MNI US OPEN - JPY Slides as Markets Contemplate Amamiya Governorship

NEWS

ECB (BBG): Significant Data Shock Needed to Avoid 50bp Hike - Kazaks

The European Central Bank would need to see data that “significantly differ” from what’s currently anticipated to avoid raising interest rates by 50 basis points in March as planned, Governing Council member Martins Kazaks said in a tweet.

ECB (BBG): ECB Must ‘Show Its Teeth’ to Reach Inflation Goal - Holzmann

The European Central Bank should actively fight inflation until people feel price stability in their everyday lives, according to Governing Council member Robert Holzmann. “The risk of over-tightening seems dwarfed by the risk of doing too little,” Holzmann told a conference Monday in Budapest. “Monetary policy must continue to show its teeth until we see a credible convergence to our inflation target.”

ECB (BBG): Rate Hikes ‘Far from Over’ Despite Lower Inflation - Vasle

Despite a slowdown in inflation, the European Central Bank is far from stopping interest-rate increases, according to Governing Council member Bostjan Vasle. “For the time being, we are firmly determined to continue with the increases,” Vasle told Slovenian state news agency STA in comments released Monday.

BOE (MNI): Mann Views Next Move More Likely Hike Than Cut

The Bank of England Monetary Policy Committee should not adopt a 'wait-and-see' approach and that is should be ready to hike further, Catherine Mann said Monday. The BoE forecasts published this month suggest that little further tightening if any is needed to get inflation back to target, but Mann argued that uncertainty over where the turning point is and the outlook did not justify policy inaction.

TURKEY (BBG): Strongest Quake in Decades Kills Hundreds in Turkey, Syria

One of the most powerful earthquakes to hit the Middle East in years has killed hundreds of people in Syria and Turkey, and forced a halt in crude oil flows to a key export terminal. Striking before dawn in the Turkish city of Gaziantep, the 7.7 magnitude quake was felt as far as Egypt and Cyprus.

JAPAN (BBG): Yen Retreats After Report Amamiya Approached to Become BOJ Chief

The Japanese government has approached Bank of Japan Deputy Governor Masayoshi Amamiya about succeeding Haruhiko Kuroda at the helm of the central bank, according to a Nikkei report that sent the yen tumbling. Japan’s deputy government spokesman later refuted the report, saying it wasn’t based on fact, but the currency remained weaker suggesting that at least some investors believed it had substance.

JAPAN (MNI): BOJ May Be Confident of 2% Target in April

The Bank of Japan's confidence in the achievement of its 2% inflation target could firm significantly as soon as April, paving the way for the new governor to consider an exit from yield curve control, a former BOJ chief economist said.

JAPAN (MNI): BOJ Must Support Economy with Easy Policy - Kuroda

Bank of Japan Governor Haruhiko Kuroda said on Monday that the BOJ must firmly support the economy with easy policy in order to achieve its 2% price target accompanied with wage hikes in a stable and sustainable manner.

MNI RBA Preview: February 2023 - Inflation to Drive Another 25bp

The RBA is widely expected to hike rates 25bp to 3.35% at its February 7 meeting given the elevated Q4 CPI data that showed an increase in domestically-driven inflation pressures. Thus, the focus is likely to be on any change in tone of the statement and indications of how the RBA's forecasts have changed. The official forecasts are published in the Statement on Monetary Policy on February 10 but the flavour of the revisions is usually in the meeting statement.

AUSTRALIA/CHINA (MNI): Tensions Continue to Thaw

RTRS runs comments from Australian Trade Minister Farrell in the wake of his virtual call with his Chinese counterpart. Farrell noted that he will travel to Beijing to meet with his counterpart in the near future, while revealing that the call struck an agreement regarding enhanced dialogue at all levels of government, which will serve as a pathway back to the timely and full resumption of trade between the two nations.

CHINA (MNI): China's Property Market May Stop Falling in Q2

China's property market is expected to bottom out as early as the second quarter should a series of stimulus moves be implemented promptly and effectively, Securities Times reported citing analysts on Monday. Local governments have sought to support real estate by lowering mortgage rates and downpayments, which would bolster demand in first-tier and second-tier cities.

DATA

EUROZONE DATA (MNI): Dec Retail Contraction Adds to Q4 Consumer Spending Drag

• EUROZONE DEC RETAIL SALES -2.7% M/M (FCST -2.5%); NOV +1.2% M/M
• EUROZONE DEC RETAIL SALES -2.8% Y/Y (FCST -2.7%); NOV -2.5% Y/Y

Euro area retail sales contracted by -2.7% m/m and -2.8% y/y, slightly worse than expectations and signaling weak holiday season spending. Food/drinks/tobacco sales fell by -2.9% m/m and non-food by -2.6%, whilst sales increased by +2.3% m/m for auto fuels. This is in line with the stagflationary end to 2022, which saw a marked decline in demand for goods as consumers felt the heat of high energy and food costs.

EUROZONE JAN CONSTRUCTION PMI 46.1; DEC 42.6 (MNI)

UK DEC CONSTRUCTION PMI 48.4 (FCST 48.5); DEC 48.8 (MNI)

GERMAN DATA (MNI): German Factory Order Boost Masks Underlying Weakness

• GERMANY DEC FACTORY ORDERS +3.2% M/M (FCST +2.0%); NOV -4.4%r M/M
• GERMANY DEC FACTORY ORDERS -10.1% Y/Y (FCST -11.6%); NOV -10.2%r Y/Y

German manufacturing new orders recorded a robust end to Q4, expanding by +3.2% m/m (vs +2.0% expected), largely rebounding from the -4.4% m/m contraction in November. The headline figure masks underlying weakness, as excluding large-scale orders a -0.6% m/m decline was recorded. The -3.3% m/m fall in consumer goods orders reiterates the weak demand environment.

AUSTRALIA DATA (MNI): Retail Sales Volumes Down In Q4, Pressures Impacting Budgets

• AUSTRALIA DEC RETAIL SALES -3.9% M/M

Inflation adjusted retail sales fell less than expected in Q4. They were down0.2% q/q and up 1.8% y/y, after an upwardly revised +0.3% q/q in Q3.This was the first drop since the Covid-affected Q3 2021 and the first since Q4 2018pre-pandemic. It is another piece of evidence that price pressures and rate hikes are impacting consumer behaviour. The RBA will be pleased to see demand coming off the boil but will be monitoring developments closely.

AUSTRALIA DATA (MNI): Inflation Gauge Signals Further Step Up in Inflation in January

The January Melbourne Institute inflation gauge rose strongly to 6.4% y/y from 5.9%, a new series high. The trimmed mean was also higher at 5.3% y/y from 4.2%. Both series rose 0.9% m/m, which is a concern. After the new monthly CPI rose to 8.4% y/y in December, this increase in the MI inflation gauge for January is not good news and may signal that inflation is yet to peak and could be proving sticky.

FOREX: JPY Slides as Markets Contemplate Amamiya as Next BoJ Governor

• The USD is on the front foot early Monday, with markets adding to the post-payrolls gains to put the USD Index at the best levels since early January and within range of the next key level: the 50-dma at 103.71. Clearance here would be the first since Q1 2022.
• JPY is comfortably the poorest performer following spurious reports in the Nikkei overnight that cited current BoJ deputy governor Amamiya as the name-in-the-frame to take over from Kuroda in a few months' time. Despite very swift denials from government spokespeople, markets have taken the prospect of an Amamiya adminstration as a signal of continuity for ultra-easy policy - resulting in USD/JPY testing solid resistance at 132.67.
• The greenback is second only to the CHF, which is the firmest currency in G10 - gaining alongside a pullback for global equity markets. The benchmark EuroStoxx 50 is lower by close to 1.5% at pixel time.
• Datapoints are few and far between Monday, with the central bank speaker slate similarly quiet. BoE's Pill is on the docket, but is not expected to cover anything outside of last week's monetary policy report.

BONDS: Core FI Continues Its Post-Payrolls Drift Lower

• After moving lower in early Asian trading as local market participants reacted to the much stronger than expected US employment and ISM services prints on Friday, core fixed income has continued to drift lower in the European timezone as markets continue to reassess terminal rate pricing higher.
• Gilts are the underperformers, after having seen big moves following last week's MPC meeting with gilt futures now largely back to where they were immediately ahead of the meeting.
• Today's calendar is a little on the light side, but there will be continued focus on the fallout of the Chinese balloon that drifted over US soil.
• This week's major economic data is backloaded with German inflation, UK activity data and Michigan inflation expectations data all due on Thursday or Friday.
• TY1 futures are down -0-15 today at 113-30+ with 10y UST yields up 6.2bp at 3.588% and 2y yields up 8.3bp at 4.374%.
• Bund futures are down -0.77 today at 137.28 with 10y Bund yields up 6.5bp at 2.254% and Schatz yields up 5.0bp at 2.588%.
• Gilt futures are down -0.91 today at 106.12 with 10y yields up 11.0bp at 3.162% and 2y yields up 14.7bp at 3.347%.

EQUITIES: E-Mini S&P Price Action Confirms Resumption of Bull Cycle, Despite Latest Pullback

The EUROSTOXX 50 futures trend needle continues to point north. Resistance at 4206.00, the Jan 18 high, has been breached. The clear break confirms a resumption of the current uptrend and paves the way for gains towards 4269.50, a Fibonacci projection. Note that the trend remains overbought. A pullback, if seen, would represent a healthy correction. A break of 4097.00, the Jan 19 low, would signal the start of a short-term bear cycle. S&P E-Minis traded higher last week and in the process cleared recent highs to confirm a resumption of the current bull cycle that started Dec 22. A key resistance and a bull trigger at 4180.00, the Dec 13 high, has been pierced. A clear break of this level would confirm a resumption of a broader uptrend and open 4250.00, the Aug 26 2022 high. Initial firm support lies at 4007.50, the Jan 31 low. The latest pullback is considered corrective.

• Japan's NIKKEI closed higher by 184.19 pts or +0.67% at 27693.65 and the TOPIX ended 8.96 pts higher or +0.45% at 1979.22.
• Elsewhere, in China the SHANGHAI closed lower by 24.708 pts or -0.76% at 3238.698 and the HANG SENG ended 438.31 pts lower or -2.02% at 21222.16.
• Across Europe, Germany's DAX trades lower by 135.07 pts or -0.87% at 15341.48, FTSE 100 lower by 61.39 pts or -0.78% at 7840.3, CAC 40 down 88.89 pts or -1.23% at 7145.05 and Euro Stoxx 50 down 51.23 pts or -1.2% at 4206.75.
• Dow Jones mini down 182 pts or -0.54% at 33780, S&P 500 mini down 27.5 pts or -0.66% at 4120.5, NASDAQ mini down 106 pts or -0.84% at 12518.75.

COMMODITIES: Sharp Friday Sell-Off Reinforces Bearish WTI Future Conditions

A sharp sell-off on Friday in WTI futures has reinforced current bearish conditions. The move lower has exposed $72.74, Jan 5 low and the next key support. A break of this level would strengthen the current bearish theme and expose $70.56, the Dec 9 low and a bear trigger. Moving average studies are in a bear-mode position and this highlights current market sentiment. Initial firm resistance is seen at $78.56, the 50-day EMA. Trend conditions in Gold are bearish for now, as the yellow metal enters a corrective cycle. This follows a strong sell-off on Thursday and Friday and sights are on the 50-day EMA, at $1853.1. This average represents a key support and if breached, would strengthen a bearish chase and suggest scope for a deeper pullback. On the upside, key resistance and the bull trigger, has been defined at $1959.7, the Feb 2 high.

• WTI Crude down $0.1 or -0.14% at $73.34
• Natural Gas down $0.03 or -1.12% at $2.383
• Gold spot up $8.93 or +0.48% at $1873.96
• Copper down $1.75 or -0.43% at $404
• Silver up $0.11 or +0.49% at $22.464
• Platinum up $1.31 or +0.13% at $977.83