US CPI data expected for clues to the outlook for Fed policy normalization

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Remarks / Observations

– US CPI data to determine the pace of Federal Reserve policy normalization.

– Powell’s testimony gave no clear indication of a first rate hike; pending the plans of the other major central banks for their own political roadmaps.

Asia

– Unemployment rate in South Korea in December: 3.8% against 3.2% e.

– Japan current account balance in November: 897.3B against ¥ 589.8Be; Current account adjustment: ¥ 1.37T against ¥ 1.05Te; Trade balance (BoP basis): – ¥ 431.3B against – ¥ 650.5Be.

– China Dec. CPI Y / Y: 1.5% against 1.7% in ev 2.3% previously; IPP Y / Y: 10.3% against 11.3% e.

– The quarterly regional economic report of the BOJ (Sakura) noted the assessment of the 9 regions. Noted that economies were picking up or showing signs of recovery.

– BOJ Gov Kuroda noted that the financial system maintains stability. Repeated position that monitored the impact of the coronavirus and would add a stimulus as needed; The CPI is gradually increasing.

– North Korea has confirmed that it has passed the final test firing of its hypersonic missile, traveled 1,000 km and accurately hit its target.

Europe

– UK Prime Minister Johnson’s leadership said it faced its most serious threat to date after reports were released his private secretary invited more than 100 people to a ‘Bring your own alcohol’ party at the official residence of the British Prime Minister during a coronavirus lockdown in May 2020.

Americas

–The testimony of Fed Chairman Powell in the Senate noted that, in all likelihood, this would normalize policy, including raising rates this year and could start the balance sheet trickle down later this year. He did not prioritize his two terms, but focused on inflation for now. Monetary policy was still accommodative and attempted to achieve a more neutral, and then perhaps more restrictive, stance if necessary.

Energy

– Weekly API crude oil inventories: -1.1 M against -6.4 M previously.

Speakers / Fixed income / FX / Commodities / Erratum

Actions

Indices [Stoxx600 +1.38% at 485.68, FTSE +0.72% at 7,545.17, DAX +0.41% at 16,006.49, CAC-40 +0.60% at 7,226.22, IBEX-35 +0.28% at 8,780.12, FTSE MIB +0.38% at 27,641.00, SMI -0.02% at 12,705.69, S&P 500 Futures +0.08%].

Market focal points / Key themes: European indices are trading higher throughout the first session, with the notable exception of the SMI; the sectors among those leading to the increase are technology and industry; healthcare and consumer discretionary lag behind other sectors; Gazprom Neft would seek to acquire the remaining stake in two Repsol joint ventures in Russia; earnings expected in the next US session include KB Homes and Jeronimo Martins.

Actions

Consumer discretionary: Just Eat Takeaway.com [JET.UK] + 3% (trading update), Page group [PAGE.UK] + 1% (trading update), JD Sports Fashion [JD.UK] -2% (trading update).

Consumer Products: J Sainsbury [SBRY.UK] + 2% (trading update).

Health: Koninklijke Philips [PHIA.NL] -14% (preliminary gains).

Technology: TeamViewer [TMV.DE] + 15% (preliminary gains), Border developments [FDEV.UK] -24% (gains).

Loudspeakers

ECB Villeroy (France) said the region was very close to the peak of the inflation bump; The ECB would do what is necessary to bring inflation down to 2.0% because it remained very vigilant on inflation.

BOE noted that the operational resilience of the financial sector remains a strategic priority. The banking sector needs to take a forward-looking approach to managing climate-related risks.

German financial regulator (Bafin) intended to raise the counter-cyclical capital buffer from 0% to 0.75% for residential mortgages. Move to bring 22 billion euros as a buffer against future risks.

Bank of Italy (BOI) Monthly statistics on banks and currency: Nov. Gross non-performing loans (NPL): 43.9 billion euros against 46.1 billion euros previously.

Deputy Governor of the Czech Central Bank Mora said it recorded a rate hike of more than 25 basis points at the next policy meeting in February. Is expected to deliver one or two larger hikes, then fine-tune its main interest rate from the May policy meeting. Pointed out that the main rate should exceed 4.00% and that there is no cap on its height. Saw the January CPI at 9.0% but with inflation peaking in the first quarter.

Currencies / Fixed Income

– The USD was weaker following the testimony of Fed Chairman Powell in the Senate. Dealers believed the Fed came across as less hawkish as Powell admitted it was debating approaches to shrink the Fed’s balance sheet. Powell added that it might take them two, three or four meetings to make such decisions.

Economic data

– (FI) Finland Nov current account balance: + € 0.4B versus – € 2.0B previously.

– (DE) Germany Dec. Wholesale price index M / M: 0.2% against 1.3% previously; Y / Y: 16.1% against 16.6% previously.

– (NO) Norway Nov Global GDP M / M: -0.3% against -0.8% previously; Continental GDP M / M: 0.7% against 0.5% e.

– (NO) Real estate price index in Norway Q4 Q / Q: 0.8% against 1.0% previously.

– (RO) Romania Q3 Final GDP (3rd reading) Q / Q: 0.4% against 0.4% preliminary; Y / Y: 7.4% against 7.4% prelim.

– (FR) Bank of France Dec Industrial (Business) Sentiment: 108 v 104th.

– (CZ) Dec. Czech CPI M / M: 0.4% vs. 0.3% e; Y / Y: 6.6% against 6.6% e (highest annual rate since October 2008).

– (CZ) Czech export price index for November Y / Y: 10.5% against 7.5% previously; Y / Y import price index: 12.8% against 9.9% previously.

(CN) Global December financing from China (CNY): 2.37 T against 2.40 Te.

(CN) Loans in new Chinese yuan (CNY): 1.130 T against 1.25 Te.

(CN) China Dec M2 Money supply Y / Y: 9.0% vs. 8.7% e; M1 Money supply Y / Y: No is v 3.0% before; M0 Money supply Y / Y: No is v 7.2% before.

(EU) Euro zone Industrial production in November M / M: 2.3% vs. 0.2% e; Y / Y: -1.5% against + 1.4% e.

Issue of fixed income securities

– (IN) India sold total INR260B vs INR260B indicated in the invoices at 3 months, 6 months and 12 months.

– (TP) Portuguese Debt Agency (IGCP) opened a book to sell EUR denominated 20 year OT bonds through a syndicate; sight guidance + 61bps at mid-swaps.

– (DK) Denmark sold a total of 2.16 billion DKK in 3-month, 6-month, 9-month and 12-month invoices.

– (THIS) Italian Debt Agency (Tesoro) sold € 6.5bn compared to € 6.5bn indicated in 12-month bonds; Average return: -0.444% against -0.467% previously; Bid to cover: 1.40 x 1.29 x front.

– (NO) Norway sold NOK 2.0 billion against NOK 2.0 billion indicated in September 2031 bonds at 1.25%; Average return: 1.82% against 1.69% previously; bid-to-cover: 3.59xv 3.61x front.

Look ahead

– (CH) Switzerland sells 2032 and 2039 Bonds.

– 5:25 am (EU) Daily liquidity statistics from the ECB.

05:30 (DE) Germany to sell € 1.5 billion in 0% Bunds from August 2052.

– 06h00 (PT) Portugal December Final CPI M / M: 0.0% ev 0.0% preliminary; Y / Y: 2.8% ev 2.8% prelim.

– 06h00 (PT) Portugal Dec Final EU CPI Harmonized M / M: No est v 0.0% prelim; Y / Y: No is v 2.8% prelim.

– 06h00 (IE) Ireland Dec Unemployment: No est v 5.2% before.

– 06:00 (UK) Russia to sell OFZ 2029 and 2032 bonds.

– 6:45 am (US) Correction of the daily Libor.

– 7:00 am (US) MBA mortgage applications with Jan 7: none is -5.6% v before.

– 07h00 (IN) India Dec. CPI Y / Y: 5.8% ev 4.9% before.

– 07h00 (IN) India Nov Industrial production Y / Y: 2.9% ev 3.2% before.

– 07:00 (UK) Weekly PM Question Time at home.

– 07:00 (CZ) Czech Central Bank comments on CPI data:

– 08h00 (UK) Daily Baltic Dry Bulk Index.

8:30 a.m. (United States) Dec. CPI H / M: 0.4% ev 0.8% before; Y / Y: 7.1% ev 6.8% before.

8:30 a.m. (United States) Dec. CPI (excluding food / energy) H / M: 0.5% ev 0.5% before; Y / Y: 5.4% ev 4.9% before.

– 8:30 a.m. (United States) Dec. CPI NSA index: 278.738ev 278.770 before; CPI Core Index SA: 284.611ev 283.201 before.

– 8:30 am (United States) Dec Real Avg Hourly Earning Y / Y: none is v -1.7% before (revised from -1.9%); Average Actual Weekly Profits Y / Y: None is v -1.9% before.

– 10:30 am (US) Weekly DOE oil inventories.

– 11:00 a.m. (UK) Russia Dec. Final CPI H / M: No is v 0.8% prelim; Y / Y: No is v 8.4% prelim.

– 11:00 a.m. (UK) Russia Dec. Core CPI M / M: 0.8% ev 1.1% before; Y / Y: 9.1% ev 8.7% before.

– 12:00 (US) USDA World Agricultural Demand and Supply Estimates (WASDE) Crop Report.

– 12:00 (CA) Canada to sell 5 year tickets.

– 1:00 p.m. (US) The Treasury sells 10-year notes.

– 1:00 p.m. (MX) Mexico Dec. Total creation of formal jobs: No is v + 165.5K before.

2:00 p.m. (US) Dec. Monthly budget: – $ 5.0 compared to – $ 191.3 M before.

– 2:00 pm (AR) Argentina Nov. Capacity utilization: no east versus 64.7% before.

2:00 p.m. (US) Federal Reserve Beige Book.

– 4:00 p.m. (KR) South Korea Dec. Export price index H / M: no is v -1.0% before; Y / Y: No is v 25.5% before.

– 4:00 p.m. (KR) South Korea Dec. Import price index M / M: no is v -0.6% before; Y / Y: No is v 35.5% before.

– 4:45 pm (NZ) New Zealand Nov. Building permit M / M: No is v -1.9% before (revised from -2.0%).

– 18:50 (JP) Japan Dec M2 Money supply Y / Y: 3.8% ev 4.0% before; M3 Y / Y money supply: 3.5% ev 3.6% before.

– 7:00 p.m. (JP) BOJ Gov Kuroda at the branch manager meeting.

– 7:01 p.m. (United Kingdom) Dec. RICS house price balance: 70% ev 71% before.

– 9:00 p.m. (JP) Japan Dec.

– 11:30 p.m. (TH) Thailand Dec. Consumer confidence: no est v 44.9 before; Economic confidence: No est v 38.8 before.

– 23:30 (JP) Japan Dec. Y / Y bankruptcies: No is v -10.4% before.

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