Traders primed to return with full force next week as January

EU Mid-Market Update: Traders primed to return with full force next week as January road ahead highlighted by Trumps return to office and beginning of Q4 earnings season; House Speaker vote in few hours.

Notes/observations

- Europe is marginally lower, with French CAC40 once again underperforming as luxury stocks again fall after FT report that PBOC would cut key interest rates "at an appropriate time in 2025". Automobile sector seeing most downside and financial services biggest upside mover. Overall, narrative is unchanged. The light calendar for data and lack of speakers means eyes are looking more into January for catalysts.

- Of the data that did release, German job report was strong, with smaller than expected unemployment gain and lower rate. Conversely, UK data was weak, with a miss in consumer credit, net lending and mortgage approvals. Some analysts surprised by miss in mortgage approvals after higher-than-expected house prices earlier in the week.

- Friday’s focus likely to be on US politics developments with House Speaker Johnson facing his first reelection vote; Any difficulties to re-elect Johnson could delay certification of the Nov election and may hint upcoming issues with passing all Trump’s legislative agenda in the House, where GOP now holds very tiny majority.

- European yields are muted. Asia bond trade was more electric as China bond yields continued their decline. 10-year bond yields are now down >100bps over the last year.

- Citi US Economic Surprise Index turns negative for the first time since early autumn ahead of next week’s jobs report; First Cleveland’s Fed Inflation Nowcast for January projects US CPI y/y to stay flat versus the one forecasted for December.

- Asia closed mixed with KOSPI underperforming +1.8%. EU indices are -0.2% to -0.9%. US futures are +0.3-0.4%. Gold -0.1%, DXY -0.2%; Commodity: Brent -0.5%, WTI -0.5%; Crypto: BTC -0.3%, ETH -0.8%.

Asia

- China PBOC said to plan "policy overhaul" as pressure mounts on economy; would likely cut key interest rates from current level of 1.5% for 7 day reverse repos "at an appropriate time in 2025". PBOC said to prioritize the role of interest rate 'adjustments" and move away from "quantitative objectives" for loan growth.

- China NDRC Sec Gen: China to "sharply" increase funding via ultra-long special Treasury Bonds in 2025 in order to support "two new programs".

- South Korea investigating authorities suspended execution of arrest warrant related to former-Pres Yoon as the team believed the execution of the warrant was 'impossible'.

Global conflict/tensions

-Outgoing Pres Biden discussed plans to strike Iran nuclear sites if Tehran sped nuclear goals to develop bomb.

Europe

- UK Chancellor Reeves said to have warned ministers to consider cuts to frontline services in order to fund the above-inflation pay raise proposal for public sector workers.

Energy

- President-elect Trump Truth Social post stated that UK was making a very big mistake. Open up the North Sea. Get rid of windmills!"

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.14% at 509.96, FTSE -0.02% at 8,258.32, DAX -0.16% at 19,971.73, CAC-40 -0.65% at 7,345.44, IBEX-35 +0.10% at 11,690.00, FTSE MIB -0.30% at 34,273.00, SMI +0.64% at 11,675.45, S&P 500 Futures +0.41%].

Market Focal Points/Key Themes: European indices open mixed with a downward bias and remained under pressure through the early part of the session; among sectors scoring gains are telecom and real estate; sectors inclined to the downside include consumer discretionary and materials; oil & gas subsector supported following rise in crude; no major corporate events expected in the upcoming US session.

Equities

- Consumer discretionary: LVMH [MC.FR] -2.0% (China said to be targeting 2025 GDP growth ~ 5%; PBOC said to cut key interest rates "at an appropriate time in 2025"), Ryanair [RYA.IE] -2.0% (Dec traffic), Volex [VLX.UK] -1.5% (To pay the first tranche of deferred consideration for Murat Ticaret acquisition)

- Energy: Tullow Oil [TLW.UK] +11.0% (Ghana Tax Arbitration outcome) - Financials: UBS Group [UBSG.CH] +2.0% (Exane raised to outperform) - Healthcare: GSK [GSK.UK] -0.5% (Nucala (mepolizumab) approved in China for treatment of adults with chronic rhinosinusitis with nasal polyps) - Industrials: Airbus [AIR.FR] -1.0% (Dec deliveries said to be ~120) - Technology: Atos [ATO.FR] -4.0% (confirms not being compromised by the ransomware group Space Bears) - Materials: Voestalpine [VOE.AT] -2.0% (Exane cuts to neutral)

Speakers

- France Industry Min Ferracci stated that regulated power rates could decline by 14% on Feb 1st. Noted that a decree had been passed for this drop to occur but a budget law was needed to confirm the change.

Currencies/fixed income

- USD holding onto its firm tone near 2-year highs as divergence among the major central banks on rate path aiding the greenback. Dealers note the prospect that ECB and BOE likely to cut interest rates at a pace faster than the Fed.

- EUR/USD staying below 1.03 level as Germany's jobless rate held steady as the country faced its longest recession since WWII.

- GBP/USD hovering around the 1.24 level as USD/JPY stayed above the 157 level.

- Bitcoin remaining below the key $100,000 level following its recent consolidation. The cryptocurrency reached a record high last month.

Economic data

- (TR) Turkey Dec CPI M/M: 1.0% v 1.6%e; Y/Y: 44.4% v 45.2%e; CPI Core Y/Y: 45.3% v 45.8%e.

- (TR) Turkey Dec PPI M/M: 0.4% v 0.7% prior; Y/Y: 28.5% v 29.5% prior.

- (HU) Hungary Nov Unemployment Rate: 4.5% v 4.5%e.

- (HU) Hungary Nov Preliminary Trade Balance: €0.7B v €1.1B prior.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 83.2K v 74.2K tons prior.

- (TH) Thailand May Foreign Reserves w/e Dec 27th: $237.1B v $236.2B prior.

- 03:00 (ES) Spain Dec Net Unemployment Change: -25.3K v -16.0K prior; Net Employment Change: +42.7K v +13.1K prior.

- (CZ) Czech Q3 Final GDP Q/Q: 0.5% v 0.4% prelim; Y/Y: 1.4% v 1.3% prelim.

- (CH) Swiss Dec PMI Manufacturing: 48.4 v 48.3e (24th month of contraction); PMI Services: 53.2 v 51.8 prior.

- (DE) Germany Dec Unemployment Change: +10.0K v +15.0Ke; Unemployment Claims Rate: 6.1% v 6.2%.

- (IT) Italy Q3 Budget Deficit to GDP Ratio: 4.6% v 5.8% prior.

- (PL) Poland Dec Preliminary CPI M/M: 0.2% v 0.3%e; Y/Y: 4.8% v 4.9%e.

- (UN) Dec FAO World Food Price Index: 127.0 v 127.6 prior.

- (UK) Nov Net Consumer Credit: £0.9B v £1.2Be; Net Lending: £2.5B v £3.2Be.

- (UK) Nov Mortgage Approvals: 65.7K v 68.7Ke - (UK) Nov M4 Money Supply M/M: 0.0% v -0.2% prior; Y/Y: 2.9% v 3.0% prior; M4 (ex-IOFCs) 3-month Annualized: 3.3% v 3.8% prior.

Fixed income issuance

- (IN) India sold total INR320B vs. INR320B indicated in 2034 and 2074 bonds.

Looking ahead

- (US) Dec Total Vehicle Sales data.

- (RO) Romania Dec International Reserves: No est v $69.6B prior.

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

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

- 06:30 (IN) India Forex Reserve w/e Dec 27th: No est v $644.4B prior.

- 07:00 (MX) Mexico Nov Unemployment Rate: 2.6%e v 2.5% prior; Unemployment Rate (seasonally adj): No est v 2.5% prior.

- 08:00 (CZ) Czech Dec Budget Balance (CZK): No est v -259.2B prior.

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

- 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming issuance.

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

- 10:00 (US) Dec ISM Manufacturing: 48.2e v 48.4 prior; Prices Paid: 51.8e v 50.3 prior.

- 10:00 (CO) Colombia Nov Exports: $4.2Be v $4.3B prior.

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

- 11:00 (DK) Denmark Dec Foreign Reserves (DKK): No est v 637.6B prior.

- 11:00 (US) Fed’s Barkin.

- 11:00 (EU) Potential sovereign ratings after European close.

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