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Chinese stock pressure clouded the Wall St. momentum, catalysts generally light - Newsquawk Europe Market Open

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Monday, Jan 22, 2024 - 06:35 AM
  • APAC stocks were mixed following a catalyst-light weekend and as weakness in Chinese stocks clouded over the early momentum from last week's record levels on Wall Street.
  • Fed's Daly (2024 voter) said on Friday there is a lot of work left to do on inflation, adding it is premature to think rate cuts are around the corner.
  • European equity futures are indicative of a higher open with Euro Stoxx 50 future +0.8% after the cash market closed down 0.1% on Friday.
  • DXY is a touch softer on a 103 handle, EUR/USD and USD/JPY oscillate around 1.09 and 148 respectively.
  • Looking ahead, highlights include US Leading Index Change, BoJ SLOOS, Comments from ECB's President Lagarde, Earnings from United Airlines, Supply from EZ & UK Syndication.

 

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US TRADE

EQUITIES

  • US stocks gained throughout the session on Friday and the S&P 500 hit a fresh record high with Technology names doing a lot of the heavy lifting, while the highlight of the session was the UoM survey which saw a huge surge in consumer sentiment with jumps in both current conditions and expectations, while the inflation expectations dipped.
  • SPX +1.23% at 4,839, NDX +1.95% at 17,313, DJIA +1.05% at 37,863, RUT +1.08% at 1,944.
  • Click here for a detailed summary.

NOTABLE HEADLINES

  • Fed's Bostic (2024 voter) said on Friday that he wants to make sure they are well on the way to 2% before cutting and he is open to changing the outlook for the rate cut timing on data.
  • Fed's Daly (2024 voter) said on Friday that the Fed does not have inflation down to 2% yet and there is a lot of work left to do on inflation, while it is premature to think rate cuts are around the corner, according to an FBN interview. Daly also stated that policy is in a good place and risks are more balanced at this point, while she noted that they do not want to loosen policy too quickly or try to squeeze inflation out too fast and said the Fed has not yet declared victory.
  • Florida Governor DeSantis ended his presidential bid and endorsed Donald Trump.

APAC TRADE

EQUITIES

  • APAC stocks were mixed following a catalyst-light weekend and as weakness in Chinese stocks clouded over the early momentum from last week's record levels on Wall Street.
  • ASX 200 was led higher by consumer and real estate sectors which benefitted from slightly lower yields, while miners were pressured after weaker quarterly output by South32 and Lynas.
  • Nikkei 225 rallied and broke above 36,500 ahead of tomorrow's BoJ announcement.
  • Hang Seng and Shanghai Comp underperformed amid notable weakness in tech and property which saw the Hang Seng Mainland Properties Index hit a record low, while sentiment remained pressured in the mainland amid ongoing economic concerns and the benchmark LPRs were kept unchanged, as expected.
  • US equity futures (ES +0.2%) kept afloat at contract highs after the cash markets hit record levels on Friday.
  • European equity futures are indicative of a higher open with Euro Stoxx 50 future +0.8% after the cash market closed down 0.1% on Friday.

FX

  • DXY slightly softened in quiet trade following a lack of macro drivers from over the weekend and with the Fed in a blackout period, while the key US data later this week includes GDP and the Fed's preferred PCE inflation gauge.
  • EUR/USD just about reclaimed the 1.0900 status albeit with upside capped ahead of this week's ECB meeting.
  • GBP/USD traded steadily around the recently reclaimed 1.2700 level amid quiet pertinent newsflow.
  • USD/JPY briefly trickled beneath 148.00 amid a softer dollar and a slight narrowing of yield differentials.
  • Antipodeans were initially lifted by the risk environment but eventually gave back their gains in the absence of any major catalysts and amid a very quiet calendar.

FIXED INCOME

  • 10yr UST futures continued its rebound from the trough seen late last week where it briefly dipped below 111.00 amid surging consumer confidence, while supply of US 2s, 5s, and 7s is scheduled from Tuesday.
  • Bund futures gained a firmer footing above 134.00 after breaking out of Friday's range.
  • 10yr JGB futures edged marginal gains but with price action choppy as the BoJ kick-started its 2-day policy meeting with no policy tweaks anticipated, while the latest enhanced liquidity auction for 10yr, 20yr and 30yr JGBs resulted in a lower-than-previous bid-to-cover.

COMMODITIES

  • Crude futures were subdued despite the ongoing geopolitical risks with mild pressure following the resumption of output at Libya's El Sharara oilfield output where protestors ended a sit-down that had shut down production.
  • Libya’s El Sharara oilfield output restarted after protestors ended the sit-down which had shut down production, while the NOC declared lifting of a force majeure and resuming full production from the El Sharara field.
  • Russian energy company Novatek was forced to suspend some operations at a huge Baltic Sea fuel export terminal due to a fire following a suspected Ukrainian drone attack, according to Reuters.
  • Spot gold traded rangebound amid a slightly softer dollar and a lack of haven demand.
  • Copper futures were marginally lower after Friday's risk-fuelled momentum petered out.

CRYPTO

  • Bitcoin was pressured and tested the USD 41,000 level to the downside.
  • Terraform Labs announced the strategic filing for Chapter 11 bankruptcy protection, while the filing is to allow it to execute its business plan as it navigates ongoing legal proceedings, according to Reuters.

NOTABLE ASIA-PAC HEADLINES

  • Chinese Loan Prime Rate 1-Year (Jan) 3.45% vs. Exp. 3.45% (Prev. 3.45%)
  • Chinese Loan Prime Rate 5-Year (Jan) 4.20% vs. Exp. 4.20% (Prev. 4.20%)

DATA RECAP

  • South Korean January 1st-20th Exports fell 1.0% Y/Y and Imports fell 18.2% Y/Y, while Trade Balance is at a provisional deficit of USD 2.61bln, according to the customs agency.

GEOPOLITICS

MIDDLE EAST

  • Israel conducted a strike on southern Lebanon which killed a Hezbollah member and one other Lebanese person, according to security sources cited by Reuters.
  • Israel conducted an air strike on Damascus which killed 4 Iranian Revolutionary Guards, while Iranian President Raisi said the Israeli strike that killed Revolutionary Guards will not go unanswered, according to state media.
  • US, Egypt and Qatar are pushing Israel and Hamas to join a phased diplomatic process that would begin with the release of hostages and eventually lead to the withdrawal of Israeli forces and an end to the war in Gaza. However, the report also noted that a media adviser to Hamas said there was no real progress, while Israeli PM Netanyahu rejected Hamas’s demands which included an end to the war and said they would not be able to ensure the security of their citizens if they would have agreed to this.
  • Saudi’s Foreign Minister said they are very focused on de-escalation in Gaza and need to focus on a solution for the Palestinian issue, according to CNN.
  • US Central Command forces conducted air strikes against a Houthi anti-ship missile that was aimed at the Gulf of Aden on January 20th, according to Reuters.
  • US personnel suffered minor injuries and an Iraqi security forces member was wounded following an attack on the Ain al-Asad air base on Saturday which involved multiple ballistic missiles and rockets that were launched by Iranian-backed militants in western Iraq, although most of the missiles were intercepted, according to Reuters.
  • UK Defence Minister Shapps said the UK military scientists shot down drones for the first time by using DragonFire laser to cut through incoming targets at the speed of light. It was also reported that the UK Defence Ministry said it will spend GBP 405mln to upgrade its warship defence missile system currently being used in the Red Sea.

OTHER

  • Russian President Putin reportedly showed his intention to visit North Korea soon, while it was also reported that North Korea and Russia expressed concern over provocation acts by the US and its allies, Furthermore, North Korea and Russia agreed on cooperation in regional affairs and agreed that cooperation and joint assistance would be in accordance with the UN Charter and international laws.
  • Eight people were killed following an attack on Russian-controlled Donetsk, according to TASS. It was also separately reported that Russia took control of the village of Krokhmalne in the Karkiv region, according to IFX.

UK/EU

NOTABLE HEADLINES

  • EU’s Dombrovskis said the EU must find ways to prevent the bloc’s most sensitive technologies, companies and assets from “ending up in the wrong hands”, as the EU prepares to unveil economic security proposals, according to FT.
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