Wednesday, January 12, 2022 8:16:00 AM
Morning Markets
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Futures Slightly Green Ahead Of Today's "Brutal" CPI Print
Wednesday, Jan 12, 2022 - 08:00 AM
U.S. index futures were little changed, if slightly in the green on Wednesday as investors settled into a wait-and-see mode ahead of today's "brutal" CPI report which is expected to show the highest CPI print in nearly 40 years, a time when the fed funds rate was 11% compared to 0% now...
... and gauge the pace of Federal Reserve tightening. Consensus expects December CPI to show inflation climbing to 7.0%, a result which could see front- end fully price in a March rate hike (currently priced at 85%). Helping the overnight mood in Asia, was a moderation in China’s inflation pressures, with CPI dipping to 10.3% y/y in December, giving the central bank scope to cut interest rates to cushion the economy’s downturn just as most major nations look to tighten policy. At 730am ET, S&P futures were up 0.2% of 7.50, and Nasdaq futures rose 22 points or 0.14%, recovering toward Asia’s best levels; Dow futures were up about 0.1%. The dollar was slightly lower, extending on its recent sharp drop, while Treasury yields were steady.
“All we know is that the Fed has waited too long before taking action,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “If today’s inflation print is higher than expected, recent gains in equities will melt like snow in the sun,” she wrote, even though investors seemed to put aside fears that tighter policy will stifle the economic rebound and market rally after soothing words from Federal Reserve Chair Jerome Powell. His testimony Tuesday helped arrest a five-day slide in the S&P 500, just as we predicted it would.
As Deutsche writes, the highlight of the last 24 hours was Chair Powell’s renomination hearing before the Senate Banking Committee. The overall communicated stance of policy wasn’t much changed with the hawkish pivot still on. Nevertheless, there were a few incremental takeaways. Powell did nothing to push back on liftoff being on the table in March, in line with our US econ team’s call and the increasing probability implied by the market, which is currently 85%. He made it clear that QE (yes it’s still happening) would finish in March, despite speculations it may come to an abrupt halt beforehand. In line with growing consensus, he painted a picture that made the start of QT likely in 2022. Finally, on the overall stance of policy, he emphasized the Fed needs to pull back from extreme levels of accommodation, but didn’t need to rush to get to a neutral stance of policy.
“It was a masterful performance really, leaving the bowls neither too full nor too shallow, but just right from the financial market’s perspective,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific, in an email. “The music can still play in equity markets in 2022, it’s just that we’ve likely seen the best of the technology gains.”
With three and possibly four Fed rate increases now priced in, strategists are turning more sanguine about inflation and focusing on positives such as the start of the earnings season. Markets have been buffeted by volatility at the start of the year on the prospect of faster interest-rate increases to subdue price pressures.
“Hawkish Fed repricing is likely largely done for now,” and “resilient earnings should help equities rebound,” Barclays Plc strategists led by Emmanuel Cau wrote in a note to clients on Wednesday.
Looking at the CPI print, DB's Jim Reid notes that repeated upside surprises in the inflation data have sent the year-on-year numbers up to multi-decade highs, putting significant pressure on the Fed. Indeed if you look at the monthly headline CPI reading, 7 of the last 9 releases have come in above the consensus estimate on Bloomberg. In terms of what to expect this time around, economists think that year-on-year CPI will rise to +7.0%, which will be the highest annual CPI number since 1982. And if that figure is realized, it would also mean that the real Fed Funds rate in December was around -7%, which for reference is lower than at any point in the 1970s, when the lowest the fed funds rate got in real terms was around -5%.
In the premarket, Dish Network Corp. rose more than 7% on a New York Post report of merger talks with DirecTV. PayPal shares dropped 1.9% in premarket trading after Jefferies cut its recommendation for the digital payments provider to hold from buy. Here are some of the biggest U.S. movers today:
U.S.-listed Chinese stocks rally in premarket trading, as Asian listings rebound amid bargain hunting and a reassuring tone from Fed Chair Jerome Powell. Alibaba (BABA US) +2.4%, JD.com (JD US) +1.5%, Pinduoduo (PDD US) +3.3%
Biogen (BIIB US) drops 9.1% in premarket trading after the U.S. government limited Medicare coverage of the company’s Aduhelm Alzheimer’s disease treatment and similar drugs to patients enrolled in clinical trials. The highly unusual move will curb access to the controversial treatment approved last year
Wells Fargo (WFC US) advanced in premarket trading as Piper Sandler upgraded its rating to overweight from neutral; cuts Premier Financial to neutral from overweight
Bed Bath & Beyond (BBBY US) shares jump as much as 4.9% in U.S. premarket trading, boosted by disclosures of insider purchases of the retailer’s stock made on Jan. 7
Rocket Lab USA (RKLB US) started at overweight, with $17 target by Morgan Stanley, which says the company offers high-quality exposure to the space race. Stock gains 4.1% in premarket trading
Cogent Communications (CCOI US) faces a “challenging setup” on weak growth and a high multiple, Wells Fargo writes in note as downgrades to underweight from equal-weight
European equities climbed back toward opening highs after a choppy first hour of cash trading. The Euro Stoxx 50 added 0.7%, FTSE 100 outperforms at the margin. Miners, oil & gas and tech are the strongest performing sectors. In Europe, mining and technology companies led the Stoxx 600 Index up 0.5%. Philips slumped 14%, the most in two decades, after the Dutch producer of medical equipment reported lower preliminary revenue than expected. Here are some of the biggest European movers today:
Rexel jumps to an eight-year high after the French maker of electrical products said 2021 organic growth will be higher than forecast with Citi noting positive demand comments from firm.
VAT shares post their steepest gains in more than a month after the Swiss supplier of products for the semiconductor industry reported 4Q order intake that was well above expectations.
DFS Furniture shares gain as much as 6.4%, among the top advancers in the FTSE All-Share Index, after the U.K. retailer kept its FY pretax profit forecast unchanged.
Just Eat Takeaway stock rises after initially falling following an update. Citi analysts say the online food delivery firm’s 4Q results are broadly in line with an expected deceleration.
TeamViewer shares rise as much as 15% in Frankfurt after the company reported 4Q and FY billings that beat market expectations with RBC calling the results “reassuring.”
Sainsbury shares rise as much as 3.9% after the U.K. grocer boosted its outlook for the year. Profit delivery is strong, according to Jefferies.
BHP Group and European mining peers are among the biggest gainers Wednesday with UBS saying in a sector note that shares are cheap -- but valuations are not compelling.
Sweco shares fall as much as 6.8% after Danske Bank downgrades to hold from buy, noting “stalling execution” despite solid market demand for the engineering consultancy’s services.
Taylor Wimpey shares drop as much as 2.2% after a holder sold about 86m shares in the company at 163.75p apiece, representing a 3.7% discount to Tuesday’s close.
Earlier in the session, Asian stocks climbed to their highest level in almost seven weeks as Federal Reserve Chair Jerome Powell’s remarks spurred expectations that anticipated rate hikes won’t derail the global economic recovery. The MSCI Pacific Index added as much as 1.6% to its highest since Nov. 26, bolstered by gains in the consumer-discretionary and information-technology sectors. Alibaba Group and Tencent Holdings were among the biggest contributors to the measure’s rise. Benchmarks in Hong Kong and Japan led gains for the region. Powell pledged to do what’s necessary to contain an inflation surge and prolong the economic expansion at his confirmation hearing for a second term as U.S. central bank chief. Futures on the S&P 500 advanced in Asia trading after halting a five-day slide. A gauge of Chinese technology shares rallied after the Nasdaq 100 outperformed major benchmarks. “The market view is that containing inflation with early rate hikes will turn out to be good for the economy -- that we’ll be able to push back on inflation while keeping the economy strong,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management in Tokyo. “Before, the market had been reacting simply to the words ‘monetary tightening’.” Asia’s equity benchmark is attempting a rebound following last year’s 3.4% slump, when the gauge was hit by concerns over U.S. tightening, Covid-19 and a selloff in Chinese tech shares. Solid gains during Wednesday’s session will likely help spread a sense of relief, according to Fujiwara. “We think there’s more attractiveness here in Asia and EMs overall. And valuations are much more compelling given overall EM/Asia markets have underperformed compared to U.S. and Europe,” Ken Wong, Asian equity fund specialist at Eastspring Investments, told Bloomberg Television. “In 2022, there will be opportunities to be selective.”
Japanese equities posted their first gain in four sessions, following a similar rebound in U.S. peers after soothing comments from Federal Reserve Chair Jerome Powell. Electronics makers and telecoms were the biggest boosts to the Topix, which closed 1.6% higher. Tokyo Electron and SoftBank Group were the largest contributors to a 1.9% rise in the Nikkei 225. Powell pledged to do what’s necessary to contain an inflation surge and prolong the expansion, while steering clear of fresh details on the path of U.S. monetary policy. The S&P 500 rose for the first time in six sessions. “The market view is that containing inflation with early rate hikes will turn out to be good for the economy - that we’ll be able to push back on inflation while keeping the economy strong,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management in Tokyo. “Before, the market had been reacting simply to the words ‘monetary tightening’.”
Indian stocks rose along with Asian peers after Federal Reserve Chair Jerome Powell reassured investors that the U.S. central bank will tackle inflation to extend the economic expansion. The S&P BSE Sensex climbed for a fourth day, up 0.9% to 61,150.04 in Mumbai. The benchmark is 1% away from surpassing its record high touched in October. The NSE Nifty 50 Index advanced by a similar magnitude. Reliance Industries Ltd. rose 2.7% and was among the biggest boosts to the key indexes. Of the 30 shares on the Sensex, 24 gained. All but two of the 19 sector indexes compiled by BSE Ltd. rose, led by a gauge of telecom companies. IT major Wipro Ltd. reported net income for the third quarter that missed the average analyst estimate. Tata Consultancy Services Ltd. and Infosys Ltd. are also scheduled to announce Oct.-Dec. earnings in the day
Australian stocks also rebounded as mining shares hit 5-month highs. The S&P/ASX 200 index rose 0.7% to 7,438.90, with miners and health-care contributing the most to the benchmark’s gain. The materials subgauge led the rebound, hitting the highest since Aug. 17. Afterpay surged after the company said that Block, formerly known as Square, has now received approval from the Bank of Spain in respect of the acquisition by Lanai AU 2 Pty Ltd. Domino’s Pizza Enterprises dropped to its lowest since May. Official data Wednesday showed job vacancies climbed to a record in Australia, up 18.5% to almost 400,000 in the three months through November. In New Zealand, the S&P/NZX 50 index fell 0.2% to 12,804.48
In rates,Treasuries were marginally cheaper across the curve, with the front-end underperforming ahead of December CPI release at 8:30am ET. Treasury 2-year yields higher by 1.8bp vs. Tuesday close while rest of the curve is less than 1bp cheaper on the day; 10-year yields around 1.74% with both bunds and gilts outperforming by over 2bp in the sector. Cash USTs bear flatten, cheapening roughly 2bps across the short end. Session highlight also includes 10-year note auction, a $36b reopening: US auctions resume with a $36BN 10-year reopening at 1pm, followed by $22b 30-year reopening Thursday. The WI 10-year at around 1.745%, above auction stops since January 2020 and ~23bp cheaper than December stop-out which tailed 0.4bp. Elsewhere, bunds and gilts drift higher, with the 10y point outperforming. Bund futures regain 170. Peripheral spreads tighten slightly.
In FX, most G-10 currencies were confined to narrow ranges after the dollar’s drop yesterday and the Bloomberg Dollar Spot Index hovered while the Treasury curve bear-flattened as yields rose by up to 2bps, while commodity currencies outperform but trade off best levels with G-10 FX generally trading narrow ranges.
Demand for long gamma exposure into the next Federal Reserve meeting remains subdued even as realized volatility stays relatively high. The Norwegian krone was the best G-10 performer, followed by the Canadian dollar, as oil steadied above $81 barrel after posting the biggest one-day surge this year as investors embraced risk assets, commodities climbed and industry estimates pointed to another drawdown in U.S. crude stockpiles. The euro moved in a tight $1.1355-1.1378 range and Bund yields inched lower, led by the belly of the curve. The pound treaded water as investors monitored London hospital admissions for any signs of an easing in pandemic pressures and questioned how much further the currency can rise when rate hikes are already priced in.Australian dollar edged up amid iron ore hitting a three-month high as heavy rains disrupted southeastern Brazil’s iron ore industry. Japanese government bonds rallied across maturities after a smooth five-year note auction, driving down benchmark 10-year yields from a 10-month high and the yen steadied. BOJ Governor Haruhiko Kuroda said he expects the country’s underlying inflation to pick up gradually over the long-term after moderate near-term gains led by energy prices.
In commodities, crude futures fade a modest push higher. WTI stalls after a test of $82, Brent trades near $84. Spot gold drifts slightly lower near $1,817/oz. Base metals are in the green with LME nickel up 4%. Bitcoin jumped back over $43K while ether was above $3,300.
Looking at the day ahead now, and the aforementioned US CPI release for December will be the highlight. Other data releases include Euro Area industrial production for November and the US monthly budget statement for December. From central banks, the Fed will be releasing their Beige Book, and speakers include BoE Deputy Governor Cunliffe and the Fed’s Kashkari.
Market Snapshot
S&P 500 futures up 0.1% to 4,710.50
STOXX Europe 600 up 0.5% to 485.30
MXAP up 1.6% to 196.29
MXAPJ up 1.6% to 641.50
Nikkei up 1.9% to 28,765.66
Topix up 1.6% to 2,019.36
Hang Seng Index up 2.8% to 24,402.17
Shanghai Composite up 0.8% to 3,597.43
Sensex up 1.0% to 61,200.72
Australia S&P/ASX 200 up 0.7% to 7,438.90
Kospi up 1.5% to 2,972.48
German 10Y yield little changed at -0.04%
Euro little changed at $1.1370
Brent Futures up 0.5% to $84.17/bbl
Gold spot down 0.3% to $1,815.68
U.S. Dollar Index little changed at 95.59
Top Overnight News from Bloomberg
Bank of France Governor Francois Villeroy de Galhau says the European Central Bank will do what is necessary to get inflation around 2% in the medium term
Natural gas prices are likely to remain high for the next two years, with very few options to boost supplies quickly, according to the chief executive of Britain’s biggest energy supplier
China’s inflation pressures moderated to 10.3% y/y in December, giving the central bank scope to cut interest rates to cushion the economy’s downturn just as most major nations look to tighten policy
US Event Calendar
7am: Jan. MBA Mortgage Applications 1.4%, prior -5.6%
8:30am Dec. CPI data:
8:30am: Dec. CPI YoY, est. 7.0%, prior 6.8%; MoM, est. 0.4%, prior 0.8%
8:30am: Dec. CPI Ex Food and Energy YoY, est. 5.4%, prior 4.9%; MoM, est. 0.5%, prior 0.5%
8:30am: Dec. Real Avg Hourly Earning YoY, prior -1.9%, revised -1.7%
8:30am: Dec. Real Avg Weekly Earnings YoY, prior -1.9%
2pm: U.S. Federal Reserve Releases Beige Book
2pm: Dec. Monthly Budget Statement, est. -$5b, prior -$191.3b
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Wishing you a Great Day
Please stay safe
Donkey video bombs the white tiger with awesome smile.
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Futures Slightly Green Ahead Of Today's "Brutal" CPI Print
Wednesday, Jan 12, 2022 - 08:00 AM
U.S. index futures were little changed, if slightly in the green on Wednesday as investors settled into a wait-and-see mode ahead of today's "brutal" CPI report which is expected to show the highest CPI print in nearly 40 years, a time when the fed funds rate was 11% compared to 0% now...
... and gauge the pace of Federal Reserve tightening. Consensus expects December CPI to show inflation climbing to 7.0%, a result which could see front- end fully price in a March rate hike (currently priced at 85%). Helping the overnight mood in Asia, was a moderation in China’s inflation pressures, with CPI dipping to 10.3% y/y in December, giving the central bank scope to cut interest rates to cushion the economy’s downturn just as most major nations look to tighten policy. At 730am ET, S&P futures were up 0.2% of 7.50, and Nasdaq futures rose 22 points or 0.14%, recovering toward Asia’s best levels; Dow futures were up about 0.1%. The dollar was slightly lower, extending on its recent sharp drop, while Treasury yields were steady.
“All we know is that the Fed has waited too long before taking action,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “If today’s inflation print is higher than expected, recent gains in equities will melt like snow in the sun,” she wrote, even though investors seemed to put aside fears that tighter policy will stifle the economic rebound and market rally after soothing words from Federal Reserve Chair Jerome Powell. His testimony Tuesday helped arrest a five-day slide in the S&P 500, just as we predicted it would.
As Deutsche writes, the highlight of the last 24 hours was Chair Powell’s renomination hearing before the Senate Banking Committee. The overall communicated stance of policy wasn’t much changed with the hawkish pivot still on. Nevertheless, there were a few incremental takeaways. Powell did nothing to push back on liftoff being on the table in March, in line with our US econ team’s call and the increasing probability implied by the market, which is currently 85%. He made it clear that QE (yes it’s still happening) would finish in March, despite speculations it may come to an abrupt halt beforehand. In line with growing consensus, he painted a picture that made the start of QT likely in 2022. Finally, on the overall stance of policy, he emphasized the Fed needs to pull back from extreme levels of accommodation, but didn’t need to rush to get to a neutral stance of policy.
“It was a masterful performance really, leaving the bowls neither too full nor too shallow, but just right from the financial market’s perspective,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific, in an email. “The music can still play in equity markets in 2022, it’s just that we’ve likely seen the best of the technology gains.”
With three and possibly four Fed rate increases now priced in, strategists are turning more sanguine about inflation and focusing on positives such as the start of the earnings season. Markets have been buffeted by volatility at the start of the year on the prospect of faster interest-rate increases to subdue price pressures.
“Hawkish Fed repricing is likely largely done for now,” and “resilient earnings should help equities rebound,” Barclays Plc strategists led by Emmanuel Cau wrote in a note to clients on Wednesday.
Looking at the CPI print, DB's Jim Reid notes that repeated upside surprises in the inflation data have sent the year-on-year numbers up to multi-decade highs, putting significant pressure on the Fed. Indeed if you look at the monthly headline CPI reading, 7 of the last 9 releases have come in above the consensus estimate on Bloomberg. In terms of what to expect this time around, economists think that year-on-year CPI will rise to +7.0%, which will be the highest annual CPI number since 1982. And if that figure is realized, it would also mean that the real Fed Funds rate in December was around -7%, which for reference is lower than at any point in the 1970s, when the lowest the fed funds rate got in real terms was around -5%.
In the premarket, Dish Network Corp. rose more than 7% on a New York Post report of merger talks with DirecTV. PayPal shares dropped 1.9% in premarket trading after Jefferies cut its recommendation for the digital payments provider to hold from buy. Here are some of the biggest U.S. movers today:
U.S.-listed Chinese stocks rally in premarket trading, as Asian listings rebound amid bargain hunting and a reassuring tone from Fed Chair Jerome Powell. Alibaba (BABA US) +2.4%, JD.com (JD US) +1.5%, Pinduoduo (PDD US) +3.3%
Biogen (BIIB US) drops 9.1% in premarket trading after the U.S. government limited Medicare coverage of the company’s Aduhelm Alzheimer’s disease treatment and similar drugs to patients enrolled in clinical trials. The highly unusual move will curb access to the controversial treatment approved last year
Wells Fargo (WFC US) advanced in premarket trading as Piper Sandler upgraded its rating to overweight from neutral; cuts Premier Financial to neutral from overweight
Bed Bath & Beyond (BBBY US) shares jump as much as 4.9% in U.S. premarket trading, boosted by disclosures of insider purchases of the retailer’s stock made on Jan. 7
Rocket Lab USA (RKLB US) started at overweight, with $17 target by Morgan Stanley, which says the company offers high-quality exposure to the space race. Stock gains 4.1% in premarket trading
Cogent Communications (CCOI US) faces a “challenging setup” on weak growth and a high multiple, Wells Fargo writes in note as downgrades to underweight from equal-weight
European equities climbed back toward opening highs after a choppy first hour of cash trading. The Euro Stoxx 50 added 0.7%, FTSE 100 outperforms at the margin. Miners, oil & gas and tech are the strongest performing sectors. In Europe, mining and technology companies led the Stoxx 600 Index up 0.5%. Philips slumped 14%, the most in two decades, after the Dutch producer of medical equipment reported lower preliminary revenue than expected. Here are some of the biggest European movers today:
Rexel jumps to an eight-year high after the French maker of electrical products said 2021 organic growth will be higher than forecast with Citi noting positive demand comments from firm.
VAT shares post their steepest gains in more than a month after the Swiss supplier of products for the semiconductor industry reported 4Q order intake that was well above expectations.
DFS Furniture shares gain as much as 6.4%, among the top advancers in the FTSE All-Share Index, after the U.K. retailer kept its FY pretax profit forecast unchanged.
Just Eat Takeaway stock rises after initially falling following an update. Citi analysts say the online food delivery firm’s 4Q results are broadly in line with an expected deceleration.
TeamViewer shares rise as much as 15% in Frankfurt after the company reported 4Q and FY billings that beat market expectations with RBC calling the results “reassuring.”
Sainsbury shares rise as much as 3.9% after the U.K. grocer boosted its outlook for the year. Profit delivery is strong, according to Jefferies.
BHP Group and European mining peers are among the biggest gainers Wednesday with UBS saying in a sector note that shares are cheap -- but valuations are not compelling.
Sweco shares fall as much as 6.8% after Danske Bank downgrades to hold from buy, noting “stalling execution” despite solid market demand for the engineering consultancy’s services.
Taylor Wimpey shares drop as much as 2.2% after a holder sold about 86m shares in the company at 163.75p apiece, representing a 3.7% discount to Tuesday’s close.
Earlier in the session, Asian stocks climbed to their highest level in almost seven weeks as Federal Reserve Chair Jerome Powell’s remarks spurred expectations that anticipated rate hikes won’t derail the global economic recovery. The MSCI Pacific Index added as much as 1.6% to its highest since Nov. 26, bolstered by gains in the consumer-discretionary and information-technology sectors. Alibaba Group and Tencent Holdings were among the biggest contributors to the measure’s rise. Benchmarks in Hong Kong and Japan led gains for the region. Powell pledged to do what’s necessary to contain an inflation surge and prolong the economic expansion at his confirmation hearing for a second term as U.S. central bank chief. Futures on the S&P 500 advanced in Asia trading after halting a five-day slide. A gauge of Chinese technology shares rallied after the Nasdaq 100 outperformed major benchmarks. “The market view is that containing inflation with early rate hikes will turn out to be good for the economy -- that we’ll be able to push back on inflation while keeping the economy strong,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management in Tokyo. “Before, the market had been reacting simply to the words ‘monetary tightening’.” Asia’s equity benchmark is attempting a rebound following last year’s 3.4% slump, when the gauge was hit by concerns over U.S. tightening, Covid-19 and a selloff in Chinese tech shares. Solid gains during Wednesday’s session will likely help spread a sense of relief, according to Fujiwara. “We think there’s more attractiveness here in Asia and EMs overall. And valuations are much more compelling given overall EM/Asia markets have underperformed compared to U.S. and Europe,” Ken Wong, Asian equity fund specialist at Eastspring Investments, told Bloomberg Television. “In 2022, there will be opportunities to be selective.”
Japanese equities posted their first gain in four sessions, following a similar rebound in U.S. peers after soothing comments from Federal Reserve Chair Jerome Powell. Electronics makers and telecoms were the biggest boosts to the Topix, which closed 1.6% higher. Tokyo Electron and SoftBank Group were the largest contributors to a 1.9% rise in the Nikkei 225. Powell pledged to do what’s necessary to contain an inflation surge and prolong the expansion, while steering clear of fresh details on the path of U.S. monetary policy. The S&P 500 rose for the first time in six sessions. “The market view is that containing inflation with early rate hikes will turn out to be good for the economy - that we’ll be able to push back on inflation while keeping the economy strong,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management in Tokyo. “Before, the market had been reacting simply to the words ‘monetary tightening’.”
Indian stocks rose along with Asian peers after Federal Reserve Chair Jerome Powell reassured investors that the U.S. central bank will tackle inflation to extend the economic expansion. The S&P BSE Sensex climbed for a fourth day, up 0.9% to 61,150.04 in Mumbai. The benchmark is 1% away from surpassing its record high touched in October. The NSE Nifty 50 Index advanced by a similar magnitude. Reliance Industries Ltd. rose 2.7% and was among the biggest boosts to the key indexes. Of the 30 shares on the Sensex, 24 gained. All but two of the 19 sector indexes compiled by BSE Ltd. rose, led by a gauge of telecom companies. IT major Wipro Ltd. reported net income for the third quarter that missed the average analyst estimate. Tata Consultancy Services Ltd. and Infosys Ltd. are also scheduled to announce Oct.-Dec. earnings in the day
Australian stocks also rebounded as mining shares hit 5-month highs. The S&P/ASX 200 index rose 0.7% to 7,438.90, with miners and health-care contributing the most to the benchmark’s gain. The materials subgauge led the rebound, hitting the highest since Aug. 17. Afterpay surged after the company said that Block, formerly known as Square, has now received approval from the Bank of Spain in respect of the acquisition by Lanai AU 2 Pty Ltd. Domino’s Pizza Enterprises dropped to its lowest since May. Official data Wednesday showed job vacancies climbed to a record in Australia, up 18.5% to almost 400,000 in the three months through November. In New Zealand, the S&P/NZX 50 index fell 0.2% to 12,804.48
In rates,Treasuries were marginally cheaper across the curve, with the front-end underperforming ahead of December CPI release at 8:30am ET. Treasury 2-year yields higher by 1.8bp vs. Tuesday close while rest of the curve is less than 1bp cheaper on the day; 10-year yields around 1.74% with both bunds and gilts outperforming by over 2bp in the sector. Cash USTs bear flatten, cheapening roughly 2bps across the short end. Session highlight also includes 10-year note auction, a $36b reopening: US auctions resume with a $36BN 10-year reopening at 1pm, followed by $22b 30-year reopening Thursday. The WI 10-year at around 1.745%, above auction stops since January 2020 and ~23bp cheaper than December stop-out which tailed 0.4bp. Elsewhere, bunds and gilts drift higher, with the 10y point outperforming. Bund futures regain 170. Peripheral spreads tighten slightly.
In FX, most G-10 currencies were confined to narrow ranges after the dollar’s drop yesterday and the Bloomberg Dollar Spot Index hovered while the Treasury curve bear-flattened as yields rose by up to 2bps, while commodity currencies outperform but trade off best levels with G-10 FX generally trading narrow ranges.
Demand for long gamma exposure into the next Federal Reserve meeting remains subdued even as realized volatility stays relatively high. The Norwegian krone was the best G-10 performer, followed by the Canadian dollar, as oil steadied above $81 barrel after posting the biggest one-day surge this year as investors embraced risk assets, commodities climbed and industry estimates pointed to another drawdown in U.S. crude stockpiles. The euro moved in a tight $1.1355-1.1378 range and Bund yields inched lower, led by the belly of the curve. The pound treaded water as investors monitored London hospital admissions for any signs of an easing in pandemic pressures and questioned how much further the currency can rise when rate hikes are already priced in.Australian dollar edged up amid iron ore hitting a three-month high as heavy rains disrupted southeastern Brazil’s iron ore industry. Japanese government bonds rallied across maturities after a smooth five-year note auction, driving down benchmark 10-year yields from a 10-month high and the yen steadied. BOJ Governor Haruhiko Kuroda said he expects the country’s underlying inflation to pick up gradually over the long-term after moderate near-term gains led by energy prices.
In commodities, crude futures fade a modest push higher. WTI stalls after a test of $82, Brent trades near $84. Spot gold drifts slightly lower near $1,817/oz. Base metals are in the green with LME nickel up 4%. Bitcoin jumped back over $43K while ether was above $3,300.
Looking at the day ahead now, and the aforementioned US CPI release for December will be the highlight. Other data releases include Euro Area industrial production for November and the US monthly budget statement for December. From central banks, the Fed will be releasing their Beige Book, and speakers include BoE Deputy Governor Cunliffe and the Fed’s Kashkari.
Market Snapshot
S&P 500 futures up 0.1% to 4,710.50
STOXX Europe 600 up 0.5% to 485.30
MXAP up 1.6% to 196.29
MXAPJ up 1.6% to 641.50
Nikkei up 1.9% to 28,765.66
Topix up 1.6% to 2,019.36
Hang Seng Index up 2.8% to 24,402.17
Shanghai Composite up 0.8% to 3,597.43
Sensex up 1.0% to 61,200.72
Australia S&P/ASX 200 up 0.7% to 7,438.90
Kospi up 1.5% to 2,972.48
German 10Y yield little changed at -0.04%
Euro little changed at $1.1370
Brent Futures up 0.5% to $84.17/bbl
Gold spot down 0.3% to $1,815.68
U.S. Dollar Index little changed at 95.59
Top Overnight News from Bloomberg
Bank of France Governor Francois Villeroy de Galhau says the European Central Bank will do what is necessary to get inflation around 2% in the medium term
Natural gas prices are likely to remain high for the next two years, with very few options to boost supplies quickly, according to the chief executive of Britain’s biggest energy supplier
China’s inflation pressures moderated to 10.3% y/y in December, giving the central bank scope to cut interest rates to cushion the economy’s downturn just as most major nations look to tighten policy
US Event Calendar
7am: Jan. MBA Mortgage Applications 1.4%, prior -5.6%
8:30am Dec. CPI data:
8:30am: Dec. CPI YoY, est. 7.0%, prior 6.8%; MoM, est. 0.4%, prior 0.8%
8:30am: Dec. CPI Ex Food and Energy YoY, est. 5.4%, prior 4.9%; MoM, est. 0.5%, prior 0.5%
8:30am: Dec. Real Avg Hourly Earning YoY, prior -1.9%, revised -1.7%
8:30am: Dec. Real Avg Weekly Earnings YoY, prior -1.9%
2pm: U.S. Federal Reserve Releases Beige Book
2pm: Dec. Monthly Budget Statement, est. -$5b, prior -$191.3b
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Wishing you a Great Day
Please stay safe
Donkey video bombs the white tiger with awesome smile.
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