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The US stock market did not trade yesterday due to the holiday. But futures on indices traded in the European and partly in the US session. By the close of the futures market on Monday, the indices were down a bit, so the stock market's opening on Tuesday will be accompanied by a price gap.

Traders should not forget that it is the earnings season in the United States. Such companies as Morgan Stanley (MS), Goldman Sachs (GS), Interactive Brokers (IBKR), and United Airlines Holdings (UAL) are reporting today.

Equity markets in Europe were mostly up yesterday. German DAX (DE30) gained 0.31%, French CAC 40 (FR40) added 0.28%, Spanish IBEX 35 (ES35) fell by 0.12%, and British FTSE 100 (UK100) closed on Monday with a 0.20% gain.

Short-term interest rate differentials are a good indicator of the future trajectory of relative monetary policy cycles. Using central bank policy projections, economists expect the two-year EUR/USD swap differential to reverse this year. Right now, swaps are trading at about 125 basis points in favor of the dollar, and by the end of this year, that differential could change to 40 basis points in favor of the euro. If this materializes, the EUR/USD currency pair will reach the 1.20 level before the end of the year.

In Europe, a surprisingly warm winter led to a drop in natural gas prices. Europe may come out of the heating season with more than 50% of its storage capacity filled. This could limit the jump in natural gas prices in the second half of 2023 to around €140-160/MWh. This is still high but well below the €250-300/MWh level seen last summer.

Goldman Sachs raised its aluminum price forecast due to rising demand in China and Europe. According to analysts, the metal is likely to cost an average of $3125 per tonne this year. However, it is pointed out that the upward price impulse will gradually increase in the spring.

Oil prices fell on Monday, consolidating after a strong rise last week ahead of the publication of demand forecasts from OPEC and IEA. These monthly reports strongly influence oil market trends in global oil demand. They may be essentially this month, given the importance the market attaches to a potential recovery in oil demand in China.

Asian markets traded flat yesterday. Japan's Nikkei 225 (JP225) decreased by 1.14% on Monday, China's FTSE China A50 (CHA50) added 1.50%, Hong Kong's Hang Seng (HK50) was up by 0.04% on the day, India's NIFTY 50 (IND50) fell by 0.34%, and Australia's S&P/ASX 200 (AU200) was positive by 0.82%.

China's GDP growth slowed in the latest quarter to +2.9% year-over-year, down from +3.9% in the previous quarter. But industrial production rose by 1.3% last month, while the unemployment rate fell to 5.5% from 5.7%. Analysts say rising domestic demand in China could be an important counterbalance to slowing growth in the US and Europe. Investors are once again buying up Chinese blue chips, from large consumer goods to financial companies. China's stock market rally underscores expectations of an economic recovery at a time when most developed countries are in a recession. Foreign capital inflows into China reached about 44 billion yuan last week, the highest since May 2021.

There is a growing possibility that the Bank of Japan may announce a significant policy change this week as bond yields reach the upper limit again. According to economists, there are two options at the moment. The first (main scenario) is the abolition of the yield curve control policy. This might lead to a sell-off in Japanese equities, which would strengthen the yen. The second scenario is that Japan's central bank can extend the range to 75 basis points on either side of its 0% target for 10-year government bonds. This would save time until the end of the quarter when Kuroda resigns. Either way, the closer we get to spring, the more likely the Bank of Japan will change course.

• S&P 500 (F) (US500) 3,999.09 0 (0%)
• Dow Jones (US30)34,302.61 0 (0%)
• DAX (DE40) 15,134.04 +47.52 (+0.31%)
• FTSE 100 (UK100) 7,860.07 +16.00 (+0.20%)
• USD Index 102.39 +0.19 (+0.18%)

Important events for today:

• China GDP (q/q) at 04:00 (GMT+2);
• China Industrial Production (m/m) at 04:00 (GMT+2);
• China Retail Sales (m/m) at 04:00 (GMT+2);
• China Unemployment Rate (m/m) at 04:00 (GMT+2).
• UK Average Earnings Index (m/m) at 09:00 (GMT+2);
• UK Claimant Count Change (m/m) at 09:00 (GMT+2);
• UK Unemployment Rate (m/m) at 09:00 (GMT+2);
• German Consumer Price Index (m/m) at 09:00 (GMT+2);
• World Economic Forum Annual Meetings at 10:00 (GMT+2);
• German ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
• Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
• Canada Consumer Price Index (m/m) at 15:30 (GMT+2);
• US NY Empire State Manufacturing Index (m/m) at 15:30 (GMT+2);
• US FOMC Member Williams Speaks at 22:00 (GMT+2).

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