EURIBOR: Mix Of Net Long Setting and Net Short Cover On Thursday

• External MPC member Professor Alan Taylor’s inaugural speech as an MPC member is due at 16:30GMT entitled “Inflation Dynamics and Outlook” which he will deliver at the Leeds University Business School on Wednesday. The text will be available here.
• His main public comments so far have come from his appearance at the Treasury Select Committee (TSC) on 19 November. Since then he was joined by both Dhingra and Ramsden to dovishly dissent in favour of a 25bp cut at the December MPC meeting.
  In his November TSC comments he noted that “gradual” to him was aligned to the market (at the time the MPR forecasts were made) which implied about 100bp of cuts over 2025 while he said "my own views are skewed to the downside risks rather than the upside risks of a year ago, then we'd be going faster."
• Given the market moves since the MPR forecasts, it will be interesting to see whether Taylor explicitly addresses the change in market prices (at time of writing 53bp of cuts are priced in for 2025 from a low of 39bp last week).
• The views of the three dissenters in the December MPC Minutes described the “sluggish demand and a weakening labour market, now and in the year ahead, both of which would see further downward pressure on demand, wages, and prices.” And noted that “Given the evolving balance of risks, a less restrictive policy rate was warranted” in the view of the three dissenting members.

• Stocks surged higher Wednesday, the DJIA and SPX Eminis +1.5-1.6% while the Nasdaq gained over 2.1% after core inflation data slowed for December. Currently, the DJIA trades up 599.5 points at 43118.16, S&P E-Minis up 88 points at 5970.5, Nasdaq up 392.5 points at 19436.96.
• Financials, Communication Services and Information Technology sectors outperformed in the first half, banks led gainers after better than expected earnings reported by Blackrock +3.62%, Bank of NY Melon +6.18%, Wells Fargo +5.18%, JP Morgan +1.38%, Goldman Sachs +4.96% and Citigroup +5.69% this morning.
• Interactive media and entertainment shares helped the Communication Services sector rebound after declining the last couple sessions: Meta +3.75%, Alphabet +2.65%, Live Nation +2.47% while Netflix gained 1.97%. Same for IT with semiconductor shares trading stronger despite ongoing curbs on China exports: Micron Technologies +5.90%, Monolithic Power +3.0%, Qualcomm +2.95%, Nvidia +2.3%.
• On the flipside, Health Care and Consumer Staples sectors underperformed in the first half, pharmaceuticals weighing on the former with Viatris -3.24%, AbbVie -2.35%, Charles River Labs -1.63%. Food manufacturers weighed on the Consumer Staples sector: Kroger and Hormel both -1.67% while Conagra declined 1.52%.

The gov't of PM Francois Bayrou is likely to avoid being ousted at the first hurdle in the censure vote set to take place tomorrow (Thursday 16 Jan) in the National Assembly. The censure motion was put forward by the far-left La France Insoumise (LFI) on 14 Jan following Bayrou's general policy speech to parliament.  President of the National Assembly Yael Braun-Pivet has said the chamber will take up the motion at 1500CET (0900ET, 1400GMT). 

• The centrist Ensemble, MoDem and Horizons parties will back Bayrou, as will the conservative Republican Right.
• Far-right Rassemblement National (National Rally) deputy and party spox Sebastien Chenu said "We will not vote for censure today. We only vote for censure on concrete actions and not on words,"
• The most intense focus will be on the centre-left Socialist Party (PS). It sits within the leftist New Popular Front (NFP) alongside LFI and other groups, but is being courted by Bayrou in an effort to win sufficient support to pass a budget.
• After Bayrou's speech, PS head Olivier Faure said "On the essential issue, that of pensions, the Prime Minister has opened the door a crack, and it is true that this is an achievement (...) but it is not enough," adding "At this stage, we will censor," and said he was waiting for "a clear answer".
• The RN's likely abstention will mean the LFI does not have the votes to oust Bayrou even if the PS sides with its NFP allies.