OIL PRODUCTS: Shandong Product Demand Seen Rising in March: OilChem

Our Europe Pi positioning indicator has just been published - PDF here

• We last updated Europe Pi before the quarterly rolls in late November/early December - at the time, German contracts and OATs were tilting to flat/short, with Gilts and BTP in long territory.
• Positioning as of early January looks slightly more tilted to the short side since then, though keep in mind that the roll period plus holiday trade may distort the signal somewhat.

• The Senate will begin confirmation hearings for President-elect Donald Trump’s cabinet nominations next week. Data from Polymarket shows bettors are confident that Trump’s four most embattled nominees are on track for confirmation.
• Financial markets received a preview of the challenges of a Trump presidency yesterday, with markets reactive to competing narratives of Trump's tariff and legislative plans. The influence of Trump’s ad hoc social media statements will likely spell a return of the market turbulence that characterised Trump's first term, with information asymmetries between the White House and key players in financial markets driving uncertainty.
• Trump will meet Republican lawmakers from the Senate and House this week to determine whether the GOP will pursue a one- or two-bill reconciliation strategy to legislate Trump's agenda.
• The Fed’s top regulatory officer, Michael Barr, confirmed yesterday he will step down by February 28, nixing a potential crisis regarding executive authority over the Fed.
• A broad overhaul of energy permitting laws is unlikely to be part of Republican reconciliation plans.
• Labour unions representing US dockworkers will meet today with the US Maritime Alliance (USMX) to negotiate a labour contract to avert a strike on January 17.
• Secretary of State Antony Blinken met with Japanese Prime Minister Ishiba Shigeru today in Tokyo amid tensions over President Biden’s decision to block Nippon Steel's acquisition of US Steel.
• Poll of the Day: Donald Trump is set to return to the White House enjoying the highest approval rating of his political career.

Full article: US Daily Brief

Eurozone services inflation accelerated on a sequential basis in December, with prices rising 0.34% M/M on a seasonally-adjusted basis using ECB data. It follows just 0.01% M/M in November, revised from what had been a particularly weak -0.07%. We still feel these latest two months of data are notable though, and on the soft side, considering December only reverted to a prior monthly pace rather than a more meaningful correction higher.  

• A reminder that the low November print raised some questions among analysts and policymakers on the ECB's seasonal adjustment methodology - so the fact that December didn't see a major acceleration appears to indicate that an underlying softening trend is still in place.
• Schnabel for instance wrote last month on the November data : "Services inflation, in particular, remains high at 3.9%. At the same time, momentum indicators, such as the three-month-on-three-month rate, suggest that price pressures have started to ease. But such signals critically depend on the way the seasonal adjustment is done.[...] Estimates by financial market participants suggest that, when correcting for these potential shifts, momentum could be measurably higher than what our current estimates imply."
• 3M/3M momentum has since slowed further to 2.66% annualized in Dec, from 2.8% in Nov, a sizeable undershoot of the 4.0% Y/Y for Dec.
• The fear for some at the ECB will be that we see a repeat of the reacceleration in services momentum, having been at the same 2.7% back in Jan'24 before accelerating to 5.2% in May'24 (still on 3M/3M terms). The next few months of data will be closely watched for a continuation of this recent softer momentum.
• Elsewhere, non-energy industrial goods price growth remained subdued at 0.41% on the momentum measure (0.62% prior) - bringing in overall core momentum at 1.85% for its lowest since December 2023.

•