BoE expected to follow Fed with unchanged rates

EU mid-market update: BOE expected to follow Fed with unchanged rates; Riksbank dovish statement weighs on Swedish Krona.

Notes/observations

- Sweden Central Bank (Riksbank) rate decision noted they see rate cuts sooner than at last decision in Nov but continued to hold Repo Rate unchanged for 2nd straight pause. SEK is weaker after statement. Increased pace of QT to SEK6.5B/month.

- Bank of England (BoE) widely expected to leave policy unchanged. Meeting will also see the release of Quarterly Monetary Policy Report and post rate decision press conf with Gov Bailey. Market currently prices in 4 rate cuts this year, starting in May/June, towards a bank rate of 4.25% (currently 5.25%).

- Most of Europe reported Jan Manufacturing PMIs with continued weakness and no strength seen in major nations Italy, Spain, Germany, France, Euro Zone and UK (all contracting).

- Moody's put NYCB on review for potential downgrade to junk; US property losses also triggered 20% drop in Japanese bank Aozora overnight; Such news serve as a reminders of continuing credit normalization.

- Notable EU earnings reported: ABB, Deutsche Bank, BNP, Dassault, Roche, Sabadell, DSV, OMV, BT, Glencore and Shell.

- US Premarket Earnings: ATI, BALL, BDX, BR, CAH, CMS, DGX, DOV, ETN, HON, IP, ITW, MO, MRK, PH, RCL, TSCO, WEC.

- Asia closed mixed with KOSPI out-performing at +1.8%. EU indices are -0.8% to +0.7%. US futures are +0.1-0.5%. Gold 0.0%, DXY +0.4%; Commodity: Brent +0.5%, WTI +0.6%, TTF -1.0%; Crypto: BTC -1.2%, ETH -1.7%.

Asia

- China Jan Caixin PMI Manufacturing: 50.8 v 50.8e(3rd month of expansion).

- China Politburo said to hold 'group study session'; Pres Xi says many reasons are hindering high-quality developments - China state media.

- Japan business lobby (Keidanren) Chief Tokura: Firms are responsible for wage hikes that outpace inflation - press.

- Rengo (Japan's largest trade union confederation) Head Yoshino: Convinced unions and employers are ‘on same page’.

- Japan PM Kishida: Not considering a cutting consumption tax rate; Also not considering a tax hike to pay for recent earthquake reconstruction - parliament.

- BOJ buys ¥5.95T of JGBs in January, lowest level since June, 2023 - Japan press.

- Hong Kong Monetary Authority (HKMA) leaves Base Rate unchanged at 5.75% (as expected).

- New Zealand to raise minimum wage by 2% from April 1st.

- India Fin Min Sitharaman: FY24 budget deficit target revised to 5.8% of GDP from 5.9%; FY25 budget deficit seen at 5.1% of GDP - Budget Speech.

Global tensions/conflict

- US fighter jets bomb 10 unmanned drones in Western Yemen (time undisclosed) - US press.

- US CENTCOM: Houthi anti-ship ballistic missile and Iranian UAVs shot down in Gulf of Aden.

- UK Roval Navy reportedly to deploy F35 capable aircraft carrier to Red Sea after USS Eisenhower returns (update) - press.

- Iran said to be scaling back IRGC presence in Syria following attacks - press.

Europe

- Sweden Central Bank (Riksbank) left Repo Rate unchanged at 4.00%, as expected; Rate can be cut sooner than indicated in Nov; Drops out the language that 'prepared to raise rate further in early 2024'.

- Belgium PM De Croo: Confident will find compromise on Ukraine aid with all 27 members today - comments ahead of EU Special Leaders Summit.

- Ahead of BoE decision, market prices in 4 rate cuts of 25bps in 2024 for Bank Rate of 4.25% (currently 5.25%).

- Hungary PM Chief of Staff Gulyas: Most states trying to apply blackmail against Hungary - ahead of EU leaders summit.

- Reportedly Turkish banks have been ending their relationships with Russian companies and making it harder for Russian citizens to open accounts - Meduza.

Americas

- Goldman Sachs pushes back forecast for first US Fed Rate cut to May (prior March) - US press.

- Tier1 analysts push out Fed's first projected rate cut from Mar to June following Powell's comments; Also push out the timing of expected QT slowdown announcement from the March FOMC meeting to the May FOMC meeting.

- US House votes 357-70 to pass $78B package of child tax credit and business breaks, sends to Senate.

- Tesla CEO Musk tweets: Public vote is unequivocally in favor of Texas! Tesla will move immediately to hold a shareholder vote to transfer state of incorporation to Texas.

- Overnight: FOMC left Target Range unchanged between 5.25-5.50% (as expected) Doesn't see cuts until more confident of nearing 2% target; Fed Chair Powell said I do not see a March rate cut as likely - Q&A.

Energy

- OPEC+ meeting to take place virtually today at 06:00 ET (11:00 GMT).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.12% at 485.08, FTSE -0.09% at 7,659.16, DAX -0.28% at 16,857.00, CAC-40 -0.79% at 7,596.08, IBEX-35 +0.49% at 10,127.50, FTSE MIB 0.00% at 30,622.00, SMI -0.75% at 11,248.10, S&P 500 Futures +0.32%].

Market focal points/key themes: European indices open generally lower but gained some upside through the early hours of trading; among sectors holding on to gains are telecom and energy; sectors leading the way into the red include materials and real estate; apparel subsector dragged by disappointing results from Adidas; banking sector under pressure following US banking concerns, BNP and ING results; ASR to sell Knab to Bawag; reportedly Cellnex exploring sale of its Austria unit; reportedly ACS is in advanced talks to take half stake in Thiess from Elliott; reportedly Volvo evaluating its Polestar stake; focus on upcoming BOE rate decision later in the day; earnings expected in the upcoming US session include Apple, Amazon, Meta, Merck and Royal Caribbean..

Equities

- Consumer discretionary: Adidas [ADS.DE] -8.0% (pre-announcement; Red Sea impact and consumer sentiment comments).

- Energy: Shell [SHEL.UK] +2.0% (earnings; buyback).

- Financials: Deutsche Bank [DBK.DE] +4.5% (earnings; job cuts; buybacks), BNP Paribas [BNP.FR] -8.5% (earnings; buyback), ING Groep [INGA.NL] -8.5% (earnings).

- Healthcare: Roche [ROG.CH] -3.5% (earnings), Sanofi [SAN.FR] -2.0% (earnings; new CFO), Siemens Healthineers [SHL.DE] +1.0% (earnings).

- Industrials: ABB [ABBN.CH] +2.0% (earnings).

- Telecom: BT Group [BT.A.UK] +2.0% (earnings).

Speakers

- ECB's Centeno (Portugal, voter): Inflation is converging to 2% target.

- ECB's Herodotou (Cyprus): Reiterates ECB council must be data dependent; See rates to start to decline this year; Any move must not be too fast but also not too late.

- Sweden Central Bank (Riksbank) Gov Thedeen: Can continue QT even as policy moves to easing cycle - post-rate decision press conf.

- South Korea Fin Min Choi: Policy efforts ongoing to improve corporate governance on short-selling of equities - Korea press.

- Bank of Korea (BoK) Gov Rhee: BoK's pivot to rate cuts may be delayed should US rate cuts get delayed - Korea press.

- China MOF Vice Min Dongwei: China 2023 Fiscal revenues +6.4% y/y; Fiscal spending +5.4% y/y.

- India PM Modi: FY25 budget to boost income and cut costs for farmers - post budget proposal.

Economic data

-(IE) Ireland Jan PMI Manufacturing: 49.5 v 48.9 prior (2nd month of contraction).

-(ID) Indonesia Jan CPI M/M: 0.0% v 0.3%e; Y/Y: 2.6% v 2.5%e; CPI Core Y/Y: 1.7% v 1.8%e.

-(IN) India Jan Final PMI Manufacturing: 56.5 v 56.9 prelim.

-(NL) Netherlands Jan Preliminary CPI Y/Y: 3.2% v 1.2% prior (highest annual pace since July 2023); CPI EU Harmonized M/M: +0.2% v -0.5%e; Y/Y: 3.1% v 2.4%e.

-(NL) Netherlands Jan PMI Manufacturing: 48.9 v 45.5e.

-(RU) Russia Jan Manufacturing PMI: 52.4 v 53.7e.

-(TR) Turkey Jan PMI Manufacturing: 49.2 v 47.4 prior.

-(TH) Thailand Jan Business Sentiment Index: 48.0 v 49.1 prior.

-(HU) Hungary Nov Final Trade Balance: €1.6B v €1.7B prelim.

-(SE) Sweden Jan PMI Manufacturing: 47.1 v 49.5e.

-(PL) Poland Jan PMI Manufacturing: 47.1 v 48.1e.

-(HU) Hungary Jan PMI Manufacturing: 49.9 v 51.0 prior (its third-lowest value for the month since records started in 1995).

-(AT) Austria Jan Preliminary CPI M/M: -0.2% v +0.4% prior; Y/Y: 4.5% v 5.6% prior.

-(ES) Spain Jan PMI Manufacturing: 49.2 v 48.0e (10th straight contraction but highest since Mar 2023).

-(IT) Italy Jan PMI Manufacturing: 48.5 v 47.0e (10th straight contraction but highest since Mar 2023).

-(NG) Nigeria Jan Manufacturing PMI: 54.5 v 52.7 prior.

-(FR) France Jan Final PMI Manufacturing: 43.1 v 43.2e (confirms 12th straight contraction but highest since Sept 2023).

-(DE) Germany Jan Final PMI Manufacturing: 45.5 v 45.4e (confirms 19th straight contraction but highest since Feb 2023).

-(EU) Euro Zone Jan Final PMI Manufacturing: 46.6 v 46.6e.

-(NO) Norway Jan PMI Manufacturing: 50.7 v 51.6 prior.

-(IS) Iceland Q4 Unemployment Rate: 3.2% v 3.0% prior.

-(ZA) South Africa Jan Manufacturing PMI: 43.6 v 50.0e.

-(GR) Greece Jan PMI Manufacturing: 54.7 v 51.3 prior.

-(UK) Jan Final Manufacturing PMI: 47.0 v 47.3e (18th consecutive contraction); New Orders 46.1 v 46.6 prior.

- (GR) Greece Dec Unemployment Rate: 9.2% v 9.4% prior.

-(EU) Euro Zone Jan Advance CPI Estimate Y/Y: 2.8% V 2.7%E; CPI Core Y/Y: 3.3% V 3.2%E (lowest Core CPI pace since spring 2022); CPI M/M: -0.4% v -0.4%e.

-(EU) Euro Zone Dec Unemployment Rate: 6.4% v 6.4%e.

-(IT) Italy Jan Preliminary CPI M/M: 0.3% v 0.5%e; Y/Y: 0.8% v 0.9%e; CPI EU -Harmonized M/M: -1.1% v -1.2%e; Y/Y: 0.9% v 0.8%e.

-(BE) Belgium Dec Unemployment Rate: 5.7% v 5.6% prior.

-(CC) Cyprus Jan CPI M/M: -1.2% v -1.1% prior; Y/Y: 1.7% v 1.6% prior.

Fixed income issuance

- Japan sells ¥2.7T v ¥2.7T indicated in 10-year JGB bonds; Avg Yield: 0.7410% v 0.5960% prior Bid-to-cover: 3.65x v 2.90x prior.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2030, 2033 and 2051 bonds.

- Spain Debt Agency (Tesoro) sells €516M vs €250-750M indicated in 2.05% Nov 2039 inflation-linked bonds.

- Spain Debt Agency (Tesoro) sells total €6.047B vs. €5.5-6.5B indicated range in 2029, 2031 and 2034 bonds.

- France Debt Agency (AFT) sells total €12.988B vs. €11.5-13.0B indicated range in 2033, 2040, 2043 and 2054 bonds.

- Sweden sells SEK4.0B vs SEK4.0B indicated in 2.25% May 2035 bonds; Avg Yield: 2.2735%; bid-to-cover: 3.45x (no prior history).

Looking ahead

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 06:00 (PT) Portugal Dec Industrial Production M/M: No est v 3.5% prior; Y/Y: No est v -1.1% prior.

- 06:00 (ZA) South Africa Dec Electricity Consumption Y/Y: No est v -2.7% prior; Electricity Production Y/Y: No est v -3.3% prior.

- 06:30 (CL) Chile Dec Economic Activity Index (Monthly GDP) M/M: -0.1%e v +.3% prior; Y/Y: 0.7%e v 1.2% prior.

- 06:30 (EU) ECB’s Lane (Ireland, chief economist).

- 07:00 (EU) European Council holds special meeting.

- 07:00 (UK) Bank of England (BoE) Interest Rate Decision: Expected to leave Bank Rate unchanged at 5.25%.

- 07:30 (UK) BOE Gov Bailey post rate decision press conference.

- 07:30 (US) Jan Challenger Job Cuts Y/Y: No est v 34.8K prior; Y/Y: No est v -20.2% prior.

- 08:00 (RU) Russia Gold and Forex Reserve w/e Jan 26th: No est v $586.7B prior.

- 08:00 (BR) Brazil Jan Manufacturing PMI: No est v 48.4 prior.

- 08:00 (CZ) Czech Jan Budget Balance (CZK): No est v -288.5B prior.

- 08:30 (US) Q4 Preliminary Nonfarm Productivity: 2.5%e v 5.2% prior; Unit Labor Costs: +1.2%e v -1.2% prior.

- 08:30 (US) Initial Jobless Claims: 212Ke v 214K prior; Continuing Claims: 1.839Me v 1.833M prior.

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

- 09:00 (UK) Bank of England (BoE) Decision Maker Panel (DMP) Jan Survey.

- 09:30 (CA) Canada Jan Manufacturing PMI: 46.5e v 45.4 prior.

- 09:45 (US) Jan Final S&P Manufacturing PMI: 50.3e v 50.3 prelim.

- 10:00 (US) Jan ISM Manufacturing Index: 47.2e v 47.4 prior; Prices Paid: 46.0e v 45.2 prior.

- 10:00 (US) Dec Construction Spending M/M: 0.5%e v 0.4% prior.

- 10:00 (CO) Colombia Jan PMI Manufacturing: No est v 49.4 prior.

- 10:00 (MX) Mexico Jan Manufacturing PMI: No est v 52.0 prior.

- 10:00 (MX) Mexico Dec Total Remittances: $5.5Be v $4.9B prior.

- 10:00 (MX) Mexico Central Bank Economist Survey.

- 10:00 (PE) Peru Jan CPI M/M: 0.1%e v 0.4% prior; Y/Y: 3.2%e v 3.2% prior.

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

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

- 12:00 (CA) Canada to sell 30 Year Bonds.

- 12:00 (IT) Italy Jan New Car Registrations Y/Y: No est v 5.9% prior.

- 13:00 (MX) Mexico Jan IMEF Manufacturing Index: 49.8e v 49.8 prior; Non-Manufacturing Index: 51.5e v 52.1 prior.

- 13:00 (BR) Brazil Jan Trade Balance: No est v $9.4B prior; Exports: No est v $28.8B prior; Imports: No est v $19.5B prior.

- 16:45 (NZ) New Zealand Dec Building Permits M/M: No est v -10.6% prior.

- 18:00 (KR) South Korea Jan CPI M/M: 0.5%e v 0.0% prior; Y/Y: 2.9%e v 3.2% prior; CPI Core Y/Y: 2.7%e v 2.8% prior.

- 18:50 (JP) Japan Jan Monetary Base Y/Y: No est v 7.8% prior.

- 19:30 (AU) Australia Q4 PPI Q/Q: No est v 1.8% prior; Y/Y: No est v 3.8% prior.

- 19:30 (AU) Australia Dec Home Loans Value M/M: 1.0%e v 1.0% prior; Owner-Occupier Loan Value M/M: No est v 0.5% prior; Investor Loan Value M/M: No est v 1.9% prior.

- 21:35 (CN) China to sell 30-year Upsized Bonds.

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

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