Technical return to trade for European markets but new years holiday approaches fast

EU Mid-Market Update: Technical return to trade for European markets but New Years holiday approaches fast; South Korean acting Pres impeached out of position.

Notes/observations

- Another quiet session for Europe as all European exchanges return to trade for first time since Dec 23rd, but with weekend ahead and New Year’s Day approaching, liquidity is light, and market participation appears thin.

- Political upheaval is not over in South Korea, after acting Pres Han (who replaced Yoon due to invoking martial law), was impeached and replaced by Fin Min Choi.

- Overnight, BOJ cut amount of bond buying operations, in line with announced schedule, and Japanese data failed to stimulate markets, with Tokyo Core CPI highest since Aug. Retail sales and industrial production beat expectations.

- Approaching year end is causing portfolio managers and investors to re-evaluate asset allocation. Bitcoin is the standout so far, up +130% YTD. US equities also a top performer, with NDAQ100 +30%. Notable weak year for Europe and Australasia. CAC40 -3%, Euro down -6%, Aussie dollar -9% and Kiwi -11%.

- Today Asia closed higher with Nikkei225 outperforming +1.8%. EU indices are +0.1-0.7%. US futures are -0.3% to -0.5%. Gold -0.3%, DXY 0.0%; Commodity: Brent +0.2%, WTI +0.3%; Crypto: BTC +1.5%, ETH +1.7%.

Asia

- Japan Nov Jobless Rate: 2.5% v 2.5%e.

- Japan Dec Tokyo CPI Y/Y: 3.0% v 2.9%e; CPI (ex-fresh food) Y/Y: 2.4% v 2.5%e; keeps rate hike prospects intact.

- Japan Nov Preliminary Industrial Production M/M: -2.3% v -3.5%e; Y/Y: -2.8% v -3.2%e.

- Japan Nov Retail Sales M/M: 1.8% v 0.5%e; Y/Y: 2.8% v 1.5%e.

- BoJ Summary of Opinions for Dec noted that was appropriate for to maintain the current monetary policy at this meeting reiterated stance that if outlook for economic activity and prices were realized, then would adjust the degree of monetary accommodation accordingly.

- China Nov Industrial Profits Y/Y: -7.3% v -10.0% prior (4th monthly decline).

- South Korea Jan Business Manufacturing Survey: 61 v 66 prior (lowest since Sept 2020).

- South Korea opposition leader Lee reiterated pledged to impeach acting President Han today (South Korea's acting president was later removed from office by legislature).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.39% at 505.76, FTSE +0.05% at 8,140.75, DAX +0.35% at 19,919.23, CAC-40 +0.54% at 7,321.68, IBEX-35 +0.22% at 11,499.71, FTSE MIB +0.58% at 33,936.00, SMI +0.48% at 11,543.30, S&P 500 Futures -0.33%].

Market focal points/key themes: European indices quickly reversed early modest losses to trend generally higher through light trading volume; Hungary closed for holiday; among sectors trending higher are health care and financials; lagging sectors include utilities and telecom; extraordinary DAX rebalance sees Fresenius Medical Care leaving to replace Covestro; no major corporate events expected in the upcoming US session.

Equities

- Consumer discretionary: Delivery Hero [DHER.DE] -5.0% (Taiwan regulator [FTC] said to reject merger of Uber Eats and Delivery Hero's FoodPanda).

- Utilities: Centrica [CNA.UK] +0.5% (£300M buyback) - Industrials: NKT [NKT.DK] +2.5% (projects award) - Technology: ASML [ASML.NL] +1.0% (strength in some chip names being attributed to press report that Xiaomi plans to 'step up' efforts related to building large AI models), Wiit [WIIT.IT] +0.5% (contract renewal).

- Materials: Eramet [ERA.FR] +2.0% (delivers first lithium carbonate from Centenario Direct Lithium Extraction plant in Argentina).

Speakers

- Germany President Steinmeier formally dissolved parliament and set election date for Feb 23rd (as expected).

- South Korea National Assembly passed motion to impeach acting President Han. Finance Minister Choi Sang-mok would be next in line to assume the acting presidency.

- Acting President Han stated that he respected the Parliament's decision. Would await Constitutional Court ruling on impeachment. (**Insight: Prime Minister Han had been acting president since President Yoon Suk Yeol was impeached on Dec. 14th over his short-lived imposition of martial law on Dec. 3rd).

Currencies/fixed income

- USD continued to maintain a steady, firm tone in quiet post-holiday trading aided by higher US bond yields.

- EUR/USD hovering just above the 1.04 level. The pair faced headwinds as EU budget battles remained in focus. Dealers noted of rising concerns about the challenges the newly formed French government faced in tackling the ballooning budget deficit in 2025.

- USD/JPY held steady above 157.80 and languishing near 5-month lows. Dec Tokyo CPI data was viewed as consistent with BOJ's expectation that underlying inflation would be consistent with price stability target in second half of projection period. BOJ Dec Opinions reiterated stance that if economic, price developments continued to improve in line with projections, BOJ must raise policy rate accordingly.

- USD/KRW was nearing 1,500 level for 16-year highs as political turmoil continued to rock South Korea as the National Assembly passed motion to impeach action President Han over his refusal to appoint judges to Constitutional Court to adjudicate Former President Yoon's impeachment trial.

Economic data

- (RU) Russia Dec Manufacturing PMI: 50.8 v 50.1e (3rd month of expansion).

- (SE) Sweden Nov Trade Balance (SEK): 7.2B v 1.1B prior.

- (NO) Norway Nov Retail Sales (with auto/fuel M/M: 0.3% v 0.3% prior.

- (TH) Thailand Nov Current Account Balance: $2.0B v $0.9Be; Overall Balance of Payments (BoP): -$0.1B v -$0.3B prior; Trade Balance: $2.0B v $1.4B prior; Exports Y/Y: 9.1% v 14.2% prior; Imports Y/Y: 2.3% v 17.1% prior.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 74.2K v 70.9K tons prior.

- (TH) Thailand Foreign Reserves w/e Dec 20th: $236.2B v $237.9B prior.

- (ES) Spain Nov Adjusted Retail Sales Y/Y: 1.0% v 3.0%e; Retail Sales (unadj) Y/Y: 2.0% v 5.4% prior.

- (RU) Russia Narrow Money Supply w/e Dec 20th (RUB): 18.71T v 18.56T prior.

- (TW) Taiwan Nov Monitoring (leading) Indicator: 34 v 32 prior.

- (CN) China Q3 Final Current Account: $147.6B v $146.9B prelim.

- (AT) Austria Dec Manufacturing PMI: 43.3 v 44.5 prior (29th month of contraction).

Fixed income issuance

- (IN) India sold total INR320B vs. INR320B indicated in 2031, 2039 and 2054 bonds.

Looking ahead

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

- 06:00 (BR) Brazil Dec FGV Inflation IGPM M/M: 1.1%e v 1.3% prior; Y/Y: 6.7%e v 6.3% prior.

- 06:00 (UK) DMO to sell £6.0B in 1-month, 3-month and 6-month bills (£1.0B, £2.0B and £3.0B respectively).

- 06:30 (BR) Brazil Nov Total Outstanding Loans (BRL): No est v 6.255T prior; M/M: No est v 0.7% prior; Personal Loan Default Rate: No est v 5.5% prior.

- 06:30 (IN) India Forex Reserve w/e Dec 20th: No est v $652.9B prior.

- 06:30 (IN) India announces upcoming bill issuance (held on Wed).

- 07:00 (BR) Brazil Nov National Unemployment Rate: 6.1%e v 6.2% prior.

- 07:00 (BR) Brazil mid-Dec IBGE Inflation IPCA-15 M/M: 0.5%e v 0.6% prior; Y/Y: 4.8%e v 4.8% prior.

- 08:00 (BR) Brazil Nov Total Formal Job Creation: +120.0Ke v +132.7K prior.

- 08:30 (US) Nov Advance Goods Trade Balance: -$101.1Be v -$98.3B prior (revised from -$99.1B).

- 08:30 (US) Nov Preliminary Wholesale Inventories M/M: 0.1%e v 0.2% prior; Retail Inventories M/M: 0.3%e v 0.1% prior.

- 08:30 (US) Weekly USDA Net Export Sales.

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

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

- 11:00 (RU) Russia Nov Real Retail Sales Y/Y: 5.4%e v 4.8% prior.

- 11:00 (RU) Russia Nov Unemployment Rate: 2.3%e v 2.3% prior; Oct Real Wages Y/Y: 7.0%e v 8.4% prior.

- 13:00 (US) Weekly Baker Hughes Rig Count data.

Weekend

- (RU) Russia Dec Services PMI: 52.0e v 53.2 prior; Composite PMI: 51.3e v 52.6 prior.

- (RU) Russia Q3 Final GDP (3rd reading) Y/Y: 3.1%e v 3.1% prelim.

- (RU) Russia Q3 Final Current Account Balance: No est v $8.0B prelim (revised from $9.1B).