MNI US OPEN: Bonds Bouncing, But Recovery Shallow

NEWS:

US/RUSSIA (Bloomberg): President Joe Biden plans to talk by phone with Russian President Vladimir Putin on Thursday as the U.S. and its allies raise alarm about Russia’s troop buildup on the Ukraine border. The leaders will “discuss a range of topics, including upcoming diplomatic engagements with Russia,” National Security Council spokeswoman Emily Horne said in a statement. The talks follow a Dec. 7 Biden-Putin telephone exchange in which the American president affirmed a commitment to Ukraine’s sovereignty and territorial integrity and warned that Russian aggression would be met with unprecedented economic penalties.

ECB (MNI): ECB Should Move Away From Negative Rates-Holzmann
Austrian central bank governor Robert Holzmann said the European Central Bank should move away from negative interest rates in 2022, adding that he was optimistic for the economy in 2022, though he cautioned that health and geopolitical factors have made forecasting more difficult. "The decisive factor in the new year will be to gradually initiate the exit from negative interest rates and unconventional monetary policy and to avoid any proximity to monetary state financing," Holzmann said in his review of 2021.

CHINA (MNI): PBOC Urged To Seize Dovish Chance Before Fed Rate Hike
The People's Bank of China should take advantage of a window of opportunity to further ease monetary conditions in coordination with fiscal expansion to counter a H1 economic slowdown before a likely rate hike by the U.S. Federal Reserve reduces policy space later in the year, advisors and experts familiar with monetary policy told MNI.

CHINA (MNI) PBOC To Support M&A For Some Property Developers
The People Bank of China will create a benign financial environment for restructuring some indebted developers and push lenders to increase green finance initiatives, central bank officials told reporters on Thursday. Zou Lan, head of the financial market department, said the central bank will encourage financial institutions to support mergers and acquisitions of real estate companies by facilitating relevant loan and bond issuance in a bid to prevent risks and promote the healthy development of the property market. Zou cited a circular jointly issued by the PBOC and China Banking And Insurance Regulatory Commission on the issue.

CHINA (MNI): PBOC To Use Broad & Targeted Tools For SME Credit
The People's Bank of China will use both overall broad and targeted monetary tools to stabilise credit growth and lower lending costs in the process of supporting small and medium-sized businesses and shoring up the economy, officials of the central bank told reporters on Thursday.

DATA:

SPAIN DEC FLASH CPI +1.3% M/M, +6.7% Y/Y; NOV +5.5% Y/Y - MNI
DEC FLASH HICP +1.2% M/M, +6.7% Y/Y; NOV +5.5% Y/Y

UK: Nationwide house prices rose more than expected in December - Bloomberg

• Nationwide house prices rose 1.0% m/m (estimate +0.5%) in December versus +0.9% in November, rose 10.4% y/y (estimate +9.4%) versus +10% in November

NYE Holiday Trading Schedules

Dec 31st:

• NYSE open as usual
• CME Floor Trade: Interest Rate Floor Options Closes at 1200CT/1800GMT
• Intercontinental Exchange observes US Holiday
• Eurex is closed for trading in all derivatives. No cash payment in JPY.

January 3rd:

• NYSE open as usual
• CME operates normal trading hours, but Chicago trading floor is closed
• Intercontinental Exchange observes UK Holiday
• Eurex closed for trading and clearing in Exchange Traded Commodities as well as British equity and equity index derivatives, Irish equity derivatives, Russian equity derivatives.

BOND SUMMARY: Bonds Bouncing, But Recovery Shallow

• Bond futures across the continent as well as the US are slightly higher Thursday, recouping a small part of the losses suffered yesterday. Mar-22 Treasury futures are higher by just over 6 ticks, trading at broadly the midpoint of the Wednesday range.
• Improving equity prices are also being reflected in Italian bond markets, with BTP futures over 70 ticks off the weekly lows. This has pressured the Italian 10y yield back to 1.10%, dropping near 5bps on the session.
• Yield curves are generally trading flatter, with the longer-end outperforming across both German and US curves. News and macro catalysts are few and far between, keeping focus on end-of-year trading and the upcoming call between Presidents Biden and Putin.
• Data of note Thursday includes MNI Chicago PMI, with markets expecting the data to improve marginally to 62.0 from 61.8 previously. Weekly jobless claims also cross, with consensus looking for a 206k IJC - in line with the prior reading.

FOREX: Focus Turns to Biden-Putin Call, MNI Chicago PMI

• The USD is clawing back a decent part of the Wednesday losses, with the USD Index rising back above the 96 handle and nearing the week's highs of 96.395. Equities are resuming the recent incline, helping nudge the e-mini S&P back toward the recent alltime highs printed at 4798.00.
• The dollar's recovery has dragged EUR/USD off the week's highs printed yesterday at 1.1369, with the pair now finding some support at the 1.13 handle ahead of the NY crossover.
• The poorest performer among G10 is the NOK, which is working against decent strength posted in the currency across the past two weeks. USD/NOK trades just below next resistance of 8.9058.
• Presidents Biden and Putin hold a call today to discuss the ongoing tensions in eastern Ukraine, with a spokesman yesterday stating Biden will offer Russia a diplomatic solution to avoid further unrest and de-escalate tensions. The call follows the US presenting intelligence to European partners that suggested Putin was building troops on the border and could launch an invasion as soon as early January. The call is scheduled for 1530ET/2030GMT.
• Focus for today rests on the MNI Chicago PMI due at 1445GMT - with markets expecting the data to improve marginally to 62.0 from 61.8 previously. Weekly jobless claims also cross, with consensus looking for a 206k IJC - in line with the prior reading

EQUITIES: Stocks Broadly Flat in Muted Year-End Trade

• Japan's NIKKEI closed down 115.17 pts or -0.4% at 28791.71 and the TOPIX down 6.66 pts or -0.33% at 1992.33. China's SHANGHAI COMP closed up 22.189 pts or +0.62% at 3619.189 and the HANG SENG ended 25.47 pts higher or +0.11% at 23112.01.
• The German Dax down 7.46 pts or -0.05% at 15847.89, FTSE 100 down 1.04 pts or -0.01% at 7420.96, CAC 40 up 13.06 pts or +0.18% at 7174.62 and Euro Stoxx 50 up 13.74 pts or +0.32% at 4297.77.
• Dow Jones mini up 8 pts or +0.02% at 36389, S&P 500 mini up 3.75 pts or +0.08% at 4787.75, NASDAQ mini up 33.5 pts or +0.2% at 16527.25.

COMMODITIES: Oil Markets Edge Off Week's Highs