RENEWABLES: EU Mid-Day Power Summary: DE-FR February Power Contracts Diverge
German February power contract is edging lower with downside from TTF and losses in most week-ahead contracts, while the French equivalent is edging higher with forecasts for cooler weather – keeping power demand elevated. This has narrowed the FR-DE discount to €7.45/MWh at the time of writing from €9.74/MWh yesterday.
- Nordic Base Power FEB 25 down 4.5% at 42 EUR/MWh
- France Base Power FEB 25 up 1.9% at 105.62 EUR/MWh
- Germany Base Power FEB 25 down 0.1% at 113.3 EUR/MWh
- EUA DEC 25 up 0.4% at 75.5 EUR/MT
- TTF Gas FEB 25 down 0.6% at 49.985 EUR/MWh
- Front-month TTF is edging lower today; however, prices remain elevated amid supply risks into 2025 as Ukraine transit flows were cut at the start of the year, with cooler temperatures lending some support and extensions at Norwegian LNG terminals.
- EU ETS Dec25 is moving higher today, diverging from slight losses in EU gas as cooler temperatures and lower wind on the week are likely to raise the call for thermal generation. However, prices may come under pressure amid the return of EUA auctions on 7 January.
- Italy’s Energy Minister Gilberto Fratin has urged the EU to extend its emergency gas price cap and lower the ceiling to €50–60/MWh to shield consumers from potential energy price shocks.
- TSO Fingrid has filed a legal application with the Helsinki District Court to seize the vessel m/v Eagle S in connection with damage to the 650MW EstLink 2.
- The 1.4GW Viking Link between the UK and Denmark (DK1) will have planned maintenance over 6-9 January, with the unit curtailed to 728MW.
- EdF has extended the outage at its 203MW Gennevilliers 1 gas-fired power plant to 8 January from 3 January.
- Swiss hydropower reserves last week – calendar week 52 – continued to descend from the previous week to 52.3% of capacity. This was due to lower rainfall on the day, with hydropower generation remaining firm from the previous week.
- German and French day-ahead prices rose sharply as low wind offset reduced consumption despite cooler weather. However, Germany remained at a discount to France as demand is forecast to be 17GW lower than the latter. The discount may persist for 6 Jan delivery, with similar wind forecasts in both regions but around 10GW lower German demand.
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FRANCE: Macron Pushes Back Against Resignation Speculation
President Emmanuel Macron has pushed back against speculation that he could resign if the gov't of PM Michel Barnier is removed from office in a confidence vote later today. On 3 Dec Macron said that talk of his possible resignation was "political fiction" and "nonsensical", adding “I was elected twice by the French people. I am extremely proud of this, and I will honour their trust with all my energy until the very last second of my term to serve the country,”.
- For Marine Le Pen, parliamentary leader of the far-right Rassemblement National (National Rally, RN) the clock is potentially ticking on her ambitions to win the presidency (at least for some time). She, along with other RN figures, are on trial for alleged embezzlement of European Parliament funds. A verdict in the case is due on 31 March, and prosecutors are requesting that if found guilty, as well as a fine and custodial sentence, Le Pen be barred from running for public office for five years.
- As such, a swift resignation by Macron could serve Le Pen (the favourite for the next election) well. Should Macron resign, Article 7 of the Constitution stipulates that a presidential election must take place between 20 and 35 days after the expiry of the president's term. This could bring the election before the delivery of the verdict.
- The required two-thirds majority in parliament to impeach Macron is not possible, and as such resignation by his own volition is the only way Macron will leave office before 2027. A continued state of political paralysis, with no gov't able to be formed, could prove enough to force the president's hand but this is not assured. As such, the likelihood he remains in office (at least over the short-to-medium term) is high.
EQUITIES: Chipmakers Boost Indices on Strong Marvell Earnings
Stock futures making further progress into the NY crossover, with the persistent bid off yesterday's pullback lows still well underway, and the e-mini S&P wading further into uncharted territory: 6082.75 is another all-time high.
- Tech is outperforming - evident in the NASDAQ futures' outperformance and strong pre-market trade in chipmakers (NVidia +0.9%, AMD +1.3%, Intel +1.1%), partly due to a surge in Marvell Technology shares (+14% pre-market), who reported solid earnings after-market Tuesday to point to solid AI-based demand.
- Round number resistance sits above the price at 6100, beyond which 6103.88 and 6145.26 are worth watching, the next Fib projections.
- Stocks responded positively to the manufacturing ISM on Monday (headline beat, but prices paid stepped sharply lower), so today's services number will be watched for an extension of that pattern - but it's Powell's appearance at the DealBook summit today at 1340ET/1840GMT that will be more carefully watched - there's no text release, but a Q&A is scheduled.
US TSYS: Early SOFR/Treasury Option Roundup: Projected Rate Cuts Near Highs
Pick-up in SOFR option volumes in the last few minutes with Mar'25 skew plays trading, mixed Treasury 10- and 30Y midcurves earlier. Projected rate cuts into early 2025 running near early week highs, current levels vs. late Tuesday (*) as follows: Dec'24 cumulative -18.5bp (-18.0bp), Jan'25 -24.4bp (-24.4bp), Mar'25 -39.0bp (-39.9bp), May'25 -47.8bp (-48.3bp).
- SOFR Options:
- 10,000 SFRH5 95.56 puts vs. 95.87/96.00 call spds ref 95.82
- 6,000 SFRM5 96.06/96.18 call spds vs. 2QM596.75/96.87 call spd spd
- 5,000 SFRF5 95.87/96.0625/96.25 put flys ref 95.825
- Treasury Options:
- 4,000 wk1 TY 109.5/109.75 put spds ref 110-24.5, expire Friday
- 4,400 weekly Mon US 120/121 call spds ref 118-23, expire 12/9
- 2,000 TYF5 112.75/113.25 call spds ref 110-31
