Weekly Market Recap (15-19 January)

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Taiwan’s Presidential
election was held over the weekend. William Lai, of the pro-sovereignty
Democratic Progressive Party (DPP) has been elected President. The party has
governed Taiwan for the past eight years. This will be
its third consecutive presidential term.

  • Lai won 40% of the
  • Ahead of the main
    opposition Kuomintang (KMT) party’s Hou Yu-ih (the KMT is friendlier with
    the mainland CCP) on 33%.
  • The third candidate
    Ko Wen-je, from the Taiwan People’s Party, scored just over a quarter of
    the vote.

Voters also chose
legislature candidates, Seats won:

  • Kuomintang (KMT) won 52.
  • Democratic
    Progressive Party (DPP) won 51 seats, a net loss of 11 seats, dropping
    from 62.
  • Taiwan People’s
    Party (TPP) won 8.
  • two independent
    legislators won seats, both of whom are ideologically most aligned with
    the KMT.


  • The DPP has lost its
  • The opposition KMT
    gained ground.
  • No party has enough
    seats to control Parliament, this would require 57 seats.
  • Taiwan political
    pundits expect the most likely parliamentary outcome is for the KMT and
    TPP to hammer out a deal to govern.


The PBoC left the
MLF rate unchanged at 2.50% vs. 2.40% expected:

  • MLF 2.50%.
  • Injected cash via
    MLF for the 14th month in a row.
  • Added net CNY 216bn.


The Eurozone
November Industrial Production came in line with expectations:

  • Industrial
    Production M/M -0.3% vs. -0.3% expected and -0.7% prior.
  • Industrial
    Production Y/Y -6.8% vs. 6.6% prior.
  • Durable consumer goods -2.0%.
  • Capital goods -0.8%.
  • Intermediate goods -0.6%.
  • Energy 0.9%.
  • Non-durable consumer goods 1.2%.

Eurozone Industrial Production YoY

ECB’s Holzmann
(hawk – non voter in January) pushed back aggressively on rate cuts

  • Should not count on
    rate cuts at all this year.
  • Rate cut
    expectations are optimistic.
  • Geopolitical developments
    pose a risk to prices outlook.
  • Does not see a real
    recession coming to the Eurozone.

ECB’s Holzmann

ECB’s Nagel (hawk
– voter) pushed back against rate cuts expectations:

  • It is too early to
    talk about rate cuts.
  • Markets are
    sometimes overly optimistic.
  • We are data dependent.
  • Inflation is still
    too high.
  • Maybe can wait until
    summer break before contemplating rate cuts.

ECB’s Nagel

The BoC Business
Outlook Survey showed even more contraction in Q4 2023:

  • Sentiment fell every
    month in Q4, from 22% at the start of the quarter to 9% at the end.
  • 38% of firms expect
    a recession in the year ahead vs. 33% in Q3.
  • 54% of firms expect
    inflation to remain above 3% for the next two years vs. 53% in Q3.
  • 75% of firms think
    wage growth will be back to normal by 2025.
  • Consumer survey
    inflation expectations for 5 years to 2.62% from 2.75%.
  • Future sales 20% vs. 14%.
  • Indicators of future
    sales vs. a year ago -10% vs. 0% prior.
  • Firms see slight
    improvement in labour availability.

BoC Business Outlook Survey

The Japanese December
PPI beat expectations:

  • PPI M/M 0.3% vs. 0.0%
    expected and 0.2% prior.
  • PPI Y/Y 0.0% vs.
    -0.3% expected and 0.3% prior.

Japan PPI YoY

The UK December
Labour Market report showed job losses and lower wage growth:

  • December Payrolls
    change -24K vs. 9K prior (revised from -13K).
  • November ILO
    unemployment rate 4.2% vs. 4.2% expected and 4.2% prior.
  • November employment
    change 73k vs. 50k expected and 50K prior.
  • Average weekly
    earnings 6.5% vs. 6.8% expected and 7.2% prior.
  • Average weekly
    earnings (ex bonus) 6.6% vs. 6.6% expected and 7.2% prior (revised from

UK Unemployment Rate

The German January
ZEW index improved further:

  • ZEW 15.2 vs. 12.0
    expected and 12.8 prior.
  • Current conditions
    -77.3 vs. -77.0 expected and 77.1 prior.
  • Expectations 15.2 vs. 12.8 prior.

German ZEW

ECB’s Villeroy
(neutral – voter) pushed back against the aggressive rate cuts expectations:

  • Too early to declare victory over inflation.
  • Next
    move will be a rate cut some time this year.

ECB’s Villeroy

ECB’s Centeno
(dove – non voter in January) he sounded a bit more neutral compared to his
previous dovish comments:

  • Need to be prepared
    for all topics, including rate cuts.
  • Recent data have
    confirmed December projections.
  • But inflation was
    slightly below forecast.
  • We should avoid
    undershooting on inflation.
  • Q1 GDP is still looking
  • Do not see reasons
    for concern about wages.
  • Inflation trajectory is good.

ECB’s Centeno

ECB’s Valimaki
(hawk – voter) pushed back against the aggressive rate cuts expectations:

  • Must not jump the
    gun on rate cuts.
  • Better to wait a bit
    longer than cut rates prematurely.
  • Inflation is on the
    right track, but the job is not done.
  • Restrictive monetary
    policy is still called for.
  • Soft landing for the
    economy is still the baseline but risks are tilted to the downside.

ECB’s Valimaki

The US January
Empire State Manufacturing Index missed expectations by a big margin with the
lowest reading on record (excluding covid):

  • Empire State
    Manufacturing Index –43.7 vs. -5.0 expected and -14.5 prior.
  • New orders -49.4 vs.
    -11.3 last month.
  • Shipments -31.3 vs. -6.4 last month.
  • Prices paid 13.2 vs.
    16.7 last month.
  • Prices Received 9.5
    vs. 11.5 last month.
  • Employment -6.9 vs. -8.4 last month.
  • Average Employee
    workweek -6.1 vs. -2.4 last month.
  • Unfilled orders
    -24.2 vs. -24.0 last month.
  • Delivery times -8.4
    vs. -15.6 last month.
  • Inventories -7.4 vs. -5.2 last month.

The 6-month forward index:

  • General business
    condition 18.8 vs. 12.1 last month.
  • new orders 25.2 vs.
    11.3 last month.
  • shipments 24.6 vs. 15.8 last month.
  • prices paid 40.0 vs.
    25.0 last month.
  • prices received 32.6
    vs. 27.1 last month.
  • employment 16.8 vs. 10.9 last month.
  • average employee
    workweek 14.7 vs. 10.4 last month.
  • unfilled orders 16.8
    vs. 5.2 last month.
  • delivery times 11.6 vs.
    -1.1 last month.
  • inventories 5.3 vs. 9.4 last month.
  • capital expenditures
    13.7 vs. 4.2 last month
  • technology spending
    9.5 vs. 10.3 last month

US Empire State Manufacturing Index

The Canadian
December CPI report came in line with expectations although the underlying
inflation measures ticked higher:

  • CPI Y/Y 3.4% vs.
    3.4% expected and 3.1% prior.
  • CPI M/M -0.3% vs.
    -0.3% expected and 0.1% prior.
  • Core CPI Y/Y 2.6% vs.
    2.8% prior.
  • Core CPI M/M -0.5% vs. 0.1% prior.
  • Trimmed Mean CPI Y/Y
    3.7% vs. 3.5% expected and 3.5% prior.
  • Median CPI Y/Y 3.6%
    vs. 3.4% expected and 3.6% prior (revised from 3.4%).
  • Common CPI Y/Y 3.9%
    vs. 3.9% prior.

Canada Inflation Measures

Fed’s Waller (neutral – voter) pushed back against the
aggressive rate cuts expectations although he did it in a balanced way keeping
some optionality on the table:

  • Data in the last few
    months allowing Fed to consider cutting rates this year.
  • Changes in policy
    path must be ‘carefully calibrated’ and ‘not rushed’.
  • I am more confident
    that we are within striking distance of achieving sustainable 2% inflation.
  • We are close but I
    will need more info in coming months to be sure.
  • I view risks to
    Fed’s mandates as more closely balanced.
  • Fed will be able to
    cut rates this year as long as inflation doesn’t rebound or stay high.
  • This view is
    consistent with Fed projections for three 25 bps cuts in 2024.
  • Timing and actual
    number of cuts will depend on data.
  • Economic activity has moderated.
  • Setting of policy
    needs to proceed with more caution to avoid over-tightening.
  • Financial conditions remain restrictive.
  • Highlights signs
    that the labour market continues to come into better balance.
  • Data on job openings
    indicates ongoing moderation in labour demand.
  • It will be up to
    committee on timing of when to start cuts.
  • The economy is doing
    and giving us the flexibility to move carefully and methodically.
  • We have to see firm
    evidence of improvement on rates.
  • If we think we have
    to move faster on rates, we can but key is that we have flexibility.
  • We’re in an unusual
    place where we can move rates down without a shock to the economy.
  • There are things we
    want to be careful about.
  • Whether we miss the
    timing on rate cuts by six weeks, it hard to believe that’s going to have
    a big effect on the economy.
  • Once supply
    adjustment is complete [from the pandemic], it will be clearer whether
    demand is falling enough to finish the inflation fight, it’s an issue to
  • Approx endpoint for
    reserves is likely around 10-11% of GDP … overnight repo doesn’t need to
    have anything in it.
  • 4% wage growth is a
    ‘little high’ but not much.

Fed’s Waller

ECB’s Simkus (hawk- voter) pushed back against the
aggressive rate cuts expectations:

  • I am far less
    optimistic than markets on rate cuts.
  • Cuts may begin
    around the summer.
  • Wage data is going
    to be very important.

ECB’s Simkus

ECB’s Muller (hawk- voter) pushed back against the
aggressive rate cuts expectations:

  • Market expectations
    for 2024 ECB rate cuts are aggressive.
  • Wage growth is not
    in line with the inflation target.

ECB’s Muller

The Chinese Q4 GDP missed expectations slightly
although still above the 5% CCP target:

  • Q4 GDP Y/Y 5.2% vs.
    5.3% expected and 4.9% prior.
  • GDP Q/Q 1.0% vs.
    1.0% expected and 1.5% prior.

China GDP YoY

The Chinese December Industrial Production beat

  • Industrial
    Production Y/Y 6.8% vs. 6.6% expected and 6.6% prior.

China Industrial Production YoY

The Chinese December Retail Sales missed expectations:

  • Retail Sales Y/Y
    7.4% vs. 8.0% expected and 10.1% prior.

China Retail Sales YoY

The UK December CPI report beat expectations across
the board:

  • CPI Y/Y 4.0% vs. 3.8%
    expected and 3.9% prior.
  • CPI M/M 0.4% vs.
    0.2% expected and -0.2% prior.
  • Core CPI Y/Y 5.1%
    vs. 4.9% expected and 5.1% prior.
  • Core CPI M/M 0.6%
    vs. 0.4% expected and -0.3% prior.


ECB’s Lagarde (neutral – voter) pushed back against
the aggressive rate cuts pricing:

  • Confident inflation
    will reach 2% target.
  • Inflation is not
    where the ECB wants it.
  • But on the right
    path towards 2% target, though no victory yet.
  • Too optimistic
    markets not helpful in fight against inflation.

ECB’s President Lagarde

ECB’s Knot (hawk – non voter in January) pushed back
against the aggressive rate cuts expectations:

  • Markets are getting
    ahead of themselves on rate cuts.
  • A lot must go well
    for inflation to hit 2% in 2025.
  • We need to see a
    turnaround in wages.
  • Policy easing, if
    and when it happens, will be very gradual.
  • Rate path priced by
    markets can be self-defeating.
  • The more easing
    markets are doing, the less likely we’ll cut.

ECB’s Knot

ECB’s Panetta (dove – voter) kept a neutral stance with
a focus on incoming data to confirm the disinflationary trend:

  • Disinflation is
    happening, is strong and will continue.
  • Monetary conditions
    should adjust but awaiting data first to confirm disinflation outlook
  • Awaiting data to
    confirm disinflation outlook.

ECB’s Panetta

The US December Retail Sales beat expectations across
the board:

  • Retail Sales Y/Y
    5.6% vs. 4.0% prior.
  • Retail Sales M/M
    0.6% vs. 0.4% expected and 0.3% prior.
  • Ex-autos M/M 0.4% vs.
    0.2% expected and 0.2% prior.
  • Control group M/M
    0.8% vs. 0.2% expected and 0.5% prior (revised from 0.4%).
  • Retail sales ex gas
    and autos M/M 0.6 vs. 0.6% prior.

US Retail Sales YoY

The US December Industrial Production beat

  • Industrial
    Production Y/Y 1.0% vs. -0.6% prior (revised from -0.4%).
  • Industrial
    Production M/M 0.1% vs. 0.0% expected and 0.0% prior (revised from 0.2%).
  • Capacity utilization
    78.6% vs. 78.7% expected and 78.6% prior (revised from 78.8%).

US Capacity Utilization

The US December NAHB Housing Market Index beat

  • NAHB 44 vs. 39
    expected and 37 prior.
  • Single family 48 vs. 41 prior.
  • Next six months 57
    vs. 45 prior.
  • Traffic of
    prospective buyers 29 vs. 24 prior.

US NAHB Housing Market Index

The Federal Reserve released the Beige Book for Q4
with most districts reporting little or no change in economic activity:

  • Of the four
    Districts that differed, three reported modest growth and one reported a
    moderate decline.
  • Consumers delivered
    some seasonal relief over the holidays by meeting expectations in most
    Districts and by exceeding expectations in three Districts.
  • Contacts from nearly
    all Districts reported decreases in manufacturing activity.
  • Districts continued
    to note that high interest rates were limiting auto sales and real estate
    deals; however, the prospect of falling interest rates was cited by
    numerous contacts in various sectors as a source of optimism.
  • concerns about the
    office market, weakening overall demand, and the 2024 political cycle were
    often cited as sources of economic uncertainty.
  • Seven Districts
    described little or no net change in overall employment levels, while the
    pace of job growth was described as modest to moderate in four Districts.
  • Six Districts noted
    that their contacts had reported slight or modest price increases, and two
    noted moderate increases. Five Districts also noted that overall price
    increases had subsided to some degree from the prior period, while three
    others indicated no significant shift in price pressures.
  • Firms in most
    Districts cited examples of steady or falling input prices, especially in
    the manufacturing and construction sectors, and more discounting by auto
  • Premium increases
    for property and casualty insurance and for health insurance continue to
    impact most firms.

Beige Book

The Australian December Labour Market report missed
expectations by a big margin:

  • Employment Change
    -65.1K vs. 17.6K expected and 72.6K prior (revised from 61.5K).
  • Unemployment Rate
    3.9% vs. 3.9% expected and 3.9% prior.
  • Participation Rate
    66.8% vs. 67.1% expected and 67.3% prior (revised from 67.2%).
  • Full-time
    employment -106.6K vs. 57K prior.
  • Part-time
    employment 41.4K vs. 15.7K prior (revised from 4.5K).

Australia Unemployment Rate

The US Jobless Claims beat expectations by a big
margin (this report corresponds with the NFP survey week):

  • Initial Claims 187K
    vs. 207K expected and 203K prior (revised from 202K).
  • Continuing Claims
    1806K vs. 1845K expected and 1832K prior (revised from 1834K).

US Jobless Claims

The US December Housing Starts and Building Permits
beat expectations:

  • Housing starts
    1.460M vs. 1.426M expected and 1.525M prior (revised from 1.560M).
  • Housing starts M/M
    -4.3% vs. 10.8% prior (revised from 14.8%).
  • Building permits
    1.495M vs. 1.480M expected and 1.467M prior.
  • Building permits M/M
    1.9% vs. -2.1% prior.

US Housing Starts and Building Permits

The New Zealand December Manufacturing PMI fell
further into contraction:

  • Manufacturing PMI
    43.1 vs. 46.7 prior.

New Zealand Manufacturing PMI

The Japanese December CPI eased further across all

  • CPI Y/Y 2.6% vs.
    2.8% prior.
  • Core CPI Y/Y 2.3%
    vs. 2.3% expected and 2.5% prior.
  • Core-Core CPI Y/Y
    3.7% vs. 3.8% prior.

Japan Core-Core CPI YoY

The UK December Retail Sales missed expectations by a
big margin:

  • Retail sales M/M
    -3.2% vs. -0.5% expected and 1.4% prior (revised from 1.3%).
  • Retail sales Y/Y
    -2.4% vs. 1.1% expected and 0.2% prior (revised from 0.1%).
  • Retail sales (ex
    autos, fuel) M/M -3.3% vs. -0.6% expected and 1.5% prior (revised from
  • Retail sales (ex
    autos, fuel) Y/Y -2.1% vs. 1.3% expected and 0.5% prior (revised from

UK Retail Sales YoY

The Canadian November Retail Sales missed

  • Retail Sales M/M
    -0.2% vs. 0.0% expected and 0.5% prior (revised from 0.7%).
  • Retail Sales Y/Y
    1.8% vs. 1.9% prior (revised from 2.2%).
  • Ex auto M/M -0.5%
    vs. -0.1% expected and 0.4% prior (revised from 0.6%).
  • Ex auto and gas M/M
    -0.6% vs. -1.2% prior.
  • December advance estimate 0.8%.

Canada Retail Sales YoY

Fed’s Goolsbee (dove – non voter) reiterated that rate
cuts can come just from inflation progress but if that progress were to
reverse, then a rate hike would be warranted:

  • If we make good
    progress on inflation, we need to factor that into rates.
  • Goods price
    inflation is back to normal and surprising progress on services inflation
  • Says they need to
    see more progress on housing inflation.
  • When the
    unemployment rate goes up, it tends to go up rapidly; we haven’t had that.
  • We’re coming into
    2024 in a much better place than we came into 2023.
  • The market should be
    focusing on economic data.
  • “We are
    definitely not off the Golden Path”.
  • The Fed is not
    facing an imminent threat from the labour market.
  • If inflation
    progress reverses, it could merit a rate hike

Fed’s Goolsbee

The January University of Michigan Consumer Sentiment
survey beat expectations across the board:

  • Consumer sentiment 78.8 vs. 70.0 expected and
    69.7 prior.
  • Current
    conditions 83.3 vs. 73.3 prior.
  • Expectations
    75.9 vs. 66.4 prior.
  • One-year inflation 2.9% vs. 3.1% prior.
  • Five-year inflation 2.8% vs. 2.9% prior.

University of Michigan Consumer Sentiment

The highlights for next week
will be

  • Monday: PBoC LPR, New Zealand Services PMI.
  • Tuesday: BoJ Policy Decision, New Zealand CPI, Australia
    Flash PMIs.
  • Wednesday: Japan/Eurozone/UK/US Flash PMIs, BoC Policy
  • Thursday: ECB Policy Decision, US Durable Goods Orders, US
    Jobless Claims, US Q4 Advance GDP.
  • Friday: Tokyo CPI, US PCE.

That’s all folks. Have a nice weekend!

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