EU CONSUMER STAPLES: Barry Callebaut; cocoa falls
(BARY 29s; Baa3/BBB-; Stable) (equities +3%)
Some changes to margin requirements by the exchange may be having some impact. We would caution reading into short-term vol too much; Barry does expect a dip in late April/early May on exchange changes that it says will limit HF activity. Similar changes last year caused prices to fall -30% before heading +100% in the final 2-months of the year.
- Front futures: £7.4k, -6%
- Dec futures: £6.4k, -7%
- vs. our leverage assumptions done against £9k/t
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STIR: Dovish Option Structures In ERM5 Dominate Again
Dovish option structures in ERM5 have dominated again today, with markets positioning for the ECB to continue cutting rates through Q2. ERM5 call volumes have outnumbered puts by more than 4 times the past two sessions.
- OIS markets currently price 48bps of cuts through March (i.e. 25bp cuts in January and March) and 80bps of easing through June.
- With 31bps of cumulative cuts priced between March and June, there is plenty of room for further dovish repricing for those expecting four consecutive 25bp cuts in the first half of this year.
- The median ECB terminal rate forecast based on sell-side analysts we track is 1.75% (i.e. 5x more 25bp cuts). A number of analysts look for sequential cuts through to the middle of this year, though some more hawkish views look for a temporary pause following the April decision.
- Earlier today, President Lagarde’s interview with CNBC did not come across as particularly dovish compared to recent GC commentary or her prior interview with the FT on December 23. Meanwhile, the usually hawkish Knot endorsed market pricing of 25bp cuts in January and March.
- Tomorrow’s regional calendar is relatively light, with French business sentiment data due and only Bank of Spain’s Escriva currently scheduled to speak (his comments today were consensual and not market moving).
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Jan-25 | 2.674 | -24.7 |
| Mar-25 | 2.437 | -48.4 |
| Apr-25 | 2.276 | -64.5 |
| Jun-25 | 2.122 | -80.0 |
| Jul-25 | 2.074 | -84.7 |
| Sep-25 | 2.002 | -91.9 |
| Oct-25 | 1.980 | -94.1 |
| Dec-25 | 1.950 | -97.1 |
| Source: MNI/Bloomberg. | ||
US-RUSSIA: Trump-If No Deal Soon Taxes, Tariffs & Sanctions On Russia & Allies
US President Donald Trump posts on Truth Social regarding the war in Ukraine. "...If we don’t make a “deal,” and soon, I have no other choice but to put high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States, and various other participating countries."
- Trump: " Let’s get this war, which never would have started if I were President, over with! We can do it the easy way, or the hard way - and the easy way is always better. It’s time to “MAKE A DEAL.”..."
- These are the first concrete comments from Trump regarding his moves towards a deal in Ukraine since his inauguration.
- His threat to 'other participating countries' could bring in a wide range of countries including those directly supplying the Russian war machine such as Iran and North Korea, through to those that the US has accused of propping up the Russian economy with increased trade such as China and India.
- In the past 24 hrs, Ukrainian President Volodymyr Zelenskyy has sought to maintain a substantial voice for Kyiv in any peace talks, and has backed Trump's call for European nations to spend 5% of GDP on defence.
JPY: USD/JPY Nears Resistance As Core Global Yields Edge Higher
An uptick in core global FI yields biases USD/JPY higher, with a fresh session high of 156.37 registered in recent trade.
- The technical setup in the pair remains bullish, with initial resistance located just above at the 20-day EMA (156.46).
- A clean break and extension there would shift focus to the January 15 high (158.08).
- The BoJ decision presents the key Japanese risk event this week (expect our full preview to be released during Asia-Pac hours on Thursday).
- A 25bp rate hike is widely expected at that event, with focus set to fall on the BoJ’s guidance and Governor Ueda’s post-meeting press conference, assuming a hike is delivered.
