Waiting for Nonfarm Payrolls after JOLTS and ADP earlier in week

EU Mid-Market Update: Waiting for nonfarm payrolls after JOLTS and ADP earlier in week; Initial details emerge about US counter strike plan.

Notes/observations

- Risk on with equities higher and bond yields lower across Europe amid a lighter data session, giving traders a moment of pause ahead of US payrolls at 08:30 ET (13:30 GMT) and time to digest details of US data and Fed decision/comments earlier in the week.

- Very volatile trade seen in Shanghai Composite, after collapsing down 3.5% before bouncing 2% off lows. Analysts note interesting buying activity from rumored 'China National Team'; South Korean KOSPI outperformed after Jan CPI came in at slowest pace since July 2023 at 2.8%.

- US futures are firmer, particularly with Nasdaq100 following earnings after the close from Amazon, Apple and Meta.

- EU Earnings Recap: Danske Bank higher after profit beat, dividend and resumption of buyback; Caixabank little changed after small profit miss seen offsetting announced buyback; Electrolux down after bigger net loss and weak outlook based on shifting consumer sentiment.

- Upcoming Premarket Earnings: AON, BMY, CHTR, CI, CVX, EMN, GWW, IMO, LYB, PIPR, XOM.

- Asia closed mixed with KOSPI out-performing at +2.9%. EU indices are +0.2-0.9%. US futures are -0.1% to +1.0%. Gold -0.1%, DXY -0.1%; Commodity: Brent +0.7%, WTI +0.7%, TTF +0.3%; Crypto: BTC +2.0%, ETH +1.7%.

Asia

- South Korea Jan CPI M/M: 0.4% v 0.4%e; Y/Y: 2.8% v 2.9%e (slowest annualized pace since July 2023).

- China Gaming Regulator (NPPA) approves 32 imported online video games for 2024 licenses; Nintendo Switch said to be included - US financial press.

- China has more room to ease Monetary Policy [inline] - China press, citing analysts (update).

- China's Foreign Ministry spokesperson: No information to provide on whether China Pres Xi and the US Pres Biden will hold a phone conversation in coming months.

- China State Asset Regulator (SASAC): Urges state firms to step up investment in new firms.

- China Financial Regulator (NFRA): Working capital loans can not be used for dividend payments.

- Japan economic security law to set jail time for leaks - Japan press.

- Japan Econ Min Saito: To aid 7 startups with ¥8.4B to cover Google Cloud fees in order to boost generative AI development (GENIAC Accelerator Challenge) - Japan press.

- Japan PM Kishida: Govt supports Tokyo Stock Exchange measures to attract global investors - Japan press.

- Japan to introduce 6-month digital nomad visa - Japan press.

- Hong Kong said to plan to launch Crypto OTC rules consultation ‘very soon’ - press.

- India Food Sec Chopra: No plans to divert more sugar for ethanol manufacturing; All options remain open to prevent further surge in rice prices.

Global conflict/tensions

- Pentagon suggests Biden response will include increased intensity on Iranian proxies via several days of targeted strikes: Including both Iraq and Syria- US press.

- Iran President Raisi: Iran will not start a war but will respond strongly to anyone who bullies it.

- Iraq's pro-Iranian Al-Nujaba movement vows to keep up attacks on US troops until US forces withdraw from Iraq and Gaza war ends - press.

- Reportedly in Israeli strike at Damascus, Syria some Iranian Revolutionary Guard advisor was killed - press.

- South Korea says North Korea fired more cruise missiles - Press.

Europe

- German parliament set to pass 2024 budget later today; Reportedly the problem facing the three-party alliance is a gap of ~ €20B for the 2025 finance plan - press.

- Sweden Central Bank (Riksbank) comments on Swedish National Audit Office's report.

- Greece PM: Will extend agricultural diesel support for farmers due to protests.

Americas

- Fed Chair Powell to appear on '60 Minutes' this Sunday at 19:00ET; To talk about the potential timing of rate cuts, among other topics.

- Fed confirms to have raised rate on BTFP loans ahead of Mar 11th's expiration date [**Note: on Jan 24th, Fed raise the interest rate on new loans from BTFP for the remainder of its life].

- Reportedly Senate leaders will unveil the long-delayed bipartisan border security and foreign aid package as soon as today, Feb 2nd; Senate Majority Leader Schumer is expected to tee up a procedural vote for Wed, Feb 7th - Punchbowl.

- S&P affirms Mexico BBB+ sovereign rating; Outlook remains Stable.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.57% at 486.64, FTSE +0.33% at 7,655.37, DAX +0.77% at 16,988.97, CAC-40 +0.57% at 7,631.64, IBEX-35 +0.88% at 10,102.22, FTSE MIB +0.21% at 30,809.00, SMI +0.48% at 11,268.00, S&P 500 Futures +0.53%].

Market Focal Points/Key Themes: European indices open generally higher and remained bouyant through the early part of the session; sectors trending higher include real estate and industrials; among lagging sectors are energy and telecom; consumer discretionary sector supported following improved earnings from Electrolux; reportedly Nestle negotiating sale of French baby food unit to FnB; focus on release of US NFP later in the day; earnings expected in the upcoming Americas session include ExxonMobil, Cigna, Abbvie and Chevron.

Equities

- Consumer discretionary: Superdry [SDRY.UK] +51.5% (takeover rumours), Electrolux [ELUXB.SE] -4.5% (final earnings; no dividend; comments on recent environment), TomTom [TOM2.NL] +9.5% (earnings), H&M [HMB.SE] +1.0% (analyst actions).

- Financials: Danske Bank [DANSKE.DK] +5.5% (prelim results and guidance; buyback).

- Healthcare: Lonza Group [LONN.CH] +3.5% (analyst upgrade).

- Industrials: Husqvarna [HUSQB.SE] +6.5% (earnings), Konecranes [KCR.FI] +5.5% (earnings).

- Technology: SAP [SAP.DE] +2.0% (analyst upgrade).

- Utilties: E.ON [EOAN.DE] -1.5% (raises outlook).

Speakers

- South Korea Fin Min Choi: Will work to stabilize inflation at 2% level - Korea press.

- Japan Fin Min Suzuki: To adopt special measures for income tax for Noto region post-Ishikawa earthquake to support funding and ease pain of disaster - Japan press

-India Finance Sec Somanathan: Have options to deal with excessive bond inclusion inflows.

Currencies/fixed income

- Dollar direction waits for US data at 08:30 ET, with focus on Nonfarm payrolls. Muted moves elsewhere for EUR, GBP and JPY, amid a lack of catalysts and speakers. Caution on Sunday night and Mon morning trade after Fed Chair Powell expected to speak on ’60 minutes’ on Sunday, leading to potentially large move at reopening of exchanges.

Economic data

-(IT) Italy Jan Budget Balance: -€5.5B v -€0.5B prior.

-(US) Jan Total Vehicle Sales seasonally adj rate (SAAR): 15.00M v 15.70Me, v 15.83M m/m - Wards.

-(TH) Thailand Jan Foreign Reserves w/e Jan 26th: $221.2B v $221.2B prior.

-(FR) France Dec Industrial Production M/M: 1.1% v 0.2%e; Y/Y: +0.9% v -0.2%e; Manufacturing Production M/M: 1.2% v 0.2%e; Y/Y: +0.9% v -1.2% prior.

-(FR) France Dec YTD Budget Balance: -€173.3B v -€198.0B prior.

-(ES) Spain Jan Unemployment Change: +60.4K v -27.4K prior (biggest jump in one year).

-(RU) Russia Narrow Money Supply w/e Jan 26th (RUB): 18.03T v 18.18T prior.

-(NO) Norway Jan Unemployment Rate: 1.9% v 1.9%e; Unemployment Rate (unadj): 2.1% v 2.1%e.

-(UN) FAO Jan World Food Price Index: 118.0 v 118.5 prior.

Fixed income issuance

-Australia sells A$800M vs. A$800M indicated in 3.50% Dec 2034 bonds; Avg Yield: 3.979% v 4.2311% prior; bid-to-cover: 3.11x v 3.18x.

-Japan sells ¥5.6T v ¥5.6T indicated in 3-Month Bills; Avg Yield: -0.1440% v -0.1544% prior; bid-to-cover: 2.90x v 2.72x prior.

-India sells total INR390B vs. INR390B indicated in 2030, 2037, 2054 and 2063 bonds.

-South Africa sells total ZAR1.0B vs. ZAR1.0B indicated in 2033, 2043, 2050 I/L bonds.

-Sweden sells SEK2.6B vs SEK3.0B indicated in 2.25% May 2035 bonds; Avg Yield: 2.2400% v 2.2735% prior; bid-to-cover: 0.87x v 3.45x prior.

Looking ahead

- 06:00 (IN) India announces upcoming bill issuance (held on Wed).

- 06:00 (IE) Ireland Dec Live Register Monthly Change: No est v -0.5K prior; Live Register Level: No est v 173.9K prior.

- 06:00 (UK) DMO to sell £5.5B in 1-month, 3-month and 6-month bills (£0.5B, £2.5B and £2.5B respectively).

- 06:00 (BE) Belgium Debt Agency (BDA) to sell bonds through Ori Auction.

- 06:30 (IN) India Weekly Forex Reserve w/e Jan 26th: No est v $616.1B prior.

- 07:00 (BR) Brazil Dec Industrial Production M/M: 0.3%e v 0.5% prior; Y/Y: -0.5%e v +1.3% prior.

- 07:00 (MX) Mexico Nov Gross Fixed Investment M/M: -1.8%e v 1.9% prior; Y/Y: 19.8%e v 25.5% prior; Private Consumption Y/Y: 4.8%e v 5.2% prior.

- 07:00 (MX) Mexico Dec Leading Indicators M/M: No est v +0.01 prior.

- 07:00 (MX) Mexico Jan Vehicle Domestic Sales: No est v 143.0K prior.

- 07:15 (UK) BOE’s Pill (chief economist).

- 08:00 (SG) Singapore Jan Purchasing Managers Index (PMI): No est v 50.5 prior; Electronic Sector Index: No est v 50.2 prior.

- 08:30 (US) Jan Change in Nonfarm Payrolls: +185Ke v +216K prior; Change in Private Payrolls: +170Ke v +164K prior; Change in Manufacturing Payrolls: +3Ke v +6K prior.

- 08:30 (US) Jan Unemployment Rate: 3.8%e v 3.7% prior; Underemployment Rate: No est v 7.1% prior; Labor Force Participation Rate: 62.6%e v 62.5% prior.

- 08:30 (US) Jan Average Hourly Earnings M/M: 0.3%e v 0.4% prior; Y/Y: 4.1%e v 4.1% prior; Average Weekly Hours: 34.3e v 34.3 prior.

- 10:00 (US) Dec Factory Orders: 0.2%e v 2.6% prior; Factory Orders (ex-transportation): 0.2%e v 0.1% prior.

- 10:00 (US) Dec Final Durable Goods Orders: 0.0%e v 0.0% prelim; Durables (ex-transportation): 0.6%e v 0.6% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v 0.3% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v 0.1% prelim.

- 10:00 (US) Jan Final University of Michigan Confidence: 79.0e v 78.8 prelim.

- 11:00 (DK) Denmark Jan Foreign Reserves (DKK): No est v 612.7B prior.

- 12:00 (EU) Potential sovereign ratings after European close.

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