EU CONSUMER CYCLICALS: H&M: 4Q Results

• In the equity space, the recent pullback in S&P E-Minis has been a correction. A key short-term support has been defined at 6771.50, the Dec 18 low. A break of this level is required to signal scope for a deeper retracement and would highlight a possible short-term reversal. For bulls, sights are on key resistance at 7014.00, the Oct 30 high. Clearance of this hurdle would confirm a resumption of the primary uptrend.
• A bull cycle in EUROSTOXX 50 futures remains intact and the latest pullback appears to have been a correction. The first key support to watch lies at 5691.88, the 50-day EMA. A clear break of the EMA would highlight a potential short-term reversal. This would open 5622.00, the Nov 26 low. For bulls, sights are on key resistance at 5847.00, the Nov 13 high. The price pattern on Dec 18 is a bullish engulfing candle - a reversal signal.

Benchmark European & UK fixed income futures mostly stick within yesterday’s ranges, awaiting fresh cues.

• There has been little market feedthrough after the Kremlin accused Ukraine of launching a drone attack on Russian President Vladimir Putin's residence in the northwestern Novgorod oblast late on Monday. Russia will alter its stance in ceasefire negotiations and well-documented differences between the two parties remain.
• Bund futures -17 at 127.63.
• From a technical perspective, Bund futures remain in a clear downtrend and the latest move higher appears corrective.
• Initial support is located at yesterday’s low (127.31) followed by the bear trigger (126.75).
• The 20-day EMA (127.86 today) capped yesterday’s rally and presents initial resistance. A break above would expose the December 8 high (128.08).
• German yields 1.0-1.5bp higher. EGB spreads to Bunds little changed.
• Gilt futures +8 at 91.36 with core global FI markets off Monday highs.
• Our technical analyst notes that recent price action highlights the Dec 16 low (90.50), and the Nov 27 high (91.93) as the important short-term directional triggers.
• UK yields ~1bp lower, with 10s oscillating either side of 4.50% in recent weeks.
• EUR & GBP short ends little changed. Fairly modest odds of ECB tightening priced through ’26, while ~39bp of BoE rate cuts are priced through November.
• FOMC meeting minutes due later (19:00 London).
• A reminder that Eurex derivatives will close this evening and not reopen until Friday. Meanwhile STIR & bond futures and options trading on ICE Europe will cease at 12:15 tomorrow and resume on Friday.

NOK outperforms after confirmation of Norges Bank becoming a net NOK buyer across January, despite the announced purchase amounts being smaller than expected. For EURNOK, the 11.75 Dec 24 low would be the next level to watch on the downside - but while light krone strength is apparent in EURNOK and NOKSEK, yesterday's ranges in both crosses remain intact for now though.

• SEK is also on the firmer side but overall trades within recent ranges after the Riksbank December minutes portray a Board that is very content with the current policy setting. The overall view on inflation is relaxed, with most members still more cognizant of weaker-than-desired underlying pressures despite signs of an economic recovery.
• AUD hovers around the 0.6707 September 17 high after breaking above the key level last week but failing to generate material upside traction since then. Analysts generally remain supportive of; to the upside, the 0.6800 handle closely coincides with the July 2024 high and multiple closes last August, while to the downside the 20-day EMA intersects at 0.6650.
• USDCNH is breaking lower this morning, printing below 6.99 for the first time since September last year. Authorities may act to slow any acceleration in the downtrend, but the outlook for CNY remains positive, with markets almost uniformly looking for USDCNY further below 7.00 in 2026.
• Moves in offshore Yuan follow the clear break below 7.00 in USDCNY overnight, despite a higher-than-expected fix. The fixing error stayed elevated but slightly tighter than yesterday's fix. This provided only temporary relief, however, with the downtrend in USDCNH, USDCNY resuming on reported FX selling by both corporate names and Chinese exporters.
• EU leaders are currently discussing the situation around Ukraine following Ukrainian President Volodymyr Zelenskyy's meeting with US President Donald Trump on 28 December. Given the key question around territorial concessions remains unresolved, there is little movement in any ceasefire concerns to be expected in the near future. On US data, weekly Redbook retail sales, the FHFA home price index for October, and MNI Chicago PMI are scheduled ahead of the FOMC minutes.