US futures rise to ATH, Taiwan export orders down heavily

EU Mid-Market Update: US futures rise to ATH; Taiwan export orders down heavily; DeSantis moves out the way for Trump; Japan spring wage talks appear to kick off.

Notes/observations

- Risk on sentiment for EU equities follows a strong US session on Fri. Despite hawkish rhetoric last week at Davos, with officials playing down rate cut expectations, the market is focusing on the hard data that continues to show declining inflation. S&P500 and Nasdaq100 breaking to record highs.

- In US politics, ahead of New Hampshire primary on Tues, Republican Pres candidate Ron DeSantis pulled out of the race, following Chris Christie and Vivek Ramaswamy in recent weeks. Ex-Pres Trump now seen to have no real republican challengers into the 2024 campaign.

- No geopolitical change over the weekend. As time progresses, in the absence of escalation, the Middle East/Red Sea conflicts will fade from forefront of market attention, such as Ukraine/Russia war did, but escalations are seen to be likely in the near-term, with shipping a key vulnerability to trade.

- Asia closed mixed with Shanghai Composite under-performing -2.7%. EU indices are +0.1-0.7%. US futures are +0.1-0.5%. Gold -0.4%, DXY -0.1%; Commodity: Brent -0.1%, WTI -0.1%, TTF -5.2%; Crypto: BTC -2.3%, ETH -3.5%.

Asia

- China PBoC Monthly Loan Prime Setting (LPR) left both the 1-year and 5-year rates unchanged at 3.45% and 4.20% respectively (as expected).

- China cabinet saihd to have instructed heavily indebted local govts to delay or halt some state-funded infrastructure projects; Cites local govts' large debts and weaker growth prospects.

- Canadian ratings agency DBRS affirmed Australia sovereign rating at AAA; trend Stable.

Global conflict/tensions

- Pres Biden stated that he discussed a two-state solution with Israel PM Netanyahu and he was not opposed to it.

- US, Egypt and Qatar said to be pushing Israel and Hamas to join a phased diplomatic process that would start with a release of hostages.

- Netanyahu rejected Hamas conditions for Israeli hostage deal.

- US government said to consider stepping up actions against the Houthis in Yemen.

- Sea-Intelligence (Shipping data analyst firm) noted supply chain data known in the industry as "vessel capacity" showed the second largest drop in recent years.

Europe

- BOE facing growing calls to drop language on rate hikes. BOE current hawkish stance said to be out of step with both the economic outlook and peers.

Americas

- Fed's Daly (voter in 2024) noted that the US economy was in a really good place and could start to be more patient and see what the Fed needs to do next.

- Presidential candidate Ron DeSantis dropped out of race and endorsed Trump.

- Treasury Sec Yellen said to plan ‘major’ economic address on Thurs (Jan 25th). in Chicago (expected to cover the 'Investing in America' agenda).

Scientific discoveries

-Defense Min Shapps unveiled UK military 'DragonFire' laser with successful test shooting down aerial targets noting the laser is attachable to warships.

-Landmark test of beaming solar power to Earth from a satellite has concluded successfully after a year-long mission, demonstrating the feasibility of one day harvesting the Sun’s energy and transmitting it wirelessly back to Earth on a commercial scale.

- In 2026, Iceland’s Krafla Magma Testbed project plans to drill into a volcano’s magma chamber, seeking to tap into its super-hot fumes to generate geothermal energy at a scale that has never been attempted before.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.56% at 471.86, FTSE +0.20% at 7,474.07, DAX +0.48% at 16,634.83, CAC-40 +0.55% at 7,412.17, IBEX-35 +0.67% at 9,924.62, FTSE MIB -0.30% at 30,258.00, SMI +0.72% at 11,230.80, S&P 500 Futures +0.30%].

Market Focal Points/Key Themes: European indices open higher across the board, but moderated the gains in early trading; among sectors leading the way higher are technology and financials; lagging sectors include utilities and energy; oil & gas subsector under pressure following retracement in Brent price; Kindred receives takeover offer from La Francaise des Jeux; Sandoz acquires CIMERLI unit from Coherus; Credit Agricole takes 7% stake in Worldline; reportedly Telefonica acquires 13% of Telefonica Deutschland’s shares; Compass Group acquires CH&CO; BW Offshore divests its stake in BW Energy; earnings expected in the upcoming US session include United Airlines and Bank of Hawaii.

Equities

- Consumer discretionary: Kindred Group [KIND.SE] +16.5% (trading update/La Française des Jeux SA offer at SEK130/shr).

- Financials: Hypoport [HYQ.DE] +8.5% (Q4 transaction volumes).

- Industrials: Trifast [TRI.UK] -13.5% (trading update noting more challenging environment in 2024; cut jobs), Belimo [BEAN.CH] -8.5% (FY23 revenue).

- Technology: Infineon Technologies [IFX.DE] +1.5% (Taiwan export orders; momentum from US Friday session), ASML [ASML.NL] +2.5% (analyst upgrade; momentum from US Friday session), Worldline [WLN.FR] +5.5% (Credit Agricole acquires 7% stake).

- Telecom: Telefonica Deutschland [O2D.DE] -0.5% (Telefonica sells stake).

Speakers

- Japan PM Kishida noted that wage growth was outpacing prices as needed for virtuous cycle. Would like to ask firms for larger pay rises this year.

- Japan Econ Min Yoshitaka Shindo would not attend the upcoming BOJ policy meeting on Tue, Jan 23rd.

- China said to review tariffs on chemical ortho-dichlorobenzene from Japan and India.

Currencies/fixed income

- FX markets were quiet once again as the trading week begun with focus on key monetary policy decisions during the week (BOJ on Tues, ECB on Thurs).

- EUR/USD holding below the 1.09. Dealers will look for clues as to the 1st ECB interest-rate cut hints.

- USD/JPY was holding above the 148 handle ahead of BOJ rate decision. BOJ is expected to keep its policy steady at the Jan meeting.

Economic data

- (NL) Netherlands Jan Consumer Confidence: -28 v -29 prior.

- (MY) Malaysia mid-Jan Foreign Reserves: $115.1B v $113.5B prior.

- (FR) France Dec Retail Sales Y/Y: -2.4% v -3.7% prior.

- (CH) Swiss Dec M3 Money Supply Y/Y: -2.0% v -3.1% prior.

- (TW) Taiwan Dec Unemployment Rate: 3.4% v 3.4%e.

- (TW) Taiwan Dec Export Orders Y/Y: -16.0% v -1.0%e.

- (HK) Hong Kong Dec CPI Composite Y/Y: 2.4% v 2.4%e.

- (PL) Poland Dec Sold Industrial Output M/M: -9.8% v -10.5%e; Y/Y: -3.9% v -5.8%e.

- (PL) Poland Dec Construction Output Y/Y: 14.0% v 4.9%e.

- (PL) Poland Dec Employment M/M: 0.0% v 0.0%e; Y/Y: -0.1% v -0.2%e.

- (PL) Poland Dec Average Gross Wages M/M: 4.7% v 7.1%e; Y/Y: 9.6% v 12.1%e.

- (PL) Poland Dec Real Retail Sales M/M: 11.0% v 14.8%e; Y/Y: -2.3% v +1.9%e; Retail Sales (current prices) Y/Y: 0.5% v 4.9%e.

- (CH) Swiss weekly Total Sight Deposits (CHF): 473.4B v 476.3B prior; Domestic Sight Deposits: 464.4B v 467.8B prior.

- (BE) Belgium Jan Consumer Confidence: -2 v 0 prior.

Fixed income issuance

- None seen.

Looking ahead

- (MX) Mexico CitiBanamex Survey of Economists.

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

- 05:30 (DE) Germany to sell combined €4.0B in 3-month and 9-month BuBills.

- 06:00 (IL) Israel Nov Manufacturing Production M/M: No est v -5.2% prior.

- 06:00 (IL) Israel to sell combined ILS3.45B in 2026, 2028, 2029, 2031, 2035, 2038 and 2052 bonds.

- 06:00 (RO) Romania to sell RON500M in 7.9% Feb 2038 Bonds.

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

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

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

- 09:00 (EU) ECB chief Lagarde.

- 09:00 (FR) France Debt Agency (AFT) to sell €4.8-6.4B in 3-month, 6-month and 12-month bills.

- 10:00 (US) Dec Leading Index: -0.3%e v -0.5% prior.

- 10:00 (CO) Colombia Nov Trade Balance: -$0.7Be v -$1.0B prior; Total Imports: $5.1Be v $5.4B prior.

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

- 16:00 (KR) South Korea Dec PPI Y/Y: No est v 0.6% prior.

- 16:30 (NZ) New Zealand Dec Performance of Services Index: No est v 51.2 prior.

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 84.4 prior.

- 19:30 (AU) Australia Dec NAB Business Confidence: No est v -9 prior; Business Conditions: No est v 9 prior.

- 21:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision.

- 21:30 (KR) South Korea to sell KRW700B in 20-year Bonds; Avg Yield: % v 3.260% prior; Bid to cover: x v 2.89x prior.

- (JP) Bank of Japan (BOJ) Interest Rate Decision: Expected to leave Interest Rate on Excess Reserves (IOER) and Yield Curve Control (YCC) unchanged.

- (JP) BOJ Quarterly Outlook for Economic Activity and Prices.