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EU Mid-Market Update: EU inflation data continued to move away from recent cycle highs; focus on Friday's EU Flash Core reading
Thu, 05 Jan 2023 5:15 AM EST
**Notes/Observations**
- EU region inflation continued to decelerate for Dec readings (Italy, Austria, Poland)
-Equities mixed as market digests yesterday's mostly hawkish FOMC Dec Minutes. Fed remained focused on curbing inflation and did not envisage interest rate cuts in 2023. UK's FTSE100 outperforming after optimistic sales data from Next retailer
-First positive indications of European energy security for next winter after German Econ Min Habeck stated he was optimistic we can get safely through next winter
-China continues push to boost property sector with reports circulating China are considering mulling a cap on property agent commissions at 2-2.5% to increase sales
-Corporate debt issuance activity remained high as new year characteristics at play
-Asia closed mostly higher with Hang Seng outperforming +1.3%. EU indices are mixed with FTSE100 at +0.4%. US futures are -0.1% to -0.2%. Gold -0.3%, DXY 0.0%; Commodity: Brent +2.3%, WTI +2.4%, TTF +2.3%; Crypto: BTC -2.0%, ETH 0.0%
Asia:
- Australia Dec Final PMI Services confirms 32nd month of expansion (47.3 v 47.3 prelim)
- China Dec Caixin PMI Services registered its 4th straight contraction (48.0 v 46.8e)
- Japan Dec Consumer Confidence: 30.3 v 28.3e
- BOJ said to potentially increase FY22/23 CPI forecasts in quarterly revisions'; Might raise 'core-core' CPI forecasts for FY24 depending on wage outlook
Taiwan:
- US said to be sending a delegation of trade and economic officials to Taiwan next week to bolster America’s commercial relationship with the island.
Europe:
- UK Dec New Car Registrations Y/Y: 18.0% v 23.5% prior (5th monthly rise)
- UK PM poised to announce laws on minimum services levels in 6 sectors that could enable employers to sue unions and sack employees over right to strike
- IMF Dep MD Gopinath said to have encourage US Fed to continue with rate hikes as inflation had not yet turned the corner. Also noted it was looking well into 2024 before we start seeing inflation coming closer to the ECB’s target
Americas:
- Dec FOMC Meeting Minutes saw Most Fed officials stressed need for policy flexibility; No participants anticipated rate cuts being appropriate in 2023. Participants were wary of unwarranted easing in financial condition, especially if driven by misperception by the public of the committees reaction function
- House again rejected Kevin McCarthy as Speaker for a a sixth time despite Trump unity plea
Energy:
- Weekly API Crude Oil Inventories: +3.3M v -1.3M prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
Equities
Indices [Stoxx600 -0.14% at 7,615.56, FTSE +0.40% at 7,615.56, DAX -0.31% at 14,446.55, CAC-40 -0.46% at 6,745.58, IBEX-35 +0.38% at 8,592.46, FTSE MIB -0.12% at 24,831.00, SMI -0.34% at 11,102.30, S&P 500 Futures -0.15%]
Market Focal Points/Key Themes: European indices opened modestly in the red across the board, but came off the lows in early trading; Sweden closed for holiday; better performing sectors include consumer discretionary and materials; sectors pushing to the downside include health care and financials; Dignity receives improved takeover offer from Valderrama consortium. Edison denies press speculation that EDF was looking to sell its stake; reportedly Unicredit looking to divest €1.0B bad loan portfolio, earnings expected in the upcoming US session include Constellation Brands, Walgreens Boots, Conagra Brands and Schnitzer Steel
***Equities***
- Consumer discretionary: Next [NXT.UK] +7%, Marks & Spencer [MKS.UK] +4% (Next reports Christmas sales; raises FY22/23, guides initial FY23/24), Ryanair [RYA.IE] +2.5% (raises FY23 Net, affirms traffic - post close), Greggs [GRG.UK] +1% (FY22 trading update)
- Energy: Verbund [VER.AT] +2% (analyst action - Erste Group raises)
- Healthcare: Angle [ANG.UK] -33% (business update)
- Industrials: Schindler [SCHP.CH] +1% (analyst upgrade)
- Technology: Infineon [IFX.DE] -1.0% (Foxconn monthly sales; outlook)
- Telecom: Pearson [PSON.UK] -4% (analyst action)
**Speakers**
- BOE Decision Maker Survey saw 1-year ahead CPI at 7.4% v 7.2% prior survey. Survey also saw 3-year ahead CPI 4.0% v 3.9% prior survey
- German Econ Min Habeck saw the domestic energy security as guaranteed for this winter
- France Fin Min Le Maire noted that the domestic economy should grow in 2023
- Turkey President Erdogan spoke with Russia President Putin (as anticipated); discussed energy and grain corridor. Called on Putin to declare a cease for in Ukraine
- Norway PM Gahr Store stressed that the priority was to maintain a high level of gas production
- Sweden Health Min announced that the country to require negative COVID test for passengers entering country from China
**Currencies/ Fixed Income**
- USD basically steady against the major pairs. Fed Minutes reiterated the hawkish message and pushed backed market hope on potential rate cuts during 2023
- EUR/USD holding above the 1.06 level in the session. Various EU inflation data continue to move away from cycle highs but focus turning to Friday’s Flash CPI reading for the Euro Zone with the core likely to remain ‘sticky’
- USD/JPY continued to rebound from recent 7-month lows and approached the 132.50 area by mid-session.
**Economic Data**
- (DE) Germany Nov Trade Balance: €10.8B v €7.5Be; Exports M/M: % v 0.0%e; Imports M/M: % v -0.9%e
- (FI) Finland Nov Preliminary Trade Balance: +€0.4B v- €1.0B prior
- (ZA) South Africa Dec PMI (Whole economy): 50.2 v 50.6 prior (2nd month of expansion)
- (HU) Hungary Nov PPI M/M: -0.8% v +3.7% prior Y/Y: 37.0% v 41.7% prior
- (BR) Brazil Dec FIPE CPI (Sao Paulo) M/M: 0.5% v 0.3%e
- (AT) Austria Dec Preliminary CPI M/M: 0.2% v 0.3% prior; Y/Y: 10.2% v 10.6% prior
- (AT) Austria Dec Wholesale Price Index M/M: -2.3% v -3.0% prior; Y/Y: 14.3% v 16.5% prior
- (TW) Taiwan Dec Foreign Reserves: $554.9B v $552.2B prior
- (DE) Germany Dec Construction PMI: 41.7 v 41.5 prior
- (IT) Italy Q3 YTD Budget Deficit to GDP Ratio: 5.5% v 5.9% prior
- (PL) Poland Dec Preliminary CPI M/M: 0.2% v 0.7%e; Y/Y: 16.6% v 17.4%e
- (IS) Iceland Dec Preliminary Trade Balance (ISK): -12.8B v -42.0B prior
- (UK) Dec Final Services PMI: 49.9 v 50.0 prelim (confirmed 3rd straight contraction); Composite PMI: 49.0 v 49.0 prelim
- (UK) Dec Official Reserves Changes: $1.2B v $2.9B prior
- (EU) Euro Zone Nov PPI M/M: -0.9% v -0.8%e; Y/Y: 27.1% v 27.5%e
- (IT) Italy Dec Preliminary CPI M/M: 0.3% v 0.5% prior; Y/Y: 11.6% v 11.6%e
- IT) Italy Dec Preliminary CPI EU Harmonized M/M: 0.2% v 0.2%e; Y/Y: 12.3% v 12.3%e
**Fixed income issuance:
- (ID) Indonesia sold total $3.0B in 5-year, 10-year and 30-year bonds
- (IE) Ireland Debt Agency (NTMA) opened its book to sell EUR-denominated 20-year green bond via syndicate; guidance seen +46bps to mid-swaps
- (PT) Portugal Debt Agency (IGCP) opened book to sell new Jun 2038 OT bond via syndicate; guidance seen +77bps to mid-swaps
- (RO) Romania opened its book to sell USD-denominated 5-year, 10-year and 30-year bonds
- (FR) France Debt Agency (AFT) sold total €B vs. €10.5-12.0B indicated range in 2032, 2038, 2053 and 2066 Bonds
- Sold €6.113B in 2.00% Nov 2032 Oat; Avg Yield: 2.77% v 2.76% prior; Bid-to-cover: 1.92x v 2.06x prior
- Sold€2.115B 1.25% May 2038 Oat; Avg Yield: 3.02% v 2.52% prior; bid-to-cover: 1.79x v 2.01x prior
- Sold €2.563B in 0.75% May 2053 Oat; Avg Yield: 2.95% v 3.00% prior; bid-to-cover: 1.56x v 1.94x prior
- Sold €1.208B in 1.75% May 2066 Oat; Avg Yield: 2.79% v 2.74% vprior, Bid-to-cover: 1.87x v 1.94x prior
**Looking Ahead:
- (IL) Israel Dec Foreign Currency Balance: No est v $194.4B prior
- (MX) Citibamex Survey
- 05:25 (EU) Daily ECB Liquidity Stats
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills
- 06:45 (US) Daily Libor Fixing
- 06:00 (CO) Colombia Dec CPI M/M: 0.9%e v 0.8% prior; Y/Y: 12.7%e v 12.5% prior
- 06:00 (CO) Colombia Dec CPI Core M/M: No est v 0.6% prior; Y/Y: No est v 9.5% prior
- 06:30(UK) DMO to sell £3.5B in 4.125% Jan 2027 Gilts
- 07:00 (BR) Brazil Nov Industrial Production M/M: -0.2%e v 0.3% prior; Y/Y: 0.7%e v 1.7% prior
- 07:00 (MX) Mexico Dec Consumer Confidence: No est v 41.7 prior
- 07:00 (CL) Chile Nov Nominal Wage Y/Y: No est v 10.9% prior
- 07:30 (US) Dec Challenger Job Cuts: No est v 76.8K prior; Y/Y: No est v 416.5% prior
- 08:00 (RU) Russia Gold and Forex Reserve w/e Dec 30th: No est v $581.7B prior
- 08:00 (PL) Poland Central Bank Dec Minutes (2 decisions ago)
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:15 (US) Dec ADP Employment Change: +150Ke v +127K prior
- 08:30 (US) Initial Jobless Claims: 225Ke v 225K prior; Continuing Claims: 1.726Me v 1.710M: prior
- 08:30 (US) Nov Trade Balance: -$63.0Be v -$78.2B prior
- 08:30 (CA) Canada Nov Int'l Merchandise Trade (CAD): 1.6Be v 1.2B prior
- 09:00 (PL) Poland Central Bank (NBP) Gov Glapinski post rate decision press conference
- 09:20 (US) Fed's Bostic
- 09:45 (US) Dec Final Services PMI: 44.4e v 44.4 prelim; Composite PMI: No est v 44.6 prelim
- 10:00 (MX) Mexico Central Bank (Banxico) Dec Minutes
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (US) Weekly DOE Oil Inventories
- 11:30 (US) Treasury to sell 4-Week and 8-week Bills
- 14:00 (AR) Argentina Nov Industrial Production Y/Y: No est v 3.5% prior; Construction Activity Y/Y: No est v -0.9% prior
- 18:30 (JP) Japan Nov Labor Cash Earnings Y/Y: 1.7%e v 1.4% prior (revised from 1.8%); Real Cash Earnings Y/Y: -2.8%e v -2.9% prior (revised from -2.6%)
- 19:30 (JP) Japan Dec Final PMI Services: No est v 50.3 prelim; PMI Composite: No est v 48.9 prelim
- 20:00 (PH) Philippines Nov Unemployment Rate: No est v 4.5% prior
- 22:00 (ID) Indonesia Nov Foreign Reserves: No est v $134.0B prior
- 22:30 (JP) Japan to sell 6-Month Bills
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