Risk appetite finding some tailwinds

Notes/Observations

- China full reopening optimism lifts risk appetite alongside market bets on lower Fed rate hikes.

- European unemployment readings show resilience in face of incoming recession with stable or improved readings for Italy, Swiss (adj), Czech.

- UK House of Commons returns from Christmas recess. Govt to meet with several union leaders in hopes of averting further strike action, although attempting to push anti-strike legislation through in parallel.

- Cargo vessel temporarily blocked Suez Canal but since been freed; 19 ships were backed-up; Normal traffic has now resumed.

- Brazil stocks volatile in wake of Ex-Pres Bolsonaro supporters storming congress.

- Asia closed higher with KOSPI outperforming at +2.6%. EU indices are mixed to flat. US futures are +0.3-0.5%. Gold +0.5%, DXY -0.2%; Commodity: Brent +3.3%, WTI +3.5%, US Nat Gas +4.5%, TTF +0.5%; Crypto: BTC +1.8%, ETH +4.3%.

Asia

- China Dec Foreign Reserves: $3.128T v $3.150Te with Gold reserves rising for the 2md straight month (64.67M troy oz v 63.67M prior (2nd straight rise).

- China PBoC reiterates that the domestic economy to rebound quickly due to an optimized Covid-19 response and after its economic policies continue to take effect..

- Six cities in China said to set 2023 GDP targets of at least 5.5%.

- Japan PM Kishida: stated that must choose a BOJ successor that is best suited for the position at this time. Need to discuss with the new BOJ governor the relationship between govt and BOJ policie.

Taiwan

- China Military confirmed executing military drills around Taiwan recently.

Europe

- BOE’s Mann: Price caps on energy allow the reorientation of spending to the rest of the consumption basket thus potentially higher inflation than otherwise would be the case.

- French govt to unveil pension system overhaul during week.

Americas

- Fed's Evans (non-voter, retiring) noted that was possible economic data would support raising policy rate by 25bps at the Fed's next meeting. Slowing rate hikes to 25bps increments would not mean the Fed is preparing to stop raising rates.

- GOP leader McCarthy elected House Speaker on 15th vote.

- Brazil Supreme Court Justice has ruled Brasilia Gov Rocha to be removed from post for 90 days after riot in capitol buildings (**Note: Supporters of former Brazilian President Bolsonaro who refuse to accept his election defeat stormed Congress, the Supreme Court and presidential palace).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.45% at 446.42, FTSE +0.05% at 7,703.70, DAX +0.21% at 14,640.85, CAC-40 +0.05% at 6,864.56, IBEX-35 -0.17% at 8,686.69, FTSE MIB +0.38% at 25,277.00, SMI +0.26% at 11,173.30, S&P 500 Futures +0.36%].

Market Focal Points/Key Themes: European indices open generally higher and ramained upbeat through the early part of the session; better performing sectors include technology and materials; among underperforming sectors are utilities and energy; AstraZeneca to acquire CinCor Pharma; Ipsen acquires Albireo Pharma; Vodafone to divest its Hungary unit; Serica to acquire Tailwind Energy; Quiagen to acquire Verogen; reportedly French government looking to invest in Orpea; earnings expected in the upcoming US session include Commercial Metals and Brunello Cucinelli.

Equities

- Consumer discretionary: Orpea [ORP.FR] +4% (press speculation on investment).

- Energy: Siemens Energy [ENR.DE] -1% (Deutsche Bank cuts to hold from buy).

- Materials: Nanoco Group [NANO.UK] -20% (update on litigation settlement).

- Healthcare: UCB [UCB.BE] +4% (raises FY22 Rev outlook), Ipsen [IPN.FR] -1.5% (acquires Albireo Pharma), AstraZeneca [AZN.UK] -1% (to acquire CinCor Pharma at $26/shr in $1.3B deal), Argenx [ARGX.BE] -1.5% (prelim FY22 VYVART sales).

- Industrials: Maersk [MAERSKB.DK] +1% (incident with cargo in Suez), Knorr-Bremse [KBX.DE] +2.5% (Deutsche Bank raises to buy from hold).

- Technology: Frontier Developments [FDEV.UK] -40% (trading update), Keller Group [KLR.UK] -5% (discovery of financial reporting fraud to impact FY22 expectations).

- Telecom: Vodafone [VOD.UK] -1% (divests Hungary unit to consortium for €1.7B).

Speakers

- China said to be considering 2023 budget deficit ratio at approx 3%. Govt said to be considering record special debt quota and wider budget deficit. New local special quota said to be of up to CNY3.8T.

- Cargo vessel 'Glory' has been refloated by the Suez Canal Authority tugs; only minor delays expected.

Currencies/fixed income

- USD remained on soft footing as the new week dawned as safe haven flows unwound. Risk appetite found fresh legs as China reopened following the pandemic and hope the Fed would slow down the pace of its tightening.

- EUR/USD approached the 1.07 area before consolidating.

- USD/JPY at 132.75.

Economic data

- (SE) Sweden Dec SEB Housing-Price Indicator: -21 v -36.0 prior.

- (ZA) South Africa Dec Gross Reserves: $60.5B v $59.9B prior; Net Reserves: $53.8B v $53.4B prior.

- (CH) Swiss Dec Unemployment Rate: 2.1% v 2.0%e; Unemployment Rate (seasonally adj): 1.9% v 2.0% prior.

- (DE) Germany Nov Industrial Production M/M: 0.2% v 0.3%e; Y/Y: -0.4% v +0.2%e.

- (DK) Denmark Nov Current Account Balance (DKK): 31.8B v 33.2B prior; Trade Balance: B v 7.9B prior.

- (MY) Malaysia end-Dec Foreign Reserves: $114.6B v $110.3B prior.

- (HU) Hungary Nov Industrial Production M/M: -0.7% v -3.6% prior; Y/Y: 0.8% v 4.1%e.

- (HU) Hungary Nov Preliminary Trade Balance: -€1.3B v -€0.4Be.

- (FR) France Nov Trade Balance: -€13.8B v -€11.6B prior; Current Account: -€6.8B v -€3.4B prior.

- (CH) Swiss Dec Foreign Currency Reserves (CHF): 784.0B v 791.2B prior.

- (CZ) Czech Q3 Final GDP Q/Q: -0.2% v -0.2% prelim; Y/Y: 1.5% v 1.7% prelim.

- (CZ) Czech Dec Unemployment Rate: 3.73.8%e.

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

- (CH) Swiss weekly Total Sight Deposits (CHF): 533.5B v 539.2B prior; Domestic Sight Deposits: 487.3B v 491.9B prior.

- (CZ) Czech Dec International Reserves: $141.0B v $137.2B prior.

- (SG) Singapore Dec Foreign Reserves: $784.0B v $291.3B prior.

- (EU) Euro Zone Jan Sentix Investor Confidence: -17.5 v -18.0e.

- (EU) Euro Zone Nov Unemployment Rate: 6.5% v 6.5%e.

- (BE) Belgium Nov Unemployment Rate: 5.5% v 5.4% prior.

Fixed income issuance

- (EU) EFSF opened its book to sell EUR-denominated 3-year and 10-year bonds.

Looking ahead

- (ZA) South Africa Dec Naamsa Vehicle Sales Y/Y: No est v 18.2% prior.

- (IT) Bank of Italy Report on Balance-Sheet Aggregates.

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

- 05:30 ((DE) Germany to sell €3.0B in 6-month BuBills.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell combined €4.0B in 3-month and 6-month bills.

- 06:00 (IE) Ireland Nov Industrial Production M/M: No est v -10.7% prior; Y/Y: No est v 55.7% prior.

- 06:00 (PT) Portugal Nov Trade Balance: No est v -€2.8B prior.

- 06:00 (IL) Israel to sell combined ILS1.25B in 2025, 2026, 2028, 2031 and 2052 bonds.

- 06:00 (RO) Romania to sell RON400M in 12-month bills.

- 06:00 (RO) Romania to sell RON500M in 8.75% 2028 Bonds.

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

- 06:30 (CL) Chile Dec Trade Balance: $0.2Be v $0.3B prior; Total Exports: No est v $7.8B prior; Total Imports: No est v $7.3B prior; Copper Exports: No est v $3.6B prior.

- 06:30 (CL) Chile Dec International Reserves: No est v $38.6B prior.

- 06:45 (US) Daily Libor Fixing.

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

- 07:00 (MX) Mexico Dec CPI M/M: 0.4%e v 0.6% prior; Y/Y: 7.8%e v 7.8% prior.

- 07:00 (MX) Mexico Dec CPI Core M/M: 0.7%e v 0.5% prior; Y/Y: 8.4%e v 8.5% prior.

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

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

- 08:30 (CA) Canada Nov Building Permits M/M: No est v -1.4% prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.1-6.3B in 3-month, 6-month and 12-month bills.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 12:30 (US) Fed’s Bostic participates in moderated discussion.

- 15:00 (US) Nov Consumer Credit: $25.0Be v $27.1B prior.

- 18:00 (KR) South Korea Nov Current Account (BOP): No est v $0.9B prior; Balance of Goods (BOP): No est v -$1.48B prior.

- 18:30 (JP) Japan Dec Tokyo CPI Y/Y: 4.0%e v 3.8% prior; CPI (Ex-Fresh Food) Y/Y: 3.8%e v 3.6% prior; CPI (ex-fresh food/energy) Y/Y: 2.7%e v 2.5% prior.

- 18:30 (JP) Japan Nov Household Spending Y/Y: 0.5%e v 1.2% prior.

- 19:01 (UK) Dec BRC Sales LFL Y/Y: No est v 4.1% prior.

- 20:00 (PH) Philippines Nov Trade Balance: -$4.5Be v -$3.3B prior; Exports Y/Y: 11.5%e v 20.0% prior; Imports Y/Y: 3.1%e v 7.5% prior.

- 21:30 (KR) South Korea to sell KRW1.2T in 2-year Bonds.

- 22:00 (TH) Thailand Central Bank to sTHB60B in 3-month bills.

- 23:30 (HK) Hong Kong to sell 3-month, 6-month and 12-month Bills.

- 22:30 (JP) Japan to sell 3-Month Bills.