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IBERIAN DAILY 05 JANUARY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CELLNEX, ELECTRICITY SECTOR, IBERDROLA.

New Year’s rally confirmed
The possibility that the Fed’s meeting minutes indicated an end to rate hikes with new messages from Central Banks underpinned more gains in European stock markets. Thus, the Euro STOXX neared December highs thanks to the performance of Consumer Goods and Real Estate, while only Energy posted losses (due to the falling oil prices), followed by Basic Resources, which closed practically flat. On the macro side, in the euro zone, December’s final services PMI improved significantly (49.8) thanks to the surprises in Spain and France. In the US, December’s manufacturing ISM fell in line with expectations, although the employment heading rose sharply to back above 50. All this suggests the labour market remains quite dynamic in December. The minutes from the Fed’s 14/12 meeting confirmed the hawkish tone, warning investors of the risks of underestimating the organisation’s determination to control prices and that the lower rate hikes in the last meeting does not mean a change in policy. Fed fund futures showed a maximum rate in July’23 (4.985%), below the dots, and cuts in 2H’23 of almost -50bps. In this regard, N. Kashkari hinted that interest rates will continue to rise until inflation has hit a ceiling, betting on raising the official rate to 5.4% (+100bps), while the IMF warned that risks of inflation remain high due to the labour market and the service sector. In China, December’s Caixin services PMI rose much more than expected, returning to 48.0. Lastly, the WHO criticised the Covid-19 figures released by China, as they do not give a precise idea of the outbreak and do not reflect the number of hospitalisations and deaths.
What we expect for today
European markets would open with drops of -0.5% due to the Fed’s decision to return inflation to the 2% target at the expense of raising unemployment and reducing growth. Currently, S&P futures are down -0.11% (the S&P 500 ended up +0.22% vs. the European closing bell). Volatility in the US fell (VIX 22.01). Asian markets are rising (China’s CSI 300 +2.2% and Japan’s Nikkei +0.4%).
Today in Mexico we will learn December’s consumer confidence and in the US December’s ADP private employment survey, November’s trade balance and weekly jobless claims.