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Dovish Remarks

Market Overview
Stocks and bonds are currently processing the robust employment data from the US released last Friday. The anticipation for Fed rate cuts is diminishing, with predictions now at -27 bp, down from -43 bp before the employment report.

Economic Expectations
The market is likely shifting to a "risk-off" stance ahead of the US CPI data scheduled for Wednesday, which is projected to increase from +2.7% to +2.9% for December. Additionally, Trump's inauguration on Monday will reveal the extent of his proposed measures and threats.

Impact on Yields and Stocks
In this environment, it seems challenging for bond yields to decrease while stocks make gains without hesitation. Notably, Wall Street saw a rebound yesterday, although the technology sector lagged.

ECB Insights
Lane, the chief economist of the ECB, highlighted the risk of inflation dropping below the 2% target if European interest rates remain excessively high. Rehn from Finland, speaking from Asia, emphasized that the ECB should cut rates irrespective of the Fed's actions. These comments might stabilize European yields but will also widen the interest rate differential with the US, exerting pressure on the euro.
Asian Market Dynamics
Today presents a mixed scenario in the Asian markets. On one hand, there are rumors that the Trump administration might take a gradual approach to tariffs, positively influencing Asian stocks, particularly in China. However, the Nikkei remained closed yesterday, reflecting declines in other markets. On the other hand, news of potential new restrictions on AI chip exports is pressing the SOX index down -0.35%, significantly impacting Nvidia, which has fallen -2% and -17% over the last four sessions.
Macro Data Releases: The only significant macroeconomic data to watch today is the US Industrial Prices report at 14:30. An increase from +3.0% to +3.5% for December is expected, with the underlying figure anticipated to rise from +3.4% to +3.8%. This could set a challenging stage for tomorrow's CPI data, although much of this may already be priced in.

Political Developments
In France, Bayrou needs to persuade the Assembly regarding his pension reform and gather the necessary support to pass the budget, which will influence the yield of the French bond, currently at a premium of 84 bp.

Conclusion
Overall, we could witness a recovery session today, fueled by expectations of a more measured American approach to tariffs and the dovish remarks from Lane and Rehn.
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