5% prior.

-(DE) Germany Jan CPI Baden Wuerttemberg M/M: 0.2% v 0.1% prior; Y/Y: 3.2% v 3.8% prior.

-(DE) Germany Jan CPI Saxony M/M: 0.4% v 0.2% prior; Y/Y: 3.5% v 4.3% prior.

-(DE) Germany Jan CPI North Rhine Westphalia M/M: +0.3% v -0.1% prior; Y/Y: 3.0% v3.5% prior (matches slowest annual pace since mid-2021).

- (ES) Spain Nov Current Account: €2.8B v €3.8B prior.

-(IS) Iceland Dec Final Trade Balance (ISK): -28.9B v -29.5B prelim.

-(CZ) Czech Dec M2 Money Supply Y/Y: 8.3% v 7.9% prior.

-(CH) Swiss Jan Expectations Survey: -19.5 v -23.7 prior.

-(NO) Norway Central Bank (Norges) Feb Daily FX Purchases (NOK): 350M v 350M prior.

-(IT) Italy Dec Hourly Wages M/M: 5.1% v 0.0% prior; Y/Y: 7.9% v 3.0% prior.

-(GR) Greece Nov Retail Sales Value Y/Y: -5.2% v -6.3% prior; Retail Sales Volume Y/Y: 0.6% v 0.1% prior.

Fixed income issuance

-Vietnam Finance Ministry sells total VNM3.0T vs. VNM10.0T indicated in 5-year, 10-year, 15-year and 30-year bonds (4 tranches).

- India sells total INR270B vs. INR270B indicated in 3-month, 6-month and 12-month bills.

-Italy Debt Agency (Tesoro) opens book to sell new EUR-denominated 15-year Oct 2039 bond, guidance seen at +13bps to BTPs.

-Sweden sells SEK3.0B vs SEK3.0B indicated in 0.0% May 2035 bonds; Avg Yield: 2.292%; bid-to-cover: 3.15x (no prior history).

-Norway sells NOK3.0B in 2027 and 2031 bonds.

Looking ahead

- 05:30 (DE) Germany to sell €4.5B in 2.2% Feb 2034 Bund.

- 05:30 (GR) Greece Debt Agency (PDMA) to sell 3-month Bills.

- 05:30 (EU) ECB allotment in 3-month LTRO tender.

- 05:30 (IN) India Dec Fiscal Deficit (INR): No est v 1.029T prior.

- 06:00 (IT) Italy Nov Industrial Sales M/M: No est v 0.1% prior; Y/Y: No est v -1.7% prior.

- 06:00 (IL) Israel Dec Chain Stroe Sales Y/Y: No est v -1.9% prior.

- 06:00 (NZ) New Zealand Jan CoreLogic House Prices Y/Y: No est v -3.3% prior.

- 06:00 (RU) Russia to sell OFZ bonds (2 tranches).

- 06:30 (IN) India Dec Eight Infrastructure (Key) Industries: No est v 7.8% prior.

- 07:00 (US) MBA Mortgage Applications w/e Jan 26th: No est v 3.7% prior.

- 07:00 (UK) Weekly PM Question time in House.

- 07:00 (ZA) South Africa Dec Trade Balance (ZAR): 10.0Be v 21.0B prior.

- 07:00 (BR) Brazil Dec National Unemployment Rate: 7.5%e v 7.5% prior.

- 07:00 (CL) Chile Dec Manufacturing Production Y/Y: 1.7%e v 4.5% prior; Industrial Production Y/Y: No est v 2.7% prior; Total Copper Production: No est v 444.9K prior.

- 07:00 (CL) Chile Dec Retail Sales Y/Y: -2.2%e v -2.4% prior; Commercial Activity Y/Y: No est v -0.8% prior.

- 08:00 (DE) Germany Jan Preliminary CPI M/M: 0.1%e v 0.1% prior; Y/Y: 3.0%e v 3.7% prior.

- 08:00 (DE) Germany Jan Preliminary CPI EU Harmonized M/M: -0.2%e v +0.2% prior; Y/Y: 3.1%e v 3.8% prior.

- 08:01 (AU) Australia Jan CoreLogic House Price Index M/M: No est v 0.4% prior.

- 08:15 (US) Jan ADP Employment Change: +148Ke v +164K prior.

- 08:30 (US) Q4 Employment Cost Index (ECI): 1.0%e v 1.1% prior.

- 08:30 (CA) Canada Nov GDP M/M: 0.1%ev 0.0% prior; Y/Y: 0.9%e v 0.9% prior.

- 09:45 (US) Jan Chicago Purchase Manager’s Index (PMI): 48.0e v 47.2 prior (revised from 46.9).

- 10:00 (CO) Colombia Dec National Unemployment Rate: No est v 9.0% prior; Urban Unemployment Rate: No est v 8.7% prior.

- 10:00 (MX) Mexico Dec Net Outstanding Loans (MXN): No est v 5.99T prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 14:00 (US) FOMC Interest Rate Decision: Expected to leave Target Range unchanged at 5.25-5.50%.

- 14:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to cut Overnight Lending Rate by 50bps to 12.50%.

- 14:30 (US) Fed Chair Powell post rate decision press conference.

- 16:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: Expected to cut Overnight Rate Target by 100bps to 7.25%.

- 16:30 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to cut Selic Target Rate by 50bps to 11.25%.

- 17:00 (AU) Australia Jan Final PMI Manufacturing: No est v 50.3 prelim.

- 19:00 (KR) South Korea Jan Trade Balance: $0.6Be v $4.5B prior; Exports Y/Y: 18.5%e v 5.0% prior; Imports Y/Y: -7.7%e.

- 19:00 (AU) Australia to sell A$800M in 3.50% Dec 2034 bonds.

- 19:30 (AU) Australia Q4 Export Price Index Q/Q: No est v -3.1% prior; Import Price Index Q/Q: No est v 0.8% prior.

- 19:30 (AU) Australia Q4 NAB Business Confidence: No est v -1 prior.

- 19:30 (AU) Australia Dec Building Approvals M/M: 0.5%e v 1.6% prior; Private Sector Houses M/M: No est v -1.7% prior.

- 19:30 (JP) Japan Jan Final PMI Manufacturing: No est v 48.0 prelim.

- 19:30 (KR) South Korea Jan PMI Manufacturing: No est v 49.9 prior.

- 19:30 (TW) Taiwan Jan PMI Manufacturing: No est v 47.1 prior.

- 19:30 (ID) Indonesia Jan PMI Manufacturing: No est v 52.2 prior.

- 19:30 (MY) Malaysia Jan PMI Manufacturing: No est v 47.9 prior.

- 19:30 (PH) Philippines Jan PMI Manufacturing: No est v 51.5 prior.

- 19:30 (TH) Thailand Jan PMI Manufacturing: No est v 45.1 prior.

- 19:30 (VN) Vietnam Jan PMI Manufacturing: No est v 48.9 prior.

- 20:01 (IE) Ireland Jan PMI Manufacturing: No est v 48.9 prior.

- 20:45 (CN) China Jan Caixin PMI Manufacturing: 50.8e v 50.8 prior.

- 22:35 (JP) Japan to sell 10-Year JGB Bonds.

- 23:00 (ID) Indonesia Jan CPI M/M: 0.3%e v 0.4% prior; Y/Y: 2.5%e v 2.6% prior; CPI Core Y/Y: 1.8%e v 1.8% prior.