MNI US OPEN - Blinken Seeks to Cool Tensions During Meetings With Israeli Officials

NEWS

MNI US EARNINGS SCHEDULE - Big Banks Kick Off Q1, With Mixed Performance Expected

Big banks kick off quarterly earnings cycle, with Bank of America, JP Morgan, Wells Fargo and Citigroup due Friday. Goldman Sachs, Morgan Stanley follow in the following week. Mixed performance expected among financials, with volatile markets countered by slowing interest income growth.

US (BBG): US Reviews LNG Export Approvals on Green Push, Politico Says

The US is reviewing criteria for approving new liquefied natural gas export projects, which could slow an expansion in supply from the world’s biggest shipper of the super-chilled fuel, Politico reported. The Department of Energy, which issues export permits, is checking whether it’s properly accounting for the climate impact of proposed plants, Politico reported, citing an unidentified senior US administration official. President Joe Biden has been under pressure to apply more scrutiny to fossil fuel projects.

US/MIDEAST (MNI): Blinken Meets w/Israeli Officials; 3 Hezbollah Members Killed in Strike

US Secretary of State Anthony Blinken has landed in Tel Aviv for talks with Israeli gov't officials as he seeks to calm tensions in the region. Alongside Israeli President Isaac Herzog, Blinken stated that "There is lots to talk about, in particular the way forward." Talk of what is to come likely a response to Israeli Defence Minister Yoav Gallant's comments last week outlining a potential plan for Gaza post-war in which Israel would retain overall security control of the strip.

ECB (BBG): ECB Decisions Could Come Before May, Centeno Tells Econostream

The European Central Bank doesn’t necessarily need full insight into wage developments in the coming months to set monetary policy, Governing Council member Mario Centeno said. “I don’t think we have to wait until May to make decisions,” Centeno told Econostream Media in an interview. “I don’t see any sign that second-round effects on wages have materialized or will materialize or that wages will put additional pressure on prices.”

ECB (MNI): ECB Says Tightening Effect Likely Intensified in H2

The effects of European Central Bank monetary tightening intensified in the first half of 2023 and are “likely to have increased further in the second half” of the year, the ECB said on Tuesday in a pre-release of its economic bulletin, issued as calls for easier policy build within the Governing Council. Tightening may have increased in H2 “as a result of the significant lag in the reaction of the services sector”, the bulletin said.

GLOBAL (MNI): Geopolitical Shocks Likely Weigh on Oil Price - ECB

Global geopolitical shocks tend to decrease oil prices as falling global activity out-weights risks to commodity supply, according to a note in the ECB's January Monthly Bulletin, although they accept "not all geopolitical shocks are alike". Shocks originating from important oil producers can increase oil prices by between 0.8 and 1.5% on impact, the report notes. According to the note, price pressures on oil arising from geopolitical shocks are typically short-lived and disappear after one quarter.

FRANCE (MNI): Macron Looks to Bolster Euro Parliament Campaign w/New PM & Reshuffle

Re resignation of PM Elisabeth Borne on the evening of 8 Jan comes as President Emmanuel Macron seeks to bolster the prospects of his centrist Renaissance -led alliance ahead of the 9 June European Parliament elections. French media reports suggest that Education Minister Gabriel Attal is set to be named as Borne's successor. At 34 years of age, Attal would be the youngest prime minister of the French Fifth Republic.

CHINA (MNI): China Trade to Hit CNY44-45 Trillion in 2024

MNI (Beijing) China’s international trade will rebound in 2024 despite the strengthening yuan and Red Sea shipping disruptions, as the world economy stabilises, geo-political tensions cool, and Beijing diversifies its trading partnerships, a policy advisor told MNI. Stabilised global growth and increased custom with BRICS, Belt and Road Initiative (BRI) and ASEAN countries will push trade near CNY44-45 trillion with a CNY5-6 trillion trade surplus, said Yu Miaojie, president at Liaoning University, deputy to the National People's Congress and trade policy consultant to the Ministry of Commerce.

CHINA (BBG): Xi Vows ‘No Mercy’ as He Deepens Graft Fight in Key Sectors

President Xi Jinping vowed to deepen an anti-corruption campaign spanning several critical sectors, a move that risks freezing spooked decision makers and hampering China’s fragile economic recovery. The Chinese leader singled out the finance, energy, pharmaceutical and infrastructure sectors, as well as state-owned enterprises, as targets of fresh scrutiny at a meeting of the Communist Party’s anti-graft agency on Monday, according to state media.

JAPAN (BBG): Japan’s Nikkei 225 Climbs Back to Highest Since 1990 Bubble Era

Japan’s Nikkei 225 Stock Average climbed as a rally in technology companies helped push the blue-chip gauge to its highest level since the nation’s bubble economy era more than three decades ago. The gauge rose 1.2% to close at 33,763.18 in Tokyo, a level unseen since March 1990, after the Nasdaq 100 Index rebounded from last week’s slump and Treasury yields dropped. The benchmark Topix index, which some funds prefer to follow because it’s more comprehensive, gained 0.8%.

BOK (MNI): Board to Consider Hold at 3.5%, Policy in Focus

The Bank of Korea monetary policy board will strongly consider holding its policy rate at 3.50% when it meets Thursday as the bank continues to focus on the slower economy and weak domestic demand. A hold will represent the central bank's eighth straight decision to leave its policy rate unchanged, following December's call. Attention will focus on whether BOK Governor Rhee Chang-yong downplays his restrictive policy stance amid growing concern over the stability of the nation’s financial system.

SAUDI ARABIA (BBG): Saudi Arabia Issues $12 Billion Bond as EM Nations Load Up

Saudi Arabia sold $12 billion of bonds — its largest deal since 2017 — amid a record start to a year for emerging-market countries. The kingdom added to the almost $25 billion of bonds that developing nations had sold since the start of the year, the biggest of those being a $7.5 billion offering from Mexico. The Saudi deal is equivalent to more than half the fiscal deficit the government is projecting for this year.

MNI NBP PREVIEW - JANUARY 2024: Waiting to See

The consensus view is that the National Bank of Poland (NBP) will start the new year with another on-hold decision, despite a larger-than-expected decline in headline inflation rate in December. Although the extension of certain relief measures by the new government opens up room for continued disinflation, there are clear risks ahead of which the increasingly cautious Monetary Policy Council (MPC) is probably cognisant. The next turning point for the NBP could be the March meeting, when policymakers will receive an updated macro projection, accounting for fiscal and regulatory decisions of the new administration.

DATA

GERMAN DATA (MNI): 6th Consecutive Fall in Industrial Production Amid Broader Weakness

• GERMANY NOV IND PROD -0.7% M/M

German Industrial Production missed expectations in November at -4.8% Y/Y (working day adjusted, vs -4.0% survey and -3.4% prior revised from -3.5%) and -0.7% M/M (seasonally adjusted, vs +0.3% cons and -0.3% prior, revised from-0.4%). This marked the sixth monthly decline in a row. The less volatile 3M/3M measure also paints a weak picture at -1.9%, the sixth month in a row below -1%.

EUROZONE NOV UNEMPLOYMENT RATE 6.4% (MNI)

UK BRC DEC BY VALUE SHOP SALES LFL +1.9% YY, TOTAL +1.7% YY (MNI)

JAPAN DATA (MNI): Tokyo CPI Close to Expectations, Core-Core Moving Lower Gradually

• JAPAN DEC TOKYO CORE CPI +2.1% Y/Y; NOV +2.3%
• JAPAN DEC TOKYO CORE-CORE CPI +3.5% Y/Y; NOV +3.6%
• JAPAN NOV HOUSEHOLD SPENDING -2.9% Y/Y; OCT -2.5%
• JAPAN NOV HOUSEHOLD SPENDING -1.0% M/M; OCT -0.1%

Japan Dec Tokyo CPI figures were close to expectations. Headline CPI printed at 2.4%y/y (against a 2.5% forecast, and 2.7% prior). The ex fresh food category was 2.1% y/y in line with forecasts (2.3% prior). The ex fresh food, energy index rose 3.5% y/y, also in line with expectations (prior was 3.6%). In m/m terms, headline inflation was flat (versus -0.2% in Nov). The core measures were both +0.2% m/m, with goods +0.3% and services inflation flat. The measure which excludes all food and energy (non seasonally adjusted) rose 0.1% m/m.

AUSTRALIA DATA (MNI): Nov Retail Sales Surge on Black Friday Sales

• AUSTRALIA NOV RETAIL SALES +2% M/M

Nov retail sales comfortably beat expectations. The 2.0% m/m rise compared with a +1.2% forecast and a revised -0.4% fall in October. In y/y terms spending is up 2.2%, so only slightly up from recent lows. The bounce in Nov was heavily influenced by sales in the month. The ABS noted: "Black Friday sales were again a big hit this year, with retailers starting promotional periods earlier and running them for longer, compared to previous years.

FOREX: Markets Patchy in Response to Monday Risk-On

• The ability for markets to hold the late Monday risk-on rally has varied, with GBP/USD remaining firm, but EUR reversing the move to keep the weekly EUR/USD lows within range on any further fade. This keeps the trend outlook in GBPUSD bullish, with resistance at 1.2827, the Dec 28 high and bull trigger, well within range. Clearance of this level would confirm a resumption of the uptrend and open 1.2881, a Fibonacci retracement point.
• CHF populates the bottom-end of the G10 table, with the persistent slide in EUR/CHF and USD/CHF stalling at the beginning of 2024. Weakness in CHF comes despite the firmer-than-expected Dec CPI release earlier this week.
• The USD Index trades modestly higher, but still below the Monday/Friday highs - risk and positioning headed into the Tuesday session is likely to dominate, with CPI and earnings risks taking up the focus for the tail-end of the week.
• AUDUSD is consolidating despite the bounce and recovery in crude prices, and trading closer to its recent lows. The recent move lower is considered corrective and the medium-term trend direction remains up. Moving average studies highlight an uptrend and trendline support drawn from the late October low remains intact.
• Trade balance data takes focus going forward, with both Canadian and US trade numbers on the docket. The US trade deficit is expected to widen to $64.9bln from October's $64.3bln. The central bank speaker slate picks up slightly, with Fed's Barr and ECB's Villeroy both set to make appearances after the European close.

EGBS: Dovish Centeno Unable to Help EGBs Off Lows

Core/semi-core EGBs are weaker once again, with Bunds and OATs down around 60 ticks each at typing. Bunds are over 300 ticks lower than 138.84 high seen on Dec 27.

• The latest comments from leaning ECB dove Centeno (r.e. not having to wait till May to make a decision on easing policy) provided a brief layer of support in Schatz futures. However, the move quick faded as Centeno had already expressed his views on rate cut timing with MNI before the Christmas break, stating that the discussion on when to ease policy may be held as early as January.
• Otherwise, headline flow has generally been light, with today's heavy slate of sovereign/IG issuance weighing. Lower-than-expected unemployment figures out of the Eurozone and Italy will have provided an additional layer of downside momentum.
• The German cash curve has bear steepened, with yields 3.5 - 6.0bps higher on the day. Periphery spreads to Bunds are a touch wider with the exception of Greece, with the GGB/Bund spread 0.4bps tighter at 113.8bps.
• The remainder of today's local data docket is light, while comments from BdF's Villeroy are scheduled for 1730GMT/1830CET.

GILTS: Off Lows, Aided by Strong Demand at Auction

Strong demand metrics at the latest round of (infrequent) 20-Year supply helps gilt futures away from worst levels of the day (as does the removal of related delta hedging flow), with the contract trading back above 100.00 at typing (vs. session lows of 99.84). The contract is -40, around the middle of its 40-tick session range after some catch up to the weakness in wider core global FI markets at the open.

• Still, the contract remains comfortably within yesterday’s range, leaving familiar technical parameters untouched and in play.
• Cash gilt yields are 1.0-4.5bp higher, with the 7- to 10-Year zone under the most pressure.
• Little else to note when it comes to macro headline flow/meaningful UK news since the open, with the presence of the heavy global duration issuance slate (both sovereign and IG) applying the early pressure.
• Recent comments from BoE FPC member Bejamin pointed to a lack of material impact re: QT during the rate hiking cycle (when compared to higher rates).
• SONIA futures show +0.25 to -4.0 through the blues, ticking away from worst levels as gilts find a bit of a base.
• BoE-dated OIS shows ~124bp of ‘24 cuts, also moving in sync with gilts thus far.

EQUITIES: Move Lower in E-Mini S&P Last Week Considered Technically Corrective

The primary trend direction in Eurostoxx 50 futures remains up and the recent move lower appears to be a correction. MA studies are in a bull-mode position, signalling a rising trend cycle. Key short-term support to watch lies at 4441.90, the 50-day EMA. A break of this level would signal scope for a deeper retracement and open 4370.00, the Nov 28 low. For bulls, a reversal higher would refocus attention on 4634.00, the Dec 14 high and bull trigger. The recent move lower in S&P E-Minis appears to have been a correction. Support at the 20-day EMA of 4750.67 has been pierced. A clear break of this average would strengthen a short-term bearish threat and expose 4695.69, the lower band of a MA envelope. A move through this support would expose the 50-day EMA, at 4656.58. For bulls, a continuation higher would expose key resistance and the bull trigger at 4841.50, the Dec 28 high.

• Japan's NIKKEI closed higher by 385.76 pts or +1.16% at 33763.18 and the TOPIX ended 19.55 pts higher or +0.82% at 2413.09.
• Elsewhere, in China the SHANGHAI closed higher by 5.713 pts or +0.2% at 2893.251 and the HANG SENG ended 34.43 pts lower or -0.21% at 16190.02.
• Across Europe, Germany's DAX trades lower by 37.66 pts or -0.23% at 16682.77, FTSE 100 lower by 1.26 pts or -0.02% at 7693.54, CAC 40 down 6.16 pts or -0.08% at 7444.08 and Euro Stoxx 50 down 13.59 pts or -0.3% at 4471.89.
• Dow Jones mini down 124 pts or -0.33% at 37808, S&P 500 mini down 14.75 pts or -0.31% at 4786.25, NASDAQ mini down 69.75 pts or -0.42% at 16732.5.

COMMODITIES: Bearish Threat in WTI Futures Remains Present

Bearish conditions in WTI futures remain intact and Monday’s sell-off reinforces the bear theme. Resistance to watch is $74.85, the 50-day EMA. The average was briefly pierced late December. A clear break of it would strengthen a bullish theme and highlight a stronger reversal. For bears, moving average studies are in a bear-mode position too, highlighting a downtrend. The trigger for a resumption of the trend is $67.98, Dec 13 low. Gold traded lower Monday, extending the pullback from $2088.5, the Dec 28 high. The next support to watch is $2012.0, the 50-day EMA. A break of this level, if seen, would expose key support at $1973.2, the Dec 13 low. For bulls, clearance of $2088.5 would reinstate the bull cycle that started on Dec 13. This would open $2097.1, 76.4% of the Dec 4 - 13 bear leg, ahead of key resistance and the Dec 4 all-time high of $2135.4.

• WTI Crude up $1.18 or +1.67% at $71.95
• Natural Gas up $0.02 or +0.5% at $2.994
• Gold spot up $8.53 or +0.42% at $2036.91
• Copper up $0.45 or +0.12% at $381.35
• Silver up $0.08 or +0.36% at $23.2002
• Platinum up $3.04 or +0.32% at $951.28