BoJ bond buying schedule for Jan provides leeway to reduce purchases

Notes/observations

- BOJ signals potential slower bond buying in 1Q.

- Hapag-Lloyd, 4th biggest shipping firm in the world, still considers current situation with Red Sea and Suez Canal security too dangerous and will continue to reroute ships via the Cape of Good Hope in South Africa until next review later this week.

Asia

- South Korea Dec Consumer Confidence: 99.5 v 97.2 prior.

- China Nov YTD Industrial Profits Y/Y: -4.4% v -7.8% prior.

- BOJ Dec Summary of Opinions stressed the need to continue with easing patiently as it did not have enough certainty of achieving sustainably price target. Noted that wage growth rate had not caught up with the inflation rate to date. Stressed that even if next spring's wage hikes were considerably higher than expected, the risk that this would cause underlying inflation to significantly exceed 2.0% was small.

- Japan PM Kishida stated that wage rises higher than inflation were important; Would push hard for pay rises higher than this year.

- Ex-PBOC adviser Yu Yongding stated that China should prioritize enforcing proactive fiscal policy, including issuance of up to CNY2T sovereign bonds to boost economy in areas like medical care, education and green infrastructure.

Mid-East

- Crude futures overnight rose more than 2% as the Houthis in Yemen continued to target ships in the Red Sea with drones and missiles).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.17% at 478.42, FTSE +0.47% at 7,733.46, DAX +0.08% at 16,719.81, CAC-40 +0.16% at 7,580.63, IBEX-35 -0.16% at 10,095.50, FTSE MIB +0.17% at 30,406.00, SMI -0.35% at 11,113.70, S&P 500 Futures -0.04%]

Market focal points/key themes

European indices open higher following few days of Christmas holidays but started to trade mixed through the early part of the session; sectors leading the way higher include materials and tech; among lagging sectors are financials and industrials; shipping dragged by lower shipping rates following Maersk and CMA CGM’s gradual restart in the Red Sea; Hapag-Lloyd also trades down over 5% as it considers current situation with Red Sea security still too dangerous and will continue to reroute ships via the Cape of Good Hope in South Africa; Astrazeneca shares slightly higher following Gracell’s acquisition; Shares of Anglo American trade higher after press report it is preparing to sell a minority stake in UK's $9B Woodsmith fertilizer mine; no earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Superdry [SDRY.UK] +6.5% (press report that it is in talks to sell brand rights in US and Middle East).

- Energy: Seadrill [SDRL.NO] +6.0% (orders).

- Healthcare: Astrazeneca [AZN.UK] +1.0% (acquisition), Novo Nordisk [NOVOB.DK] +0.5% (to build a “mega manufacturing facility” near Dublin, Ireland).

- Industrials: Maersk [MAERSKB.DK] -4.0% (restarts shipping in the Red Sea during Christmas weekend), Hapag Lloyd AG [HLAG.DE] -5.5% (considers current situation with Red Sea security still too dangerous; Will continue to reroute ships via the Cape of Good Hope in South Africa), AMG Critical Materials [AMG.NL] +3.0% (acquisition).
- Technology:

- Materials: Horizonte Minerals [HZM.UK] +7.5% (interim funding package).

Speakers

- Russia Dep PM Novak stated that Russia did not target oil prices; Russian producers were sticking to their obligations on supply cuts agreed in OPEC+ deal. Saw Brent averaging between $80-85/barrel in 2024.

- JCR [Japan rating agency] affirmed Japan sovereign rating at AAA; Outlook stable.

- Bank of Japan (BOJ) announced Bond purchases for Jan-Mar 2024: tweaked amounts in shorter maturities while trimming JGB buying frequencies in long-term maturities.

Currencies/ Fixed Income

- USD continues to face headwinds as year-end approached. Dealers noted of expectations that the Fed would soon cut interest rates pushed the USD Index to 5-month lows.

- USD/JPY was around 142.60 as markets dissected BOJ opinions from its upcoming bond buying scheme for rate hike expectations. BOJ Dec Summary of Opinions stressed the need to continue with easing patiently as it did not have enough certainty of achieving sustainably price target but the Jan bond buying scheme signaled potential lower bond purchases in 1Q.

Economic data

- (FI) Finland Dec Consumer Confidence: -13.3 v -12.4 prior; Business Confidence: -20 v -21 prior.

- (NO) Norway Nov Retail Sales M/M: 0.4% v 0.4% prior.

- (TW) Taiwan Nov Monitoring Leading Indicator: # v 16 prior.

- (CZ) Czech Dec Consumer Confidence: 84.9 v 90.7 prior; Business Confidence: 95.2 v 93.5 prior; Consumer & Business (composite) Confidence: 93.4 v 93.1 prior.

- (CH) Swiss Dec Expectations Survey: -23.7 v -29.6 prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 462.2B v 462.6B prior; Domestic Sight Deposits: 453.6B v 453.8B prior.

Fixed income issuance

- (IN) India sold total INR240B vs. INR240B indicated in 3-month, 6-month and 12-month bills.

Looking ahead

- (RO) Romania Nov M3 Money Supply Y/Y: No est v 10.3% prior.

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

- 05:30 (GR) Greece Debt Agency (PDMA) to sell 6-month Bills.

- 06:00 (IL) Israel Oct Manufacturing Production M/M: No est v -4.0% prior.

- 07:00 (US) MBA Mortgage Applications w/e Dec 22nd: No est v -1.5% prior.

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

- 09:00 (FR) France Debt Agency (AFT) to sell €1.8-3.0B in 3-month, 6-month and 12-month bills.

- 10:00 (US) Dec Richmond Fed Manufacturing Index: -3e v -5 prior.

- 10:30 (US) Dec Dallas Fed Services Activity: No est v -11.6 prior.

- 11:00 (RU) Russia Nov Industrial Production Y/Y: 4.2%e v 5.3% prior.

- 11:00 (RU) Russia Nov Real Retail Sales Y/Y: 11.8%e v 12.7% prior.

- 11:00 (RU) Russia Nov Unemployment Rate: 2.9%e v 2.9% prior; Oct Real Wages Y/Y: 6.8%e v 7.2% prior.

- 11:30 (US) Treasury to sell 2-Year FRN Reopening.

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

- 12:30 (BR) Brazil Nov Total Federal Debt (BRL): No est v 6.170T prior.

- 14:00 (BR) Brazil Nov Central Govt Budget Balance (BRL): -38.3Be v +18.3B prior.

- 13:00 (US) Treasury to sell 5-Year Notes.

- 14:00 (AR) Argentina Oct Supermarket Sales Y/Y: No est v 3.8% prior; Shop Center Sales Y/Y: No est v 19.9% prior.

- 16:00 (KR) South Korea Jan Business Manufacturing Survey: No est v 68 prior; Non-Manufacturing Survey: No est v 71 prior.

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

- 18:00 (KR) South Korea Nov Industrial Production M/M: +1.4%e v -3.5% prior; Y/Y: 3.2%e v 1.1% prior; Cyclical Leading Index Change: No est v 0.3% prior.

- 18:50 (JP) Japan Nov Retail Sales M/M: +0.5%e v -1.7% prior (revised from -1.6%); Y/Y: 5.0%e v 4.1% prior (revised from 4.2%); Dept. Store, Supermarket Sales Y/Y: No est v 3.7% prior.

- 18:50 (JP) Japan Nov Preliminary Industrial Production M/M: -1.6%e v +1.3% prior; Y/Y: -2.1%e v +1.1% prior.

- 23:00 (TH) Thailand Nov ISIC Manufacturing Production Y/Y: -3.5%e v -4.3% prior; Capacity Utilization: No est v 56.8% prior.