Focus remains on rising bond yields

Notes/Observations

- US yields move higher as markets view the Fed was unlikely to be concerned by softer employment growth as the underlying trend remained favorable.

Asia

- Chinese property developer Shimao Group [813.HK ]said to put all of its property projects for sale in late Dec [follows recent default on trust loan].

- China to make it easier for state backed property developers to buy up distressed assets of property developers.

Coronavirus

- All parts of England said to be showing signs of nearing their peak in virus cases.

- Japan PM Kishida noted that the US had agreed to implement tighter Covid measures at its military bases in Japan due to worries that outbreaks at bases might have added to cases in local communities.

Europe

- ECB's Schnabel (Germany) stated that the 'green' transition posed upside risks to medium term inflation, but so far there are no signs of broader 2nd round effects of high inflation.

- Brexit negotiator Truss stated that she was willing to trigger Article 16 if the EU did not cooperate.

- Some members of UK Parliament want Chancellor Sunak to levy a one-off windfall tax on North Sea operators to help offset soaring domestic energy bills.

- Italy govt said to be preparing a €2.0B package to be approved during week of Jan 10th to help companies impacted by the pandemic.

Americas

- Sec of State Blinken stated that was not expecting any major breakthrough in talks with Russia on Ukraine this week. Very hard to see progress being made when Russia had a gun to the head of Ukraine.

- Sen Manchin (D-WV) appeared to be pulling back support for Build Back Better, thought to have privately said he was not interested in approving the legislation.

- Goldman analyst: Fed to likely raise interest rates four times (Mar/Jun/Sep/Dec) this year and would start its balance sheet runoff process in July, if not earlier.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -0.23% at 485.14, FTSE -0.07% at 7,480.11, DAX -0.26% at 15,906.49, CAC-40 -0.23% at 7,202.56, IBEX-35 -0.04% at 8,748.21, FTSE MIB +0.16% at 27,663.00, SMI -0.23% at 12,763.66, S&P 500 Futures -0.03%].

Market Focal Points/Key Themes: European indices open modestly higher across the board, but later turned around to trade generally lower; industrials and consumer discretionary among the sectors leading to the upside; real estate and materials sectors among the underperformers; Sodexo acquires Frontline Food Services; Immofinanz rejects S IMMO’s offer; earnings expected during the upcoming US session include Commercial Metals Company and Brunello Cucinelli.

Equities

- Financials: Credit Suisse [CSGN.CH] +2% (merger speculation), Plus500 [PLUS.UK] +3% (trading update).

- Healthcare: Molecular Partners [MOLN.CH] +31%, Novartis [NOVN.CH] +1% (positive trial results of COVID-19 antibody drug).

- Technology: Atos [ATO.FR] -17% (prelim results).

Speakers

- Germany Fin Min Lindner stated that was monitoring inflation and rising debt levels.

- Ireland Fin Min Donohoe (Eurogroup chief) stated that are closely monitoring inflation.

- Poland Central Bank nominee Kotecki stated that he saw more Polish rate hikes in the coming months.

- Ukraine Dep PM Stefanishyna stated that the country had the right to choose our own security arrangements.

- NATO Sec Gen Stoltenberg: To help Ukraine move towards NATO membership. Might not be able to resolve all issues with Russia this week but might agree on a way forward.

- China Aviation Regulator (CAAC) targets 2022 air passenger trips 570M v 440M y/y.

Currencies/Fixed income

- Bond yields continued to move higher despite the US non-farm payroll miss on Friday. Dealers noted that Fed officials would view that the full employment criteria to raise rates had by most metrics achieved with the December reading. Goldman analyst noted that the Fed would likely raise interest rates four times (Mar/Jun/Sep/Dec) this year and start its balance sheet runoff process in July, if not earlier.

- The USD clawed back some of its losses after US payrolls aided by the rising bond yields. Markets viewed the Fed was unlikely to be concerned by softer employment growth as the underlying trend remained favorable.

- EUR/USD at 1.1330 area as dealers note the upcoming US CPI data would likely bolster the case for higher interest rates while the ECB's dovish stance on rising prices would provide continued headwinds for the euro.

Economic data

- (NL) Netherlands Nov Manufacturing Production M/M: 0.6% v 1.1% prior; Y/Y: 10.6% v 9.9% prior; Industrial Sales Y/Y: 26.0% v 17.3% prior.

- (FI) Finland Nov Industrial Production M/M: 0.6% v 0.2% prior; Y/Y: 5.4% v 51% prior.

- (NO) Norway Dec CPI M/M: 0.7% v 0.5%e; Y/Y: 5.3% v 5.1%e.

- (NO) Norway Dec CPI Underlying M/M: +0.4% v -0.1%e; Y/Y: 1.8% v 1.4%e.

- (NO) Norway Dec PPI (including Oil) M/M: 8.1% v 3.0% prior; Y/Y: 68.7% v 58.6% prior.

- (TR) Turkey Nov Unemployment Rate: 11.2% v 11.2% prior.

- (DK) Denmark Dec CPI M/M: -0.5% v +0.3% prior; Y/Y: 3.1% v 3.4% prior.

- (DK) Denmark Dec CPI EU Harmonized M/M: -0.6% v +0.4% prior; Y/Y: 3.4% v 3.8% prior.

- (DK) Denmark Nov Industrial Production M/M: 3.0 v 2.8% prior.

- (DK) Denmark Nov Current Account Balance (DKK): 21.4B v 20.8B prior; Trade Balance: 4.8B v 3.5B prior.

- (AT) Austria Nov Industrial Production M/M: 2.0% v 1.4% prior; Y/Y: 7.4% v 5.5% prior.

- (CZ) Czech Dec Unemployment Rate: 3.5% v 3.3% prior.

- (HU) Hungary Nov Preliminary Trade Balance: +€0.1B v -€0.3B prior.

- (SE) Sweden Nov GDP Indicator M/M: % v 1.2% prior; Y/Y: % v 4.8% prior.

- (SE) Sweden Nov Private Sector Production M/M: 0.5% v 1.7% prior; Y/Y: 6.5% v 6.7% prior.

- (SE) Sweden Nov Industrial Orders M/M: -0.9% v +5.9% prior; Y/Y: 3.0% v 7.8% prior.

- (SE) Sweden Nov Industry Production Value Y/Y: 4.2% v 4.4% prior; Service Production Value Y/Y: 8.2% v 8.1% prior.

- (SE) Sweden Nov Household Consumption M/M: 1.0% v 1.0% prior; Y/Y: 8.3% v 5.6% prior.

- (IT) Italy Nov Unemployment Rate: 9.2% v 9.3%e.

- (CH) Swiss weekly Total Sight Deposits (CHF): 724.6B v 722.8B prior; Domestic Sight Deposits: 650.6B v 648.9B prior.

- (EU) Euro Zone Jan Sentix Investor Confidence: 14.9 v 13.0e.

- (IT) Bank of Italy (BOI) Dec Balance-Sheet Aggregates: Target2 Liabilities at €590.0B v €544.9B prior.

- (EU) Euro Zone Nov Unemployment Rate: 7.2% v 7.2%e.

- (BE) Belgium Nov Unemployment Rate: 5.9% v 6.0% prior.

- (GR) Greece Nov Industrial Production Y/Y: 8.0% v 16.5% prior.

Fixed income issuance

- (EU) EFSF opened its book to sell EUR-denominated 8-year and 31-year bonds via syndicate.

Looking ahead

- (ZA) South Africa Dec Naamsa Vehicle Sales Y/Y: No est v 6.6% prior.

- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to raise Interest Rate by 50bps to 2.25%.

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

- 05:30 ((DE) Germany to sell combined €6.0B in 3-month and 9-month BuBills.

- 06:00 (IE) Ireland Nov Industrial Production M/M: No est v -34.5% prior; Y/Y: No est v -12.9% prior.

- 06:00 (PT) Portugal Nov Trade Balance: No est v -€2.0B prior.

- 06:00 (IL) Israel Dec Consumer Confidence: No est v 102 prior.

- 06:00 (IL) Israel to sell 2024, 2026, 2951 bonds.

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

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 07:00 (TR) Turkey to sell Bonds (2 tranches).

- 07:00 (MX) Mexico Oct Gross Fixed Investment: No est v 9.9% prior.

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

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming auctions.

- 08:30 (UK) Ukraine Dec CPI M/M: 0.8%e v 0.8% prior; Y/Y: 10.2%e v 10.3% prior.

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

- Sells €B vs. €B indicated in 3-month bills; Avg Yield: % v -0.667% prior; Bid-to-cover: x v 2.70x prior.

- Sells €B vs. €B indicated in 6-month bills; Avg Yield: % v -0.640% prior; bid-to-cover: x v 3.40x prior.

- Sells €B vs. €B indicated in 12-month bills; Avg Yield: % v -0.635% prior; Bid-to-cover: x v 3.10x prior.

- To sell €B in 3-month Bills.

- To sell €B in 6-month Bills.

- To sell €B in 12-month Bills.

- 10:00 (US) Nov Final Wholesale Inventories M/M: 1.2%e v 1.2% prelim; Wholesale Trade Sales M/M: No est v 2.2% prior.

- 12:00 (US) Fed’s Bostic discusses Economic Outlook (cancelled).

- 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 108.4 prior (last 12/20th).

- 18:00 (KR) South Korea Nov Current Account Balance: No est v $7.0B prior; Balance of Goods (BOP): No est v $5.6B prior.

- 19:01 (UK) Dec BRC Sales Like-For-Like Y/Y: No est v 1.8% prior.

- 19:30 (AU) Australia Nov Trade Balance: A$10.6Be v A$11.2B prior; Exports M/M: No est v -3% prior; Imports M/M: No est v -3% prior.

- 19:30 (AU) Australia Nov Retail Sales M/M: 3.5%e v 4.9% prior.

- 20:00 (PH) Philippines Nov Trade Balance: -$4.0Be v -$4.0B prior; Exports Y/Y: 5.5%e v 4.9% prior; Imports Y/Y: 30.4%e v 25.1% prior.

- 23:30 (HK) Hong Kong to sell 3-month and 6-month Bills.