In focus today
The Polish central bank announces its base rate at 14.30. We expect them to maintain their current rate level of 5.75%.
Early Thursday morning, Chinese CPI and PPI for January is released, and set to show another deflation print on the headline and thus continue the downbeat news flow out of China. Consensus looks for a -0.5% y/y print for headline CPI. It is partly driven by food prices, though, and we still do not see broad based declines in CPI ex food and energy, which is running at 0.6% y/y. But we might see a decline in core CPI inflation this time as the base from January 2023 may have seen a lift from the reopening after lockdowns.
Riksbank Minutes are released 09.30 CET. We expect a repetition from a majority of members that they are set to start cutting rates in June/July, moving in “cautious” steps from there (which we have interpreted as 25 bps cut at each “big” monetary policy meeting). Supposedly they will emphasize that inflation needs to be at 2% and on a stable trajectory. There could be some push-back on pricing given that 50bp cuts are priced in for H1. One hour later, 10.30 CET, Governor Thedeén speaks at Eesti Pank in Tallin.
Focus is on German industrial production data from December. The data will likely be weak as GDP declined 0.3% q/q in 2023Q4. Yet, it will be interesting to see how actual production fared in December as soft indicators have shown improvements.
US Secretary of State Anthony Blinken is visiting Israel where he will be discussing a proposed cease fire deal. Hamas had yesterday given a “positive response” to the deal.
Fed’s Barkin and Bowman speak at 18.30 and 20.00 respectively.
Economic and market news
What happened overnight
It has been a rather quiet night with no major events.
What happened yesterday
In Germany, factory orders for the month of December rose unexpectedly by 8.9% m/m compared to consensus expectations of -0.2%. The big jump was however largely due to some major orders related to airplane manufacturing. Looking past these orders, factory orders fell 2.2% m/m, which also appears more in line with German GDP shrinking 0.3% q/q in 2023Q4.
In the euro area, retail sales for the month of December showed a drop of 1.1% m/m in line with consensus expectations. The drop was rather broad based hence the December print points to the euro area consumers still being cautionary with personal spending, as they have been throughout 2023.
In the US, an appeal court found that Donald Trump did not have immunity in the case of whether he tried to overturn the 2020 presidential election result. A Bloomberg poll of 31 January found that 53% of voters in key swing states would refuse to vote for him if found guilty of a criminal offense before the November presidential election. Trump vowed to appeal the decision.
Equities: Global equities rose yesterday without any particular news to set the direction for equities. As yields dropped, the focus on central bank reprising faded which was enough to bring back the positive sentiment in equities led by the small caps. Tech did underperform and the equal-weight S&P outperformed the official index. Interestingly, there haven’t been the same focus on magnificent seven so far this year despite the tech sector has been outperforming year to data.
In US yesterday Dow +0.4%, S&P 500 +0.2%, Nasdaq +0.1% and Russell 2000 +0.9%. Asian markets are mixed this morning but with less intraday vol than we have been witnessing lately. US and European future also showing marginal change to yesterdays close.
FI: On a very uneventful day, market attention turned towards Moody’s downgrade of NYCB (to junk) and the concerns surrounding the US commercial real estate market. Government bond yields in the US and Europe fell by a couple of basis points across the curve as markets added to rate cut expectations for 2024-25. German ASW-spreads continued tightening throughout the day.
FX: The USD pulled back from twelve-week highs as yields slipped amid further concerns regarding regional banks. Scandies thrived in said climate, with EUR/SEK and EUR/NOK both falling ten figures on the day, the exception being DKK with EUR/DKK rising above 7.4600 on the back of a deal announced by Novo.
