MNI US OPEN - Trend in US Supercore Inflation Expected to Remain Stubborn

NEWS

MNI US CPI PREVIEW: Potentially Stubborn Supercore to be Treated with Caution

Consensus puts core CPI inflation at 0.3% M/M in December, with risk seen to the downside. If analysts are correct, supercore trend rates are likely to remain very strong at 4% annualized handles, but treat with some caution as differences in methodology have seen core PCE at notably weaker rates in recent months. The extent to which volatile factors such as airfares can once again help shape the market reaction.

US/CHINA (MNI): Commerce Ministers Hold Call, China Warns On US Chip Sanctions

The Chinese Ministry of Commerce has issued comments following a call between Commerce Minister Wang Wentao and his US counterpart Gina Raimondo earlier today. MOFCOM: "The two sides engaged in in-depth and pragmatic communication on issues of mutual concern in trade and economics, focusing on implementing the important consensus reached during the meeting of the heads of state in San Francisco."

US (BBG): Haley, DeSantis Turn Final Iowa GOP Debate Into Insult Fest

Nikki Haley and Ron DeSantis immediately went on the attack in the final Republican debate before the Iowa caucuses, relentlessly accusing each other of lying and flip-flopping on issues. Both candidates presented themselves at the CNN event on Wednesday night as successors to Donald Trump, the Republican frontrunner who held forth at a town hall on Fox News as they argued.

GLOBAL (FT): AP Møller-Maersk Chief Warns Red Sea Shipping Disruption May Last for Months

The boss of shipping giant AP Møller-Maersk has warned it could take months to reopen the crucial Red Sea trading route, risking an economic and inflationary hit to the global economy, companies and consumers. Vincent Clerc, Maersk’s chief executive, told the Financial Times on Thursday that the closure of the Red Sea to most shipping after a series of attacks from Yemen’s Houthi militants was “brutal and dramatic”. He added there were “no winners” as a result of the situation, which has forced vessels to take long and costly detours around South Africa.

CRYPTO (FT): SEC Approves First Spot Bitcoin ETFs in Boost to Crypto Advocates

The US Securities and Exchange Commission has approved the first spot bitcoin exchange traded funds in a watershed moment that cryptocurrency enthusiasts are betting will draw new retail and institutional investors into the market.

RED SEA (The Times): Britain ‘On Brink of Bombing Yemen’ Over Houthi Red Sea Attacks

Britain and America are on the brink of launching military strikes against the Houthis in Yemen after repelling the largest attack yet by the Iran-backed rebels in the Red Sea. Grant Shapps, the defence secretary, suggested that military action was imminent as he warned “enough is enough” hours after carrier-based jets and destroyers shot down a barrage of drones and missiles launched by the group. “This cannot continue and we won’t allow it to continue so watch this space,” he said at a press conference in central London.

UK (The Times): Mortgage Rates Cut by UK’s Biggest Lenders as Price War Heats Up

The majority of Britain’s largest mortgage lenders have now cut mortgage rates this year to below 4 per cent, as competition between banks delivers further good news for homeowners. Santander cut some of its cheapest five-year fixed-rate deals to below 4 per cent, joining the Co-operative Bank, HSBC and Virgin Money. Barclays now tops the best buy tables for two-year fixes after cutting rates by up to half a percentage point, with a 4.17 per cent deal for those buying a property.

UK (BBG): UK Commits to Another Large Nuclear Plant in Net Zero Push

The UK will build another large-scale nuclear power plant, beyond current projects by Electricite de France SA, as the nation maps out its biggest expansion of atomic energy in 70 years. Discussions on the next site will begin once EDF and the government reach a final investment decision on the Sizewell C station, Andrew Bowie, the minister for nuclear and renewables, said in an interview. That’s expected to happen this year. Competition for a new project would also be open to other developers, potentially at the Wylfa or Moorside sites.

UK (BBG): Christmas Grocery Sales Sizzle at Tesco, Marks & Spencer

Two of Britain’s biggest retailers recorded bumper grocery sales over Christmas as inflation-hit consumers focused their spending on food rather than gifts. Tesco Plc, Britain’s biggest grocer, now expects to deliver £2.75 billion ($3.5 billion) in adjusted operating profit this year from its retail business, compared with previous guidance of as much as £2.7 billion. Tesco said it grew market share during its best-ever festive period with UK like-for-like sales rising 9.2% in the four weeks to Christmas.

CHINA (MNI): PBOC to Boost Targeted Facilities - Advisor

MNI (Beijing) The Peoples’ Bank of China will continue to inject funds into its targeted facilities, such as the Pledged Supplementary Lending programme, to shore up infrastructure and property, while Beijing may issue additional government bonds to cover a fiscal gap later this year, a prominent policy advisor told MNI in an interview. The central bank last year granted the PSL facility a CNY500 billion quota to policy banks, with more expected this year, said Zhang Ming, senior fellow and deputy director at the Institute of Finance and Banking at the Chinese Academy of Social Science.

CHINA (BBG): PBOC Provides Strongest Boost to Yuan With Fixing Since November

China’s central bank pushed back against recent yuan weakness by setting its daily reference rate for the managed currency at the widest gap to estimates since November. The People’s Bank of China set the so-called fixing at 7.1087 per dollar on Thursday, 609 pips stronger than the average estimate in a Bloomberg survey. That’s after the onshore yuan declined nearly 1% since the end of last year.

CHINA (MNI): China 2023 Auto Sales Up 12% - Association

MNI (Beijing) China sold 30.09 million vehicles in 2023, an increase of 12% y/y, according to data published by the China Association of Automobile Manufacturers Thursday. New energy vehicles sales reached 9.4 million units, up 37.9% y/y and increasing market share by 5.9pp to 31.6%. Exports hit 4.91 million vehicles, a year-on-year increase of 57.9%, the association said.

CHINA (BBG): China Relaxes Requirements for Visa on Arrival to Boost Tourism

China will ease some visa requirements to make it easier for foreigners to travel for business, education and tourism, a move that comes as the government seeks to rejuvenate a slowing economy. The National Immigration Administration outlined five steps including letting foreigners apply for re-entry visas, simplifying visa application, and allowing those who need to enter China urgently for work or other reasons to apply for port visas, or visa on arrival, China’s state broadcaster reported Thursday.

BOJ (MNI): BOJ Mulls Framework Post Likely April Rate Liftoff

The Bank of Japan is on course to raise its benchmark overnight rate from negative levels as soon as its April 25-26 meeting, but officials remain uncertain as to what will then become the main interest rate target, MNI understands. The Bank currently applies a negative 0.1% interest rate on banks’ excess reserves, but once this is moved into positive territory it will have the option of selecting either the unsecured overnight call loan rate or the interest rate on excess reserves as its new main policy rate, as detailed by Governor Kazuo Ueda to parliament last month.

BOJ (MNI): Regions Recovering Moderately - BOJ Branches

All nine regional Bank of Japan branch managers said their respective economies, despite being affected by a slowdown in the pace of recovery in overseas economies and price rises, had either picked up or recovered moderately, the BOJ’s regional economic report said on Thursday.

JAPAN (MNI): Special Task Force Starts Debate on Future of LDP Factions

A special task force created to oversee reforms of Japan's ruling Liberal Democratic Party (LDP) held its first meeting today, with former Environment Minister Shinjiro Koizumi backing the call for the dissolution of the party's factions, which have organised internal politics since the creation of the LDP in 1955. The idea to get rid of factions was proposed by former Prime Minister Yoshihide Suga, who became part of the newly created task force. Suga himself has been unaffiliated for most of his political career and has been critical of his successor Fumio Kishida for a decision to remain a faction head while serving as PM.

RBA (MNI): Updated RBA Goals to Push Hawkish Stance - Ex Officials

The Reserve Bank of Australia’s updated agreement with the federal treasurer will put upward pressure on the cash rate over time, as the Bank’s inflation target shifts lower and it applies a more narrow definition of full employment, former officials told MNI. Peter Tulip, chief economist at the Centre for Independent Studies and a former senior research manager at the RBA, said the wording of the updated Statement on the Conduct of Monetary Policy – the key document which dictates the bank’s goals – implied the Reserve would need to adopt a more hawkish stance.

BOK (MNI): Governor Rules Out Premature Cuts, Holds Rate

Bank of Korea Governor Rhee Chang-yong on Thursday ruled out premature rate cuts, but stressed the need for further hikes had decreased, while pledging to maintain a restrictive policy stance for some time. The BOK monetary policy board on Thursday decided unanimously to keep its Base Rate unchanged at 3.50% amid persistent concerns over the weaker economy and despite elevated inflation rates for the eighth consecutive meeting. The move was in line with expectations.

ARGENTINA (BBG): Argentina Wins Key IMF Support With Deal to Unlock $4.7 Billion

The International Monetary Fund gave President Javier Milei’s economic plans a vote of confidence by approving a review of Argentina’s $44 billion program that will likely unlock a larger-than-expected loan disbursement. The deal, if backed by the IMF’s executive board, will give Argentina access to $4.7 billion, the Fund said in a statement late on Wednesday. That’s more than the $3.3 billion initially expected, and it buys Milei time to honor debt repayments to the Fund before deciding whether to continue with the current program brokered by his predecessor or negotiate a new one.

DATA

SPAIN DATA (MNI): November IP Picks Up, But Outlook Remains Sluggish

Spanish industrial production for November grew on an annual basis for the first time in 8-months, at +0.8% Y/Y (SWDA, vs a downwardly revised -1.4% prior). There was no consensus for the annual print. The industrial/manufacturing outlook in Spain appears somewhat brighter than in Germany (which this week reported a 6th consecutive Y/Y fall), but remains weak according to the latest survey data. The Spanish manufacturing PMI remained sluggish below 50 in December, and while the latest EC Industry survey picked up to -6.5 (vs -9.6 prior), it was the 18th consecutive reading below zero.

ITALY NOV IP -1.5% M/M, -3.1% Y/Y (MNI)

FOREX: EUR Strength Falters, Markets Pre-Position for CPI

• EUR has been unable to maintain the strength seen through the Wednesday close, with EUR/USD fading off the early Asia-Pac session high at 1.0989. This has seen prices fade through the morning to dip back below 1.0975 and ease off the sharp rally through yesterday's WMR fix.
• Resultingly, EUR is the poorest performer in G10 ahead of the NY crossover, with the much-watched strength in EUR/JPY fading after a print at 160.01. Data and newsflow has been light and/or ineffective, leaving markets to pre-position ahead of the CPI print later today.
• NZD trades to the better, but the daily gains have made little dent in the broader NZD/USD chart. The subsequent retracement in EUR/NZD tips prices off the YTD high posted yesterday at 1.7639, and the sharply negative trend in the 50-dma points to near-term downward momentum. Cross has so far stopped dead on 1.7541, the 38.2% retracement for the Dec - Jan upleg, opening 1.7511 intraday, ahead of 1.7443 and the bear trigger of 1.7383.
• US CPI data takes focus going forward, with markets expecting headline Y/Y to tick higher to 3.2%, while Core Y/Y slows to 3.8% from 4.0%. Supercore trend rates are likely to remain very strong at 4% annualized handles, but the data may be treated with caution as differences in methodology have seen core PCE at notably weaker rates in recent months.
• Outside of CPI, ECB's Vujcic takes part in an MNI videoconference at 1400GMT/0900ET, with Fed's Mester & Barkin and ECB's Lagarde also set to make appearances.

EGBS: Firmer Following a Smaller Issuance Slate vs Last Few Days; US CPI Eyed

Core/semi-core EGBs have firmed through the European morning as markets await today's US CPI release at 1330 GMT / 1430 CET.

• Thursday's sovereign/IG issuance slate is substantially smaller than the past few sessions, which has which has helped relieve pressure on the space.
• Additionally, today's Irish 10Y syndication has shown strong demand indications, following on from similar dynamics in Italy and Spain's recent syndications.
• Bunds are currently up 36 ticks at 135.52 but remain within yesterday's range. German and French cash curves have bull flattened.
• Peripheries are once again tighter to Bunds, with the 10Y BTP/Bund spread now below 160bps for the first time since before Christmas. Short-end BTP gains were capped in the lead-up to this morning's new 3Y BTP supply.
• Aside from the aforementioned US CPI release, European markets look to ECB-speak from President Lagarde and the usually hawkish Vujcic (the latter will speak at an MNI event at 1400 GMT).

GILTS: Still a Little Firmer on the Day

Gilt futures trade a handful of ticks shy of the top of their 32-tick range, last +11 at 100.35.

• The contract sticks comfortably within the range observed yesterday.
• That leaves familiar technical parameters that we have covered on many occasions untouched.
• Cash gilt yields are 1-4bp lower across the curve, with the belly outperforming.
• U.S. CPI data dominates the scheduled macro risk slate today, while the easing of the wider European IG issuance burden vs. the last couple of days provides some spill over tailwinds, at least for now.
• Domestic headline flow and IG issuance remain muted.
• SONIA futures are 0.5-1.5bp firmer through the blues, operating in narrow ranges thus far.
• BoE-dated OIS contracts are flat to 2.5bp softer through ’24 MPC meetings, showing ~121bp of cuts through ’24.

EQUITIES: E-Mini S&P Extends Recovery from Last Friday's Lows

The primary trend direction in Eurostoxx 50 futures remains up and the recent move lower is considered corrective. Moving studies are in a bull-mode position, signalling a rising trend cycle. Key short-term support to watch is 4445.90, the 50-day EMA. A break of this average 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 and the contract is again trading higher. Key resistance and the bull trigger is at 4841.50, the Dec 28 high. Clearance of this level would resume the uptrend and open 4854.75, a Fibonacci projection. Support at the 20-day EMA of 4760.92 has recently been pierced. A clear break of this average would strengthen a short-term bearish threat and open the 50-day EMA, at 4668.13.

• Japan's NIKKEI closed higher by 608.14 pts or +1.77% at 35049.86 and the TOPIX ended 38.39 pts higher or +1.57% at 2482.87.
• Elsewhere, in China the SHANGHAI closed higher by 8.948 pts or +0.31% at 2886.65 and the HANG SENG ended 204.76 pts higher or +1.27% at 16302.04.
• Across Europe, Germany's DAX trades higher by 65.95 pts or +0.4% at 16756, FTSE 100 higher by 12.56 pts or +0.16% at 7664.81, CAC 40 up 29.31 pts or +0.39% at 7455.39 andEuro Stoxx 50 up 21.34 pts or +0.48% at 4490.39.
• Dow Jones mini up 37 pts or +0.1% at 37974, S&P 500 mini up 8 pts or +0.17% at 4828.5, NASDAQ mini up 58.5 pts or +0.35% at 17004.5.

COMMODITIES: WTI Future Moving Average Studies Remain in a Bear-Mode Position

Trend conditions in WTI futures are unchanged and the signals remain bearish. Resistance to watch is $74.62, 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. Moving average studies remain in a bear-mode position, highlighting a downtrend. The trigger for a resumption of the downtrend is $67.98, the Dec 13 low. Gold is trading closer to its recent lows following the pullback from $2088.5, the Dec 28 high. Price is trading ahead of the next key support at $2013.2 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 up $1.16 or +1.63% at $72.53
• Natural Gas down $0.05 or -1.58% at $2.992
• Gold spot up $7.65 or +0.38% at $2032
• Copper up $2.25 or +0.6% at $380.3
• Silver up $0.09 or +0.37% at $22.9865
• Platinum up $4.22 or +0.46% at $926.96