Chinese top officials still concerned about stock market performance, earnings in focus

Notes/observations

- Yields across Europe are mostly higher as the underlying theme of unwinding rate cut expectations from end-2023 continues. UK Gilts yields notably higher after BoE Chief Economist Pill said ‘not yet confident enough in inflation dropping to cut rates’ and better than expected BRC LFL sales for Jan.

- Significant tailwinds seen in Chinese stocks, with Shanghai Composite up 3.2%, after multiple headlines from govt about stock market support, including China Sovereign Wealth Fund increasing ETF holdings, CSRC supporting firms increasing buybacks and Pres Xi to meet financial regulators to discuss the stock market.

- EU Earnings Recap: Infineon very weak Q1 sees market outside of auto as weak, Q2 guidance below estimates and cuts FY24 guidance; BP higher after Q4 sees accelerating share buyback plan, and guiding Q1 production higher; UBS Q4 weighs on stock after top and bottom-line miss, targets ~$13B in cost reductions by end-FY26 and to resume $1B buyback in H2.

- Upcoming US Premarket Earnings: AGCO, CMI, FI, HTZ, LIN, LLY.

- Asia closed mixed with Shanghai out-performing at +3.2%. EU indices are -0.2% to +0.4%. US futures are -0.2% to +0.1%. Gold +0.0%, DXY +0.1%; Commodity: Brent +0.1%, WTI 0.0%, TTF +1.0%; Crypto: BTC -0.2%, ETH +0.4%.

Asia

- Reserve Bank of Australia (RBA) left Cash Rate Target unchanged at 4.35%; As expected; Cut Trimmed Mean Inflation and GDP growth forecasts in Statement on Monetary Policy (SOMP).

- Australia Q4 Retail Sales Q/Q: 0.3% v 0.1%e (Smallest rise in two years).

- China A-share market needs policy stimulus, cites experts [professors and analysts]; stabilization fund can act as a last resort against 'irrational' market downturns – China News.

- Central Huijin, a unit of China's Sovereign Wealth Fund (CIC) has increased holdings of ETFs recently - US financial press.

- China Pres Xi set to discuss China stock market with financial regulators as early as Tues [Feb 6th] - US financial press.

- China CSRC says its supports listed firms to increase stock buybacks to inject more capital into the A-share market - China press.

- China tells local govt's to increase govt-supported housing - China press.

- Japan Dec Labor Cash Earnings Y/Y: 1.0% v 1.4%e; Real Cash Earnings Y/Y: -1.9% v -1.5%e.

- Traders circulating press chatter which cites 'sources familiar with BOJ thinking', saying it's fair to say the BOJ has its eyes set on April as the preferred timing of an exit of negative interest rate policy [**Note: as priced in by markets].

- Philippines Central Bank (BSP): Balance of risks to inflation outlook still lean significantly towards upside - press.

- Hong Kong confirms to raise cap on deposit protection scheme to HK$800K (prior: HK$500K) - Hong Kong press.

Europe

- ECB Dec Consumer Expectation Survey: 1-year CPI Expectations: 3.2% v 3.5% prior; 3-year CPI Expectations: 2.5% v 2.4% prior.

-Hungary reportedly to provide HUF450B in financial support to small companies in Q2 - press.

- Turkey Central Bank (CBRT): See main inflation trend slowing after Jan; Core inflation acceleration is in line with estimates.

- EU Commission Chief Von der Leyen: Farmers need incentives for nature protection; Public subsidies may help their efforts.

Americas

- US Commerce Sec Raimondo: US expects to announce in the next 6-8 weeks 'several more' semiconductor chips funding announcements.

- US Pres Biden: Would veto house GOP standalone Israel-only bill - White House.

- Deutsche Bank analysts no longer see US recession in 2024; See 2024 US GDP growth at 1.9% on a quarterly average basis.

Energy

- Saudi Aramco leaves unchanged the official selling price (OSP) of Arab light oil for Asia; March price remains at a more than 2-year low.

- Japan eyes expanding offshore wind farms to its Exclusive Economic Zone.

- India PM Modi: Large part of FY25 capex will be spent on energy security; Domestic energy demand estimated to double by 2045.

- Indian firms said to be in talks with Qatar for long-term LNG deals - press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.22% at 484.76, FTSE +0.49% at 7,652.71, DAX 0.00% at 16,903.45, CAC-40 +0.22% at 7,606.98, IBEX-35 +0.31% at 9,972.26, FTSE MIB +0.40% at 31,077.00, SMI -0.49% at 11,219.10, S&P 500 Futures +0.03%].

Market Focal Points/Key Themes: European indices open generally higher and managed to hold on to the green through the early hours of trading; improved market sentiment comes after German factory orders jumped in December; among sectors pushing higher are energy and consumer discretionary; lagging sectors include utilities and telecom; oil & gas subsector supported following BP earnings; MorphoSys to be acquired by Novartis; earnings expected in the upcoming US session include Linde, Jacobs Solutions, Cummins and Eli Lilly.

Equities

- Energy: BP [BP.UK] +6.0% (earnings; accelerates buybacks).

- Healthcare: Morphosys [MOR.DE] +15.5% (to be acquired by Novartis), Novo Nordisk [NOVOB.DK] +1.0% (share buyback tranche).

- Industrials: UBS [UBSG.CH] -3.5% (earnings; share buybacks and cost reductions; CEO comments), Volkswagen [VOW3.DE] -1.0% (Toyota results and guidance), Alfa Laval [ALFA.SE] -2.5% (earnings), Demant [DEMANT.DK] +7.5% (earnings).

- Technology: Infineon [IFX.DE] -1.0% (earnings; cuts outlook), Nordic Semiconductor [NOD.NO] -21.5% (earnings; outlook), Landis + Gyr [LAND.CH] -9.5% (placement).

Speakers

- ECB De Cos (Spain): Confident inflation is heading back to 2% target.

- Reserve Bank of Australia (RBA) Gov Bullock: Situation now back to more normal vs the pandemic; not ruling anything in or out on policy - Post rate decision press conference.

- Bank of Japan (BOJ) Gov Ueda: Will mull fate of ETF buying if price goal is in sight - parliament questions.

- Sweden Central Bank (Riksbank) Gov Thedeen: An uncertain environment requires a high level of preparedness.

- Japan PM Kishida: Specific monetary policy decision is up to the BOJ.

- Japan Fin Min Suzuki: I respect BOJ's independence on monetary policy - Japan press.

- Japan Chief Econ Hayashi: If this year's wage growth exceeds that of last year, we will likely see positive wage-inflation cycle kick off - Japan press.

- Thailand PM Srettha: Lowering the Thai key policy rate is 'important' - Thailand press.

Currencies/fixed income

- US dollar a bit firmer overnight. Euro weaker after miss in Germany Factory Orders. GBP/USD last seen at 1.254, EUR/USD at 1.073, USD/JPY at 148.66.

Economic data

- (BR) Brazil Jan Vehicle Sales: 161.6K v 248.6K prior.

- (UK) Jan BRC Sales LFL Y/Y: 1.4% v 1.0%e.

- (DE) Germany Dec Factory Orders M/M: +8.9% v -0.2%e; Y/Y: +2.7% v -5.3%e (biggest M/M jump since June 2020); Analysts cite impact from big ticket orders.

- (FI) Finland Dec Preliminary Trade Balance: -€0.3B v +€1.7B prior.

- (HU) Hungary Dec Industrial Production M/M: -0.3% v -2.2% prior; Y/Y: -8.7% v -7.8%e.

- (HU) Hungary Dec Retail Sales Y/Y: -0.2% v -2.2%e.

- (TW) Taiwan Jan CPI Y/Y: 1.8% v 2.2%e; CPI Core Y/Y: 1.6% v 2.4% prior; PPI Y/Y: -0.5% v -0.5% prior.

- (CZ) Czech Dec National Trade Balance (CZK): 3.5B v 6.8Be.

- (CZ) Czech Dec Industrial Output (unadj) Y/Y: -6.0% v -7.0%e; Construction Output Y/Y: -4.6% v -6.5% prior.

- (DE) Germany Jan Construction PMI: 36.3 v 37.0 prior.

- (IT) Italy Jan Consumer Confidence: 96.4 v 95.8 prior; Manufacturing Confidence: 88.3 v 87.3 prior; Economic Sentiment: 98.1 v 97.3 prior.

- (UK) Jan Construction PMI: 48.8 v 47.2e (5th straight contraction, but highest reading since Aug 2023).

- (EU) Euro Zone Dec Retail Sales M/M: -1.1% v -1.0%e; Y/Y: -0.8% v -0.8%e.

Fixed income issuance

-Thailand sells THB40B vs. TH40B indicated in 12-month bills: Avg Yield: 2.29101%.

-Thailand sells THB60B vs. THB60B indicated in 3-month bills: Avg Yield: 2.26964% V 2.26806% prior; bid-to-cover: x v 1.91x prior.

-Philippines sells PHP0B (nil) vs. PHP30B indicated in 5-year bonds; Rejected all bids.

-South Africa sells total ZAR3.9B vs. ZAR3.9B indicated in 2031, 2040 and 2048 bonds.

-Spain Debt Agency (Tesoro) sells total €5.03B vs. €4.5-5.5B indicated in 6-month and 12-month bills.

-UK DMO sells £2.5B vs. £2.5B indicated in 1.5% July 2053 Gilts; Avg Yield: 4.565% v 4.936% prior; Bid-to-cover: 3.05x v 2.83x prior; Tail: 0.3bps v 1.0bps prior.

-Austria Debt Agency (AFFA) sells total €2.0B vs. €2.0B indicated in2028 and 2034 bonds.

Looking ahead

- 05:30 (HU) Hungary Debt Agency (AKK) to sell HUF30B in 3-Month Bills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €2.0B in 3-month and 9-month bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:00 (BR) Brazil Jan FGV Inflation IGP-DI M/M: -0.1%e v 0.6% prior; Y/Y: -3.5%e v -3.3% prior.

- 06:00 (BR) Brazil Central Bank (BCB) Jan Minutes.

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 06:30 (EU) ESM to sell €1.1B in 3-month Bills.

- 06:30 (TR) Turkey Jan Real Effective Exchange Rate (REER): No est v 55.15 prior.

- 06:30 (BR) Brazil Dec Total Outstanding Loans (BRL): No est v 5.655T prior; M/M: No est v 0.9% prior; Personal Loan Default Rate: No est v 5.7% prior.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

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

- 08:30 (CA) Canada Dec Building Permits M/M: No est v -3.9% prior.

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

- 10:00 (CA) Canada Jan Ivey Purchasing Managers Index (seasonally adj): No est v 56.3 prior; PMI (unadj): No est v 43.7 prior.

- 12:00 (US) Fed’s Mester.

- 13:00 (US) Fed’s Kashkari.

- 13:00 (US) Treasury to sell 3-Year Notes.

- 14:00 (US) Fed’s Collins.

- 14:00 (AR) Argentina Dec Industrial Production Y/Y: -5.5%e v -4.9% prior; Construction Activity Y/Y: No est v -2.1% prior.

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

- 16:45 (NZ) New Zealand Q4 Unemployment Rate: 4.3%e v 3.9% prior; Employment Change Q/Q: +0.3%e v -0.2% prior; Y/Y: 2.1%e v 2.4% prior; Participation Rate: 72.0%e v 72.0% prior; Avg Hourly Earnings Q/Q: No est v 2.0% prior; Private Wages Q/Q: 0.8%e v 0.9% prior.

- 18:00 (KR) South Korea Dec Current Account: No est v $4.1B prior; Balance of Goods (BoP): No est v $7.0B prior.

- 20:00 (PH) Philippines Dec Unemployment Rate: No est v 3.6% prior.

- 21:35 (CN) China to sell 2-year and 7-year Upsized Bonds.

- 21:35 (CN) China to sell 2-month and 3-month bills.

- 22:00 (ID) Indonesia Jan Foreign Reserves: No est v $146.4B prior.

- 22:35 (JP) Japan to sell 30-Year JGB Bonds.

- 23:00 (MY) Malaysia Dec Industrial Production Y/Y: 0.5%e v 0.6% prior’ Manufacturing Sales Value Y/Y: No est v -2.6% prior.