FRANCE DATA: Lacklustre Domestic Demand In Q4 And Goods Spending In January

Bund futures are +29 ticks at 131.70, off earlier session highs as European equities find a short-term base. The downtick in crude oil futures is somewhat offset by a ~3% rally in natural gas, limiting the feedthrough into core EGBs.  

• The 10-year OAT/Bund spread has widened back to ~74bps after reaching a low of 72bps earlier. Markets are digesting a rift between the Socialists and the government, following PM Bayrou’s comments around immigration yesterday.
• German cash yields are 2-3bps lower across the curve. E4.5bln of the 10-year 2.50% Feb-35 Bund was sold this morning.
• Eurozone lending to households and firms accelerated in December, in a signal that ECB policy rate cuts are continuing to be fed through the real economy.
• 10-year peripheral spreads to Bunds have tightened alongside the equity rally.  The 10-year BTP/Bund spread has fully retraced the widening seen into yesterday’s close, now ~2.5bps tighter at ~107bps. Yesterday’s widening came on news that PM Meloni has been placed under investigation in a case relating to the repatriation of a Libyan police officer.
• Broader global focus turns to the BoC and Fed decisions later today, before the ECB decision tomorrow (a 25bp cut remains essentially fully priced in ECB-dated OIS).

• In the equity space, the S&P E-Minis contract remains above Monday’s low. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the recent sharp pullback appears corrective, however, a clear breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement, towards 5943.94, 61.8% of the Jan 13 - 24 bull leg. Key resistance is 6178.75, the Dec 6 high.
• A bull cycle in the EUROSTOXX 50 futures contract remains intact and the move lower from last Friday’s high, appears to have been a correction. A deeper retracement would allow an overbought trend condition to unwind. Moving average studies are in a bull-mode set-up highlighting a dominant uptrend. The first important support to watch is 5108.69, the 20-day EMA. A resumption of the uptrend would open 5298.50, the 1.500 projection of the Nov 21 - Dec 9 - 20 price swing.

Gilts hold the bulk of the opening rally.

• Futures last +42 at 92.51, just off session highs (92.54).
• Short-term bullish correction within the longer run bearish technical theme remains intact.
• Initial support and resistance 91.10/92. 68.
• Yields 3.5-4.5bp lower, 10s lead the rally.
• Spread to Bunds continues to hover around 204bp, which represents the early November closing low. A break (on a closing basis) would expose the psychological 200bp marker.
• GBP STIRs hold the early dovish repricing.
• BoE-dated OIS showing ~72.5bp of cuts through ’25 vs. 69bp late yesterday.
• SONIA futures flat to +4.5.
• 8-Year green gilt supply saw a softish demand/pricing mix.
• No meaningful market input from Chancellor Reeves pro-growth speech.
• Macro and cross-market cues will be eyed for the remainder of today, with the UK data calendar subdued through the remainder of the week.