Risk aversion sentiment continues to simmer ahead of next week’s Fed meeting

EU Middle Market Update: Risk aversion sentiment continues to simmer ahead of next week’s Fed meeting; The PBoC further cuts its key rates.


– Risk aversion continued to seep ahead of the Fed meeting next week (recent reassessment of Fed rate hike expectations, with markets forecasting up to four hikes in 2022 with take off in March [some speculation it could be 50bps at that time].

– UK retail sales data for December misses expectations.

– China’s PBoC cuts policy rates further (as expected; cuts standing lending facility by 10 basis points.


– Japan Dec National CPI Y/Y: 0.8% vs. 0.9%e; CPI excluding fresh food (core) Y/Y: 0.5% vs. 0.6%e.

– South Korea Vice Fin Min Ahn: Confirmed amount of supplementary budget at KRW14.0T and would issue KRW11.3T in bonds to fund it (Note: Supplementary budget could stoke inflationary pressures and likely strengthen case for BOK to raise interest rates).

– China’s PBoC has speculated that it will cut Standing Liquidity Facility (SLF) lending rates in the near future.


– UK Foreign Sec Truss called on its allies to curb the rise of Russia and China; the West to unite against the dictatorship and confront the aggressors.

– UK Jan GfK Consumer Confidence: -19v -15th (lowest since February 2021).


– Treasury Secretary Yellen reiterated that inflation should remain above 2% over the medium term, but expected it to fall to nearly 2.0% by the end of the year.

– The Fed will solicit public comments on the central bank’s digital currency; Describes the potential benefits of CBDC.

Speakers/Fixed Income/FX/Commodities/Erratum


clues [Stoxx600 -1.37% at 476.74, FTSE -0.86% at 7,519.40, DAX -1.39% at 15,691.39, CAC-40 -1.19% at 7,108.68, IBEX-35 -1.18% at 8,710.92, FTSE MIB -1.26% at 27,223.00, SMI -1.02% at 12,432.79, S&P 500 Futures -0.09%].

Market Focal Points/Key Themes: European indices opened lower across the board and remained firmly in the red as the session progressed; all sectors start the day in the red; less negative sectors include consumer discretionary and financials; sectors among those leading the decline include industrials and materials; wind turbine manufacturers under pressure after Siemens Gamesa cut its outlook; Photo-Me discloses a private offer; Playtech Confirms Aristocrat’s Acquisition Recommendation Following JKO Play’s Exit; earnings expected in the upcoming US session include Schlumberger, IHS Markit and Ally Financial.


Consumer Discretionary: Boiron [BOI.FR] +10% (preliminary sales), 4Legal notices [FOUR.UK] +1% (commercial update), NENT Group [NENT.B.SE] -6% (Netflix revenue).

Energy: Siemens Gamesa Renewable Energy SA [SGRE.ES] -13% (preliminary results; profit warning), Siemens Energy [ENR.DE] -11% (preliminary results; profit warning).

Manufacturers: Stellantis [STLA.FR] -4% (location), Renault [RNO.FR] -2% (partnership with Geely).

Technology: Playtech [PTEC.UK] -14% (withdrawal of one of the offers received).


German Chancellor Scholz declared that a new Russian aggression against Ukraine must be avoided.

EU Sefcovic spoke to UK Brexit negotiator Truss ahead of the next meeting (January 24) and stressed the need to push for solutions under the Northern Ireland Protocol.

Representative of the Central Bank of Poland Kochalski said the MPC may consider another 50 basis point rate hike in February (**Insight: Poland’s Central Bank has raised the base rate four times in the current tightening cycle by a total of 215 basis points (the last increase dates back to January 2022).

Min Lavrov of Russian Foreign Affairs said he was grateful to the United States for holding security talks, but did not expect any breakthrough today.

China’s PBoC cuts the rate on the standing lending facility (SLF) by 10 bps (affects overnight, daily and monthly rates; effective from 17 January.

Zhu Chinese Cabinet Advisor noted that potential GDP growth was between 5.0 and 6.0%; confident that China could achieve GDP growth of around 5.5% in 2022 [vs 8.1% in 2021]; The Fed’s rate hike and balance sheet reduction could have a “very big impact on the market.”

we said it would respond to Russian security proposals during the week of January 24.

Currency/Fixed Income

– Safe-haven flows favored the CHF, Yen and USD pairs as risk aversion sentiment continued to seep ahead of next week’s Fed meeting.

– EUR/USD in the 1.1340 area with USD/JPY below the 114 level.

– The US 10-year rate continued to deviate from weekly highs of 1.90%. and tested 1.77% in the electronic session. The Eurozone and the UK are also seeing moves of around 3 basis points trailing the US stock over 10 years.

Economic data

(UK) December retail sales (ex auto/fuel) M/M: -3.6%v -0.8%e; Y/Y: -3.0% v +1.1%e.

– (UK) Retail Sales Dec. (including auto/fuel) M/M: -3.7% vs. -0.6%e; Y/Y: %-0.9v +3.4%e.

– (TR) Turkey Jan Consumer confidence: 73.2 vs. 68.9 before.

– (DK) Denmark Jan Consumer confidence indicator: -1.5 vs. -2.1 before.

– (CN) Weekly copper stocks in Shanghai (SHFE): 35.1 K against 30.3 K tonnes previously.

– (CH) Swiss monetary mass dec. M3 Y/Y: 1.7% vs. 1.9% before.

– (RU) Narrow money supply of Russia with Jan 14 (RUB): 14.39 T v14.61 T before.

– (PL) Poland Dec Sold Industrial Output M/M: -2.9%v -6.3%e; Y/Y: 16.7% vs. 13.1%e.

– (PL) Poland Dec Construction Output Y/Y: 3.1% vs. 7.7%e.

– (PL) Poland Dec Employment M/M: 0.0% vs. 0.1%e; Y/Y: 0.5% versus 0.7%e.

– (PL) Poland Dec Average gross wages H/M: 10.3% against 8.2%e; Y/Y: 11.2% versus 9.3%e.

– (PL) Poland Dec PPI M/M: 0.8% vs. 0.4%e; Y/Y: 14.2% versus 13.5%e.

– (SL) Sri Lanka December National CPI (NCPI) Y/Y: 14.0% vs. 11.1% before.

– (BE) Belgium Jan Consumer confidence: -2 vs. -4 before.

Issuance of fixed income securities

– (IN) India Total INR sold against INR240B shown in bonds 2023, 2026, 2035 and 2051.

– (ZA) South Africa total sold ZAR against ZAR1.2B shown in I/L bonds 2038, 2046 and 2050.

Look forward

– 05:25 (EU) Daily ECB liquidity statistics.

– 06:00 (IE) Ireland Dec PPI M/M: No is v 0.0% prior; Y/Y: no east v 0.2% before.

– 06:00 (UK) DMO to sell £2.0 billion in 1 month, 3 month and 6 month bills (respectively £0.5 billion, £0.5 billion and £1.0 billion pounds sterling).

– 06:30 (CL) Survey of traders from the Central Bank of Chile.

– 06:30 (IN) India Weekly Forex Reserve with Jan 14: No east against $B ahead.

– 06:45 (US) Libor daily fixing.

– 07:30 (EU) ECB chief Lagarde during a WEF panel.

– 08:00 (UK) BOE Mann.

– 08:00 (UK) Daily Baltic Dry Bulk Index.

08:30 (CA) Canada November Retail Sales M/M: 1.2%ev 1.6% before; Retail sales (excluding autos) H/M: 1.2%ev 1.3% before.

– 08:30 (US) USDA Weekly Net Export Sales.

– 09:00 (IT) Quarterly Economic Bulletin of the Bank of Italy (BOI).

10:00 a.m. (US) Dec leading index: 0.8% ev 1.1% forward.

10:00 (EU) Eurozone Jan Advance Consumer Confidence: -9.0ev -8.3 before.

– 11:00 am (EU) Potential sovereign ratings after European close.

– 11:30 (US) Trésor Sec Yellen at the WEF.

– 1:00 p.m. (US) Baker Hughes Platform Weekly Count.

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