Squawk Box Europe Express

Stocks in Japan surge as the yen posts its worst session in almost three years and the JGBs fall back as the BoJ insists it will continue its yield curve control procedure. We hear from Polish President Andrzej Duda who says that Russian President Vladimir Putin is on the back foot in Ukraine, calling on allies to further increase support for the nation. German Finance Minister Christian Lindner tells this channel that a trade war with the U.S. must be avoided and that Brussels should work hand-in-hand with Washington to combat inflation. In banking news, Goldman Sachs posts its worst profit miss in almost ten years with rival Morgan Stanley also underperforming. However, U.S. bank CEOs in Davos predicted a more gentle recession this year. Chinese Vice Premier Liu He is set to meet with U.S. Treasury Secretary Janet Yellen in Zurich as Beijing reports a steady increase in full-year FDI.

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Chinese annual GDP has come in at its second-worst rate since the Cultural Revolution, growing at only 3 per cent – well below its official 5.5 per cent target. The country’s population also contracted for the first time in six decades. We hear from Spanish Prime Minister Pedro Sanchez who says the EU should follow the U.S. lead on fighting inflation and that he hopes a trade war could be avoided. The World Economic Forum kicks off in its annual winter slot for the first time since 2020 in Davos. ‘Polycrisis’ and fragmentation risks are two central themes this year as the IMF warns the developing world is falling behind. Up to two-thirds of global economists are braced for recession within a year while CEO confidence has fallen to a more than 10-year low. And in Japan, the BoJ holds its two-day policy meeting. The 10-year JGB has surpassed the 0.5 per cent threshold for the third consecutive session.   

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The 10-year JGB breaks the BoJ’s ceiling for a second day while the yen surges. The central bank is now under pressure to begin tightening monetary policy. The IMF has a dire warning ahead of this year’s World Economic Forum meeting in Davos, predicting that economic fragmentation could cause global GDP to fall by up to 7 per cent. On Wall Street, U.S. banks post a mixed set of Q4 results amid increased provisioning and downturn concerns. Bank of America CEO Brian Moynihan says 2023 will see likely see a ‘mild recession’ in early to mid-2023. Credit Suisse is reportedly to slash 10 per cent of its investment banking staff as part of its next wave of restructuring.   

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US consumer prices for December plunge at their steepest rate since April 2020. The headline CPI of 6.5 per cent is the smallest annual rise in more than a year. Despite Fed officials Patrick Harker and James Bullard insisting that rates will continue to rise, there are hopes the central bank could start cutting them later this year as inflation eases. In China, December exports hit their lowest level since February 2020, while Covid infections have continued to hamper domestic demand. Tesla is set to slash EV prices Stateside on its most popular models by 20 per cent in a bid to claw back market share following a rollercoaster 2022. And U.S. AG Merrick Garland appoints a special counsel to investigate classified documents found at President Biden’s home and private offices.  

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Asian markets are at a seven-month high on the back of the Nasdaq’s first four-day rally since last September. Investors are now awaiting the U.S. inflation data later today. In China, the CPI accelerates in line with falling Covid restrictions. However, factory prices are unexpectedly down, hampered by continuing snags in the global supply chain. Disney shares are up on the announcement that Mark Parker is to become the next chairman. Activist investor Nelson Peltz is denied a seat on the board at the entertainment giant. The world’s largest chip maker, TSMC, posts a near-80 per cent surge in Q4 profits of close to $10bn. And we hear from WEF managing director Saadia Zahidi ahead of next week’s Davos annual meeting. She tells CNBC that the cost-of-living crisis and climate change are the most grave crises facing the globe. 

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U.S. Federal Reserve Chairman Jerome Powell says he recognises the pain of rising interest rates but insisted that the central bank needs to maintain its independence to successfully make difficult policy decisions. The Hang Seng leads Asian markets into the green as China continues to reopen follow. The World Bank cuts its global growth forecast almost by half warning that the economy is on pace for its weakest growth in 30 years. President David Malpass tells CNBC that despite the gloom, China’s reopening is a ‘key variable’. Airbus remains well ahead of Boeing as the world’s top plane maker with 2022 deliveries climbing by 8 per cent. And in France, a nationwide strike is announced for next week following the government’s move to extend the retirement age from 62 years to 64 in order to avoid a major structural deficit.  

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The New Year Wall Street rally stumbles with the Dow and S&P 500 closing in the red after the Fed Reserve’s Raphael Bostic and Mary Daly confirm that although hikes will slow the terminal rate will likely surpass the 5 per cent mark. Markets in China pull back somewhat following the reopening bounce. State officials say that several regions are now past the peak of Covid infections. Pfizer CEO Albert Bourla tells CNBC is could begin to manufacture its Paxlovid dose with a local Chinese partner within a matter of months. French President Emmanuel Macron’s government is set to roll out its pension reform plan, putting it on a collision course with unions and left-wing MPs. And in the UK, the government fails to agree a pay deal with various unions, potentially setting up more strike action this winter.  

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U.S. indices rally to their best daily performance since November as a favourable December jobs reports raises hopes of a soft landing Stateside. CNBC hears exclusively from Atlanta Federal Reserve President Raphael Bostic who says that the pace of hikes could slow if there are signs of loosening in the labour market. Asian markets are in the green as China opens its borders and scraps Covid quarantine rules for the first time in three years. Alibaba shares are up as Ant Group founder Jack Ma gives up control of the company, easing tensions with the Chinese Communist Party. Ant now insists it will not relaunch an IPO. And in Brasilia, Brazil, hundreds of Jair Bolsonaro supporters storm the nation’s Congress, Supreme Court and other government buildings following last week’s inauguration of President Luiz Inacio Lula da Silva.

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Stronger-than-expected employment data Stateside fuels concerns about further Fed tightening, pushing U.S. markets into the red. Kansas City Federal Reserve President Esther George tells CNBC that she believes rates will stay higher until at least 2024. In China, mortgage rules are loosened to help boost a flagging property sector and authorities are reportedly prepared to ease ‘three red line’ limits on developer borrowing. In tech news, Samsung Electronics expects to see Q4 profit slump by almost 70 per cent on the back of soft demand for smart phones and chips. The collapse of crypto exchange FTX prompts Silvergate Capital to cover $8bn in withdrawals. And Kyiv has rejected an Orthodox Christmas truce offered by Moscow while clinching U.S., German and French deals for armoured vehicles.   

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The Federal Reserve signals that it will maintain rates at a higher level for longer following the release of December’s FOMC meeting’s minutes. It is expected to slow the pace of hikes while ruling out any cuts this year. U.S. markets are in the green for the first time this year amid a dip in manufacturing activity and a strong employment scenario. China’s service sector contracts for the fourth consecutive month as rising Covid rates hamper consumer demand. The EU urges a coordinated testing regime on Chinese arrivals to the bloc while the WHO accuses Beijing of opacity over its Covid data. E-commerce giant Amazon announces it will cut up to 18,000 jobs as lay-offs increase throughout the tech sector.  

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