MNI US OPEN - DeSantis Suspends Presidential Campaign, Endorses Trump

NEWS

US (MNI): DeSantis Drops Out, Trump Above 90% Implied Probability For GOP Nomination

Florida Governor Ron DeSantis suspended his campaign for the Republican presidential nomination on 21 Jan following a poor performance in the Iowa caucuses, with the one-time betting market favourite for the nomination stating that he did not "have a clear path to victory". DeSantis endorsed frontrunner and presumptive nominee Donald Trump during his withdrawal speech. The former president is given a 90.1% implied probability of winning the nomination, compared to just 7.1% for the only other remaining candidate, former South Carolina Governor Nikki Haley.

US/CHINA (BBG): China Buys Near-Record $40 Billion of Chip Gear to Beat US Curbs

China’s imports of chipmaking machines jumped last year as firms ramped up investment in an attempt to get around US-led efforts to hobble the nation’s semiconductor industry. Imports of the machinery used to make computer chips rose 14% in 2023 to almost $40 billion — the second largest amount by value on record in data going back to 2015, according to Bloomberg calculations based on official customs data.

EU/CHINA (BBG): EU to Upgrade Economic Security to Shield Key Tech From China

The European Union will take the next step this week in its effort to recreate itself into a global power that can leverage its massive single market to rebuff coercive actions from the likes of Beijing, Moscow and even Washington. The EU’s executive arm will unveil a proposal on Wednesday with rules aimed at boosting its power to screen and potentially block foreign investment in sensitive industries, according to a draft of the plan seen by Bloomberg.

EU/ISRAEL (BBG): EU Says Israel’s Attack on Hamas ‘Seeding Hate’ for Generations

Israel’s attack on Hamas is failing to root out the militant group, the EU’s top foreign policy chief said, as he urged parties to start thinking more concretely about a two-state peace process. “Certainly, the way they’re trying to destroy Hamas is not the way they’re doing, because they’re seeding the hate for generations,” Josep Borrell told reporters Monday ahead of a meeting of EU foreign ministers in Brussels.

CHINA (RTRS): China Moves to Support Yuan as Stock Markets Tumble

China's major state-owned banks moved to tighten yuan liquidity in the offshore foreign exchange market on Monday, actively selling U.S. dollars onshore, four sources with knowledge of the matter said. The goal was to prevent the yuan from falling too fast as China's A shares plunged, said one of the people. Offshore yuan tomorrow-next forwards jumped to a more than two-month high of 4.25 points, reflecting signs of tighter liquidity conditions.

CHINA (MNI): China’s Jan Loan Prime Rate Unchanged

MNI (Beijing) China's Loan Prime Rate remained unchanged on Monday according to a People's Bank of China statement, in line with market expectation following the PBOC's decision to keep a key policy rate steady on Jan 15. The one-year LPR, based on the PBOC’s Medium-term Lending Facility rate and quotes submitted by 20 banks, was left at 3.45% and the five-year plus maturity was held at 4.2%.

MNI BOJ PREVIEW - JANUARY 2024: Policy Normalisation is Coming But Not Yet

Our analysis aligns with the prevailing consensus, anticipating the BoJ to continue normalising its policy in 2024, though such adjustments are not anticipated at this week's meeting. Instead, both our perspective and the consensus majority anticipate the BoJ to implement a policy rate increase during the meeting scheduled for April 26, coinciding with the release of the next Quarterly Outlook Report.

JAPAN (BBG): Japan PM Gains Little After Disbanding Tarnished Faction

Support for Japanese Prime Minister Fumio Kishida showed scant signs of recovery in a series of polls carried out over the weekend after he dissolved his scandal-hit faction in a bid to restore trust. A survey by the Yomiuri newspaper carried out Saturday and Sunday found support had fallen by one percentage point to 24%, while another by broadcaster ANN showed a slip to 20.4%. The Asahi newspaper found support unchanged, while by contrast the Sankei found it had risen by five percentage points compared with the previous month.

RUSSIA/CHINA (BBG): Russia Becomes Top China Oil Supplier for First Time Since 2018

Russia blew past Saudi Arabia to become the biggest source of Chinese oil imports last year, highlighting the ineffectiveness of Western efforts to deprive the Kremlin of funds for its war in Ukraine. The world’s biggest oil importer bought a record 107 million tons of crude from Russia in 2023, almost a quarter more than the year before, according to customs data released Monday. That compared with just under 86 million tons from Saudi Arabia. It’s the first time Russia has been China’s No. 1 supplier since 2018, and translates to around 2.15 million barrels a day.

N.KOREA/RUSSIA (MNI): Pyongyang Says Putin Might Visit N. Korea "At Early Date"

North Korea's state news agency KCNA reported that Russian President Vladimir Putin expressed willingness to visit Pyongyang in the near future. This would be Putin's first visit to North Korea in 24 years, reflecting tightening cooperation between the two countries isolated by the West. Kremlin spokesman Dmitry Peskov had mentioned that such a visit was on the cards before, but new reports note that Putin confirmed his intentions to North Korea's Foreign Minister Choe Son-hui during the latter's visit in Russia last week.

FOREX: Solid Equities Remain a Tailwind for Sentiment

• The USD sits broadly unchanged, as early support from an incline in the US 10y yield faded through early European hours. This tempered a pullback in most major pairs, with EUR/USD and GBP/USD finding a base at earlier lows and looking more stable headed through to the US open.
• Equity markets remain a source of sentiment strength, as the e-mini S&P holds the entirety of the Friday rally and keeps European cash markets afloat.
• NOK is marginally the poorest performer in G10 so far Monday, but recent ranges are being largely respected. Moves come ahead of the Norges Bank rate decision on Thursday - although no change in policy is expected, and markets wait until March for the next policy path projection update.
• With both the ECB and the Fed inside their pre-meeting media blackout periods, central bank is expected to be muted for the first half of the week, with data few and far between on Monday also. As such, markets will be positioning and preparing for the Tuesday BoJ rate decision. While no change in policy is foreseen, communications and messaging surrounding normalisation in April will be carefully watched.

EGBS: Bunds Recover from Intraday Lows; Peripheries a Touch Wider

After initially seeing a bout of weakness as European desks filtered in, Bunds have recovered from intraday lows to trade 49 ticks higher at 134.49.

• Ongoing tensions in the Middle East over the weekend will have provided some background support to EGBs, with little other meaningful newsflow ahead of the ECB decision on Thursday (Jan 25), where main market interest will lie on the degree of pushback against current rate cut pricing.
• Initial resistance in Bund is at 135.34, the 20-day EMA. A clear break of the average is required to ease bearish pressure.
• OAT futures trade similarly to Bunds, currently +44, while BTPs have failed to sustain early outperformance to sit +34.
• This prompted the 10-year BTP/Bund spread to move away from its tightest levels in almost 2 years (reaching a low of 151.7bps today), currently +0.1bps wider at 154.2bps. Other peripheral spreads to Bunds are also a touch wider.
• The German and French cash curves have bull steepened on the day, with 5Y tenors outperforming across core/semi-core EGBs.
• Thursday's ECB decision highlights the weekly regional docket, though we also receive a slew of survey data including the flash PMIs (Weds) and the IFO (Thurs) in the next few days.

GILTS: Firmer & Flatter

Gilt futures have firmed in early Monday trade. The rally in Bund & Tsy equivalents since Friday’s gilt close provided initial support.

• A pullback from best levels was then seen, before fresh session highs were made.
• The contract last shows +30 or so around 99.10, ~5 ticks shy of the peak of its early 33-tick range.
• Friday’s high (99.24) is located a little way above, while more meaningful resistance can be found at the Jan 16 low/gap target (99.71).
• Cash gilt yields are 1-5bp lower as the curve flattens. 10s stabilises around the 3.90% mark after gilt bears failed to force a break of 4.00% last week.
• 2s10s and 5s30s flatten away from respective early ’24 peaks.
• SONIA futures show -2.0 to +2.5 through the blues, little changed from levels seen shortly after the gilt open. The uptick in gilts provided some support seeing the space off early Monday lows.
• BoE-dated OIS shows ~107.5bp of cuts through ’24 vs ~104.5bp seen ahead of the gilt open.
• Local headline flow has been very limited since the open.
• Note there will be nothing in the way of APF sales from the BoE today.
• A reminder that the DMO is set to issue a new 30-year 4.375% Jul-54 gilt via syndication at some point this week, we believe that will likely come on Tuesday. The gap in APF sales can probably be explained by the presence of this syndication.

EQUITIES: Friday's Gains in E-Mini S&P Confirm Resumption of Uptrend

Eurostoxx 50 futures last week breached support at the Jan 5 low of 4444.0, trading to a low of 4402.00, the Jan 17 low. The contract has since recovered and 4402.00 represents a key short-term support. A break of this level would resume bearish pressure and open 4370.00, the Nov 28 low. Initial resistance to watch is 4536.00, the Jan 11 high. Clearance of this level would highlight a potential reversal and a resumption of the primary uptrend. The uptrend in S&P E-Minis remains intact and Friday’s gains confirmed a resumption of the trend. Resistance at 4841.50, the Dec 28 high has been cleared, marking an extension of the price sequence of higher highs and higher lows. Moving average studies remain in a bull-mode condition, reinforcing the current bullish condition. Sights are on 4900.00 next. Key support lies at 4699.31, the 50-day EMA.

• Japan's NIKKEI closed higher by 583.68 pts or +1.62% at 36546.95 and the TOPIX ended 34.89 pts higher or +1.39% at 2544.92.
• Elsewhere, in China the SHANGHAI closed lower by 75.939 pts or -2.68% at 2756.34 and the HANG SENG ended 347.51 pts lower or -2.27% at 14961.18.
• Across Europe, Germany's DAX trades higher by 82.68 pts or +0.5% at 16638.05, FTSE 100 higher by 13.27 pts or +0.18% at 7475.94, CAC 40 up 41.68 pts or +0.57% at 7413.32 and Euro Stoxx 50 up 26.45 pts or +0.59% at 4475.28.
• Dow Jones mini up 50 pts or +0.13% at 38095, S&P 500 mini up 13.5 pts or +0.28% at 4883, NASDAQ mini up 92 pts or +0.53% at 17530.75.

COMMODITIES: Trend Signals in WTI Futures Remain Bearish

Trend signals in WTI futures remain bearish and recent short-term gains are considered corrective. Resistance to watch is $74.23, the 50-day EMA. It has been pierced, a clear break would strengthen a bullish theme and expose $76.31, the Dec 26 high. Moving average studies remain in a bear-mode position and continue to highlight a downtrend. The trigger for a resumption of the downtrend is $68.28, Dec 13 low. Gold remains above the Jan 17 low of $2001.9. Last week’s print below the 50-day EMA and the break of support at $2013.4, the Jan 11 low, has strengthened a bearish threat and a resumption of weakness would open a key level at $1973.2, the Dec 13 low. For bulls, clearance of 2062.3, the Jan 12 high, is required to signal a reversal. This would expose $2088.5, the Dec 28 high.

• WTI Crude down $0.44 or -0.6% at $72.97
• Natural Gas down $0.15 or -5.84% at $2.369
• Gold spot down $7.44 or -0.37% at $2021.65
• Copper down $1.55 or -0.41% at $377.1
• Silver down $0.51 or -2.24% at $22.1105
• Platinum down $6.98 or -0.77% at $896.3