CHF: Finer Details of CPI Show Core Strength Even When Stripped of Volatiles
The finer details of January CPI show underlying strength in Swiss inflation that goes beyond the higher-than-expected core print. Volatile factors may have played a part and could reverse in February, however even when these one-offs are excluded, we still see core CPI running ahead-of-expectations.
- Core inflation contributed 0.19pp to the headline (which accelerated to 0.87% from December's 0.66% against consensus expectations for a slowdown to 0.6%) of which, 0.13pp came from services - a considerable acceleration (Services exc. rents marked in the dark blue bar in the first chart below). The question is if this acceleration will be persistent or not.
- The 0.13pp appear to be largely driven by only a small set of categories: Airfares and rental cars, which contributed 0.05pp each more to headline than in December, and both these categories can be volatile.
- As such, some of the services acceleration thus has the potential to reverse in February. Nevertheless, even if the 0.1pp positive contribution from rental cars & airfares had not have occurred, core would have come considerably above analyst expectations in January - so the print appears overall firm.
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OAT: 10-year OAT/Bund Spread Steady As Bayrou Delivers Address
The 10-year OAT/Bund spread is broadly steady as headlines from PM Bayrou’s general policy address cross, currently at ~82.5bps (almost 2bps tighter on the day).
- Bayrou has outlined plans to re-evaluate and renegotiate pension reforms, in line with local media reports earlier today.
- He outlines a proposed 2025 deficit of 5.4%, which is at the upper end (but still within) the 5.0-5.5% range noted by Finance Minister Lombard last week.
- The 3% deficit target by 2029 is maintained, while the 2025 growth forecast has been downgraded two tenths to 0.9%.
EQUITY TECHS: E-MINI S&P: (H5) Bear Threat Still Present
- RES 4: 6178.75 High Dec 6 and key resistance
- RES 3: 6163.75 High Dec 16
- RES 2: 6068.25/6107.50 High Jan 6 / High Dec 26
- RES 1: 5991.72 50-day EMA and a pivot resistance
- PRICE: 5902.50 @ 14:29 GMT Jan 14
- SUP 1: 5809.00 Low Jan 13
- SUP 2: 5784.00 Low Nov 4
- SUP 3: 5698.25 50.0% retracement of the Aug 5 - Dec 6 bull leg
- SUP 4: 5658.00 Low Sep 12 ‘24
A bear threat in the S&P E-Minis contract remains present and short-term gains are considered corrective - for now. The reversal from the Dec 26 high, confirms the end of the Dec 20 - 26 correction. 5866.00, the Dec 20 low and a key short-term support, has been cleared. This strengthens a bearish theme and sights are on 5784.00, the Nov 4 low and an important short-term support. Initial pivot resistance is seen at 5991.72, the 50-day EMA.
FRANCE: PM Outlines Plans To Re-Evaluate Pension Reforms
In his general policy speech to the National Assembly, Prime Minister Francois Bayrou says the is ".. the need, the requirement, the [instruction] that the country assigns us to find stability...All French people need it. They understand well that we do not agree on everything, but they urge us, I believe, to join forces to force the issues."
- Bayrou "No recovery and rebuilding policy can be implemented if it does not take into account [France's] over-indebtedness situation and if it does not set itself the objective of containing and reducing it", says that it is a 'sword of Damocles' hanging over the country.
- PM: "we must pull ourselves together and adopt the two budgets, the State and Social Security, without delay. We are all paying a high price for this budgetary precariousness: businesses, investors, families, taxpayers, borrowers...[we must]: put in place the conditions for stability, which requires reconciliation"
- Bayrou: "Pension reform is vital for our country and our social model". Says he will "put this issue back on the table with the social partners for a short time and under transparent conditions."
- The PM says that he will bring together a new permanent delegation that includes opposition parties and unions to consider changes to the pension reforms. "If during this "conclave" this delegation finds an agreement on balance and better justice, we will adopt it". Says that if no agreement is reached, the current reforms will remain in place.
- Livestream (in French).
