MNI US OPEN - Divisions Revealed Following Blinken's Israel Talks

NEWS

MNI CONNECT: Livestream Video Conference with ECB

You are invited to listen to a Livestreamed MNI Connect Video Conference with Croatian National Bank Governor & ECB Policymaker, Boris Vujcic. Click here to register.

• Boris Vujcic joins us to discuss ‘Croatia’s First Anniversary in the Eurozone: Economic Developments & Macroeconomic Policy Challenges'.
• Date: Thursday, 11 Jan 2024
• Time: 14:00 - 15:30 GMT
• This event is on the record and will run as a Zoom Webinar

US/ISRAEL (WPT): Blinken’s Talks With Israeli Officials Reveal Divisions Over Gaza

Disagreements between the United States and Israel over the Jewish state's treatment of Palestinians emerged during Secretary of State Antony Blinken's visit to Israel on Tuesday as leaders aired opposing views over when Palestinians can return to northern Gaza and receive tax revenue collected by Israel. "These are their revenues," Blinken told reporters here. "They should have them." Israel's far-right finance minister, Bezalel Smotrich, has vowed not to transfer any tax money to Gaza as long as he remains in that job.

US/CHINA (BBG): US, China Resume In-Person Defense Policy Coordination Talks

US and Chinese defense officials held policy coordination talks at the Pentagon on Monday and Tuesday — the first such in-person meetings since before the coronavirus pandemic. Deputy Assistant Secretary of Defense for China, Taiwan, and Mongolia Michael Chase met at the Pentagon with Major General Song Yanchao, deputy director of China’s Central Military Commission Office for International Military Cooperation, according to a Defense Department spokesman.

US (BBG): Senate GOP Floats More Short-Term Funding as Shutdown Nears

Congress will need another temporary spending measure to avert a Jan. 20 partial government shutdown, Senate Republican leaders said Tuesday in comments that risk provoking backlash from House conservatives. Senate Minority Leader Mitch McConnell acknowledged that there wasn’t enough time to resolve lingering spending differences before the deadline. His No. 2, Senator John Thune of South Dakota, said Congress would need a stopgap measure to March.

US (BBG): Haley, DeSantis Face Off in Last GOP Debate Before Iowa Caucus

Both Nikki Haley and Ron DeSantis could use a strong showing in the final Republican debate ahead of the Iowa caucuses, where exceeding expectations could propel their campaigns to challenge Donald Trump as the party's standard-bearer. It will be the first head-to-head matchup between Haley, the former UN Ambassador, and DeSantis, the Florida governor, who are each registering about 11% nationally. In Iowa, they’re running neck-and-neck, but still well behind frontrunner Trump.

ECB (MNI): Labour Market Slowing From Record Level - ECB's Guindos

There are initial signs the euro area labour market is cooling from the record levels seen in November, as total hours worked are now declining for the first time since late 2020, European Central Bank Vice President Luis de Guindos said Wednesday. The strength of the labour market, particularly employee earnings, are a key metric for ECB policymakers contemplating when the first rate cut of the cycle could come.

GLOBAL (BBG): Houthis Launch Missiles, Drone Barrage in New Red Sea Attack

Houthi rebels carried out one of their largest missile and drone attacks to date on commercial shipping lanes in the Red Sea, igniting a response from five US and UK warships patrolling the region critical to global trade. Eighteen drones, two anti-ship cruise missiles and one anti-ship ballistic missile were shot down by allied forces late Tuesday local time, US Central Command said in a statement on X, formerly known as Twitter.

UKRAINE (MNI): NATO-Ukraine Council Meets; Kyiv Seeks More Weapons Amid EU & US Delays

The NATO-Ukraine Council meets for the first time this year in Brussels today, with Ukrainian Foreign Minister Dmytro Kuleba seeking to impress upon the NATO ambassadors Kyiv's need for an increase in provision in weaponry that will allow Ukraine to fend off Russian aerial attacks on its cities, which have ramped up significantly in recent weeks. The end to the 'fighting season' between Ukrainian and Russian forces that came as winter closed in has seen Russia revert to mass bombardment of Ukrainian cities, including Kyiv, Kharkiv, and Lviv, with Iranian-made drones, ballistic and hypersonic missiles.

BITCOIN (BBG): SEC’s X Account Hacked to Falsely Say Bitcoin ETF Approved

A highly anticipated decision by the US Securities and Exchange Commission on whether to approve a spot-Bitcoin exchange-traded fund quickly morphed into a major cybersecurity incident on Tuesday. The SEC’s X account was compromised and a fake post claiming that the agency had green lit plans for the products fueled a brief surge in the price of the world’s biggest cryptocurrency. It also has sparked an investigation by US authorities into how a social media account at Wall Street’s main regulator was compromised.

CHINA (MNI): China Could Seek Moderate Easing Soon to Lift Growth

MNI (Beijing) Chinese authorities could cut interest rates or banks’ reserve ratio soon and shift investment support to projects that boost demand and support shrinking manufacturing activity weighed down by weak expectations and a persistently soft real-estate sector, policy advisors told MNI. Manufacturing PMI has lingered below the 50 contractionary mark since Q2 2023 – despite a brief spike to 50.2 in September – with the latest December read of 49 its third straight monthly fall.

CHINA (MNI): Maldives Links Up With China in Pivot Away from India

MNI (London) Chinese President Xi Jinping is currently hosting his counterpart from the Maldives Mohamed Muizzu in Beijing, with the two countries set to sign a number of bilateral agreements on areas ranging from infrastructure to tourism. At the meeting, Chinese state media reports that Xi called Muizzu an 'old friend', and stated that China is willing to make new plans to develop bilateral ties with the Maldives and push relations to a new level.

CHINA (BBG): Goldman Predicts 17% Gain for China Stocks on Support Measures

Goldman Sachs Group Inc. is sticking to its bullish call on Chinese stocks, even after a prolonged rout that has wrong-footed many Wall Street banks as they try to gauge the timing of a recovery. Strategists including Kinger Lau estimate a 17% return for the MSCI China Index in 2024, based on their projections for 8%-10% growth in corporate earnings and effective government policy. The broker said it trimmed its index and earnings forecasts from its November projections given the still uncertain economic environment.

ECUADOR (WSJ): Armed Gang Storms Public TV Station in Ecuador

Armed gang members broke into a public television station in Ecuador during a live broadcast on Tuesday, threatening employees as the country reels from drug-related violence. Ecuador's police chief, César Zapata, said Tuesday afternoon that officers had taken control of the TC Television station in the coastal city of Guayaquil, detained 13 people and seized weapons, including grenades. He said the assailants appeared to be members of the Los Tiguerones, a prison drug gang that emerged from Esmeraldas province on the border with Colombia.

INDIA (BBG): India Holds Back $600 Million Strategic Oil Reserve Top-Up

India’s finance ministry has scrapped a 50 billion rupee ($602 million) plan to top up the nation’s strategic crude oil reserves, given market volatility and the prospect of a further decline in prices. Instead of buying at current levels — Brent crude has already slumped about a fifth from a September peak, and could fall further if supply remains plentiful — the ministry is asking state-owned Indian Strategic Petroleum Reserves Ltd. to lease out empty underground storage to refiners and global oil majors, according to people familiar with the matter. They asked not be named as the discussions aren’t public.

COMMODITIES (BBG): Iron Ore Set for Biggest Daily Drop Since October on Weak Demand

Iron ore dropped the most since October as flagging demand spurred more Chinese steel mills to suspend production and go into maintenance. The steelmaking staple has retreated around 7% in a five-day run of losses after hitting an 18-month high on Jan. 3. Mills have largely eschewed annual winter stockpiling, as China’s economic recovery remains sluggish and the property sector struggles to gain momentum.

DATA

GERMANY DATA (MNI): VDMA Machinery Orders Confirm Ongoing Industrial Weakness

VDMA Machinery Orders for November came in at -13% Y/Y (vs -5% prior) in volume terms and -12% on the less volatile 3M measure compared with the same period in2022 (vs -13% prior). This is the 14th consecutive drop on a Y/Y basis. Looking at a geographical split, the decrease seemed broad-based with domestic orders decreasing -15% Y/Y and foreign orders at -13%.

NORWAY DATA (MNI): Seasonally Adjusted Data Suggests a Firmer Report Than at First Glance

• NORWAY DEC CPI +0.1% M/M, +4.8% Y/Y
• NORWAY DEC CORE CPI +0.2% M/M, +5.5% Y/Y

While the monthly and annual figures in the December CPI report were softer than expected, the seasonally adjusted series indicated relatively firmer price pressures. SA CPI rose +0.46% M/M (vs +0.61% prior) while SA CPI-ATE rose+0.31% M/M for the second consecutive month. Both run-rates are above the Norges Bank's 2% target when annualised. This suggests that the Norges Bank will be in no rush at the upcoming meeting to alter its December guidance, which notes the policy rate "will likely be kept at 4.5% for some time ahead".

FRANCE NOV INDUSTRIAL PRODUCTION +0.5% M/M, +0.6% Y/Y (MNI)
FRANCE NOV MANUFACTURING OUTPUT +0.3% M/M, -0.9% Y/Y (MNI)

SWEDEN DEC RETAIL SALES -1.7% Y/Y (MNI)

JAPAN DATA (MNI): November Wages Well Below Expectations

Japan Nov labor cash earnings data were well below expectations. The nominal outcome printed at 0.2% y/y, versus 1.5% expected. The prior was 1.5%. In real terms, earnings were down -3.0% y/y, against a -2.0% forecast and -2.3% prior. The slump in real wages is above earlier 2023 trough points, with a -4.1% y/y drop recorded in January. Still, the trend is not an encouraging one around hopes for a return to positive real wages growth.

AUSTRALIA DATA (MNI): Aussie Monthly CPI Lower at 4.3%

The monthly Consumer Price Index rose 4.3% y/y in November from 4.9% the prior month, lower than the expected 4.4%, while trimmed CPI increased 4.6%, down from October’s 5.3%, data from the Australian Bureau of Statistics (ABS) showed Wednesday. Michelle Marquardt, ABS head of prices statistics, said November’s rise was the smallest annual increase since January 2022.

FOREX: USD/JPY Extending Bounce Off 200-dma Support

• AUD is furtively the strongest performer in G10, reverting off yesterday's lows to recoup an iron-ore inspired pullback in the currency. Nonetheless, AUD/USD remains within the broader downtrend drawn off the December high, but progress through 0.6718 could counter this bearish sentiment to return focus to formation of a golden cross pattern in DMA space: the 50-dma rose above the 200-dma for the first time since January last year last week.
• JPY is trading softer against all others, with USD/JPY extending the bounce off the 200-dma at 143.49 at the beginning of the week. Progress remains shallow, however, with prices holding below resistance at both 145.97 and the 50-dma of 146.27.
• The USD Index remains rangebound, trading inside the weekly range, with few cues to trigger a breakout in either direction. Technically speaking, the imminent formation of a death cross between the 50- and 200-dma in the coming sessions should enforce the downward momentum in the currency, but 101.908 remains support ahead of any notable weakness.
• Focus for the Wednesday session ahead turns to central bank speak, with a number of key appearances due Wednesday. BoE's Bailey is set to testify in front of the Treasury Select Committee, covering off the Financial Stability Report released in December of last year. ECB's Schnabel, de Cos and Fed's Williams are also due to be speaking.

EGBS: Peripheries Outperform as Spanish Syndication Shows Strong Demand

Peripheries are outperforming Bunds this morning following indications of strong demand at today's Spanish 10Y Obli syndication.

• Bunds are 18 ticks higher at 135.64 but BTPs outperform, up 42 ticks at 118.29 at typing. Firmness in US Tsys and Brent crude's move away from yesterday's highs will also be providing support to the space.
• Spain has received a record E130bln of bids for the 10Y Obli on offer at today's syndication, and comes following similarly strong demand-dynamics at yesterday's dual BTP syndication. The 10Y Obli/Bund spread is 2.0bps tighter at 95.2bps today, while the 10Y BTP/Bund spread trades 2.6bps tighter at 163.6bps, down from around 170bps last week.
• German and French cash curves have bear flattened on the day.
• Otherwise, headline flow has generally been light. Comments from ECB's de Guindos r.e. uncertainty around the future inflation path did not move the needle much, nor did today's French/German data.
• The remainder of today's docket is light, with main focus on ECB speak from Executive Board member Schnabel at 1400GMT/1500CET.

GILTS: Wider vs. European Peers on Syndication Announcement

Gilt futures sit +10 or so, showing around 100.50. That leaves the contract within the confines of yesterday’s range, operating between 100.23-62 thus far. Familiar technical parameters remain untouched.

• Cash gilt yields are 1-2bp lower across the curve.
• Tailwinds for core global FI markets have seemingly stemmed from the continuation of the trend in impressive demand seen in the early rounds of ’24 EGB syndications.
• This has provided some background support for gilts, although the announcement of a Jul-54 gilt syndication (for week commencing 22 Jan) has promoted some widening pressure for long end UK paper vs. core/semi-core European peers and capped local rallies.
• The latest 3-year gilt auction generated strong demand metrics, akin to yesterday’s longer dated offering.
• SONIA futures are -2.0 to +4.0 through the blues.
• BoE-dated OIS is little changed to 1.5bp firmer on the day, showing ~122bp of cuts through ’24.
• A reminder that BoE Governor Bailey will appear in front of a Treasury Select hearing on the recently released Financial Stability Report this afternoon.

EQUITIES: E-Mini S&P Holds Onto This Week's Earlier Gains

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 4444.00, the 50-day EMA. A break of it 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. S&P E-Minis have recovered from last Friday’s low. Support at the 20-day EMA of 4754.67 has recently been pierced. A clear break of this average would strengthen a short-term bearish threat and open 4694.47, the lower band of a MA envelope. A move through this support would expose the 50-day EMA, at 4661.92. Key resistance and the bull trigger is at 4841.50, the Dec 28 high. Clearance of this level would resume the uptrend.

• Japan's NIKKEI closed higher by 678.54 pts or +2.01% at 34441.72 and the TOPIX ended 31.39 pts higher or +1.3% at 2444.48.
• Elsewhere, in China the SHANGHAI closed lower by 15.549 pts or -0.54% at 2877.702 and the HANG SENG ended 92.74 pts lower or -0.57% at 16097.28.
• Across Europe, Germany's DAX trades higher by 47.63 pts or +0.29% at 16723.11, FTSE 100 lower by 11.67 pts or -0.15% at 7670.52, CAC 40 up 14.61 pts or +0.2% at 7447.32 and Euro Stoxx 50 up 10.92 pts or +0.24% at 4479.77.
• Dow Jones mini down 8 pts or -0.02% at 37773, S&P 500 mini up 6.5 pts or +0.14% at 4800.75, NASDAQ mini up 61.25 pts or +0.36% at 16888.5.

COMMODITIES: Bearish Conditions in WTI Futures Remains Intact

Bearish conditions in WTI futures remain intact and Monday’s sell-off reinforces the bear theme. Resistance to watch is $74.75, 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 remain in a bear-mode position, 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. Price is trading ahead of the next key support at $2012.8, 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 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 down $0.39 or -0.54% at $71.95
• Natural Gas down $0.11 or -3.51% at $3.086
• Gold spot up $5.46 or +0.27% at $2035.51
• Copper up $2.45 or +0.65% at $378.5
• Silver up $0.07 or +0.32% at $23.077
• Platinum up $5.15 or +0.55% at $938.37