NEWS

EQUITIES (MNI): Earnings Season Kicks Off With Banks, Financials

Quarterly earnings season begins next week, with 4.5% of the S&P 500 by market cap set to report. Banks and financials start the cycle, with JPMorgan, Bank of America, Citigroup and Wells Fargo due among others. Earnings reach critical mass later in the quarter, with 50% of the index set to have reported by Feb 1st, making earnings releases less relevant for the index from then onwards.

ECB (BBG): ECB’s Kazaks Sees No Reason for Rate Cuts This Year: Reuters

European Central Bank Governing Council member Martins Kazaks rejected market bets that interest rates may be lowered this year, according to an interview with Reuters. “It would take a deep recession with a sizable jump in unemployment for inflation to sink and thus push for rate cuts,” Kazaks was cited as saying. “But that is not likely, given the current macro outlook.”

ECB (BBG): ECB’s Vujcic Says Monetary-Tightening Cycle Isn’t Over Yet

The end of the monetary-tightening cycle hasn’t been reached yet as inflation remains high, European Central Bank Governing Council member Boris Vujcic told Portuguese newspaper Jornal de Negocios in an interview. “The ECB’s response should be to continue to tighten monetary policy,” the Croatian official said.

EU (MNI): Swedish Gov't Agreement Could Derail Council of EU Presidency Aims

Swedish Prime Minister Ulf Kristersson is set to meet with European Commission President Ursula von der Leyen in the northern city of Kiruna later today for talks and a press conference as Sweden takes on the sixth-month rotating presidency of the Council of the European Union.

JAPAN (MNI): Japan 10-Yr JGB Yield Hits 0.562%; Above BOJ Range

The yield on the 10-year Japanese government bonds rose as high as 0.560% in Friday trade, above the upper limit of the Bank of Japan’s recently amended target range of around -0.5% and +0.5%, before falling back to trade around 0.52%. The rise in yields was caused by persistent speculation that the BOJ may tweak monetary policy at the January 17-18 meeting, as distortion of financial markets continued despite the December decision.

CHINA (MNI): PBOC Monitoring Inflation, Keeps Yuan Flexible

MNI (Beijing) - The People Bank of China will monitor inflation for signs of strengthening and enhance the flexibility of the yuan exchange rate, officials of the Bank told reporters on Friday in a briefing. Alongside that, the Bank will make efforts to boost domestic consumption and support employment via ample liquidity and lower borrowing cost, officials of the Bank told reporters on Friday in a briefing.

CHINA (MNI): New Policy Tools "Under Consideration"

MNI (Beijing) - New structural policy tools to support the real estate sector are "under evaluation", Zou Lan, Head of Monetary Policy at the PBOC said Friday. Speaking at a press conference on Friday, Zou said the new tools, which will be announced at a later date, are structural tools designed to support mortgage loans, rental mortgages, and private enterprise bond financing.

BOK (MNI): Bank of Korea Raises Policy Rate By 25bp to 3.50%

The Bank of Korea on Friday raised its policy interest rate to 3.50% from 3.25% , maintaining its fight against inflationary pressures, although signalling further hikes will be judged against the growth and financial stability outlooks. The move was largely in line with expectations.

DATA

UK DATA (MNI): UK GDP In Upside Surprise in Nov on World Cup Boost

UK GDP surprised to the upside in November, with the monthly growth at 0.1% m/m, beating expectations of a decline of 0.3%, the Office for National Statistics said Friday. Following on from the 0.5% gain in October, that leaves GDP in a better position than feared and a decline of 0.3% would be needed in December for a flat quarterly reading.

• UK NOV GDP +0.1% M/M, -0.3% 3MM, +0.6% 3M Y/Y
• UK NOV TRADE BALANCE GBP -1.8BN
• UK NOV IND PROD -0.2% M/M, -5.2% Y/Y
• UK NOV CONSTRUCTION OUTPUT +0% MM, +0.3% 3M3M, +4% YY
• UK NOV SERVICES INDEX +0.2% M/M, -0.1% 3MM

EUROZONE NOV IP +1% M/M, +2% Y/Y (MNI)

FRANCE DEC CPI -0.1% M/M, +5.9% Y/Y (MNI)
FRANCE DEC HICP -0.1% M/M, +6.7% Y/Y (MNI)

ITALY NOV IP -0.3% M/M, -3.7% Y/Y (MNI)

SPAIN DEC HICP +0% M/M, +5.5% Y/Y (MNI)

SWEDEN DEC CPIF +10.2% Y/Y (MNI)

CHINA DATA (MNI): China Still Facing Downward Export Pressure - GAC

MNI (BEIJING) - China faces further downward pressure on exports in 2023 due to the volatile external environment, a spokesperson from the General Administration Of Customs said Friday. However, China’s economy is on an upward trajectory despite foreign trade difficulties, due to its strong fundamentals remaining unchanged.

• CHINA 2022 TRADE SURPLUS +CNY5.87 TRLN IN YUAN TERM: MNI CAL
• CHINA 2022 TRADE SURPLUS +$877.6 BLN
• CHINA DEC EXPORTS -9.9% Y/Y; NOV -8.7% Y/Y
• CHINA 2022 EXPORTS +10.5% Y/Y IN YUAN TERM
• CHINA DEC IMPORTS -7.5% Y/Y; NOV -10.6% Y/Y
• CHINA 2022 IMPORTS +4.3% Y/Y IN YUAN TERM

FOREX: USD/JPY Extends Losses After Key Break of Support

• JPY is the strongest currency in G10 for a second session, with USD/JPY extending the break lower after yesterday's support at 129.52 gave way. The move has hastened the swift formation of a death cross (50-dma < 200-dma) for the first time since 2020.
• This sequence highlights the clear downtrend, making further weakness likely. The focus going forward is on 127.53, the May 31, 2022 low. Significantly, this week's downtick is yet to trigger any technically oversold signals, with the 14-day RSI holding above levels that would suggest momentum has gone too far.
• The greenback is moderately weaker as markets continue to react to yesterday's CPI print, with Fed hike expectations for February waning further. Around 5 bps of tightening has been knocked off market pricing after yesterday's release, helping keep the USD Index on the backfoot.
• UK GDP data came in ahead of expectations for November, with activity around the World Cup helping boost growth. The surprise growth in the month works against expectations of an imminent recession in the UK, and has helped GBP/USD recover well off the post-CPI lows on Thursday.
• Focus turns to the imminent beginning of earnings season, with banks and financials starting proceedings today. Reports are due from Bank of America, BNY Mellon, Blackrock, Citigroup, JPMorgan and Wells Fargo, among others.

BONDS: Core FI Off Earlier Highs

• Core fixed income moved higher in early European trading but since around 8:45GMT / 3:45ET we have moved off the highs. These moves higher were in spite of UK activity data coming in better than expected.
• Terminal rate expectations have also moved off their lows over the past 90 minutes of trading, too.
• There were no headlines to drive the moves off the highs, but we note that there has been a significant reduction in terminal rate pricing and ensuing core FI rally over the past week or so, so we may have just moved too far, too fast.
• Looking ahead to today's events, we will receive US import / export price data at 13:30GMT / 8:30ET but the key release of the day will be Michigan inflation expectations data at 15:00GMT / 10:00ET.
• In terms of speakers the Fed's Kashkari and Harker are the highlights (although the latter spoke yesterday).
• TY1 futures are up 0-1 today at 115-08+ with 10y UST yields up 0.7bp at 3.452% and 2y yields down -3.0bp at 4.117%.
• Bund futures are up 0.66 today at 138.88 with 10y Bund yields down -4.9bp at 2.104% and Schatz yields down -3.0bp at 2.519%.
• Gilt futures are up 0.36 today at 104.54 with 10y yields down -2.5bp at 3.306% and 2y yields down -0.5bp at 3.401%.

EQUITIES: E-Mini S&P Futures Clear 4000.0 Handle, Targeting 4043.0 Dec 15 High Next

EUROSTOXX 50 futures bullish conditions remain intact and the contract traded higher again yesterday. Futures have cleared resistance at 4043.00, the Dec 13 high and a bull trigger. The break represents a key short-term positive development and paves the way for gains towards 4175.50 next, the Feb 16 high (cont). Moving average studies are in a bull-mode condition, reinforcing the current positive trend condition. Initial support lies at 3944.00. S&P E-Minis traded higher again Thursday. The contract has this week cleared resistance at the 50-day EMA and this has strengthened the short-term bullish condition. Price has also traded above the 4000.00 handle to open 4043.00, the Dec 15 high. Key support and the bear trigger has been defined at 3788.50, the Dec 22 low. A reversal lower and a break of this level would resume bearish activity.

• Japan's NIKKEI closed lower by 330.3 pts or -1.25% at 26119.52 and the TOPIX ended 5.1 pts lower or -0.27% at 1903.08.
• Elsewhere, in China the SHANGHAI closed higher by 31.855 pts or +1.01% at 3195.306 and the HANG SENG ended 224.56 pts higher or +1.04% at 21738.66.
• Across Europe, Germany's DAX trades lower by 2.44 pts or -0.02% at 15056.08, FTSE 100 higher by 46.87 pts or +0.6% at 7841.05, CAC 40 up 29.68 pts or +0.43% at 7005.14 and Euro Stoxx 50 up 15.74 pts or +0.38% at 4142.01.
• Dow Jones mini down 25 pts or -0.07% at 34293, S&P 500 mini down 3.75 pts or -0.09% at 3999.75, NASDAQ mini down 15.75 pts or -0.14% at 11518.

COMMODITIES: Bullish Gold Targets 1919.9 Apr 29 High

WTI futures traded higher Thursday, extending the recent recovery. A continuation higher would signal scope for a test of resistance at $81.50, the Jan 3 high and a bull trigger. Clearance of this hurdle is required to strengthen a bullish theme. The broader trend outlook still appears bearish. A reversal lower would expose the bear trigger that has been defined at $70.31, the Dec 9 low. Trend conditions in Gold remain bullish and the yellow metal traded higher Thursday, extending the current uptrend. This week’s climb maintains the positive price sequence of higher highs and higher lows and note that moving average studies are in a bull mode position - reflecting the current uptrend. The yellow metal has traded above $1900.00, this opens $1919.9, the Apr 29, 2022 high. Support to watch lies at $1835.4, the 20-day EMA.

• WTI Crude up $0.23 or +0.29% at $78.7
• Natural Gas down $0.03 or -0.76% at $3.673
• Gold spot up $10.97 or +0.58% at $1907.7
• Copper down $2.25 or -0.54% at $417.55
• Silver up $0.12 or +0.51% at $23.8958
• Platinum up $6.66 or +0.62% at $1075.45