UK looks to avoid recession for the time being, EU region inflation readings mixed

Notes/Observations

- JGB 10YR yield rose above BOJ policy ceiling of 0.50%. Later on, BOJ announced additional JGB bond buying operation with amount to be determined by market conditions.

- Core CPI in Europe remains a concern as Spain Dec Final Core CPI revised higher despite headline CPI cooling and Sweden Dec CPI hit fresh 30-year highs; Following this, ECB's Kazaks stated core inflation is key gauge for price pressures.

- UK Monthly GDP beats and tips in positive territory after ONS cites boost from World Cup spectacle; Data raises doubt over validity of view that UK is currently within recession.

- China CNY and USD-denominated trade data overnight.

- Asia closed higher by +0.7-1.0%. EU indices are +0.3-0.7%. US futures are -0.1% to +0.1%. Gold +0.5%, DXY -0.1%; Commodity: Brent +0.5%, WTI +0.6%, UK Nat Gas +0.4%; Crypto: BTC +4.2%, ETH +0.7%.

Asia

- Bank of Korea (BOK) raised 7-day Repo Rate by 25bps to 3.50% (as expected). Vote to hike was not unanimous ( 2 dissenters wanted rates to be left unchanged). To keep reviewing if additional rate hike was needed.

- China Dec Trade Balance: $78.0B v $76.9Be; Exports Y/Y: -9.9% v -11.1%e; Imports Y/Y: -7.5% v -10.0%e.

- Australia Nov Home Loans Value M/M: -3.7% v -2.0%e.

- Yield on 10-year JGB moved above BOJ ceiling of 0.5% at 0.53%, BOJ announced two unscheduled bond buying operations in session.

- IMF's Georgieva reiterated view that BOJ pursuing appropriate review of monetary policy stand but should keep policy accommodative.

Europe

- BOE’s Mann (hawk) stated that needed to do more on raising interest rates, not at risk yet of policy over tightening.

Americas

- IMF’s Georgieva stated that was not expecting to cut forecast for 2023 GDP global growth forecast of 2.7% (last WEO was made in Oct.

- Fed's Bostic (non-voter) stated that recent Dec inflation report was welcome news and might allow Fed to move more slowly. Would be comfortable moving at 25bps if conversations with business leaders were consistent with slowing inflation.

- Fed’s Bullard (Non-Voter) noted that inflation remained very high even following Dec CPI data. Remains well above Fed target but it was moderating. Q4 US GDP growth was looking better than expected.

- Fed's Barkin (non-voter) stated that made sense to steer more deliberately as Fed works to lower inflation. Favored slower path of rate hikes, possibly higher.

- Peru Central Bank (BCRP) raised Reference Rate by 25bps to 7.75% (as expected).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.56% at 452.74, FTSE +0.54% at 7,836.43, DAX +0.37% at 15,113.65, CAC-40 +0.68% at 7,023.43, IBEX-35 +0.85% at 8,903.50, FTSE MIB +0.38% at 25,833.00, SMI +0.33% at 11,325.60, S&P 500 Futures +0.01%].

Market Focal Points/Key Themes: European indices open generally higher and advanced into the green as the session progressed; sectors among those leading the way higher are consumer discretionary and technology; industrials and materials sectors inclined to the downside; RHI Magnesita acquires stake in Jinan New Mei; earnings expected in the upcoming US session include United Health, JPMorgan, Delta and Bank of America.

Equities

- Consumer discretionary: Air France-KLM [AF.FR] +7.0% (analyst action - UBS raises to buy), SAS [SAS.SE] +2.0% (reaches agreements with two additional lessors), Rational [RAA.DE] +2.0% (analyst action - Exane BNP raises to neutral), Kindred Group [KIND.SE] -17.0% (post close - prelim Q4), 888 Holdings [888.UK] -4.5% (trading update).

- Financials: Morses [MCL.UK] +70% (holder sells stake), NN Group [NN.NL] -1.0% (analyst action - HSBC cuts to hold).

- Healthcare: Novo Nordisk [NOVOB.DK] +2.0% (receives FDA approval of label update for Rybelsus (semaglutide)).

- Industrials: Hella [HLE.DE] +1.0% (reports H1 - affirms FY22/23 guidance), Dialight [DIA.UK] -19.0% (trading update).

- Technology: Tobii [TOBII.SE] +23.0% (post close - prelim Q4), United Internet [UTDI.DE] +3.0% (mulls unit IPO).

- Telecom: Vodafone [VOD.UK] +5.0% (said to hundreds of job cuts), Bouygues [EN.FR] -2.5% (analyst action - Morgan Stanley cuts to underweight).

Speakers

- ECB's Kazaks (Slovenia) stated that rates should rise into restrictive territory. Pushed back on speculation ECB would cut interest rates by the end of this year noting that it would take a deep recession for borrowing costs to be lowered.

- ECB's Vujcic (Croatia) stated that monetary tightening cycle was not over yet.

- Germany Economic Ministry noted that Q4 GDP likely stagnated.

- UK Chancellor of the Exchequer (Fin Min) Hunt stressed the need to stick with plan to cut inflation by half for 2023 and get the economy back to growth.

- China PBoC Vice Gov Xuan Changneng reiterated stance that monetary policy will be appropriate and that that China would not engage in flood-like stimulus.

Currencies/fixed income

- Policy divergence themes on the central bank front helping the USD continue its soft tone. Key G7 central banks are far from done with interest-rate hikes but the pace of tightening being recalibrated. Dealers believed that the US December inflation data likely sealed the deal on a shift to 25 basis point hikes in February.

- EUR/USD hovered around the 1.0850 area.

- USD/JPY hit fresh 7-month lows on mounting speculation the BOJ could further tweak its ultra-easy monetary policy. Yield on 10-year JGB recently moved above BOJ ceiling of 0.5% at 0.53%, BOJ announced two unscheduled bond buying operations during its Fri (Jan 13th) session. BOJ also announced it would conduct an additional JGB bond buying operation on Mon, Jan 16th.

Economic data

- (SE) Sweden Dec Maklarstatistik Housing Prices Y/Y: -10% v -8% prior; Apartment Prices Y/Y: -9% v -7% prior.

- (FI) Finland Dec CPI M/M: -0.1% v +1.2% prior; Y/Y: 9.1% v 9.1% prior.

- (FI) Finland Nov GDP Indicator Y/Y: -0.4% v +0.3% prior.

- (FI) Finland Nov Final Retail Sales Volume Y/Y: -3.0% v -3.1% prelim.

- (UK) Nov Monthly GDP M/M: +0.1% v -0.2%e; GDP 3M/3M: -0.3% v -0.3%e.

- (UK) Nov Industrial Production M/M: -0.2% v -0.2%e; Y/Y: -5.1% v -2.8%e.

- (UK) Nov Manufacturing Production M/M: -0.5% v -0.2%e; Y/Y: -5.9% v -4.8%e.

- (UK) Nov Construction Output M/M: 0.0% v -0.3%e; Y/Y: 4.0% v 5.4%e.

- (UK) Nov Index of Services M/M: +0.2% v -0.1%e; 3M/3M:-0.1 % v -0.3%e.

- (UK) Nov Visible Trade Balance: -£15.6B v -£14.9Be; Overall Trade Balance: -£1.8B v -£2.5Be.

- (SE) Sweden Dec CPI M/M: 2.1% v 1.8%e; Y/Y: 12.3% v 12.0%e ; CPI Level: 395.96 v 394.92e.

- (SE) Sweden Dec CPIF M/M: 1.9% v 1.6%e; Y/Y: 10.2% v 9.8%e.

- (SE) Sweden Dec CPIF (ex-energy) M/M:0.8 % v 0.7%e; Y/Y:8.4 % v 8.3%e.

- (TR) Turkey Central Bank TCMB Jan Inflation Expectation Survey: Next 12 Months: 30.4% v 34.9% prior.

- (RO) Romania Dec CPI M/M: 0.4% v 0.5%e; Y/Y: 16.4% v 16.5%e.

- (CN) Weekly Shanghai copper inventories (SHFE): 102.5K v 80.4K tons prior.

- (HU) Hungary Dec CPI M/M:1.9 % v 3.0%e; Y/Y: 24.5% v 25.8%e.

- (FR) France Dec Final CPI M/M: -0.1% v -0.1%e; Y/Y: 5.9% v 5.9%e; CPI (ex-tobacco) Index: 113.42 v 113.44e.

- (FR) France Dec Final CPI EU Harmonized M/M: -0.1% v -0.1% prelim; Y/Y: 6.7% v 6.7% prelim.

- (RU) Russia Narrow Money Supply w/e Dec 30th (RUB): 16.45T v 16.19T prior.

- (ES) Spain Dec Final CPI M/M: 0.2% v 0.3% prelim; Y/Y: 5.7% v 5.8% prelim.

- (ES) Spain Dec Final CPI EU Harmonized M/M: 0.0% v 0.1% prelim; Y/Y: 5.5% v 5.6% prelim.

- (ES) Spain Dec Final CPI Core M/M: 0.9% v 0.7% prior; Y/Y: 7.0% v 6.9% prelim.

- (DE) Germany 2022 Annual GDP NSA (unadj) Y/Y: 1.9% v 1.8%e; Budget deficit to Maastricht Criteria: % v -2.6%e.

- (IT) Italy Nov Industrial Production M/M: -0.3% v +0.4%e; Y/Y: -3.7% v -1.6% prior; Industrial Production NSA (unadj) Y/Y: -3.7% v -1.6% prior.

- (PL) Poland Dec Final CPI M/M: 0.1% v 0.2% prelim; Y/Y: 16.6 v 16.6% prelim.

- (CZ) Czech Nov Current Account (CZK): -39.3B v -26.0Be.

- (EU) Euro Zone Nov Industrial Production M/M: 1.0% v 0.5%e; Y/Y: 2.0% v 0.5%e.

- (EU) Euro Zone Nov Trade Balance (seasonally adj): -€15.2B v -€21.0Be; Trade Balance NSA (unadj): -€11.7B v -€26.5B prior.

Fixed income issuance

- (IN) India sold total INR300B vs. INR 300B indicated in 2025, 2029, 2036 and 2062 bonds.

- (ZA) South Africa sold total ZAR1.2B vs. ZAR1.2B indicated in I/L 2033, 2038 and 2050 Bonds.

Looking ahead

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

- 06:00 (IE) Ireland Dec Live Register Monthly Change: No est v +0.9K prior; Live Register Level: No est v 184.7K prior.

- 06:00 (UK) DMO to sell £4.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £2.0B respectively).

- 06:30 (IN) India Weekly Forex Reserve w/e Jan 6th: No est v $562.9B prior.

- 06:45 (US) Daily Libor Fixing.

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

- 07:00 (BR) Brazil Nov Economic Activity Index (Monthly GDP) M/M: -0.3%e v -0.1% prior; Y/Y: 2.3%e v 3.7% prior.

- 08:00 (PL) Poland Nov Current Account Balance: -€1.0Be v -€0.5B prior; Trade Balance: -€2.3Be v -€2.3B prior; Exports: €29.8Be v €28.7B prior; Imports: €31.9Be v €31.0B prior.

- 08:00 (RU) Russia Dec Official Reserve Assets: No est v $567.3B prior.

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

- 08:30 (US) Dec Import Price Index M/M: -0.9%e v -0.6% prior; Y/Y: 2.2%e v 2.7% prior; Import Price Index (ex- petroleum) M/M-0.3%e v -0.3% prior.

- 08:30 (US) Dec Export Price Index M/M: -0.7%e v -0.3% prior; Y/Y: 7.3%e v 6.3% prior.

- 09:15 (US) Fed's Williams.

- 10:00 (US) Jan Preliminary University of Michigan Confidence: 60.5e v 59.7 prior.

- 10:00 (US) Fed's Kashkari.

- 10:20 (US) Fed's Harker.

- 11:00 (RU) Russia Dec CPI M/M: 1.1%e v 0.4% prior; Y/Y: 12.2%e v 12.0% prior.

- 11:00 (RU) Russia Dec CPI Core M/M: No est v 0.2% prior; Y/Y: No est v 15.1% prior.

- 11:00 (EU) Potential sovereign ratings after European close (Fitch on Luxembourg and Poland Sovereign Ratings; Moody’s on Spain and Iceland Sovereign Ratings.

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