MNI EUROPEAN OPEN: China Reopening Remains In Focus As Asia Digests U.S. Data

EXECUTIVE SUMMARY

• FED’S COOK SAYS INFLATION IS TOO HIGH, SOME SIGNS OF HOPE (MNI)
• FED'S MORE GRADUAL RATE HIKE PATH SHOULD LIMIT ECONOMIC HARM, BARKIN SAYS (RTRS)
• FED’S BOSTIC OPEN ON SIZE OF RATE HIKE AT NEXT MEETING (RTRS)
• ECB’S LANE SAYS PRICE PRESSURES WON’T VANISH IF ENERGY COSTS EASE (BBG)
• BOE’S MANN SAYS ENERGY PRICE CAPS MAY BE LIFTING OTHER INFLATION
• ‘NOT A GIVEN’ UK INFLATION WILL SLOW THIS YEAR, RISHI SUNAK SAYS (BBG)
• CHINA TIGHTENS LISTING GUIDELINES TO FUNNEL FUNDING TO STRATEGIC SECTORS (FT)
• CHINA WRAPS UP TWO-YEAR TECH CRACKDOWN, TOP OFFICIAL SAYS (CAIXIN)
• COLONIAL RESTARTS NEW YORK HARBOR-BOUND FUEL PIPE AFTER LEAK (BBG)

Fig. 1: U.S. Dollar Index Vs. USD/CNH

Source: MNI - Market News/Bloomberg

UK

BOE: Price caps on energy in response to a price surge following Russia’s invasion of Ukraine might be sparking inflation in other sectors by boosting consumer spending, Bank of England policy maker Catherine Mann said. (BBG)

INFLATION: UK Prime Minister Rishi Sunak said it’s “not a given” that inflation will slow this year and stressed the need for continued wage restraint in ongoing negotiations with striking sectors including the National Health Service and railways. (BBG)

ECONOMY: British households are only halfway through a two-year cost of living crisis, with average incomes likely to fall by more than £2,000, a leading thinktank has warned. (Guardian)

ECONOMY: Manufacturers have warned that high energy costs will force them to cut jobs and production this year, with some bosses saying political chaos is damaging UK competitiveness and making the country less attractive to foreign investors. (FT)

ECONOMY/POLITICS: Train drivers have been offered a 4% pay rise for two years in a row by the body which represents rail companies in a bid to end strike action. (BBC)

FISCAL/POLITICS: Prime Minister Rishi Sunak is facing calls from senior Conservatives, including members of his own government, to get a grip of the crisis in Britain’s National Health Service and make a more generous pay offer to end strikes by nurses and ambulance drivers. (BBG)

FISCAL/POLITICS: Striking health workers could get a significant pay boost from April - if staff will accept radical reforms to improve productivity, Steve Barclay has suggested in an olive branch to the unions. (Telegraph)

POLITICS/FISCAL: Rishi Sunak has opened the door to a pay deal for striking nurses when ministers meet health unions for talks on Monday after signalling for the first time a willingness to address demands for more help with the cost of living. (Guardian)

BREXIT: British foreign minister James Cleverly will on Monday seek to inject fresh momentum into talks with the EU on resolving disputes over a post-Brexit trade relationship when he hosts the European Commission Vice-President Maros Sefcovic in London. (RTRS)

EUROPE

ECB: European Central Bank Chief Economist Philip Lane said price pressures in the euro area will remain elevated even if surging energy costs are starting to ease. (BBG)

GERMANY: Germany has enough gas to get through the current winter season without the risk of a supply emergency, the head of the country's network regulator told weekly Bild am Sonntag, adding the focus was now on the 2023/24 period. (RTRS)

FRANCE: French President Emmanuel Macron’s plan to increase the retirement age to preserve the financial balance of the national pension system may get the backing of the Republican opposition party, its leader Eric Ciotti said. (BBG)

FRANCE: France's power suppliers have agreed to offer small businesses struggling with price rises a guaranteed tariff of 280 euros ($298) on average per megawatt hour, Finance Minister Bruno Le Maire said. (RTRS)

IRELAND: Ireland risks bigger than expected revenue losses under a global overhaul of corporate tax rules kicking in next year, according to a new government estimate. (BBG)

U.S.

FED: U.S. inflation remains “far too high” for the Federal Reserve’s comfort despite recent dips in headline and core figures, Governor Lisa Cook said Friday, although there is some reason to hope for improvement. (MNI)

FED: The Federal Reserve's move to smaller interest rate hike increments will help limit damage to the economy as the U.S. central bank works to bring high inflation down, Richmond Fed President Thomas Barkin said on Friday. (RTRS)

FED: Federal Reserve Bank of Atlanta President Raphael Bostic said the central bank still needs to keep raising interest rates despite cooler-than-expected wage data and indicated he’s open to a second straight half-point increase. (BBG)

FED: A long-serving Federal Reserve official set to retire from the central bank next week said he was hopeful milder inflation data would allow for the Fed to return to raising interest rates in more traditional quarter-percentage-point increments at its next meeting. Chicago Fed President Charles Evans said in an interview Thursday he penciled in the benchmark federal-funds rate peaking this year at a level between 5% and 5.25% in projections at last month's meeting of Fed officials. (WSJ)

FED: The Federal Reserve faces an "extremely tight labor market" and needs to bring supply and demand into balance to lower inflation this year, Kansas City Fed president Esther George said Friday. (MNI)

ECONOMY: The U.S. economy appears headed for a soft landing, with recent economic data pointing to an ongoing recovery, not a recession, White House economist Heather Boushey told Reuters on Friday. (RTRS)

ECONOMY: U.S. Treasury Secretary Yellen tweeted the following on Friday: "Today’s jobs report is further evidence of a strong labor market with broad-based employment gains, increased labor force participation, and the lowest unemployment rate in over a half-century." (MNI)

ECONOMY: A surprising contraction in U.S. services in December probably won't lead to a further decline next month, Institute for Supply Management chair Anthony Nieves told MNI Friday. (MNI)

FISCAL: The White House on Sunday said it wasn't planning to circumvent Congress in order to raise the U.S. debt ceiling, a regular flashpoint in times of divided government. (RTRS)

FISCAL: A conservative Republican at the center of the tortured effort to elect House Speaker Kevin McCarthy says he’d welcome a hard-fought battle over the US debt ceiling, but said both parties should start negotiating terms for the increase now so it doesn’t go down to the wire. (BBG)

POLITICS: Republican Kevin McCarthy was elected speaker of the U.S. House of Representatives early on Saturday, after making extensive concessions to right-wing hardliners that raised questions about the party's ability to govern. (RTRS)

TSYS: The Federal Reserve will be the backstop of the Treasury market this year to alleviate dysfunction resulting from its increasing size and the retreat of regular buyers. That’s the view of Credit Suisse Group AG analyst Zoltan Pozsar, who in a note to clients Friday predicted the Fed will restart asset purchases during the summer of 2023. (BBG)

EQUITIES: Hundreds of Tesla owners gathered at the automaker's showrooms and distribution centres in China over the weekend, demanding rebates and credit after sudden price cuts they said meant they had overpaid for electric cars they bought earlier. (RTRS)

BANKS: Goldman Sachs Group Inc. is embarking on one of its biggest round of job cuts ever as it locks in on a plan to eliminate about 3,200 positions this week, with the bank’s leadership going deeper than rivals to shed jobs. (BBG)

OTHER

CHINA/TAIWAN: China's military said it had carried out combat drills around Taiwan on Sunday, the second such exercises in less than a month, with the island's defence ministry reporting it detected 57 Chinese aircraft. (RTRS)

EU/CHINA/TAIWAN: A delegation led by Marie-Agnes Strack-Zimmermann, chair of the Bundestag’s defense committee, and Johannes Vogel, deputy chairman of the Free Democratic Party, will visit Taiwan from Jan. 9 to 12, according to a statement from the Foreign Ministry in Taipei. (BBG)

GEOPOLITICS: The US and Japanese armed forces are rapidly integrating their command structure and scaling up combined operations as Washington and its Asian allies prepare for a possible conflict with China such as a war over Taiwan, according to the top Marine Corps general in Japan. (FT)

GEOPOLITICS: Japanese defense officials are weighing a plan to build dozens of ammunition and weapons depots on far-flung southwestern islands in preparation for a potential Taiwan crisis, Nikkei has learned. (Nikkei)

GEOPOLITICS: The US and Japan will issue a joint statement on security following Prime Minister Fumio Kishida’s summit with President Joe Biden in Washington this week, the Yomiuri newspaper said. (BBG)

NATO: Sweden has said Turkey is demanding concessions that Stockholm cannot give to approve its application to join Nato as the prime minister insisted the country had done all it could to meet Ankara’s concerns. (FT)

CORONAVIRUS: Countries from around the world are stepping up measures to shield their populations from the Covid-19 outbreak in China that comes as a more transmissible variant of the virus boosts infections globally. (BBG)

JAPAN: Japanese Prime Minister Fumio Kishida said careful explanation and communication with markets would be part of consideration on monetary policy, when asked about possible future changes in the Bank of Japan’s ultra-loose policy. (BBG)

AUSTRALIA: Labor want a more ‘sustainable footing’ for its second budget, with a fresh approach towards defence, debt, the NDIS and aged care being prioritised. (The Australian)

USMCA: Prime Minister Justin Trudeau and U.S. President Joe Biden are set to meet just before the start of a summit of North American leaders next week in Mexico City. (CBC)

USMCA: Canada and the United States are going to argue at a North American leaders' summit next week that resolving a dispute over measures that favor Mexican energy companies would help draw more foreign investment to Mexico, Prime Minister Justin Trudeau said on Friday. (RTRS)

BRAZIL: Police regained control of Brazil’s main government complex on Sunday evening after thousands of supporters of rightwing former president Jair Bolsonaro stormed the Congress, supreme court and presidential palace. (FT)

BRAZIL: Former Brazilian president and conservative firebrand Jair Bolsonaro spoke out against supporters who invaded and vandalized the government’s top institutions on Sunday. (BBG)

BRAZIL: Petroleo Brasileiro SA stepped up security at its refineries, in a cautionary measure after threats against assets including Brazil's biggest such fuel plant, two company officials said, speaking on condition of anonymity. (RTRS)

BRAZIL: Brazil’s state-controlled oil giant Petrobras should abandon planned divestments in refining and natural gas and expand in those areas instead, according to a detailed report from President Luiz Inacio Lula da Silva’s transition team. (BBG)

RUSSIA: President Volodymyr Zelenskiy said Ukraine is sending reinforcements to defend two front-line towns in the Donetsk region that he called among the bloodiest in the fight against Russia’s invasion. Earlier Sunday, Kyiv rejected as “nonsense” a Russian government claim that Kremlin troops killed 600 Ukrainian soldiers in an overnight strike. (BBG)

RUSSIA: The Biden administration is sending a $2.85 billion package of military hardware to Ukraine, supplying the sort of powerful weapons that it had previously withheld as the country looks to press a counteroffensive against Russia. (BBG)

SOUTH AFRICA: South Africa’s governing African National Congress is intent on turning itself around and addressing voter disillusionment over poor government services and high levels of crime, poverty and unemployment, President Cyril Ramaphosa said. (BBG)

WORLD BANK: The World Bank is concerned that “further adverse shocks” could push the global economy into recession in 2023, with small states especially vulnerable. (BBG)

ENERGY: Iran cut gas exports to Turkey by 70% due to a fault ahead of peak winter demand, Turkey’s state-owned grid operator said. (BBG)

OIL: The Biden administration is delaying the replenishment of the nation’s emergency oil reserve after deciding the offers it received were either too expensive or didn’t meet the required specifications, according to people familiar with the matter. (BBG)

OIL: Colonial Pipeline Co. resumed service to a vital conduit that supplies fuel to the US Northeast, fixing a leak from last week that the company took more than a day longer than expected to repair. (BBG)

OIL: Monthly wage growth in the US shale patch slowed to less than 1% in November as explorers pulled back activity in an effort to manage record costs in the oilfield. (BBG)

CHINA

CORONAVIRUS: The State Council joint prevention and control mechanism against COVID-19 issued the 10th edition of the COVID-19 prevention and control protocol on Saturday in accordance to the decision of downgrading the epidemic management from Class A to Class B, highlighting the monitoring of mutated variants and early warning as well as protection of key groups by preventing severe cases. (Global Times)

CORONAVIRUS: China’s long-awaited border reopening — the final step in its dismantling of Covid Zero — is set to spark a homecoming rush for many diaspora, though a full rebound in travel is likely to take longer. (BBG)

CORONAVIRUS: The likelihood of a second or third wave of Covid infections during the Lunar New Year holidays this month is small because outbreaks in many provinces have peaked, Liang Wannian, a senior health official overseeing China’s epidemic response, said in an interview with state broadcaster CCTV. (BBG)

CORONAVIRUS: The rate of Covid-19 cases in big cities has peaked, with the rate of people requiring emergency care showing signs of decline, and those needing intensive care plateauing, according to Jiao Yahui, Director of the Department of Medical Administration of the National Health Commission. (MNI)

CORONAVIRUS: China's Health Security Administration said on Sunday that talks to include Pfizer's Paxlovid in the latest drug list for basic state health insurance did not succeed. (RTRS)

ECONOMY: Six Chinese cities have announced GDP growth targets for next year, with most between 5.5% and 7%, on confidence that changes to Covid policies will lead to economic recovery, Securities Daily reported. (BBG)

PBOC: China’s economic growth will return to its “normal” path as Beijing provides more financial support to households and private companies to help them recover after the nation ended its Covid Zero policy. (BBG)

PBOC: The People’s Bank of China will ensure ample liquidity and guide down borrowing costs early in 2023 as the economy continues to struggle after a likely slowdown in fourth quarter GDP amid a nationwide surge in Covid infections, economists and analysts said. (MNI)

YUAN: Overseas capital flows will continue to rebound and the yuan will continue to strengthen in 2023, according to Guo Shuqing, Secretary of the Party Committee of the People's Bank of China (the PBOC) and Chairman of the Banking and Insurance Regulatory Commission. (MNI)

YUAN: China’s foreign exchange reserves will remain stable in 2023 despite weakening in the world economy and volatile international financial markets, according to Guan Tao, a former official at the State Administration of Foreign Exchange. (MNI)

POLICY/EQUITIES: China’s more than two-year clampdown on its sprawling internet sector is coming to an end, according to a top central bank official. (Caixin)

POLICY/EQUITIES: China’s stock regulator is set to stop allowing local companies in certain sectors to list on the country’s main stock exchanges as Beijing works to channel funding into strategic industries, according to two capital markets bankers familiar with the matter. (FT)

POLICY/EQUITIES: Chinese billionaire Jack Ma is to relinquish control of Ant Group, the fintech company revealed on Saturday, as its founder continues his withdrawal from his online businesses following Beijing’s tech crackdown. (FT)

CHINA MARKETS

PBOC NET DRAINS CNY41 BILLION VIA OMOS MONDAY

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Flag	Country	Event
09/01/2023	0645/0745	**		CH	Unemployment
09/01/2023	0700/0800	**		DE	Industrial Production
09/01/2023	0745/0845	*		FR	Foreign Trade
09/01/2023	1000/1100	**		EU	Unemployment
09/01/2023	-			UK	House of Commons Returns
09/01/2023	1330/0830	*		CA	Building Permits
09/01/2023	1600/1100	**		US	NY Fed survey of consumer expectations
09/01/2023	1630/1130	*		US	US Treasury Auction Result for 13 Week Bill
09/01/2023	1630/1130	*		US	US Treasury Auction Result for 26 Week Bill
09/01/2023	1730/1230			US	Atlanta Fed's Raphael Bostic
09/01/2023	2000/1500	*		US	Consumer Credit