Awaiting US CPI data

Notes/Observations

-European bourses climb amid moderate risk on appetite ahead of US CPI dur out later in today’s session.

-ECB's Economic Bulletin outlined staff view of a short and shallow Euro Area recession at the turn of the year; ECB Consumers' inflationary expectations declined for 1-year and 3-year ahead, with raised growth expectations.

-Major UK retailers Tesco, Marks & Spencer and Asos, among others, reported trading updates that painted color on consumer habits over the Christmas period.

-Asia closed higher with ASX200 outperforming at +1.2%. EU indices are +0.3-0.7%. US futures are flat. Gold +0.4%, DXY -0.2%; Commodity: Brent +1.0%, WTI +1.0%, TTF +2.4% UK Nat Gas +3.5%; Crypto: BTC +4.0%, ETH +4.6%.

Asia

- Japan Nov BoP Current Account: +¥1.8T v +¥481.0Be (record high for month); Trade Balance (BOP):-¥1.5T v -¥1.620Te.

- Australia Nov Trade Balance (A$): 13.2B v 11.3Be; Exports M/M: 0% v -1% prior; Imports M/M: -1% v -1% prior.

- China Dec CPI Y/Y: 1.8% v 1.8%e; PPI Y/Y: -0.7% v -0.1%e.

- China State Planner NDRC reiterated stance that was capable of keeping prices stable in 2023; imported inflation pressure remained in 2023.

- BOJ said to review side effects of monetary easing at policy meeting next week’s meeting. Review said to be driven by the skewed interest rates in markets, despite the BOJ's YCC tweak in Dec 2022.

Europe

- ECB's de Cos (Spain) reiterated Council stance that plan to continue increasing interest rates "significantly" in the next meetings; Hikes will continue until reaching sufficiently restrictive levels.

- UK Foreign Sec Cleverly noted that there were genuine differences remain over Northern Ireland protocol and that gaps that needed to be resolved.

Americas

- Fed's Collins noted that was leaning toward 25bps hike at Feb 1st meeting; Favored raising rates to just above 5% this year.

- Fed watcher Timiraos Tweets: Fed research presented at the recent AEA meetings suggests average underlying job growth ran at around 300,000 per month last year, not quite as strong as reported in the monthly BLS payroll reports.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.45% at 449.42, FTSE +0.56% at 7,768.08, DAX +0.57% at 15,033.65, CAC-40 +0.68% at 6,971.05, IBEX-35 +0.70% at 8,787.82, FTSE MIB +0.64% at 25,711.00, SMI +0.30% at 11,279.40, S&P 500 Futures -0.12%].

Market Focal Points/Key Themes: European indices open higher across the board and advanced into the green through the early hours of the session; sectors moving to the upside include energy and utilities; lagging sectors include real estate consumer discretionary; oil & gas subsector supported following move higher in crude prices; reportedly Spanish government supporting Iberia’s interest in Air Europa; focus on release of US CPI figures later in the day; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Asos [ASC.UK] +17% (trading update; cost cutting plan), Marks & Spencer [MKS.UK] -2% (trading update), Persimmon [PSN.UK] +3.0% (Q4 update), Tesco [TSCO.UK] -1% (earnings), Henkel [HEN3.DE] -1.5% (analyst action - Deutsche Bank cuts to sell), WhitBread [WTB.UK] +4.0% (Q3 update).

- Consumer staples: CHR Hansen [CHR.DK] -1% (reports Q1 - cuts guidance).

- Energy: Centrica [CNA.UK] +6.0% (FY22 update; new CFO).

- Financials: Savills [SVS.UK] +3.0% (FY22 update).

- Healthcare: Dechra Pharmaceuticals [DPH.UK] +2.5% (H1 update).

- Industrials: Signify [LIGHT.NL] -3% (cuts FY22 outlook).

- Technology: Ubisoft [UBI.FR] -19% (post close - cuts Q3 net bookings; analyst action - JP Morgan and Societe Generale cut), Logitech [LOGN.CH] -14% (cuts outlook; TSMC results).

- Materials: Rio Tinto [RIO.UK] +1.0% (analyst action - Barclays and Berenberg raise).

Speakers

- ECB Economic Bulletin noted that ECB staff now expects a short-lived and shallow recession in the euro area at the turn of the year. Euro area economy may contract in the fourth quarter of 2022 and the first quarter of 2023. Inflation remained far too high and is projected to stay above the target for too long.

- ECB survey on 12-month Consumers' inflationary expectations declined from 5.4% to 5.0% with 3-year outlook cut from 3.0% to 2.9%. The 12-month GDP forecast raised from

-2.6% to -2.0%.

- Poland Central Bank (NBP) Maslowska stated that rate hikes were unlikely.

- Czech Central Bank Dep Gov Frait stated that would be cautious to promise that rate would be falling soon.

Currencies/ fixed income

- USD was steady against the major European currencies. Focus was on upcoming US CPI data with expectations for another surprise to the downside; Data seen building the cast for Fed to lessen the pace of tightening to 25bps at the Feb meeting. However dealers note the possible situation of ‘sticky inflation.

- USD/JPY moved lower during the Asian session after reports circulated that the BOJ would review the side-effects of its ultra-monetary easing. Dealers noted that expectations of upward revisions to upcoming BOJ Staff Projections for inflation and the forthcoming announcement of a new BOJ governor to likely feed into the expectation of a policy shift.

- EUR/USD at 1.0765 by mid-session.

Economic data

- (FI) Finland Nov Current Account Balance: +€1.1B v -€0.3B prior.

- (NO) Norway Nov Overall GDP M/M: +0.2% v -0.8% prior; GDP Mainland Q/Q: 0.2% v 0.2%e.

- (NO) Norway Q4 House Price Index Q/Q: -0.9% v 0.-1% prior.

- (TR) Turkey Nov Retail Sales Y/Y: 12.1% v 9.3% prior.

- (RO) Romania Q3 Final GDP (3rd reading) Q/Q: 1.2% v 1.3% prelim; Y/Y: 3.8% v 4.0% prelim.

- (CZ) Czech Nov Retail Sales (ex-auto) Y/Y: -8.7% v -7.9%e.

- (GR) Greece Dec CPI Y/Y: 7.2% v 8.5% prior; CPI EU Harmonized Y/Y: 7.6% v 8.8% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €6.43B vs. €5.5-6.5B indicated range in 2026, 2029 and 2046 bonds.

- Sold €2.864B in 2.8% May 2026 SPGB bonds; Avg Yield: 2.805% v 2.669% prior; Bid-to-cover: 1.80x v 1.92x prior (Oct 20th 2022 under 1.95% Apr 2026 bond).

- Sold €2.088B in 0.80% July 2029 SPGB bond; Avg Yield: 2.889% v 3.247% prior; bid-to-cover: 2.19x v 1.86x prior (Oct 20th 2022).

- Sold €1.480B in 2.90% Oct 2046 SPGB; Avg Yield: 3.426% v 1.124% prior; Bid-to-cover: 1.58x v 1.41x prior.

- (ES) Spain Debt Agency (Tesoro) sold €507M vs. €250-750M indicated range in 0.70% Nov 2033 inflation-linked bonds (SPGBei); Real Yield: 1.018% v 0.607% prior; Bid-to-cover: 2.10x v 2.33x prior.

- (IT) Italy Debt Agency (Tesoro) sold total €7.0B vs. €6.0-7.0B indicated range in 3-year and 7-year BTP Bonds.

- Sold €3.5B vs. €3.0-3.5B indicated range in 3.50% Jan 2026 BTP; Avg Yield: 3.26% v 3.07% prior; bid-to-cover: 1.52x v 1.85x prior (Dec 13th 2022).

- Sold €3.5B vs. €3.0-3.5B indicated range in 3.85% Dec 2029 BTP; Avg Yield: 3.77% v 3.61%prior; Bid-to-cover: 1.41x v 1.38x prior.

Looking ahead

- (DE) Germany Nov Current Account: No est v €5.9B prior.

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 2026, 2028 and 2032 bonds.

- 06:00 (IL) Israel Dec Trade Balance: No est v -$3.2B prior.

- 06:00 (ZA) South Africa Nov Electricity Consumption Y/Y: No est v -2.3% prior; Electricity Production Y/Y: No est v -3.8% prior.

- 06:00 (RO) Romania to sell combined RON1.0B in 2030 and 2034 bonds.

- 06:00 (CZ) Czech Republic to sell Bills.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IN) India Dec CPI Y/Y: 5.9%e v 5.9% prior.

- 07:00 (IN) India Nov Industrial Production Y/Y: +2.8%e v -4.0% prior.

- 07:00 (BR) Brazil Nov IBGE Services Volume M/M: +0.2%e v -0.6% prior; Y/Y: 6.5%e v 9.5% prior.

- 07:00 (BR) Brazil CONAB Crop Report.

- 07:30 (US) Fed’s Harker on economic outlook.

- 08:00 (RU) Russia Gold and Forex Reserve w/e Dec 30th: No est v $581.7B prior.

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

- 08:30 (US) Dec CPI M/M: -0.1%e v 0.1% prior; Y/Y: 6.5%e v 7.1% prior.

- 08:30 (US) Dec CPI (ex-food/energy) M/M: 0.3%e v 0.2% prior; Y/Y: 5.7%e v 6.0% prior.

- 08:30 (US) Dec CPI Index NSA: 296.699e v 297.711 prior; CPI Core (seasonally adj): 300.746e v 300.066 prior.

- 08:30 (US) Dec Real Avg Hourly Earning Y/Y: No est v -1.9% prior; Real Avg Weekly Earnings Y/Y: No est v -3.0% prior.

- 08:30 (US) Initial Jobless Claims: 215Ke v 204K prior; Continuing Claims: 1.71Me v 1.694M prior.

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

- 09:45 (BOE Gilt sale operation.

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

- 11:30 (US) Fed’s Bullard on Economy and Monetary Policy.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report.

- 12:00 (CA) Canada to sell 2 Year Bonds.

- 12:40 (US) Fed's Barkin.

- 13:00 (US) Treasury to sell 30-Year Bond Reopening.

- 14:00 (US) Dec Monthly Budget Statement: -$65.0Be v -$248.5B prior.

- 14:00 (AR) Argentina Dec National CPI M/M: 5.2%e v 4.9% prior; Y/Y: 94.9%e v 92.4% prior.

- 16:00 (KR) South Korea Dec Import Price Index M/M: No est v -5.3% prior; Y/Y: No est v 14.2% prior.

- 16:00 (KR) South Korea Dec Export Price Index M/M: No est v -5.2% prior; Y/Y: No est v 8.6% prior.

- 18:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to raise Reference Rate by 25bps to 7.75%.

- 18:50 (JP) Japan Dec M2 Money Supply Y/Y: No est v 3.1% prior; M3 Money Supply Y/Y: No est v 2.7% prior.

- 19:30 (AU) Australia Nov Home Loans Value M/M: -2.0%e v -2.7% prior; Investment Lending M/M: No est v -2.2% prior; Owner Occupied Loan Value M/M: No est v -2.9% prior.

- 20:00 (KR) Bank of Korea (BOK) Interest Rate Decision: Expected to raise 7-day Repo Rate by 25bps to 3.50%.

- 21:30 (KR) South Korea to sell KRW300B in 50-Year Bonds.

- 21:35 (CN) China to sell 3-month and 6-month Bills.

- 21:35 (CN) China to sell 2024 and 2028 Bonds.

- 22:30 (JP) Japan to sell 3-Month Bills.

- 22:35 (JP) Japan to sell 5-Year JGB bonds.