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Original insights into market moving news

Euro Market Open: Tentatively firmer trade ahead of data, earnings and the FOMC

  • APAC stocks traded higher after the positive lead from Wall St, although gains were capped ahead of the FOMC and after disappointing Chinese Caixin Manufacturing PMI.
  • European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.1% after the cash market closed up 0.1% yesterday.
  • DXY is flat and just above the 102 mark with major FX pairs relatively contained.
  • The Times reports that the UK and EU reached a customs agreement which could pave the way for an end to post-Brexit wrangling over Northern Ireland.
  • Looking ahead, highlights include EZ, UK & US Final Manufacturing PMIs, EZ HICP Flash, US ADP, ISM Manufacturing, JOLTS, Construction Spending, FOMC Policy Announcement & Press Conference, OPEC+ JMMC, Supply from UK, Germany & US (Quarterly Refunding Announcement), Earnings from Novo Nordisk, GSK, Vodafone, Novartis, Meta, T-Mobile, Thermo Fisher, & Altria.

US TRADE

  • US stocks rallied into month-end with the softening Q4 Employment Cost Index adding dovish fuel to the fire.
  • SPX +1.46% at 4,076, NDX +1.59% at 12,101, DJIA +1.09% at 34,086, RUT +2.45% at 1,931.
  • Click here for a detailed summary.

NOTABLE HEADLINES

  • US President Biden is to discuss the challenges posed by China and Russia during the State of the Union Address next week in the days after Secretary of State Blinken visits Beijing, according to SCMP citing a White House official.

APAC TRADE

EQUITIES

  • APAC stocks traded higher after the positive lead from Wall St where stocks advanced into month-end and which was facilitated by the softer Employment Cost growth in the US, although gains were capped by the approaching FOMC rate decision and after disappointing Chinese Caixin Manufacturing PMI data.
  • ASX 200 was led higher by strength in the mining and materials sectors after a rebound in commodity prices and with an upgrade in the Final Australian Manufacturing PMI also conducive for risk appetite.
  • Nikkei 225 briefly climbed above 27,500 but closed off its highs amid a deluge of earnings releases and after Japan’s manufacturing activity was confirmed to have declined for a 3rd consecutive month.
  • Hang Seng and Shanghai Comp. were positive albeit with momentum restricted after Chinese Caixin Manufacturing PMI missed forecasts and printed a 6th consecutive month in contraction territory which was in contrast to the recent rebound seen in China’s official PMIs.
  • US equity futures were lacklustre (ES -0.3%) amid the cautious gains in Asia and with markets bracing for the Fed.
  • European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.1% after the cash market closed up 0.1% yesterday.

FX

  • DXY was flat overnight with the FOMC on the horizon and after having softened during US hours owing to the risk-on mood on Wall St and softer-than-expected Employment Cost data.
  • EUR/USD was indecisive after the recent price swings and mixed data releases from the bloc.
  • GBP/USD retested support around the 1.2300 level heading into today’s disruptions with teachers, lecturers, civil servants, bus drivers and train drivers conducting the largest strike action in over a decade.
  • USD/JPY initially declined below 130.00 amid narrowing yield differentials, although the move was eventually reversed and the BoJ also announced its outright bond purchases in January reached a record.
  • Antipodeans were indecisive with NZD/USD dampened after New Zealand Employment and Labour Cost data printed mostly weaker than expected which unwound some of the more hawkish RBNZ rate hike calls.
  • PBoC set USD/CNY mid-point at 6.7492 vs exp. 6.7499 (prev. 6.7604)

FIXED INCOME

  • 10yr UST futures held onto their gains after the recent bull steepening as lower employment costs growth in the US added to the tailwinds from the softer-than-expected French inflation data.
  • Bund futures marginally extended on their advances and just about reclaimed the 137.00 status.
  • 10yr JGB futures were positive as they followed suit to their global peers but with momentum limited by the lack of additional BoJ purchases and as markets await the FOMC.

COMMODITIES

  • Crude futures marginally extended on yesterday's rebound which was helped by a subdued dollar and Exxon jawboning, although gains were limited by bearish inventories and ahead of the OPEC+ JMMC.
  • US Energy Inventory Data (bbls): Crude +6.3mln (exp. +0.4mln), Cushing +2.7mln, Gasoline +2.7mln (exp. +1.4mln), Distillate +1.5mln (exp. -1.3mln).
  • Spot gold traded sideways and lacked conviction ahead of the looming Fed rate decision.
  • Copper futures were lacklustre due to pre-FOMC cautiousness and weak Chinese Caixin PMI.

CRYPTO

  • Bitcoin took a breather amid the tentative mood and after having reclaimed the 23,000 level.

NOTABLE ASIA-PAC HEADLINES

  • White House said one goal of US Secretary of State Blinken's trip to China is to try to revitalise some topics of discussion between the US and China, according to Reuters.
  • US Defence Secretary Austin's visit to Manila is expected to bring a deal on expanded US access to bases in the Philippines, according to a senior Philippines official cited by Reuters.

DATA RECAP

  • Chinese Caixin Manufacturing PMI Final (Jan) 49.2 vs. Exp. 49.5 (Prev. 49.0)
  • Australian Manufacturing PMI (Jan F) 50.0 (Prelim. 49.8)
  • New Zealand HLFS Job Growth QQ* (Q4) 0.2% vs. Exp. 0.3% (Prev. 1.3%)
  • New Zealand HLFS Unemployment Rate* (Q4) 3.4% vs. Exp. 3.3% (Prev. 3.3%)
  • New Zealand Labour Cost Index - QQ* (Q4) 1.1% vs. Exp. 1.2% (Prev. 1.1%)
  • New Zealand Labour Cost Index - YY* (Q4) 4.3% vs. Exp. 4.3% (Prev. 3.8%)

GEOPOLITICS

  • US is readying a USD 2.2bln weapons package for Ukraine which includes longer-range rockets for the first time, according to two officials cited by Reuters.
  • US State Department report stated that Russia violated the New START treaty cutting long-range nuclear arms by refusing to allow on-site inspections and rebuffing Washington’s requests to meet to discuss its compliance concerns, according to WSJ.

EU/UK

  • UK and EU reached a customs agreement which could pave the way for an end of post-Brexit wrangling over Northern Ireland, according to The Times.

DATA RECAP

  • UK BRC Shop Price Index YY (Jan) 8.0% (Prev. 7.3%)
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