Original insights into market moving news

[PODCAST] European Open Rundown 12th January 2022

  • Asia-Pac bourses traded positively as stocks took their cue from the energy and tech-led gains in the US
  • US indices closed higher across the board with the Nasdaq outpacing peers with gains of 1.4%
  • Chinese inflation metrics cooled from the prior and came in below expectations
  • The DXY languished around two-month lows near 95.50. Activity currencies lead in the G10 FX space
  • Looking ahead, highlights include US CPI, DoEs, Fed's Kashkari, supply from Germany and the US


Washington D.C. Mayor Bowser declared a limited public health emergency until January 26th to help hospitals cope with a surge in COVID infections, while it was also reported that schools in Las Vegas, Nevada will shut for a week due to staff shortages and COVID surge. (NBC4 Washington/Fox5)

China halted flights from US to Shanghai amid the Omicron spread, while it was reported that an airline trade group is in talks with both the US and Chinese governments over China service halts. (Newswires)


Asia-Pac bourses traded positively as stocks took their cue from the energy and tech-led gains in the US where sentiment was underpinned as yields eased and focus centred on Fed Chair Powell's confirmation hearing where he noted that the Fed is prepared to act to control inflation if required but refrained from ramping up the hawkish rhetoric. ASX 200 (+0.7%) was led higher by strength in commodity-related sectors after gold made headway above the USD 1800/oz level and WTI crude notched its biggest gain in a month, while the tech sector was also inspired following the growth and duration bias stateside. Nikkei 225 (+2.0%) was underpinned amid the broad constructive mood and recent JPY weakening with Softbank among the top performers after it was reported to have repurchased around JPY 42.9bln of shares during December. Hang Seng (+2.5%) and Shanghai Comp. (+0.7%) also benefitted from the risk momentum with the former spearheaded by tech and energy shares including CNOOC which saw an initial double-digit percentage jump due to the rally in oil prices and after it raised its production guidance for 2022. However, the gains in the mainland were modest in comparison as Chinese property developers face key bond payments this week and with participants digesting softer than expected Chinese inflation data. Finally, 10yr JGBs clawed back yesterday’s losses following a rebound in USTs and despite the heightened risk appetite, while prices briefly stalled after the 5yr JGB auction showed weaker results across all metrics although this was only momentarily with further upside on a break above the 151.00 level.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.3658 vs exp. 6.3655 (prev. 6.3684)

Chinese CPI MM (Dec) -0.3% vs. Exp. 0.2% (Prev. 0.4%) Chinese CPI YY (Dec) 1.5% vs. Exp. 1.8% (Prev. 2.3%) Chinese PPI YY (Dec) 10.3% vs. Exp. 11.1% (Prev. 12.9%)


French Central Bank sees Q4 2021 growth of 0.6% Q/Q, which consistent with FY estimate of 6.7% growth, while it sees economic activity at +0.75% of pre-pandemic levels in January, which is unchanged from December and noted that stable activity in January suggests the economy on still on track for 2022 growth of 3.6%. (Newswires)


In FX markets, the DXY languished around two-month lows near 95.50 after the recent decline in yields. Yesterday, the spotlight was on Fed Chair Powell who didn’t provide specifics on the timing of a rate lift off or balance sheet runoff other than that they are both likely this year. Furthermore, Powell noted they are on a long road to normal and have not made any decision regarding the balance sheet reduction but will talk about it at the January meeting, which will take two to four meetings to work through the decision. EUR/USD was steady and held on to the prior day’s gains at the expense of the greenback. GBP/USD also retained its recent spoils, helped by the softer USD and despite the ongoing scandal regarding Downing Street lockdown parties which PM Johnson is set to face a showdown on at today’s PMQs. USD/JPY and JPY-crosses were kept afloat amid the heightened risk appetite and antipodeans were uneventful in which AUD/USD marginally extended above its 200-hour moving average and was unfazed despite the miss on Chinese inflation data.

BCB Chief Campos Neto said the Brazil Central Bank has taken measures that will allow inflation to meet the targets for 2022, 2023 and 2024, while he added it is appropriate that monetary tightening continues. (Newswires)


WTI crude took a breather following the prior day's rally to above the USD 81/bbl level and its biggest gain in a month with the upside supported by the constructive risk tone and a softer greenback, while the EIA STEO forecast global oil demand to increase by 3.5mln BPD this year. Furthermore, there were recent comments from Oman's Energy Minister that OPEC+ monthly adjustments are at a good pace, while the private sector inventory data was bearish as it showed a narrower than expected draw to headline crude and a large gasoline build, although this did little to dent prices. Gold traded sideways above the USD 1800/oz level ahead of the upcoming CPI data but held on to most of yesterday's gains owing to the weaker USD and copper prices continued to advance amid the broad heightened risk appetite.

US Private Energy Inventory Data (bbls): Crude -1.1mln (exp. -1.9mln), Cushing -3.7mln, Gasoline +10.9mln (exp. +2.4mln), Distillate +3.0mln (exp. +1.8mln). (Newswires)

EIA STEO expects global oil demand to rise by 3.5mln BPD in 2022, while it sees US crude output to rise 640k BPD in 2022 Y/Y (prev. month forecast saw a 670k BPD rise) and to rise 610k BPD to 12.41mln BPD in 2023. (Newswires)


White House said it is too early to tell if Russia is serious about a path to diplomacy. (Newswires)

French Minister for Europe and Foreign Affairs Le Drian said Iran talks made progress at the end of December but added that discussions are too slow and they are still a long way for reviving a nuclear deal. (Newswires)

North Korea said Tuesday's launch was a hypersonic missile and that its final test-firing of the hypersonic missile was successful which its leader Kim Jong Un attended, while it was separately reported that the missile launch prompted the US to temporarily pause some flights at some airports along its west coast. (Yonhap/SCMP)


Treasuries bull-flattened in the front-to-belly and front-to-back spreads, although the back-end struggled to outperform ahead of supply; TIPS well bid before CPI. 2s -0.5bps at 0.899%, 3s -1.4bps at 1.185%, 5s -3.1bps at 1.506%, 7s -3.2bps at 1.688%, 10s -3.5bps at 1.745%, 20s -3.0bps at 2.124%, 30s -3.6bps at 2.073%. 5yr TIPS -12.9bps at -1.401%, 10yr TIPS -10.2bps at -0.840%, 30yr TIPS -8.0bps at -0.238%. 5yr BEI +9.1bps at 2.911%, 10yr BEI +6.0bps at 2.560%, 30yr BEI +3.8bps at 2.327%. T-Notes made session highs of 128-14 in the European morning before paring to lows of 128-01 at the NYSE open. Attention in the US session unsurprisingly fell on Powell's Senate hearing, where the Fed Chair didn't give much specifics in the way of the timing of rate liftoff, nor on the balance sheet runoff, but did say the decision would likely take between two to four meetings of discussion (which would indicate a May announcement at the earliest). There was some gradual strength in bonds after Powell's speech, perhaps as the Chair failed to ramp up the hawkishness any further. Note his comments came after Fed's George and Mester (both voters and hawks) earlier in the session, with the latter giving a hat tip to March for rate liftoff with eyes on three hikes this year. T-Notes were lifted gradually into the NY afternoon and then settlement, just failing to breach their session highs seen earlier at the London open; the front-end was supported from a solid 3yr auction. Attention now looms on Wednesday's 10yr auction and CPI print, coming ahead of Thursday's 30yr. T-note (H2) futures settled 8 ticks higher at 128-12+.

Fed Discount Rate Minutes stated that all 12 regional Fed branches wanted to keep the discount rate unchanged at 25bps and directors were generally optimistic about the economic outlook. (Newswires)

White House Press Secretary Psaki said US President Biden is open to making changes to a "broken" Senate. It was separately reported that President Biden said he supports a change to key Senate filibuster rule to pass voting reforms, while CNN's Manu Raju tweeted that President Biden said he has been having quiet conversations with Congress over the past two months and is tired of being quiet. (Newswires/AFP News Agency/Twitter)

US Democratic House Budget Committee Chairman Yarmuth said he thinks House Speaker Pelosi is likely to retire after this term. (Fox News)