GERMAN DATA: Services Sector Turnover Turning Lower, Mirroring Weak Survey Data

Feb-07 09:56

Turnover in German services sectors (excl. finance and insurance) weakened in November, coming in at -0.2% M/M (vs -0.6% prior) and +1.2% Y/Y.

  • Those figures, published on Tuesday, which are reported by Destatis in real (inflation adjusted) and seasonally adjusted terms, represented the third monthly decline in a row. The 3M/3M measure came in at -0.6% (vs -0.2% prior), the second decline after 6 consecutive positive prints.
  • The strongest gains on a monthly basis could be seen in information and communication at +1.3% M/M (vs -0.1% prior) and in freelance, scientific and technical services at +0.4% (vs +1.0% prior).
  • Declines could be observed in the "other services" sector (i.e. rental of movable property and placement of labour) at -1.3% M/M (vs -2.4% prior), transport at -0.7% M/M (vs -0.5% prior) and real estate services at -0.2% M/M (vs +1.4% prior).
  • Services have been relatively resilient compared to the manufacturing sector in Germany, but the weakness which started to emerge at the beginning of autumn last year seems to continue.
  • Activity implied by the German Services PMI has remained in contractionary territory since November, coming in at 47.7 in January (49.3 Dec, 48.7 Nov). The latest release noted "an insufficient supply of new business to replace completed projects" and the "rate at which outstanding business fell was [...] the quickest seen for just over three-and-a-half years". The IFO services subindex also is on a declining trend but stayed in expansionary territory for now.
  • Further dents in the relatively strong performance of German services might thus be possible going forward.

MNI, Destatis

Historical bullets

EQUITIES: Primary Trend Direction in Eurostoxx 50 Futures Remains Up

Jan-08 09:52

The primary trend direction in Eurostoxx 50 futures remains up and the recent move lower appears to be a correction. MA studies are in a bull-mode position, signalling a rising trend cycle. Key short-term support to watch lies at 4439.30, the 50-day EMA. A break of this level would signal scope for a deeper retracement and open 4370.00, the Nov 28 low. For bulls, a reversal higher would refocus attention on 4634.00, the Dec 14 high and bull trigger. The pullback in S&P E-Minis from recent highs has now cracked first material support at the 20-day EMA of 4745.34. This strengthens a short-term bearish threat and exposes 4696.72, the lower band of a MA envelope. A move through this support would expose the 50-day EMA, at 4650.64. The recent move lower is considered corrective and the primary uptrend remains intact. Key resistance and the bull trigger is 4841.50, the Dec 28 high.



  • In China the SHANGHAI closed lower by 41.645 pts or -1.42% at 2887.538 and the HANG SENG ended 310.88 pts lower or -1.88% at 16224.45.
  • Across Europe, Germany's DAX trades lower by 59.71 pts or -0.36% at 16536.66, FTSE 100 lower by 45.21 pts or -0.59% at 7646.26, CAC 40 down 37.77 pts or -0.51% at 7383.18 and Euro Stoxx 50 down 21.19 pts or -0.47% at 4442.57.
  • Dow Jones mini down 245 pts or -0.65% at 37473, S&P 500 mini down 18.75 pts or -0.4% at 4715.75, NASDAQ mini down 79.75 pts or -0.48% at 16381.25.

GILTS: Goldman Don’t See Scope For Further Front End Outperformance Vs. Peers, 10-Year ’24 Call Unch

Jan-08 09:45

Goldman Sachs write “over the winter break, data has continued to point to a faster disinflation profile in the UK. Our economists have pulled forward their expectation of the first BoE cut to May (from June previously).”

  • “Beyond that, they expect the BoE to ease at every meeting until reaching the terminal rate of 3.0%.”
  • “Against that backdrop, we have taken a more positive view on UK GDP growth, as the drag on consumption from mortgages is set to be smaller than we anticipated previously.”
  • “We note that the easing priced in the UK curve over 2024 has largely converged to that priced in the Euro area and US, and in the near-term we don’t expect further outperformance at the UK front-end.”
  • “At the long-end, better growth news should also limit the scope for a rally in UK duration, especially if we see further fiscal loosening, and therefore we leave unchanged our 10y Gilt forecast of 3.75% at end-24.”

US TSYS: Recovering From Lows

Jan-08 09:36

TYH4 is -0-02 at 111-21, 0-02 off the high of a contained 0-07+ range, with volumes picking up after a Japanese holiday limited activity and kept cash Tsys closed in Asia-Pac hours).

  • Cash Tsys have recovered to essentially neutral levels during early London trade, after some early London cheapening (TY session lows were seen in Asia hours).
  • Early Monday inputs included already swelling USD & EUR IG issuance slates (headlined by a USD multi-part benchmark offering from Saudi Arabia, including 6-, 10- & 30-Year paper), softer-than-expected German factory orders data and a firmer-than-expected round of Swiss CPI data.
  • The weekend saw Dallas Fed President Logan stress that the central bank should not rule out a move higher in interest rates, stressing her focus on financial conditions at the same time.
  • On the future of QT, she thinks “it’s appropriate to consider the parameters that will guide a decision to slow the runoff of our assets. In my view, we should slow the pace of runoff as ON RRP balances approach a low level. Normalizing the balance sheet more slowly can actually help get to a more efficient balance sheet in the long run by smoothing redistribution and reducing the likelihood that we’d have to stop prematurely.”
  • On the fiscal side, the weekend saw congressional leaders announce an accord re: top-line spending levels for the current FY. This essentially reduces the chance of a government shutdown occurring later this month.
  • FOMC-dated OIS shows ~135bp of cuts through ’24 at typing, after Friday’s data-inspired vol. saw some meaningful swings in that marker.
  • NY Fed inflation expectations data and comments from Atlanta Fed President Bostic (’24 voter) will cross today.