Waiting on Trump speech at Davos, likely delayed by few hours

EU Mid-Market Update: Waiting on Trump speech at Davos, likely delayed by few hours; Supreme Court hearing about Fed's Cook could be wildcard in session; Safe havens maintain tailwinds.

Notes/observations

- Flood of commentary from senior officials in both political and corporate spheres as Davos continues. Market is less volatile than yesterday however, as spotlight is pointed at Pres Trump’s special address later this afternoon. Originally planned for 08:30 ET but delayed after Airforce One had to return briefly due to technical issues. Sentiment is cautious until we hear Trump either doubling down on Greenland aggression via tariff pressure or whether he will back off. Either way, Europe has decided to re-strategize its geopolitical approach, aiming to be more self-sustainable in what they are calling ‘new world order’. NATO leadership highlighted strategic competition in the Arctic (Russia/China presence), while analysts also pointed to plausible “off-ramps” via negotiated resource/security arrangements.

- UK inflation surprised slightly higher (3.4% vs 3.3% exp; core 3.2%), reinforcing that disinflation remains uneven. Analysts’ commentary framed it as a bumpy path rather than a regime change, services inflation eased a touch, and a weakening labour market keeps the door open to further BoE cuts later this year, with March still “live” in some views. Front-end expectations remain dovish despite the CPI beat; 10y gilt yields fell ~3bp to ~4.43% after Tuesday’s spike (which was linked partly to the JGB shock). RBC flagged the May 2029 gilt as looking “cheap” into the 10:00 GMT auction, supporting demand Sterling (GBP) popped on the print, but strategists warn gains may fade if jobs data continue to soften.

- ECB / fiscal messaging: Lagarde used Davos to underline that central banks won’t always backstop unsustainable fiscal paths - distinguishing “productive/security” spending from debt that doesn’t sustain growth. Germany’s Nagel characterized policy as near neutral, but flagged tariff uncertainty as a potential spillover into policy.

- A separate volatility catalyst is the US Supreme Court hearing arguments related to whether Trump can fire Fed Governor Lisa Cook - raising the risk of renewed focus on central bank independence later in the US session.

- Any Rick Rieder’s potential Fed chairmanship would likely represent a paradigm shift toward a "Practitioner’s Fed" that replaces lagging econometric models with a technical focus on market liquidity and a targeted 3.00% neutral rate. This regime would potentially seek to resolve structural "housing-lock" by compressing mortgage spreads and utilizing the Federal Reserve balance sheet as a tactical tool to manage SOFR stability and Treasury issuance pressures.

- Bitcoin stayed heavy (sub-$90k, three-week lows overnight) alongside wider risk aversion.

- “Sell America” chatter re-emerged in some commentary (pressure across USD/bonds/stocks at points), but conditions looked more stabilized after Japan officials sought to calm their bond market.

- Asia closed mixed with KOSPI outperforming +0.5%. EU indices -0.2% to -0.8%. US futures +0.0-0.1%. Gold +2.1%, DXY +0.1%; Commodity: Brent -0.8%, WTI -0.7%; Crypto: BTC -2.2%, ETH -4.6%.

Asia

- South Korea Jan Exports 1-20 Days Y/Y: 14.9% v 6.8% prior; Imports Y/Y: 4.2% v 0.7% prior.

- Japan Fin Min Katayama stated that she wanted markets to calm down; Reiterated FX intervention remained an option that could take; Japan not conducting expansionary fiscal policy; and confident future bond auctions would be successful.

Global conflict/tensions

- Pentagon reportedly has not been asked to plan Greenland invasion.

Europe

- Germany reportedly to cut 2026 growth expectations from 1.3% to 1.0%.

- ECB Chief Lagarde noted that uncertainty was back, trust was being undermined; Trump threats were a movie we have seen before.

- UK Chancellor Reeves stated that did not plan any tax changes at Spring statement; We absolutely wanted to deescalate situation with Trump on Greenland; Confident our plan to grow UK economy was the right one. Joining EU customs union was not on the cards.

Americas

- Swiss-bound Air Force One carrying Pres Trump had to turn around back to DC after what the White House described as a ‘minor electrical issue’. Trump to head back again to Davos on another plane.

- Commerce Sec Lutnick stated that he believed US GDP would grow more than 5% this quarter; If Europe retaliated with tariffs, then we'll be back at a 'Tit for tat' situation.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.41% at 600.32, FTSE -0.19% at 10,107.60, DAX -0.59% at 24,544.32, CAC-40 -0.21% at 8,045.74, IBEX-35 -0.60% at 17,325.02, FTSE MIB -0.87% at 44,324.50, SMI -0.46% at 13,098.00, S&P 500 Futures +0.19%].

Market focal points/key themes: European indices opened generally lower and remained under pressure through the early part of the session; trade tensions continue to sap risk appetite after US markets had worst performance in months; outperforming sectors include materials and industrials; while financials and telecom among sectors leading the way lower; 1Spatial receives takeover offer from Vertigis; earnings expected in the upcoming US session include Halliburton, Johnson & Johnson, United Airlines and Travelers.

Equities

- Consumer discretionary: JD Sports Fashion [JD.UK] +1.5% (trading update).

- Consumer staples: Danone [BN.FR] -6.5% (broker commentary around an announcement by the Singapore Food Agency recalling additional infant formula products), Burberry Group [BRBY.UK] +5.5% (trading update).

- Technology: Atos [ATO.FR] +9.0% (prelim results).

- Materials: Rio Tinto [RIO.UK] +4.5% (production).

Speakers

- US Treasury Sec Bessent stated that free trade should be fair trade; Rebalancing must continue; Growth was the only way out of mountain of debt.

- ECB Chief Lagarde: Uncertainty was more serious; New world economic order must lead us to a deep review of how we organize European economy.

- ECB's Villeroy (France) stated that was time for Europe to wake up amid US threats.

- ECB’s Nagel (Germany): Monetary policy was in neutral territory; uncertainty on tariffs would spill over to policy.

- ECB's Kocher (Austria): Threatened tariffs would accelerate inflation in the US.

- SNB President Schlegel stated that could have negative inflation prints this year, which a few months of was not a problem; Geopolitics was main risk. CHF (franc) FX rate has been stable over last few months.

- Indonesia Central Bank Policy Statement noted that the decision to keep policy steady was in line with efforts to keep inflation within target and support growth. Decision also consistent with focus of maintaining FX stability. To continue to assess room for further rate cuts and increase stabilization efforts to guide IDR currency (Rupiah) stronger.

- IEA Monthly Oil Report (OMR) raised the 2026 global oil demand growth from 860K to 930K and reused the 2026 global oil supply growth from 2.4M to 2.5M.

Currencies/fixed income

- USD was steady despite the amount of speakers participating at Davos. No fresh tensions on the geopolitical front but markets await President Trump address at Davos later today.

- GBP/USD was little change following mixed UK inflation data. Marlets continued to price approx. 50bps more of cuts from BOE during 2026.

- USD/JPY hovering around the 158 area in relatively quiet trade. The 160 area remains key resistance in the wake of renewed verbal intervention comments from Japanese officials.

- Precious metals remain at record highs with gold and silver edging towards key psychological levels of $5,000/oz and $100/oz.

- Bond yields were initally lower during the session. 10-year German Bund yield last at 2.86%, France 10-year Oat at 3.52% and 10-year Gilt yield at 4.44% 10-year Treasury yield: 4.28%; 10-year JGB: 2.27%.

Economic data

- (UK) Dec CPI M/M: 0.4% v 0.4%e v; Y/Y: 3.4% v 3.3%e; CPI Core Y/Y: 3.2% v 3.3%e; CPI Services Y/Y: 4.5% v 4.6%e; CPIH Y/Y: 3.6% v 3.6%e.

- (UK) Dec RPI M/M: 0.7% v 0.6%e; Y/Y: 4.2% v 4.1%e; RPI (Ex-Mortgage Interest Payment Payments) Y/Y: 4.1% v 3.7% prior; Retail Price Index: 408.5 v 408.1e.

- (UK) Dec PPI Input M/M: -0.2% v -0.1%e; Y/Y: 0.8% v 1.0%e.

- (UK) Dec; PPI Output M/M:0.0 % v 0.1%e; Y/Y: 3.4% v 3.4%e.

- (ID) Indonesia Central Bank (BI) left the BI Rate unchanged at 4.75% (as expected).

- (CH) Swiss Dec M3 Money Supply Y/Y: 4.6% v 4.9% prior.

- (ZA) South Africa Dec CPI M/M: 0.2% v 0.2%e; Y/Y: 3.6% v 3.6%e.

- (ZA) South Africa Dec CPI Core M/M: 0.1% v 0.2%e; Y/Y: 3.3% v 3.4%e.

- (UK) Nov ONS House Price Index Y/Y: 2.5% v 1.9% prior.

Fixed income issuance

- (AT) Austria Debt Agency (AFFA) opened its book to sell EUR-denominated 10-year and 23-year RAGB bonds via syndicate.

- (FI) Finland opened book to sell EUR-denominated 15-year RFGB bonds via syndicate; guidance seen +50bps to mid-swaps.

- (CY) Cyprus opened its book to sell EUR-denominated 10-year bonds; guidance seen +52bps to mid-swaps.

- (IN) India sold total INR290B vs. INR290B indicated in 3-month, 6-month and 12-month bills.

- (SE) Sweden sold total SEK20.0B vs. SEK20.0B indicated in 3-month and 6-month Bills.

- (UK) DMO sold £4.75B in 4.0% May 2029 Gilts; Avg Yield: 3.821% v 3.855% prior; bid-to-cover: 3.66x v 3.10x prior; Tail: 0.3bps v 0.4bps prior.

Looking ahead

- (US) President Trump speech at Davos.

- (US) Supreme Court hearing on Fed’s Cook dismissal.

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

- 05:30 (DE) Germany to sell combined €2.0B in 2041 and 2056 Bunds.

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 12-Month Bills.

- 06:00 (IE) Ireland Nov Property Prices M/M: No est v 0.6% prior; Y/Y: No est v 7.3% prior.

- 06:00 (ZA) South Africa Nov Retail Sales M/M: No est v 0.9% prior; Y/Y: 2.7%e v 2.9% prior.

- 06:00 (UK) Jan CBI Industrial Trends Total Orders: -33e v -32 prior; Selling Prices: 16e v 19 prior; Business Optimism: No est v -31 prior.

- 06:00 (EU) European Union to sell combined €3.5B in 3-month, 6-month and 12-month bills.

- 06:00 (CZ) Czech Republic to sell combined CZK10.0B in 2034, 2035 and 2037 Bonds.

- 06:00 (RU) Russia to sell OFZ Bonds.

- 07:00 (US) MBA Mortgage Applications w/e Jan 16th: No est v 28.5% prior.

- 07:00 (MX) Mexico Nov Retail Sales M/M: 0.2%e v 0.4% prior; Y/Y: 2.8%e v 3.4% prior.

- 07:00 (UK) Weekly PM Question time in House.

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

- 08:30 (CA) Canada Dec Industrial Product Price M/M: 0.3%e v 0.9% prior; Raw Materials Price Index M/M: 0.6%e v 0.3% prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 10:00 (US) Oct Construction Spending M/M: 0.1%e v 0.1% prior.

- 10:00 (US) Dec Pending Home Sales M/M: -0.5%e v 3.3% prior; Y/Y: No est v -0.3% prior.

- 11:30 (US) Treasury to sell 17-Week Bills.

-11:45 (EU) ECB Chief Lagarde speaks on panel in Davos.

- 12:00 (CA) Canada to sell 30-year Bonds.

- 13:00 (US) Treasury to sell 20-Year Bond Reopening.

- 14:00 (AR) Argentina Nov Economic Activity Index (Monthly GDP) M/M: No est v -0.4% prior; Y/Y: No est v 3.2% prior.

- 16:00 (NZ) New Zealand Government 5-Month Financial Statements.

- 16:30 (US) Weekly API Crude Oil Inventories.

- 16:45 (NZ) New Zealand Dec Total Card Spending M/M: No est v 1.9% prior; Retail Card Spending M/M: No est v 1.2% prior.

- 16:45 (NZ) New Zealand Nov Net Migration: No est v 2.4K prior.

- 18:00 (KR) South Korea Q4 Advance GDP Q/Q (1st of 3 readings): 0.2%e v 1.3% prior; Y/Y: 1.9%e v 1.8% prior; Overall 2025 GDP Y/Y: 1.0%e v 2.0% prior.

- 18:50 (JP) Japan Dec Trade Balance: ¥361.3Be v ¥322.3B prior; Adjusted Trade Balance: ¥13.9Be v ¥62.9B prior; Exports Y/Y: 6.1%e v 6.1% prior; Imports Y/Y: 3.6%e v 1.3% prior.

- 19:30 (AU) Australia Dec Employment Change: 27.0Ke v -21.3K prior; Unemployment Rate: 4.3%e v 4.3% prior; Full Time Employment Change: No est v -56.5K prior; Part Time Employment Change: No est v 35.2K prior; Participation Rate 66.8%e v 66.7% prior.

- 22:30 (JP) Japan to sell 3-Month Bills.

- 23:00 (SG) Singapore to sell 12-month Bills.