- US stocks were mostly higher in what was a choppy session ahead of US CPI data although futures had initially bounced on a cool US PPI print. Thereafter, stocks and Treasuries were indecisive as markets remained tentative over the direction of US yields with the latest Reuters poll suggesting 2/3 of bond strategists surveyed see the 10yr yield surpassing 5% in 2025. In terms of the sectors, outperformance was seen in Utilities, Materials and Real Estate, whereas Healthcare and Communications were the biggest losers with the former weighed on by Eli Lilly's disappointing preliminary Q4 weight loss drug numbers.
- USD failed to sustain its early strength and weakened against its peers following softer-than-expected PPI data, while there was little new in regards to Fed rhetoric and macro updates were light as participants now look to the incoming US CPI data and several Fed speakers.
- Looking ahead, highlights include South Korean Unemployment Rate, Japanese Money Supply & Machine Tool Orders, Supply from Australia.
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LOOKING AHEAD
- Highlights include South Korean Unemployment Rate, Japanese Money Supply & Machine Tool Orders, Supply from Australia.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were mostly higher in what was a choppy session ahead of US CPI data although futures had initially bounced on a cool US PPI print. Thereafter, stocks and Treasuries were indecisive as markets remained tentative over the direction of US yields with the latest Reuters poll suggesting 2/3 of bond strategists surveyed see the 10yr yield surpassing 5% in 2025. In terms of the sectors, outperformance was seen in Utilities, Materials and Real Estate, whereas Healthcare and Communications were the biggest losers with the former weighed on by Eli Lilly's disappointing preliminary Q4 weight loss drug numbers.
- SPX +0.11% at 5,843, NDX -0.13% at 20,757, DJIA +0.52% at 42,518, RUT +1.13% at 2,219.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Schmid (2025 voter) said the Fed will act if there is a disruption to either side of its mandate when asked about tariffs and there will be a significant time lag in the impact of the new administration's policies, while he added the Fed's influence on housing supply is limited.
- US House Speaker Johnson said the intention is to have a budget bill voted on the House floor by Easter and send it to the President's desk by Memorial Day. It was separately reported that House Speaker Johnson said he wants to extend the debt limit for the entirety of Trump’s presidency but said it would be “costly” meaning Democrats would exact a price for their votes, according to Punchbowl's Sherman.
DATA RECAP
- US PPI exFood/Energy MM (Dec) 0.0% vs. Exp. 0.3% (Prev. 0.2%)
- US PPI exFood/Energy YY (Dec) 3.5% vs. Exp. 3.8% (Prev. 3.4%, Rev. 3.5%)
- US PPI Final Demand MM (Dec) 0.2% vs. Exp. 0.3% (Prev. 0.4%)
- US PPI Final Demand YY (Dec) 3.3% vs. Exp. 3.4% (Prev. 3.0%)
FX
- USD failed to sustain its early strength and weakened against its peers following softer-than-expected PPI data, while there was little new in regards to Fed rhetoric and macro updates were light as participants now look to the incoming US CPI data and several Fed speakers.
- EUR outperformed as it benefitted from the soft US PPI data to eventually return to the 1.0300 handle against the dollar, while there were hawkish comments from ECB's Holzmann who does not think the ECB can lower rates too quickly and noted that core inflation is still closer to 3% than 2%.
- GBP lagged behind its major peers and GBP/USD initially retreated beneath the 1.2200 level before bouncing back on the back of the US PPI data.
- JPY ultimately softened on the day but with price action choppy as participants continue to second-guess whether the BoJ will hike rates next week.
FIXED INCOME
- T-notes settled marginally higher in the aftermath of softer-than-expected PPI data but futures were off peaks as a surge in airfares has hawkish implications for PCE and with participants awaiting CPI data.
COMMODITIES
- Oil prices declined in a choppy session with prices weighed on by initial dollar strength and continued constructive geopolitical dialogue.
- Private inventory data (bbls): Crude -2.6mln (exp. -1.0mln), Distillate +4.9mln (exp. +0.8mln), Gasoline +5.4mln (exp. -2mln), Cushing +0.6mln.
- US EIA STEO stated 2025 US crude production is seen at 13.55mln BPD (prev. 13.52mln bbls) and 2026 US crude production is seen at 13.62mln BPD, while both 2025 and 2026 US oil demand is seen at 20.5mln bpd.
- US President-elect Trump is preparing pro-fossil fuel executive orders and will seek to overturn offshore drilling bans and resume LNG approvals, according to WSJ citing lobbyists.
- Libya's NOC said Al-Hatibah field production has exceeded 100mln cubic feet of natural gas per day.
- EU Foreign Commissioner Kallas said they are pushing to get the Russian oil price cap lowered.
- EU Commission intends to propose a ban on imports of Russian primary aluminium in the latest package of sanctions.
GEOPOLITICAL
MIDDLE EAST
- Israel and Hamas agreed in principle to a ceasefire draft deal and if all goes well, will be finalised this week, according to CBS.
- Israel-Hamas deal on a Gaza ceasefire could be struck as soon as Tuesday or Wednesday and would then be implemented 48-72 hours afterwards, while the main issues are all agreed with logistical/minor points remaining, according to FT citing sources.
- Negotiating delegation informed Israeli PM Netanyahu of the possibility of reaching an agreement within hours, according to Al Arabiya.
- Southern Command discussed preparations for a gradual withdrawal of IDF forces from Gaza, according to Al Jazeera citing the Israel Broadcasting Corporation.
- Hamas did not deliver their response because Israel did not clarify the areas of its withdrawal, according to Al Arabiya citing a Hamas source.
- US Secretary of State Blinken said Iran has lost its ability to supply Hezbollah with weapons, while Israel will have to accept a united Gaza and West Bank under the leadership of a reformed Palestinian authority. Blinken added Israel must abandon the myth that it can carry out de facto annexation, as well as noted that a Gaza ceasefire reportedly right on the brink and awaiting the final word from Hamas.
RUSSIA-UKRAINE
- Senior Ukrainian official said they launched a "massive attack" which hit multiple targets in the Engels, Saratov, Kazan, Bryansk and Tula regions of Russia.
- Russia and Iran cooperation agreement is to be signed for a 20-year period, according to TASS.
OTHER
- Finland's President said will increase NATO's presence in the Baltic Sea.
ASIA-PAC
NOTABLE HEADLINES
- PBoC Deputy Governor said they will adjust and improve policy force and its pace at a proper time to support China's FY economic and social development targets, while they will continue to take measures to keep CNY basically stable at a reasonable and balanced level. Furthermore, he said they will prevent overshooting risks in exchange rates and will move to ease pressure on banks from falling net interest margins.
- Chinese President Xi held phone conversations with European Council President Costa, while Xi said that China has confidence in the EU and hopes the EU can become a partner that can be trusted.
- China placed 7 US firms on the unreliable entity list for involvement in arms sales to Taiwan.
- US banned imports for over 30 entities over Uyghur forced labour, according to the federal register.
- US finalises the rule to effectively ban Chinese vehicles which could include Polestar (PSNY), according to The Verge.
- EU investigation found "clear evidence" that China is limiting access of EU medical device producers to its government contracts and it is assessing the next steps.
EU/UK
NOTABLE HEADLINES
- UK Chancellor Reeves reiterated the UK remains committed to fiscal rules at all times and movements in financial markets have been global in nature, while she said she is committed to fiscal rules when asked to rule out spending cuts.
- ECB's Holzmann said he hopes to meet the 2% inflation target by year-end and he does not think the ECB can lower rates too quickly, as well as noted that core inflation is still closer to 3% than 2%.
- French PM Bayrou said it is absolutely vital to reform the pension system and will re-open talks on the pension reform system with social partners along with trade unions and employers groups for a "short time and under transparent conditions".
- Head of France's Socialist party said that if his party does not get a clear response from the PM to its demands on pension reform, then it will vote in favour of no-confidence against the government.
- France's far-left Unbowed Party said it will file a motion of no confidence against the government.
