- US stock indices finished mostly lower following mixed data releases and despite the upward skew in sectors as Utilities and Real Estate sat atop of the pile with mega-cap sectors (Consumer Discretionary, Communications, Tech) the only ones in the red. On the earnings footing, MS and BAC continued the strong bank earnings although shares in the latter slipped, while TSMC also impressed. Nonetheless, the main highlight of the day was the rhetoric from Fed Governor Waller who toed a dovish line as he suggested that a cut in March cannot be completely ruled out and that three or four cuts are possible this year depending on the data, which pressured the dollar, spurred upside in Treasuries and briefly supported stocks.
- USD was choppy with early strength reversed after dovish comments from Fed Governor Waller who does not think that March can be completely ruled out although data could disrupt this, while he added that cuts could start several months from now if current inflation expectations are met and three or four cuts are possible this year, if data cooperates. Furthermore, the latest data releases were mixed as the Philly Fed Index (Jan) surged to its highest reading since April 2021, Retail Sales (Dec) printed mixed and Initial Jobless Claims rose above expectations.
- Looking ahead, highlights include Singapore Non-Oil Exports, Chinese House Prices, GDP, Industrial Production & Retail Sales, Malaysian GDP, Supply from Australia.
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LOOKING AHEAD
- Highlights include Singapore Non-Oil Exports, Chinese House Prices, GDP, Industrial Production & Retail Sales, Malaysian GDP, Supply from Australia.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stock indices finished mostly lower following mixed data releases and despite the upward skew in sectors as Utilities and Real Estate sat atop of the pile with mega-cap sectors (Consumer Discretionary, Communications, Tech) the only ones in the red. On the earnings footing, MS and BAC continued the strong bank earnings although shares in the latter slipped, while TSMC also impressed. Nonetheless, the main highlight of the day was the rhetoric from Fed Governor Waller who toed a dovish line as he suggested that a cut in March cannot be completely ruled out and that three or four cuts are possible this year depending on the data, which pressured the dollar, spurred upside in Treasuries and briefly supported stocks.
- SPX -0.21% at 5,937, NDX -0.69% at 21,091, DJIA -0.16% at 43,153, RUT +0.12% at 2,266.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Waller (voter) said December inflation data was very good and he does not think that March can be completely ruled out although data could disrupt this. Furthermore, Waller said cuts could start several months from now if current inflation expectations are met and three or four cuts are possible this year if the data cooperates.
- Fed's Goolsbee (2025 voter) said he has grown less concerned about a labour-market slowdown and is less worried about unemployment turning into something worse.
- US Treasury Secretary nominee Bessent said the US government has a significant spending problem and they will revive the US economy through pro-growth regulatory policies, reducing taxes and unleashing American energy. Furthermore, Bessent said if Trump's 2017 tax cuts are not renewed, the US will face economic calamity and they will see a gigantic middle-class tax increase if tax cuts are not continued.
- US House Republican leadership has asked the incoming Trump administration to hold off on rolling back several Biden-era policies, while the report added that if President-elect Trump wipes out big-ticket Biden policies using executive orders, Congress can’t claim them as savings in reconciliation, according to Punchbowl.
DATA RECAP
- US Retail Sales MM (Dec) 0.4% vs. Exp. 0.6% (Prev. 0.7%, Rev. 0.8%)
- US Retail Control (Dec) 0.7% vs. Exp. 0.4% (Prev. 0.4%)
- US Philly Fed Business Index (Jan) 44.3 vs. Exp. -5.0 (Prev. -16.4, Rev. -10.9)
- US Export Prices MM (Dec) 0.3% vs. Exp. 0.2% (Prev. 0.0%)
- US Import Prices MM (Dec) 0.1% vs. Exp. 0.1% (Prev. 0.1%)
- US Initial Jobless Claims w/e 217.0k vs. Exp. 210.0k (Prev. 201.0k, Rev. 203k)
- US Continued Jobless Claims w/e 1.859M vs. Exp. 1.871M (Prev. 1.867M, Rev. 1.877M)
FX
- USD was choppy with early strength reversed after dovish comments from Fed Governor Waller who does not think that March can be completely ruled out although data could disrupt this, while he added that cuts could start several months from now if current inflation expectations are met and three or four cuts are possible this year, if data cooperates. Furthermore, the latest data releases were mixed as the Philly Fed Index (Jan) surged to its highest reading since April 2021, Retail Sales (Dec) printed mixed and Initial Jobless Claims rose above expectations.
- EUR eked slight gains against the dollar to restest the 1.0300 level although the upside was limited and ECB Minutes were largely a non-event.
- GBP marginally softened but was of European morning lows and reverted to the 1.2200 handle albeit with price action constrained after the miss on monthly UK GDP.
- JPY outperformed with USD/JPY at the weaker end of the 155.00 territory heading into next week's BoJ meeting with a recent Bloomberg poll showing 74% of economists surveyed expect the central bank to raise the policy rate at next week's meeting.
- BoC's Gravelle said for QT to end now, the BoC thinks settlement balances in a range of CAD 50-70bln are needed which is up from last year's estimate of a CAD 20-60bln range, while he expects to announce the end of quantitative tightening in the first half of 2025. Gravelle also said they will need to restart normal-course asset purchases gradually and well before September.
FIXED INCOME
- T-notes caught a bid following dovish comments from Fed's Waller.
COMMODITIES
- Oil prices were lower as an initial dollar rebound and constructive, but mixed Middle East comments weighed.
- Saudi Arabia received India and China inquiries for up to 750k BPD more oil, according to reports.
- Iraq plans to increase production from the West Qurna 1 oilfield to 750k BPD by the end of 2025, while Iraq can boost oil output by 200k BPD immediately if asked by OPEC and it is to sign an agreement with Halliburton to develop the Nahr Bin Omar oilfield.
- US President-elect Trump’s team reportedly readies an oil sanctions plan for a Russia deal and Iran squeeze, according to Bloomberg.
- US Treasury Secretary nominee Bessent said sanctions on Russia over the Ukraine war were not forceful enough and Biden was too concerned about raising the price of oil, burdening Trump with higher oil prices, while he would be in favour of increasing sanctions on Russian oil majors to levels that would bring Russia to the negotiating table. Furthermore, he said as US energy output climbs, they can squeeze Iran and noted with sanctions, they can "make Iran poor again".
- Russia's Kremlin said it will be prepared to provide gas to Transdniestria.
- LME said no further deliveries of primary nickel brand BHP Nickel Briquettes, produced by BHP Nickel West, will be accepted for LME warranting with effect from 16th July 2025.
GEOPOLITICAL
MIDDLE EAST
- Israel’s cabinet is to convene on Friday to approve the brokered ceasefire agreement, according to Israeli media.
- Israeli National Security Minister Ben-Gvir said he will resign from the government if the Gaza ceasefire deal is approved.
- Israeli government spokesman told Sky News Arabia that Hamas made some changes in the agreement at the last minute. However, it was later reported that the final disputes surrounding the hostage deal have been resolved, according to Axios citing a US source.
- Hamas spokesperson said Israel targeted a place where a female hostage was following on from the announcement of a ceasefire.
- Russian President Putin and Iranian President Pezeshkian may discuss the situation in Syria, Palestine, Caucasus and the Iranian nuclear programme on Friday, according to TASS.
RUSSIA-UKRAINE
- Ukrainian military said it hit a Russian oil depot in the Voronezh region.
ASIA-PAC
NOTABLE HEADLINES
- China's MOFCOM said it will adjust the export control list of dual-use items based on actual conditions in 2025 and will list more strategic resources and strengthen export controls in 2025 at a proper time. MOFCOM will also initiate an anti-dumping and anti-subsidy investigation into US subsidies in its chip industry at the Chinese mature node chip industry's request.
- US ban of TikTok is poised to be delayed, according to Bloomberg. It was also reported that President-elect Trump is considering an executive order to circumvent the TikTok ban which would allow TikTok to continue operating until new owners are found, according to NYT.
- India’s government is reportedly re-introducing a concessional corporate tax rate and mulls reintroduction of a concessional scheme for new manufacturing units at 18% (prev. 15%), according to CNBC TV18 sources.
EU/UK
NOTABLE HEADLINES
- ECB Minutes noted regarding the inflation outlook that members were increasingly confident that inflation would return to the target in H1 '25, while it was stated that if the baseline projection for inflation was confirmed over the next few months and quarters, a gradual dialling-back of policy restrictiveness was seen as appropriate. Furthermore, some members noted that a case could be made for a 50bps rate cut at that meeting and would have favoured more consideration being given to the possibility of such a larger cut, while it was also stated that a gradual approach was needed to allow an assessment of whether policy rates had reached a broadly neutral level.
- Portugal will reportedly not appoint Centeno for a second term at the Bank of Portugal or by extension the ECB, according to SIC.
- French PM Bayrou survived a no-confidence motion against the government.
DATA RECAP
- UK GDP Estimate MM (Nov) 0.1% vs. Exp. 0.2% (Prev. -0.1%)
- UK GDP Estimate YY (Nov) 1.0% vs. Exp. 1.3% (Prev. 1.3%)
- German CPI Final MM (Dec) 0.5% vs. Exp. 0.4% (Prev. 0.4%)
- German CPI Final YY(Dec) 2.6% vs. Exp. 2.6% (Prev. 2.6%)
