CREDIT OPEN: Trump drags geo-politics back to centre-stage
Stocks look set for a weaker open Wednesday after a raft of newsflow items flooded the market following the European close. Haven plays were active, with prevailing, well-documented worries in the shape of Trump's tariffs on major partners continuing to simmer, while there was renewed focus on matters in the Middle East. Of note, Trump said in a joint presser with Israeli PM Netanyahu that the US should take over the Gaza Strip while also assuming responsibility for reconstruction efforts in what he termed as a "long-term ownership position", with the possibility of a US troop deployment there as well.
Trump also re-opened a "maximum pressure" campaign on Iran, with one of the major goals being to lower Iranian crude exports to zero. New Treasury Sec. Bessent was directed to use sanctions and to tighten existing controls to ramp up pressure on Iran, although Trump said that "hopefully we're not going to have to use it very much", and that he was looking to "work out a deal with Iran".
Looking at other matters, Fed Vice Chair Jefferson said that officials should move cautiously in relation to tweaks to interest rates, and that he sees "a gradual reduction in the level of monetary policy restraint placed on the economy as we move toward a more neutral stance" as "the most likely outcome".
On the theme of haven assets being in play overnight, Gold was seen USD18/oz firmer at USD2,860/oz at the time of writing, marking fresh record highs. Of note, gold has risen even as Mexico and Canada have won reprieves relating to US tariffs on their exports, while participants have been evidently speculating on a similar turn of events between the US and China.
A packed economic calendar sees a global PMI blitz, with final January readings for services and composite activity across key economies, including the Eurozone, UK and the US. Investors will also parse French industrial production and Italian retail sales data along with the eurozone's latest release of PPI figures (for December). Later in the day and stateside we have the US ADP employment report and ISM Services Index, for fresh signals on growth momentum.
Central bank watchers will tune into remarks from ECB’s Lane and several Fed speakers, including Barkin, Goolsbee, and Bowman, for policy insights.
Meanwhile, UK debt markets will focus on a long-dated gilt auction. During NY hours, the Treasury's quarterly refunding announcement will be in focus, although most do not expect the event to provide much by way of a surprise. That being said, there will be quite some attention centred on any possible tweaks to language re: future issuance, particularly with new chief Bessent at the helm.
Earnings season continues with particular focus likely to be placed upon updates from major European and US banks. In total 25 Stoxx600 and 36 S&P500 companies are slated to releases results.
For more on latest developments see the European Breakfast Briefing.
Wednesday's supply prospects
Another batch of issuers, predominantly lower-beta SSA ones, are lining up offerings for today’s business in both EUR and USD. That after another batch of SSAs and also IG corporate names forged ahead with trades on Tuesday despite trade war worries hanging over markets. That decision paid off too with the tone improving as the day progressed, aiding investor demand which was very solid on the whole for the nine single currency transactions which totalled EUR12.35bn. Faring particularly well were the quartet of corporate names which were swamped with orders and secured economic funding (recap here).
** EIB EUR May 2030 EARN
** KBN EUR 7yr
** Madrid EUR Apr 2035 sustainable
** Baden-Wuerttemberg EUR1bn no grow 10yr LSA
** IDA USD 10yr SD at SOFR m/s +63 area IPTs
** Land NRW USD 5yr at SOFR m/s +48 area IPTs
** KfW USD1bn Nov 2026 tap at SOFR m/s +20 (the #) IPTs
** Luminor inaugural EUR150m no grow PNC6.5 AT1
** Sparkasse Pforzheim Calw EUR 3.5yr sub-benchmark covered
** Raiffeisenverband Salzburg EUR250m no grow 6yr covered
** Whitbread Group GBP long 7yr
Eight borrowers teamed up to raise USD14.365bn in the first ex-SSA issuance of the month, led by a rather hefty USD6.065bn 5-part offering from Foundry JV Holdco, a special purpose entity created by Brookfield Asset Management to enable its investment in the construction of two semiconductor facilities as part of a joint venture with Intel Corp. For more colour see THE ENDGAME.
What to watch Wednesday – Composite/Services PMIs
** Key Data: FR Dec Industrial/Manufacturing Production (07:45), SP Jan HCOB Composite/Services PMIs (08:15), IT Jan HCOB Composite/Services PMIs (08:45), FR Jan F HCOB Composite/Services PMIs (08:50), GE Jan F HCOB Composite/Services PMIs (08:55), EC Jan F HCOB Composite/Services PMIs (09:00), IT Dec Retail Sales (09:00), UK Jan F S&P Global Composite/Services PMIs (09:30), EC Dec PPI (10:00), US Weekly MBA Mortgage Applications (12:00), US Jan ADP Employment Change (13:15), US Dec Trade Balance (13:30), US Jan F S&P Global Composite/Services PMIs (14:45) and US Jan ISM Services Index (15:00)
** Key Events: ECB’s Lane (14:00) speaks, along with Fed’s Barkin (12:30 & 14:00), Goolsbee (19:30) and Bowman (20:00)
** Auctions: UK to sell GBP2bn 2053 Gilts (10:00)
** Earnings: 25 Stoxx600 & 36 S&P500 companies release results. Former includes Credit Agricole, DNB Bank, Santander and Svenska Handelsbanken
All times GMT
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