The January 25 session, punctuated by the ECB's press release and a press conference devoid of any surprises, seems to have reassured European bond markets.

Slightly hesitant this morning, with a timid rise, they amplified their gains after 2:30 p.m. and ended the day at their highest level: Bund yields eased sharply by -5pts to 2.285% and -6pts on OATs to 2.773%, while Italian BTPs erased -5.5pts to 3.815%.

The ECB maintains its main deposit rate for the second time at 4%, and Christine Lagarde notes that the disinflation trend continues and that rates are sufficiently restrictive to bring inflation back to the 2% target.

But from her recent statements - and those of her rather hawkish main lieutenants - it is clear that the ECB remains vigilant with regard to the price-wage spiral (the ECB boss spoke at length about the sources of wage data she monitors on a daily basis).
She considered expectations of rate cuts to be premature, and reaffirmed that she remains 'data dependent': the ECB will only modify the cost of money once the Fed has acted first ('rather this summer than in the spring': she could wait until July).

As the day's press release was very short and lacked any original announcements, the markets found cause for hope in the disappearance of a recurring phrase: 'domestic inflationary pressures remain'.
On the economic front, the job market remains robust, with unemployment at its lowest level for 20 years. Growth is virtually nil, but could pick up again if demand recovers... but conflicts (Ukraine, Israel, Yemen) pose risks for global activity... and transport prices.
The current inflation rate remains close to 3.4% in the core sector, but has reached 4% in the services sector.
Let's take a look at the figures published in Europe (which have taken a back seat due to the ECB): the business climate in France is stable compared with December 2023, according to the Insee synthetic indicator, which remains at 98, a level slightly below its long-term average (100).

Business sentiment deteriorated in Germany in January, confirming the recessionary dynamic in which Europe's leading economy is evolving, according to the monthly survey published on Thursday by the Ifo institute.

The Ifo index - calculated from a sample of some 9,000 companies - came out at 85.2 this month, compared with 86.3 in December, while economists were on average expecting a slight improvement to 86.6.


US figures remain very robust: US real GDP (gross domestic product) growth for the fourth quarter of 2023 came in +1% to +1.3% above expectations, at +3.3% annualized, according to a very first estimate from the Commerce Department.

Growth in the world's leading economy is easing off from the roaring 4.9% seen in the third quarter, but should reach 2.5% in 2024, well above the 2% previously forecast.
The increase in the fourth quarter was mainly due to growth in consumer spending and exports. Imports, which are a subtraction in the calculation of GDP, increased", says the Commerce Department.
Weekly jobless claims are up by +25,000:
The Labor Department reports 214,000 new claimants.

The four-week moving average - more representative of the underlying trend - came in at 202,250 this week, down by 1,500 on the previous week's revised average.

Finally, the number of people receiving regular benefits rose by 27,000 to 1,833,000 in the week to January 8, the most recent period available for this statistic.

New single-family home sales were another surprise: they rebounded by 8% in December 2023 compared with the previous month, to an annualized rate of 664,000 units, according to the Commerce Department, following a 9% drop in November.

The median home price was $413,200, and the average price was $487,300. The stock of new homes for sale stands at 453,000, representing a supply of around 8.2 months at the current rate of sales.
Surprisingly, these figures, which seem to rule out even the risk of a soft landing (notably GDP), are not worrying the US fixed-income markets, with the T-Bond 2034 erasing -4pts to 4.14%, and the 2-year -5.8Ps to 4.32%.

Finally, across the Channel: total status quo: Gilts remained unchanged at 4.012%.



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