EXECUTIVE SUMMARY
- ISRAEL AND HAMAS PUT FINISHING TOUCHES TO DEAL TO FREE HOSTAGES: WSJ
- ECB’S HOLZMANN CONTINUES TO ARGUE FOR CAUTIOUS EASING
- BOJ’S HIMINO SEES PRICE UPSIDE, DOWNSIDE RISKS
- PBOC TO ENSURE YUAN STABLE, EASE FOR ECONOMY - DEPUTY GOVERNOR XUAN
Figure 1: EUR/GBP extends rally to two-month high
Source: MNI/Bloomberg
NEWS
MNI US CPI PREVIEW - DECEMBER 2024: Still Too High For Comfort
Consensus sees core CPI inflation decelerating slightly to between 0.2 to 0.3% M/M in December, with MNI’s analyst review pointing to an average estimate of 0.24% so a bias toward a 0.2% rounded figure. Likely to be the single most closely watched individual aspect of Wednesday’s CPI report, rental inflation is expected to accelerate to an average figure that firmly rounds to 0.3% M/M in December. Supercore inflation is seen pulling back, though, to the upper 0.20s%, from 0.34% in November.
ISRAEL/MIDEAST (WSJ): Israel and Hamas Put Finishing Touches to Deal to Free Hostages
Israel and Hamas are finalizing the terms of a cease-fire deal that could be announced as soon as Tuesday, Arab and Israeli officials said, raising hopes of an agreement that would at least pause the fighting in the Gaza Strip and free some of the hostages held there. Negotiators -- including Steve Witkoff, President-elect Donald Trump's designated Middle East envoy, along with officials from the U.S., Israel and Arab countries -- were meeting midday in Doha, Qatar, to finalize a draft of a deal, said the Arab officials, who are helping to mediate the talks.
US/CHINA (BBG): China Weighs Sale of TikTok US to Musk as a Possible Option
Chinese officials are evaluating a potential option that involves Elon Musk acquiring the US operations of TikTok if the company fails to fend off a controversial ban on the short-video app, according to people familiar with the matter. Beijing officials strongly prefer that TikTok remains under the ownership of parent ByteDance Ltd., the people say, and the company is contesting the impending ban with an appeal to the US Supreme Court. But the justices signaled during arguments on Jan. 10 that they are likely to uphold the law.
ECB (MNI): Holzmann Continues to Argue for Cautious Easing
Unsurprising rhetoric from ECB hawk Holzmann this morning, speaking at a Euromoney conference in Vienna. Holzmann expressed some concerns around energy prices in an interview with Kurier on Dec 28: "It could be the case that we take more time before lowering rates again,"..."It's true, some energy prices are trending upwards again. But there are also other scenarios for how inflation could return, such as a stronger depreciation of the euro."
FRANCE (MNI): Socialist Party Ldr-Agreement w/Gov't Possible in the Coming Hours
Speaking to BFM TV leader of the centre-left Socialist Party (PS) Olivier Faure says that after conversations with PM Francois Bayrou overnight they could see a non-censorship agreement in exchange for a suspension/freeze/pause of the controversial 2023 pension reforms, among other policies. Faure says that any such agreement not to vote for the gov'ts censure in confidence motions would apply to today's general policy speech from Bayrou (taking place in the National Assembly at 1500CET (0900ET, 1400GMT) as well as the social security budget (PLFSS) and state budget (PLF). However, it would not apply to general gov't policy beyond that.
UK (MNI): Chancellor Reeves to Address Commons ~1230GMT
Chancellor of the Exchequer Rachel Reeves is set to deliver a ministerial statement in the House of Commons at around 1230GMT (0730ET, 1330CET) regarding her recent trip to China for talks with senior officials. While the China trip is ostensibly the reason for the statement, it is likely that - if she does not address it herself - then during questions after the statement, the chancellor will be asked about the state of the UK's public finances amid elevated borrowing costs, the prospect of gov't spending cuts or tax rises to address the issue, and indeed the longevity of her own position.
BOJ (MNI): BOJ Himino Sees Price Upside, Downside Risks
Bank of Japan Deputy Governor Ryozo Himino said on Tuesday upside and downside risk to prices exist, although inflation is on track, and the BOJ must manage this risk in an appropriate manner. Himino noted policymakers will make a policy rate decision next week based on additional data to be made available at the meeting, he told reporters in Yokohama City. “It is important for the BOJ to judge the timing of rate hike in an appropriate manner. But it is difficult for the bank to judge when the appropriate timing would be,” Himino said.
CHINA (MNI): PBOC to Ensure Yuan Stable, Ease For Economy: Xuan
MNI (London) The People’s Bank of China will take further measures to ensure a stable yuan exchange rate while strengthening counter-cyclical moves to support the economy, deputy-governor Xuan Changneng told a press conference on Tuesday. A combination of measures will be adopted to boost the resilience of the foreign exchange market, stabilize market expectations, and enhance market management, he said, stressing the yuan will be supported by the solid economic foundation, the surplus in current account, balanced capital flows and abundant foreign exchange reserves, even though external environment faces increasing uncertainties.
CHINA (MNI): China Yields Will Reflect Fundamentals - PBOC
MNI (Beijing) China’s government bond yields will eventually reflect the improvement in expected economic fundamentals, Zou Lan, director at the PBOC's Monetary Policy Department, told reporters on Tuesday. The central bank has temporarily suspended the purchase of government bonds to avoid exacerbating market fluctuations, Zou added. Authorities have strengthened market supervision and repeatedly warned participants of risks to promote steady movement in the market, Zou said.
INDIA (BBG): India’s RBI Governor Signals He’s Open to More Flexible Rupee
India’s new central bank governor has shown a willingness to allow the rupee to move more freely in tandem with peers in the region while still intervening in the foreign-exchange market to curb excessive moves, according to people familiar with the regulator’s thinking. Reserve Bank of India Governor Sanjay Malhotra, who took office in December, has held multiple meetings with departments at the central bank ahead of his first monetary policy meeting in February, the people said, asking not to be identified as the discussions are private.
N. KOREA (BBG): North Korea Fires Short-Range Missiles Before Trump’s Return
North Korea fired several short-range missiles toward waters off its east coast on Tuesday, raising tensions in the region less than a week before Donald Trump returns to the White House. The missiles were launched at around 9:30 a.m. local time from the Jagang province near the border with China, South Korea’s defense ministry said in a text message. The missiles flew about 250 kilometers (155.3 miles) before landing in the waters.
DATA
ITALY DATA (MNI): Trend in Transport Equipment IP Remains Weak
- ITALY INDUSTRIAL PRODUCTION NOV 0.3% M/M, -1.5% Y/Y WDA
Italian November industrial production was stronger-than-expected at 0.3% M/M (vs 0.1% cons, one tenth upwardly revised 0.1% prior). On a 3m/3m basis, industrial production remains negative at -0.5%, though this was a tenth above October's reading. Industrial sentiment in Italy remains weak, with the manufacturing PMI in
contractionary territory for 9 consecutive months (46.2 in December), and the ISTAT manufacturing confidence series below its 2000-2019 average (85.8 in December vs 91.0 average).
CHINA DATA (MNI): China Dec M1 Decline Narrows, M2 Quickens
- CHINA END-DEC M2 +7.3% Y/Y VS MEDIAN +7.3%; END-NOV +7.1% Y/Y
- CHINA END-DEC M1 -1.4% Y/Y VS -3.7% Y/Y END-NOV
- CHINA END-DEC M0 +13.0% Y/Y VS +12.7% Y/Y END-NOV
- CHINA JAN-DEC NEW LOANS CNY18.09 TRLN VS MEDIAN CNY17.85 TRLN
- CHINA JAN-DEC TSF CNY32.26 TRLN VS MEDIAN CNY31.56 TRLN
MNI (Beijing) China's M1 money supply drop narrowed further for the third consecutive month in December amid the recent housing market recovery, data released Tuesday by the People's Bank of China showed. M1 continued to contract, falling for a ninth straight month in December, though with the decline narrowing to -1.4% from the previous -3.7%. Growth in M2 was 7.3% y/y, up from November's 7.1% growth and meeting the 7.3% forecast. Banks extended CNY990 billion in new loans in December, up from November's CNY580 billion. Total social financing rose by CNY2.86 trillion, higher than growth of CNY2.34 trillion in November.
FOREX: Recovery for Equities Weighs on Greenback, Cross/JPY Extends Bounce
- The USD was under pressure at the NY/Asia Pac cross over, as headlines crossed from Bloomberg that Trump economic advisers were considering/studying a gradual tariff hike approach. The more optimistic price action for equities has provided weakness for both the greenback and the Japanese Yen, with most recent reports of a potential Israel/Hamas ceasefire assisting this sentiment.
- As such, cross/JPY is extending its recovery, with the likes of EURJPY and AUDJPY rising half a percent on Tuesday to turn positive on the week despite Monday’s sharp initial selloff.
- The recent move down in EURJPY appears technically corrective, however the cross did breach support at 160.91, the Jan 2 low. The next support to watch is 159.51, 61.8% of the Dec 3 - 30 bull cycle. A reversal higher would signal the end of the corrective cycle and refocus attention on 164.90, the Dec 30 high. First resistance is at 162.43, the 20-day EMA.
- NZD outperformance stands out today, and appears to be driven by the positive signals from the Q4 NZIER Business Opinion Survey and its influence on OIS pricing, which is tempering expectations for RBNZ easing. To sum up, the survey showed that a net 16% of businesses expect the economy to improve, vs 1% expecting it to get worse in Q3.
- NZDUSD has risen back above 0.5600 and will look to the 20-day EMA as initial resistance, intersecting today at 0.5641. NZDJPY is one of the best performing crosses, currently up 0.80% on the session.
- GBP once again underperforms, with cable down 0.15% on the day and notably 70 pips off the overnight 1.2250 highs. EURGBP is currently testing the Monday highs of 0.8424 having recently undermined the recent bearish theme, suggesting scope for a stronger short-term recovery. The cross will now target 0.8448, the Oct 31 high, and 0.8494, the Aug 26 ’24 high.
- US PPI is the focus on the Tuesday economic calendar before UK and US CPI cross Wednesday. Fed speakers include Schmid and Williams.
EGBS: French Political Developments in Focus Ahead of PM Adress
French political developments ahead of PM Bayrou’s general policy address at 1400GMT/1500CET have dominated EGB-specific news flow this morning. Although Socialist leader Faure suggested an agreement with his party and the ruling government was possible this morning, the PM has since pushed back on changes to Macron’s pension reform law.
- That helps the 10-year OAT/Bund spread widen back above ~83bps, up from an intraday low of 82bps earlier. The spread remains 1bp tighter today though.
- Bund futures have moved further away from session highs, now -14 ticks at 130.68. Alongside the aforementioned French developments, a bid in European equities and supply-related pressure has weighed on major EGB futures.
- 10-year peripheral spreads to Bunds have tightened on the equity rally. The BTP/ Bund spread is 2bps tighter at 118.5bps, down from yesterday’s intraday high of almost 124bps. Italian November industrial production was stronger-than-expected at 0.3% M/M (vs 0.1% cons), but the underlying trend remains weak.
- The spread has been set for today’s 10-year GGB and 3/30-year EU-bond syndications. The EU syndication will have a joint size of E11bln, in line with MNI’s expectations. E5bln of the new 2.40% Apr-30 Bobl was also issued this morning.
- ECB’s Holzmann continued to express a preference for a cautious easing cycle, given persistent core inflation pressures.
- The US calendar is headlined by PPI at 1330GMT.
GILTS: Fade From Early Highs, Little Changed Ahead of Reeves' Appearance
The early bid in gilts fades alongside a similar move in wider global FI.
- Pressure around EU/EGB syndications, a move off lows in oil and continued questions surrounding medium-term French political and fiscal risks initially pushed bonds away from session highs. Oil has pulled back since.
- Gilt futures last flat at 89.30 vs. highs of 89.72.
- Bearish technicals intact, initial support & resistance located at 88.96/90.31.
- Yields little changed to 1.5bp lower on the day, curve steeper.
- 10s spread to Bunds 1.5bp tighter around 225bp.
- Decent demand at the latest 30-Year I/L auction did little to counter the pullback, although the DMO will have welcomed such results given the weakness in bonds seen in recent weeks alongside questions surrounding the UK’s fiscal health. Yield levels on offer will have aided takedown.
- BoE-dated OIS prices 42bp of cuts through ’25 vs. 44bp early today. Hawkish cycle extremes situated at 39bp.
- SONIA futures -1.5 to +1.0.
- Chancellor Reeves will appear in the Commons later today (around 12:30 London), with MPs set to question her on the UK’s fiscal outlook after the recent increase in market-based fiscal risk premia.
- Beyond that, tomorrow will see the latest round of CPI data (expect our full preview later today), comments from BoE dovish dissenter Taylor and an auction of the GBP4.00bln of the 10-year 4.25% Jul-34 gilt.
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Remains in Play
A bull cycle in the Eurostoxx 50 futures contract remains intact and the latest pullback appears corrective. Initial support is at 4937.06, the 50-day EMA. It has been pierced, a clear break of this EMA would undermine a bullish theme and signal scope for a deeper retracement. For bulls, resistance at 5040.00, Dec 9 high, has recently been pierced. Clearance of it would resume the bull cycle that started on Nov 21 and open 5068.13, a Fibonacci projection. A bear threat in the S&P E-Minis contract remains present and the contract traded to a fresh short-term low on Monday. The reversal from the Dec 26 high, confirms the end of the Dec 20 - 26 correction. 5866.00, the Dec 20 low and a key short-term support, has been cleared. This strengthens a bearish theme and sights are on 5784.00, the Nov 4 low and an important short-term support. Initial pivot resistance is seen at 5991.72, the 50-day EMA.
- Japan's NIKKEI closed lower by 716.1 pts or -1.83% at 38474.3 and the TOPIX ended 31.54 pts lower or -1.16% at 2682.58.
- Elsewhere, in China the SHANGHAI closed higher by 80.185 pts or +2.54% at 3240.94 and the HANG SENG ended 345.64 pts higher or +1.83% at 19219.78.
- Across Europe, Germany's DAX trades higher by 118.37 pts or +0.59% at 20250.54, FTSE 100 higher by 13.18 pts or +0.16% at 8237.44, CAC 40 up 68.03 pts or +0.92% at 7476.67 and Euro Stoxx 50 up 45.63 pts or +0.92% at 4999.84.
- Dow Jones mini up 141 pts or +0.33% at 42664, S&P 500 mini up 30.25 pts or +0.51% at 5905, NASDAQ mini up 153.75 pts or +0.73% at 21102.
Time: 09:50 GMT
COMMODITIES: WTI Futures Continue to Trade Close to Recent Highs
The trend structure in WTI futures remains bullish and the contract traded higher again Monday. The stronger reversal to the upside has resulted in a breach of key short-term resistance at $76.41, the Oct 8 high. Clearance of this hurdle strengthens a bull theme and opens $79.59, the Jul 5 ‘24 high. On the downside, a reversal lower would expose the 20-day EMA, at $72.69. This average is seen as a key short-term support. Recent gains in Gold appear corrective - for now. However, the yellow metal is holding on to the bulk of last week’s gains and scope is seen for a continuation higher near-term. A stronger recovery would open $2726.2, the Dec 12 high and an important resistance. Clearance of this level would be a bullish development. On the downside, a reversal lower would expose $2583.6, the Dec 19 low. Initial support is at $2642.9, the 50-day EMA.
- WTI Crude up $0.11 or +0.14% at $78.94
- Natural Gas down $0.15 or -3.89% at $3.782
- Gold spot up $5.09 or +0.19% at $2667.46
- Copper up $1.5 or +0.35% at $434.35
- Silver up $0.1 or +0.35% at $29.7113
- Platinum up $0.36 or +0.04% at $956.85
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 14/01/2025 | 1100/0600 | ** |  US | NFIB Small Business Optimism Index |
| 14/01/2025 | 1330/0830 | *** | US | PPI |
| 14/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 14/01/2025 | 1500/1000 | US | Fed's Schmid | |
| 14/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 15/01/2025 | 0315/0415 |  EU | ECB's Lane in fireside chat at GS global macro conference | |
| 15/01/2025 | 0700/0700 | *** |  GB | Consumer inflation report |
| 15/01/2025 | 0700/0700 | *** | GB | Producer Prices |
| 15/01/2025 | 0700/0800 | *** |  SE | Inflation Report |
| 15/01/2025 | 0745/0845 | *** |  FR | HICP (f) |
| 15/01/2025 | 0800/0900 | *** |  ES | HICP (f) |
| 15/01/2025 | 0800/0900 | EU | ECB's De Guindos at 15th Spain Investors Day | |
| 15/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 15/01/2025 | 1000/1100 | ** | EU | Industrial Production |
| 15/01/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 15/01/2025 | 1330/0830 | ** |  CA | Monthly Survey of Manufacturing |
| 15/01/2025 | 1330/0830 | ** | CA | Wholesale Trade |
| 15/01/2025 | 1330/0830 | *** | US | CPI |
| 15/01/2025 | 1330/0830 | ** | US | Empire State Manufacturing Survey |
| 15/01/2025 | 1400/0900 | * | CA | CREA Existing Home Sales |
| 15/01/2025 | 1420/0920 | US | Fed's Barkin | |
| 15/01/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 15/01/2025 | 1600/1100 | US | Fed's Williams | |
| 15/01/2025 | 1630/1630 | GB | BOE's Taylor Speech on Inflation Dynamics and Outlook | |
| 15/01/2025 | 1900/1400 | US | Fed Beige Book |