Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY
- WALLER SAYS FED CAN CUT RATES ‘METHODICALLY, CAREFULLY’ - MNI
- CHINA Q4 GDP GROWS 5.2%, 2023 GDP BEYOND TARGET - MNI BRIEF
- CHINA CPI TO “INCREASE MODERATELY” IN 2024 - NBS - MNI BRIEF
- CHINA-US SHIPPING RATES DOUBLE AMID RED SEA CONFLICT - GLOBAL TIMES
- CHINA POPULATION SHRINKS AGAIN AS BIRTHS FALL TO RECORD LOW - BBG
- BOJ CONCERNED SAVINGS MAY DRIVE WEAKER CONSUMPTION - MNI BRIEF
Fig. 1: China Retail Sales & Industrial Production Y/Y
Source: MNI - Market News/Bloomberg
U.K.
SUPPLY (BBG): The UK is creating a new panel of business and government representatives to monitor access to vital goods, as part of a long-awaited strategy to protect the economy from supply chain shocks.
POLITICS (BBG): Rishi Sunak suffered a major setback as a right-wing politician whom he made deputy chairman of the governing Conservative Party to boost support ahead of a looming UK general election resigned over the prime minister’s refusal to toughen his signature anti-immigration bill.
POLITICS (BBC): Two Tory Party deputy chairmen and a ministerial aide have resigned to rebel against Rishi Sunak's Rwanda bill. Deputy chairs Lee Anderson and Brendan Clarke-Smith quit to join about 60 Tory MPs backing an amendment rebels said toughened the immigration legislation.
EUROPE
ECB (BBG): Market expectations for European Central Bank rate cuts in 2024 may be overly optimistic, Governing Council Member Madis Muller told Estonia’s ETV in a televised interview.
ECB (BBG): European Central Bank Governing Council member Gediminas Simkus said investors are too hopeful when it comes to the prospect of lowering interest rates imminently.
FRANCE (BBG): President Emmanuel Macron laid out a strikingly conservative vision for France on Tuesday as he seeks to revive support for his government and counter the rise of the far right.
UKRAINE (POLITICO): French President Emmanuel Macron said Tuesday he plans to sign a bilateral security agreement with Kyiv during a visit to Ukraine next month.
CHINA/EU (XINHUA): Chinese Premier Li Qiang urges the EU to ease high-tech export restrictions when meeting with EU President Ursula von der Leyen on the sidelines of the World Economic Forum meeting, Xinhua reports.
U.S.
FED (MNI): The Federal Reserve can lower interest rates "methodically and carefully" this year if inflation keeps moderating, Governor Christopher Waller said Tuesday, adding he's more confident than he's been since 2021 that inflation is on a path toward 2%.
FED (MNI INTERVIEW): Persistent inflation in services and housing could force Federal Reserve officials to push off the start of interest rate cuts until later in the year, former Fed board economist Andrew Levin told MNI. “Supercore prices in the service sector and rental rates in the housing market are leveling off at levels that are not consistent with the Fed’s inflation target,” Levin said in an interview.
FED (MNI): The Federal Reserve could soon start to slow the pace of quantitative tightening, but officials will aim to press on with some form of balance sheet reduction for as long as bank reserves are ample and there are no signs of a hard landing, former New York Fed staffers told MNI.
MIDEAST (BBG): The US hit four Houthi missiles in Yemen in a preemptive strike on Tuesday local time, American defense officials said. “US forces struck and destroyed four Houthi anti-ship ballistic missiles,” Central Command said in a statement. “These missiles were prepared to launch from Houthi-controlled areas of Yemen and presented an imminent threat to both merchant and US Navy ships in the region.”
OTHER
JAPAN (MNI BRIEF): Bank of Japan officials are concerned higher savings rates among households could negatively impact Japan's consumption recovery, as negative real wage growth continues and demand weakens, MNI understands. Weaker private consumption will lower corporate profits and make it harder for businesses to raise prices and wages, which will weaken the second force of inflationary pressure should private consumption lose momentum, BOJ officials warn.
IRAN (RTRS): An Iranian missile strike on targets in northern Iraq set off an unusual dispute between the neighbouring allies on Tuesday, with Baghdad recalling its ambassador in protest and Tehran insisting the attack was intended to deter threats from Israeli spies.
MIDEAST (BBG): A deal has been reached to deliver medicine and other humanitarian aid to residents of Gaza in exchange for medicine being provided to hostages held by Hamas since its Oct. 7 attack on Israel, according to the government of Qatar.
CHINA
ECONOMY (MNI BRIEF): The Chinese economy grew by 5.2% y/y in Q4, in line with market expectations, bringing 2023 GDP to 5.2%, which ensures Beijing will meet its annual growth target of “around 5%", data released by the National Bureau of Statistics on Wednesday showed.
PRICES (MNI BRIEF): China will see a "moderate increase" in consumer prices during 2024, as the structural and temporary conditions causing negative CPI lessen, Kang Yi, commissioner at the National Bureau of Statistics said at a press conference on Wednesday.
POLICY (SECURITIES DAILY): China’s benchmark Loan Prime Rate may hold next Monday, as the People’s Bank of China kept the anchor rate of the Medium-term Lending Facility unchanged this week, Securities Daily reported citing analysts. Some banks are under great pressure on their net interest margins, with the 1.73% average net interest margin of commercial banks by end-Q3 lower than the “warning line” of 1.8% proposed by the Pricing Self-Regulatory Mechanism for Market Interest Rates.
SHIPPING (GLOBAL TIMES): Freight rates between Shanghai and the US have surged amid the ongoing military conflict in the Red Sea, China’s state-run Global Times reported, citing data from the Shanghai International Shipping Institute.
MARKETS (CSJ): Chinese investors’ enthusiasm over ETFs tracking Japanese stocks had led to a surge in premium on a few products and prompted fund managers to issue risk warnings, China Securities Journal reports Wednesday.
BONDS (SECURITIES TIMES): Foreign investors will likely continue to buy yuan bonds in the coming months, supported by the steady recovery of the Chinese economy and eased depreciation pressure of the yuan, Securities Times reported. Investors overseas have continued to increase net domestic bond holdings, with December recording a USD24.5 billion rise, a two-year high.
POPULATION (BBG): China’s population declined at a faster pace in 2023 as births fell to a record, accelerating a demographic shift that poses long-term challenges to a government already contending with deflation pressures and a property crisis.
CHINA MARKETS
MNI: PBOC Injects Net CNY527 Bln Via OMO Wed; Rates Unchanged
The People's Bank of China (PBOC) conducted CNY547 billion via 7-day reverse repo on Wednesday, with the rates unchanged at 1.80%. The reverse repo operation has led to a net injection of CNY527 billion reverse repos after offsetting CNY20 billion maturity today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.9056% at 09:30 am local time from the close of 1.9591% on Tuesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 60 on Tuesday, compared with 54 on Monday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
PBOC Yuan Parity Higher At 7.1168 Wednesday vs 7.1134 Tuesday
The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1168 on Wednesday, compared with 7.1134 set on Tuesday. The fixing was estimated at 7.1953 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND DEC CARD SPENDING TOTAL M/M -0.6%; PRIOR 0.8%
NEW ZEALAND DEC CARD SPENDING RETAIL M/M -2.0%; PRIOR 1.7%
CHINA DEC NEW HOME PRICES M/M -0.45%; PRIOR -0.37%
CHINA 4Q GDP SA Q/Q 1.0%; MEDIAN 1.1%; PRIOR 1.5%
CHINA 4Q GDP Y/Y 5.2%; MEDIAN 5.2%; PRIOR 5.2%
CHINA DEC IP Y/Y 6.8%; MEDIAN 6.6%; PRIOR 6.6%
CHINA DEC FIXED ASSET INVESTMENT YTD Y/Y 3.0%; MEDIAN 2.9%; PRIOR 2.9%
CHINA DEC PROPERTY INVESTMENT YD Y/Y -9.6%; MEDIAN -9.5%; PRIOR -9.4%
CHINA DEC RESIDENTIAL PROPERTY SALES YTD Y/Y -6.0%; PRIOR -4.3%
CHINA DEC RETAIL SALES Y/Y 7.4%: MEDIAN 8.0%; PRIOR 10.1%
CHINA DEC SURVEYED JOBLESS RATE 5.1%; MEDIAN 5.0%; PRIOR 5.0%
SOUTH KOREA MONEY SUPPLY M2 SA M/M 0.9%; PRIOR 0.3%
MARKETS
US TSYS: Cash Bonds Are Dealing Little Changed, Heavy US Calendar
TYH4 is trading at 111-29+, 0-02+ from NY closing levels.
- Cash bonds are dealing little changed in today’s Asia-Pac session after early weakness. Yesterday, US tsys bear-steepened after Fed Waller pushed back against aggressive rate cut expectations.
- There has been little meaningful newsflow in today's session, apart from China's data drop that showed slightly weaker than expected Q4 GDP. It failed to be a market mover.
- Looking ahead: Heavy US data calendar including Retail Sales, Import/Export $, IP/Cap-U, Fed speakers: Barr, Bowman and Williams, US Treasury auctions $13.B 20Y Bond re-open.
JGBS: Bear-Steepening Ahead Of 20Y Supply Tomorrow
JGB futures are holding in negative territory and just above the session’s low, -16 compared to the settlement levels.
- There hasn’t been much in the way of domestic drivers to flag.
- 79.3% of Japanese households expect prices to rise a year from now, compared with 86.8% in the previous survey - BoJ Quarterly Survey in December. (Rtrs)
- Local market dealings today therefore appear to have been guided by US tsys NY close yesterday and today’s Asia-Pac dealings. Cash bonds are dealing little changed in today’s Asia-Pac session after early weakness. Yesterday, US tsys bear-steepened after Fed Waller pushed back against aggressive rate cut expectations.
- The cash JGB curve has bear-steepened, with yields 1-6bps higher, ahead of tomorrow’s 20-year supply. The benchmark 10-year yield is 3.9bps higher at 0.609% versus the Nov-Dec rally low of 0.555%.
- Swaps curve has bear-steepened, with rates 1-3bps higher. Swap spreads are mixed.
- Tomorrow, the local calendar will see Weekly International Investment Flow and Core Machine Orders data.
- Before then, there is a heavy US data calendar including Retail Sales, Import/Export $, and IP/Cap-U data. There are also Fed speakers: Barr, Bowman and Williams, and a 20-year US Treasury auction.
AUSSIE BONDS: Cheaper, Dec-34 Auction Weighs, Employment Report Tomorrow
ACGBs (YM -6.0 & XM -5.5) are cheaper and just above Sydney session lows. Given the absence of significant domestic data on today's calendar, local participants appear to have been guided by US tsys in the Asia-Pac session today. Cash US tsys are dealing little changed in today’s Asia-Pac session after early weakness. Weaker than expected China GDP data, along with a softening in equity markets, may be at least partially responsible for this unwind.
- Cash ACGBs are 5-6bps cheaper, with the AU-US 10-year yield differential unchanged at +15bps. A giveback of early session outperformance versus US tsys may be attributable to a relatively poor showing at today’s Dec-34 ACGB auction.
- Swap rates are 4bps higher, with EFPs tighter.
- The bills strip is cheaper, with pricing -1 to -5.
- RBA-dated OIS pricing is 3-5bps firmer for meetings beyond May. A cumulative 44bps of easing is priced by year-end.
- Tomorrow, the local calendar sees Consumer Inflation Expectations for January along with the Employment Report for December. The data is likely to be watched closely given its strength over the previous two months. Bloomberg consensus expects job gains of 15k after a stronger-than-forecast 61.5k in November and for the unemployment rate to be stable at 3.9%.
NZGBS: Cheaper, Narrow Ranges, NZGB Issuance Re-Starts Tomorrow
NZGBs closed 2-3bps cheaper and above session lows. The ranges were however relatively narrow, with domestic drivers light on the ground outside of the previously outlined card spending and CoreLogic house prices.
- For that reason, it is best to view today’s session as being driven by US tsys NY close yesterday and today’s Asia-Pac dealings. Cash bonds are dealing little changed in today’s Asia-Pac session after early weakness. Yesterday, US tsys bear-steepened after Fed Waller pushed back against aggressive rate cut expectations.
- Outside NZ, there has been little meaningful newsflow in today's session, apart from China's data drop that showed slightly weaker than expected Q4 GDP. It failed to be a market mover.
- Swap rates closed 1bp lower to 3bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing is flat to 1bp higher. A cumulative 98bps of easing is priced by year-end.
- Tomorrow, the local calendar sees REINZ House Sales and Food Prices.
- Tomorrow, the NZ Treasury plans to sell NZ$275mn of the 0.25% May-28 bond, NZ$175mn of the 3.5% Apr-33 bond and NZ$50mn of the 2.75% Apr-37 bond.
FOREX: USD Supported On Dips, A$ To Fresh Lows On Lower Metal Prices
The USD has been supported on dips during the session. The BBDXY sits around 0.1% higher, last at 1238.50. Equity sentiment has mostly been risk off, with US futures around 0.20-+0.25% lower, while regional equity markets (ex Japan) are down.
- US yields were higher in early trade, but are now back around flat.
- China Q4 GDP and Dec activity data was mixed. Lower crude steel output has weighed on iron ore prices, the Singapore benchmark contract, back to sub $127/ton, down nearly 2%. Copper is also weaker, off 0.40% for CMX.
- AUD/USD is off 0.20%, last near 0.6570, close to session lows. Lows from close to mid Dec last year around the 0.6540 region aren't too far away.
- NZD/USD has slipped back to 0.6130, marginally outperforming the AUD.
- USD/JPY got close to 147.50 in early trade, as yields firmed. Dips back to the low 147.00 region were supported though, we sit back at 147.30/35 in latest dealings.
- Looking ahead, focus will be on UK inflation data for December before the US reports December retail sales figures.
EQUITIES: Hong Kong & South Korea Off More Than 2%
Regional equities are mostly lower, with sharp losses evident for Hong Kong bourses and South Korean shares. Japan shares have outperformed but sit well off earlier highs. US futures are lower, with Eminis down over 0.20% at this stage, last near 4788, while Nasdaq futures have lost a little over 0.30%. This follows generally negative leads from US and EU cash trading on Tuesday.
- At the break, the CSI 300 is off 2.8%, with tech stocks underperforming. The tech sub index is down nearly 3.9%. China Q4 and Dec activity data were mixed. Property related measures finished poorly though, while home price losses accelerated in Dec. The Golden Dragon index fell heavily in Tuesday US trade (-3.81%).
- The CSI 300 is off 0.73% at the break, with similar headwinds in play.
- The Kospi has slumped a further 2.4%, continuing its pull back after making fresh highs near the start of the year. Offshore investors have sold a further -$565.2mn in local shares.
- Japan indices are marginally higher, but well off earlier highs. The Taiex is down 0.80%, the ASX 200 off around 0.50% at this stage.
- in SEA, markets are all weaker, although losses are generally under 1% at this stage.
OIL: Crude Continues Falling As Risk Sentiment Dominates Middle East Conflict
Oil prices have continued lower during today’s APAC session as US dollar strength (USD index +0.1%) and the risk off move continued to outweigh tensions in the Middle East. WTI has traded below $72 for most of today and is currently down 0.8% to $71.81/bbl. Brent has been unable to break above $78 and is now 0.7% lower at $77.75.
- China’s Q4 growth came in slightly below expectations, which has also put downward pressure on crude. It is the world’s largest importer of oil.
- While crude markets are yet to price in a war premium, developments in the Middle East are being monitored closely with Houthi attacks on Red Sea shipping continuing and driving more vessels to take other longer routes and Iran’s attacks on northern Iraq. The risk of the conflict spreading remains a distinct possibility. But currently the issues in the region haven’t impacted oil supply.
- OPEC’s monthly report is published today and there are also US industry inventory data.
- The Fed’s Williams, Barr and Bowman speak plus the Beige Book is published. On the data front US December retail sales, trade prices, IP and NAHB housing index are all released as well as December euro area/UK CPI. ECB President Lagarde participates in a dialogue at the World Economic Forum.
GOLD: Steady After the Biggest Decline In Six Weeks On Tuesday
Gold is little changed in the Asia-Pac session, after closing 1.4% lower at $2028.44 on Tuesday. The decline was the most in six weeks.
- Bullion wilted as the USD strengthened and US Treasury yields bear-steepened after the Fed’s Waller pushed back on the speed of rate cuts priced.
- Projected rate cuts cooled, with March at a cumulative -17.3bps at 5.155%, May 2024 at a cumulative -41.9bp at 4.910% and June 2024 at a cumulative -70.9bp at 4.620%.
- Tuesday’s move took the precious metal closer to support at $2016.8 (50-day EMA) closely followed by $2013.4 (Jan 11 low), according to MNI’s technicals team.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 17/01/2024 | 0700/0700 | *** |  | UK | Consumer inflation report |
| 17/01/2024 | 0700/0700 | *** | | UK | Producer Prices |
| 17/01/2024 | 1000/1100 | *** |  | EU | HICP (f) |
| 17/01/2024 | 1000/1000 | ** | | UK | Gilt Outright Auction Result |
| 17/01/2024 | 1200/0700 | ** |  | US | MBA Weekly Applications Index |
| 17/01/2024 | 1330/0830 | * |  | CA | Industrial Product and Raw Material Price Index |
| 17/01/2024 | 1330/0830 | * | | CA | International Canadian Transaction in Securities |
| 17/01/2024 | 1330/0830 | ** | | US | Import/Export Price Index |
| 17/01/2024 | 1330/0830 | *** | | US | Retail Sales |
| 17/01/2024 | 1355/0855 | ** | | US | Redbook Retail Sales Index |
| 17/01/2024 | 1400/0900 | | US | Fed Vice Chair Michael Barr | |
| 17/01/2024 | 1400/0900 | | US | Fed Governor Michelle Bowman | |
| 17/01/2024 | 1415/0915 | *** | | US | Industrial Production |
| 17/01/2024 | 1415/0915 | *** | | US | Industrial Production |
| 17/01/2024 | 1500/1000 | * | | US | Business Inventories |
| 17/01/2024 | 1500/1000 | ** | | US | NAHB Home Builder Index |
| 17/01/2024 | 1515/1615 | | EU | ECB's Lagarde participates in Stakeholder Dialogue at WEF | |
| 17/01/2024 | 1800/1300 | ** | | US | US Treasury Auction Result for 20 Year Bond |
| 17/01/2024 | 1900/1400 | | US | Fed Beige Book | |
| 17/01/2024 | 2000/1500 | | US | New York Fed's John Williams | |
| 18/01/2024 | 2350/0850 | * |  | JP | Machinery orders |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.