Markets brace for US jobs report and start of earnings season

EU mid-market update: Markets brace for US jobs report and start of earnings season; UK Gilts still at the forefront of global bond market stress; TSMC monthly sales impress again.

Notes/observations

- Awaiting US non-farm payrolls, which could influence market sentiment regarding potential Fed rate adjustments, especially after recent cautious comments from Feds Bowman and Schmid, who suggested the policy rate is nearing neutral levels.

- European indices started the day on a positive note before turning flat to mixed, with an eye on the US data for directional cues. UK continues to grapple with market volatility, particularly in the gilt market, following fiscal concerns. BoE Dep Gov Breeden downplayed recent market movements but hinted at possible adjustments to quantitative tightening if volatility persists. UK Chancellor is reportedly considering alternative growth plans amid these market conditions. GBP Sterling has trimmed some losses after assurances from the Treasury on fiscal policy adherence.

- TSMC reported renewed acceleration in its monthly sales, beating analysts expectations ahead of earnings next week.

- Corporate News: Ambu, J Sainsbury, and Bang & Olufsen provided trading updates. Airbus 2024 delivery statistics slightly missing company’s own guidance while Ubisoft Entertainment is exploring strategic options after a disappointing Q3.

- Asian markets had a mixed performance, with the Kospi holding steady while the Nikkei suffered from disappointing Q4 profits from major components like Fast Retailing. Japanese shipping stocks fell, reflecting broader market concerns following news of a US port strike resolution.

- Asia closed lower with Nikkei225 underperforming -1.0%. EU indices are -1.0% to +0.2%. US futures are -0.2% to -0.4%. Gold +0.4%, DXY 0.0%; Commodity: Brent +2.3%, WTI +2.3%; Crypto: BTC +1.5%, ETH -0.3%.

Asia

- Australia Nov Household Spending M/M: 0.4% v 0.7%e; Y/Y: 2.4% v 2.5%e.

- China PBOC unexpectedly said it will ‘temporarily’ suspend purchase of govt bonds in the open market during January, due to a “short supply of treasury bonds and excess demand”.

- China PBOC, SAFE (FX regulator) to hold briefing on financial support for economy on Tues, Jan 14th.

- Japan Econ Min Akazawa noted of no change to govt stance on working closely with BOJ on policy for economy, prices. Able to declare full end to deflation and could relieve ourselves from deploying tools for such fight.

Europe

- BOE Dep Gov Breeden noted that recent evidence further supported the case to withdraw policy restrictiveness gradually. Monitoring what was happening in the GILT market; Moves had been orderly and reflect global factors.

Americas

- Fed's Schmid (voter; hawk) noted that the strength of the economy allowed the Fed to be patient; Rates might be very close to the longer run neutral rate.

- Fed's Bowman (voter, hawk) stated that continued to prefer a cautious and gradual approach to adjusting rates; Inflation was elevated with upside risks, and progress has stalled. Supported the Dec rate cut as a 'final step' in the policy recalibration.

- Fed’s Barkin (non-voter) noted that consumer debt burden was still well below 2018-2019 levels.

- China President Xi will not attend Trump inauguration on Jan 20th but to send top-level envoy.

- US Supreme Court declined to halt Donald Trump’s ‘hush money’ sentencing (**Note: judge previously indicated he would not impose a fine or condemn Trump to prison time).

- Insurers brace for losses of up to $20bn from California wildfires.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.12% at 515.20, FTSE -0.22% at 8,301.11, DAX +0.09% at 20,337.31, CAC-40 +0.11% at 7,498.60, IBEX-35 -1.00% at 11,779.81, FTSE MIB +0.24% at 35,400.00, SMI +0.04% at 11,937.40, S&P 500 Futures -0.30%].

Market focal points/key themes: European indices open generally lower and remained under pressure through the early part of the session; lack of risk appetite being attributed to multiple factors including upcoming major data releases, tighter monetary policy concerns and recent volatility in the UK; among sectors managing gains are telecom and materials; sectors leading the way lower include utilities and real; mining subsector supported on rising metals prices spurred by hopes of increased demand from China; earnings expected in the upcoming US session include Delta Airlines, Constellation Brands, Walgreens Boots Alliance and TD Synnex.

Equities

- Consumer discretionary: Ubisoft [UBI.FR] -7.0% (expects lower Holiday sales; delays game title) - Consumer staples: Sainsbury [SBRY.UK] -3.0% (Christmas trading update) - Real Estate: Persimmon [PSN.UK] +2.0% (UBS raised to buy) - Financials: Munich Re [MUV2.DE] -1.0% (two largest CA fires, Palisades Fire (~20K acres) and Eaton Fire (~14K acres) are still only 6% and 0% level of containment, respectively) - Healthcare: Alliance Pharma [APH.UK] +38.0% (to be acquired by DBAY Affiliates and the ERES IV Fund at 62.5p/shr), Ambu [AMBUB.DK] +13.5% (preannouncement).

- Technology: STMicroelectronics [STM.FR] +0.5% (TSMC monthly sales) - Utilities: E.ON [EOAN.DE] -2.0% (MVM bid for E.on Energie might be blocked on security grounds - FT).

Speakers

- BOJ said to be carefully assessing its options for its Jan rate decision. No decision has been made on any hike thus far.

- China Vice Fin Min stated that could expect more proactive fiscal policy in 2025 in terms of strength, efficiency and timing.

Currencies/fixed income

- USD continued to maintain a form tone into Friday with focus on US Nonfarm payrolls data. Dealers not the reading could provide hints on the timing of the Fed next interest-rate cut. Recent strong US data has priced out expectations of any March rate cut and potentially push the first fully-priced move beyond June. Global bond yields have risen in recent weeks as on growing concerns about Trump's policies.

- GBP/USD at 1.23 area off the week lows aided by Thurs comments from Treasury Min Jones who noted of no need for emergency intervention as financial markets continued to function in an orderly way. Market seems to be acknowledging the Treasury's reiterated fiscal pledge and this has prevented the gilt and pound selloffs from becoming disorderly. Pair did test 14-month low on Thurs at 1.2239.

- USD/JPY moved lower in the session after reports circulated that BOJ was said to be carefully assessing its options for its Jan rate decision.

Economic data

- (NL) Netherlands Nov Manufacturing Production M/M: 1.3% v 0.1% prior; Y/Y:-0.1% v -1.7% prior; Industrial Sales Y/Y: -1.6% v -0.5% prior.

- (FI) Finland Nov Industrial Production M/M: 1.4% v 0.4% prior; Y/Y: 3.2% v 0.6% prior.

- (CH) Swiss Dec Unemployment Rate: 2.8% v 2.8%e; Unemployment Rate (seasonally adj): 2.6% v 2.7%e.

- (SE) Sweden Nov GDP Indicator M/M: 1.4% v 0.4%e; Y/Y: +2.1% v -0.3% prior.

- (SE) Sweden Nov Private Sector Production M/M: +1.4% v -0.6% prior; Y/Y: 2.7% v 0.6% prior

- (SE) Sweden Nov Industrial Orders M/M: 2.8% v 0.9% prior; Y/Y: +5.1% v -1.1% prior.

- (SE) Sweden Nov Industry Production Value YoY: +2.6% v -2.0% prior; Service Production Value YoY: 3.9% v 2.0% prior.

- (SE) Sweden Nov Household Consumption M/M: +1.1% v -0.3% prior; Y/Y: +1.6% v -1.1% prior.

- (SE) Sweden Dec Budget Balance (SEK): -127.2B v +17.9B prior.

- (NO) Norway Dec CPI M/M: -0.1% v 0.1%e; Y/Y: 2.2% v 2.5%e.

- (NO) Norway Dec CPI Underlying M/M: -0.1% v +0.0%e; Y/Y: 2.7% v 2.8%e.

- (DK) Denmark Dec CPI M/M: -0.3% v -0.3% prior; Y/Y: 1.9% v 1.6% prior.

- (DK) Denmark Dec CPI EU Harmonized M/M: -0.3% v -0.4% prior; Y/Y: 1.8% v 1.6% prior.

- (RO) Romania Q3 Final GDP (3rd reading): Q/Q: 0.0% v -0.1% prelim; Y/Y: 1.2% v 1.1% prelim.

- (TR) Turkey Nov Industrial Production M/M: +2.9% v -0.9% prior; Y/Y: +1.5% v -3.1% prior.

- (TR) Turkey Nov Unemployment Rate: 8.6% v 8.7% prior.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 78.8K v 83.2K tons prior.

- (TH) Thailand May Foreign Reserves w/e Jan 3rd: $236.4B v $237.1B prior.

- (FR) France Nov Consumer Spending M/M: 0.3% v 0.2%e; Y/Y: +0.3% v -0.2%e.

- (FR) France Nov Industrial Production M/M: +0.2% v -0.1%e; Y/Y: -1.1% v -1.3%e.

- (FR) France Nov Manufacturing Production M/M: +0.2% v -0.1% prior; Y/Y: -1.5% v -1.7% prior.

- (ES) Spain Nov Industrial Production M/M: -0.8% v +0.5% prior; Y/Y: -0.4% v +1.5%e; Industrial Output NSA (unadj) Y/Y: -3.4% v +6.5% prior.

- (AT) Austria Nov Industrial Production M/M: -0.6% v +0.1% prior; Y/Y: -2.7% v -2.5% prior.

- (RU) Russia Narrow Money Supply w/e Dec 27th (RUB): 18.95T v 18.71T prior.

- (IT) Italy Nov Retail Sales M/M: -0.4% v -0.5% prior; Y/Y: 1.1% v 2.6% prior.

- (GR) Greece Nov Industrial Production Y/Y: +4.9% v -2.5% prior.

Fixed income issuance

- (IN) India sold total INR220B vs. INR220B indicated in 2027 and 2064 bonds.

- (ZA) South Africa sold total ZAR695M vs. ZAR1.0B indicated in I/L 2031, 2043 and 2058 bonds.

- (IT) Italy Debt Agency (Tesoro) sold €8.0B vs. €8.0B indicated in 12 month bills; Avg Yield: 2.517% v 2.411% prior; Bid-to-cover: 1.49x v 1.49x prior.

Looking ahead

- (DE) Germany Nov Current Account: No est v €12.5B prior.

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

- 05:30 (IN) India Nov Industrial Production Y/Y: 4.0%e v 3.5% prior; Manufacturing Production Y/Y: No est v 4.1% prior; Mining Production Y/Y: No est v 0.9% prior.

- 06:00 (IE) Nov Ireland Retail Sales Volume M/M: No est v -0.1% prior; Y/Y: No est v 0.9% prior.

- 06:00 (IE) Ireland Dec Live Register Monthly Change: No est v -6.3K prior; Live Register Level: No est v 162.9K prior.

- 06:00 (UK) DMO to sell £6.5B in 1-month, 3-month and 6-month bills (£1.0B, £2.5B and £3.0B respectively).

- 06:30 (IN) India Forex Reserve w/e Jan 3rd: No est v $640.3B prior.

- 06:30 (CL) Chile Central Bank Economist Survey.

- 06:30 (IS) Iceland to sell 2027 and 2035 Bonds.

- 06:30 (IN) India announces upcoming bill issuance (held on Wed).

- 07:00 (IS) Iceland Dec Unemployment Rate: No est v 3.7% prior.

- 07:00 (BR) Brazil Dec IBGE Inflation IPCA M/M: 0.5%e v 0.4% prior; Y/Y: 4.9%e v 4.9% prior.

- 07:00 (MX) Mexico Nov Industrial Production M/M: +0.1%e v -1.2% prior; Y/Y: -1.4%e v -2.2% prior; Manufacturing Production Y/Y: -0.6%e v +0.5% prior.

- 08:00 (UR) Ukraine Dec CPI M/M: 1.1%e v 1.9% prior; Y/Y: 11.8%e v 11.2% prior.

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

- 08:30 (US) Dec Change in Nonfarm Payrolls: +165Ke v +227K prior; Private Payrolls: +140Ke v +194K prior; Manufacturing Payrolls: +5Ke v +22K prior.

- 08:30 (US) Dec Unemployment Rate: 4.2%e v 4.2% prior; Underemployment Rate: No est v 7.8% prior; Labor Force Participation Rate: 62.5%e v 62.5% prior.

- 08:30 (US) Dec Average Hourly Earnings M/M: 0.3%e v 0.4% prior; Y/Y: 4.0%e v 4.0% prior; Avg Weekly Hours All Employees: 34.3e v 34.3 prior.

- 08:30 (CA) Canada Dec Net Change in Employment: +25.0Ke v +50.5K prior; Unemployment Rate: 6.9%e v 6.8% prior; Full Time Employment Change: No est v +54.2K prior; Part Time Employment Change: No est v -3.6K prior; Participation Rate: No est v 65.1% prior; Hourly Wage Rate Y/Y: 3.8%e v 3.9% prior.

- 08:30 (CA) Canada Nov Building Permits M/M: +1.4%e v -3.1% prior.

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

- 10:00 (US) Jan Preliminary University of Michigan Confidence: 74.0e v 74.0 prior.

- 11:00 (EU) Potential sovereign ratings after European close.

- 12:00 (US) USDA World Agricultural Supply Demand Estimates (WASDE) Crop Report.

- 12:00 (US) USDA Quarterly Corp Report.

- 13:00 (US) Weekly Baker Hughes Rig Count data.