MNI ASIA OPEN: Biden In Surprise Ukraine Trip

NEWS

Europe

Ukraine (BBG): Biden Meets Zelenskiy on Surprise Trip Nearly Year Into War
US President Joe Biden made a surprise visit to Kyiv and met with his Ukrainian counterpart Volodymyr Zelenskiy, declaring “unwavering support” in a dramatic show of solidarity as Russia’s invasion nears the one-year mark.

ECB (MNI): ECB Peak Rate Likely in Summer - BoF's Rehn
The ECB will raise key interest rates by 50bps in March, with further hikes likely into the summer, then hold them at a sufficiently restrictive level “for some time,” Bank of Finland governor Olli Rehn said in an interview with Boersen-Zeitung published Monday. However, Europe’s positive growth prospects need not keep inflation high or make it more persistent than previously expected, he added.

ECB (BBG): Goldman Lifts Forecast for ECB’s Terminal Deposit Rate to 3.5%
Goldman Sachs economists led by Jari Stehn raised their forecast for the European Central Bank’s deposit rate to 3.5%, citing a more hawkish stance from policy makers including Executive Board member Isabel Schnabel. Goldman predicts an additional 25 basis-point move in June.

EU/UK (MNI): Cleverly & Sefcovic To Talk Again This Week As NI Protocol Work Continues
Following talks between himself, Northern Ireland Secretary Chris Heaton-Harris and EU Commission VP Maros Sefcovic, UK Foreign Secretary James Cleverly tweets: "Good to speak again with Maros Sefcovic and Chris Heaton-Harris about ongoing work on NI Protocol. We are focused on finding a durable solution for NI. Intensive work continues and we agreed to talk again in the coming days."

EU/Russia (BBG): EU Nations Push for New Powers to Stop Russia Sanctions Evaders
A group of European Union member states is pushing for the bloc to ramp up its ability to hit back against those helping Russia circumvent sanctions, including through the use of trade measures. The new powers may include issuing warnings to people or companies outside and in the EU that are helping Russia get around sanctions and giving the bloc the ability to act where this relates to products used against Ukraine in battle, according to a draft of the proposal seen by Bloomberg.

EU/US (MNI): Baerbock: No Legal Grounds For EU To Designate IRGC Terrorist Org
Comments from German Foreign Minister Analenna Baerbock hitting wires stating, "As of now, we don't have legal grounds in EU to list [Iranian Revolutionary Guards Corps] as terrorist organisation." Baerbock's comments come following a meeting on Saturday at the Munich Security Conference with US Secretary of State Antony Blinken, French Foreign Minister Catherine Colonna, and UK Foreign Secretary James Cleverly - the Western signatories of the 2015 Joint Comprehensive Plan of Action nuclear accords.

UK (BBG): UK’s FCA to Consult on Post-Brexit Rules for Asset Managers
The Financial Conduct Authority is consulting on regulatory changes for the asset management industry, another element of the UK’s attempt to boost the City of London’s competitiveness after Brexit. A discussion paper published Monday includes proposals to streamline prospectuses, introducing specific guidance around liquidity management and mooting a common framework of rules for all asset managements.

CARBON (BBG): EU Carbon Prices Hit Record as Industry Seen Shaking Energy Woes
European carbon futures rose to a record as easing gas prices are set to boost industrial activity that shut down amid last year’s energy crisis. The rising carbon price follows a year when moves in the cost of emissions were muted compared to highly volatile fossil fuels markets. But European politicians doubled down on the bloc’s cap and trade system, guaranteeing its core role in long-term decarbonization efforts.

Asia

CHINA (BBG): China Launches PE Investment Pilot to Boost Property Industry
China said it is launching a pilot program for real estate private equity investment funds as part of efforts to promote the property industry. The investment scope of the funds would include residential housing, commercial property and infrastructure projects, the China Securities Regulatory Commission said in a statement Monday.

DATA

MNI: EUROZONE DEC CONSTRUCTION OUTPUT -2.5% M/M, -1.3% Y/Y

MNI: EUROZONE FEB FLASH CONSUMER CONF -19.0 (FCST -19); JAN
Consumer sentiment in the euro area rose to the highest in a year — a sign of resilience and rising hope that the region can dodge recession this year (Bloomberg).

US TSYS: Firmly Within Friday’s Range Amid Holiday Thinned Trade

• Cash Tsys were closed and TYH3 sees an early close at joint session lows of 111-24+. The latter cheapened overnight in a modest push back of Friday’s bid before a very tight range on unsurprisingly minimal volumes with the US out for Presidents’ Day.
• In doing so it remained well within Friday’s range and off its low of 111-08+ that saw it briefly clear support at 111-10 (lower 2.0% Bollinger Band) before quickly retracing. To the upside sits resistance at the 50-day EMA of 114-00+.
• Tomorrow sees notable second tier data with the preliminary February manufacturing and service PMIs plus existing home sales for January, before perhaps greater focus on Wednesday’s FOMC Minutes.

EGBs-GILTS CASH CLOSE: Gilts Outperform With ECB Hawkishness In Focus

GIlts easily outperformed Bunds to start the week, with EGB periphery spreads trading mixed.

• With US markets closed for a holiday, and limited European data and central bank speakers, volumes were subdued.
• After trading steadily for most of the session, Bunds weakened in mid-afternoon into the close, following some moderately hawkish comments by ECB's Rehn.
• ECB hike expectations edged a few basis points higher, with the terminal rate seen above 3.7% by September (Of note, Goldman upped their peak call 25bp to 3.50% today as well.)
• Conversely, Gilts held up well with bull steepening in the curve, amid a strong APF sales operation with high bid-to-cover.
• February Flash PMIs are the expected highlight Tuesday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.1bps at 2.898%, 5-Yr is up 3bps at 2.538%, 10-Yr is up 2.4bps at 2.464%, and 30-Yr is up 1.4bps at 2.409%.
• UK: The 2-Yr yield is down 4.8bps at 3.746%, 5-Yr is down 4.9bps at 3.384%, 10-Yr is down 4.4bps at 3.471%, and 30-Yr is down 3.8bps at 3.898%.
• Italian BTP spread up 0.9bps at 186.9bps / Spanish down 0.5bps at 96.4bps

FOREX: G10 Ranges Contained Amid US Holiday, AUD Outperforms

• G10 FX traded within very narrow ranges throughout the US session on Monday with U.S. markets closed due to the observance of the Presidents Day holiday. The USD index remains close to unchanged levels approaching Tuesday’s APAC crossover after paring some moderate gains in Asia.
• AUD remains the strongest performer major at the margins, rising ~0.5%, last printing at $0.6915 having slowly edged above the 0.6900 mark. Firmer Iron Ore and Copper are aiding the Aussie at the margins. AUD/NZD rose to a best level of 1.1088, the highest level for the pair since October last year with the RBA minutes first up on the Tuesday docket.
• With the focus turning to tomorrow’s Eurozone flash PMI’s, EURUSD found supply above the 1.0700 handle and the pair continues to threaten a sustained break below the 50-day EMA, which intersects today around 1.0680. A clear break of this average would strengthen the bearish cycle and initially expose 1.0484, the Jan 6 low.
• Another main data point on Tuesday will be the release of January CPI in Canada, where annual headline inflation is expected to dip to 6.1% Y/y. USDCAD looks set to snap a four day winning streak, however medium term parameters appear well established at 1.3705, the bull trigger and 1.3262, the 2023 lows.
• German ZEW sentiment data and US PMI’s are also scheduled on Tuesday before the FOMC minutes release the following day.

US STOCKS: Holding Off Bullish Trend Near Last Week’s Lows

• S&P e-minis closed early at 4075.75 (-0.3%) at the low end of a narrow 16 point range on Presidents’ Day, against a backdrop of a minor cheapening in Treasury futures. There were similar moves for Nasdaq (-0.2%) and Dow (-0.3%) futures.
• In doing so it only unwound half of Friday’s intraday recovery and kept off its low of 4055.75, otherwise at levels last seen briefly on Feb 10 and before that Feb 1.
• The trend condition is bullish and the latest pullback is considered corrective. The contract has pierced initial support at 4069.52, the 20-day EMA. Firmer support lies at the 50-day EMA, at 4006.63 whilst key resistance and the bull trigger intersect at 4208.50 (Feb 2 high) with a breach resuming the uptrend.