JASPER’S MARKET SQUAWK 17-01-2023

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JASPER'S MARKET SQUAWK 17-01-2023

Markets take breather on China demand worries

Barclays revised its global growth forecast upward last week due to China’s reopening, but markets took a breather from the recent rally. Reportedly, China diverted cargoes of natural gas to Europe due to capacity, with analysts at an impasse about demand expectations.

Oil fell 1% and European gas as much as 9pc on the euro, but natural gas prices soared 7.50% on reports the Freeport LNG might return to normal.

Chart: Natural Gas

Key factors for today:

• Chinese reopening not as fruitful to warranty upwards revisions


• China’s GDP might offer respite as markets take a breather


• European gas prices to multiyear low on storage capacity


• Dollar a little higher during holiday session


• BOJ back in the spotlight with focus on YCC


• ECB official a tad dovish on cooling inflation narrative

Chinese top-tier data outperforms

Chinese Q4 GDP came in flat, compared to the -1.1% expected, and could offer some respite in today’s session given the most recent energy market developments. Annual GDP handily beat expectations at 2.9% compared to the 1.6% expected. Industrial production also grew significantly faster than expected, while retail sales fell much slower than predicted.

Natural Gas Prices crater in Europe

The European natural gas benchmark (TTF) fell to the lowest level since Sept 2021 on reports that LNG cargoes were being diverted from China to Europe due to full storage capacity in China. EU stockpiles are currently at 82%, above the seasonal average of 70%.

US yields drift higher during holiday

US markets were closed for holiday, but US bond yields drifted higher in the European and Asian sessions, supporting the dollar. The DXY rose 0.20% in a somewhat weka move to distance itself from the 100.00 floor, but below 103.00 risk of revisiting the base remains increased.

Volatility in yen increases ahead of BOJ meeting

The BOJ once again offered to buy unlimited JGB to keep yields within the control range. Last week it said it would review the side effects of the YCC policy at tomorrow’s policy meeting. USD/JPY ended the sessions 0.70% higher, and eyes are next glued on the 130.00 resistance.

Some dovish talk from ECB officials

ECB’s Robert Holzmann suggested that the ECB should be cautious in unwinding the balance sheet. Chief Economist Philip Lane said that interest rates were in the “ballpark” of neutral at the moment. EUR/USD slid 0.10%, but likely on the back of a stronger dollar. $1.08 remains major short-term support, with $1.09 in sight.

On the docket

• German inflation


• UK jobs data


• Zew economic index


• Canadian inflation

FX 1-day relative performance (USD)

• Kiwi best performer with 0.25% gain compared the dollar


• Aussie and pound 0.10% up and down vs the USD


• Euro and loonie nearly unchanged agionasty greenback


• Yen took a beating with 0.37% loss relative to USD


• Natural gas in surging mode 8.98% higher


• Silver and gold both around 0.50% lower


• Crude down 0.65%, brent up 0.32% in surprise trade

The post JASPER’S MARKET SQUAWK 17-01-2023 appeared first on Key To Markets Blog.

Source: JASPER'S MARKET SQUAWK 17-01-2023