UK bond yields surge

EU mid-market update: UK bond yields surge; Continental Europe data impresses, but EU Core CPI sticky; CES keynote holds Nvidia higher in premarket.

Notes/observations

- Political shakeup in focus with Canada PM Trudeau resigning after 9-year leadership. Remaining in service until Mar 24th. Musk has received notable backlash to social media attacks on western leaders. Trudeau developments suggest there might be some bite behind the barks.

- UK 30-year bond yield hit highest since 1998 as Halifax house prices drops for 1st time in 9 months and Kantar survey shows uptick in grocery inflation from 2.6% to 3.7%; FTSE100 underperforms.

- Healthy economic data from Europe, with French inflation cooler than expected at 1.3% v 1.5% estimate on YoY basis and Italian unemployment hitting record low at 5.7%.

- French CAC40 volatility remains elevated compared to European peers. Franco/German 10-year spread ~83bps. Budget in focus.

- Nvidia Keynote at CES 2025 was lacking major impact but announcements were still seen as positive, highlighted by RTX 50 series GPUs, Agentic AI, NVIDIA Cosmos, Project DIGITs personal AI supercomputer and Automotive/Robotics Initiatives; Nvidia also fine-tuned Llama open models for easier enterprise AI adoption, specifically for agentic AI; Later today, Nvidia set to host JPMorgan fireside chat (11:00ET) and CES Financial analyst Q&A (15:30ET).

- CNBC reported that ILA union and port owners held secret meeting on automation issue as new strike looms as soon as Jan 15th; Earlier, reports circulated that leaders from a US dockworkers’ union and the group that represents their employers are set to resume contract talks on Tue, Jan 7th.

- Asia closed mixed with Nikkei225 outperforming +2.1%. EU indices are -0.2% to +0.4%. US futures are 0.0% to -0.1%. Gold +0.3%, DXY -0.3%; Commodity: Brent +0.4%, WTI +0.2%; Crypto: BTC +2.7%, ETH +0.3%.

Asia

- Australia Nov Building Approvals M/M: -3.6% v -1.0%e.

- Japan Fin Min Kato reiterated stance of seeing one-sided and sudden FX moves; deeply concerned about recent FX moves.

Europe

- UK Dec BRC LFL Sales Y/Y: +3.1% v -0.2%e.

Americas

- Canada PM Trudeau confirmed to step down as soon as the Liberal Party selected a replacement; Also confirmed work at Parliament to be suspended until March 24th.

- Canadian Liberal Party's Mark Carney was considering running for party Leader. Front runners also include Chrystia Freeland, Dominic LeBlanc, Pierre Poilievre.

- ILA union and port owners said to have held secret meeting on automation as new strike looms; A document produced from the meeting indicated ports willing to pair any new technology with new union jobs, but it could also introduce new risks to a deal.

- Goldman Sachs analyst on Fed 2025 outlook: Expected 75bps in cuts (prior view was 100bps).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.15% at 513.78, FTSE -0.20% at 8,233.56, DAX +0.26% at 20,263.45, CAC-40 +0.32% at 7,469.49, IBEX-35 +0.14% at 11,824.96, FTSE MIB -0.13% at 34,736.00, SMI +1.02% at 11,800.41, S&P 500 Futures +0.07%].

Market focal points/key themes: European indices open generally lower but later turned around to trade mixed; among sectors trending higher are consumer discretionary and real estate; underperforming sectors include financials and industrials; Julius Baer confirms will sell its Brazil unit to BTG Pactual; focus on US trade balance coming out later in the day; earnings expected in the upcoming US session include Lindsay Corp, Apogee Enterprises and AZZ.

Equities

- Consumer discretionary: Next [NXT.UK] +3.0% (Q4 trading update, raises FY24 guidance), Aperam [APAM.ES] +1.0% (affirms Q4 Adj EBITDA), Lufthansa [LHA.DE] +1.0% (CitiGroup raised to buy).

- Energy: Shell [SHEL.UK] +0.5% (Morgan Stanley raised to overweight), Thyssenkrupp Nucera [NCH2.DE] +1.0% (extends CEO contract for 5 more years), Repsol [REP.ES] -2.0% (Morgan Stanley cuts to equal weight).

- Financials: Julius Baer [BAER.CH] +1.0% (confirms to sell its domestic Brazilian business to BTG Pactual for ~CHF91M).

- Industrials: Kion [KGX.DE] +9.5% (teams with NVIDIA and Accenture to optimize supply chains with AI-powered robots and digital twins), Mercedes-Benz [MBG.DE] -1.0% (cautious comments on FY25-26; Seen 'likely' to lower medium-term profit targets), Inpost [INPST.NL] -2.0% (parcel volumes).

- Technology: BE Semiconductor [BESI.NL] +3.0% (UBS raised to buy), Elmos Semiconductor [ELG.DE] +5.0% (expands partnership with Samsung).

Speakers

- Japan Foreign Min Iwaya noted that US Steel purchase would benefit both countries; Wanted to build close relationship with Trump Admin.

- South Korea court approved new arrest warrant for impeached Pres Yoon.

- China Foreign Ministry Spokesman Guo noted that govt to take countermeasures [asked about the blacklisting of Tencent and CATL by the US].

- Fed's Bowman (voter)said to be the top candidate to replace Fed's Barr (voter) as vice chair for supervision.

Currencies/fixed income

- USD managed to find fresh legs after some wobbling on Monday. Greenback saw some technical retracement after reports circulated that President-elect Trump could soften his stance on trade tariffs. Dealers afterwards re-analyzed any toned-down trade war scenario.

- EUR/USD holding above the 1.04 level as inflation data remained in focus. EU CPI remained above ECB target for the 2nd straight month. Dealers noted that the 1.05 level likely to be resistance in the pair as markets continued to expect ECB being poised to cut rates more aggressively than the Fed.

- GBP/USD at 1.2565 with focus on UK bond yields. The UK 30-year Gilt Yield currently at 5.27% for its highest level since 1998.

- USD/CHF was after Swiss Dec CPI came in below consensus and remained firmly below the SNB target for the 19th straight month. Dealers noted that the inflation reading vindicated the SNB on its recent 'jumbo' rate cut. Pair at 0.9040 by mid-session.

- USD/JPY at 157.60 and unfazed by Japanese verbal intervention.

Economic data

- (NL) Netherlands Dec Preliminary CPI Y/Y: 4.1% v 4.0%e; CPI EU Harmonized M/M: 0.3% v 0.3%e; Y/Y: 3.9% v 3.9%e

- (UK) Dec Halifax House Price Index M/M: -0.2% v +1.3% prior; Y/Y: 3.3% v 4.8% prior (1st monthly decline in 6 months).

- (NO) Norway Nov Industrial Production M/M: 0.2% v 9.8% prior; Y/Y: 0.5% v 2.1% prior.

- (NO) Norway Nov; Manufacturing Production M/M: +1.1% v -1.6% prior; Y/Y: 1.4% v 0.2% prior.

- (DK) Denmark Nov Unemployment Rate: 2.6% v 2.6% prior; Gross Unemployment Rate: 2.9% v 2.9% prior.

- (CH) Swiss Dec CPI M/M: -0.1% v -0.1%e; Y/Y: 0.6% v 0.6%e; CPI Core Y/Y: 0.7% v 0.8%e.

- (CH) Swiss Dec CPI EU Harmonized M/M: -0.1% v -0.5% prior; Y/Y: 0.4% v 0.6%e.

- (SE) Sweden Dec PMI Services: 51.4 v 52.0e; PMI Composite: 51.7 v 51.8 prior.

- (HU) Hungary Nov PPI M/M: 4.3% v 1.0% prior; Y/Y: 7.9% v 2.6% prior.

- (FR) France Dec Preliminary CPI M/M: 0.2% v 0.3%e; Y/Y: 1.3% v 1.5%e.

- (FR) France Dec Preliminary CPI EU Harmonized M/M: 0.2% v 0.4%e; Y/Y: 1.8% v 1.9%e.

- (CZ) Czech Nov Trade Balance (CZK): 23.6B v 18.0Be.

- (AT) Austria Dec Preliminary CPI M/M: 0.6% v 0.3% prior; Y/Y: 2.0% v 1.9% prior.

- (AT) Austria Dec Wholesale Price Index M/M: -0.1% v +0.2% prior; Y/Y: +0.9% v -0.1% prior.

- (TW) Taiwan Dec CPI Y/Y: 2.1% v 2.1%e; CPI Core Y/Y: 1.7% v 1.7%e; PPI Y/Y: 2.9% v 1.1% prior.

- (CN) China Dec Foreign Reserves: $3.202T v $3.273Te; gold purchases rise for 2nd straight month.

- (HK) Hong Kong Dec Foreign Reserves: $421.4B v $425.1B prior.

- (EU) Euro Zone Nov ECB Consumer Expectation Survey: 1-year ahead CPI expectations: 2.6% v 2.5% prior; 3-year ahead CPI expectations: 2.4% v 2.1% prior.

- (IT) Italy Nov Unemployment Rate: 5.7% v 5.8%e.

- (CZ) Czech Dec International Reserves: $146.4B v $148.3B prior.

- (SG) Singapore Dec Foreign Reserves: $371.4B v $377.2B prior.

- (UK) Dec Construction PMI: 53.3 v 54.4e (9th month of expansion).

- (EU) Euro Zone Dec Advance CPI Estimate Y/Y: 2.4% v 2.4%e; CPI Core Y/Y: 2.7% v 2.7%e; CPI M/M: 0.4% v 0.4%e.

- (EU) Euro Zone Nov Unemployment Rate: 6.3% v 6.3%e.

- (BE) Belgium Nov Unemployment Rate: 5.8% v 5.8% prior.

- (IT) Italy Dec Preliminary CPI M/M: 0.1% v 0.3%e; Y/Y: 1.3% v 1.5%e.

- (IT) Italy Dec Preliminary CPI EU Harmonized M/M: 0.1% v 0.3%e; Y/Y: 1.4% v 1.6%e.

Fixed income issuance

- (ID) Indonesia sold total IDR26.2T vs. IDR28.0T target in bills and bonds.

- (BE) Belgium Debt Agency (BDA) opened its book to sell EUR-denominated 10-year OLO bond via syndicate; guidance seen +68bps to mid-swaps.

- (SI) Slovenia opened its book to sell EUR-denominated 30-year bonds; guidance seen +140bps to mid-swaps.

- (CL) Chile opened its book to sell EUR-denominated 7-year social bonds; guidance seen +175bps to mid-swaps.

- (ES) Spain Debt Agency (Tesoro) sold total €6.19B vs. €5.5-6.5B indicated range in 6-month and 12-month bills.

- (UK) DMO sold £2.25B in 4.375% July 2054 Gilts; Avg Yield: 5.198% v 4.747% prior; bid-to-cover: 2.75x v 3.00x prior; Tail: 0.3bps v 0.4bps prior.

- (AT) Austria Debt Agency (AFFA) sold total €2.013B vs. €2.013B indicated in 2029 and 2071 RAGB bonds.

Looking ahead

- (IL) Israel Dec Foreign Currency Balance: No est v $217.1B prior.

- (UR) Ukraine Dec Official Reserve Assets: No est v $39.9B prior.

- (MX) Mexico CitiBanamex Survey of Economists.

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

- 05:15 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €4.5B in 2.0% Dec 2026 Schatz.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell combined €4.0B in 3-month, 6-month and 12-month bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 05:30 (IN) India 2025 Advance GDP (current Fiscal Year) Y/Y: 6.5%e v 8.2% prior.

- 06:00 (BR) Brazil Dec FGV Inflation IGP-DI M/M: 0.8%e v 1.2% prior; Y/Y: 6.9%e v 6.6% prior.

- 06:00 (FI) Finland to sell combined €2.0B in 6-month and 9-month bills.

- 06:30 (EU) ESM to sell €1.1B in 3-month Bills.

- 06:30 (CL) Chile Dec Trade Balance: $2.5Be v $1.4B prior; Total Exports: No est v $7.9B prior; Total Imports: No est v $6.6B prior; Copper Exports: No est v $4.2B prior.

- 06:30 (CL) Chile Dec International Reserves: No est v $44.8B prior.

- 07:00 (CL) Chile Nov Nominal Wage Y/Y: No est v 8.2% prior.

- 08:00 (PL) Poland Dec Official Reserves: No est v $218.3B prior.

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

- 08:00 (US) Fed’s Barkin.

- 08:30 (US) Nov Trade Balance: -$78.2Be v -$73.8B prior.

- 08:30 (CA) Canada Nov Int’l Merchandise Trade (CAD): -0.9Be v -0.9B prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 10:00 (US) Nov JOLTS Job Openings: 7.745e v 7.744M prior.

- 10:00 (US) Dec ISM Services Index: 53.5e v 52.1 prior.

- 10:00 (CA) Canada Dec Ivey Purchasing Managers Index: No est v 52.3 prior; PMI (unadj): No est v 52.2 prior.

- 14:00 (US) FOMC Dec Minutes.

- 16:30 (US) Weekly API Oil Inventories.

- 18:00 (KR) South Korea Nov Current Account Balance: No est v $9.8B prior; Balance of Goods (BOP): No est v $8.1B prior.

- 19:00 (NZ) New Zealand Dec ANZ Commodity Price Index M/M: No est v 2.9% prior.

- 19:30 (AU) Australia Nov CPI Y/Y: 2.2%e v 2.1% prior; CPI Trimmed Mean Y/Y: No est v 3.5% prior.

- 19:30 (AU) Australia Nov Job Vacancies Q/Q: No est v -5.2% prior.

- 20:00 (PH) Philippines Nov Unemployment Rate: No est v 3.9% prior.

- 22:00 (ID) Indonesia Dec Foreign Reserves: No est v $150.2B prior.