Newsquawk

Euro Market Open: Sentiment supported ahead of the Lunar New Year holiday, ECB speak ahead

20 Jan 2023, 06:50 by Newsquawk Desk

APAC stocks traded higher following the weak performance by global peers (S&P 500 -0.76%)
European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.5% after the cash market closed down 1.9% yesterday
US equity futures are marginally firmer (ES +0.3%), albeit the ES is still firmly below the 4k mark
DXY tested 102 to the downside, JPY lags the majors with USD/JPY back above 129, antipodeans lead.
Looking ahead, highlights include UK Retail Sales, US Existing Home Sales, Speeches from ECB's Lagarde & Elderson

US stocks and treasuries were pressured after hawkish ECB rhetoric and strong US data served as headwinds.
SPX -0.76% at 3,899, NDX -1.00% at 11,296, DJIA -0.76% at 33,045, RUT -0.97% at 1,836
Click here for a detailed summary.

NOTABLE HEADLINES

Fed's Brainard (voter) said the recent downshift in the pace of rate hikes allows the Fed to assess more data as it moves policy to a sufficiently restrictive level, while it will take time and resolve to get high inflation down to Fed's 2% target. Brainard reiterated that policy will need to be sufficiently restrictive for some time and said the Fed has tightened a lot and is starting to see the effects on inflation.
Fed's Williams (voter) said US inflation is too high and the Fed has more work to do on rate increases, while he added that the Fed must stay the course until inflation is brought back to 2% and still has a way to go on rate increases with the data to drive where the Fed stops raising rates. Williams also noted the destination, not speed, is the key issue for the rate hike question and that the Fed still has lots of room to run on shrinking the balance sheet.

APAC stocks traded higher but with some of the gains limited ahead of mass holiday closures and after the weak performance by global peers due to hawkish ECB rhetoric and headwinds from firm US data.
ASX 200 was led by commodity-related stocks as the energy sector was underpinned by the recent rebound in oil prices and with Whitehaven Coal boosted by a 50% jump in its quarterly coal output.
Nikkei 225 gradually breached the 26,500 level to the upside after the latest inflation data which mostly printed in line with estimates and showed the fastest pace of increase in Core CPI since 1981.
Hang Seng and Shanghai Comp were jubilant ahead of the Lunar New Year celebrations and after this week's record liquidity injection although further upside was capped given the upcoming mass holiday closures with mainland bourses to remain shut throughout the whole of next week, while there was a lack of surprise from the PBoC which maintained its benchmark lending rates.
US equity futures are marginally firmer (ES +0.3%), albeit the ES is still firmly below the 4k mark.
European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.5% after the cash market closed down 1.9% yesterday.

DXY initially tested 102.00 to the downside after gains in its major peers, but later caught a mild tailwind alongside advances in USD/JPY.
EUR/USD traded steadily and held onto the prior day’s gains after the hawkish pushback from ECB’s Knot who stated that the ECB won't stop after a single 50bp hike and is planning multiple 50bp rate increases.
GBP/USD slightly softened after recent upward momentum was stalled by resistance at 1.2400.
USD/JPY gradually climbed back above the 129.00 level after mostly in-line inflation data.
Antipodeans were contained in tandem with the price action in commodities.
PBoC set USD/CNY mid-point at 6.7702 vs exp. 6.7708 (prev. 6.7674)

10yr UST futures tested the prior day’s lows amid headwinds from strong US data.
Bund futures remained subdued beneath 140.00 after the recent selling pressure which was triggered by a further pushback from within the ECB against the dovish sources earlier this week.
10yr JGB futures extended on this week's post-BoJ gains with the central bank also present in the market for JPY 1.85tln of JGBs on top of its fixed rate operations.

Crude futures were uneventful and held on to yesterday's gains after oil prices shrugged off bearish inventory data with China demand recovery optimism and a softer dollar providing support.
Saudi Foreign Minister said Saudi is engaging with Russia on keeping oil prices stable, according to Bloomberg.
Ukrainian Foreign Minister Kuleba said Ukraine is confident it's time to review the oil price cap given the current market price on Urals is lower than USD 50/bbl.
Spot gold marginally pulled back after having printed a fresh 9-month high.
Copper futures were steady ahead of the week-long closure for its largest buyer.

Bitcoin traded rangebound overnight in which price action oscillated around 21,100.

NOTABLE ASIA-PAC HEADLINES

PBoC 1-Year Loan Prime Rate (Jan) 3.65% vs Exp. 3.65% (Prev. 3.65%)
PBoC 5-Year Loan Prime Rate (Jan) 4.30% vs Exp. 4.30% (Prev. 4.30%)
US Treasury staff will visit China in February ahead of a visit by Treasury Secretary Yellen, according to Reuters sources.

DATA RECAP

Japanese National CPI YY (Dec) 4.0% vs. Exp. 4.0% (Prev. 3.8%)
Japanese National CPI Ex. Fresh Food YY (Dec) 4.0% vs. Exp. 4.0% (Prev. 3.7%)
Japanese National CPI Ex. Fresh Food & Energy YY (Dec) 3.0% vs. Exp. 3.1% (Prev. 2.8%)

US announced the authorisation of security assistance for Ukraine valued at up to USD 2.5bln which includes 59 Bradley fighting vehicles, 90 Stryker armoured personnel carriers and air defence systems.
CIA Director Burns travelled to Ukraine's capital last week and held a secret meeting with Ukrainian President Zelensky on Russia's next steps and the CIA chief told Zelensky that aid will be ‘harder to come by’ in the future, according to Washington Post.
Russian Ambassador to the US said Russia has warned the US its approach is leading the world to a catastrophic scenario, according to Sky News Arabia.

UK Chancellor Hunt warned not to expect tax cuts in the March budget although Tory strategists are earmarking a pre-election giveaway next year, according to FT. It was separately reported that Chancellor Hunt wants to extend the 5p cut in the price of petrol and diesel for another year, according to The Times
UK and Ireland agreed to continue close cooperation in accordance with the three-stranded approach established in the Belfast/Good Friday Agreement.
Irish PM Varadkar says the possibility of an EU-UK agreement in the next few months is “very real” and can be achieved with “reasonableness and flexibility on both sides”. (BBC)

DATA RECAP