MNI US OPEN - 2023 Starts With Demand for Dollars

NEWS

MNI Sovereign Rating Review Calendar 2023

Please use the above link to access the indicative sovereign rating review schedule for 2023. Do note that the schedule is indicative only and ratings can be reviewed on an ad-hoc basis. The schedule may also be adjusted by the rating agencies during the year.

ECB (BBG): ECB Should Reconsider Higher Rates Policy, ABI Chair Tells Sole

The European Central Bank should reconsider its plan to raise borrowing costs again, according to the head of Italy banking association ABI Antonio Patuelli. “Energy prices in Europe have decreased, and not only as a consequence of a deal on a gas-price cap,” Patuelli said in an interview with Il Sole 24 Ore published Tuesday.

“Market speculation might be influenced right now by expectations on potential truce accord between Russia and Ukraine. In such a context, the ECB should revise its stated intention to proceed with another interest rate hike early this year.”

US/JAPAN (MNI): Trade Minister to Visit US 5-10 Jan to Discuss China Chip Curbs - Sankei

Japanese outlet Sankei reporting that Japanese Trade Minister Yasutoshi Nishimura will be in the US 5-10 January for discussions with officials regarding potential curbs on the export of semiconductor/microchip manufacturing equipment to China.

CHINA (BBG): China Vows to Hit Back at Nations Imposing Covid Travel Curbs

China said it would hit back at nations that placed Covid restrictions on its travelers for “political goals,” showing the coronavirus remains a politically sensitive subject in Beijing even as it lets the virus run rampant. “We believe that some countries’ entry restrictions targeting only China lack scientific basis and some excessive measures are unacceptable,” Foreign Ministry spokeswoman Mao Ning said Tuesday at a regular press briefing in Beijing.

CHINA (MNI): China Needs Yuan Asset Pool to Drive Currency Ambitions

MNI (Beijing) - China will need to offer more investment options for yuan holders, including expanding its offshore bond market, to support the expected increased use of the yuan in settling oil and gas trade with Gulf countries, but the internationalisation of the currency must be done at a gradual pace that doesn’t threaten the stability of the yuan or the financial system, advisers told MNI.

AUSTRALIA (MNI): Looming Supply-Side Shortages Risk to 2023 Growth

Treasurer Chalmers and business leaders are warning that the outbreak of Covid in China could be the biggest risk to Australia's economy this year, according to The Australian. They expect there to be supply-chain issues again, especially in the retail and building sectors. But on the positive side, Australia should benefit from the reopening of China.

DATA

UK FINAL DEC MANUF. PMI 45.3 (FLSH 44.7); NOV 46.5 (MNI)

GERMAN DATA (MNI): MNI Projects CPI to Cool to +8.55% y/y in December

• BAVARIA JAN CPI -1.1% M/M, +9.2% Y/Y
• SAXONY JAN CPI -0.6% M/M, +8.7% Y/Y
• BADEN WUERT JAN CPI -0.4% M/M, +8.5% Y/Y

We have now received state data that equates to 88.1% weighting of the national German CPI print. MNI calculations estimate that CPI fell -0.82% m/m, which would be equivalent to a +8.55% y/y increase. This is based on the published index values for available state data. The Bloomberg consensus is for inflation to remain more elevated, falling at a softer -0.6% m/m to hover around a higher +9.0% y/y. This implies a 1.0pp deceleration on the annualised figure, as German headline inflation distances itself further from the October peak of +10.4% y/y.

GERMANY DEC UE RATE (SA) 5.5% (FCST 5.6%); NOV 5.5%r (MNI)
GERMANY DEC JOB VACANCIES (SA) -7K; NOV -7K (MNI)
GERMANY DEC UE TOTAL (SA) 2.520MN; NOV 2.533r (MNI)
GERMANY DEC UE NET CHANGE (SA) -13K (FCST +15K); NOV +15Kr (MNI)

CHINA (MNI): China Dec Manufacturing PMI Falls to Near 3-Yr Low

MNI (Beijing) - China's Purchasing Managers' Index (PMI) slid by one point to 47.0 in December, deeper into the contractionary zone below 50 and hitting the lowest level since February 2020, as fresh outbreaks of Covid-19 disrupted factory activities, data from the National Bureau of Statistics on Saturday showed.

CHINA (MNI): Caixin China Dec Mfg PMI Fell to 3-Month Low

MNI (Beijing) - China's Caixin manufacturing PMI, affected by the impact of relaxed Covid control measures, contracted for a fifth consecutive month to 49.0 in December, marking the lowest reading in three months, the financial publisher said Tuesday.

FX SUMMARY: New Year Trade Starts in Earnest, Tips USD Higher

• Markets have resumed trade for 2023 in earnest, with markets seeking USD from the European open onwards. This leaves the greenback among the strongest currencies in G10 early Tuesday, with the JPY similarly strong. The firmer USD Index and JPY backdrop comes despite a better session for equity futures, as the EuroStoxx50 tops mid-December resistance on the way higher.
• AUD, NZD and EUR are among the poorest performers, with AUD/USD below the Dec29 low to near the 50-dma of 0.6662. Weakness through here opens 0.6629 and levels not seen since mid-November. Similarly, NZD/USD is through the 200-dma of 0.6232 to near first support of 0.6156.
• Regional Germany CPI releases continue, with the national inflation figure due at 1300GMT. Inflation is seen slowing to 10.2% for the Y/Y EU-harmonized release. There are no central bank speakers of note across G10, with the FOMC minutes from their December meeting not due until Wednesday.

BOND SUMMARY: Soft German CPI Figures Set Bullish Tone

Softer-than-expected German state CPI data have helped set a positive tone for Bunds and global FI more broadly in Tuesday's European morning session.

• With states representing just under 90% of the national weighting of CPI having reported, MNI estimates the national German reading to come in at 8.55% Y/Y, below the 9.0% consensus coming into the session.
• Accordingly, Gilt and US Treasury yields have fallen sharply in their first trading day of 2023.
• Curves have bull flattened.
• Fairly limited data left in the rest of the session beyond German CPI, with final Dec US PMI and Nov Construction spending on the docket.

Latest levels:

• Mar 10-Yr futures (TY) up 23/32 at 113-0.5 (L: 112-12.5 / H: 113-02)
• Mar Bund futures (RX) up 106 ticks at 135.38 (L: 133.79 / H: 135.55)
• Mar Gilt futures (G) up 160 ticks at 101.5 (L: 99.97 / H: 101.63)
• Italy / German 10-Yr spread 2.2bps tighter at 209.8bps

EQUITIES: Eurostoxx Futures Trade Through 3857.60 Key Short-Term Resistance

EUROSTOXX 50 futures remain above the December lows. The contract has topped resistance at the 20-day EMA which intersects at 3857.60 and marks a key short-term hurdle. A clear breach of this level would suggest potential for a stronger recovery. Gains are considered corrective - for now. A resumption of weakness and a break of 3753.00, the Dec 20 low, would resume the recent downtrend. The key bull trigger is 4043.00, Dec 13 high. S&P E-Minis trend signals remain bearish and the contract is trading closer to its recent lows. Short-term gains are considered corrective with resistance at 3926.25, the 50-day EMA. A clear break of this hurdle is required to suggest potential for a stronger recovery. On the downside, a break lower would confirm a resumption of the downtrend and open 3778.45, a Fibonacci retracement.

• In China the SHANGHAI closed higher by 27.254 pts or +0.88% at 3116.512 and the HANG SENG ended 363.88 pts higher or +1.84% at 20145.29.
• Across Europe, Germany's DAX trades higher by 168.69 pts or +1.2% at 14237.27, FTSE 100 higher by 151.07 pts or +2.03% at 7602.58, CAC 40 up 69.33 pts or +1.05% at 6664.09 and Euro Stoxx 50 up 48.64 pts or +1.26% at 3905.11.
• Dow Jones mini up 312 pts or +0.94% at 33602, S&P 500 mini up 39.25 pts or +1.02% at 3900.75, NASDAQ mini up 121.25 pts or +1.1% at 11143.75.

COMMODITIES: Gold Touches 1850.0 Handle, Targets 1856.6 June 2022 High Next

The short-term trend conditions in WTI futures are bullish. The contract has traded above both the 20- and 50-day EMA points and this suggests scope for a stronger short-term recovery. The focus is on the next key resistance at $83.27, the Dec 1 high. Clearance of this level, if seen, would strengthen bullish conditions. On the downside, key short-term support has been defined at $76.79, the Dec 29 low where a break would signal a top. Trend conditions in Gold remain bullish and the yellow metal has started the year on a firm note, clearing resistance and resuming its uptrend. The break higher signals scope for gains towards $1857.6 next, the Jun 16 high and $1896.5, the 61.8% retracement of the Mar - Sep bear leg. Moving average studies are in a bull mode position, highlighting current sentiment. Initial firm support is seen at $1795.00, the 20-day EMA.

• WTI Crude up $0.2 or +0.25% at $80.45
• Natural Gas down $0.38 or -8.54% at $4.091
• Gold spot up $15.61 or +0.86% at $1839.18
• Copper up $1.4 or +0.37% at $381.75
• Silver up $0.42 or +1.73% at $24.346
• Platinum up $11.34 or +1.06% at $1083.75