Spain Q4 GDP data beats and adds to theme that EU likely to avoid recession

Notes/Observations

- Quite news on geopolitical front as macro focus turns to major Central Bank decisions next week from FOMC, ECB and BoE (all expected to hike).

- EU economic growth in spotlight ahead of plethora of GDP readings next week. Spain Q4 prelim GDP beat estimates as fears of EU recession in doubt; UK Fin Min Hunt outlined economic growth plans and fought Tory party calls for tax cuts, stating that best tax cut right now is to reduce inflation.

- US premarket earnings expected from ALV, AXP, BAH, CL, CVX, FBP.

- Asia closed mixed with Indian Nifty50 under-performing -1.6%. EU indices are flat to mixed. US futures are -0.1% to -0.5%. Gold -0.1%, DXY 0.0%; Commodity: Brent +1.2%, WTI +1.2%, TTF -3.3%; Crypto: BTC -0.1%, ETH -1.4%.

Asia

- Japan Jan Tokyo CPI reading registered its fastest pace since May 1981 (Y/Y: 4.4% v 4.0%e v 4.0% prior; CPI (Ex-Fresh Food) Y/Y: 4.3% v 4.2%e.

- Japan PM Kishida stated that a return to deflation could not be ruled out, domestic demand-driven inflation remained 'feeble'.

Europe

- UK Chancellor of the Exchequer (Fin Min) Hunt stated that inflation was predicted to fall because of tough decisions taken in the Autumn Budget. Government must maintain its disciplined approach to the public.

- UK Fin Min Hunt said to reject Tory right-wing calls big for tax cuts in his budget. To set out his plan to increase growth in a speech schedule for today (Friday, Jan 27th).

Americas

- President Biden stressed that he would not let anyone use the full faith and credit of the US as a bargaining chip.

- House Republican Leaders said to be considering extending the US debt ceiling limit until Sept 30th.

- Chile Central Bank (BCCh) left the Overnight Rate Target unchanged at 11.25% (as expected).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.06% at 454.24, FTSE +0.16% at 7,773.27, DAX +0.11% at 15,148.85, CAC-40 +0.16% at 7,107.02, IBEX-35 +0.01% at 9,036.45, FTSE MIB +0.17% at 26,262.00, SMI +0.03% at 11,321.40, S&P 500 Futures -0.29%].

Market Focal Points/Key Themes: European indices open mixed but took on a positive bias through the early hours of the session; better performing sectors include real estate and energy; underperforming sectors include consumer discretionary and materials; oil & gas subsector supported following jump in crude prices; luxury subsector under pressure following LVMH results; Bestway takes stake in Sainsbury’s; Enagas raises its holdings in the Trans Adriatic Pipeline; earnings expected in the upcoming US session include Autoliv, Booz Allen, Colgate-Palmolive and Chevron.

Equities

- Consumer discretionary: LMVH [MC.FR] +2.5% (reports FY22 - post close), Hennes & Mauritz [HMB.SE] -5.5% (reports Q4, margins deterioration - SEK3B share buyback), Remy Cointreau [RCO.FR] -1.5% (sales), Superdry [SDRY.UK] -15.5% (earnings), Yougov [YOU.UK] -0.5% (H1 trading update).

- Consumer staples: Sainsbury [SBRY.UK] +5.0% (Bestway acquires 3.4% stake).

- Industrials: Vestas Wind Systems [VWS.DK] -3.0% (prelim FY22 - low end of prior outlook), Signify [LIGHT.NL] -2.0% (reports Q4 - misses).

- Technology: STMicroelectronics [STM.FR] -1.0%, ASML [ASML.NL] -1% (wake of Intel post close weak earnings).

Speakers

- UK Chancellor of the Exchequer (Fin Min) Hunt speech noted that his Tory party understood the importance of low taxes; Best tax cut now was lowering inflation. The plan to halve inflation to require patience and discipline.

- Hungary PM Orban stated that he expected inflation to be in single digits by Dec; CPI could start declining around Feb-Mar period.

- Norway PM Gahr Store stated that would introduce mechanism to limit power exports; To retain more hydropower reservoirs and exports if we saw a risk of a strain.

- India Central Bank (RBI) Gov Das noted that the yield curve has evolved in an orderly manner although core inflation remained sticky. Country's financial system remained robust and stable.

Currencies/fixed income

- FX markets saw a quiet session. Focus was turning to next week’s key central bank decisions (Fed, ECB and BOE all expected to hike).

- EUR/USD holding below the 1.09 level after testing 7-month highs earlier i the week.

- GBP/USD finish the week on a steady note with the pair hovering around the 1.2370 area.

- USD/JPY hovering around the 130 area. Dealers noted that market expectations for changes in BOJ policy looming including the next meeting in March.

Economic data

- (FI) Finland Dec Unemployment Rate: 6.7% v 5.9% prior.

- (SE) Sweden Dec Unemployment Rate: 6.9% v 6.4% prior; Unemployment Rate (seasonally adj): 7.5% v 7.3%e; Trend Unemployment Rate: 7.3% v 7.3% prior.

- (SE) Sweden Dec Household Lending Y/Y: 3.5% v 4.1% prior.

- (SE) Sweden Dec Retail Sales M/M: -1.8% v +1.5%; Y/Y: -8.0% v -7.0% prior.

- (NO) Norway Dec Retail Sales M/M: -3.6% v 0.5%e.

- (HU) Hungary Dec Unemployment Rate: 3.9% v 3.9%e.

- (FR) France Jan Consumer Confidence: 80 v 83e.

- (ES) Spain Q4 Preliminary GDP Q/Q: 0.2% v 0.1%e; Y/Y: 2.7% v 2.2%e.

- (RU) Russia Narrow Money Supply w/e Jan 20th (RUB): 16.40T v 16.39T prior.

- (EU) Euro Zone Dec M3 Money Supply Y/Y: 4.1% v 4.6%e.

- (AT) Austria Jan Manufacturing PMI: 48.4 v 47.3 prior (6th straight contraction).

- (IT) Italy Nov Industrial Sales M/M: +0.9% v -0.8% prior; Y/Y: 11.5% v 12.5% prior.

Fixed income issuance

(IN) India sold total INR300B vs. INR300B indicated in 2025, 2029, 2036 and 2062 bonds.

- (ZA) South Africa sold total ZAR vs. ZAR1.2B indicated in I/L 2029, 2033 and 2046 Bonds.

- (IT) Italy Debt Agency (Tesoro) sold €5.0B vs. €5.0B indicated in 6-month Bills; Avg Yield: 2.822% v 2.324% prior; Bid-to-cover: 1.50x v 1.57x prior.

Looking ahead

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

- 06:00 (IE) Ireland Dec Retail Sales Volume M/M: No est v -1.4% prior; Y/Y: No est v -4.2% prior.

- 06:00 (UK) DMO to sell £4.0B in 1-month, 3-month and 6-month bills (£0B, £B and £B respectively).

- 06:30 (IN) India Weekly Forex Reserve w/e Jan 20th: No est v $572.0B prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IN) India announces upcoming bill issuance (held on Wed).

- 07:00 (MX) Mexico Dec Trade Balance: +$0.8Be v -$0.1B prior.

- 07:30 (BR) Brazil Dec Total Outstanding Loans (BRL): 5.323Te v 5.264T prior; M/M: 1.1%e v 1.0% prior; Personal Loan Default Rate: No est v 5.9% prior.

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

- 08:30 (US) Dec Personal Income: 0.2%e v 0.4% prior; Personal Spending: -0.1%e v +0.1% prior; Real Personal Spending (PCE): -0.1%e v 0.0% prior.

- 08:30 (US) Dec PCE Deflator M/M: 0.0%e v 0.1% prior; Y/Y: 5.0%e v 5.5% prior.

- 08:30 (US) Dec PCE Core Deflator M/M: 0.3%e v 0.2% prior; Y/Y: 4.4%e v 4.7% prior.

- 10:00 (US) Dec Pending Home Sales M/M: -1.0%e v -4.0% prior; Y/Y: -35.4%e v -38.6% prior.

- 10:00 (US) Jan Final University of Michigan Confidence: 64.6e v 64.6 prelim.

- 10:30 (EU) ECB chief Lagarde.

- 11:00 (EU) Potential sovereign ratings after European close (Fitch on Denmark and Greece sovereign Rating; S&P on Hungary and Luxembourg Sovereign Rating; Moody’s on Netherlands and Latvia Sovereign Rating.

- 12:30 (BR) Brazil Dec Central Govt Budget Balance (BRL): No est v -14.7B prior.

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

- 13:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to raise the Overnight Lending Rate by 100bps to 13.00%.