EU Mid-Market Update: Risk aversion sentiment continues to simmer ahead of next week's Fed meeting; PBoC cuts more policy rates.
- Risk aversion continued to percolate ahead of next week Fed meeting (recent re-pricing in Fed rate hike expectations with markets pricing in up to four hikes in 2022 with liftoff seen in March [some speculation it could be 50bps at that time].
- UK Dec Retail Sales data miss expectations.
- China PBoC cuts more policy rates (as anticipated; cuts Standing Lending Facility by 10bps.
- Japan Dec National CPI Y/Y: 0.8% v 0.9%e; CPI Ex-fresh food (core) Y/Y: 0.5% v 0.6%e.
- South Korea Vice Fin Min Ahn: confirmed size of extra budget at KRW14.0T and would issue KRW11.3T in bonds to finance it (Note: Extra budget could fan inflationary pressures and likely bolstering the case for the BOK to raise interest rates).
- China PBoC speculated to cut rates on Standing Liquidity Facility (SLF) loans in the near furure.
- UK Foreign Sec Truss called on allies to curb the rise of Russia and China; West to stand together against dictatorship and face down aggressors.
- UK Jan GfK Consumer Confidence: -19 v -15e (lowest since Feb 2021).
- Treasury Sec Yellen reiterated stance that inflation to remain above 2% in medium term but did expect it to come down near 2.0% by year end.
- Fed to seek public comment on Central Bank Digital Currency; Outlines potential benefits of CBDC.
Indices [Stoxx600 -1.37% at 476.74, FTSE -0.86% at 7,519.40, DAX -1.39% at 15,691.39, CAC-40 -1.19% at 7,108.68, IBEX-35 -1.18% at 8,710.92, FTSE MIB -1.26% at 27,223.00, SMI -1.02% at 12,432.79, S&P 500 Futures -0.09%].
Market Focal Points/Key Themes: European indices open lower across the board and stayed firmly in the red as the session wore on; all sectors start the day in the red; least negative sectors include consumer discretionary and financials; sectors among those leading to the downside include industrials and materials; wind turbine manufacturers under pressure after Siemens Gamesa cuts outlook; Photo-Me discloses take private offer; Playtech affirms recommendation of acquisition by Aristocrat after JKO Play withdraws; earnings expected during the upcoming US session include Schlumberger, IHS Markit and Ally Financial.
- Consumer discretionary: Boiron [BOI.FR] +10% (prelim sales), 4Imprint [FOUR.UK] +1% (trading update), NENT Group [NENT.B.SE] -6% (Netflix earnings).
- Energy: Siemens Gamesa Renewable Energy SA [SGRE.ES] -13% (prelim results; profit warning), Siemens Energy [ENR.DE] -11% (prelim results; profit warning).
- Industrials: Stellantis [STLA.FR] -4% (placement), Renault [RNO.FR] -2% (partnership with Geely).
- Technology: Playtech [PTEC.UK] -14% (withdrawal of one of received offers).
- German Chancellor Scholz stated that must avert further Russian aggression against Ukraine.
- EU's Sefcovic spoke with UK's Brexit negotiator Truss ahead of the upcoming meeting (Jan 24th) and stressed that needed to press on towards solutions within the Northern Irish Protocol.
- Poland Central Bank official Kochalski stated that the MPC might consider another 50bps rate hike in Feb (**Insight: Poland Central Bank has raised the Base Rate four times in the current tightening cycle by a total of 215bps. The last hike was in Jan 2022).
- Russia Foreign Min Lavrov stated that was grateful for US to hold security talks but was not expecting any breakthrough today.
- China PBoC cut the rate on the Standing Lending Facility (SLF) by 10bps (affects the overnigh, 1-day and 1-month rates; effective from Jan 17th.
- China Cabinet Advisor Zhu noted that potential GDP growth was seen between 5.0-6.0%; confident China could achieve 2022 GDP growth of ~5.5% [vs 8.1% in 2021]; Fed rate hike and balance sheet cut could have 'very big market impact'.
- US said to reply to Russia security proposals during week of Jan 24th.
- Safe-haven flows favored the CHF, yen and USD pairs as risk aversion sentiment continued to percolate ahead of next week Fed meeting.
- EUR/USD at 1.1340 area with USD/JPY below the 114 level.
- US 10-year yield continued to move off the weekly highs of 1.90%. and tested 1.77% during the electronic session. Euro Zone and UK also seeing moves of approx 3bps tracking US 10-year action.
- (UK) Dec Retail Sales (ex-auto/fuel) M/M: -3.6% v -0.8%e; Y/Y: -3.0% v +1.1%e.
- (UK) Dec Retail Sales (including auto/fuel) M/M: -3.7% v -0.6%e; Y/Y: %-0.9 v +3.4%e.
- (TR) Turkey Jan Consumer Confidence: 73.2 v 68.9 prior.
- (DK) Denmark Jan Consumer Confidence Indicator: -1.5 v -2.1 prior.
- (CN) Weekly Shanghai copper inventories (SHFE): 35.1K v 30.3K tons prior.
- (CH) Swiss Dec M3 Money Supply Y/Y: 1.7% v 1.9% prior.
- (RU) Russia Narrow Money Supply w/e Jan 14th (RUB): 14.39 T v14.61T prior.
- (PL) Poland Dec Sold Industrial Output M/M: -2.9% v -6.3%e; Y/Y: 16.7% v 13.1%e.
- (PL) Poland Dec Construction Output Y/Y: 3.1% v 7.7%e.
- (PL) Poland Dec Employment M/M: 0.0% v 0.1%e; Y/Y: 0.5% v 0.7%e.
- (PL) Poland Dec Average Gross Wages M/M: 10.3% v 8.2%e; Y/Y: 11.2% v 9.3%e.
- (PL) Poland Dec PPI M/M: 0.8% v 0.4%e; Y/Y: 14.2% v 13.5%e.
- (SL) Sri Lanka Dec National CPI (NCPI) Y/Y: 14.0% v 11.1% prior.
- (BE) Belgium Jan Consumer Confidence: -2 v -4 prior.
Fixed income issuance
- (IN) India sold total INR vs. INR240B indicated in 2023, 2026, 2035 and 2051 bonds.
- (ZA) South Africa sold total ZAR vs. ZAR1.2B indicated in I/L 2038, 2046 and 2050 Bonds.
- 05:25 (EU) Daily ECB Liquidity Stats.
- 06:00 (IE) Ireland Dec PPI M/M: No est v 0.0% prior; Y/Y: No est v 0.2% prior.
- 06:00 (UK) DMO to sell £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively).
- 06:30 (CL) Chile Central Bank Traders Survey.
- 06:30 (IN) India Weekly Forex Reserve w/e Jan 14th: No est v $B prior.
- 06:45 (US) Daily Libor Fixing.
- 07:30 (EU) ECB chief Lagarde in WEF panel.
- 08:00 (UK) BOE Mann.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 08:30 (CA) Canada Nov Retail Sales M/M: 1.2%e v 1.6% prior; Retail Sales (ex-auto) M/M: 1.2%e v 1.3% prior.
- 08:30 (US) Weekly USDA Net Export Sales.
- 09:00 (IT) Bank of Italy (BOI) Quarterly Economic Bulletin.
- 10:00 (US) Dec Leading Index: 0.8%e v 1.1% prior.
- 10:00 (EU) Euro Zone Jan Advance Consumer Confidence: -9.0e v -8.3 prior.
- 11:00 (EU) Potential sovereign ratings after European close.
- 11:30 (US) Treasury Sec Yellen at WEF.
- 13:00 (US) Weekly Baker Hughes Rig Count.
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