Euro Area GDP and inflation data gives green light for ECB rate hike path

Notes/Observations

- Global risk off sentiment builds ahead of upcoming rate decisions later this week after US markets bounced off 200-day moving average

- IMF World Economic Outlook suggested the worst of the economic slump has passed

- UK Mortgage and Lending data for Dec added to theme of UK economy lagging behind counterparts. Mortgage approvals came in lowest since May 2020 as rate hikes take effect on consumer decisions.

- European Q4 GDP QoQ readings flooded in as Portugal and France held expansion while Austria and Czech contracted. Both the Euro Zone and Italian readings slightly beat consensus.

- Various EU retail and consumption data suggest consumer succumbed to the income shock

- EU and Asia earnings season in full swing; US premarket earnings expected from the likes of CAT, DOV, IMO, MCD, MPC, OSK, PFE, PHM, PSX, SYY, UPS, XOM

- Asia closed lower with Hang Seng under-performing at -1.0%. EU indices are lower by -0.2% to -1.0%. US futures are -0.3% to -0.4%. Gold -1.4%, DXY +0.1%; Commodity: Brent -1.5%, WTI -1.6%, TTF -0.5%; Crypto: BTC -1.5%, ETH -0.9%

Asia

- China Jan Manufacturing PMI (Govt Official): 50.1 v 50.1e (1st expansion in 3 months); Non-manufacturing PMI: 54.4 v 52.0e.

- China Dec YTD Industrial Profits Y/Y: -4.0% v -3.6% prior.

- South Korea Dec Industrial Production M/M: -2.9% v -0.2%e; Y/Y: -7.3% v -6.1%e.

- Japan Dec Jobless Rate: 2.5% v 2.5%e.

- Japan Dec Preliminary Industrial Production M/M: -1.1%e v +0.2% prior; Y/Y: -3.9%e v -0.9% prior.

- Japan Dec Retail Sales M/M: 1.1% v 0.%e; Y/Y: 3.8% v 3.2%e.

- Australia Dec Retail Sales M/M: -3.9% v -0.2%e [first decline in 12 months].

- Japan Fin Min Suzuki reiterated govt stance that was too early to say whether joint statement [between government and BOJ] needed revision.

- Two Bank of Japan veterans continued to lead surveys with Dep Gov Amamiya or his predecessor Nakaso.

Europe

- IMF World Economic Outlook (WEO) raised its 2023 Global GDP growth forecast from 2.7% to 2.9% (1st upward revision in a year). It did cut the 2024 Global GDP growth forecast from 3.2% to 3.1%.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.65% at 451.46, FTSE -0.63% at 7,736.14, DAX -0.57% at 15,039.24, CAC-40 -0.44% at 7,050.59, IBEX-35 -0.24% at 9,027.66, FTSE MIB -0.16% at 26,294.00, SMI -0.85% at 11,282.50, S&P 500 Futures -0.25%].

Market Focal Points/Key Themes: European indices open generally lower and fell further into the red through the early hours of the session; better performing sectors include financials and consumer discretionary; sectors trending lower include materials and real estate; Integrated Diagnostics Holdings decides to no longer acquire IDC stake; earnings expected during the upcoming US session include McDonald’s, UPS, Caterpillar, General Motors, ExxonMobil and Pfizer.

Equities

- Consumer discretionary: Pets at Home [PETS.UK] +11.5% (Q3 trading update - FY23 expected at upper end of estimates), Byggmax [BMAX.SE] -12.0% (earnings).

- Healthcare: Addex Therapeutics [ADXN.CH] -1.5% (reports year end cash).

- Financials: UBS Group [UBSG.CH] -3.0% (reports Q4 - top line beat, buyback announced), Unicredit [UCG.IT] +9.0% (reports Q4 - top line beat, buyback planned), Swedbank [SWEDA.SE] +2.0% (reports Q4 - beats estimates).

- Materials: Johnson Matthey [JMAT.UK] -1.0% (partnership with Plug Power), Stora Enso [STERV.FI] -3.0% (reports Q4).

- Industrials: Hapag-LLoyd [HLAG.DE] -1.5% (prelim Q4), Rheinmetall [RHM.DE] -5.5% (to sell €1.0B in convertible bonds), NCC [NCCA.SE] +1.0% (reports Q4).

- Technology: Darktrace [DARK.UK] -6.5% (short selling report), XLMedia [XLM.UK] +8.0% (trading update), Atoss Software [AOF.DE] -3.0% (reports FY22), AMS Osram [AMS.CH] -3.0% (CEO to step down).

- Telecom: Tele2 [TEL2A.SE] -5.0% (earnings).

Speakers

- Euro Area Jan Bank Lending Survey noted that rising rates were making a substantial dent on loan demand. Demand for loans from enterprises and household fell. Drop in demand for mortgages was the biggest on record. Survey noted that the trend was expected to continue in Q1.

- France Fin Min Le Maire commented that the domestic economy was solid and expected growth in 2023.

- Sweden Central Bank (Riksbank) Gov Thedeen testified in Parliament that high inflation and rising interest rates were testing resilience of the Swedish financial system.

- Hong Kong Monetary Authority (HKMA to bring stablecoins into regulatory perimeter.

Currencies/fixed income

- Some risk aversion sentiment appeared to give the USD some reprieve during the session. Focus remained on the key central bank rate decisions later this week (Fed, BOE and ECB). Various inflation and GDP data in session trying to aid dealers in navigating the path ahead on rates.

- EUR/USD was lower and re-approching the lower end of the 1.08 area as various EU retail and consumption data suggested consumer succumbed to the income shock.

- GBP/USD below 1.2330 area as UK mortgage data hit another three year low.

- USD/JPY holding above the 130 area. Markets awaiting the selection of the next BOJ Gov (process to begin in early Feb).

Economic data

- (NL) Netherlands Dec Retail Sales Y/Y: 11.1% v 6.3% prior.

- (ZA) South Africa Dec M3 Money Supply M3 Y/Y: 8.7% v 8.7%e; Private Sector Credit Y/Y: 7.7% v 8.3%e.

- (FI) Finland Dec House Price Index M/M: -0.2% v -1.2% prior; Y/Y: -2.5% v -3.4% prior.

- (FR) France Q4 Preliminary GDP Q/Q: 0.1% v 0.0%e; Y/Y: 0.5% v 0.5%e.

- (FR) France Dec Consumer Spending M/M: -1.3% v +0.2%e; Y/Y: -5.6% v -3.8%e.

- (DE) Germany Dec Retail Sales M/M: -5.3% v -0.5%e; Y/Y: -6.6% v -2.6%e.

- (DE) Germany Dec Import Price Index M/M: -1.6% v -2.5%e; Y/Y: 12.6% v 11.8%e.

- (FI) Finland Nov Final Trade Balance: €B v €0.4B prelim.

- (TR) Turkey Dec Final Trade Balance: -$9.7B v -$10.4Be.

- (DK) Denmark Dec Unemployment Rate: 2.4% v 2.3% prior; Gross Unemployment Rate: 2.7% v 2.7% prior.

- (TH) Thailand Dec Current Account Balance: $1.1B v $0.5Be; Overall Balance of Payments (BOP): $3.5B v $0.6B prior; Trade Account Balance: $1.0B v $0.5B prior; Exports Y/Y: -12.9% v -5.5% prior; Imports Y/Y: -10.5% v 8.2% prior.

- (AT) Austria Q4 GDP Q/Q: -0.7% v +0.2% prior; Y/Y: 2.7% v 2.0% prior.

- (CH) Swiss Dec Real Retail Sales Y/Y: -2.8% v -1.4% prior.

- (HU) Hungary Dec PPI M/M: -0.1% v -0.8% prior; Y/Y: 34.9% v 37.0% prior.

- (FR) France Jan Preliminary CPI M/M: 0.4% v 0.5%e; Y/Y: 6.0% v 6.1%e.

- (FR) France Jan Preliminary CPI EU Harmonized M/M: 0.4% v 0.4%e; Y/Y: 7.0% v 7.0%e.

- (FR) France Dec PPI M/M: 1.4% v 0.7% prior; Y/Y: 20.7% v 20.9% prior.

- (CZ) Czech Q4 Advance GDP (1st of 3 readings) Q/Q: % v -0.6%e; Y/Y: % v 0.2%e.

- (TW) Taiwan Dec Export Orders Y/Y: -23.2% v -25.0%e.

- (TW) Taiwan Dec M1 Money Supply Y/Y: 4.1% v 4.4% prior; M2 Money Supply Y/Y: 7.1% v 7.4% prior.

- (HK) Hong Kong Dec Budget Balance (HKD): 87.1B v 5.4B prior.

- (DE) Germany Jan Net Unemployment Change: -22.0K v +5.0Ke; Unemployment Claims Rate: 5.5% v 5.5%e.

- (IT) Italy Dec Unemployment Rate: 7.8% v 7.8%e.

- (IC) Iceland Dec Final Trade Balance (ISK): B v -12.8B prelim.

- (NO) Norway Central Bank (Norges) Feb Daily FX Purchases (NOK): 1.9B v 1.5Be.

- (CZ) Czech Dec M2 Money Supply Y/Y: 5.6% v 5.9% prior.

- (UK) Dec Net Consumer Credit: £0.5B v £1.1Be; Net Lending: £3.2B v £3.9Be.

- (UK) Dec Mortgage Approvals: 35.6K v 45.0Ke.

- (UK) Dec M4 Money Supply M/M: -0.8% v -1.5% prior; Y/Y: 1.6% v 2.5% prior; M4 (ex-IOFCs) 3-Month Annualized: -10.3% v +4.5% prior.

- (PT) Portugal Q4 Preliminary GDP Q/Q: 0.2% v 0.2%e; Y/Y: 3.1% v 4.9% prior.

- (ES) Spain Nov Current Account: €5.6B v €2.7B prior.

- (EU) Euro Zone Q4 Advance GDP (1st of 3 readings) Q/Q: +0.1% v -0.1%e; Y/Y: 1.9% v 1.7%e.

- (IT) Italy Q4 Preliminary GDP Q/Q: -0.1% v -0.2%e; Y/Y: 1.7% v 1.6%e.

- (GR) Greece Nov Retail Sales Value Y/Y: +0.9% v -2.3% prior; Retail Sales Volume Y/Y: 12.3% v 8.0% p.

Fixed income issuance

- (ID) Indonesia sold total IDR23.0T vs. IDR23.0T target in bills and bonds.

- (ZA) South Africa sold total ZAR3.9B vs. ZAR3.9B indicated in 2030, 2035 and 2040 bonds.

- (IT) Italy Debt Agency (Tesoro) sold total €7.5B vs. €6.5-7.5B indicated range in 5-year and 10-year BTP Bonds.

- Sold €4.0B vs. €3.5-4.0B indicated range in 3.40% Apr 2028 BTP bonds; Avg Yield: 3.70% v 3.48% prior; Bid-to-cover: 1.38x v 1.49x prior (Oct 28th 2022 under 2.65% Dec 2027 BTP).

- Sold €3.5B vs. €3.0-3.5B indicated range in 4.40% May 2033 BTP; Avg Yield: 4.28% v 3.96% prior; bid-to-cover: 1.35x v 1.47x prior.

- (IT) Italy Debt Agency (Tesoro) sold €1.5B vs. €1.0-1.5B indicated range in Apr 2026 CCTeu (floating rate Notes); Avg Yield: % v 2.54% prior; Bid-to-cover: x v 2.16x prior.

Looking ahead

- 05:15 (CH) Switzerland to sell 3-month Bills.

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

- 05:30 (IN) India Dec Fiscal Deficit (INR): No est v 220.0B prior.

- 05:30 (DE) Germany to sell €6.0B in new Mar 2025 Schatz.

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

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €1.241B with 23 bids recd).

- 06:00 (PT) Portugal Dec Industrial Production M/M: No est v 3.7% prior; Y/Y: No est v -0.3% prior.

- 06:00(PT) Portugal Jan Preliminary CPI M/M: % v -0.3% prior; Y/Y: % v 9.9% prior.

- 6:00 (PT) Portugal Jan Preliminary CPI EU Harmonized M/M: % v -0.4% prior; Y/Y: % v 9.8% prior.

- 06:00 (IE) Ireland Jan Preliminary CPI EU Harmonized Y/Y: No est v 8.2% prior.

- 06:00 (IT) Italy Dec Hourly Wages M/M: No est v 0.0% prior; Y/Y: No est v 1.1% prior.

- 06:00 (IL) Israel Dec Chain Store Sales Y/Y: No est v -0.5% prior.

- 06:30 (IN) India Dec Eight Infrastructure Industries: No est v 5.4% prior.

- 06:45 (US) Daily Libor Fixing.

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

- 07:00 (ZA) South Africa Dec Trade Balance (ZAR): 5.3Be v 8.0B prior.

- 07:00 (MX) Mexico Q4 Preliminary GDP Q/Q: 0.3%e v 0.9% prior; Y/Y: 3.4%e v 4.3% prior.

- 07:00 (CL) Chile Dec Manufacturing Production Y/Y: -7.0%e v -7.8% prior; Industrial Production Y/Y: No est v -5.0% prior; Copper Production: No est v 459.2Kt prior.

- 07:00 (CL) Chile Dec Retail Sales Y/Y: -14.0%e v -15.2% prior; Commercial Activity Y/Y: No est v -9.3% prior.

- 08:00 (DE) Germany Jan Preliminary CPI (postponed).

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

- 08:01 (AU) Australia Jan CoreLogic House Price Index M/M: No est v -1.2% prior.

- 08:30 (US) Q4 Employment Cost Index (ECI): 1.1%e v 1.2% prior.

- 08:30 (CA) Canada Nov GDP M/M: 0.1%e v 0.1% prior; Y/Y: 2.8%e v 3.1% prior.

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

- 09:00 (US) Nov FHFA House Price Index M/M: -0.5%e v 0.0% prior.

- 09:00 (US) Nov S&P/Case-Shiller House Price Index (20-City) M/M: -0.65%e v -0.52% prior; Y/Y: 6.65%e v 8.64% prior; House Price Index (overall) Y/Y: No est v 9.24% prior.

- 09:45 (US) Jan Chicago Purchase Manager’s Index (PMI): 45.0e v 45.1 prior (revised from 44.9).

- 10:00 (US) Jan Consumer Confidence: 109.0e v 108.3 prior.

- 10:00 (MX) Mexico Dec Net Outstanding Loans (MXN): No est v 5.44T prior.

- 10:00 (CO) Colombia Dec National Unemployment Rate: No est v 9.5% prior; Urban Unemployment Rate: 9.5%e v 9.1% prior.

- 11:00 (NZ) New Zealand Jan CoreLogic House Prices Y/Y: No est v -5.0% prior.

- 11:30 (BR) Brazil Dec Total Formal Job Creation: -327.5Ke v +135.5K prior.

- 14:00 (AR) Argentina Nov Wages M/M: No est v 5.1% prior.

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

- 16:45 (NZ) New Zealand Q4 Unemployment Rate: 3.3%e v 3.3% prior.

- 16:45 (NZ) New Zealand Q4 Employment Change Q/Q: 0.3%e v 1.3% prior; Y/Y: 1.5%e v 1.2% prior.

- 16:45 (NZ) New Zealand Q4; Avg Hourly Earnings Q/Q: No est v 2.6% prior; Participation Rate: 71.7%e v 71.7% prior.

- 17:00 (AU) Australia Jan Final PMI Manufacturing: No est v 49.8 prelim.

- 17:00 (CO) Colombia Central Bank Jan Minutes.

- 19:00 (KR) South Korea Jan Trade Balance: -$9.3Be v -$4.7B prior; Exports Y/Y: -11.1%e v -9.5% prior; Imports Y/Y: -2.6%e v -2.4% prior.

- 19:01 (UK) Jan BRC Shop Price Index Y/Y: No est v 7.3% prior.

- 19:30 (JP) Japan Jan Final PMI Manufacturing: No est v 48.9 prelim.

- 19:30 (KR) South Korea Jan PMI Manufacturing: No est v 48.2 prior.

- 19:30 (TW) Taiwan Jan PMI Manufacturing: No est v 44.6 prior.

- 19:30 (ID) Indonesia Jan PMI Manufacturing: No est v 50.9 prior.

- 19:30 (PH) Philippines Jan PMI Manufacturing: No est v 53.1 prior.

- 19:30 (MY) Malaysia Jan PMI Manufacturing: No est v 47.8 prior.

- 19:30 (TH) Thailand Jan PMI Manufacturing: No est v 52.5 prior.

- 19:30 (VN) Vietnam Jan PMI Manufacturing: No est v 46.4 prior.

- 20:01 (IE) Ireland Jan PMI Manufacturing: No est v 48.7 prior.

- 20:45 (CN) China Jan Caixin PMI Manufacturing: 49.8e v 49.0 prior.