EU mid-market update: Europe flat and Norges holds course as market looks to Trump in Davos and BOJ decision tonight; First OpenAI's AI agent apparently imminent; SK Hynix outlook cut.

Notes/observations

- European indices displaying mixed performance, with CAC 40 flat, pausing after a seven-session rally. French business confidence dipped to a three-month low, impacting manufacturing sectors, while corporate movers included gains for Sanofi and losses for Kering.

- ECB is poised to maintain its easing trajectory, with expectations of a 25bps cut at meeting next week. This contrasts with Norway, where Norges Bank kept rates steady at 4.5% but signaled a probable cut in March, reflecting a cooling economy and controlled inflation.

- US dollar gaining slightly ahead of Trump's virtual speech at Davos, with speculation on his views on international tax codes potentially supporting the dollar further.

- On AI breakthroughs front, OpenAI said to be preparing release of new AI agent “Operator” this week which would have ability automate complex tasks typically done through the Web browser; It is also said to be taking a significant step toward AGI via developing AI coding agent that aims to replicate a senior software engineer, which it believes is a key step to AGI that outperforms people at most economically valuable work Note: CEO Altman reportedly scheduled a closed-door briefing for US government officials on Jan 30th, while OpenAI top executive has recently noted the company is already training the model that comes after o3 and it promises another big jump in capabilities.

- In the UK, BRC consumer confidence fell, while remarks from UK Chancellor Reeves at Davos tried to reassure businesses but did not prevent a slight decline in gilt yields.

- Euro slid to $1.04, stepping back from recent highs, as traders remain on edge for more concrete policy directions from Trump. His initial focus on pro-business measures has buoyed sentiment, but the threat of tariffs keeps markets cautious. ECB Chief Lagarde commented on the need for Europe to brace for trade policy shifts, describing Trump's tariff delay as a "smart approach".

- Looking ahead: In focus are US earnings, Trump speech in Davos, and BOJ decision later tonight, still widely expected to raise policy by 25bps.

- Asia closed mixed with KOSPI underperforming -1.2%. EU indices are -0.1% to +0.5%. US futures are 0.0% to -0.5%. Gold -0.4%, DXY 0.0%; Commodity: Brent -0.1%, WTI -0.1%; Crypto: BTC -3.1%, ETH -3.1%.

Asia

- South Korea Q4 Advance GDP (1st of 3 readings) Q/Q: 0.1% v 0.2%e; Y/Y: 1.2% v 1.4%e.

- Japan Dec Trade Balance: +¥130.9B v -¥68.5Be; Exports Y/Y: 2.8% v 2.4%e; Imports Y/Y: 1.8% v 3.2%e.

- China securities regulator (CSRC) Head Wu Qing announced new measures to support investments into markets: There would be at least 'hundreds of billions of yuan' of new long-term capital for A-shares every year from state-owned insurance companies.

Europe

- UK Chancellor (Fin Min) Reeves said to overrule environmental objections to third runway expansion at London Heathrow Airport. Said to be in order to prioritize growth. UK’s regulators impose “overlapping burdens” on business, leaving the system too focused on managing risk and not focused enough on promoting growth.

Americas

- President Trump stated that he did not care if Congress did 1 or 2 bills for reconciliation.

Energy

- Weekly API Crude Oil Inventories: +1.0M v -2.6M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.08% at 527.62, FTSE -0.12% at 8,534.94, DAX +0.20% at 21,300.81, CAC-40 +0.16% at 7,849.85, IBEX-35 +0.49% at 11,922.00, FTSE MIB +0.40% at 36,002.00, SMI 0.00% at 12,188.20, S&P 500 Futures -0.18%].

Market focal points/key themes: European indices open mixed; outperforming sectors include health care and financials; among underperforming sectors are technology, following SK Hynix memory outlook cut, and communication services; focus on Euro Area consumer confidence figures coming out later in the day; earnings expected in the upcoming US session feature names such as Texas Instruments, Blackrock, American Airlines and GE Aerospace.

Equities

- Consumer discretionary: Puma [PUM.DE] -18.5% (prelim Q4 results - post close), Ubisoft [UBI.FR] +1.0% (EA outlook cut) - Consumer staples: Associated British Foods [ABF.UK] -2.0% (Q1 trading update).

- Financials: Swedbank [SWEDA.SE] +5.0% (Q4 results), EQT [EQT.SE] +5.5% (FY24 results).

- Industrials: Volkswagen [VOW3.DE] +1.5% (positive pre-close call with investors), Sandvik [SAND.SE] +5.5% (Q4 results).

- Technology: ASML [ASML.NL] -3.5% (SK Hynix outlook cut), Logitech [LOGN.CH] +2.0% (Morgan Stanley raised to equal weight), IQE plc [IQE.UK] +8.0% (trading update), Nagarro [NA9.DE] +1.0% (ends talks to be taken private; buyback; initial FY25 guidance).

Speakers

- Norway Central Bank (Norges) Policy Statement reiterated stance that restrictive policy was still needed to stabilize inflation around target but time to begin easing was approaching. Reiterated policy rate likely to be cut in March.

- UK Chancellor of the Exchequer (Fin Min) Reeves commented that would find ways to meet fiscal rules; Would announce measures if needed on Mar 26th; Tariffs only raise prices, want to be careful.

- Russia govt spokesperson stated that the domestic economy maintained a relatively high rate of development despite certain problematic factors; situation was stable. Nothing particularly new in a threat by Trump to hit Russia with new sanctions and tariffs.

- China Commerce Ministry (MOFCOM) commented that tariff measures were not good for China, US and entire world.

Currencies/fixed income

- USD was locked in a tight range in quiet trading on Thurs. The greenback saw some weakness during the week on rising risk appetite. Focus on upcoming US claims data and remote speech by President Trump at Davos. Markets await more clarity on President Trump's policy plans.

- EUR/USD steady around the 1.04 level as ECB members continue to paint the picture of a steady flow of rate cut in H1. Markets anticipated ECB to deliver 25bps in rate cuts at each of the upcoming four meetings.

- USD/JPY at 155.50 with focus on the upcoming BOJ rate decisions. BOJ futures currently pricing over a 90% chance for 25bps rate hike this week.

- UK Gilt yields showed little reaction after UK Fin Min Reeves commented that would find ways to meet fiscal rules; Would announce measures if needed on Mar 26th.

Economic data

- (NL) Netherlands Jan Consumer Confidence: -28 v -26 prior.

- (TR) Turkey Jan Consumer Confidence: 81.0 v 81.3 prior.

- (DK) Denmark Jan Consumer Confidence: -11.7 v -13.1 prior.

- (HU) Hungary Nov Average Gross Wages Y/Y: 11.9% v 12.4%e.

- (FR) France Jan Business Confidence: 95 v 94e; Manufacturing Confidence: 95 v 96e; Production Outlook Indicator: -15 v -19e; Own-Company Production Outlook: +1 v -1 prior.

- (TW) Taiwan Dec Industrial Production Y/Y: 20.0% v 13.5%e.

- (TW) Taiwan Dec M2 Money Supply Y/Y: 5.5% v 5.5% prior; M1 Money Supply Y/Y: 4.0% v 4.6% prior.

- (NO) Norway Central Bank (Norges) left Deposit Rate unchanged at 4.50% (as expected).

- (PL) Poland Jan Consumer Confidence: -15.1 v -16.5e.

- (PL) Poland Dec Real Retail Sales M/M: 9.9% v 12.0%e; Y/Y: 1.9% v 4.0%e; Retail Sales (current prices) Y/Y: 2.7% v 5.1%e.

- (PL) Poland Dec Construction Output Y/Y: -8.0% v -11.6%e.

- (BE) Belgium Jan Consumer Confidence: # v -9 prior.

Fixed income issuance

- (FR) France Debt Agency (AFT) sold total €12.99B vs. €11.0-13.0B indicated range in 2027, 2029 and 2030 Bonds.

- Sold €3.522B in 2.50% Sept 2027 Oat; Avg Yield: 2.51% v 2.45% prior; Bid-to-cover: 3.26x v 2.47x prior (Nov 21st 2024).

- Sold €1.796B in 5.50% Apr 2029 Oat; Avg Yield: 2.74% v 3.03% prior; Bid-to-cover: 5.28x v 2.68x prior (Sept 20th 2024).

- Sold €7.674B in 2.75% Feb 2030 Oat; Avg Yield: 2.84% v 2.74% prior; Bid-to-cover: 2.60x v 2.71x prior.

- (UK) DMO sold £4.25B in 4.375 2028 Mar Gilts; Avg Yield: 4.384% v 4.499% prior; bid-to-cover: 3.20x v 3.12x prior; Tail: 0.2bps v 1.0bps prior.

Looking ahead

- (AR) Argentina Jan Consumer Confidence: No est v 46.0 prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (ES) ECB’s Escriva (Spain).

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 05:40 (UK) BOE allots £46.7B in 7-day short-term repo operation (STR).

- 05:50 (FR) France Debt Agency (AFT) to sell €1.50-2.25B in inflation-linked 2034, 2039, 2040 and 2053 Bonds (Oatei).

- 06:00 (UK) Jan CBI Industrial Trends Total Orders: -35e v -40 prior; Selling Prices: 20e v 23 prior; Business Optimism: No est v -24 prior (every 3 months).

- 06:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to cut One Week Repo by 250bps to 45.00%.

- 06:00 (RO) Romania to sell RON800M in 12-month Bills; Avg Yield: % v 6.49% prior, bid-to-cover: x v 1.24x prior (Dec 12th 2024).

- 06:30 (CL) Chile Central Bank Traders Survey.

- 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to raise Key Rate by 75bps to 14.25%.

- 07:00 (DE) ECB’s Schnabel (Germany).

- 08:00 (RU) Russia Gold and Forex Reserve w/e Jan 17th: No est v $607.7B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Initial Jobless Claims: 220Ke v 217K prior; Continuing Claims: 1.87Me v 1.859M prior.

- 08:30 (CA) Canada Nov Retail Sales M/M: 0.3%e v 0.6% prior; Retail Sales (ex-auto) M/M: 0.1%e v 0.1% prior.

- 10:00 (EU) Euro Zone Jan Advance Consumer Confidence: -14.1e v -14.5 prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) Weekly DOE Oil Inventories.

- 11:00 (US) Jan Kansas City Fed Manufacturing Activity: No est v -4 prior.

- 11:00 (US) President Trump Davos address (remote).

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 30 Year Bonds.

- 13:00 (US) Treasury to sell 10-Year TIPS.

- 14:00 (AR) Argentina Nov Economic Activity Index (Monthly GDP) M/M: No est v 0.6% prior; Y/Y: -0.6%e v -0.7% prior.

- 17:00 (AU) Australia Jan Preliminary PMI Manufacturing: No est v 47.8 prior; PMI Services: No est v 50.8 prior; PMI Composite: No est v 50.2 prior.

- 18:30 (JP) Japan Dec National CPI Y/Y: 3.4%e v 2.9% prior; CPI Ex-Fresh Food (Core) Y/Y: 3.0%e v 2.7% prior; CPI Ex Fresh Food, Energy (Core-Core) Y/Y: 2.4%e v 2.4% prior.

- 19:00 (SI) Singapore Monetary Authority (MAS) Policy Statement.

- 19:01 (UK) Jan GfK Consumer Confidence: -18e v -17 prior.

- 19:30 (JP) Japan Jan Preliminary PMI Manufacturing: No est v 49.6 prior; PMI Services: No est v 50.9 prior; PMI Composite: No est v 50.5 prior.

- 20:00 (PH) Philippines Dec Trade Balance: -$4.9Be v -$4.7B prior; Exports Y/Y: +2.0%e v -8.7% prior; Imports Y/Y: +5.0%e v -4.9% prior.

- (JP) Bank of Japan (BOJ) Interest Rate Decision: Expected to raise Target Rate by 25bps to 0.50%.

- BOJ Quarterly Outlook for Economic Activity and Prices (aka “Staff Projections”).

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