UK Dec Retail Sales slump

Notes/Observations

- UK Dec retail sales unexpectedly drop to register the sharpest decline for month of Dec since records began in 1989.

-Quiet EU session in general on macro and corporate side, with final day of WEF event in Davos being held.

-Overnight, Japan Dec National Core CPI measured fastest annual pace since 1981 (double BOJ target of 2%). China PBOC left 1-year and 5-year LPR setting unchanged, as-expected.

-EU bourses modestly higher as technical trading dictates market moves in light session for news.

-Ahead of US equity open, expected earnings from ALLY, SLB and STT.

-Asia closed higher with Hang Seng outperforming at +1.8%. EU indices are +0.3-1.0%. US futures are 0% to +0.3%. Gold +0.4%, DXY +0.2%; Commodity: Brent +0.6%, WTI +0.6%, TTF -1.0%; Crypto: BTC +0.7%, ETH +1.6%.

-Reminder: Due to Chinese New Year holiday, Shanghai market will be closed Mon-Fri and Hong Kong Mon-Wed.

Asia

- Japan Dec National CPI data saw the core hitting its fastest annualized pace since Dec 1981 (Y/Y: 4.0% v 4.0%e).

- China PBOC Monthly Loan Prime Rate (LPR) Setting left the 1-Year and 5-Year rates unchanged at 3.65% and 4.30% respectively.

- Lunar New Year holiday begins on Sunday, Jan 22nd.

Ukraine conflict

- US CIA Director Burns met with Ukraine Pres Zelenskiy last week to brief him on his expectations for what Russia was planning militarily near-term. He also acknowledged that at some point US assistance would be harder to come by.

Europe

- Jan GfK Consumer Confidence: -45% v -40%e.

- UK Chancellor of the Exchequer (Fin Min) Hunt warned against expectation of a tax cut in the March budget. Wants to extend the 5p cut in the price of petrol and diesel for another year should the public finances allow it.

- EU's Dombrovskis (Trade Chief) stated that the region growth was stronger than expected; Recession would probably be avoided.

Americas

- Fed’s Williams (voter) reiterated that the Fed had more work to do on rate hikes. Market pricing was roughly consistent with the Fed's rate outlook.

- Fed Vice Chair Brainard (voter) stated that inflation remained high but saw tentative signs wage growth was moderating. Fed to stay the course.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.17% at 451.26, FTSE +0.27% at 7,768.44, DAX +0.35% at 14,972.95, CAC-40 +0.51% at 6,987.60, IBEX-35 +0.95% at 8,876.34, FTSE MIB +0.61% at 25,753.00, SMI +0.32% at 11,294.70, S&P 500 Futures +0.02%].

Market Focal Points/Key Themes: European indices trade in the green through the early part of the session; sectors leading to the upside include energy and financials; lagging sectors include industrials and consumer discretionary; oil & gas subsector supported following rise in crude despite surprise build in inventories; reportedly Entain and MGM like to explore merger; UK FCA opens inquiry into UnitedHealth/Emis deal; reportedly American Tower and Brookfield interested in acquiring Cellnex; earnings expected in the upcoming US session include Schlumberger, Regions Financial and State Street.

Equities

- Consumer discretionary: Rovio Entertainment [ROVIO.FI] +38% (confirms improved offer), 4Imprint [FOUR.UK] +3.5% (FY22 trading update).

- Materials: Vallourec [VK.FR] +3.0% (secured significant order in Gulf of Mexico), Covestro [1COV.DE] +3.0% (analyst action).

- Energy: Saipem [SPM.IT] +3.0% (large orders), Orsted [ORSTED.DK] -7.5% (prelim results).

- Financials: Argan [ARG.FR] +1.0% (reports FY22 - post close), Hypoport [HYQ.DE] -5.5% (resolves on €50M cash capital increase by way of an accelerated bookbuilding - post close).

- Healthcare: Astellas Pharma [YPH.DE] +1.0% (FDA hold on FORTIS clinical trial is lifted), BB Biotech [BION.CH] -1.0% (reports Q4).

- Industrials: Michelin [ML.FR] -2.0% (analyst action - cut to perform at RBC).

- Technology: Spirent Communications [SPT.UK] -16.0% (FY22 trading update - adj op to be ahead of market expectations).

- Utilities: SSE [SSE.UK] +2.0% (raises FY22/23 adj EPS).

- Telecom: Ericsson [ERICB.SE] -6.0% (reports Q4, notes near-term outlook remains uncertain), Deutsche Telekom [DTE.DE] -1% (T-Mobile breach).

Speakers

- SNB President Jordan stated that probably underestimated inflation during 2021; Policy was too expansionary everywhere. Headline inflation would go down quickly but bringing inflation to 2% from 4% would be difficult.

- France Fin Min Le Maire stated that the govt to sticj with planned pension reforms; Reiterated some improvements of pension reform were possible.

- IMF's Georgieva reiterated that the outlook was less pessimistic than initially feared from just a few months ago and that inflation was leaning in right direction.

Currencies/ fixed income

- USD price action was mixed in the session but trend remained under pressure. Recent US data highlighted the slowdown in activity momentum and reinforced growth concerns.

- EUR/USD should benefit from a rather supportive rate differential. Pair holding above the 1.0830 area in quiet trade.

- GBP/USD was softer after UK Dec retail sales unexpectedly dropped. GBP/USD was at 1.2345 by mid-session.

- USD/JPY higher in the session despite Japn Dec CPI coming in double the central bank's 2% target. Dealers noted that data would be unlikely to quell market expectations of a change in policy at some point.

Economic data

- (NL) Netherlands Jan Consumer Confidence: -49 v -52 prior.

- (UK) Dec Retail Sales (Ex-Auto/Fuel) M/M: -1.1% v+ 0.4%e; Y/Y: -6.1% v -4.4%e.

- (UK) Dec Retail Sales (including auto/fuel) M/M: -1.0% v 0.5%e; Y/Y: -5.8% v -4.0%e.

- (DE) Germany Dec PPI M/M: -0.4% v -1.2%e; Y/Y: 21.6% v 20.7%e.

- (MY) Malaysia mid-Jan Foreign Reserves: $114.9B v $114.6B prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 140.0K v 102.5K tons prior.

- (ES) Spain Nov House transactions Y/Y: 10.8% v 11.4% prior.

- (RU) Russia Narrow Money Supply w/e Jan 13th (RUB): 16.39T v 16.46T prior.

- (HK) Hong Kong Dec CPI Composite Y/Y: 1.9% v 1.9%e.

- (PL) Poland Dec Employment M/M: 0.0% v 0.0%e; Y/Y: 2.2% v 2.3%e.

- (PL) Poland Dec Average Gross Wages M/M: 6.9% v 8.8%e; Y/Y: 10.3% v 13.1%e.

- (IS) Iceland Dec International Reserves (ISK): 837B v 893B prior.

- (BE) Belgium Jan Consumer Confidence: -12 v -15 prior.

Fixed income issuance

- (IN) India sold total INR280B vs. INR280B indicated in 2027, 2032 and 2052 bonds.

- (ZA) South Africa sold total ZAR190M vs. ZAR1.2B indicated in I/L 2033, 2038 and 2050 Bonds.

Looking ahead

- (IT) Italy Debt Agency (Tesoro) Exchange auction.

- (FR) France Dec Retail Sales Y/Y: No est v -3.1% prior.

- (MX) Mexico Banamex Survey of Economists.

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

- 06:00 (IE) Ireland Dec PPI M/M: No est v -3.9% prior; Y/Y: No est v 3.8% prior.

- 06:00 (SE) Sweden Central Bank (Riksbank) Breman.

- 06:00 (UK) DMO to sell £4.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £2.0B respectively).

- 06:45 (US) Daily Libor Fixing.

- 06:30 (IN) India Weekly Forex Reserve w/e Jan 13th: No est v $561.6B prior.

- 07:00 (IN) India announces upcoming bill issuance (held on Wed).

- 07:00 (MX) Mexico Nov Retail Sales M/M: -0.3%e v +0.7% prior; Y/Y: 2.2%e v 3.8% prior.

- 07:30 (IS) Iceland to sell new Oct 2026 Bonds ; Avg Yield: %; bid-to-cover: x.

- 08:00 (RO) Romania Central Bank (NBR) Jan Minutes.

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

- 08:30 (CA) Canada Nov Retail Sales M/M: -0.5%e v+ 1.4% prior; Retail Sales (Ex-Auto) M/M: -0.6%e v 1.7% prior.

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

- 09:00 (US) Fed’s Harker.

- 10:00 (US) Dec Existing Home Sales: 3.95Me v 4.09M prior.

- 11:00 (EU) Potential sovereign ratings after European close (Fitch on Ireland, Norway, Hungary and Ukraine Sovereign Ratings).

- 13:00 (US) Fed’s Waller.

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