Sunset Market Commentary

It’s another stoic trading day where market driving news was scant. A Spanish bumper syndication was a sign of bond markets for the time being absorbing supply with ease The country racked in a record €137bn of bids for a sale with a rumoured size of €15bn. The US tests the market later today with its monthly 10-y auction ($37 bn).

Easing Liquidity Conditions May Provide Interim Support for China and Hong Kong Stock Markets

China and Hong Kong stock markets have been in the doldrums for the past four years since the pandemic crisis added by a heightened deflationary risk inflicted on China’s economy due to persistent weakness in the property market in the past two years.

All Eyes on US Inflation

The most important release today will be the US December CPI. We look for a modest uptick in headline inflation to +0.2% m/m SA (Nov +0.1% m/m) driven mostly by less negative energy contribution while core inflation is set to remain relatively stable at +0.3% m/m SA (Nov +0.3% m/m). The main focus will be on underlying components of inflation, especially on the services sector.

US Headline Inflation Could Rise Modestly from 3.1% to 3.2% in December

In summary, if inflation data from the US turns out to be suitably mild, it could serve as the final element needed to propel the S&P500 to a new record.

Rising (US) Yields Should Provide a Bottom for Dollar

Rising (US) yields should provide a bottom for the dollar, especially if equity optimism fades somewhat. The S&P 500 is nearing strong resistance around the 4800 barrier. EUR/USD first reference to the downside is located at 1.0875.

Is Oil Headed for Another Supply War?

Oil prices have taken a beating in recent months, falling by around 23% since late September despite a series of production cuts from the OPEC+ cartel that were meant to reduce supply and stabilize prices. Concerns that the Israel-Hamas war could spiral into a regional conflict that impacts supply have also done little to support prices.

Finally! The SEC Approves all 11 Applications for Bitcoin ETFs

Despite the regulatory approval of the first spot Bitcoin ETFs in US history, the head of the US Securities and Exchange Commission (SEC) Gary Gensler has not changed his critical attitude towards cryptocurrencies. Thus, the regulator sees signs of illegally issued securities in many cryptocurrencies that operate on the Proof-of-Stake (PoS) algorithm.

Nikkei 225 Sets 21st Century High

As the chart shows, this morning the Nikkei 225 price exceeded 35,700, its highest level in decades.

Could Euro Area CPIs Unsettle ECB Rate Cut Expectations?

Both the ECB and the market are clearly very interested in growth prospects, especially as the relevant data prints following the December ECB gathering were mixed. On Thursday, we will get the final print for the December Services PMI surveys, but the focus will also be on the preliminary inflation report for December.

Euro Extends Losses after Weak PMIs

The euro is down sharply on Tuesday. In the European session, EUR/USD is trading at 1.0969, down 0.62%. The euro hasn’t posted a gain since Wednesday.