MNI US OPEN - Firm Spanish CPI Kicks Off Euro Inflation Round

NEWS

SECURITY (MNI): Hamas Studying Paris Ceasefire Proposal

Bloomberg reporting that Hamas is studying the ceasefire and hostage exchange proposal devised in meetings between security officials in Paris, France over the weekend. Hamas said in a statement on Telegram that their, "priority is stopping the war and full withdrawal of Israeli forces from the Gaza strip." Qatari Prime Minister Sheikh Mohammed al Thani, a key intermediary, yesterday pushed against suggestions that Doha can exert influence over Hamas - taken by observers as managing expectations for a full ratification of the agreement.

MNI FED PREVIEW - JANUARY 2024: Dropping the Tightening Pretense

The Federal Reserve will hold rates steady for the 5th time in 6 meetings in January, further cementing expectations that the hiking cycle is over and that the next move will be a cut. Given participants’ pushback against 2024 market rate cut pricing since the December meeting, the main question will be the degree to which the Statement and Chair Powell leave the door open to a rate cut as soon as March. There is a good chance that the forward guidance will be amended to remove the tightening bias in favor of a more neutral stance, in light of recent disinflationary progress.

US/IRAN (BBG): Iran Urges Diplomacy as US Weighs Response to Deadly Attack

Iran urged the US to use diplomacy to ease tensions in the Middle East, as Tehran braces for a military response to a deadly attack on an American base over the weekend. The foreign minister of the Islamic Republic said “active” diplomacy is underway to find a political solution to the war in Gaza and the regional fallout, without elaborating. “The White House knows very well” that the way to end the war “and the current crisis in the region is political,” Hossein Amirabdollahian said in a post on X.

US (BBG): Morgan Stanley Turns Bullish on US Banks Over Capital Rules

Morgan Stanley analysts are turning bullish on major US banks on expectations that pending regulatory changes for higher capital levels will be less onerous than the current proposal, opening the door for an increase in buybacks. The analysts, led by Betsy Graseck, raised their recommendation on Goldman Sachs Group Inc., Citigroup Inc. and Bank of America Corp. to overweight and upgraded the large-cap banking group to attractive, according to a Tuesday note.

US (BBG): Speaker Johnson Says House to Move Forward on Tax Deal: Axios

House Speaker Mike Johnson told a group at a Congressional Institute event that the tax deal will move move forward on suspension, Axios reporter Juliegrace Brufke says in a post on X, citing a person familiar.

SECURITY (MNI): Hamas Studying Paris Ceasefire Proposal

Bloomberg reporting that Hamas is studying the ceasefire and hostage exchange proposal devised in meetings between security officials in Paris, France over the weekend. Hamas said in a statement on Telegram that their, "priority is stopping the war and full withdrawal of Israeli forces from the Gaza strip." Qatari Prime Minister Sheikh Mohammed al Thani, a key intermediary, yesterday pushed against suggestions that Doha can exert influence over Hamas - taken by observers as managing expectations for a full ratification of the agreement.

GLOBAL POLITICAL RISK (MNI): BRICS Foreign Ministers to Meet in Russia in June

Russian news services have confirmed that foreign ministers from the BRICS grouping will meet in Nizhniy Novgorod, Russia in June - one of roughly two-hundred events Russia will host as president of the bloc - leading up to the 16th BRICS Summit in Kazan in October. Last year's BRICS Summit in South Africa hinted at a major geopolitical recalibration raising concerns in Washington and Europe that western-leaning countries Saudi Arabia, Egypt, the UAE, and Argentina, may be drawn closer to Russia and China and elevate BRICS as a credible political counterweight to the G7.

FRANCE (BBG): French Government Plans New Measures to Calm Farmer Protests

The French government plans to take new steps on Tuesday to address farmers’ concerns over rising costs and European regulations as protesters continue to block highways around Paris. Prime Minister Gabriel Attal met again with union leaders for talks late Monday after previous concessions failed to bring an end to the unrest that began around two weeks ago.

JAPAN (BBG): Japan’s PM Pushes for Higher Wages as Election Talk Swirls

Japanese Prime Minister Fumio Kishida pressed forward with his campaign for higher wages as a slide in his support rate seems to have halted and speculation re-emerges that he may opt to call a general election this year. Kishida underscored the need for pay rises to bolster the economy in a speech to parliament Tuesday that laid out his agenda for the new session. Dismayed at wage rises falling short of inflation and angered by a widespread political slush-fund scandal, voters sent his disapproval rating to a record level in a recent poll.

N.KOREA (MNI): N. Korea Continues Cruise Missile Tests Ahead of S. Korean Election

North Korea fired several cruise missiles off its west coast overnight, which came on the heels of a similar test-launch conducted over the weekend and another one last week. South Korea's Joint Chiefs of Staff confirmed the latest test without specifying the number of projectiles involved. The recent acceleration of cruise missile tests is believed to represent an attempt to develop a new weapons system, which would help North Korea pursue its goal of diversifying the range of available delivery platforms for its nuclear warheads.

DATA

EUROZONE Q4 FLASH GDP +0% Q/Q
EUROZONE Q4 PRELIM FLASH GDP +0.1% Y/Y

SPAIN DATA (MNI): Firmer-Than-Expected Inflation Driven by Electricity Prices

• SPAIN JAN FLASH HICP -0.2% M/M, +3.5% Y/Y
• SPAIN JAN FLASH CPI +0.1% M/M, +3.4% Y/Y
• SPAIN JAN FLASH CORE CPI +3.6% Y/Y

Spanish preliminary January HICP came in firmer-than-expected at +3.5% Y/Y (vs 3.0% cons and 3.3% prior) and -0.2% M/M (vs -0.6% cons and 0.0% prior). The national CPI measure data came in at +3.4% Y/Y (vs +3.0% cons and +3.1% prior) and +0.1% M/M (vs -0.2% cons and 0.0% prior). Core inflation also exceeded expectations, printing at +3.6% Y/Y (vs +3.3% cons and +3.8% prior). The uptick in the headline readings was mostly driven by higher electricity prices, while fuel prices had a deflationary impact.

SPAIN Q4 FLASH GDP +0.6% Q/Q, +2% Y/Y (MNI)

FRANCE Q4 FLASH GDP +0% Q/Q, +0.7% Y/Y (MNI)
FRANCE DEC CONSUMER SPENDING +0.3% M/M, +1.3% Y/Y (MNI)
FRANCE DEC CONSUMER MANUF SPENDING +0.4% M/M, -0.1% Y/Y (MNI)

UK JAN BRC SHOP PRICES -0.7% M/M, +2.9% Y/Y (MNI)

SWISS KOF JAN ECONOMIC BAROMETER 101.5 (MNI)

UK DATA (MNI): BoE M4 and Lending to Individuals Data, Small Miss

• UK DEC M4 MONEY SUPPLY +0.5% M/M, -0.9% Y/Y
• UK BOE DEC MORTGAGE APPROVALS 50,459
• UK BOE DEC CONSUMER CREDIT GBP1.2 BLN
• UK BOE DEC SECURED LENDING GBP-0.83 BLN

The numbers remortgaging ticked up through the 6M average, indicative that consumers are starting to try to roll off higher rates. A small miss on lending appetite, relative to expectations which is a muted run-rate into 2024 for the UK lenders (most affected: Lloyds and NatWest).There an interest asset quality point on the increasing EIR on stock and the uptick in remortgages which gives a sense of the stress households continue to be under. NPL figures for the banks are more tied to unemployment, generally, but still one to watch.

JAPAN DATA (MNI): Unemployment Rate Dips, But Detail Mixed

• JAPAN DEC JOBLESS RATE FALLS TO 2.4% FROM NOV 2.5%

Japan Dec jobs data was somewhat mixed. The jobless rate ticked down to 2.4%versus an expected 2.5% (2.5% was also the prior print). The job to applicant ratio ticked down though to 1.27, versus an expected 1.28 (1.28 was also the prior outcome). The dip in the unemployment rate is a little at odds with the fall in the job-to-applicant ratio, (see the chart below, note the job-to-applicant ratio is inverted on the chart). However, the dip in the unemployment rate was driven by a fall in the participation rate, down to 62.8% from 63.1% in Nov.

AUSTRALIA DATA (MNI): Retail Sales Downside Miss, But Little Market Reaction

AU retail sales printed at -2.7% m/m, versus -1.7% forecast. The Nov number was revised down to a +1.6% gain from +2.0% prior. The ABS noted the m/m volatility reflects the bring forward in spending to due sales in Nov. The trend was only up a touch. So overall spending is still only growing modestly.

FOREX: GBP is the Early Worst Performer in G10s

• Most G10s pairs have stayed within tight ranges, overnight and during the European early session.
• EURUSD still trade in 30 pips range.
• The EUR was under small early pressures, but failed to break the 1.0800 handle, and the initial immediate support of 1.0793, printed a 1.0796 low Yesterday and a 1.0812 low today, with the bounce aided by better GDPs in Europe.
• The Yen was the early small best performer, as Yield saw further downside continuation, but Treasury futures are off their highs, capped by the European GDP data and ahead of heavy supply on this side of the Pond.
• The SEK is now leading in G10, up 0.27%, Economic tendency, Consumer and Mfg Confidence, came above last, but these aren't real market movers and overall USDSEK stays in that 10.5145/10.3675 range it has traded within for the past 10 sessions, now at 10.41.
• Worst early performer is the Pound, albeit off its low, still down 0.27%, but still short of the next support situated at 1.2642, printed a 1.2672 low so far today.
• Looking ahead, US JOLTS is the main data remaining for the session, while ECB Vasle and Nagel are still due to speak.

EGBS: Bunds Pare Gains Following Higher-than-expected Spanish CPI

Bunds are trading flat on the day, having fallen almost 50 ticks from early session highs following this morning's higher-than-expected Spanish inflation data. OAT and BTP futures are also now little changed.

• While it is hard to interpret any significant read-throughs from the Spanish print to the Eurozone-wide figure, it nonetheless sets the tone for potential upside risks to the region's inflation data over the next few days.
• The slightly firmer-than-expected run of Q4 flash GDP figures in Spain, Italy and the Eurozone will have also factored in.
• The move off highs comes after lower-than-expected borrowing estimates from the US Treasury and China-centric worry seemed to promote a bid through Asia-Pac hours.
• Supply from Germany, Italy and Greece will have also weighed in the run-up to the respective bidding deadlines.
• German and French cash yields are unchanged/a touch higher, while 10-year periphery spreads to Bunds are generally little changed.
• Later today, ECB-speak includes the hawkish leaning Vasle (1230GMT) and Nagel (1530GMT). This morning, the usually hawkish Kazaks re-asserted the importance of labour market data as a prerequisite for rate cuts.

GILTS: Off Best Levels, Curve Twist Flattens

Matters from the continent tempered the early gilt bid, with the burden of EGB issuance and firmer-than-expected Spanish CPI data noted.

• Futures have recovered from session lows to trade +35 at 99.37 around the middle of their early 31-tick range.
• Cash gilt yields are 1.5bp higher to 1.5bp lower, with the curve twist flattening.
• The early rally was centred on expectations surrounding U.S. Tsy issuance matters and China-related worry during Asia-Pac hours.
• Domestic credit data printed on the softer side of expectations.
• Long end I/L supply saw solid demand metrics, as covered elsewhere.
• SONIA futures are flat to 4.0bp firmer, with a light flattening bias.
• STIRs are off dovish session extremes alongside the pullback from best levels in gilts.
• BoE-dated OIS prints 1bp softer to 1bp firmer on the day through ’24 contracts. ~109bp of cuts are seen through ’24 on the whole.

EQUITIES: Monday's Rally Reinforces Positive Sentiment in E-Mini S&P

Eurostoxx 50 futures traded sharply higher last week and the contract started this week’s session on a bullish note, with price holding on to its recent gains. Key resistance at 4634.00, the Dec 14 high, has been cleared. The break confirms a resumption of the medium-term uptrend and sights are on the 4700.00 handle next. Initial firm support lies at 4522.80, the 20-day EMA. Key trend support has been defined at 4402.00, the Jan 17 low. The uptrend in S&P E-Minis remains intact and Monday’s rally reinforces current conditions. Resistance at 4841.50, the Dec 28 high, has recently been cleared, confirming an extension of the price sequence of higher highs and higher lows. Moving average studies remain in a bull-mode condition too, highlighting positive market sentiment. Sights are on 4982.62 next, a Fibonacci projection. Key support lies at 4744.97, the 50-day EMA.

• Japan's NIKKEI closed higher by 38.92 pts or +0.11% at 36065.86 and the TOPIX ended 2.55 pts lower or -0.1% at 2526.93.
• Elsewhere, in China the SHANGHAI closed lower by 52.829 pts or -1.83% at 2830.527 and the HANG SENG ended 373.79 pts lower or -2.33% at 15703.45.
• Across Europe, Germany's DAX trades higher by 7.67 pts or +0.05% at 16952.33, FTSE 100 higher by 37.59 pts or +0.49% at 7670.45, CAC 40 up 17.95 pts or +0.23% at 7658.76 and Euro Stoxx 50 up 14.49 pts or +0.31% at 4653.85.
• Dow Jones mini down 50 pts or -0.13% at 38438, S&P 500 mini down 5.25 pts or -0.11% at 4949.25, NASDAQ mini down 12.25 pts or -0.07% at 17694.75.

COMMODITIES: Gold Remains in a Technical Consolidation Mode

WTI futures traded higher last week. The contract has breached resistance at $76.31, the Dec 26 high. The clear break of this hurdle undermines the recent bearish theme and highlights a stronger short-term bullish condition. A continuation higher would signal scope for a climb towards $79.56, the Nov 30 high. On the downside, initial key support lies at $74.55, the 50-day EMA. Monday’s move lower appears - for now - to be a correction. Gold remains in consolidation mode and continues to trade above the Jan 17 low of $2001.9. The recent 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 up $0.28 or +0.36% at $77.05
• Natural Gas up $0 or +0.19% at $2.059
• Gold spot up $4.44 or +0.22% at $2037.81
• Copper down $0.4 or -0.1% at $387.45
• Silver down $0.08 or -0.34% at $23.1327
• Platinum down $2.63 or -0.28% at $929.74