Markets
European stocks were off for a blazing start in the wake of new record highs on Wall Street (S&P 500, Down Jones) end last week. The EuroStoxx50 gapped >1% higher at the open before losing some momentum. US equities open higher as well, resulting in new highs for the major indices but the Nasdaq. Risk assets are still buoyed by market believe of economies slowing down enough to cool inflation while avoiding a painful recession. Such a scenario gives central banks all the reasons to kick off the monetary easing cycle. Core bond yields indeed slip several basis points today. German bonds outperform US Treasuries. Yields on the former had some minor catching up to do with a late-session swoon in US yields last Friday. Net daily changes currently vary between -4.2 bps (30-y) to -6.9 bps (-5y). The 10-year’s break above the 38.2% resistance level (2.32%) last week therefore doesn’t receive technical confirmation just yet. US yields are down 0.8 bps (2-y) to -3.8 bps (10-y). Using a magnifying glass, we spot some JPY outperformance on currency markets. Tomorrow morning’s BoJ meeting could upend that soon if governor Ueda keeps postponing (hints on) policy normalization. The main reason is that the central bank is not yet seeing enough signs of inflation getting anchored around the 2% target as long as there’s no virtuous cycle between wage and price growth. Prime minister Kishida today called upon companies for larger wage hikes, saying the country is at a critical point for escaping from deflation. USD/JPY eases to 147.47 after a blistering rally last week and, more broadly, all off 2024. EUR/JPY loses some ground to 160.88. Other cross rates including EUR/USD barely budge. EUR/GBP is back towards testing the 0.856 support area (December lows). A break would pave the way towards the August low of 0.849. This is not our preferred scenario
The European Union will tap the bond market tomorrow. It announced a dual tranche transaction comprising an increase of the EU 3.125% December 2030 and of the EU 3% March 2053 benchmark lines. The syndicated transaction is one of the six planned for the first half of 2024 along with seven bond auctions. The EU seeks to issue €75bn of long-term bonds during this period while setting the annual limit for all of 2024 at €160bn. The proceeds will be used to meet payments primarily related to NextGenerationEU (including possible payments under REPowerEU).
News & Views
Belgian consumer confidence fell from 0 to -2 in December, posting a first monthly decline since May. After last month’s rebound, household expectations for the general economic situation in Belgium deteriorated significantly (-14 from -9). On the other hand, consumers’ opinion on the trend in unemployment over the next twelve months remains unchanged (14). On a personal level, they expressed a bit more caution about their future financial situation (-1 from 1). Moreover, they revised their saving intentions very slightly upwards (21 from 20). Consumer confidence remains above its long term average of around -6. Belgian business confidence will be published on Thursday.
Polish retail sales (constant prices) rose by 11% M/M in December (vs 14.8% consensus). Compared with a year earlier, sales are down 2.3% (vs consensus +1.9% forecast). The decline was driven by an 11% decline in the sales of household goods, an 8.3% drop in newspapers, books and other sales in specialized stores, as well as a 6.4% fall in the sales of fuel. Average gross wages increased by 4.7% M/M & 9.6%Y/Y (vs 7.1% M/M & 12.1% Y/Y expected).
