- European bourses opened on a strong footing and remain at highs, with Tech and Luxury among top performers; US futures mixed whilst NQ leads.
- USD mixed vs. peers, JPY leads as BoJ hike bets mount after reports noted that BoJ is said to see a good chance of a January rate hike barring a major market rout, following Trump’s inauguration.
- Gilts gap lower despite soft GDP, USTs await data and Treasury Secretary nominee Bessent’s confirmation hearing.
- Crude takes a breather while base metals cheer risk appetite.
- Looking ahead, US Jobless Claims, Philly Fed Index & Retail Sales, ECB Minutes, NBP Policy Announcement, Treasury Secretary nomination hearing for Scott Bessent, Comments from BoC’s Gravelle, Supply from the US, Earnings from UnitedHealth, Bank of America, Morgan Stanley, USB, PNC.
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EUROPEAN TRADE
EQUITIES
- European bourses (Stoxx 600 +0.6%) opened on a strong footing, and have remained at session highs throughout the European morning – continuing the momentum seen in APAC trade overnight, and as sentiment is lifted following strong Luxury/Tech updates.
- European sectors hold a strong positive bias, with sentiment lifted by positive catalysts within the Luxury and Tech industries. Starting with Luxury; Richemont (+15%) soars after it reported extremely strong Q3 results, lifting heavyweight LVMH (+9.1%). As for Tech; chip-giants such ASML (+3.1%) and ASM International (+3.7%) both gain today, following strong TSMC results (TSM +5% in pre-mkt trade).
- US equity futures are mixed, with the RTY in modest negative territory whilst the tech-heavy NQ (+0.5%) outperforms, lifted by post-earning strength in TSMC.
- TSMC (2330 TT) (TWD): Net income 374.7bln (exp. 369.8bln), oper. profit 425.7bln (exp. 411.4bln), rev. 868.5bln (prelim. 868.4bln). Guides Q1 rev. USD 25.0bln-25.8bln (exp. 23.9bln), Q1 oper. margin 46.5%-48.5% (exp. 46.4%), gross margin 57%-59% (exp. 56.9%). Sees 2025 capex USD 38bln-42bln (exp. 35.15bln); 2025 revenue increasing by close to 20% in USD-terms. Strong surge in AI demand is seen continuing in 2025.
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FX
- USD is mixed vs. peers after being sold yesterday in the wake of soft CPI metrics which saw Fed easing expectations return to pre-NFP levels. For today's docket, attention will be on December retail sales data and weekly claims figures. Elsewhere, attention will be on incoming Treasury Secretary Bessent's Senate confirmation hearing which is expected to see him questioned on the USD and tariff policy. Pre-prepared remarks have stressed the role of the USD as the world's reserve currency. DXY is just about holding above the 109 mark and within yesterday's 108.06-109.38 range.
- EUR is trivially softer vs. the USD after fading some fleeting reprieve provided by an upward revision to M/M German CPI for December. Today's EZ-docket includes the minutes from the December meeting which saw the Bank pull the trigger on a 25bps rate cut. The account will be scanned for any views of GC members that could suggest a slowdown in the ECB's rate cutting cycle.
- JPY is the best performer across the majors as expectations of a BoJ hike next week continue to ramp up. In terms of the latest updates, source reporting via Bloomberg noted that the BoJ is said to see a good chance of a January rate hike barring a major market rout following Trump’s inauguration. USD/JPY has made a fresh low for the year at 155.22 with the next downside levels coming via the 155 mark and the 50DMA at 154.61.
- GBP is towards the bottom of the G10 leaderboard following a softer-than-expected outturn for UK GDP; M/M 0.1% vs. Exp. 0.2% (prev. -0.1%). In response to the data, Pantheon Macro lowered its Q4 GDP growth forecast to 0.0% Q/Q from 0.1% previously; also cites the recent outturns for UK PMI metrics. Cable has just slipped below the 1.22 mark but sits within yesterday's 1.2154-1.2306 range.
- Antipodeans are both slightly softer vs. the USD after a recent run of three consecutive sessions of gains. Macro focus for AUD has been on the overnight jobs data, which, although saw a larger-than-expected level of employment change, was largely driven by part-time roles and accompanied by an uptick in the unemployment rate. Accordingly, AUD is a touch softer with a 25bps cut fully priced by April.
- PBoC set USD/CNY mid-point at 7.1881 vs exp. 7.3247 (prev. 7.1883).
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FIXED INCOME
- USTs are currently trading in-line with peers ahead of another busy data docket with Retail Sales and weekly Claims due before Treasury Secretary nominee Bessent’s confirmation hearing and the announcement for 20yr supply. At a 108-05 trough with yields firmer across the curve, the short end leading and as such the curve itself is flattening.
- Gilts opened lower by 10 ticks, despite cooler-than-expected GDP data for November. Downside which was likely a function of three factors: 1) Weaker economic performance reduces the Chancellor’s fiscal headroom and as such is a Gilt negative. 2) An upward revision to the German Final CPI for December. 3) General fixed income pressure on account of the constructive European open. Opened at the 90.91 mark and has since slipped to a 90.76 trough.
- Bunds are softer hit early doors on the same three factors as Gilts. In terms of the German metric, Final CPI M/M was revised up slightly and seemingly almost exclusively as a function of travel prices, with package holidays +9.1%, and rail up 4.2% or 3.0% for long- and short-distance options. Currently, in proximity to the 131.15 session low with support at the figure and then numerous recent lows between 130.70-28, the latter being the contract trough.
- Spain sells EUR 5.99bln vs exp. EUR 5.0-6.0bln 2.70% 2030, 0.85% 2037 & 1.00% 2050 Bono
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COMMODITIES
- Subdued trade in the crude complex as prices take a breather from yesterday's surge. Prices this morning have been trundling lower despite the constructive risk tone as DXY attempts to regain some composure and against the backdrop of ongoing geopolitics. Brent Mar trades in an 81.75-82.57/bbl parameter.
- Mixed trade in the precious metals complex with spot gold and silver continuing to benefit from the US CPI and mixed noise surrounding the Israel-Hamas ceasefire. Spot gold topped USD 2,700/oz and currently sits within a USD 2,690-2,706/oz range.
- Firmer across the board as the base metals complex continues to cheer the softer-than-expected US CPI alongside the constructive risk tone, which brought market expectations for Fed rate cuts back to pre-NFP levels.
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NOTABLE DATA RECAP
- UK GDP Estimate MM (Nov) 0.1% vs. Exp. 0.2% (Prev. -0.1%); YY 1.0% vs. Exp. 1.3% (Prev. 1.3%); 3M/3M 0.0% vs. Exp. 0.0% (Prev. 0.1%)
- UK RICS House Price Balance (Dec) 28% vs. Exp. 28% (Prev. 25%)
- German CPI Final MM (Dec) 0.5% vs. Exp. 0.4% (Prev. 0.4%); YY 2.6% vs. Exp. 2.6% (Prev. 2.6%)
- Italian CPI (EU Norm) Final YY (Dec) 1.4% vs. Exp. 1.4% (Prev. 1.4%); Consumer Prices Final YY (Dec) 1.3% vs. Exp. 1.4% (Prev. 1.3%); Consumer Prices Final MM (Dec) 0.1% vs. Exp. 0.1% (Prev. 0.1%); CPI (EU Norm) Final MM (Dec) 0.1% vs. Exp. 0.1% (Prev. 0.1%)
- EU Eurostat Trade NSA, Eur (Nov) 16.4B EU vs. Exp. 8.5B EU (Prev. 6.8B EU).
NOTABLE EUROPEAN HEADLINES
- ECB's Centeno said the interest rate will continue on a trajectory ideally towards values close to 2%.
NOTABLE US HEADLINES
- US Commerce Department announces USD 1.5bn in final awards to support next generation of US semiconductor advanced packaging.
- US President Biden said in his farewell address that he wishes the Trump administration success and is concerned about a dangerous concentration of power in the hands of a few wealthy people, while he added that excessive wealth threatens democracy. Biden is also concerned about the tech industrial complex and said Americans are buried in disinformation and free press is crumbling. Furthermore, he said AI needs safeguards and that they must make AI safe and trustworthy, as well as noted that America must lead on AI, not China.
- US Treasury Secretary Yellen said a duplicative agency doesn't seem like a good step to save money for taxpayers when asked about Trump's plan for an 'external revenue service', while she said Trump's plan to impose new tariffs will raise costs for US goods and services.
- US Treasury Secretary nominee Bessent said in prepared remarks ahead of his Senate testimony that sanctions must be part of a whole government approach, and they must ensure the dollar remains the world's reserve currency. Bessent also stated that the US must secure supply chains vulnerable to strategic competitors and the US must carefully deploy sanctions as part of a government-wide approach to address national security requirements. Furthermore, he said Trump has a generational opportunity to unleash a 'new economic golden age' with more jobs, wealth, and prosperity for Americans.
- US House Speaker Johnson said one bill strategy makes sense, while he added that they will pass the budget and target by late February.
- Outgoing Canadian PM Trudeau said Canada will respond forcefully if the US imposes tariffs but added that they do not even know whether US President-elect Trump will impose tariffs and therefore they don't know what their response would be. Furthermore, reports noted that Canada could impose countermeasures on up to CAD 150bln worth of imports from the US if the Trump administration slaps tariffs on Canadian imports, although Canada won't necessarily impose the countermeasures and would carry out public consultations first, while the proposed Canadian countermeasures would be divided into three groups and Florida orange juice would be targeted immediately.
- Hindenburg Research founder Nate Anderson announced the decision to disband Hindenburg Research.
GEOPOLITICS
MIDDLE EAST
- "Trump administration's national security adviser: We made it clear to the Israelis that if Hamas does not abide by the agreement, we will be with them in the war", according to Sky News Arabia.
- Hamas Official says they are committed to the ceasefire agreement announced by the mediators, via Al Arabiya.
- Israeli Prime Minister's Office: "Israel will not set a date for a cabinet and government meeting until the mediators announce that Hamas has approved all the details of the agreement.", according to journalist Stein. "Hamas withdraws from the explicit understandings agreed with the mediators and with Israel in a last-minute blackmail attempt."
- Israel's PM office says Hamas is reneging on the understandings and creating a last-minute crisis that prevents an agreement, according to N12 News.
- Israel-Hamas deal outlines a six-week initial ceasefire phase that includes a gradual withdrawal of Israeli forces from central Gaza and the return of displaced Palestinians to northern Gaza. Hamas will release 33 Israeli hostages, including all women, children and men over 50, while the total number of Palestinians released will depend on the hostages released and could be between 990-1,650. Furthermore, negotiations over the second phase of the agreement will start by the 16th day of phase one and is expected to include the release of all remaining hostages.
- Israeli PM Netanyahu thanked US President-elect Trump for help in the Gaza deal and they agreed to meet in Washington soon, while he also spoke with US President Biden and thanked him for help in the hostages deal. However, it was separately reported that Israeli PM Netanyahu's office said they are working on the final details of a Gaza agreement, according to AP. Yedioth Ahronoth also reported that the Israeli negotiating team will remain in Doha to complete talks, according to Asharq News.
- Israel reportedly conducted violent raids on Gaza City, according to Al Arabiya.
RUSSIA-UKRAINE
- Ukrainian President Zelensky sees a higher likelihood for the war to end in 2025.
- UK and Ukraine are to sign a historic partnership as UK PM Starmer travels to Ukraine to meet President Zelensky, according to Downing Street.
- Russian Defence Ministry said it successfully hit a large underground gas storage area in Stryi in western Ukraine, while it added that attacks on energy infrastructure were responses to Ukrainian strikes using Western weapons on the Krasnodar region and TurkStream pipeline.
CRYPTO
- Bitcoin continues to climb higher and sits just above USD 99k; Ethereum gains to a slightly larger magnitude and holds around USD 3.3k.
APAC TRADE
- APAC stocks traded mostly higher as the region took impetus from the rally on Wall St in the aftermath of the soft-leaning US CPI data which boosted Fed rate cut bets and saw money market pricing of cuts for this year return to around pre-NFP levels.
- ASX 200 advanced at the open with outperformance in tech and financials although miners lagged with Rio Tinto shares indecisive after its quarterly update.
- Nikkei 225 gained but was well off today's best levels amid a firmer currency and the risk of a potential BoJ rate hike next week.
- Hang Seng and Shanghai Comp were choppy and initially boosted after the PBoC continued with its liquidity efforts and with analysts suggesting the PBoC could lower RRR ahead of the Chinese New Year later this month, although the gains in the mainland were then pared amid lingering trade frictions after the US strengthened restrictions on advanced computing semiconductors to prevent diversion to China. Indices then resumed to the upside heading into the European open.
NOTABLE ASIA-PAC HEADLINES
- China Commerce Ministry says will initiate anti-dumping and anti-subsidy investigation into US subsidies in its chip industry at Chinese Mature Node chip industry's request.
- China's NDRC will raise retail gasoline and diesel prices by CNY 340/t and CNY 325/t respectively, effective January 17th.
- PBoC might cut RRR before the Lunar New Year this month, according to analysts cited by Shanghai Securities News.
- BoJ Governor Ueda reiterated they will raise the policy rate this year if economic and price conditions continue to improve, while he added how to proceed with monetary policy adjustment will depend on economic, price, and financial conditions at the time. Ueda also commented that the new US administration's policy outlook and domestic wage negotiations are key factors in the policy decision, as well as repeated that they will debate at next week's meeting whether to hike rates.
- BoJ is said to see a good chance of a January rate hike barring a major market rout following Trump's inauguration, according to Bloomberg citing several unnamed people.
- Reuters poll showed nearly two-thirds of 32 economists expect the BoJ to hike rates at next week's meeting with 59 of 61 expecting the key rate to be at 0.50% by end-March, while two-thirds of 21 economists expect Japanese authorities to intervene in FX if yen weakens to 165 vs the dollar and the Japan rate of pay increase in labour talks this year is seen at 4.75% (prev. 4.70% in December poll).
- BoK maintained its base rate at 3.0% (exp. 25bps cut) with the decision not unanimous as board member Shin dissented and wanted a cut, while it announced to expand the cap on the temporary special loan for small to medium businesses to KRW 14tln. BoK said it will determine the timing and pace of any further base rate cuts to mitigate downside risks to economic growth, as well as noted that South Korean consumption weakened, construction investment has been sluggish and economic growth is to slow. BoK Governor Rhee said the need for further cuts is higher now that downside risks to economic growth have heightened and all board members said a rate cut would be necessary but took consideration of dollar-won FX rates fluctuating due to political turmoil. Rhee also stated that six board members said they are open to rate cuts in the three-month ahead window, while Rhee noted it would be appropriate to wait until domestic political turmoil stabilises, and some certainty comes from the new US administration before changing policies. Furthermore, Rhee said Thursday's rate decision was not because dollar-won rates are at a certain level, but because political uncertainties have been impacting the FX rates.
DATA RECAP
- Japanese Corp Goods Price MM (Dec) 0.3% vs. Exp. 0.4% (Prev. 0.3%)
- Japanese Corp Goods Price YY (Dec) 3.8% vs. Exp. 3.8% (Prev. 3.7%, Rev. 3.8%)
- Australian Employment (Dec) 56.3k vs. Exp. 15.0k (Prev. 35.6k)
- Australian Full Time Employment (Dec) -23.7k (Prev. 52.6k)
- Australian Unemployment Rate (Dec) 4.0% vs. Exp. 4.0% (Prev. 3.9%)
- Australian Participation Rate (Dec) 67.1% vs. Exp. 67.0% (Prev. 67.0%)
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