- US stocks and bonds saw hefty bids in response to the soft-leaning US CPI report which resulted in participants boosting rate cut bets with 40bps of easing now priced through year-end which is back to around pre-NFP levels. As such, nearly all sectors were underpinned with notable outperformance in the heavyweight industries such as tech, communications and discretionary, while financials also gained after the big banks kicked off earnings season.
- USD softened but is well off intraday lows in which the DXY briefly dipped beneath the 109.00 level following the US CPI report which saw the Core CPI Y/Y ease to 3.2% (exp. 3.3%) from a previous of 3.3% which is a level it had been stuck at since September, and the Core M/M figure eased as expected to 0.2%. Nonetheless, the dollar gradually recouped some of the losses, while the latest Fed commentary provided little to shift the dial.
- Looking ahead, highlights include Japanese PPI, Australian MI Inflation Gauge & Jobs Data, BoK Rate Decision, Supply from Japan.
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LOOKING AHEAD
- Highlights include Japanese PPI, Australian MI Inflation Gauge & Jobs Data, BoK Rate Decision, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks and bonds saw hefty bids in response to the soft-leaning US CPI report which resulted in participants boosting rate cut bets with 40bps of easing now priced through year-end which is back to around pre-NFP levels. As such, nearly all sectors were underpinned with notable outperformance in the heavyweight industries such as tech, communications and discretionary, while financials also gained after the big banks kicked off earnings season.
- SPX +1.83% at 5,950, NDX +2.31% at 21,238, DJIA +1.65% at 43,222, RUT +1.99% at 2,263.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Williams (voter) is optimistic about the US productivity outlook and said the wildcard for a neutral rate view is much higher levels of debt, while he added that higher government debt may have lifted the neutral rate estimate. Williams also said he doesn’t see higher yields reflecting a big inflation view shift and is not surprised bond yields have risen, while he added that term premia factors are a big part of climbing bond yields and has no prediction when the balance sheet contraction will stop.
- Fed's Goolsbee (2025 voter) said he still sees continued progress on inflation and for the last 6 months, PCE inflation has run close to the 2% target. Furthermore, Goolsbee stated he is optimistic for 2025 regarding a soft landing but also noted a lot of uncertainties.
- Fed's Barkin (2027 voter) said inflation is coming down towards the 2% target and the latest CPI suggests inflation is still declining, while he sees a path where inflation is sticky or continues to progress towards the target.
- Fed Beige Book stated economic activity increased slightly to moderately across the twelve Federal Reserve Districts in late November and December, while consumer spending moved up moderately with most Districts reporting strong holiday sales that exceeded expectations.
- Hindenburg Research founder Nate Anderson announced the decision to disband Hindenburg Research.
- Outgoing Canadian PM Trudeau said Canada will respond forcefully if the US imposes tariffs but added that they don't even know whether US President-elect Trump will impose tariffs and therefore they don't know what their response would be.
NOTABLE EARNINGS
- JPMorgan Chase & Co (JPM) Q4 2024 (USD): EPS 4.81 (exp. 4.11), Revenue 43.74bln (exp. 41.73bln)
- Goldman Sachs Group Inc (GS) Q4 2024 (USD): EPS 11.95 (exp. 8.22), Revenue 13.87bln (exp. 12.39bln)
- Citigroup Inc (C) Q4 2024 (USD): EPS 1.34 (exp. 1.22), Revenue 19.58bln (exp. 19.49bln)
- Wells Fargo & Co (WFC) Q4 2024 (USD): EPS 1.43 (exp. 1.35), Revenue 20.378bln (exp. 20.58bln)
DATA RECAP
- US CPI MM (Dec) 0.4% vs. Exp. 0.3% (Prev. 0.3%)
- US Core CPI MM (Dec) 0.2% vs. Exp. 0.2% (Prev. 0.3%)
- US CPI YY NSA (Dec) 2.9% vs. Exp. 2.9% (Prev. 2.7%)
- US Core CPI YY NSA (Dec) 3.2% vs. Exp. 3.3% (Prev. 3.3%)
- US Cleveland Fed CPI (Dec) 0.3% (Prev. 0.2%)
- US NY Fed Manufacturing (Jan) -12.6 vs. Exp. 3.0 (Prev. 0.2, Rev. 2.1)
FX
- USD softened but is well off intraday lows in which the DXY briefly dipped beneath the 109.00 level following the US CPI report which saw the Core CPI Y/Y ease to 3.2% (exp. 3.3%) from a previous of 3.3% which is a level it had been stuck at since September, and the Core M/M figure eased as expected to 0.2%. Nonetheless, the dollar gradually recouped some of the losses, while the latest Fed commentary provided little to shift the dial.
- EUR was initially boosted by the US CPI data but then gave back its gains and retreated to beneath the 1.0300 handle, while the attention for the single currency turns to the ECB Minutes scheduled for Thursday.
- GBP was firmer on the day despite the softer-than-expected UK inflation data with GBP/USD boosted by the US CPI data but with much of the earlier gains reversed after hitting resistance around the 1.2300 level.
- JPY outperformed amid the BoJ rate hike risk with money markets pricing around a 70% chance for a 25bps hike at next week's meeting.
FIXED INCOME
- T-notes rally across the curve after soft-leaning CPI sees traders boost rate-cut bets.
COMMODITIES
- Oil prices advanced with WTI above USD 80/bbl amid dollar weakness post-CPI and continuing angst between Russia and Ukraine.
- US EIA Weekly Crude Stocks w/e -1.962M vs. Exp. -1.645M (Prev. -0.959M)
- OPEC MOMR (January) stated global oil demand growth forecast for 2025 remains unchanged at 1.4mln BPD and that robust oil demand growth is expected to continue in 2026.
- IEA OMR trimmed 2025 world oil demand growth forecast to 1.05mln BPD (prev. 1.1mln BPD) and stated that new US sanctions on Russia could significantly disrupt Russian oil supply and distribution chains.
- Kazakhstan is to compensate for oil overproduction under the OPEC+ deal until the end of June 2026, according to IFX.
- Falling Ukrainian drones triggered a fire at an oil storage facility in Russia's southern Voronezh region although no casualties were reported, according to Reuters citing a regional governor.
- US President-elect Trump is to abolish the requirement for some LNG export permit renewals, according to Reuters citing sources.
- Russia's Kremlin said possible EU sanctions on Russian aluminium could destabilise an "already fragile market", while it also commented that nothing can be ruled out when it comes to Russia's response to the latest US sanctions on the energy sector.
- Chile is expected to produce 27.3% of global copper output in 2034 vs. 2024 level of 23.6%, according to Cochilco. Chile is expected to produce 5.54mln tonnes of copper in 2035 (up 5.6% from 2023 levels) and its copper production is expected to hit a peak in 2027 at 6.07mln tonnes.
GEOPOLITICAL
MIDDLE EAST
- US official said a Gaza hostage and ceasefire deal was reached, while US President-elect Trump commented on Truth Social that they have a deal for hostages in the Middle East and they will be released shortly. Furthermore, Qatar’s PM also stated that a ceasefire deal in Gaza has been reached and will take effect on 19th January.
- 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.
- Houthis announced the targeting of US aircraft carrier USS Harry Truman and its naval vessels in the northern Red Sea, according to Sky News Arabia.
RUSSIA-UKRAINE
- Ukrainian President Zelensky sees a higher likelihood for the war to end in 2025.
- Russian President Putin is to demand that Ukraine never joins NATO and the Kremlin would seek curbs on Kyiv's army, according to Bloomberg citing sources.
- Russia and Ukraine held a PoW swap in which they swapped 25 prisoners of war each, according to Interfax citing Russia's Defence Ministry.
- US Treasury issued new Russia-related sanctions which target entities in China and Kyrgyzstan.
OTHER
- Incoming US Secretary of State Rubio said rich and advanced NATO countries need to contribute more to defence and stated that unless something dramatic changes, the US will have to deal with a Chinese invasion of Taiwan before the end of this decade.
ASIA-PAC
NOTABLE HEADLINES
- US strengthened restrictions on advanced computing semiconductors to prevent diversion to China, according to the Commerce Department.
- US Commerce Department said it is imposing new export controls on lab equipment and is to address concerns about biotechnology and AI, while it added 16 entities to its trade blacklist including 14 in China and 2 in Singapore. In response, China said that US President Biden's administration measures are damaging China-US relations and it is strongly dissatisfied with the decision, as well as firmly opposes the trade restrictions.
EU/UK
NOTABLE HEADLINES
- BoE's Taylor said his view is the risks around inflation have shifted in the last 12 months and that inflation moderated faster than expected in 2024, while he would expect the underlying trend of inflation to remain on track towards the 2% target from now on and his base case on rate cuts is around 100bps this year. Taylor also stated that a rise in Gilt yields does not make things easier and that it is a headwind for the economy.
- ECB's de Guindos said the disinflation process is well on track and the balance of macroeconomic risks has shifted from concerns about inflation to concerns about low growth.
- ECB's Villeroy said they have practically won the battle against inflation and noted that risks to the 0.9% French growth forecast for 2025 are on the downside but they do not see a recession.
DATA RECAP
- UK CPI MM (Dec) 0.3% vs. Exp. 0.4% (Prev. 0.1%)
- UK CPI YY (Dec) 2.5% vs. Exp. 2.6% (Prev. 2.6%)
- EU Industrial Production MM (Nov) 0.2% vs. Exp. 0.3% (Rev. 0.2%)
- EU Industrial Production YY (Nov) -1.9% vs. Exp. -1.9% (Prev. -1.2%, Rev. -1.1%)
