POWER: Italy’s Cabinet Adopts Framework To Revive Nuclear Energy

The centre-left Socialist Party (PS) has set out the conditions that could see it return to the negotiating table with the gov't on the subject of the 2025 state budget. The PS confirmed it had suspended cooperation after comments from PM Francois Bayrou made on 27 Jan referring to a "feeling of flooding" with regards to immigration (see 'FRANCE: Greens & PS Criticise PM's Immigration Comments As Budget Talks Halted', 1005GMT). Le Monde reports that the PS could take part in budget talks if the PM walks back his comments, an immediate increase in the minimum wage, and a commitment not to touch state medical aid (AME) for illegal immigrants. 

• Gov't spox Sophie Primas says that the budget talks must not be taken "hostage". Primas: "This is the number one issue for our country. We must reach an agreement."
• The demand on AME made by PS Mayor of Nantes, Johanna Rolland, could cause significant issues for the gov't. AME allows those without residency permits to receive medical treatment, but the budget draft passed by the Senate cut its budget by EUR200mn.
• Should the gov't seek the restoration of AME funds it risks a censure motion being moved by the far-right Rassembelement National (RN). Parties of the leftist New Popular Front alliance have proved reluctant to back RN censure motions, but the far-left La France Insoumise could support such a motion given its staunch anti-gov't stance. It would also put the nominally pro-gov't conservative Les Republicains in a difficult position. 

• On the commodity front, Gold is trading closer to its recent highs. A bull cycle is in play and the recent breach of resistance at $2726.2, the Dec 12 high, reinforces current conditions. Sights are on $2790.1, the Oct 31 all-time high. A break of this hurdle would confirm a resumption of the primary uptrend. On the downside, the first key support to watch is $2675.2, the 50-day EMA. A reversal lower and a breach of this average would reinstate a bearish threat. The 20-day EMA is at $2708.1.
• In the oil space, Monday’s move lower in WTI futures marks an extension of the current corrective cycle. The 20-day EMA has been breached and attention turns to support around the 50-day EMA, at $72.22. A clear break of the 50-day average would suggest scope for a deeper retracement. On the upside, a reversal higher would focus attention on $79.48, the Apr 12 ‘24 high and a key resistance.

• Treasuries have pared minor gains seen in Asia hours to leave them almost exactly unchanged overnight ahead of today’s FOMC decision.
• Today’s data should be very much secondary, perhaps tweaking GDP tracking at the margin in the final updates ahead of tomorrow’s GDP Q4 advance, with focus firmly be on the Fed and any headlines alluding to Trump administration policy.
• There are also some important tech names due to report after the close, including Tesla, Microsoft, IBM and Meta Platforms.
• Cash yields sit between 0.3bp higher (7s) to 0.1bp lower (long end).
• 2s10s at 33.9bp (+0.0bp) remains within recent ranges.
• TYH5 sits at 109-04 (+ 03+) having inched back from an earlier high of 109-09, on modest cumulative volumes of 275k.
• It’s at the high end of the week’s range, with Monday’s high of 109-12 having stopped just short of resistance at 109-12+ (50-day EMA). Clearance is required to strengthen a bullish theme working against a medium-term bearish trend condition, whilst support is seen at 108-00 (Jan 16 low).
• Data: MBA mortgages (0700ET), Advance goods trade Dec (0830ET), Wholesale/retail inventories Dec P/Dec (0830ET)
• Feds: FOMC decision (1400ET), Powell press conference (1430ET)