EXECUTIVE SUMMARY
- CHINA Q4 GDP GROWS BY 5.4%, MEETING 2024 TARGET
- NIKKEI SOURCES THE LATEST TO POINT TO BOJ HIKE
- XI TO SKIP TRUMP’S INAUGURATION, SENDS VICE PRESIDENT INSTEAD
- UK RETAIL SALES SOFTER-THAN-EXPECTED, FOOD SALES PARTICULARLY WEAK
Figure 1: China GDP grows 5.4% Y/Y in Q4-2024, meeting full-year target
Source: MNI/Bloomberg/NBS
NEWS
US/CHINA (BBG): Xi to Skip Trump’s Inauguration, Sends Vice President Instead
Chinese President Xi Jinping will skip US President-elect Donald Trump’s inauguration on Monday but will send Vice President Han Zheng instead, the country’s Foreign Ministry said. An announcement Friday from an unnamed ministry spokesperson confirming Han’s participation said China wanted a “stable, healthy and sustainable relationship” with the US and was ready to work with the new American government to “find the right way for the two countries to get along with each other.”
ISRAEL (MNI): Security Cabinet Starts Meeting On Gaza Ceasefire Deal
The Security Cabinet is meeting to sign off on the Gaza ceasefire-for-hostages deal after PM Benjamin Netanyahu confirmed that his negotiating team in Doha had approved a final agreement. After the Security Cabinet approves the deal it will then move to the full Cabinet on the evening of 18 Jan. So far the two ultranationalist parties in gov't, Security Minister Itamar Ben-Gvir's Otzma Yehudit (OY) and Finance Minister Bezalel Smotrich's Religious Zionism (RZ) have both raised objections.
MIDEAST (BBG): Houthis Signal Pause on Red Sea Ship Attacks After Gaza Truce
The Yemen-based Houthis signaled a pause in their months-long attacks on commercial ships following a ceasefire deal between Israel and Hamas. In his first comments since the Gaza truce accord was announced on Wednesday, Houthi leader Abdulmalik Al-Houthi said that the group would follow the agreement, suggesting a halt in its campaign on vessels and on Israel. Still, he left the door open for resuming the attacks, which would likely mean shipping firms will remain very cautious of returning to the Red Sea.
BOJ (MNI): Nikkei Sources the Latest to Point to BOJ Hike
Nikkei sources report that a majority of the BOJ policy board will favour a 25bp rate hike next week, though a final decision will be made following US President-elect Trump's Inauguration on Monday. This is in line with the reporting from our Policy Team yesterday, which noted that the board sees no issue holding the rate steady should market volatility increase following the inauguration.
UK (MNI): UK to Delay Implementation of Basel 3.1 Until 2027
The UK's Prudential Regulation Authority, after consultation with HM Treasury, said Friday it has decided to delay the implementation of Basel 3.1 in the UK by one year until 1 January 2027. This, the PRA said, will allow more time for greater clarity to emerge about plans for its implementation in the United States. Basel 3.1 is the final set of international banking reforms designed in response to the 2008 global financial crisis. It is designed to improve banks’ own measurement of risk, standardising approaches between firms to make their capital ratios more consistent and comparable.
CHINA (WSJ): China Sees a Fresh Decline in Population, Despite a Rise in Births
China’s population continued to decline last year—though births edged up for the first time in eight years—falling for a third straight year as deaths outpaced births. China had seen birth numbers plummet since 2017, the year after it ended the one-child policy, despite Beijing’s encouragement of couples to have three children. At the same time, the number of deaths in China had been creeping up as the population ages.
CHINA (MNI): NBS Note Favourable Conditions for China CPI
MNI (Beijing) China’s upcoming Spring Festival will raise demand for food and consumption activities, providing favourable conditions to increase the nation's CPI, said Fu Linghui, director at the National Bureau of Statistics on Friday. CPI in 2025 is expected to rise moderatly, given the implementation of macro policies and a reasonable recovery in economic growth, Fu noted. January’s CPI was expected to expand based on analysis of preliminary data, Fu said.
S. KOREA (MNI): Investigators Seek Arrest Warrant For Yoon
Yonhap News reporting that the Senior Civil Servants' Corruption Investigation Office (CIO) is seeking an arrest warrant for suspended President Yoon Suk-yeol. The request comes at the end of the 48-hour period during which Yoon has been detained for questioning over his role in the short-lived imposition of martial law in Dec 2024. Following the end of the questioning period, in which Yoon maintained his right to silence, investigators were obliged to either request a formal arrest warrant or release the president.
DATA
EUROPEAN INFLATION (MNI): EZ Final HICP Broadly In-Line With Flash; Sticky Services
- EUROZONE DEC FINAL HICP +0.4% M/M, +2.4% Y/Y
- EUROZONE DEC FINAL CORE HICP +0.5% M/M, +2.7% Y/Y
Eurozone December Final HICP was unrevised from the flash reading on a rounded basis at 2.4% Y/Y (from 2.2% in Nov) and 0.4% M/M (-0.3% in Nov). Unrounded Y/Y was revised down 0.01% to 2.43% Y/Y (2.44% flash, 2.24% prior). On a M/M basis it was unrevised from flash at 0.36% ( -0.32% prior) non-seasonally adjusted. Core inflation (ex energy, food, alcohol & tobacco) was unrevised versus flash at 2.71% Y/Y (2.72% in Nov), remaining around the 2.7% Y/Y level for the fourth consecutive month. On a monthly basis it was also unrevised at 0.45% (-0.57% in Nov).
UK DATA (MNI): Food Sales Particularly Weak
- UK DEC RETAIL SALES -0.3% M/M, 3.6% Y/Y
- UK DEC RETAIL SALES EX-FUEL -0.6% M/M, 2.9% Y/Y
Looking more at retail sales, food store sales were particularly weak, down 1.9% M/M and the ONS noting this puts index levels "at their lowest since April 2013." Clothing sales were strong (and to a lesser extent non-food stores were generally on a M/M basis). As we noted earlier, however, despite the MPC becoming more concerned regarding growth recently, retail sales data are so volatile they are hard to read too much into. Overall, this is a disappointing print though.
CHINA DATA (MNI): China's Q4 GDP Grow by 5.4%, Meeting 2024 Target
- CHINA Q4 2024 REAL GDP +5.4% Y/Y VS MEDIAN +5.0% Y/Y
- CHINA Q4 2024 REAL GDP +1.6% Q/Q VS MEDIAN +1.7% Q/Q
- CHINA 2024 REAL GDP +5.0% Y/Y VS +5.2% 2023
- CHINA DEC RETAIL SALES +3.7% Y/Y VS MEDIAN +3.5% Y/Y
- CHINA DEC INDUSTRIAL OUTPUT +6.2% Y/Y VS MEDIAN +5.4% Y/Y
- CHINA DEC UNEMPLOYMENT RATE +5.1% VS NOV +5.0%
The Chinese economy grew by 5.4% in Q4, rising 0.8 percentage points from Q3 and driving 2024's growth to the government's 5% annual target, beating market expectations of 5.0% and 4.9%, data released by the National Bureau of Statistics on Friday showed. Retail sales rose 3.7% y/y in December, rising from November's 3.0% gain and outpacing the 3.5% forecast. Retail sales grew 3.5% y/y in 2024, unchanged from the Jan-Nov reading of 3.5%. Industrial production increased 6.2% y/y in December, hitting an eight-month high, up from November’s 5.4% growth and outperforming the expected 5.4%.
CHINA DATA (MNI): House Price Trends Continue to Improve
Further signs that the impact of the various stimulus measures are flowing through to the property sector were evidenced in the December New and Used House price data released today. China New Home Prices MoM -0.084% vs prior -0.201%; China Used Home Prices MoM -0.314% vs prior -0.347%. For both new and used prices, this is the fourth consecutive month of improvement with new home price declines the least since June 2023. Of the 70 cities surveyed, 23 cities saw new prices rise for the month versus only 17 in November and there are now 2 cities up YoY.
RATINGS: A Busier Round of After Hours Updates Scheduled This Week
Rating reviews of note scheduled for after hours on Friday include:
- Fitch on Estonia (current rating: A+; Outlook Stable)
- Morningstar DBRS on the EFSF (current rating: AAA, Stable Trend), the ESM (current rating: AAA, Stable Trend), Portugal (current rating: A, Positive Trend) & Switzerland (current rating: AAA, Stable Trend)
- Scope Ratings on China (current rating: A; Outlook Stable), the EFSF (current rating: AA+; Outlook Stable), the ESM (current rating: AAA; Outlook Stable), Poland (current rating: A; Outlook Stable) & Slovakia (current rating: A; Outlook Stable)
- Please use this link to access the indicative sovereign rating review schedule covering the five most notable rating agencies for 2025.
- Note that this schedule is indicative only and ratings can be reviewed on an ad-hoc basis. Rating agencies may also adjust their schedules during the year.
FOREX: GBP Underperforms Following Data Miss, USDMXN New Cycle Highs
- GBPUSD underperformance stands out on Friday, printing a daily low of 1.2161 on the back of weaker-than-expected UK retail sales. These followed yesterday's disappointing activity data and should, on the margin, underpin ongoing UK growth / fiscal concerns. However, we've noted that retail sales data are volatile and tough to read into too much - a factor potentially playing into the subsequent partial recovery for the pair back to 1.2200.
- Overall, the greenback is firmer on the session, assisted by a steady appreciation for USDJPY after the brief test below 155.00 overnight. Rising chances of a BOJ hike next week have weighed on the pair in recent sessions, and despite today’s 0.4% advance, spot remains down 1.25% on the week. Latest Nikkei sources reiterate that a majority of the BOJ policy board will favour a 25bp rate hike next week, though a final decision will be made following US President-elect Trump’s Inauguration on Monday.
- Elsewhere, EURUSD has continued to oscillate around 1.03 the figure, with a decent amount of option expiries helping to contain momentum in either direction. For reference, there is 3.98bn rolling off at today’s NY cut at 1.0300.
- Also standing out ahead of Trump’s inauguration is the strong rally for USDMXN, which remained well bid throughout the entirety of Thursday’s session and extended in early Friday trade. Spot printed a fresh cycle high in the process at 20.9382 as market participants await any details on bilateral relations, including tariffs, and mull the chances of Banxico accelerating the easing pace in early Feb.
- US Building Permits and industrial production data are the highlights of a less busy economic calendar to finish the week.
EGBS: Bund Futures Just Shy of Session Highs, Centeno and Escriva Due Imminently
Bund futures are just shy of session highs, currently +29 ticks at 131.80 following the weaker-than-expected UK retail sales data this morning.
- The technical trend in Bund futures remains bearish for now, but the recovery from Tuesday’s low signals scope for a corrective bull cycle that would allow an oversold trend condition to unwind. A continuation higher would open 132.55, the 20-day EMA.
- The German curve has bull flattened, with yields 1.5-3bps lower. 2s10s is ~5bps shy of multi-month highs, currently at 30bps.
- Eurozone final December HICP confirmed flash estimates at 2.4% Y/Y headline and 2.7% core. The ECB’s underlying metrics will be released in due course.
- ECB’s Stournaras continued to push for further gradual easing this morning, while Nagel’s speech was centred on the weak German economy.
- The 10-year OAT/Bund spread is 1.5bps tighter at 77.5bps, after the Government survived a no-confidence vote yesterday.
- 10-year peripheral spreads to Bunds are also narrower, with European equity futures up 0.9%.
- APA reported that Austria will avoid an EU Excessive Debt Procedure, in line with the MNI Policy Team’s recent story.
- ECB's Escriva and Centeno are scheduled to speak from 1030GMT/1130CET.
GILTS: Off Early Highs, Yields Still Lower Following Retail Sales
The retail sales-driven rally has faded, owing to the volatile nature of the release.
- The downside surprise in the data built on yesterday’s softer-than-expected monthly economic activity readings.
- Downside risks to economic growth had already risen following the Budget.
- Gilt futures as high as 91.89, before fading to the 91.60 area last.
- The 20-day EMA (91.54) has been broken, with Fibonacci resistance (91.86) pierced. The threat to the bearish trend has deepened. Fresh extension higher would target the Jan 6 high (92.27)
- Yields 3-4bp lower across the curve.
- 2s have registered a fresh ’25 low.
- 10s 1bp narrower vs. Bunds at ~212bp, nearing the tightest close seen since November.
- BoE-dated OIS shows ~65bp of cuts through year-end. That compares to ~61bp late yesterday and dovish session extremes of ~67bp. ~36bp of cuts were priced late Tuesday.
- ~22bp of cuts now priced for February and 38.5bp through May. We look for cuts at both of those meetings.
- SONIA futures last 0.5-4.0 firmer, off highs alongside gilts.
- SONIA/Euribor Dec ’25 (Z5) spread set for the first sub-200bp close since November.
- BoE Governor Bailey will speak later today (text release at 17:00 London, speech at 21:00). The appearance is unlikely to be market moving given the topic of ‘A Central Banker’s view of global challenges and expectations for the Bretton Wood Institutions’ response.’
- Tuesday’s labour market data presents the next key UK risk event.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Feb-25 | 4.482 | -21.8 |
Mar-25 | 4.439 | -26.1 |
May-25 | 4.313 | -38.7 |
Jun-25 | 4.255 | -44.5 |
Aug-25 | 4.163 | -53.7 |
Sep-25 | 4.129 | -57.1 |
Nov-25 | 4.073 | -62.7 |
Dec-25 | 4.051 | -64.9 |
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Intact Following This Week's Climb
A bull cycle in the Eurostoxx 50 futures contract remains intact. This week’s climb resulted in a breach of 5054.00, the Jan 8 high, to confirm a resumption of the uptrend. The contract is holding on to its recent gains. The focus is on a climb towards 5142.00, a Fibonacci projection point. Key short-term support has been defined at 4931.00, the Jan 13 low. A break of this level would be bearish. A bear threat in the S&P E-Minis contract remains present. However, Wednesday’s gains resulted in a print above resistance at 5987.04, the 50-day EMA. The average marks an important pivot level and a clear break of it would signal a possible reversal. This would open 6107.50, the Dec 26 high. Key short-term support has been defined at 5809.00, the Jan 13 low. A breach of this level would confirm a resumption of the downtrend.
- Japan's NIKKEI closed lower by 121.14 pts or -0.31% at 38451.46 and the TOPIX ended 8.89 pts lower or -0.33% at 2679.42.
- Elsewhere, in China the SHANGHAI closed higher by 5.789 pts or +0.18% at 3241.821 and the HANG SENG ended 61.17 pts higher or +0.31% at 19584.06.
- Across Europe, Germany's DAX trades higher by 201.6 pts or +0.98% at 20857.54, FTSE 100 higher by 77.86 pts or +0.93% at 8469.83, CAC 40 up 78.95 pts or +1.03% at 7713.69 and Euro Stoxx 50 up 36.76 pts or +0.72% at 5143.69.
- Dow Jones mini up 111 pts or +0.26% at 43483, S&P 500 mini up 19 pts or +0.32% at 5994.75, NASDAQ mini up 86 pts or +0.4% at 21335.
Timer: 09:50 GMT
COMMODITIES: Recent Gains in Gold Still Deemed Corrective
The trend structure in WTI futures remains bullish and Wednesday's rally reinforces current conditions. The recent strong impulsive rally has resulted in a breach of $76.41, the Oct 8 high. Note too that $80.14, the Apr 12 ‘24 high has been pierced, strengthening the bullish theme. Sights are on $81.69, a Fibonacci projection. On the downside, a reversal lower would expose the 20-day EMA, at $73.81, a key short-term support. Recent gains in Gold appear corrective - for now. However, the yellow metal continues to hold on to its latest gains and scope is seen for a continuation higher near-term. The stronger recovery exposes $2726.2, the Dec 12 high and an important resistance. Clearance of this level would be a bullish development. On the downside, a reversal lower would expose $2583.6, the Dec 19 low. Initial support is at $2649.0, the 50-day EMA.
- WTI Crude up $0.1 or +0.13% at $78.83
- Natural Gas down $0.13 or -2.94% at $4.131
- Gold spot down $7.68 or -0.28% at $2706.51
- Copper up $0.4 or +0.09% at $444.5
- Silver down $0.32 or -1.05% at $30.4889
- Platinum up $4.88 or +0.52% at $940.72
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 17/01/2025 | 1100/1200 |  EU | ECB's Cipollone lecture at Crypto Asset Lab conference | |
| 17/01/2025 | 1330/0830 | * |  CA | International Canadian Transaction in Securities |
| 17/01/2025 | 1330/0830 | *** |  US | Housing Starts |
| 17/01/2025 | 1415/0915 | *** | US | Industrial Production |
| 17/01/2025 | 1600/1100 | CA | BOC releases review of pandemic policy actions. | |
| 17/01/2025 | 2100/1600 | ** | US | TICS |
| 17/01/2025 | 2100/2100 |  GB | BOE's Bailey Remarks at the Bretton Woods Institutions | |
| 20/01/2025 | 2350/0850 | * |  JP | Machinery orders |