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HEADLINES
- Trump: We'll have strong control over 'monetary manipulation & devaluation'
- Trump: Trade deals will be one-on-one; US will cut regulations
- WH: Trump wants to pay for border wall via a border tax
- Trump: US Trade with Mexico is 'a once sided deal'
- Mexico President cancels Trump meeting amid border wall feud
- US Adv Goods Trade Balance (USD) (Dec): -65.0bn (est -65.3bn, prev -66.6bn)
- US Wholesale Inventories (MoM) Dec, P: 1.0% (est 0.1% prev 1.0%)
- US New Home Sales Change Dec: 536K (est 588K; rev prev 598K)
- US Initial Jobless Claims (WoW) 21 Jan: 259K (est 247K rev prev 237K)
- US Continuing Claims (WoW) 14 Jan: 2.100 Mln (est 2.040 Mln prev 2.059 Mln)
- US Leading Index (MoM) Dec: 0.50% (est 0.50%; rev prev 0.10%)
- US Chicago Fed Nat Index (Dec): 0.14 (est -0.05 rev prev -0.33)
- US Kansas City Fed Mfg Index (Jan): 9 (est 8, prev rev to 9 from 11)
- US Atlanta Fed GDPnow (26/Jan): 2.9% (prev 2.8% on 19/Jan)
- ECB's Weidmann: If infl rise sustainable, may need to withdraw stimulus
- ECB's Knot: Improved economy reduces the need for more stimulus
- IMF: For sustained recovery of EZ infl, Germany must run above 2%
- UK publishes bill to authorise Brexit
- ECB's Villeroy: UK's free trade deal with EU difficult to achieve
- US EIA Natural Gas Storage (BCF) Jan 20: -119 (est -117; prev -243)
- J&J to pay $30 billion for Actelion
COMMENTARY
Mexico & Trump - a key call in emerging markets
President Trump’s anti-Mexico rhetoric has made Mexican assets one of the key calls in emerging market debt. I have just returned from a research trip to Mexico where I met with local economists, analysts, and corporate bond issuers. Below are a number of observations from my time there. Donald Trump won the election on a fairly protectionist rhetoric – with a special focus on Mexico – and the pressure to fulfil electoral promises (unlike most seasoned politicians) is therefore likely to see the implementation of some of the things he has proposed. Whilst the intentions are clear, the measures that he will implement to satisfy his electorate are more uncertain. Despite the symbolic nature, building a wall at the Southern border of the US would have a limited impact on the Mexican economy. However, other policies that Trump supports may have a significant impact on the economy and asset prices. (Bond Vigilantes)
When do rising yields become a headwind for equities?
Interestingly, on a very strong day for equities, the majority of e-mails that I fielded yesterday involved bonds. From sell-side sales traders, and from retail traders alike, either to ask what I thought, or to offer their own opinion, there seemed to be a theme. Traders want to know: "At what point do rising yields become a headwind for equities?" The answer is relatively complex. To this point, the rise in interest rates has been a market tailwind. The financial sector led the post-election "Trump Bump", and then led equity markets sideways to slightly lower for a month. There is no doubt that higher rates are a good thing if you are invested in banks and consumer finance stocks. (The Street, continue)
US Q4 GDP Preview
US GDP in Q4 is forecast to print an annualised 2.2% QoQ. While the Fed's December economic projections expect 2016 growth at 2.4%, there seems to be an interesting divergence between the Fed’s own econometric models, and the NY Fed’s GDP Nowcast tracking growth at 2.1% annualised, while the Atlanta Fed’s GDPnow is running at a clip of 2.9%. If uncertainty is evident in the models and forecasts for Q4, going ahead, it may become an even more tricky exercise. In Q4, the rate of GDP growth is seen easing from Q3 levels -- which was the best rate in two years -- on the back of the widening trade gap, with the dollar’s moves also providing some forecast risk. Until President Donald Trump’s policies are fully announced, this trade uncertainty will remain. “The future effects of trade on US output are rife with uncertainty with regards to the evolution of policy and the value of the dollar,” Moody’s analysts write. “But the underlying pace of consumer spending is holding firm, getting a lift from the recent upside surprise in auto sales.” Potentially offsetting the trade ‘wildcard’ is stock building, which is seen contributing to growth. (Livesquawk)
Top Fed forecaster BNP Paribas sees hikes in every quarter in 2018
The Federal Reserve is about to go rapid-fire on interest rates, boosting them in the second half of this year, and following that with a rise in every single quarter of 2018, according to BNP Paribas SA, which expects the tightening to strengthen the dollar and push gold down toward $1,000 an ounce. The U.S. central bank is seen raising borrowing costs later this year given the fiscally expansive policies proposed by Donald Trump, and the new president’s agenda may help to lift wages in 2018, hoisting labor costs, the bank said in a Jan. 25 report. BNP was the top gold and precious metals forecaster in the fourth quarter, according to data compiled by Bloomberg. (BBG)
DATA
- US Advance Goods Trade Balance (Dec): USD -65.0 Bln (est USD -65.3 Bln prev USD -66.6 Bln)
- US Wholesale Inventories (MoM) Dec, P: 1.0% (est 0.1% prev 1.0%)
- US New Home Sales Change Dec: 536K (est 588K; rev prev 598K)
- US New Home Sales (MoM) Dec: -10.40% (est -0.70%; rev prev 4.70%)
- US Initial Jobless Claims (WoW) 21 Jan: 259K (est 247K rev prev 237K)
- US Continuing Jobless Claims (WoW) 14 Jan: 2.100 Mln (est 2.040 Mln prev 2.059 Mln)
- US Leading Index (MoM) Dec: 0.50% (est 0.50%; rev prev 0.10%)
- US Chicago Fed Nat Index (Dec): 0.14 (est -0.05 rev prev -0.33)
- US Kansas City Fed Mfg Index (Jan): 9 (est 8, prev rev to 9 from 11)
- US Atlanta Fed GDPnow (26/Jan): 2.9% (prev 2.8% on 19/Jan)
POLITICS/GEOPOLITICS
- President Trump: US Trade with MExico is 'a once sided deal'
- Mexico President cancels Trump meeting amid border wall feud --FT
- House Speaker Ryan: Congress will pay billions for US-Mexico wall --BG
- Corporate America split over radical Republican import tax plan --FT
- WH: Trump wants to pay for border wall via a border tax
- EU's Moscovici: Finance tax 'within reach' but political will needed --Rtrs
- German SPD's new leader Schulz level with Merkel in poll --Rtrs
GOVT/CBANKS
- ECB's Weidmann: If inflation rise sustainable, we may need to withdraw stimulus --ForexLive
- ECB's Knot: Improved economy reduces the need for more stimulus --ForexLive
- ECB's Mersch: QE may have some negative effects on the repo market --ForexLive
- IMF: For sustained recovery of EZ infl, Germany must run above that target --ForexLive
- EU's Dijsselbloem: IMF wants to participate in Greek bailout in full --Rtrs
- Creditors ask Greece for more austerity beyond 2018 --DM
BREXIT
- UK publishes bill to authorise Brexit --FT
- UK FinMin Hammond: EU no longer wants to 'chastise' UK --BBC
- ECB's Villeroy: UK's free trade deal with EU difficult to achieve --Rtrs
- EU's Moscovici: Brexit fallout to hit Britain in 2017, 2018 --Rtrs
- Irish central bank frets over Brexit, cuts growth forecasts again --FT
- Barclays explores moving EU HQ to Dublin post-Brexit --City AM
- Trade body GDV: Brexit effect on German insurers to be manageable --Rtrs
- UK car production drives to 17-year high --Tele
C&E
- US EIA Natural Gas Storage (BCF) Jan 20: -119 (est -117; prev -243)
- Anglo American boosts 2016 output overall, copper down in fourth quarter --Rtrs
- Libya oil prod'n rises to 700k bpd after NOC restores power at Sarir
- Fitch Affirms Petrobras' IDRs at 'BB'; Outlook Negative
- Gold exports to China soar in the run-up to the start of the Lunar New Year --BBG
FIXED INCOME
- US sells $28bn of 7s at 2.335%, stopping-through by 0.3bps
- BoE Corporate Bond Holdings At GBP5.67B (prev GBP5.29B)
- Freddie Mac: Mortgage rates rise for the first time in 2017 --MW
- Investors shun Italian bonds on political outlook --BBG
FOREX
- MXN drops on Trump tweets --ForexLive
EQUITIES
- S&P 500 crosses 2,300 mark for first time --FT
- Johnson & Johnson to pay $30 billion for Actelion --MW
- Moody's affirms J&J's Aaa rating after Actelion deal
- Verizon is exploring a combination with Charter; efforts preliminary and may not result in deal --WSJ
- Fitch: US Banks' Q4 Strong Capital Markets Results Led by FICC
- Sanofi Said to Set Sights on Takeover of Tesaro --Street Insider
- Caterpillar beats on earnings, but issues gloomier outlook --BI
- Fiat Chrysler Profit Doubles on Lower Costs --WSJ
- Dow Chemical Swings to Loss --WSJ
- Northrop Grumman Gives Soft Earnings View Even as Sales Climb --WSJ
- Missile maker Raytheon's sales fall 1.4 percent --Rtrs
- Whirlpool posts flat quarterly profit, hurt by acquisition costs --ET
- Ford sees lower 2017 profits, takes hit from pensions, Mexico --Rtrs
- Comcast shares jump after company beats earnings estimates --CNBC
- Bristol-Myers Squibb cuts outlook --MW
- Volkswagen compliance chief to leave board after disagreement --Rtrs
- Moody's changes outlook on Novartis' Aa3 rating to negative on share buy backs announcement; affirms ratings
- LVMH shrugs off luxury sector woes with 8% revenue climb in 2016 --FT
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