Silver, Gold and Yen rip ahead of Trump's Fed Chair pick likely this week

EU mid-market update: Silver, Gold and Yen rip ahead of Trump's Fed Chair pick likely this week; Speculation of JPY intervention; US cold snap arrives, oil pares rally.

Notes/observations

- European indices flat lining amid focuses on precious metals and yen (JPY) strength. Bond yields drift lower as supply is set to slow sharply after heavy early-year issuance. Data-wise, Germany’s Jan IFO missed slightly (Business Climate 87.6 vs 88.2e; Expectations 89.5 vs 90.2e), keeping the “weak growth / investment shortfall” narrative alive.

- Japanese yen is extremely strong, which pushed USD/JPY below 154 (down from 159 on Fri), as reports circulated the NY Fed ran a ‘rate check’ on USD/JPY. Japan officials reiterated verbal intervention. Analysts note Japan’s fiscal credibility (tax-cut proposals without clear funding) is adding a risk premium to JPY; Coordinated US-Japan action is possible, but history suggests US involvement isn’t a cure-all. Regarding policy, earliest plausible BoJ hike seen around April, but strategists suggest June/July more likely; Futures are now fully pricing a hike by June 2026. Extra note: In current yen environment, risk of carry trade unwinding is increased, which triggered sell off in US tech stocks in Aug 2024.

- Precious metals run goes parabolic with silver leading the way. Futures touched $110, while gold surpassing $5000. Analysts frame it as a barometer of fear, tied to renewed pressure on Fed independence, tariff threats, geopolitical brinkmanship, and stress around JGBs plus a weaker USD.

- Rick Rieder has surged past Kevin Warsh to become the ~50% favorite to replace a besieged Jerome Powell, enticing the White House with a "plumber’s" pivot that treats the Fed’s balance sheet not as a theoretical burden, but as a lever to save the Treasury $20bn annually and arrest a cooling labor market.

- For geopolitics and trade, US/Ukraine/Russia talks reportedly continue with another round expected in Abu Dhabi next weekend; Zelenskyy says a US security agreement is “100% ready” to sign. India-EU are set to sign an FTA tomorrow, with a headline cut in tariffs on EU-made cars to 40% from 110% (temporary EV exemptions to support domestic industry). Separately, UK PM Starmer is in Beijing with business leaders to deepen trade ties.

- The probability of a partial U.S. government shutdown has surged to ~77% - up from just 12% on Friday - as Chuck Schumer leads a Democratic blockade of spending legislation to force the removal of Homeland Security funding. This rapid deterioration, compounded by the political fallout from the Minneapolis shooting and weather-induced paralysis in D.C., has triggered a visceral "sell America" trade. Trump sought to deescalate the crisis in a Sunday WSJ interview by suggesting an ICE withdrawal from the city - yet it remains an open question whether this concession can untangle the gridlock before funding lapses.

- Tier1 analysts project Winter Storm Fern will shave 0.5–1.5pp off Q1 2026 GDP growth, using the precedent of 2021’s Storm Viola to model a sharp, though likely ephemeral, freeze in consumption across half the U.S. While the historical parallel is imperfect—clouded by 2021's legislative stimulus noise—the consensus remains that this is a temporary weather distortion rather than a structural economic scar.

- Notable EU corp news: Ryanair Q3 complicated by an €85M provision (linked to an Italian watchdog fine); Guidance for FY26 improved (traffic up, earlier Boeing deliveries, fares rising); Stabilus Q1 adj EBIT and revenue down y/y; guidance reiterated (margin and revenue bands maintained); Danone weakness from limited infant formula recall, Estimated revenue impact seen as <€50M.

- DeepMind CEO Demis Hassabis has issued a stark corrective to the industry’s "exuberance," warning that multibillion-dollar valuations for product-less startups are "unsustainable" even as he touts the "transformative" demand for Google’s own Gemini 3. On the geopolitical front, he argues that Western firms retain a decisive edge in the "research-heavy" race for Artificial General Intelligence, characterizing Chinese rivals as distracted by the hunt for near-term commercial revenue. This assessment cements a bearish consensus among the industry's godfathers - echoing earlier warnings from Sundar Pichai and Sam Altman - that while the AI revolution is inevitable, the "irrational" capital flooding the sector is destined for a painful reckoning.

- Asia closed lower with Nikkie225 underperforming -1.8%. EU indices -0.4% to +0.2%. US futures -0.2% to -0.5%. Gold +2.0%, DXY -0.5%; Commodity: Brent -0.1%, WTI -0.2%; Crypto: BTC -1.0%, ETH -1.9%.

Asia

- Japan PM Takaichi reiterated would take necessary steps against speculative, abnormal market moves (didn't specify what actions or which markets she was referring to). Not realistic to create sovereign wealth fund combining BOJ ETF holdings, Pension Funds and FX Reserves.

- Japan Top FX Diplomat Mimura reiterated stance to decline comment on FX intervention; keeping 'close' contact with the US on FX.

Global conflict/tensions

- Ukraine Pres Zelenskiy: Trilateral talks with US and Russia were constructive; further meetings might take place next week. US delegation raised the issue of formats to formalize parameters for ending the war.

- Spot gold moved above the $5K level on US shutdown fears, geopolitical tensions; Silver approaching $110/oz.

Europe

- France PM Lecornu managed to pass spending part of 2026 budget without a vote after surviving no-confidence votes.

Americas

- NY Fed said to have performed rate checks on USD/JPY with counterparties, acting as a fiscal agent for the US Treasury.

- Democratic lawmakers now say they will not support legislation that includes funds for the Department of Homeland Security until federal immigration agents are reined in.

Trade

- President Trump threatened 100% tariff against Canada if it made a trade deal with China.

- Canada PM Carney stated that Canada had no intention of pursuing a free-trade deal with China and a recently signed deal amounted to a rectification of existing issues.

- India said to cut tariffs on cars to 40% as part of trade deal with the EU (from as high as 110%).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.13% at 607.52, FTSE -0.08% at 10,135.30, DAX -0.24% at 24,799.18, CAC-40 -0.43% at 8,108.14, IBEX-35 +0.18% at 17,576.25, FTSE MIB +0.17% at 44,909.50, SMI -0.41% at 13,072.60, S&P 500 Futures -0.32%].

Market focal points/key themes: European indices opened generally higher but later turned around to trade mostly in the red; lack of risk appetite attributed to global risk around monetary policy and slow growth in Germany; outperforming sectors include communication services and financials; among underperforming sectors are health care and consumer discretionary; FNAC receives takeover offer from EP Group; CVC acquires Marathon Asset; focus on US durable goods orders coming out later in the session; earnings expected in the upcoming US session include Nucor and Steel Dynamics.

Equities

- Consumer discretionary: FNAC Darty [FNAC.FR] +17.5% (offered to be acquired; trading update), Ryanair [RYA.IE] -1.5% (earnings; guidance), Inficon Holding [IFCN.CH] -1.5% (earnings).

- Industrials: Stabilus [STM.DE] +0.5% (earnings).

- Technology: ASML [ASML.NL] -1.0% (Samsung press reports).

Speakers

- France to hold G-7 finance call on Tues, Jan 27th; Rare earths and Ukraine will be discussed.

- Swiss National Bank (SNB) adjusts remuneration of sight deposits; Again lowers threshold factor from 16.5 to 15.0.

- China Commerce Ministry (MOFCOM) reiterated to orderly expand opening up of service sectors. Maintained communication with US at various level following recent leader summit in South Korea. To manage differences and promote stable trade.

- OPEC+ said to likely continue pause in its March supply at its next meeting.

Currencies/fixed income

- USD was broadly softer against the major pairs as renewed concerns about a US govt shutdown and geopolitical concerns.

- USD/JPY tested below the 154.50 level after reports circulated late on Friday that the Fed did a price check in the pair which ramped up coordinated FX intervention speculation. USD/JPY almost 6 big figures below Fri’sd high. The 160 level now firmly cemented as key psychological resistance in the pair. BOJ accounts reportedly provided no clear sign that Japan did intervened in the yen currency last Friday.

- EUR/USD higher at 1.1850 area with the pivotal 1.20 resistance coming into view.

- GBP/USD higher at 1.3660

- Spot gold moved above the $5K level on US shutdown fears, geopolitical tensions; Silver approaching $110/oz.

- 10-year German Bund yield last at 2.88%, France 10-year Oat at 3.46% and 10-year Gilt yield at 4.44% 10-year Treasury yield: 4.21%; 10-year JGB: 2.22%.

Economic data

- (FI) Finland Dec PPI M/M: -1.0% v +0.3% prior; Y/Y: -0.8% v +0.2% prior.

- (ES) Spain Dec PPI M/M: % v -0.4% prior; Y/Y: % v -2.5% prior.

- (ES) Spain Nov Total Mortgage Lending Y/Y: 24.4% v 8.0% prior; House Mortgage Approvals Y/Y: 12.4% v 0.6% prior.

- (CZ) Czech Jan Consumer Confidence: 108.2 v 111.4e; Business Confidence: 98.6 v 98.8e.

- (DE) Germany Jan IFO Business Climate: 87.6 v 88.2e; Current Assessment: 85.7 v 86.0e; Expectations Survey: 89.5 v 90.2e.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 449.3B v 456.2B prior; Domestic Sight Deposits: 433.6B v 439.9B prior.

- (PL) Poland Dec Real Retail Sales M/M: 12.5% v 12.5%e; Y/Y: 5.3% v 5.8%e; Retail Sales (current prices) Y/Y: 5.0% v 5.7%e.

Fixed income issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills; Avg Yield: 3.98% v 4.00% prior; Bid-to-cover: 4.52x v 1.43x prior.

Looking ahead

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

- 5:30 (EU) European Union to sell combined €7.0B in 2030, 2035 and 2040 NGEU Bonds.

- 06:00 (BR) Brazil Jan FGV Consumer Confidence: No est v 90.2 prior.

- 06:00 (BE) Belgium Debt Agency (BDA) cancelled planned Bond Auction (due to syndication).

- 06:00 (RO) Romania to sell combined RON1.4B in 2029 and 2034 bonds.

- 06:00 (RO) Romania to sell RON1.0B in 12-month bills.

- 06:00 Norway announcement on upcoming Bonds.

- 06:00 (IL) Israel to sell combined ILS3.0B in 2028, 2031, 2033, 2034 and 2052 bonds (6 tranches).

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

- 06:30 (BR) Brazil Dec Current Account Balance: -$5.0Be v -$4.9B prior; Foreign Direct Investment (FDI): $0.9Be v $9.8B prior.

- 07:00 (MX) Mexico Dec Unemployment Rate: 2.5%e v 2.7% prior.

- 08:00 (PL) Poland Dec M3 Money Supply M/M: 1.9%e v 0.8% prior; Y/Y: 10.5%e v 10.6% prior.

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

- 08:30 (US) Chicago Fed National Activity Index: -0.20e v -0.231 prior.

- 08:30 (US) Nov Preliminary Durable Goods Orders: +3.8%e v -2.2% prior; Durables (ex-transportation): 0.3%e v 0.1% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.3%e v 0.5% prior; Capital Goods Shipments (non-defense/aircraft): 0.3%e v 0.8% prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €6.6-7.8B in 3-month, 6-month and 12-month bills.

- 09:00 (BE) Belgium Jan Business Confidence: No est v -11.9 prior.

- 10:30 (US) Jan Dallas Fed Manufacturing Activity: -8.6e v -10.9 prior.

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

- 13:00 (US) Treasury to sell 2-Year Notes.

- 16:00 (KR) South Korea Jan Business Manufacturing Survey: No est v 94.4 prior; Non-Manufacturing Survey: No est v 93.2 prior.

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 79.3 prior.

- 18:50 (JP) Japan Dec PPI Services Y/Y: No est v 2.7% prior.

- 19:00 (AU) Australia to sell A$1.0B in 1.5% 2031 Bonds.

- 19:01 (UK) Jan BRC Shop Price Index Y/Y: No est v 0.7% prior.

- 19:30 (AU) Australia Dec NAB Business Confidence: No est v 1 prior; Business Conditions: No est v 7 prior.

- 20:00 (PH) Philippines Dec Trade Balance: -$3.3Be v -$3.5B prior; Exports Y/Y: 22.0%e v 21.3% prior; Imports Y/Y: +1.9%e v -2.0% prior.

- 20:30 (CN) China Dec Industrial Profits Y/Y: No est v -13.1% prior; YTD Y/Y: No est v 0.1% prior.

- 21:00 (KR) South Korea to sell KRW500B in 2.75% 20-Year Bonds.

- 22:00 (TH) Thailand Central Bank to sell THB65B in 3-month bills.

- 23:00 (SG) Singapore MAS to sell 4-week and 14- week Bills.

- 23:30 (TW) Taiwan to sell NT$400M in 30-Year Bonds.