MNI US OPEN - US Jobs Growth Seen Softer, But Revisions Key

NEWS

MNI US PAYROLLS PREVIEW: A Potential Test of Powell’s Higher Bar to a March Cut

Bloomberg consensus sees nonfarm payrolls rising 185k in January, primary dealers see a median 205k. All change from revisions: The establishment survey will be affected by annual benchmark revisions, new seasonal factors and updated estimates for the net birth/death model, whilst the household survey (e.g. unemployment rate) will be adjusted for new population controls.

US (BBG): Fed’s Powell to Discuss Rate Cuts, Inflation Risks on CBS Sunday

Federal Reserve Chair Jerome Powell will appear on CBS News’s 60 Minutes this Sunday and will discuss inflation risks, expected rate cuts and the banking system, among other topics, the network said. CBS announced his appearance on the social media platform X on Thursday, the same day that the interview was conducted. Powell last appeared on the program in April 2021.

MIDEAST (MNI): Reports: IRGC Adviser Killed in Strike; Raisi: 'We Won't Be Bullied'

Wires reporting that according to a 'semi-official Iranian news outlet' an Iranian Revolutionary Guards Corps (IRGC) adviser has been killed in an Israeli airstrike on a target south of the Syrian capital Damascus. Tzvi Joffre at the Jersualem Post on X: "Iranian media reporting that a member of the IRGC named Saeed Alidadi was killed in the airstrikes." The strike comes as the IRGC is believed to be withdrawing many of its senior figures from Syria and Iraq with the expectation that they could be targets for US strikes.

GERMANY (BBG): Germany to Channel €1 Billion to Critical Raw Material Needs

The German government earmarked about €1 billion ($1.1 billion) for raw materials investments as it seeks to reduce dependency on producers such as China for critical minerals in high-tech and green projects, according to people familiar with the plan. A selection process will be established to determine which projects — including in extraction, processing and recycling materials — are eligible, the people said, speaking on condition of anonymity.

CHINA (MNI): China Likely to Grow by 5% in 2024 - Advisor

MNI (Beijing) The Chinese economy is expected to grow by 5% in 2024, as consumption and manufacturing investment will likely further recover amid more proactive macroeconomic policies, and upcoming new reforms will help lift expectations, said a policy advisor in an interview with the PBOC-run magazine China Financialyst.

JAPAN (BBG): Japan Sees Debt-Service Costs Hitting $228 Billion in FY2027

The Japanese government sees its annual debt servicing costs rising steadily in coming years to more than $225 billion as it continues to issue fresh bonds to fund spending and as changes in central bank policy push up interest rates. Debt-servicing costs will climb to ¥33.4 trillion ($228 billion) in the year starting April 2027, according to estimates released Friday by the finance ministry, an increase of almost 24% from the coming fiscal year.

RBA (MNI): Board Likely to Hold Cash Rate at 4.35%

The Reserve Bank of Australia board will strongly consider holding the cash rate steady at 4.35% in its first board meeting of 2024 over Feb 5-6, as it maintains a cautious stance despite a faster-than-expected decline in inflation. While Governor Michele Bullock struck a hawkish tone in late 2023, recent quarterly and monthly inflation reads show inflation falling fast, which will also prompt the RBA to revise its forecasts within February’s Statement on Monetary Policy due to be published alongside the cash-rate decision.

RBA (MNI): RBA to Cut by June - Ex-staffer

The Reserve Bank of Australia may cut the cash rate by June to stay ahead of the curve as inflation falls faster than expected, driven by eased supply-side constraints, a former RBA economist told MNI. Isaac Gross, economist at Monash University and RBA economist between 2011-2018, noted the significant fall in quarterly trimmed mean CPI will lead the Reserve to fundamentally change its forecasts, bringing forward the expected return of inflation to its 2-3% target.

CORPORATE (BBG): Meta, Amazon Surge by $272 Billion as Cost Cuts Cheer Investors

Meta Platforms Inc. and Amazon.com Inc. spent 2023 cutting costs and re-focusing their businesses. It was a strategy that upended the lives of displaced tech workers in Seattle and Silicon Valley, but appears to have paid off handsomely for investors who are likely to continue reaping benefits. Both companies reported better-than-expected earnings on Thursday, sending their stock prices soaring by a combined $272 billion in premarket trading and validating the belt-tightening strategies that defined the tech industry’s past 16 months.

DATA

GERMANY DATA (MNI): VDMA Machine Orders Suggest Ongoing Caution Among Domestic Producers

VDMA Machinery Orders for December came in at -6% Y/Y (vs -13% prior) in volume terms (the improvement driven by an increase in non-euro area orders). Orders were down -9%Y/Y looking at the 3-month period between Oct-Dec compared with the same period in 2022 (vs -12% prior). For 2023 in total, machine orders printed at -12% Y/Y. The 3M measure was driven lower by domestic orders (-15% 3M/Y), suggesting ongoing caution among domestic producers. Foreign orders decreased less severely at -6% 3M/Y.

FRANCE DEC INDUSTRIAL PRODUCTION +1.1% M/M, +0.9% Y/Y (MNI)
FRANCE DEC MANUFACTURING OUTPUT +1.2% M/M, +0.9% Y/Y (MNI)

FOREX: Attention Remains Squarely on the US Employment Data

• The Dollar leans in the red going into the European session, weighted by the recovery in Equities Yesterday and into the overnight session.
• The Greenback tested intraday low against the GBP, EUR, and resistance in Cable seen towards 1.2775 High Jan 24, held in early trade, after printing a 1.2772 high, now at 1.2760.
• Overall the USD is down across G10s over a 5 days period, and today, AUD is the best performer, up 0.37%, aided by the recovery in Risk.
• The pound extended some gains against the Dollar, still not yet the best performer, but slowly catching the AUD, AUD leads up 0.47%.
• The Yen saw some unwind, after trading at its highest in 12 sessions against the Dollar, and despite the lower US Yield, the Yen is on the back foot against the EUR, GBP, USD, AUD, and is the only Currency down against the Dollar in G10, with the NOK.
• Some market participants will look at 147.11, Yesterday's high for initial resistance in the USDJPY.
• Looking ahead, focus is squarely on the US NFP/AHE.

BONDS: Yields Hold Higher on the Day, NFPs & BoE’s Pill Eyed Later

A relatively contained round of trade for core global FI markets early on Friday, with the pullback from yesterday’s U.S. regional banking sector worry-/data-inspired best levels generally developing a little further.

• Broader macro focus remains on the impending U.S. NFP release.
• The previously covered swings in Chinese equity markets garnered most of the early European attention on the news flow front, although failed to factor into core global FI price swings.
• Bund futures sit ~15 ticks above worst levels, last showing -57 at 135.68. Benchmark German yields are 1-5bp higher across the curve, with some bear flattening seen.
• 10-Year EGB spreads to Bunds are generally little changed to a touch tighter on the day with some modest outperformance seen for peripherals alongside an uptick in equity benchmarks.
• Gilt futures are -57 at 99.93, ~15 ticks off lows, while cash gilt yields run 3-8bp higher on the day as the curve bear flattens. An uptick in Citi/YouGov inflation expectations surrounding the geopolitical tension in the Middle East added a local input to the pressure. BoE chief economist Pill will speak later today (12:15 London).
• Both EUR & GBP STIR markets operate off yesterday’s dovish session extremes, with the ECB-dated OIS strip showing ~139bp of cuts through ’24, while the BoE-dated OIS strip shows ~107bp of cuts over the same horizon. These moves factor into the bear flattening of the curves outlined above.

EQUITIES: Broad Uptrend in E-Mini S&P Intact Following Thursday's Gains

Eurostoxx 50 futures remain firm and the contract is holding on to this week’s gains. Key resistance at the Dec 14 high has recently 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 4569.00, the 20-day EMA. Key trend support has been defined at 4402.00, the Jan 17 low. A short-term pullback would be considered corrective. A broader uptrend in S&P E-Minis remains intact and the latest pullback has proved to be a correction. This week’s fresh cycle highs, reinforce current trend conditions. Note too that moving average studies remain in a bull-mode condition, highlighting positive market sentiment. A resumption of gains would open 4982.62 next, a Fibonacci projection. Initial support to watch lies at 4862.80, the 20-day EMA. Key support is 4764.36, the 50-day EMA.

• Japan's NIKKEI closed higher by 146.56 pts or +0.41% at 36158.02 and the TOPIX ended 5.64 pts higher or +0.22% at 2539.68.
• Elsewhere, in China the SHANGHAI closed lower by 40.588 pts or -1.46% at 2730.152 and the HANG SENG ended 32.65 pts lower or -0.21% at 15533.56.
• Across Europe, Germany's DAX trades higher by 116.88 pts or +0.69% at 16975.63, FTSE 100 higher by 37.91 pts or +0.5% at 7659.66, CAC 40 up 39.22 pts or +0.52% at 7627.97 and Euro Stoxx 50 up 26.42 pts or +0.57% at 4665.02.
• Dow Jones mini down 11 pts or -0.03% at 38614, S&P 500 mini up 25.5 pts or +0.52% at 4954, NASDAQ mini up 174.5 pts or +1% at 17612.25.

COMMODITIES: Sharp Reversal in WTI Futures This Week Undermines Bullish Theme

WTI futures are trading just above this week’s low print of $73.70 (Feb 1). The sharp reversal undermines the recent bullish theme. A continuation lower would expose support at $70.62, the Jan 17 low, and $69.56, the Jan 3 low. For bulls, a reversal higher would refocus attention on the key short-term resistance at $79.29, Jan 29 high. A break of this level is required to reinstate a bullish theme. Gold traded higher yesterday and the yellow metal remains above the Jan 17 low of $2001.9. Recent short-term gains have improved a bullish condition and a continuation higher would signal scope for a climb towards $2088.5, the Dec 28 high and a key resistance. For bears, a reversal lower would refocus attention on $2001.9 where a break is required to reinstate the recent bearish theme.

• WTI Crude up $0.31 or +0.42% at $74.1
• Natural Gas up $0.02 or +0.73% at $2.064
• Gold spot down $0.72 or -0.04% at $2054.24
• Copper down $1.7 or -0.44% at $383.7
• Silver up $0.02 or +0.1% at $23.198
• Platinum up $3.82 or +0.42% at $920.04