• GLOBAL CAPITAL MARKETS OVERVIEW:

U.S. stocks closed sharply lower on Friday as earnings results from companies surging amid the pandemic disappointed, while investors expected tighter monetary policy. The Dow fell 450 points, the S&P lost 1.9%, and the tech-heavy Nasdaq Composite lost 2.7%. Netflix's subscriber outlook fell short of expectations as streaming competition intensified, with Netflix being the main drag, down 23%, and Disney+ streaming also down 7%. On the other hand, Peloton shares rose 10%, rebounding from yesterday's 23.9% drop. The Nasdaq Composite fell 7.6% for the week, its worst performance since October 2020. The Dow and S&P 500 fell for the third straight week, falling 4.6% and 5.7%, respectively. Next week, the focus remains on the Federal Reserve's monetary policy decision and further earnings reports from big tech companies, which investors fear could disappoint. Canada's main stock index s&P/TSX fell 2.1 percent to close at 20,608 on Friday, falling to its lowest level in more than a month for the fourth session in a row, in line with international peers, as crude oil futures fell and energy-heavy stocks fell 3.4 percent. In addition, investors weighed the impact of the Federal Reserve's tightening monetary policy, dragging technology shares down 3.3%, while disappointing U.S. earnings raised concerns about an economic recovery. On the data front, Canadian retail sales fell 2.1% in December from the previous month, according to preliminary estimates, while final data showed a weaker-than-expected increase in November. In a corporate update, analysts at the Imperial Bank of Commerce lowered their target for food processing company George Weston Ltd. to C$171 per share from C$175 previously. Weekly, the index fell 3.4%, its worst performance in a year. On Friday, the FTSE MIB index fell 1.8 percent to close at 27,061, its lowest level in four weeks, tracking a sell-off in global equities amid high inflation and a tightening of monetary policy. Healthcare shares fell 2.6%, led by Amplifon (-4.1%) and DiaSorin (-2.8%), while technology shares fell more than 2%, led by STMicroelectronics (1.9%). Meanwhile, the industrials sector fell 2.2%, led by Priceman (-3.8%) and Tenaris (-3.7%), the latter due to a global sell-off by steel pipe makers. On the economic data front, the Bank of Italy cut its forecast for Italian GDP this year to 3.8% from 4%, as the current surge in coronavirus cases clouded the economic outlook. The CAC 40 index fell 1.8 percent to close at 7,067 on Friday, its lowest level in four weeks and its second straight weekly loss, as expectations of a tightening Fed monetary policy weighed on technology stocks and risk sentiment. In line with global peers, the tech sector fell more than 2%, dragged down by STMicroelectronics (down 1.9%) and Dassault Systèmes (down 2.4%), while the energy sector fell 2.2% as oil prices fell from seven-year highs. Meanwhile, ArcelorMittal (-7.3%) and Valourec (-6.6%) both fell, and like steel pipe makers, there was a sell-off across the sector as investors took profits from the industry's recent rebound. Finally, Stellantis shares fell 3.6% after the Chinese group Dongfeng Motor sold 1.2% of the French company's capital at 18.3 euros per share, in line with current prices. On Friday, the Shanghai Composite fell 0.91% to close at 3,523, while the Shenzhen Composite fell 1.19% to close at 14,030, as mainland stocks remained flat even after the Chinese government stepped up policy easing boost growth. Failed to gain momentum. The People's Bank of China cut 1-year loan yields by ten basis points to 3.7% on Thursday and the benchmark mortgage rate by five basis points to 4.6% before abruptly cutting 1-year MLF on Monday. The moves send a strong signal of policy direction, reflecting how quicker the central bank can 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. Healthcare, technology, and industrial companies led to losses. Since the beginning of the year, the recent declines have caused the Shanghai and Shenzhen indices to drop 3.22% and 5.57%, respectively. The Nikkei 225 lost 0.9 percent to end at 27,522. In comparison, the broader Topix index fell 0.59 percent to close at 1,927 on Friday, with Japanese stocks tracking Wall Street's overnight losses as investors remained cautious ahead of next week's Federal Reserve meeting. Selling pressure on stocks has intensified amid the prospect of rising interest rates, with tech and other growth stocks most affected. On Thursday, investor sentiment was also subdued as Japan's daily confirmed coronavirus cases surpassed 46,000, a new record for the third day in a row. Technology, auto manufacturing and shipping stocks led the declines, with Laser Technology (down 4.5%), Tokyo Electron (down 6.2%), SoftBank (down 0.72%), Sony (down 1.4%), Toyota (down 2.5%), Mitsubishi Automotive (-3.7%), Denso (-4%) and Japan's Yusen (-2.1%) fell significantly. Energy, manufacturing, and distribution companies also declined. The Nikkei lost 2.14% for the week, its third straight weekly decline. The S&P/ASX 200 index fell 2.27% to close at 7176 on Friday, its worst week in more than a year, as mining stocks pulled back from their recent gains, weighing on stocks. Investor sentiment was also subdued on February 5 when Australia's mining powerhouse Western Australia scrapped plans to reopen its borders, citing risks of omicron variants. Shares in global iron ore giant BHP Group fell 4.8% after its investors in London and Sydney approved a plan to drop a dual listing in favor of a primary listing in Sydney. Rio Tinto shares also fell 4.1 percent after Serbia revoked a lithium mining license on environmental grounds. Other losers in the mining sector include Fortescue Metals (-2.1%), Newcrest Mining (-1.1%), Mineral Resources (-3%), Pilbara Mining (-6%), and Lynas Rare Earths (-7.5%). All other market sectors fell as the prospect of higher interest rates added to selling pressure on stocks.

 

• REVIEWING ECONOMIC DATA:

Looking at the last economic data:

- TW: Taiwan's seasonally adjusted unemployment rate fell to 2021 in December from 3.71% in the previous month, the lowest level since April. Unemployment rose by 1,000 to 443,000, while employment fell by 5,000 to 11.459 million. Meanwhile, the labor force participation rate edged up to 59.08% from 59.06% in November.

- EU: Preliminary estimates put the Eurozone Consumer Confidence Index at 8.5 in January 2022, the lowest since March 2021 and down from market expectations of 9. Across the EU, consumer confidence fell 0.4 points to -10.0.

- CA: Preliminary estimates show that Canadian retail sales likely fell 2.1% in December from the previous month. Considering November, retail sales rose 0.7% from a month earlier, down from a downwardly revised 1.5% in October and missing preliminary estimates for a 1.2% increase. Sales rose in 6 of 11 sub-sectors, with overall growth driven by gas stations (4.9%), construction materials, gardening equipment and supplies (3%), and food and beverage stores (1%) retail sales boosted by growth. Among Canada's leading provinces, Quebec (1.2 percent), Ontario (0.5 percent), and British Columbia (0.8 percent) all saw an increase in severe flooding in November. As a result, retail sales rose 4.4% in November on an annual basis, down from an upwardly revised 5.5% in October.

- HK: Hong Kong's business confidence index for the first quarter of 2022 was 1, unchanged from the previous period. The percentage of respondents expecting business conditions in the first quarter of 2022 to be better than the last quarter (14%) was slightly higher than that of respondents expecting it to be worse (13%). The results are consistent with the Q4 2021 round of survey results. Import and export trade and wholesale (+2 to 0 in the fourth quarter), finance and insurance (+5 to -2 in the fifth quarter), real estate (+7 in the eighth quarter), professional and business services (in the third quarter of +3 to -1) sentiment improved, but construction (-6 in Q17), retail (+9 in Q11), manufacturing (+14 in Q8), accommodation Sentiment deteriorated in the food services sector (+29 in the second quarter), transportation (-8 in the fourth quarter, +29 in the fourth quarter), warehousing and express services (-7 to -2) and information and communications ( -2 vs. +5).

- UK: UK retail sales fell 3.7% in December, the most significant drop since January and two months of strong retail sales growth, with consumers expecting to spend much of Christmas shopping compared to the swift popularity of the OmiCon variant, Usually early. The figure was much worse than the 0.6% drop the market had forecast. Sales at non-food stores fell 7.1%, with sales down in every sub-segment, including department stores, clothing stores, other non-food stores, and home stores. Motor fuel sales fell 4.7%, with fewer home jobs in December 2021, and tourism and food store sales fell 1%. Still, retail sales were 2.6% higher than in February 2020 when the coronavirus crisis hit. In 2021, sales rose 5.1%, the most significant increase since 2004.

- JP: Consumer prices in Japan rose 0.8% year-on-year in December 2021, marking the fourth consecutive month of growth from a 0.6% gain a month earlier. The latest figures are also the highest annual inflation rate since December 2019, driven by sharp increases in food prices and further housing costs. In addition, core consumer prices rose 0.5% year-on-year, unchanged from November, at their highest level in nearly two years as energy prices remained high but remained well below the Bank of Japan's 2% target.

- NZ: New Zealand visitor arrivals rose 3.8% year-on-year in November as travel-related travel restrictions began to ease, allowing the tourism industry to rebound, coinciding with the opening of quarantine-free travel from New Zealand to Australia 1 November 2021. In the history of COVID-19, travel numbers tend to increase towards the end of the year, with provisional data for December 2021 showing a further increase in border crossings. However, overall levels are well below those seen before the COVID-19 pandemic.

 

• LOOKING AHEAD:

Today, investors will receive:

- EUR: French Flash Services PMI, French Flash Manufacturing PMI, German Flash Manufacturing PMI, German Flash Services PMI, Flash Manufacturing PMI, Flash Services PMI, and German Buba Monthly Report.

- USD: Flash Manufacturing PMI, and Flash Services PMI.

- AUD: Flash Manufacturing PMI, and Flash Services PMI.

- JPY: Flash Manufacturing PMI.

 

• KEY EQUITY & BOND MARKET DRIVERS:

- Canada's 10-year government bond yield fell below 1.80% after hitting a near three-year high of 1.89% on Jan. 18, tracking U.S. Treasury yields lower as stocks fell and U.S.-Russian political tensions over Ukraine dragged investors down. Become more cautious. Meanwhile, this year's Fed tightening appears to be priced in, with investors now betting on a more than 25 basis point hike in the fed funds rate in March. Also, at home, weaker-than-expected retail sales data prompted investors to question whether Bank of China should start raising interest rates in its next monetary policy decision, with 75% of analysts believing the Bank of Canada will keep borrowing costs unchanged, while 25% % see a 25 basis point hike.

- U.K. 10-year government bond yields fell back below 1.2 percent as tensions between the U.S. and Russia and a drop in stock markets boosted demand for safe-haven assets. Washington has said it is ready to impose significant sanctions on Moscow if it invades Ukraine. In contrast, Russia has said it has no current plans to launch an attack while making several demands from the West, including blocking Ukraine from joining NATO. British government bond yields recently hit a nearly three-year high of 1.3%, with inflation expected to accelerate monetary policy tightening. Data showed that the UK consumer price index rose 5.4% in December, the most significant increase since March 1992. The CPI data, combined with robust activity data for November and better employment data, suggest the Bank of England is likely to raise rates by 25 basis points on February 3, with multiple hikes expected to follow this year. Elsewhere, the Fed is also set to raise interest rates in March.

- Germany's benchmark bund yield fell to -0.05%, after rising to 0 for the first time in nearly three years earlier this week as investors pared bets on a rate hike following the ECB's December meeting minutes %above. Money markets are now pricing in an 85% chance the ECB will raise rates by ten basis points in September, down from 100% on Wednesday. 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. As a result, the central bank cut stimulus to the economy at its December meeting but extended its bond purchases until at least the end of 2022. Elsewhere, the Fed will raise rates as early as March and three more by the end of the year.

- The yield on the benchmark 10-year Treasury note fell for a third straight day to 1.79% on Friday, the lowest in a week and well below the new pandemic high of 1.9% set earlier this week. Investors turned more cautious amid falling stock markets and U.S.-Russian political tensions over Ukraine. Meanwhile, this year's Fed tightening appears to be priced in, with investors now betting on a more than 25 basis point hike in the fed funds rate in March. Yields on 2-year (1%), 5-year (1.57%), 20-year (2.35%), and 30-year (2.1%) bonds also fell for the third straight session.

-

 

• STOCK MARKET SECTORS:

- High: Consumer Staples.

- Low: Communication Services, Consumer Discretionary, Materials.

 

• TOP CURRENCY & COMMODITIES MARKET DRIVERS:

- CAD: traded above 1.25, not far from a one-week low of 1.25504 hit on Jan. 14, as growing uncertainty over the pace of expected Fed rate hikes weighed on investor sentiment, and data showed Canadian retail sales rose less than expected. Global traders are cautiously awaiting the next Federal Reserve meeting for details on the MAS facing high inflation and lower-than-expected earnings for companies surging amid the pandemic. Domestically, retail sales rose 0.7% in November from the previous month, down from a downwardly revised 1.5% in October and missing a preliminary estimate of a 1.2% increase. Meanwhile, preliminary estimates suggest that Canadian retail sales are likely to decline by 2.1% in December 2021. In addition, the recent drop in oil prices from recent highs has also put pressure on the lunatic.

- CNY: The offshore yuan rose to 6.34 against the dollar on Friday and was on track for the second week of gains, even after Beijing stepped up policy easing to boost growth. After unexpectedly cutting the 1-year MLF on Monday, the People's Bank of China Thursday cut the 1-year LPR by ten basis points to 3.7% and the mortgage benchmark by five basis points to 4.6%. China's policy moves stand in stark contrast to other major economies that have normalized monetary policy this year, prompting Chinese President Xi Jinping to be wary of rapidly rising global interest rates during a virtual event on the Davos agenda earlier this week. Analysts expect the People's Bank of China to roll out easing measures in the first half of the year, further cutting interest rates and lowering the reserve requirement ratio in the first quarter. Strong seasonal business demand and a record trade surplus supported the yuan as Chinese exports remained strong in December.

- JPY: The yen rose to 114 yen per dollar on Friday, gaining for a fourth straight session, supported by inflation concerns and falling risk appetite. Investors sold riskier assets, while the safe-haven yen rose on renewed worries about rising inflation, policy uncertainty, and heightened geopolitical tensions. In its quarterly outlook report, the Bank of Japan noted that inflationary pressures are building, with core consumer prices expected to hit 1.1% in the fiscal year ending March 2023, and warned that if raw material costs continue to soar, inflation could accelerate at a rate that could 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 this week to maintain its ultra-easy monetary policy, as widely expected.

- AUD: The Australian dollar fell below $0.722 on Friday as risk aversion expanded while traders braced for more aggressive tightening by 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. The Aussie reversed course from the previous session as stronger-than-expected jobs data hit a high of $0.7276, raising expectations for an early hike in the official cash rate. 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. The RBA has also lagged other major central banks in withdrawing pandemic-era stimulus but will decide at its February 1 meeting whether to end bond purchases at the start of the year.

- NZD: The New Zealand dollar fell to a one-month low of over $0.675 on Friday as risk aversion was broader and traders braced for more aggressive tightening by 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, but currency movements remained dovish. Kiwis will lose about 1% this week.

- 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.

 

• CHART OF THE DAY:

European shares fell sharply on Friday, dragged down by automakers and banks, with Frankfurt's DAX and the pan-European Stoxx 600 down around 2 percent each. Energy stocks were also under pressure as crude prices fell from recent seven-year highs. Among individual stocks, wind turbine maker Siemens Gamesa fell more than 10% after cutting its 2022 revenue guidance, and its owner Siemens Energy fell 16%. On the economic data front, UK retail sales fell 3.7% in December, the most significant drop since January last year, compared with expectations for a 0.6% decline. European stocks fell 1.5% this week as the prospect of tightening global monetary policy this year and tensions between the United States and Russia weighed on sentiment.•  German DAX index - D1, Resistance around ~ 16293, Support (target zone) around  ~ 14900.

Concerns about profit margins, valuations, the Fed, and geopolitics. Safe-haven trade in Treasuries

• GLOBAL CAPITAL MARKETS OVERVIEW:

U.S. stocks closed sharply lower on Friday as earnings results from companies surging amid the pandemic disappointed, while investors expected tighter monetary policy. The Dow fell 450 points, the S&P lost 1.9%, and the tech-heavy Nasdaq Composite lost 2.7%. Netflix's subscriber outlook fell short of expectations as streaming competition intensified, with Netflix being the main drag, down 23%, and Disney+ streaming also down 7%. On the other hand, Peloton shares rose 10%, rebounding from yesterday's 23.9% drop. The Nasdaq Composite fell 7.6% for the week, its worst performance since October 2020. The Dow and S&P 500 fell for the third straight week, falling 4.6% and 5.7%, respectively. Next week, the focus remains on the Federal Reserve's monetary policy decision and further earnings reports from big tech companies, which investors fear could disappoint. Canada's main stock index s&P/TSX fell 2.1 percent to close at 20,608 on Friday, falling to its lowest level in more than a month for the fourth session in a row, in line with international peers, as crude oil futures fell and energy-heavy stocks fell 3.4 percent. In addition, investors weighed the impact of the Federal Reserve's tightening monetary policy, dragging technology shares down 3.3%, while disappointing U.S. earnings raised concerns about an economic recovery. On the data front, Canadian retail sales fell 2.1% in December from the previous month, according to preliminary estimates, while final data showed a weaker-than-expected increase in November. In a corporate update, analysts at the Imperial Bank of Commerce lowered their target for food processing company George Weston Ltd. to C$171 per share from C$175 previously. Weekly, the index fell 3.4%, its worst performance in a year. On Friday, the FTSE MIB index fell 1.8 percent to close at 27,061, its lowest level in four weeks, tracking a sell-off in global equities amid high inflation and a tightening of monetary policy. Healthcare shares fell 2.6%, led by Amplifon (-4.1%) and DiaSorin (-2.8%), while technology shares fell more than 2%, led by STMicroelectronics (1.9%). Meanwhile, the industrials sector fell 2.2%, led by Priceman (-3.8%) and Tenaris (-3.7%), the latter due to a global sell-off by steel pipe makers. On the economic data front, the Bank of Italy cut its forecast for Italian GDP this year to 3.8% from 4%, as the current surge in coronavirus cases clouded the economic outlook. The CAC 40 index fell 1.8 percent to close at 7,067 on Friday, its lowest level in four weeks and its second straight weekly loss, as expectations of a tightening Fed monetary policy weighed on technology stocks and risk sentiment. In line with global peers, the tech sector fell more than 2%, dragged down by STMicroelectronics (down 1.9%) and Dassault Systèmes (down 2.4%), while the energy sector fell 2.2% as oil prices fell from seven-year highs. Meanwhile, ArcelorMittal (-7.3%) and Valourec (-6.6%) both fell, and like steel pipe makers, there was a sell-off across the sector as investors took profits from the industry's recent rebound. Finally, Stellantis shares fell 3.6% after the Chinese group Dongfeng Motor sold 1.2% of the French company's capital at 18.3 euros per share, in line with current prices. On Friday, the Shanghai Composite fell 0.91% to close at 3,523, while the Shenzhen Composite fell 1.19% to close at 14,030, as mainland stocks remained flat even after the Chinese government stepped up policy easing boost growth. Failed to gain momentum. The People's Bank of China cut 1-year loan yields by ten basis points to 3.7% on Thursday and the benchmark mortgage rate by five basis points to 4.6% before abruptly cutting 1-year MLF on Monday. The moves send a strong signal of policy direction, reflecting how quicker the central bank can 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. Healthcare, technology, and industrial companies led to losses. Since the beginning of the year, the recent declines have caused the Shanghai and Shenzhen indices to drop 3.22% and 5.57%, respectively. The Nikkei 225 lost 0.9 percent to end at 27,522. In comparison, the broader Topix index fell 0.59 percent to close at 1,927 on Friday, with Japanese stocks tracking Wall Street's overnight losses as investors remained cautious ahead of next week's Federal Reserve meeting. Selling pressure on stocks has intensified amid the prospect of rising interest rates, with tech and other growth stocks most affected. On Thursday, investor sentiment was also subdued as Japan's daily confirmed coronavirus cases surpassed 46,000, a new record for the third day in a row. Technology, auto manufacturing and shipping stocks led the declines, with Laser Technology (down 4.5%), Tokyo Electron (down 6.2%), SoftBank (down 0.72%), Sony (down 1.4%), Toyota (down 2.5%), Mitsubishi Automotive (-3.7%), Denso (-4%) and Japan's Yusen (-2.1%) fell significantly. Energy, manufacturing, and distribution companies also declined. The Nikkei lost 2.14% for the week, its third straight weekly decline. The S&P/ASX 200 index fell 2.27% to close at 7176 on Friday, its worst week in more than a year, as mining stocks pulled back from their recent gains, weighing on stocks. Investor sentiment was also subdued on February 5 when Australia's mining powerhouse Western Australia scrapped plans to reopen its borders, citing risks of omicron variants. Shares in global iron ore giant BHP Group fell 4.8% after its investors in London and Sydney approved a plan to drop a dual listing in favor of a primary listing in Sydney. Rio Tinto shares also fell 4.1 percent after Serbia revoked a lithium mining license on environmental grounds. Other losers in the mining sector include Fortescue Metals (-2.1%), Newcrest Mining (-1.1%), Mineral Resources (-3%), Pilbara Mining (-6%), and Lynas Rare Earths (-7.5%). All other market sectors fell as the prospect of higher interest rates added to selling pressure on stocks.

 

• REVIEWING ECONOMIC DATA:

Looking at the last economic data:

- TW: Taiwan's seasonally adjusted unemployment rate fell to 2021 in December from 3.71% in the previous month, the lowest level since April. Unemployment rose by 1,000 to 443,000, while employment fell by 5,000 to 11.459 million. Meanwhile, the labor force participation rate edged up to 59.08% from 59.06% in November.

- EU: Preliminary estimates put the Eurozone Consumer Confidence Index at 8.5 in January 2022, the lowest since March 2021 and down from market expectations of 9. Across the EU, consumer confidence fell 0.4 points to -10.0.

- CA: Preliminary estimates show that Canadian retail sales likely fell 2.1% in December from the previous month. Considering November, retail sales rose 0.7% from a month earlier, down from a downwardly revised 1.5% in October and missing preliminary estimates for a 1.2% increase. Sales rose in 6 of 11 sub-sectors, with overall growth driven by gas stations (4.9%), construction materials, gardening equipment and supplies (3%), and food and beverage stores (1%) retail sales boosted by growth. Among Canada's leading provinces, Quebec (1.2 percent), Ontario (0.5 percent), and British Columbia (0.8 percent) all saw an increase in severe flooding in November. As a result, retail sales rose 4.4% in November on an annual basis, down from an upwardly revised 5.5% in October.

- HK: Hong Kong's business confidence index for the first quarter of 2022 was 1, unchanged from the previous period. The percentage of respondents expecting business conditions in the first quarter of 2022 to be better than the last quarter (14%) was slightly higher than that of respondents expecting it to be worse (13%). The results are consistent with the Q4 2021 round of survey results. Import and export trade and wholesale (+2 to 0 in the fourth quarter), finance and insurance (+5 to -2 in the fifth quarter), real estate (+7 in the eighth quarter), professional and business services (in the third quarter of +3 to -1) sentiment improved, but construction (-6 in Q17), retail (+9 in Q11), manufacturing (+14 in Q8), accommodation Sentiment deteriorated in the food services sector (+29 in the second quarter), transportation (-8 in the fourth quarter, +29 in the fourth quarter), warehousing and express services (-7 to -2) and information and communications ( -2 vs. +5).

- UK: UK retail sales fell 3.7% in December, the most significant drop since January and two months of strong retail sales growth, with consumers expecting to spend much of Christmas shopping compared to the swift popularity of the OmiCon variant, Usually early. The figure was much worse than the 0.6% drop the market had forecast. Sales at non-food stores fell 7.1%, with sales down in every sub-segment, including department stores, clothing stores, other non-food stores, and home stores. Motor fuel sales fell 4.7%, with fewer home jobs in December 2021, and tourism and food store sales fell 1%. Still, retail sales were 2.6% higher than in February 2020 when the coronavirus crisis hit. In 2021, sales rose 5.1%, the most significant increase since 2004.

- JP: Consumer prices in Japan rose 0.8% year-on-year in December 2021, marking the fourth consecutive month of growth from a 0.6% gain a month earlier. The latest figures are also the highest annual inflation rate since December 2019, driven by sharp increases in food prices and further housing costs. In addition, core consumer prices rose 0.5% year-on-year, unchanged from November, at their highest level in nearly two years as energy prices remained high but remained well below the Bank of Japan's 2% target.

- NZ: New Zealand visitor arrivals rose 3.8% year-on-year in November as travel-related travel restrictions began to ease, allowing the tourism industry to rebound, coinciding with the opening of quarantine-free travel from New Zealand to Australia 1 November 2021. In the history of COVID-19, travel numbers tend to increase towards the end of the year, with provisional data for December 2021 showing a further increase in border crossings. However, overall levels are well below those seen before the COVID-19 pandemic.

 

• LOOKING AHEAD:

Today, investors will receive:

- EUR: French Flash Services PMI, French Flash Manufacturing PMI, German Flash Manufacturing PMI, German Flash Services PMI, Flash Manufacturing PMI, Flash Services PMI, and German Buba Monthly Report.

- USD: Flash Manufacturing PMI, and Flash Services PMI.

- AUD: Flash Manufacturing PMI, and Flash Services PMI.

- JPY: Flash Manufacturing PMI.

 

• KEY EQUITY & BOND MARKET DRIVERS:

- Canada's 10-year government bond yield fell below 1.80% after hitting a near three-year high of 1.89% on Jan. 18, tracking U.S. Treasury yields lower as stocks fell and U.S.-Russian political tensions over Ukraine dragged investors down. Become more cautious. Meanwhile, this year's Fed tightening appears to be priced in, with investors now betting on a more than 25 basis point hike in the fed funds rate in March. Also, at home, weaker-than-expected retail sales data prompted investors to question whether Bank of China should start raising interest rates in its next monetary policy decision, with 75% of analysts believing the Bank of Canada will keep borrowing costs unchanged, while 25% % see a 25 basis point hike.

- U.K. 10-year government bond yields fell back below 1.2 percent as tensions between the U.S. and Russia and a drop in stock markets boosted demand for safe-haven assets. Washington has said it is ready to impose significant sanctions on Moscow if it invades Ukraine. In contrast, Russia has said it has no current plans to launch an attack while making several demands from the West, including blocking Ukraine from joining NATO. British government bond yields recently hit a nearly three-year high of 1.3%, with inflation expected to accelerate monetary policy tightening. Data showed that the UK consumer price index rose 5.4% in December, the most significant increase since March 1992. The CPI data, combined with robust activity data for November and better employment data, suggest the Bank of England is likely to raise rates by 25 basis points on February 3, with multiple hikes expected to follow this year. Elsewhere, the Fed is also set to raise interest rates in March.

- Germany's benchmark bund yield fell to -0.05%, after rising to 0 for the first time in nearly three years earlier this week as investors pared bets on a rate hike following the ECB's December meeting minutes %above. Money markets are now pricing in an 85% chance the ECB will raise rates by ten basis points in September, down from 100% on Wednesday. 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. As a result, the central bank cut stimulus to the economy at its December meeting but extended its bond purchases until at least the end of 2022. Elsewhere, the Fed will raise rates as early as March and three more by the end of the year.

- The yield on the benchmark 10-year Treasury note fell for a third straight day to 1.79% on Friday, the lowest in a week and well below the new pandemic high of 1.9% set earlier this week. Investors turned more cautious amid falling stock markets and U.S.-Russian political tensions over Ukraine. Meanwhile, this year's Fed tightening appears to be priced in, with investors now betting on a more than 25 basis point hike in the fed funds rate in March. Yields on 2-year (1%), 5-year (1.57%), 20-year (2.35%), and 30-year (2.1%) bonds also fell for the third straight session.

-

 

• STOCK MARKET SECTORS:

- High: Consumer Staples.

- Low: Communication Services, Consumer Discretionary, Materials.

 

• TOP CURRENCY & COMMODITIES MARKET DRIVERS:

- CAD: traded above 1.25, not far from a one-week low of 1.25504 hit on Jan. 14, as growing uncertainty over the pace of expected Fed rate hikes weighed on investor sentiment, and data showed Canadian retail sales rose less than expected. Global traders are cautiously awaiting the next Federal Reserve meeting for details on the MAS facing high inflation and lower-than-expected earnings for companies surging amid the pandemic. Domestically, retail sales rose 0.7% in November from the previous month, down from a downwardly revised 1.5% in October and missing a preliminary estimate of a 1.2% increase. Meanwhile, preliminary estimates suggest that Canadian retail sales are likely to decline by 2.1% in December 2021. In addition, the recent drop in oil prices from recent highs has also put pressure on the lunatic.

- CNY: The offshore yuan rose to 6.34 against the dollar on Friday and was on track for the second week of gains, even after Beijing stepped up policy easing to boost growth. After unexpectedly cutting the 1-year MLF on Monday, the People's Bank of China Thursday cut the 1-year LPR by ten basis points to 3.7% and the mortgage benchmark by five basis points to 4.6%. China's policy moves stand in stark contrast to other major economies that have normalized monetary policy this year, prompting Chinese President Xi Jinping to be wary of rapidly rising global interest rates during a virtual event on the Davos agenda earlier this week. Analysts expect the People's Bank of China to roll out easing measures in the first half of the year, further cutting interest rates and lowering the reserve requirement ratio in the first quarter. Strong seasonal business demand and a record trade surplus supported the yuan as Chinese exports remained strong in December.

- JPY: The yen rose to 114 yen per dollar on Friday, gaining for a fourth straight session, supported by inflation concerns and falling risk appetite. Investors sold riskier assets, while the safe-haven yen rose on renewed worries about rising inflation, policy uncertainty, and heightened geopolitical tensions. In its quarterly outlook report, the Bank of Japan noted that inflationary pressures are building, with core consumer prices expected to hit 1.1% in the fiscal year ending March 2023, and warned that if raw material costs continue to soar, inflation could accelerate at a rate that could 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 this week to maintain its ultra-easy monetary policy, as widely expected.

- AUD: The Australian dollar fell below $0.722 on Friday as risk aversion expanded while traders braced for more aggressive tightening by 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. The Aussie reversed course from the previous session as stronger-than-expected jobs data hit a high of $0.7276, raising expectations for an early hike in the official cash rate. 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. The RBA has also lagged other major central banks in withdrawing pandemic-era stimulus but will decide at its February 1 meeting whether to end bond purchases at the start of the year.

- NZD: The New Zealand dollar fell to a one-month low of over $0.675 on Friday as risk aversion was broader and traders braced for more aggressive tightening by 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, but currency movements remained dovish. Kiwis will lose about 1% this week.

- 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.

 

• CHART OF THE DAY:

European shares fell sharply on Friday, dragged down by automakers and banks, with Frankfurt's DAX and the pan-European Stoxx 600 down around 2 percent each. Energy stocks were also under pressure as crude prices fell from recent seven-year highs. Among individual stocks, wind turbine maker Siemens Gamesa fell more than 10% after cutting its 2022 revenue guidance, and its owner Siemens Energy fell 16%. On the economic data front, UK retail sales fell 3.7% in December, the most significant drop since January last year, compared with expectations for a 0.6% decline. European stocks fell 1.5% this week as the prospect of tightening global monetary policy this year and tensions between the United States and Russia weighed on sentiment.•  German DAX index - D1, Resistance around ~ 16293, Support (target zone) around  ~ 14900.

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