EU REAL ESTATE: Mercialys (MERYFP: BBB): FY24

• Stocks are trading mixed early Monday, off early session lows with the DJIA outperforming ahead midday. Narrow ranges amid two-way trade with focus on this week's PPI and CPI inflation measures on Tuesday and Wednesday respectively, as well the next corporate earning cycle that kicks off this week.
• Currently, the DJIA trades up 125.13 points (0.3%) at 42067.97, S&P E-Minis down 35.75 points (-0.61%) at 5830.5, Nasdaq down 259.8 points (-1.4%) at 18900.8.
• Utility and Information Technology sectors underperformed early Monday, independent energy and electricity providers weighed on the former: Edison International down nearly 12% amid investigations into whether electrical equipment operated by SoCal Edison sparked a blaze in Hurst. Elsewhere, Constellation Energy declined 7.76% despite several agency upgrades,  Vistra -4.23 and PG&E -4.08%.
• IT sector shares remained under pressure as the Biden administration looked to squelch high end semiconductor export to China: Super Micro Computer -6.67%, Micron -4.69%, Palantir -3.91, Nvidia -3.13%.
• On the positive sidfe, Energy and Materials outperformed in the first half, support for the latter tied to further gains in crude (WTI +2.18 at 78.75): Valero Energy +6.56%, Marathon Petroleum +5.87%, APA Corp +4.27%. Materials led by CF Industries +6.85%, Mosaic +6.12%, Steel Dynamics +5.16% while Corteva gained 4.40%.
• Reminder, the next round of quarterly earnings kicks off this week with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 15-16.

Danske on the rise in long-end US yields: "remain sceptical about whether such a rapid increase in the term premium will prove sustainable".

• "The new US administration has strong incentives to try to ease market concerns that their fiscal plans will lead to a significant increase in the issuance of long-term bonds. This could be achieved through financing strategies designed to limit the amount of duration that the bond market needs to absorb".
• "Worth remembering that just a few months ago, the focus was on the ongoing weakening of the labour market and the risk that the Fed’s easing measures might ultimately prove too late. Although there is little indication of this at present, it may only take a couple of weak job reports to shift the spotlight back"
• They maintain their 12m forecast for 10y USTs at 4.20% and have raised their 12m 10y Bund forecast to 2.25% (from a prior 2.00%)

• NY Fed consumer inflation expectations saw a mixed month for December, with the 1Y holding steady at 3.0%, the 3Y jumping 40bps to 3.0% and the 5Y falling 20bps to 2.7%.
• The 3Y measure is its highest since Nov 2023 and came amidst its highest uncertainty since May.  Largest increases in inflation uncertainty were those with lowest educational attainment and lowest pay.
• The 5Y measure meanwhile fell to its lowest since March but is still a relatively new series having only started in 2022.
• Interestingly, the unchanged 1Y figure came despite gas inflation expectations falling to their lowest since Sep’22 (down 70bps to 2.0%).
• The medium term components likely received particular focus this month after Friday’s surprise jump in the preliminary U.Mich survey, with its 5-10Y measure rising 30bps to 3.3% for its highest since 2008 (but only a preliminary release that could still be revised). To this end, the rise in the 3Y series is of some note but it can be a volatile series and it keeps to recent ranges for now.
• Back to the NY Fed’s survey (in full here), the labor market details point to less churn, with the mean probability of losing a job, voluntarily leaving a job and finding a job dropping to their lowest since Jan’24, Jan’24 and Apr’21.