EUROPEAN INFLATION: Eurozone HICP in line, but variation on subcomponents

Retail sales data underpins the narrative that the Swiss consumer is in solid shape and, barring new shocks, the SNB is likely to hold its policy rate at 0% for the foreseeable future. The series continued Q4 growing marginally, at 0.1% M/M in November (0.2% October, revised from 0.7%).

• Looking at the drivers of the release shows limited moves within the subcategories, with auto fuel standing out positively, at 0.8% M/M (1.3% prior). However, over the last couple of months, none of the main subseries have exhibited a clear directional trend on a M/M basis.
• On a broader 3-month moving average of the Y/Y measure, Swiss retail sales picked up and grew quicker than their long term average rate, at a current 2.2% (1.4% October).

• French political risks remain a focus in January, with the Government set to restart 2026 budget negotiations on Thursday. PM Lecornu will have to walk a fine line between ensuring enough fiscal restraint to get the conservative Les Republicains on board, while ensuring that the budget is not so austere that the centre-left Socialists cannot abstain (the only path for a majority in the National Assembly).
• Accordingly, the 10-year OAT/Bund spread has continued to struggle pushing below the 70bp handle in recent weeks.
• A reminder that before Christmas, the Government passed a “special law” to ensure that taxes can continue to be levied, gov't debt can be issued, and public sector workers can be paid in the absence of a state budget for 2026. This is a stop-gap solution, with the budget rollover doing little to improve France’s concerning fiscal position.
• Elsewhere, the BTP/OAT spread has struggled to deviate meaningfully from the 0bp level since October. Although relative fiscal and political backdrops may argue for lower yields in Italy compared to France, there still seems to be some hesitance amongst participants to endorse this fully. That may reflect acknowledgement that Italy is still the largest bond issuer in the Eurozone, alongside historical biases of Italy as a source of volatility and instability in the region (e.g. during the sovereign debt crisis).

The trend condition in WTI futures remains bearish and recent gains are considered corrective. Moving average studies are in a bear-mode position, highlighting a dominant downtrend. A resumption of the downtrend would signal scope for a move towards $53.77, a Fibonacci projection. Key short-term resistance is $61.25, the Oct 24 high. First resistance is at $58.47, the 50- day EMA. The trend structure in Gold is unchanged, it remains bullish and a sharp sell-off late December appears corrective - for now. The trend is overbought and a deeper retracement would allow this condition to unwind. First support at $4325.1, the 20-day EMA, has been pierced. A clear break of the average would expose the 50-day EMA at $4194.5. For bulls, a resumption of gains would open $4578.3, a Fibonacci projection.

• WTI Crude down $0.06 or -0.1% at $57.22
• Natural Gas down $0.12  or -3.32% at $3.495
• Gold spot up $102.57 or +2.37% at $4435.24
• Copper up $17.5 or +3.07% at $587.2
• Silver up $3.47 or +4.76% at $76.278
• Platinum up $83.79 or +3.91% at $2230.24