MNI EUROPEAN OPEN: RBA’s Lowe Points To Patience, Notes ’22 Hike Is Plausible

EXECUTIVE SUMMARY

• FED'S BULLARD DOES NOT THINK A HALF-POINT RATE HIKE 'REALLY HELPS US' (RTRS)
• EU TO OUTLINE TECH STANDARDS PLAN TO COUNTER CHINA INFLUENCE (FT)
• RBA’S LOWE FLAGS RATE RISE POSSIBILITY THIS YEAR FOR FIRST TIME (BBG)
• US TRYING TO DRAW RUSSIA INTO WAR SAYS PUTIN (BBC)
• NO 10 REFUSES TO COMMENT ON FRESH REPORTS DETAILING LOCKDOWN PARTIES PM ALLEGEDLY ATTENDED (SKY)

Fig. 1: 5-Year JGB Yield (%)

Source: MNI - Market News/Bloomberg

UK

BOE: The Bank of England should raise rates by at least 0.25 per cent tomorrow to show that it is serious about tackling inflation, according to The Times’s shadow monetary policy committee. The committee was divided on whether to raise rates by 0.25 percentage points or by even more. Five of the nine members of the shadow committee voted to increase the interest rate to 0.5 per cent from 0.25 per cent, while two opted for a 0.5-point rise to 0.75 per cent. The other two backed a rise of 0.75 percentage points to 1 per cent. Interest rates have not been as high as 1 per cent since 2009. They were cut from 5 per cent to 0.5 per cent in a year to aid the economic recovery from the 2008 financial crisis. (The Times)

FISCAL/ENERGY: Boris Johnson is poised to announce billions of pounds in state-backed loans to reduce the impact of soaring energy prices on household bills. The prime minister and Rishi Sunak, the chancellor, have agreed to a “rebate and clawback” scheme, in which taxpayers will underwrite loans to energy firms. Companies will pass the money on to every household in Britain in the form of a rebate on energy bills, limiting the impact of price rises in April. The firms will recoup the money from consumers in subsequent years to pay back the loans as energy prices fall. Government sources said the plans had been approved by ministers and would be announced in the coming days, possibly on Thursday. (The Times)

POLITICS: Downing Street has refused to comment on reports that reveal details of lockdown parties Boris Johnson is alleged to have attended. In new allegations this evening, two newspapers detail claims he attended a party in his flat and also went to a leaving do for two colleagues. (Sky)

EUROPE

ITALY: Italy is looking to sell branches of Banca Monte dei Paschi di Siena SpA even before it finds a buyer for the whole lender, people familiar with the matter said Another state lender, Mediocredito Centrale - Banca Del Mezzogiorno SpA, would buy as many as a few dozen Monte Paschi branches in southern Italy, as part of the bank’s restructuring plan under discussion with European authorities, the people said, asking not to be named discussing confidential deliberations. (BBG)

NORWAY: Norway is easing most of the measures to curb infection and aims to remove the rest in a couple of weeks as it bets a high level of vaccination will be enough to shield the health system from overloading. Limits on guests at private gatherings, a curb on the service of alcohol in bars and restaurants, and testing after arriving at the border have all been removed, Prime Minister Jonas Gahr Store told reporters in Oslo on Tuesday. Face masks will still need to be worn in shops, shopping centers and on public transport where a distance of a meter (3 feet) can’t be maintained. (BBG)

U.S.

FED: St. Louis Federal Reserve President James Bullard on Tuesday said he favors lifting rates at the U.S. central bank's meeting in March and likely again in May, but he pushed back against the idea of kicking off the coming tightening cycle with a half-percentage point hike. (RTRS)

FED: MNI: Fed's Reticence To Hike Rates Raises Risk of Hard Landing

• The Federal Reserve’s slow march toward eventually raising interest rates in the face of surging inflation puts them further behind in the fight to combat price pressures, and may well force officials to overcorrect later by tightening policy too quickly, former Fed staffers told MNI after last week’s FOMC meeting - on MNI Policy MainWire now, for more details please contact sales@marketnews.com.

FED: Democratic Senator Joe Manchin praised all five of President Joe Biden’s nominees for the Federal Reserve, an important signal for their confirmations in the 50-50 Senate. “They all look extremely qualified,” the West Virginia senator, who is a pivotal vote, said Tuesday of the nominees. While Federal Reserve Chair Jerome Powell likely faces easy confirmation to a second term as head of the central bank, other Biden nominees have come in for criticism from GOP senators. Sarah Bloom Raskin, who is nominated for vice chair of supervision, faces opposition from the oil and gas lobby and some Republicans over her view the Fed should act to mitigate the risks from climate change. Separately, Banking Chair Sherrod Brown of Ohio told reporters he planned to vote in committee on Biden’s Fed picks on Feb. 15. (BBG)

ECONOMY: MNI INTERVIEW: US Mfg Growth To Stay Solid Despite Omicron -I SM

• U.S. manufacturers are experiencing weaker business activity in the face of omicron but will likely sustain moderate growth levels into 2023, Institute for Supply Management manufacturing chair Tim Fiore told MNI Tuesday. "I don't think this knocks us off the path at all," he said about omicron. "This is just a little bit of a blip but I do think we're really not looking at much over 60 anymore [in the PMI]. I think we're gonna run strong right into 2023" - on MNI Policy MainWire now, for more details please contact sales@marketnews.com.

FISCAL: Democratic Senator Joe Manchin said President Joe Biden’s $2 trillion Build Back Better plan is “dead,” and any talks on reviving key parts of it must start from scratch. “What Build Back Better bill?” Manchin said Tuesday when asked about the legislation. “It’s dead.” (BBG)

FISCAL: House Democrats have reupped calls for President Joe Biden to move ahead with the $555 billion in climate change investments already passed by the House as part of the Build Back Better Act, which has stalled for more than a month in the Senate. The group of Democrats, who are running for reelection in swing districts, have demanded that the president quickly finalize clean energy and climate-change provisions that can pass the Senate in the coming weeks. They said that the urgency of the climate crisis requires immediate action. (CNBC)

CORONAVIRUS: Pfizer Inc. and partner BioNTech SE have begun submitting data to U.S. regulators for authorization of their Covid-19 vaccine in children 6 months to 4 years old, according to people familiar with the matter, hastening an effort to get shots to younger kids after the omicron wave caused pediatric infections to jump. (BBG)

CORONAVIRUS: New Orleans is requiring Covid vaccinations for all students ages 5 and up beginning Feb. 1, making it one of the first major school districts to require such mandates. Families may still claim exemptions for philosophical, religious, or medical needs. “We know vaccinations are the best tool we have against COVID-19,” the district said in a statement. “We are doing our part to connect our families to these lifesaving remedies.” (BBG)

BONDS: A record amount of more than half a trillion dollars of debt was raised in January by companies as issuers scrambled to take advantage of attractive funding conditions before global central banks led by the U.S. Federal Reserve begin a tightening cycle. (RTRS)

ENERGY: Texas Gov. Greg Abbott (R) said on Tuesday "no one can guarantee" that there won't be power outages throughout the state as it braces for freezing weather. The Republican governor's remarks come just over two months after he promised the lights would stay on during the winter season, touting that the state was better equipped to endure the inclement weather. (Axios)

OTHER

GLOBAL TRADE: The EU will on Wednesday outline a more aggressive approach to setting global standards for cutting-edge and green technologies in a concerted effort to counter the influence of China. Margrethe Vestager, the bloc’s competition chief, told the Financial Times the new strategy was designed to ensure Europe continued to set international benchmarks that guided the development of everything from facial recognition systems, advances in battery power and the next generation of environmental innovations. “This is strategic,” said Vestager. “It’s really, really important who sets the standards because they should enable a market to work, but not to make innovation difficult.” She added the EU wanted to implement the plan “as fast as possible”. (FT)

U.S./CHINA: The U.S. House of Representatives plans a procedural vote on Wednesday on a bill aimed at increasing U.S. competitiveness with China and supporting the U.S. chip industry, according to a source familiar with the decision. President Joe Biden's administration is pushing to persuade Congress to approve the bill, which includes $52 billion to subsidize semiconductor manufacturing and research, as shortages of the key components used in autos and computers have exacerbated supply chain bottlenecks. If the procedural vote succeeds in the narrowly Democratic-controlled House, the full chamber would aim to vote on the full bill on Friday. (RTRS)

CORONAVIRUS: The World Health Organization on Tuesday said there’s no indication omicron’s new sister variant, BA.2, causes more serious infections than the original version, though initial data shows it’s more transmissible. The WHO and other researchers around the world have found that omicron generally doesn’t make people as sick as the delta variant, though it does spread faster than previous strains of the virus and can evade some of the immune protection provided by vaccines. (CNBC)

BOJ: Bank of Japan Governor Haruhiko Kuroda said on Wednesday he "cannot accept" the view the central bank's ultra-loose monetary policy has led to regional lenders' deteriorating health. "It's true Japan's low interest rate environment has had an impact on regional lenders through various channels," Kuroda told parliament. "But Japan's economy has expanded moderately thanks in part to the BOJ's aggressive monetary easing" and helped boost growth in areas the regional banks operate, he said. (RTRS)

RBA: Australia’s central bank chief Philip Lowe signaled for the first time that interest rates could rise this year if faster wages growth returns inflation sustainably to the 2-3% target. That is “a plausible scenario” depending on how events unfold, but there are plenty of other scenarios as well, Lowe said in comments that increased his room for maneuver over the coming months. (BBG)

NEW ZEALAND: People who suddenly lose their jobs through redundancy or illness would receive up to 80 per cent of their usual income for six months under a newly-proposed Government scheme. The proposal would essentially offer ACC-like cover to those who lose their jobs through redundancy or chronic illnesses, rather than just accidents. Those who lost their job would be given four weeks notice and a four-week payment at 80 per cent of their salary. If they could not find more work they would get up to 80 per cent of their usual income for another six months. This would be capped at the ACC rate – currently $1820 a week. (Stuff NZ)

NEW ZEALAND: New Zealanders will be able to get a vaccine booster shot after three months rather than four months, starting from Feb. 4, according to an emailed statement from Covid Response Minister Chris Hipkins. The announcement means 1 million more people will be eligible for a booster from this weekend. More than 1.3 million people in the nation of about 5.1 million have already received a third shot. (BBG)

NORTH KOREA: The United States, supported by Britain and France, has asked the U.N. Security Council to meet behind closed-doors on Thursday over North Korea's launch of an intermediate-range ballistic missile, diplomats said on Tuesday. (RTRS)

BRAZIL: Special Treasury and Budget Secretary Esteves Colnago on Tuesday argued that reducing a Brazilian tax on industrialized products (IPI) would provide more effective relief for consumer prices than cutting fuel taxes. Addressing an online seminar hosted by Credit Suisse, he also suggested that a stabilization fund for fuel prices would be ineffective considering the large cost for a relatively small benefit. (RTRS)

RUSSIA: Russia's President Vladimir Putin has accused the US of trying to draw his country into a war in Ukraine. In his first significant comments on the crisis in several weeks, he said America's goal was to use a confrontation as a pretext to impose more sanctions on Russia. He also said the US was ignoring Russia's concerns about Nato alliance forces in Europe. (BBC)

RUSSIA: White House Press Secretary Jen Psaki says the “door to diplomacy remains open” when it comes to Russia-Ukraine crisis. (PBS)

RUSSIA: Pre-emptive sanctions against Russia and the fate of the Nord Stream 2 pipeline have emerged as two sticking points in Senate negotiations over a new package of penalties in response to Russian President Vladimir Putin’s aggressive posture toward Ukraine. “It’s 95% done, but it’s always the last 5% that are the toughest,” Democratic Senator Chris Murphy, a member of the Foreign Relations Committee, said. “I think there’s still questions about the Nord Stream 2 language and the balance of sanctions applied immediately versus sanctions to be applied after an invasion.” (BBG)

RUSSIA: The Biden administration has informed the Kremlin it is willing to discuss giving Russia a way to verify there aren’t offensive Tomahawk cruise missiles stationed at sensitive NATO missile-defense bases in Romania and Poland, according to people familiar with the matter. The U.S. proposal is aimed at allaying Moscow’s concerns the launchers could be used to target Russia. One person added any agreement would only happen after discussion with allies, especially Poland and Romania, and would need to be reciprocated with a number of Russian bases housing ground-launched weapons. There are no offensive missiles, such as ground-launched Tomahawks, at the sites in Poland and Romania. Even so, Russian President Vladimir Putin has repeatedly suggested the U.S. and the North Atlantic Treaty Organization could use the Aegis Ashore missile-defense systems to fire Tomahawks. (BBG)

RUSSIA: Boris Johnson has warned Russia that Britain and its allies will hit Moscow with sanctions the "moment the first Russian toecap crosses further into Ukrainian territory" The prime minister says it is vital the Kremlin "steps back" from what would be a "military disaster" for both Russia and the world. (BBC)

RUSSIA: The U.S. government has urged Brazilian President Jair Bolsonaro to cancel a visit with President Vladimir Putin in Russia due to rising tensions over its troop build-up near Ukraine, a person with knowledge of the matter told Reuters. (RTRS)

RUSSIA: RT tweeted the following on Tuesday: “Military personnel 'killed' after Ukrainian drone strike on the frontline in Eastern Ukraine One person has been killed Tuesday, according to the head of the self-declared Donetsk People's Republic (DPR). (Reports)” (MNI)

SOUTH AFRICA: Power utility Eskom has announced that it will implement stage 2 load shedding from 11:00 on Wednesday morning to 05:00 next week Monday. (News 24)

PERU: A former central bank economist educated in the U.K. was sworn in as Peru’s new finance minister on Tuesday, potentially calming the nerves of investors alarmed by recent political turmoil. President Pedro Castillo named Oscar Graham, who spent more than two decades working at the monetary authority, to take over from Pedro Francke. He also sworn in a prime minister together with new chiefs of the interior, defense, and foreign affairs. Graham’s appointment will reassure investors that Peru won’t implement abrupt changes to its economic model, said Rodolfo Rojas, a partner at Lima-based Sequoia political advisory group. (BBG)

OIL: The oil market will be oversupplied by 1.3 million b/d in 2022 if OPEC and its allies fully unwind their production cuts as planned, the group's advisory technical committee heard Feb. 1, as ministers appear likely to approve another 400,000 b/d hike in quotas for March. But the inability of several members to hit their quotas over the past several months casts significant doubt on whether the alliance will actually bring on as much supply as it is aiming for. The 19 OPEC+ countries with quotas underperformed their production targets by 832,000 b/d in December, according to analysis prepared for the committee and seen by S&P Global Platts. (Platts)

OIL: OPEC nations barely increased production last month amid chronic struggles among members and renewed unrest in Libya, again illustrating the group’s inability to calm a booming market. The Organization of Petroleum Exporting Countries and its partners are expected to rubber-stamp the revival of more halted supplies when they gather online on Wednesday. But a Bloomberg survey showed they struggled severely in January, in part due to depressed investment. (BBG)

OVERNIGHT DATA

JAPAN JAN MONETARY BASE +8.4% Y/Y; DEC +8.3%
JAPAN JAN MONETARY BASE END OF PERIOD Y663.2TN; DEC Y670.1TN

NEW ZEALAND Q4 UNEMPLOYMENT RATE 3.2%; MEDIAN 3.3%; Q3 3.3%
NEW ZEALAND Q4 EMPLOYMENT CHANGE +3.7% Y/Y; MEDIAN +3.8%; Q3 +4.2%
NEW ZEALAND Q4 EMPLOYMENT CHANGE +0.1% Q/Q; MEDIAN +0.4%; Q3 +1.9%
NEW ZEALAND Q4 PARTICIPATION RATE 71.1%; MEDIAN 71.2%; Q3 71.2%
NEW ZEALAND Q4 AVERAGE HOURLY EARNINGS +1.4% Q/Q; MEDIAN +1.0%; Q3 +1.2%
NEW ZEALAND Q4 PVT WAGES EX OVERTIME +0.7% Q/Q; MEDIAN +0.9%; Q3 +0.7%
NEW ZEALAND Q4 PVT WAGES INC OVERTIME +0.7% Q/Q; MEDIAN +0.9%; Q3 +0.7%

NEW ZEALAND JAN CORELOGIC HOUSE PRICE INDEX +27.5% Y/Y; DEC +27.6%

UK JAN BRC SHOP PRICE INDEX +1.5% Y/Y; DEC +0.8%

MARKETS

UP TODAY (Times GMT/Local)

Date	GMT/Local	Impact	Flag	Country	Event
02/02/2022	1000/1100	***		IT	HICP (p)
02/02/2022	1000/1100	***		EU	HICP (p)
02/02/2022	1200/0700	**		US	MBA Weekly Applications Index
02/02/2022	1315/0815	***		US	ADP Employment Report
02/02/2022	1330/0830	*		CA	Building Permits
02/02/2022	1500/1000	**		US	Housing Vacancies
02/02/2022	1500/1000			CA	BOC Deputy Gravelle Speaks On Swaps Panel
02/02/2022	1530/1030	**		US	DOE Weekly Crude Oil Stocks
02/02/2022	2000/1500			CA	BOC Gov Macklem Testifies At Parliamentary Committee
03/02/2022	2200/0900	*		AU	IHS Markit Final Australia Services PMI