All eyes on content and style of Trump

EU Mid-Market Update: All eyes on content and style of Trump's inauguration speech

Notes/Observations

- ECB Survey of Professional Forecasters 2019 inflation forecast remains both below staff projections and ECB target

- UK Dec retail sales weaker than expected with back month revised lower

- Donald J. Trump to be inaugurated as the 45th President of the United States of America; all eyes on content and style of Trump's inauguration speech

Overnight:

Asia:

- China Q4 GDP annual reading hits a 1-year high) (Q/Q: 1.7% v 1.7%e; Y/Y: 6.8% v 6.7%e; Overall 2016 GDP of 6.7% in mid-range of 6.5-7.0% target

- Japan Fin Min Aso: Undesirable for extreme volatility in FX moves

- S&P affirmed New Zealand sovereign ratings at AA+, outlook remained stable

Europe:

- PM May: Have had positive meetings with bank and tech CEOs about Brexit

Americas:

- Chile Central Bank (BCCh) cuts Overnight Rate Target by 25bps to 3.25% (as expected) for its 1st rate cut since Oct 2014
incoming Treasury Sec Mnuchin calling USD "very very strong"

Economic data

- (JP) Japan Dec Nationwide Dept Sales Y/Y: -1.7 v -2.4% prior; Tokyo Dept Store Sales Y/Y: -1.0% v -1.4% prior

- (JP) Japan Dec Convenience Store Sales Y/Y: 0.5% v 0.5% prior

- (TW) Taiwan Dec Export Orders (miss) Y/Y: 6.3% v 9.0%e

- (UK) Dec Retail Sales (Ex-Auto/Fuel) (miss) M/M: -2.0% v -0.4%e; Y/Y: 4.9% v 7.5%e

- (UK) Dec Retail Sales (Including Auto/ Fuel) M/M: -1.9% v -0.1%e; Y/Y: 4.3% v 7.2%e

Fixed Income Issuance:

- (IN) India sold total INR110B vs. INR110B in 2024, 2029, 2033 and 2051 bonds

- (ZA) South Africa sold total ZAR650M vs. ZAR650M indicated in I/L 2029, 2033 and 2046 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +0.2% at 3,295, FTSE flat at 7,208, DAX flat at 11,600, CAC-40 +0.1% at 4,844, IBEX-35 flat at 9,382, FTSE MIB +0.1% at 19,510, SMI +0.1% at 8,278, S&P 500 Futures +0.2%]

Market Focal Points/Key Themes: European equity indices are trading higher after spending much of the early morning session near intraday lows, as market participants digest ECB Draghis dovish comments yesterday; Markets also jittery ahead of Donald Trumps inauguration ceremony scheduled later today; Banking stocks leading the sector gains across Europe with shares of Deutsche Bank, Intesa Sanpaolo and Societe Generale leading the gains in the Eurostoxx; Commodity and mining stocks trading lower in the FTSE 100 as copper prices continue to fall from contract highs; Energy stocks generally higher as oil prices trade higher intraday.

Upcoming scheduled US earnings (pre-market) include Citizens Financial Group, Rockwell Collins, General Electric, Kansas City Southern, Procter & Gamble, Regions Financial, Schlumberger, SunTrust Banks, and Synchrony Financial.

Equities (as of 09:50 GMT)

- Consumer Discretionary: [Carrefour CA.FR +3.3% (said to consider BestBuy CEO Hubert Joly as CEO), Elis ELIS.FR +0.5% (prelim FY16 results)]

- Financials: [Close Brothers CBG.UK +1.2% (trading update), Compagnie Financiere Tradition CFT.CH +1.8% (FY16 sales), Trygvesta TRYG.DK -2.4% (Q4 results)]

- Healthcare: [BB Biotech BION.CH +0.6% (prelim Q4 results)]

- Industrials: [Synthomer SYNT.UK +10.4% (trading update)]

Speakers

- ECB's Coeure (France) reiterated Council view that QE would not last forever but too early to adjust program at this time

- EU's Moscovici believed that Italy would be able to achieve its budget deficit to GDP target. Euro was a big shield for Euro Area economy

- Germany Finance Ministry said to see bigger budget deficit in 2018

- ECB Survey of Professional Forecasters (SPF) Survey made some upward revisions in inflation for this year and next due mainly to the increase in the price of oil but its 2019 forecast remains below the ECB staff view of 1.7% and the ECB target of around 2%

- Sweden Central Bank (Riksbank) Dep Gov Skingsley stated that the Riksbank needed to look at currency movements when setting policy and that FX intervention remained an option. FX remained a bit of concern for central bank. Reiterated view that SEK currency (krona) to gradually appreciate

- Swiss Fin Min Maurer: Government to eye savings program if corporate tax vote fails

- IMF issued a statement on Greece and reiterated its goal to reach an early agreement on a bail-out program for the country

- China PBoC said to cut its RRR by 100bps to 16.00% for the 5 largest banks on a temporary basis to alleviate seasonally pressure. To restore to normal level at appropriate time after lunar New Year holiday (**Note: China Lunar New Year Holiday begins on Friday, Jan 27th)

- China said to shelve plans to start crude futures trading in Shanghai

- China Securities Regulatory Commission (CSRC): Financing system for listed companies needs to be improved

- China PBoC said to have issues new guidance on cross-border financing by Chinese companies that facilitates offshore borrowing

- Philippines Central Bank Gov Tetangco: No urgency to raise interest rates with inflation expected to stay within target for both 2017 and 2018

- Australia Fin Min Cormann stated that did not believe there would be a trade war; looks forward to working with President Trump

- Libya National Oil Company (NOC): Libya oil production at 722K bpd (+67K bpd w/w)

Currencies

- FX markets were relatively quiet in the session. The USD initially faced some headwinds on recnt verbal intervention from various Trump advisors in recent session. Comments by incoming Treasury Sec Mnuchin calling USD "very very strong" weighing on USD late in US hours, followed by somewhat less hawkish Fed Chair Yellen stressing continued uncertainty on the fiscal side and ongoing short-term headwinds.

- EUR/USD little changed at 1.0650 area. Price action was little phased after ECB Survey of Professional Forecasters saw 2019 inflation remain below both ECB staff projections and target. The survey reinforced the Darghi press conference from Thursday which he noted inflation had increased lately but underlying pressures remained subdued

- GBP was slightly weaker after Dec retail sales data missed expectations with the back month revised lower across the board. GBP/USD lower by 0.4% below the 1.2300 level

Fixed Income:

- Bund futures trade at 162.73 down 28 ticks reversing earlier gains, resuming the down trend following a recovery in European Equities with President Trump inauguration in focus later today. Continued downside targets support at 162.47 followed by 162.30. A move back higher targets 163.44 followed by 163.82.

- Gilt futures trade at 123.71 down 44 ticks a 1 month low, maintaining its downward momentum with yields popping above 1.4% despite weaker Dec UK Retail Sales figures which has seen Cable sink back below 1.23. Support moves to 123.59 followed by 123.35. Resistance moves to 124.84 gap fill followed by 125.19 then 125.73 high. Short Sterling futures trade up 1bp to 4bp lower on sharp steepening trade Jun17Jun18 rising to 23/24bp the top end of the recent range.

- Friday's liquidity report showed Thursday's excess liquidity fell to €1.256T a fall of €9B from €1.265T prior. This was primarily due to AFs and MonPol portfolios rising to negative €785.5B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €182M from €261M prior.

- Corporate issuance saw $3B coming to market via 2 issuers headlined headlined by US Bancorp $1.5B 2 part offering and US Bank $1.5B 2 part offering. This brings weekly issuance to $29.2B.
For the week ending Jan 18th Lipper US fund flows reported IG Funds net inflows of $1.89B bringing YTD inflows to $8.11B. High Yield Funds reported net outflows of $887.1M bringing YTD inflows to $410.5M.

Looking Ahead

- 06:00 (IE) Ireland Dec PPI M/M: No est v 0.9% prior; Y/Y: No est v -0.3% prior

- 06:00 (UK) DMO to sell combined £5.0B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £2.5B respectively)

- 06:30 (IN) India Weekly Forex Reserves

- 06:45 (US) Daily Libor Fixing

- 08:15 (UK) Baltic Dry Bulk Index

- 08:30 (CA) Canada Dec CPI M/M: 0.0%e v -0.4% prior; Y/Y: 1.7%e v 1.2% prior

- 08:30 (CA) Canada Dec CPI Common Core Y/Y: No est v 1.3% prior; CPI Medium Core Y/Y: No est v 1.9% prior; CPI Trim Core Y/Y: No est v 1.6% prior

- 08:30 (CA) Canada Dec CPI (Seasonally Adj) M/M: No est v -0.2% prior; CPI Core (Seasonally Adj) M/M: No est v 0.0% prior

- 08:30 (CA) Canada Dec Consumer Price Index: 128.7e v 128.6 prior

- 08:30 (CA) Canada Nov Retail Sales M/M: 0.0%e v 1.1% prior; Retail Sales Ex Auto M/M: 0.5%e v 1.4%prior

- 08:30 (US) Weekly USDA Net Export Sales

- 09:00 (BE) Belgium Jan Consumer Confidence: No est v -5 prior

- 09:00 (MX) Mexico Dec Unemployment Rate (Seasonally Adjusted): 3.7%e v 3.6% prior; Unemployment Rate (Unadj): 3.3%e v 3.5% prior

- 09:00 (US) Fed's Harker speaks in New Jersey on Economic Outlook

- 12:00 (US) Donald J. Trump to be inaugurated as the 45th President of the United States of America

- 13:00 (US) Weekly Baker Hughes Rig Count data