German jan IFO survey misses as pandemic darkens recovery hopes

Notes/Observations

- German Jan IFO Survey misses across the board as 2nd wave of pandemic derails optimism

- Italian politics remain in focus; PM Conte could decide to resign in a tactical move to position himself to lead a new government if he’s set to fall short on a key vote mid-week

- US Congress negotiates over the fiscal stimulus amid the worsening pandemic; Some Republicans seek justification for the $1.9Ton price tag

- FOMC rate decision mid-week (1st meeting under the new Biden Administration); little change to policy was expected

Asia:

- China PBoC said to potentially use contingency reserve arrangement (CRA) to stabilize liquidity before Lunar New year

Coronavirus:

- Total global cases 99.2M (+1.8% vs. Fri); total deaths: 2.13M (+1.9% vs. Fri)

- France’s PM Macron could announce the country’s 3rd lockdown on Wednesday, Jan 27th

Europe:

- ECB’s Rehn (Finland): Yield control (YCC) would be rather mechanical and not sensible for the Euro area because of the differences between the 19 member states

- Portugal President de Sousa re-elected in a "landslide" according to preliminary results

- Italy PM Conte said to be struggling to find the votes in the Senate on the annual report of his justice minister to take place Wednesday or Thursday.

- Italy PM Conte said to be threatening legal action against AstraZeneca over serious contractual violation because the firm is reducing the amount of vaccine it will deliver to the EU

- EU Council President Michel stated that would make vaccine companies respect supply contracts

- Police in Russia detained over 2.5K people who participated in rallies across the country in support of Kremlin critic Navalny

Americas:

- Senate Majority Leader Schumer stated that confirming members of President Biden’s cabinet will be top priority for the Senate

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.03% at 408.68, FTSE -0.32% at 6,673.94, DAX -0.17% at 13,851.00, CAC-40 -0.47% at 5,533.64, IBEX-35 -0.64% at 7,985.00, FTSE MIB +0.08% at 22,105.50, SMI +0.49% at 10,984.50, S&P 500 Futures +0.26%]

Market Focal Points/Key Themes: European indices open higher but later turned around to trade mixed; concerns over covid cases and delays with vaccines seen weighing on risk sentiment; sectors among better performers are technology and materials; sectors among those trending to the downside are consumer discretionary and energy; reportedly UK to extend partial lockdown measures after Easter, France might enter third lockdown, US reportedly to reimpose travel restrictions; boohoo.com acquires Debenham’s retail IP; Orange deviests concessions business; Asos looking to take on Arcadia assets; focus on plethora of speakers at Davos Forum; earnings expected in the upcoming US session include Kimberly Clark

Equities

- Consumer discretionary: Asos [ASC.UK] +5% (n talks to acquire Topshop, Topman, Miss Selfridge and HIIT Brands), boohoo [BOO.UK] +4% (acquisition of all of the intellectual property assets of Debenhams)

- Energy: EDF [EDF.FR] -11% (European Commission willing to take another 6 months to discuss with France a regulatory reform)

- Technology: Solutions 30 [ALS30.FR] -16% (Muddy Waters tweet)

Speakers

- ECB said to invest in Bank of International Settlement (BIS) green bond fund. ECB to use own funds portfolio to invest in BIS’ euro-denominated green bond fund that consists of renewable energy production and energy efficiency projects

- ECB chief Lagarde on Climate change and central banking: Climate risks are not adequately priced

- Italy PM Conte said to refute speculation that he could decide to resign in a tactical move to position himself to lead a new government

- German IFO Economists noted that the 2nd wave of coronavirus had brought the recovery of the German economy to a halt for now

- BOJ Gov Kuroda stated that the domestic economy was substantially affected by pandemic. Renewed State of Emergency might weaken recovery

- China Foreign Ministry spokesperson Zhao Lijian reiterated govt stance for US to abide by its One China policy with Taiwan. Hoped US would put relations back on the right track. Committed to upholding peace on India border; new round of talks held on issue’

- President Biden to sign an executive order on Monday to boost federal agencies’ purchases of US products

Currencies/Fixed Income

- Quiet start to the trading week with the most major FX pair little changed from opening levels. USD was steady but still poise to move lower on US stimulus hopes amid the worsening pandemic. Analysts do note that US Congress negotiations over the fiscal stimulus could face some headwinds as some Republicans sought justification for the $1.9Ton price tag – especially after a $600B package was just approved in Dec.

- EUR/USD trading at 1.2150 after German IFO Survey missed expectations. IFO Economists noted that the 2nd wave of coronavirus had brought the recovery of the German economy to a halt for now.

- Italian politics remained in focus; PM Conte could decide to resign in a tactical move to position himself to lead a new government if he’s set to fall short on a key vote mid-week. The Italian 10-year BTP yield was lower by 5bps to test 0.70% area after last week’s surge higher.

- FOMC rate decision mid-week was the main event for the week in FX markets although little change to policy was expected

Economic data

- (FI) Finland Dec PPI M/M: 1.0% v 0.7% prior; Y/Y: -2.9% v -4.6% prior

- (TR) Turkey Jan Real Sector Confidence (seasonally adj): 109.0 v 110.4 prior; Real Sector Confidence NSA (unadj): 107.0 v 106.8 prior

- (TR) Turkey Jan Capacity Utilization: 75.4% v 75.6% prior

- (AT) Austria Nov Industrial Production M/M: -0.8% v +1.6% prior; Y/Y: +0.1 v -0.6% prior

- (TW) Taiwan Dec Industrial Production Y/Y: 9.9% v 6.0%e

- (CZ) Czech Jan Consumer Confidence Index: -17.8 v -14.5 prior; Business Confidence: -1.9 v -1.0 prior; Composite Confidence (Consumer & Business): -5.1 v -3.7 prior

- (TW) Taiwan Dec M2 Money Supply Y/Y: 8.5% v 7.6% prior; M1 Money Supply Y/Y: 16.2% v 14.3% prior

- (DE) Germany Jan IFO Business Climate Survey: 90.1 v 91.4e; Current Assessment Survey: 89.2 v 90.6e; Expectations Survey: 91.1 v 93.6e

- (CH) Swiss weekly Total Sight Deposits (CHF): 704.4 v 703.8B prior; Domestic Sight Deposits: 636.3B v 634.1B prior

- (PL) Poland Dec Sold Industrial Output M/M: -4.4% v -6.0%e; Y/Y: 11.2% v 8.9%e

Fixed income Issuance

- (NO) Norway sold NOK2.0B in 3-month Bills; Avg Yield: 0.12% v 0.09% prior; Bid-to-cover: 1.96x v 2.85x prior

Looking Ahead

- (EU) Daily ECB Liquidity Stats

- (IL) Israel Dec Leading 'S' Indicator M/M: No est v 0.7% prior

- 05:30 (DE) Germany to sell €4.0B in 12-month Bubills

- 05:45 (IT) ECB's Panetti (Italy)

- 06:00 (BE) Belgium Debt Agency (BDA) cancels planned OLO Bond Auction

- 06:00 (RO) Romania to sell RON500M in 4.75% 2034 Bonds; Avg Yield: % v 3.65% prior; bid-to-cover: x v 1.12x prior

- 06:00 (IL) Israel to sell combined ILS2.15B in 2023, 2025, 2026, 2029 and 2030 bonds

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey

- 06:45 (US) Daily Libor Fixing

- 07:00 (MX) Mexico Nov IGAE Economic Activity Index (Monthly GDP) M/M: 0.4%e v 1.6% prior; Y/Y: -4.6%e v -5.3% prior

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

- 08:00 (IE) ECB's Lane, Ireland, chief economist)

- 08:30 (US) Dec Chicago Fed National Activity Index: 0.10e v 0.27 prior
08:50 (FR) France Debt Agency (AFT) to sell €4.3-5.5B in 3-month, 6-month and 12-month bills

- 09:00 (BE) Belgium Jan Business Confidence Index: -8.0e v -8.4 prior

- 09:45 (EU) ECB weekly QE bond buying update

- 09:45 ECB’s Elderson (Netherlands) in Parliament

- 10:30 (US) Jan Dallas Fed Manufacturing Activity Index: 12.0e v 9.7 prior

- 11:00 (RU) Russia Dec Industrial Production Y/Y: -3.0%e v -2.6% prior

- 11:00 (EU) ECB chief Lagarde at Davos

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills

- 13:00 (US) Treasury to sell 2-Year Notes

- 16:30 (NZ) New Zealand Dec Performance Services Index: No est v 46.7 prior

- 18:00 (KR) South Korea Q4 Preliminary GDP Q/Q: 0.8%e v 2.1% prior; Y/Y: -1.6%e v -1.1% prior

- 18:50 (JP) Japan Dec PPI Services Y/Y: -0.6%e v -0.6% prior

- 21:00 (NZ) New Zealand Dec Credit Card Spending M/M: No est v 0.1% prior; Y/Y: No est v -5.6% prior

- 21:30 (KR) South Korea to sell KRW1.0T in 20-Year Bonds

- 22:00 (TH) Thailand Central Bank to sell THB60B in 3-month bills

- 22:30 (HK) Hong Kong to sell 3-month and 6-month bills

- 22:35 (JP) Japan to sell 40-Year JGB Bonds

- 23:30 (TW) Taiwan to sell TWD35B in 20-year Bonds