• GLOBAL CAPITAL MARKETS OVERVIEW:

Most European stock indexes rebounded in afternoon trade on Thursday, with Frankfurt's DAX 30 up 0.6% to close at 15,902 and shares in Paris, Milan, and Madrid up 0.3% to 0.5%. Investors welcomed the upbeat earnings report, while concerns over rising inflation and accelerated rate hikes in 2022 continued to weigh on sentiment. German sportswear maker Puma rose 1.2 percent after reporting stronger-than-expected prior quarterly sales and core profit. Shares in Deliveroo rose 2.5% after the company said the value of orders on its platform increased 36% in the fourth quarter from a year earlier. In comparison, Unilever fell 0.5% after dropping plans to buy GlaxoSmithKline's consumer health business. German producer price inflation jumped to an all-time high of 24.2% in December on rising energy costs on the economic data front. The CAC 40 rebounded from early losses to close at 7,194 on Thursday, up 0.3%, extending a 0.6% gain in the previous session, supported by health care and utility stocks, even as investors continued to weigh on inflationary pressures. While eurozone inflation was confirmed at a record 5 percent and policymakers noted prices could be higher than expected, European Central Bank President Christine Lagarde reiterated that rate hikes should not be rushed. Healthcare shares rose 1.2% on the corporate front, driven by a surge in Valneva shares (19.8%) after preliminary data showed that three doses of the biotech's new coronavirus vaccine could neutralize a variant of Omicron. Meanwhile, Vivendi's shares rose 1.5% after Goldman Sachs upgraded the company's recommendation to a "buy." Engie (1.7%) and Veolia Environnement (2.2%) also closed in the green. On Thursday, the FTSE 100 fell 0.1% to close at 7,579 as investors worry about high inflation, sluggish growth, and rising interest rates. GlaxoSmithKline was one of the worst performers after Unilever effectively abandoned buying a consumer healthcare business. Meanwhile, Primark owner Associated British Foods also weighed on the index after it said that despite a 36% increase in post-Christmas transactions from the previous year and a higher-than-expected operating profit margin, Austrian The spread of Mikron's coronavirus variant dented shopper numbers in December. On the other hand, food delivery company Deliveroo climbed on the back of quarterly solid order value growth. The S&P/TSX Composite rose 0.4% on Thursday to close at 21,300, rebounding from a 0.3% loss in the previous session, as tech and healthcare stocks offset losses in the energy sector. At the same time, investors expected the Bank of Canada to be down. a rate hike at the week's meeting. Despite the fall in North American bond yields, Scotiabank said in a note to investors that the Bank of China is expected to raise its key overnight rate by 25 basis points to 0.5% on Jan. 26. Technology shares rose 2.1% on the company front, led by Shopify (3.6%) and Descartes Systems (3%), while healthcare shares rose 1.2%, led by marijuana growers. Losses in the energy sector capped further gains, pressured by falling oil and gas prices. U.S. stocks rebounded on Thursday, with the Dow up more than 400 points, the S&P 500 up more than 1%, and the Nasdaq up 2%. U.S. Treasury yields retreated from their most recent two-year highs for the second day in a row as traders turned their attention to corporate earnings. Revenue from travel companies and American Airlines beat estimates, while United Airlines lowered its 2022 growth forecast due to the spread of the omicron variant. Netflix and PPG Industries are scheduled to report after the market close today. Meanwhile, initial jobless claims hit their highest level in 3 months, while a better-than-expected Philadelphia Fed manufacturing index sent mixed signals of an economic recovery. Foreigners were net sellers of Japanese stocks for the first time in four weeks. As global investors sold stocks on expectations, the Federal Reserve would tighten monetary policy more aggressively to combat persistently high inflation. Sentiment on Japanese stocks was also subdued on fears of a surge in coronavirus infections triggered by the country's Omicron. The Nikkei 225 lost 1.24% last week, while the broader Topix lost 0.9%. Foreigners sold a net 11 billion yen worth of stocks in the week ended Jan. 14, in contrast to their net purchases of 780.6 billion yen in the previous week. On Thursday, the Shanghai Composite fell 0.09% to close at 3,555, while Shenzhen shares fell 0.06% to close at 14,198, as mainland Chinese stocks failed to build on earlier gains and traders mulled over the People's Bank of China the latest policy initiatives. The People's Bank of China cut the prime rate for one-year loans by ten basis points to 3.7% after a five basis point cut in December. The PBOC also cut the five-year lending rate by five basis points to 4.6%, the first cut since April 2020. While the rate cut was widely expected, it sent a strong signal of policy direction and reflected how quicker the central bank could respond to an economic slowdown. Concerns grew over the sustainability of China's economic growth last year as consumer spending weakened, regulation tightened, the real estate sector struggled. Beijing's zero-tolerance policy on the coronavirus outbreak grew. Technology, manufacturing, and industrial sectors led losses, while financials, real estate, and consumer-related sectors gained. The S&P/ASX 200 index reversed early losses on Thursday, rising 0.14% to close at 7,342, as gains in commodity prices led to a rebound in resource stocks, while technology and financial stocks trailed their Wall Street counterparts. Gold stocks led gains after the underlying commodity rose 1.5% overnight, with Northstar Resources (11.2%), Evolution Mining (8.92%), and IGO Ltd (4.11%) gaining. Other miners in the iron ore, copper, nickel, and lithium sectors also rose, with notable gains from BHP Billiton (3.11%), Fortescue Metals (4.65%), and Newcrest Mining (6.59%). Meanwhile, investors remained cautious about rising U.S. bond yields as the Nasdaq entered correction territory and selling pressure on tech and other growth stocks continued. Among technology stocks, after-sales services (-2.18%) and Brainchip Holdings (-6.8%) led losses.

 

• REVIEWING ECONOMIC DATA:

Looking at the last economic data:

- US: U.S. residential sales fell 4.6% in December to a seasonally adjusted annual rate of 6.18 million, the slowest in four months and below the consensus forecast of 6.44 million, primarily due to low inventory. Each of the four major U.S. regions saw sales decline in the final month of 2021. Total housing inventory fell 18% to 910,000 units, and the median existing-home price for all housing types was $358,000, up 15.8% from last year. Considering all of 2021, sales rose 8.5% to 6.12 million, the highest since 2006. “Sales slipped in December, but the pullback was more of a sign of supply constraints than weakening demand for housing. This year, consumers should brace for some hikes in mortgage rates. I also expect a modest 3% home price growth in 2022. to 5% and then 2023 as more supply comes into the market," said Lawrence Yun, chief economist at NAR.

- US: The U.S. Philadelphia Fed manufacturing index rose to 23.2 in January 2022 from a one-year low of 15.4 in December, beating market expectations of 20. The survey's general activity, shipments, and new orders metrics rose slightly after falling sharply last month. The employment index remained positive but declined. The price index is still growing. Companies that responded were generally optimistic about growth over the next six months.

- US: In the week ended Jan. 15, new U.S. jobless claims rose 55,000 from the previous period to 286,000, the highest level since mid-October and well above market expectations of 220,000 people. The rate of COVID-19 also rose, the most significant weekly increase since mid-July, as OmiCon variant-driven COVID-19 cases disrupted business activity while employers continued amid growing jobs. Keep hard-to-retain employees. Initial jobless claims fell by 83,000 to 337,000 on a non-seasonally adjusted basis, led by New York (down 14,000), Missouri (down 75,000), and Texas (down 75,000). The number of initial jobless claims fell markedly by 61,000.

- EU: ECB policymakers noted that near-term and projected inflation growth was driven mainly by temporary factors expected in 2022 but warned that "higher inflation" could not be ruled out, the December 2021 meeting showed. Inflation is projected to be relatively close to 2% in 2023 and 2024 but could easily exceed 2%, given the upside risks. At the same time, the central bank reiterated that net purchases under the PEPP are likely to taper and stop at the end of March but noted that substantial monetary policy support is still needed. Hence, a rate hike this year is unlikely.

- EU: Italy's construction industry output rose 11.2% year-on-year in November, moderating from a 14.6% increase in the previous month. On a seasonally adjusted monthly basis, construction activity rose 1% from an upwardly revised 1.3% in October. In the first 11 months of 2021, construction production was up 24.6% from a year earlier.

- EU: The French manufacturing climate indicator rose to 112 in January 2022 from 110 in December, the highest reading since February 2018 and above the forecast of 111. The improvement is mainly reflected in the order book (-1 vs. -8) and past production (23 vs. 20), while the individual production outlook is slightly down (23 vs. 26), and sales prices are expected to moderate but remain high Levels (35 vs. 50).

- EU: Producer inflation in Germany rose for the twelfth consecutive month to a new December high of 24.2% in November 2021, up from 19.2% in November and above forecasts of 19.4%. Rising energy costs continued to make the most significant contribution to price increases (up 69%), namely the distribution of natural gas (121.9%) and electricity (74.3%). Excluding energy, producer inflation was 10.4%. In addition, the cost of intermediate products also increased (19.3%), namely metals (36.1%), second-hand raw materials (69.1%), wooden containers (66.9%), non-durable consumer goods (4.7%), mainly crude vegetable oil (54.5%) and butter (48.1 percent); and capital goods (3.8 percent), namely computers (18.5 percent) and metal structures and parts (17.9 percent). Taking 2021 into consideration, producer prices will rise by an average of 10.5%, and energy prices will surge by 24.8%, mainly driven by natural gas (41.7%), oil (27.6%), and electricity (25.1%).

- CN: The People's Bank of China cut its one-year loan prime rate by ten basis points to 3.70% in its January 2022 fixed rate cut, the second straight month of rate cuts to support the economy amid the ongoing coronavirus outbreak Growth is slowing. Earlier, the central bank cut one-year policy loans by ten basis points, the first cut since April 2020, and missed the seven-day reverse repo rate. Five basis points also cut the five-year loan prime rate to 4.60%, the first cut since April 2020. Official data show that in the fourth quarter of 2021, China's GDP will grow by 4% year-on-year, at least 4.9% in 1-2 years, and 4.9% in the third quarter.

- JP: Compared with the 42.8% expected by the Japanese market, imports to the United States in December 2021 increased by 41.1% year-on-year, reaching an all-time high of 8,463.79 billion yen. It was the 11th consecutive month of growth in purchases as domestic demand remained strong ahead of the year-end holiday.

- JP: Exports from Japan increased. In December 2021, the yen rose 5% against the yen, beating market expectations of 16% and up 20.5% a month earlier. It was the 10th consecutive month of increases in overseas shipments, as supply chain disruption eased due to solid foreign demand ahead of the year-end holiday.

- JP: Japan's trade deficit in December 2021 was 582.36 billion yen, down from 780.28 billion yen in the same period last year compared to the 784.1 billion yen price-earnings ratio in the same period the previous year. The latest figures show a trade deficit amid the fast-spreading global COVID-19 pandemic for the sixth month. The export value was 7,881.43 billion yen, a year-on-year increase of 17.5%, and the import value was 8,463.79 billion yen, a year-on-year increase of 41.1%. As a result, the annual trade balance was 1,472.16 billion yen, with exports up 21.5% and imports up 24.3%.

- NZ: Food prices in New Zealand rose 4.5% year-on-year in December and 4% from a year earlier, hitting a 10-year high. It was the highest inflation rate for food since September 2011, as the cost of groceries (4.5%) and restaurant meals and ready meals (5.1%) rose. Food prices rose 0.6% month-on-month, while fruit and vegetables rose 2.6%.

 

• LOOKING AHEAD:

Today, investors will receive:

- USD: CB Leading Index m/m, and Treasury Sec Yellen Speaks.

- EUR: ECB President Lagarde Speaks, and Consumer Confidence.

- GBP: GfK Consumer Confidence, Retail Sales m/m, WEF Annual Meetings, and MPC Member Mann Speaks.

- CAD: Core Retail Sales m/m, Retail Sales m/m, and NHPI m/m.

- JPY: National Core CPI y/y, and Monetary Policy Meeting Minutes.

 

• KEY EQUITY & BOND MARKET DRIVERS:

- U.S. stock futures rose on Thursday, with the Dow up more than 100 points, the S&P 500 up 0.5%, and the Nasdaq up nearly 1% after sliding into correction territory. U.S. Treasury yields retreated from their most recent two-year highs for the second day in a row as traders focused on corporate earnings. The travel company and American Airlines beat earnings estimates, while Netflix and PPG Industries are set to report after the close today. Meanwhile, United Airlines lowered its 2022 growth forecast due to the spread of the omicron variant, sending the company's stock down about 1% in premarket trading.

- Annual inflation in the eurozone hit an all-time high of 5% in December 2021, up from 4.9% in November, as the cost of oil and gas continued to soar and supply chain disruptions continued to worsen. The most significant contributor was energy costs, up 25.9%, followed by services (2.4%), non-energy industrial goods (2.9%), and food, alcohol, and tobacco (3.2%). Excluding energy, inflation rose to 2.8% from 2.5%. The core index excluding energy, food, smoking, and alcohol rose 2.6% year-on-year, unchanged from November and in line with preliminary estimates.

- Yields on China's 10-year government bond fell to 2.72% in January, the lowest since May 2020, after the People's Bank of China cut key interest rates and pledged to use more monetary tools to support the economy. The one-year and five-year prime rates were cut on January 20, following short- and medium-term lending rates on January 17. This year, most investors see room for further easing, including lowering banks' reserve requirements or further reducing essential borrowing costs.

- The yield on the benchmark U.S. 10-year Treasury note edged down to 1.84% for the second day in a row on Thursday after hitting a fresh high of 1.9% earlier in the week. However, the bond sell-off eased markedly as investors digested the prospect of a more than 25 basis point hike in the Fed's funds rate by March and focused on the economic recovery and earnings.

 

• STOCK MARKET SECTORS:

- High: Utilities.

- Low: Consumer Discretionary, Materials, Information Technology, Industrials.

 

• TOP CURRENCY & COMMODITIES MARKET DRIVERS:

- OIL: U.S. crude inventories rose by 515,000 barrels in the week ended Jan. 14, the first increase since November, compared with a forecast for a decline of 938,000 barrels, data from the EIA Oil Conditions report showed. Meanwhile, gasoline inventories rose by 5.873 million barrels, beating expectations of 2.634 million barrels.

- CAD: The Canadian dollar traded near 1.245 to the U.S. dollar, its highest since Nov. 9, after higher oil prices and consumer price data showed inflation rose to a 30-year high in December, reinforcing calls by the Bank of China to raise interest rates. Investors are still betting that the People's Bank of China will raise interest rates at its next monetary policy meeting, with a 70% chance already priced in despite the slowdown in Covid-19 growth. In addition, inflation in Canada rose to 2021 in December from 4.7% in November and October, in line with market expectations. This was the highest inflation rate since September 1991, when supply disruptions continued, and the common base-year effect. Also, more important to the Bank of China's decision, the core measure excluding energy prices accelerated to 3.8% from 3.3% growth in November.

- CNY: The offshore yuan rose to 6.34 against the dollar on Thursday, despite seasonal solid corporate demand despite the People's Bank of China slashing its benchmark lending rate. The People's Bank of China cut the 1-year LPR by ten basis points to 3.7% and the 5-year LPR by five basis points to 4.6% this week, as Beijing ramped up monetary easing this week to prop up a slowing economy. China's policy moves stand in stark contrast to other significant economies expected to normalize monetary policy this year, prompting Chinese President Xi Jinping to guard against a rapid rise in global interest rates during a virtual event on Monday's Davos agenda. Analysts expect the People's Bank of China to roll out easing measures in the first half of the year, cut interest rates, and lower the reserve requirement ratio in the first quarter. In December, a record trade surplus also supported the yuan as Chinese exports remained strong.

- AUD: The Australian dollar gained more than $0.721 on Thursday as stronger-than-expected jobs data reinforced expectations for an early rise in interest rates. Employment rose steadily by 66,800 in December, and the unemployment rate fell to its lowest level since mid-2008 at 4.2 percent, the data showed. As a result, markets are pricing in a 70% chance of a hike in the cash rate by May, and the RBA is expected to halt its quantitative easing program at its Feb. 1 policy meeting. The Aussie was also supported by news of further easing in China, raising hopes for stronger demand in Australia's biggest export market. At the same time, the Reserve Bank of Australia has repeatedly insisted that domestic interest rates are not likely to rise until 2023, or until inflation continues to push above its 2-3% target range.

- NZD: The New Zealand dollar hovered below $0.68 on Thursday, still under pressure from a stronger dollar and rising U.S. Treasury yields as traders braced for more aggressive tightening from the Federal Reserve. The U.S. central bank will meet on Jan. 25-26. While no rate change is expected, a growing number of Fed officials have expressed readiness to accelerate the pace of policy normalization. Meanwhile, the Reserve Bank of New Zealand raised interest rates twice last year to 0.75%, widely expected at its Feb. 23 policy meeting amid persistent inflation and record-low unemployment. rate hike to 1.0%. New Zealand's economy contracted more modestly than expected in the third quarter, cementing expectations for further monetary policy tightening by the central bank.

- USD: The dollar index traded around 95.5 on Thursday, slipping from a one-week high of 95.83 hit on Jan. 18 but avoiding further losses as U.S. bond yields rose. The benchmark 10-year Treasury note yield hit a two-year high of 1.9% on Wednesday, as traders braced for more aggressive tightening by the Federal Reserve to curb persistently high inflation. The U.S. central bank will meet on Jan. 25-26, and policymakers have made hawkish comments even though no rate change is expected. Last week, Federal Reserve Chairman Jerome Powell said the U.S. economy was ready for higher borrowing costs, and he expected a series of rate hikes this year.

 

• CHART OF THE DAY:

The yen was steady at around 114.4 against the dollar on Thursday, having maintained its upward momentum over the past two sessions, as the Bank of Japan said in its quarterly outlook report that inflationary pressures were mounting. The Bank of Japan expects core consumer inflation to hit 1.1% in the fiscal year ending March 2023, up from a previous forecast of 0.9% and warned that inflation could rise if raw material costs continue to soar, forcing more companies to raise prices will be faster than expected. A Reuters article also reported that Japanese policymakers debate when to signal an eventual rate hike, possibly even before inflation hits the central bank’s 2 percent target. Meanwhile, the Bank of Japan decided to maintain its ultra-easy monetary policy, as widely expected.•  USDJPY - D1, Resistance (consolidation) around ~ 114.546 & 116.151, Support  around  ~ 112.573

 

Investors sell into strength, and the market closes at session lows

• GLOBAL CAPITAL MARKETS OVERVIEW:

Most European stock indexes rebounded in afternoon trade on Thursday, with Frankfurt's DAX 30 up 0.6% to close at 15,902 and shares in Paris, Milan, and Madrid up 0.3% to 0.5%. Investors welcomed the upbeat earnings report, while concerns over rising inflation and accelerated rate hikes in 2022 continued to weigh on sentiment. German sportswear maker Puma rose 1.2 percent after reporting stronger-than-expected prior quarterly sales and core profit. Shares in Deliveroo rose 2.5% after the company said the value of orders on its platform increased 36% in the fourth quarter from a year earlier. In comparison, Unilever fell 0.5% after dropping plans to buy GlaxoSmithKline's consumer health business. German producer price inflation jumped to an all-time high of 24.2% in December on rising energy costs on the economic data front. The CAC 40 rebounded from early losses to close at 7,194 on Thursday, up 0.3%, extending a 0.6% gain in the previous session, supported by health care and utility stocks, even as investors continued to weigh on inflationary pressures. While eurozone inflation was confirmed at a record 5 percent and policymakers noted prices could be higher than expected, European Central Bank President Christine Lagarde reiterated that rate hikes should not be rushed. Healthcare shares rose 1.2% on the corporate front, driven by a surge in Valneva shares (19.8%) after preliminary data showed that three doses of the biotech's new coronavirus vaccine could neutralize a variant of Omicron. Meanwhile, Vivendi's shares rose 1.5% after Goldman Sachs upgraded the company's recommendation to a "buy." Engie (1.7%) and Veolia Environnement (2.2%) also closed in the green. On Thursday, the FTSE 100 fell 0.1% to close at 7,579 as investors worry about high inflation, sluggish growth, and rising interest rates. GlaxoSmithKline was one of the worst performers after Unilever effectively abandoned buying a consumer healthcare business. Meanwhile, Primark owner Associated British Foods also weighed on the index after it said that despite a 36% increase in post-Christmas transactions from the previous year and a higher-than-expected operating profit margin, Austrian The spread of Mikron's coronavirus variant dented shopper numbers in December. On the other hand, food delivery company Deliveroo climbed on the back of quarterly solid order value growth. The S&P/TSX Composite rose 0.4% on Thursday to close at 21,300, rebounding from a 0.3% loss in the previous session, as tech and healthcare stocks offset losses in the energy sector. At the same time, investors expected the Bank of Canada to be down. a rate hike at the week's meeting. Despite the fall in North American bond yields, Scotiabank said in a note to investors that the Bank of China is expected to raise its key overnight rate by 25 basis points to 0.5% on Jan. 26. Technology shares rose 2.1% on the company front, led by Shopify (3.6%) and Descartes Systems (3%), while healthcare shares rose 1.2%, led by marijuana growers. Losses in the energy sector capped further gains, pressured by falling oil and gas prices. U.S. stocks rebounded on Thursday, with the Dow up more than 400 points, the S&P 500 up more than 1%, and the Nasdaq up 2%. U.S. Treasury yields retreated from their most recent two-year highs for the second day in a row as traders turned their attention to corporate earnings. Revenue from travel companies and American Airlines beat estimates, while United Airlines lowered its 2022 growth forecast due to the spread of the omicron variant. Netflix and PPG Industries are scheduled to report after the market close today. Meanwhile, initial jobless claims hit their highest level in 3 months, while a better-than-expected Philadelphia Fed manufacturing index sent mixed signals of an economic recovery. Foreigners were net sellers of Japanese stocks for the first time in four weeks. As global investors sold stocks on expectations, the Federal Reserve would tighten monetary policy more aggressively to combat persistently high inflation. Sentiment on Japanese stocks was also subdued on fears of a surge in coronavirus infections triggered by the country's Omicron. The Nikkei 225 lost 1.24% last week, while the broader Topix lost 0.9%. Foreigners sold a net 11 billion yen worth of stocks in the week ended Jan. 14, in contrast to their net purchases of 780.6 billion yen in the previous week. On Thursday, the Shanghai Composite fell 0.09% to close at 3,555, while Shenzhen shares fell 0.06% to close at 14,198, as mainland Chinese stocks failed to build on earlier gains and traders mulled over the People's Bank of China the latest policy initiatives. The People's Bank of China cut the prime rate for one-year loans by ten basis points to 3.7% after a five basis point cut in December. The PBOC also cut the five-year lending rate by five basis points to 4.6%, the first cut since April 2020. While the rate cut was widely expected, it sent a strong signal of policy direction and reflected how quicker the central bank could respond to an economic slowdown. Concerns grew over the sustainability of China's economic growth last year as consumer spending weakened, regulation tightened, the real estate sector struggled. Beijing's zero-tolerance policy on the coronavirus outbreak grew. Technology, manufacturing, and industrial sectors led losses, while financials, real estate, and consumer-related sectors gained. The S&P/ASX 200 index reversed early losses on Thursday, rising 0.14% to close at 7,342, as gains in commodity prices led to a rebound in resource stocks, while technology and financial stocks trailed their Wall Street counterparts. Gold stocks led gains after the underlying commodity rose 1.5% overnight, with Northstar Resources (11.2%), Evolution Mining (8.92%), and IGO Ltd (4.11%) gaining. Other miners in the iron ore, copper, nickel, and lithium sectors also rose, with notable gains from BHP Billiton (3.11%), Fortescue Metals (4.65%), and Newcrest Mining (6.59%). Meanwhile, investors remained cautious about rising U.S. bond yields as the Nasdaq entered correction territory and selling pressure on tech and other growth stocks continued. Among technology stocks, after-sales services (-2.18%) and Brainchip Holdings (-6.8%) led losses.

 

• REVIEWING ECONOMIC DATA:

Looking at the last economic data:

- US: U.S. residential sales fell 4.6% in December to a seasonally adjusted annual rate of 6.18 million, the slowest in four months and below the consensus forecast of 6.44 million, primarily due to low inventory. Each of the four major U.S. regions saw sales decline in the final month of 2021. Total housing inventory fell 18% to 910,000 units, and the median existing-home price for all housing types was $358,000, up 15.8% from last year. Considering all of 2021, sales rose 8.5% to 6.12 million, the highest since 2006. “Sales slipped in December, but the pullback was more of a sign of supply constraints than weakening demand for housing. This year, consumers should brace for some hikes in mortgage rates. I also expect a modest 3% home price growth in 2022. to 5% and then 2023 as more supply comes into the market," said Lawrence Yun, chief economist at NAR.

- US: The U.S. Philadelphia Fed manufacturing index rose to 23.2 in January 2022 from a one-year low of 15.4 in December, beating market expectations of 20. The survey's general activity, shipments, and new orders metrics rose slightly after falling sharply last month. The employment index remained positive but declined. The price index is still growing. Companies that responded were generally optimistic about growth over the next six months.

- US: In the week ended Jan. 15, new U.S. jobless claims rose 55,000 from the previous period to 286,000, the highest level since mid-October and well above market expectations of 220,000 people. The rate of COVID-19 also rose, the most significant weekly increase since mid-July, as OmiCon variant-driven COVID-19 cases disrupted business activity while employers continued amid growing jobs. Keep hard-to-retain employees. Initial jobless claims fell by 83,000 to 337,000 on a non-seasonally adjusted basis, led by New York (down 14,000), Missouri (down 75,000), and Texas (down 75,000). The number of initial jobless claims fell markedly by 61,000.

- EU: ECB policymakers noted that near-term and projected inflation growth was driven mainly by temporary factors expected in 2022 but warned that "higher inflation" could not be ruled out, the December 2021 meeting showed. Inflation is projected to be relatively close to 2% in 2023 and 2024 but could easily exceed 2%, given the upside risks. At the same time, the central bank reiterated that net purchases under the PEPP are likely to taper and stop at the end of March but noted that substantial monetary policy support is still needed. Hence, a rate hike this year is unlikely.

- EU: Italy's construction industry output rose 11.2% year-on-year in November, moderating from a 14.6% increase in the previous month. On a seasonally adjusted monthly basis, construction activity rose 1% from an upwardly revised 1.3% in October. In the first 11 months of 2021, construction production was up 24.6% from a year earlier.

- EU: The French manufacturing climate indicator rose to 112 in January 2022 from 110 in December, the highest reading since February 2018 and above the forecast of 111. The improvement is mainly reflected in the order book (-1 vs. -8) and past production (23 vs. 20), while the individual production outlook is slightly down (23 vs. 26), and sales prices are expected to moderate but remain high Levels (35 vs. 50).

- EU: Producer inflation in Germany rose for the twelfth consecutive month to a new December high of 24.2% in November 2021, up from 19.2% in November and above forecasts of 19.4%. Rising energy costs continued to make the most significant contribution to price increases (up 69%), namely the distribution of natural gas (121.9%) and electricity (74.3%). Excluding energy, producer inflation was 10.4%. In addition, the cost of intermediate products also increased (19.3%), namely metals (36.1%), second-hand raw materials (69.1%), wooden containers (66.9%), non-durable consumer goods (4.7%), mainly crude vegetable oil (54.5%) and butter (48.1 percent); and capital goods (3.8 percent), namely computers (18.5 percent) and metal structures and parts (17.9 percent). Taking 2021 into consideration, producer prices will rise by an average of 10.5%, and energy prices will surge by 24.8%, mainly driven by natural gas (41.7%), oil (27.6%), and electricity (25.1%).

- CN: The People's Bank of China cut its one-year loan prime rate by ten basis points to 3.70% in its January 2022 fixed rate cut, the second straight month of rate cuts to support the economy amid the ongoing coronavirus outbreak Growth is slowing. Earlier, the central bank cut one-year policy loans by ten basis points, the first cut since April 2020, and missed the seven-day reverse repo rate. Five basis points also cut the five-year loan prime rate to 4.60%, the first cut since April 2020. Official data show that in the fourth quarter of 2021, China's GDP will grow by 4% year-on-year, at least 4.9% in 1-2 years, and 4.9% in the third quarter.

- JP: Compared with the 42.8% expected by the Japanese market, imports to the United States in December 2021 increased by 41.1% year-on-year, reaching an all-time high of 8,463.79 billion yen. It was the 11th consecutive month of growth in purchases as domestic demand remained strong ahead of the year-end holiday.

- JP: Exports from Japan increased. In December 2021, the yen rose 5% against the yen, beating market expectations of 16% and up 20.5% a month earlier. It was the 10th consecutive month of increases in overseas shipments, as supply chain disruption eased due to solid foreign demand ahead of the year-end holiday.

- JP: Japan's trade deficit in December 2021 was 582.36 billion yen, down from 780.28 billion yen in the same period last year compared to the 784.1 billion yen price-earnings ratio in the same period the previous year. The latest figures show a trade deficit amid the fast-spreading global COVID-19 pandemic for the sixth month. The export value was 7,881.43 billion yen, a year-on-year increase of 17.5%, and the import value was 8,463.79 billion yen, a year-on-year increase of 41.1%. As a result, the annual trade balance was 1,472.16 billion yen, with exports up 21.5% and imports up 24.3%.

- NZ: Food prices in New Zealand rose 4.5% year-on-year in December and 4% from a year earlier, hitting a 10-year high. It was the highest inflation rate for food since September 2011, as the cost of groceries (4.5%) and restaurant meals and ready meals (5.1%) rose. Food prices rose 0.6% month-on-month, while fruit and vegetables rose 2.6%.

 

• LOOKING AHEAD:

Today, investors will receive:

- USD: CB Leading Index m/m, and Treasury Sec Yellen Speaks.

- EUR: ECB President Lagarde Speaks, and Consumer Confidence.

- GBP: GfK Consumer Confidence, Retail Sales m/m, WEF Annual Meetings, and MPC Member Mann Speaks.

- CAD: Core Retail Sales m/m, Retail Sales m/m, and NHPI m/m.

- JPY: National Core CPI y/y, and Monetary Policy Meeting Minutes.

 

• KEY EQUITY & BOND MARKET DRIVERS:

- U.S. stock futures rose on Thursday, with the Dow up more than 100 points, the S&P 500 up 0.5%, and the Nasdaq up nearly 1% after sliding into correction territory. U.S. Treasury yields retreated from their most recent two-year highs for the second day in a row as traders focused on corporate earnings. The travel company and American Airlines beat earnings estimates, while Netflix and PPG Industries are set to report after the close today. Meanwhile, United Airlines lowered its 2022 growth forecast due to the spread of the omicron variant, sending the company's stock down about 1% in premarket trading.

- Annual inflation in the eurozone hit an all-time high of 5% in December 2021, up from 4.9% in November, as the cost of oil and gas continued to soar and supply chain disruptions continued to worsen. The most significant contributor was energy costs, up 25.9%, followed by services (2.4%), non-energy industrial goods (2.9%), and food, alcohol, and tobacco (3.2%). Excluding energy, inflation rose to 2.8% from 2.5%. The core index excluding energy, food, smoking, and alcohol rose 2.6% year-on-year, unchanged from November and in line with preliminary estimates.

- Yields on China's 10-year government bond fell to 2.72% in January, the lowest since May 2020, after the People's Bank of China cut key interest rates and pledged to use more monetary tools to support the economy. The one-year and five-year prime rates were cut on January 20, following short- and medium-term lending rates on January 17. This year, most investors see room for further easing, including lowering banks' reserve requirements or further reducing essential borrowing costs.

- The yield on the benchmark U.S. 10-year Treasury note edged down to 1.84% for the second day in a row on Thursday after hitting a fresh high of 1.9% earlier in the week. However, the bond sell-off eased markedly as investors digested the prospect of a more than 25 basis point hike in the Fed's funds rate by March and focused on the economic recovery and earnings.

 

• STOCK MARKET SECTORS:

- High: Utilities.

- Low: Consumer Discretionary, Materials, Information Technology, Industrials.

 

• TOP CURRENCY & COMMODITIES MARKET DRIVERS:

- OIL: U.S. crude inventories rose by 515,000 barrels in the week ended Jan. 14, the first increase since November, compared with a forecast for a decline of 938,000 barrels, data from the EIA Oil Conditions report showed. Meanwhile, gasoline inventories rose by 5.873 million barrels, beating expectations of 2.634 million barrels.

- CAD: The Canadian dollar traded near 1.245 to the U.S. dollar, its highest since Nov. 9, after higher oil prices and consumer price data showed inflation rose to a 30-year high in December, reinforcing calls by the Bank of China to raise interest rates. Investors are still betting that the People's Bank of China will raise interest rates at its next monetary policy meeting, with a 70% chance already priced in despite the slowdown in Covid-19 growth. In addition, inflation in Canada rose to 2021 in December from 4.7% in November and October, in line with market expectations. This was the highest inflation rate since September 1991, when supply disruptions continued, and the common base-year effect. Also, more important to the Bank of China's decision, the core measure excluding energy prices accelerated to 3.8% from 3.3% growth in November.

- CNY: The offshore yuan rose to 6.34 against the dollar on Thursday, despite seasonal solid corporate demand despite the People's Bank of China slashing its benchmark lending rate. The People's Bank of China cut the 1-year LPR by ten basis points to 3.7% and the 5-year LPR by five basis points to 4.6% this week, as Beijing ramped up monetary easing this week to prop up a slowing economy. China's policy moves stand in stark contrast to other significant economies expected to normalize monetary policy this year, prompting Chinese President Xi Jinping to guard against a rapid rise in global interest rates during a virtual event on Monday's Davos agenda. Analysts expect the People's Bank of China to roll out easing measures in the first half of the year, cut interest rates, and lower the reserve requirement ratio in the first quarter. In December, a record trade surplus also supported the yuan as Chinese exports remained strong.

- AUD: The Australian dollar gained more than $0.721 on Thursday as stronger-than-expected jobs data reinforced expectations for an early rise in interest rates. Employment rose steadily by 66,800 in December, and the unemployment rate fell to its lowest level since mid-2008 at 4.2 percent, the data showed. As a result, markets are pricing in a 70% chance of a hike in the cash rate by May, and the RBA is expected to halt its quantitative easing program at its Feb. 1 policy meeting. The Aussie was also supported by news of further easing in China, raising hopes for stronger demand in Australia's biggest export market. At the same time, the Reserve Bank of Australia has repeatedly insisted that domestic interest rates are not likely to rise until 2023, or until inflation continues to push above its 2-3% target range.

- NZD: The New Zealand dollar hovered below $0.68 on Thursday, still under pressure from a stronger dollar and rising U.S. Treasury yields as traders braced for more aggressive tightening from the Federal Reserve. The U.S. central bank will meet on Jan. 25-26. While no rate change is expected, a growing number of Fed officials have expressed readiness to accelerate the pace of policy normalization. Meanwhile, the Reserve Bank of New Zealand raised interest rates twice last year to 0.75%, widely expected at its Feb. 23 policy meeting amid persistent inflation and record-low unemployment. rate hike to 1.0%. New Zealand's economy contracted more modestly than expected in the third quarter, cementing expectations for further monetary policy tightening by the central bank.

- USD: The dollar index traded around 95.5 on Thursday, slipping from a one-week high of 95.83 hit on Jan. 18 but avoiding further losses as U.S. bond yields rose. The benchmark 10-year Treasury note yield hit a two-year high of 1.9% on Wednesday, as traders braced for more aggressive tightening by the Federal Reserve to curb persistently high inflation. The U.S. central bank will meet on Jan. 25-26, and policymakers have made hawkish comments even though no rate change is expected. Last week, Federal Reserve Chairman Jerome Powell said the U.S. economy was ready for higher borrowing costs, and he expected a series of rate hikes this year.

 

• CHART OF THE DAY:

The yen was steady at around 114.4 against the dollar on Thursday, having maintained its upward momentum over the past two sessions, as the Bank of Japan said in its quarterly outlook report that inflationary pressures were mounting. The Bank of Japan expects core consumer inflation to hit 1.1% in the fiscal year ending March 2023, up from a previous forecast of 0.9% and warned that inflation could rise if raw material costs continue to soar, forcing more companies to raise prices will be faster than expected. A Reuters article also reported that Japanese policymakers debate when to signal an eventual rate hike, possibly even before inflation hits the central bank’s 2 percent target. Meanwhile, the Bank of Japan decided to maintain its ultra-easy monetary policy, as widely expected.•  USDJPY - D1, Resistance (consolidation) around ~ 114.546 & 116.151, Support  around  ~ 112.573

 

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