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MNI EUROPEAN OPEN: China Pledges Support For Equity Markets, Livening Up Pre-FOMC Asia Session

EXECUTIVE SUMMARY

  • ECB’S DE GUINDOS: NORMALIZATION DOESN’T MEAN IMMEDIATE RATE HIKE (BBG)
  • GERMANY EARMARKS $48BN FOR ARMAMENTS IN DEFENCE PUSH (BBG)
  • UKRAINIAN PRESIDENT: POSITIONS OF UKRAINE, RUSSIA AT TALKS SOUND MORE REALISTIC (IFX)
  • RUSSIA-UKRAINE TALKS TO CONTINUE ON WEDNESDAY
  • BIDEN'S NOMINEE FOR TOP FED REGULATORY POST BOWS OUT (RTRS)
  • CHINA STOCKS EXTEND REBOUND AS STATE COUNCIL VOWS MARKET SUPPORT (BBG)
  • ANALYSTS: CHINA COULD STILL ADJUST POLICY RATES (CSJ)

Fig. 1: WTI & Brent Crude Oil Futures ($/bbl)

Source: MNI - Market News/Bloomberg


EUROPE

ECB: “We are in a process of monetary normalization, when it comes to net asset purchases, but that doesn’t mean we will raise rates immediately,” European Central Bank Vice President Luis de Guindos says. Governments are taking the right steps in reducing taxes to counter surge in energy prices stemming from the war in Ukraine, Guindos tells Spain’s Antena 3 television station on Tuesday. Tax breaks and subsidies should be selective and temporary. Sees no risk of recession in euro zone as result of conflict. (BBG)

GERMANY: Germany has targeted at least 44 billion euros ($48 billion) in spending on modern armaments as it seeks to rapidly upgrade its military after Russia’s invasion of Ukraine, according to a lawmaker involved in the defense ministry’s planning process. The bulk of the total so far is going toward warplanes and ammunition, said Marcus Faber, a defense expert and member of the Free Democrats, a junior partner in Chancellor Olaf Scholz’s three-party coalition. Germany said Monday it would purchase 35 Lockheed Martin Corp. F-35 warplanes and 15 Eurofighters. Those aircraft will cost a combined 15 billion euros, Faber said. Another 20 billion euros is earmarked for ammunition, with more than 9 billion euros going to cargo helicopters and armored personnel carriers, he said. The spending spree is part of an urgent effort to strengthen the armed forces as decades of relative stability give way to a new, uncertain reality set loose by Russian President Vladimir Putin’s effort re-establish dominance in parts of the former Soviet Union. (BBG)

U.S.

FED: Sarah Bloom Raskin on Tuesday withdrew as President Joe Biden's nominee to become the top bank regulator at the Federal Reserve, one day after a key Democratic senator and moderate Republicans said they would not back her, leaving no path to confirmation by the full Senate. "Despite her readiness — and despite having been confirmed by the Senate with broad, bipartisan support twice in the past — Sarah was subject to baseless attacks from industry and conservative interest groups," Biden said in a statement. (RTRS)

FED: U.S. Senate Banking Committee Chair Sherrod Brown said Tuesday he will move to hold a vote on four of President Joe Biden's nominees to the Federal Reserve Board after the fifth, former Fed Governor Sarah Bloom Raskin, withdrew from consideration amid objections from Republicans and one Democrat over her views on climate change risks. (RTRS)

FED: Senator Thom Tillis, a Republican from North Carolina, says he sees no path forward for President Joe Biden's nominee for the Federal Reserve vice chair of supervision, Sarah Bloom Raskin. Tillis also says he also wouldn't vote to support Lael Brainard, Biden's nominee for vice chair of the Fed. (BBG)

FISCAL/CORONAVIRUS: The White House on Tuesday warned the U.S. won’t have enough booster shots and lifesaving Covid treatments for Americans if Congress fails to pass $22.5 billion in additional pandemic funding. Senior Biden administration officials, on a call with reporters, said the U.S. could face another wave of Covid infections in the coming months, even as new cases and hospitalizations have dramatically declined from the peak of the unprecedented omicron surge in January. Infections are already on the rise again in major European nations, such as the U.K. and Germany. China is battling its worst outbreak since 2020. (CNBC)

CORONAVIRUS: Pfizer and BioNTech are expected to seek U.S. authorization this week for a second Covid-19 vaccine booster for people 65 and older, according to a person familiar with the plans. If the Food and Drug Administration grants authorization, the additional shot would go to a group of people who are among those with the highest risk of serious illness and death from Covid. (CNBC)

OTHER

CORONAVIRUS: Informal discussions among the United States, South Africa, India and the European Union have resulted in a compromise that could end a deadlock over an intellectual property waiver aimed at helping end the COVID-19 pandemic, the U.S. Trade Representative's Office said Tuesday. "The difficult and protracted process has resulted in a compromise outcome that offers the most promising path toward achieving a concrete and meaningful outcome," USTR spokesman Adam Hodge said. While no agreement on text had been reached, the parties were consulting on the outcome, he said. (RTRS)

JAPAN: Japanese Prime Minister Fumio Kishida is likely to order the compilation of “large-scale” economic stimulus measures after passing the annual budget, Yomiuri reports, without saying where it obtained the information. The government and ruling Liberal Democratic Party will move to reactivating a “trigger clause” on the gasoline tax that will allow the levy to be lowered. Party heads of the ruling coalition and opposition Democratic Party for the People will meet Wednesday to discuss specifics, including revamping the trigger clause mechanism. (BBG)

JAPAN: Japan's government is considering compiling a fresh economic stimulus package after the fiscal 2022 budget passes parliament, Kyodo news agency reported on Wednesday. Ruling coalition officials called on Tuesday for a fresh spending package to cushion the economic blow from the Ukraine crisis, which has hit households and retailers by driving up already rising energy and food prices. (RTRS)

NEW ZEALAND: New Zealand will begin reopening its border to the world next month, bringing an end to the “fortress” settings that kept Covid-19 out for much of the pandemic. Vaccinated Australians will be allowed to enter without needing to isolate on arrival from 11:59 p.m. on April 12, Prime Minister Jacinda Ardern said Wednesday in Wellington. The border will open to visitors from other visa-waiver countries such as the U.S., the U.K., Japan, Singapore and Germany from midnight May 1, she said. “We’re ready to welcome the world back,” Ardern told a news conference. “Now that we’re highly vaccinated and predicted to be off our omicron peak, it’s now safe to open up.” (BBG)

SOUTH KOREA: A planned meeting between President Moon Jae-in and President-elect Yoon Suk-yeol has been called off as working-level, pre-meeting discussions have not been completed yet, Cheong Wa Dae said. Moon and Yoon had been scheduled to hold a one-on-one meeting Wednesday, marking their first encounter since Yoon won the election last week. The two sides will reschedule the meeting, officials said. (Yonhap)

NORTH KOREA: North Korea’s latest missile test on Wednesday appeared to have “failed” immediately after launch, according to South Korea’s military. The unidentified projectile appeared to have launched from an area near Pyongyang’s international airport and failed shortly after it took off, the Joint Chiefs of Staff said in a text message. The area was used for two launches in the past few weeks. North Korea said those launches were tests for a satellite system, but the U.S. said they were testing components for an intercontinental ballistic missile. Wednesday morning’s launch may have been of a ballistic missile, Japanese media including public broadcaster NHK reported, citing unidentified Defense Ministry officials. North Korea typically doesn’t comment on any test until at least a day after the event. The suspected launch comes after Yonhap News Agency reported that North Korea could fire an ICBM as soon as this week, in what would be its most serious provocation in five years as South Korea undergoes a presidential transition and the world focuses on Russia’s invasion of Ukraine. Confirmation of such a test can take hours after it occurs. (BBG)

BRAZIL: The decline in oil prices abroad heralds a return to normalcy and Petrobras is expected to follow this move and reduce domestic fuel prices, Brazilian President Jair Bolsonaro told during an event in Brasilia. Fuel price hikes are not the government’s responsibility, he said, attributing the latest readjustments exclusively to Petrobras. Govt weighs a further cut in the so-called IPI industrial tax for cars, motorcycles and white-colored home appliances, according to Bolsonaro. (BBG)

BRAZIL: Petrobras should invest half of its profit in new refineries and research to continue growing, former president Luiz Inacio Lula da Silva said during an interview with a local radio from Northeastern Brazil. If elected, he pledged to spend as much as needed to improve the lives of Brazilians, adding he does not believe in the spending cap. Former president will also strive to strengthen workers’ rights, he told when asked on the latest labor and pension reforms. As for environmental concerns, Lula stressed that mining activities in indigenous lands are forbidden and, if elected, he will commit to fighting deforestation in the Amazon forest and Pantanal, the world’s largest tropical wetland. “We are going to re-create many investment funds so that rich countries can contribute to protecting the forest,” he said. (BBG)

RUSSIA: Ukrainian President Volodymyr Zelenskiy said on Wednesday that the positions of Ukraine and Russia at peace talks were sounding more realistic, the Interfax Ukraine news agency reported. "Meetings continue. I am told that the positions at the negotiations sound more realistic," Zelenskiy said in a video address released early on Wednesday, the agency said. "However, more time is still needed for decisions to be in the interests of Ukraine." (RTRS)

RUSSIA: Ukrainian and Russian delegations will continue negotiations on Wednesday amid “fundamental contradictions'' in the talks, Mykhailo Podolyak, an adviser to Zelenskiy’s chief of staff, said in a tweet. “But there is certainly room for compromise,” Podolyak said after the talks. (BBG)

RUSSIA: Some 20,000 civilians have been evacuated from Mariupol as thousands of private cars left the besieged southern port via a humanitarian corridor to the Ukrainian-government-held city of Zaporizhzhia, according to local officials. Buses heading to the city to deliver humanitarian aid and offer transport for residents seeking to leave remained stuck outside the city, where they’ve been held up since the weekend by Russian forces, and will make another attempt on Wednesday. (BBG)

RUSSIA: Joe Biden said the US and its allies were overcoming “exceedingly difficult” conditions to get humanitarian supplies into Ukraine. Speaking at the White House, as he signed the consolidated appropriations act into law, the president said his administration’s priority was to provide essential supplies for civilians suffering during the “rapidly evolving crisis” caused by Russian attacks. “We’re airlifting emergency relief supplies in staging positions in the region, thermal blankets, water treatment equipment, so they can be shipped into Ukraine,” the president said. “Essentials like soap, laundry detergent, simple sounding things to refugees who fled really with nothing but the clothes on their backs. “It’s exceedingly difficult to get supplies into Ukraine while the Russian onslaught continues. But we’re managing to get supplies in... thanks to the bravery of so many frontline workers who are still at their posts.” (The Guardian)

RUSSIA: The White House on Tuesday made light of Russia's retaliatory sanctions against U.S. officials, saying Moscow may have inadvertently sanctioned the deceased father of Joe Biden by omitting the suffix "junior" from the spelling of the U.S. president's name. Russia said on Tuesday it had placed Biden, Defense Secretary Lloyd Austin, CIA chief William Burns, National Security Adviser Jake Sullivan, White House press secretary Jen Psaki and a handful of other U.S. officials on a "stop list" that bars them from entering the country. Aimed at retaliating against U.S. sanctions imposed on Russia over its invasion of Ukraine, the move appeared largely symbolic, since Russia's Foreign Ministry said it was maintaining official relations and if necessary would make sure that high-level contacts with the listed individuals could take place. "I think we are confident that if we need to have ... direct and indirect conversations with Russia we will be able to do that." (RTRS)

RUSSIA: President Joe Biden will travel to Europe next week to meet with world leaders and discuss Russia's invasion of Ukraine, White House press secretary Jen Psaki said Tuesday. The President will travel to Brussels, Belgium, to participate in a NATO summit on March 24 and will also join a European Council meeting, Psaki told reporters at a White House briefing. The trip, which will be one of the most closely watched visits to Europe by an American president in decades, comes weeks after Russia launched an unprovoked attack on Ukraine. Biden will "discuss ongoing deterrence and defense efforts," during the NATO summit and reaffirm the US' commitment to its NATO allies, Psaki said. "He will also join a scheduled European Council summit to discuss our shared concerns about Ukraine, including trans-Atlantic efforts to impose economic costs on Russia, provide humanitarian support to those affected by the violence and address other challenges related to the conflict," she said. (CNN)

RUSSIA: An international peacekeeping mission should be sent to operate in Ukraine, the leader of Poland's ruling party said on Tuesday during a press conference in Kyiv alongside Ukrainian President Volodymyr Zelenskiy. "I think that it is necessary to have a peace mission - NATO, possibly some wider international structure - but a mission that will be able to defend itself, which will operate on Ukrainian territory," Jaroslaw Kaczynski said during the conference, which was broadcast on Polish television. (RTRS)

RUSSIA: President Biden is expected to announce more than $1b in new military assistance to the Ukraine government as early as Wednesday, according to U.S. officials, as Ukrainian president Volodymyr Zelenskiy, is expected to make a plea to Congress for more aid to defend his country. The $1.01b is expected to include more of the same kinds of military equipment the U.S. says the Ukrainians need the most: antiarmor and antiair systems, including portable air defenses such as Javelins and Stingers. The money would come from the roughly $13.6 billion allotted for Ukraine in the omnibus budget bill Biden signed Tuesday. (WSJ)

RUSSIA: Ukrainian officials plan to present the United States with a list of military equipment they need, including armed drones and mobile air-defense systems, when President Volodymyr Zelensky of Ukraine addresses Congress on Wednesday, according to two European diplomats briefed on the request. The new list does not take the place of Ukraine’s high-profile request for Polish MIG fighter planes, which has been held up, but Ukrainian officials have crafted a list of additional matériel the Biden administration might be more willing to give, one of the diplomats said. (NYT)

RUSSIA: U.S. Senate Republican leader Mitch McConnell said on Tuesday the idea of arming Ukraine with warplanes transferred from Poland was still under discussion. The United States last week rejected an offer by Poland to transfer Russian-made MiG-29 fighter jets to boost Ukraine's air force in its defense against invading Russian forces. "I haven’t met anybody in the Senate who's not in favor of seeing those MiGs get into Ukraine. Exactly how to make that happen is still under discussion," McConnell told reporters. (RTRS)

RUSSIA: The European Union formally approved on Tuesday a new barrage of sanctions against Russia for its invasion of Ukraine, which include bans on investments in the Russian energy sector, luxury goods exports and imports of steel products from Russia. The sanctions, which come into effect after publication in the EU official journal later on Tuesday, also freeze the assets of more business leaders who support the Russian state, including Chelsea football club owner Roman Abramovich. The European Commission said in a statement on Tuesday that the sanctions included “a far-reaching ban on new investment across the Russian energy sector”. The measure will hit Russia’s oil majors Rosneft, Transneft and Gazprom Neft, but EU members will be still able to buy oil and gas from them, an EU source told Reuters. (RTRS)

RUSSIA: The Ukrainian government is seeking to have President Volodymyr Zelenskiy deliver a virtual speech to the Japanese parliament, broadcaster TV Asahi reports, citing a Japan ruling party official. Request was made via Ukrainian Embassy in Tokyo. No precedent of a virtual speech in Japanese parliament; official quoted as saying there are technical hurdles including the lack of a screen. (BBG)

RUSSIA: Chelsea Football Club is still being managed by those close to Roman Abramovich, leading to friction in discussions with the government over how the team can operate, a U.K. official familiar with the matter said. The government is frustrated with the approach of the club’s management as it tries to find ways to work with the club after sanctioning its owner over his links to Russian President Vladimir Putin, according to the person, who requested anonymity speaking about private discussions. Britain last week froze Abramovich’s assets, altering the way the club is run, and complicating plans for a rushed sale. The government -- which is now effectively in charge of any sale process -- issued a license spelling out the operations the club can undertake. That prevented it from carrying out player transfers or selling new tickets to soccer matches, and limiting what it can spend money on. At stake is the ability of one of the Premier League’s biggest clubs -- Chelsea are the reigning European champions -- to keep operating. The government has already said it’s open to an application for a sale of the club, so long as the proceeds don’t go to Abramovich. (BBG)

RUSSIA: Japan will revoke Russia's most-favoured nation trade status as part of further sanctions against Moscow following the invasion of Ukraine, two people with direct knowledge with the matter told Reuters on Wednesday. The government is set to announce the decision on Wednesday, public broadcaster NHK reported. The Group of Seven (G7) nations, which includes Japan, had said on Friday they would seek the move. With the revocation of the most-favoured status, Japan would raise tariffs for certain seafood products such as sea urchins and crab imported from Russia by passing legislation during the current session of parliament, the Mainichi newspaper reported. In 2021, Russia accounted for 81% of sea urchins and 47.6% of crab imported by Japan, according to government data. (RTRS)

RUSSIA: Russia’s State Transport Leasing Company, GTLK, has paid the coupon on the $600 million bonds issued by its Ireland-based subsidiary due on March 10. The payment, which totals about $14 million, was processed on Friday and reached bondholders in the following days, according to people familiar with the matter, who asked not to be identified because they aren’t authorized to speak publicly. (BBG)

RUSSIA/INDIA: Russia, many of whose banks have been cut off from the Swift financial network, is exploring opening alternative payment channels with India, including linking Unified Payments Interface (UPI) with the Faster Payments System (FPS) of the Bank of Russia, to continue cross-border trade. According to Dmitry A. Solodov, a spokesperson for the Russian embassy in New Delhi, his government has also asked Indian lenders to connect to the financial messaging system of the Bank of Russia to facilitate interbank transactions. In addition, the two sides are discussing accepting RuPay and MIR Cards within national payment infrastructures, Solodov said in an emailed statement. “All these options are on the table and are being discussed by the two governments, the Reserve Bank of India and the Bank of Russia," said a senior Indian government official, requesting anonymity. (Mint)

RUSSIA/INDIA: White House press secretary Jen Psaki said India would not be violating US sanctions by purchasing discounted Russian oil but warned that such a move would put the world’s largest democracy on the wrong side of history. (Independent)

RUSSIA/IRAN: The United States continues to engage with Russia on reviving the Iran nuclear deal, a senior U.S. State Department official said on Tuesday, saying Moscow may now grasp that Ukraine-related sanctions should not affect the accord's implementation. Washington would not sanction Russian participation in nuclear projects that are part of the deal, formally called the Joint Comprehensive Plan of Action (JCPOA), when it is fully implemented, the official said on condition of anonymity. Lavrov said Russia had received written U.S. assurances that sanctions against Moscow over Ukraine would not hinder cooperation within the framework of the deal, which lifted sanctions on Tehran in return for curbs on its nuclear program. "We continue to engage with Russia on a return to full implementation of the JCPOA," the senior U.S. State Department official said when asked about Lavrov's comments. "We would of course not sanction Russian participation in nuclear projects that are part of resuming full implementation of the JCPOA." (RTRS)

RUSSIA/IRAN: Russia's foreign ministry said on Tuesday the remaining points of an agreement aimed at reviving a big-power nuclear deal with Iran were being 'polished', and again denied U.S. suggestions that Moscow was blocking an accord, the TASS news agency reported. Earlier, Foreign Minister Sergei Lavrov said after meeting his Iranian counterpart that Russia had received written assurances from Washington that sanctions against Moscow over Ukraine would not hinder cooperation within the framework of the deal. RIA news agency quoted the ministry as saying these points were being added to the treaty. The 2015 deal between Iran and major powers that is being revived lifted sanctions on Tehran in return for curbs on its nuclear programme. (RTRS)

RUSSIA: S&P Dow Jones Indices made the following statement as part of a broader announcement on Tuesday: “S&P DJI now announces that it will remove all bonds from issuers whose Country of Risk is Russia or Belarus with the upcoming rebalancing effective after the close of business on Thursday, March 31, 2022. The bonds will continue to be priced in the index as per the evaluated prices from the designated pricing vendor.” (MNI)

PERU: Peru President Pedro Castillo said the country is suffering an unprecedented institutional crisis during a speech to congress a day after lawmakers approved a motion to impeach him. Castillo said that the mandates of five of six constitutional court judges as well as the human rights ombudsman, who “promoted the impeachment of the president,” have expired. Judicial branch has suffered from years of legitimacy problems, Castillo said. Said his government will propose legislative reforms to overcome the country’s institutional crisis. Castillo vows PEN8.9 billion worth of stalled public works to move forward. Expects Peru to exceed $64 billion in exports in 2022. (BBG)

COMMODITIES: Trafigura Group, one of the world’s top oil and metals traders, has been holding talks with private equity groups to secure additional financing as soaring prices trigger giant margin calls across the commodities industry. Trafigura has in recent weeks stepped up efforts to seek new funding from beyond its traditional group of bank lenders, according to people familiar with the matter. The trader held talks with Blackstone Inc. for an investment of around $2 billion to $3 billion in preference shares or a similar hybrid instrument, but those talks ended without a deal, said the people, who asked not to be identified as the discussions were private. Trafigura has also approached Apollo Global Management Inc., BlackRock Inc. and KKR & Co., the people said. The discussions with private equity firms have been broad-based, ranging from financing for specific projects to raising funding at a company level, the people said. There’s no certainty any of the discussions will progress to a deal, they said. (BBG)

METALS: The London Metal Exchange (LME) will reopen nickel trading Wednesday after a week of suspension following an unprecedented surge in the metal’s price and a massive short squeeze involving a Chinese metals giant. Trading will restart at 8 a.m. London time March 16, the LME said in a statement. The exchange decided to set daily price limits in either direction for all base metal outright contracts. (Caixin)

METALS: Creditors to Yanggu Xiangguang Group Co., one of China’s biggest copper smelters, has stopped providing more loans over concerns about its ability to repay, according to people familiar with the matter. The lenders of Xiangguang include Chinese and foreign banks, said the people, who asked not to be named as the information is private. The lenders are in discussions with Xiangguang on solutions, the people said. The local government is lobbying the banks to extend debt maturities and resume some financing, but no agreement has been made yet, the people said. Xiangguang, based in Yanggu of the eastern Chinese province of Shandong, held a combined liability of 11 billion yuan ($1.7 billion) as of September, according to its latest quarterly result. It’s not clear why creditors have withdrawn support, and Xiangguang is still turning a profit in its refining business. (BBG)

ENERGY: Boris Johnson will hold talks with the leaders of Saudi Arabia and the United Arab Emirates as he bids to end the West's "addiction" to Russian oil and gas. With Vladimir Putin's increasingly barbaric assault on Ukraine set to enter a third week, the prime minister will visit the Gulf in a stepping-up of his efforts to starve Moscow of its income from fossil fuels. Mr Johnson will meet with Crown Prince Mohammed bin Zayed in Abu Dhabi on Wednesday, before travelling to Riyadh to speak with Crown Prince Mohammed bin Salman. There is a widespread expectation that the prime minister will use the trip to try and persuade Gulf states to boost their own production of oil and gas. (Sky)

CHINA

PBOC: The People’s Bank of China is likely to cut the rate of the Medium-term Lending Facility by another 10 bps in Q2, as well as lowering banks’ reserve requirement ratios, the Securities Daily reported citing Wang Qing, chief analyst at Golden Credit Rating. The need for further easing was highlighted after new loans in February expanded at the slowest pace in 20 years, the newspaper said citing Wang. Inflation will not hinder the subsequent easing as CPI will remain within the 3% ceiling and PPI will edge down from the current high level, Wang was cited as saying. (MNI)

PBOC: The PBOC should show its pro-growth stance and signal the market with a clear interest rate adjustment trajectory, so as to stabilize businesses’ investment confidence, wrote Zhu He, deputy director of Research Department of China Finance 40 Forum, a state-affiliated policy advisory body. The PBOC should support credit expansion and help resolve risks in the real estate sector. Developers may face liquidity crunch as home sales data still fell sharply and the record-low medium and long-term new loans borrowed by residents in February indicated sluggish demand, wrote Zhu. A tight cash flow situation in the sector could trigger developers’ debt risks and hinder their credit expansion, wrote Zhu. (MNI)

EQUITIES: Equity markets across Hong Kong and China surged after a report showed China’s state council vowed to keep its stock market stable. The Hang Seng China Enterprises Index gained as much as 8% on Wednesday, its biggest jump in over a decade, while a gauge on Chinese tech firms listed in Hong Kong rallied more than 12%. China’s benchmark CSI 300 Index advanced more than 3%. The broad rally followed a report by the official Xinhua news agency that China will keep the stock market stable and support overseas share listing, citing a meeting chaired by Vice Premier Liu He. (BBG)

EQUITIES: China’s A shares may rebound in future due to positive factors including the stable economic fundamentals, liquidity and some companies’ better-than-expected earnings, Securities Daily reports, citing five analysts. The A share valuations are on the lower end of their levels in the past decade, report says. (BBG)

EQUITIES: China should install a series of measures to prevent further plunge in Hong Kong and mainland stock markets, including openly voicing the government's confidence in the fundamentals and ordering the National Social Security Council to buy blue-chip stocks, wrote Zhang Ming, deputy director of state-affiliated National Institution for Finance Development, in his WeChat blog. The PBOC should quickly cut interest rates and RRRs to boost liquidity, said Zhang. U.S. and other foreign institutional investors may be shorting Chinese stocks amid the Russia-Ukraine conflict and exiting China, so regulators should contact them to prevent a short-term capital exodus, and consider a Tobin tax in the medium term, Zhang wrote. (MNI)

EQUITIES: Chinese companies are working to boost market confidence through measures including share buybacks and disclosing operation information amid market slump, the China Securities Journal reports. Over 30 industry leading firms have recently disclosed operation data for January and February, and more than 10 companies on Tuesday night released plan for production capacity expansion or investor research notes: report The positive trend of the Chinese economy in the mid- to long-term hasn’t changed, and there is apparent room for A-share’s value to rise after short-term risk factors diminish: report, citing Shao Yu, chief economist of Orient Securities. (BBG)

EQUITIES: A number of private banks are triggering margin calls on some wealthy Asian clients who use Chinese technology stocks as collateral for their portfolios, following a market rout. Swiss wealth managers including UBS Group AG and Union Bancaire Privee as well as Citigroup Inc. are among firms that have asked some clients in the past few days to add capital after the lending value of some of their holdings fell, people familiar with the matter said, declining to be identified as the details are private. It’s not known if the wealthy clients were able to meet the margin call requirement. Chinese stocks have seen relentless selling in recent days with concern about the nation’s ties to Russia and persistent regulatory pressure sending a key index to the lowest level since 2008. Tech giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd. led the decline. While stocks recovered some ground on Wednesday, they are still trading at depressed levels. (BBG)

CORONAVIRUS: China has halved the duration of mandatory home isolation for discharged Covid patients to seven days, according to a revised notice posted on the State Council website late Tuesday. They were previously required to stay home for 14 days, according to a separate report by the state-run Xinhua news agency. (BBG)

OVERNIGHT DATA

CHINA FEB NEW HOME PRICES -0.13% M/M; JAN -0.04%

JAPAN FEB TRADE BALANCE -Y668.3BN; MEDIAN -Y150.0BN; JAN -Y2.1935TN
JAPAN FEB TRADE BALANCE ADJUSTED -Y1.0314TN; MEDIAN -Y390.5BN; JAN -Y776.9BN
JAPAN FEB EXPORTS +19.1% Y/Y; MEDIAN +20.6%; JAN +9.6%
JAPAN FEB IMPORTS +34.0% Y/Y; MEDIAN +26.4%; JAN +38.7%

JAPAN FEB CAPACITY UTILISATION -3.2% M/M; DEC -0.4%

JAPAN JAN, F INDUSTRIAL PRODUCTION -0.5% Y/Y; FLASH -0.9%
JAPAN JAN, F INDUSTRIAL PRODUCTION -0.8% M/M; FLASH -1.3%

AUSTRALIA FEB WESTPAC LEADING INDEX -0.15% M/M; JAN -0.29%

Previous estimates had the Index growth rate nudging into slight positive at the start of the year. That has been revised away with the Index growth rate marked down following updates showing a more material impact from the omicron outbreak in January. While the growth rate lifted in February, the latest read remains in negative territory but only slightly below trend. In contrast with this cautious signal from the Leading Index Westpac is expecting strong above trend growth in 2022. This is largely due to the aftermath of the extraordinary emergency policy measures from both the fiscal and monetary authorities during 2020 and 2021. Australian households have accumulated around $250 billion in excess savings while their current savings rate, at 13.6%, is well above the ‘normal’ savings rate of around 6%. As households move that savings rate down to more normal levels, considerable spending power will be freed up. While we expect households to be careful with their accumulated excess savings, the fall in the savings rate and solid disposable income growth will support very strong consumer spending. Not surprisingly, the Leading Index is likely to be understating the delayed impacts of these extraordinary emergency policies. (Westpac)

NEW ZEALAND Q4 BOP CURRENT ACCOUNT BALANCE -NZ$7.261BN; MEDIAN -NZ$6.225BN; Q3 -NZ$8.248BN
NEW ZEALAND Q4 CURRENT ACCOUNT GDP RATIO YTD -5.8%; MEDIAN -5.6%; Q3 -4.6%

SOUTH KOREA FEB UNEMPLOYMENT RATE 2.7%; MEDIAN 3.6%; JAN 3.6%

CHINA MARKETS

PBOC INJECTS CNY10 BILLION VIA OMOS, LIQUIDITY UNCHANGED

The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1% on Wednesday. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos today, according to Wind Information.

  • The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
  • The 7-day weighted average interbank repo rate for depository institutions (DR007) fell to 2.1000% at 09:29 am local time from the close of 2.1334% on Tuesday.
  • The CFETS-NEX money-market sentiment index closed at 43 on Tuesday vs 46 on Monday.

PBOC SETS YUAN CENTRAL PARITY AT 6.3800 WEDS VS 6.3760

The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 6.3800 on Wednesday, compared with 6.3760 set on Tuesday.

MARKETS

SNAPSHOT: China Pledges Support For Equity Markets, Livening Up Pre-FOMC Asia Session

Below gives key levels of markets in the second half of the Asia-Pac session:

  • Nikkei 225 up 419.28 points at 25765.69
  • ASX 200 up 77.753 points at 7175.2
  • Shanghai Comp. up 84.395 points at 3149.013
  • JGB 10-Yr future up 5 ticks at 150.09, yield down 0.6bp at 0.200%
  • Aussie 10-Yr future up 2.4 ticks at 97.440, yield down 2.2bp at 2.497%
  • U.S. 10-Yr future +0-03 at 124-24, yield up 0.72bp at 2.151%
  • WTI crude up $0.71 at $97.16, Gold up $1.99 at $1919.92
  • USD/JPY down 9 pips at Y118.21
  • ECB’S DE GUINDOS: NORMALIZATION DOESN’T MEAN INMEDIATE RATE HIKE (BBG)
  • GERMANY EARMARKS $48BN FOR ARMAMENTS IN DEFENCE PUSH (BBG)
  • UKRAINIAN PRESIDENT: POSITIONS OF UKRAINE, RUSSIA AT TALKS SOUND MORE REALISTIC (IFX)
  • RUSSIA-UKRAINE TALKS TO CONTINUE ON WEDNESDAY
  • BIDEN'S NOMINEE FOR TOP FED REGULATORY POST BOWS OUT (RTRS)
  • CHINA STOCKS EXTEND REBOUND AS STATE COUNCIL VOWS MARKET SUPPORT (BBG)
  • ANALYSTS: CHINA COULD STILL ADJUST POLICY RATES (CSJ)

BOND SUMMARY: Limited Pre-FOMC Ranges Observed

Core FI markets initially looked through surging Chinese & Hong Kong equities after the Chinese State Council pledged to support equity markets via post-meeting communique, The pre-headline resumption of the uptick in Chinese & HK equities had already applied some modest pressure to the space.

  • Cash Tsys have cheapened a touch as European traders start to file in and react to a 7+% surge in the Hang Seng, with TYM2 last -0-02 at 124-19, printing a fresh session low, although the contract has stuck to a narrow 0-09 range in Asia, on volume of ~82K (limited by the proximity to the upcoming FOMC decision). Cash Tsys have twist steepened running 0.5bp richer to 2.5bp cheaper on the day, pivoting around 3s. A block buy of TU futures (+5.294) headlined on the flow side in Asia. Wednesday’s aforementioned FOMC decision provides the major risk event (click for our full preview of that event: https://marketnews.com/mni-fed-preview-mar-2022). Elsewhere, retail sales data provides the highlight of the U.S. economic data releases on Wednesday, with MBA mortgage applications, NAHB housing data and business inventories also due. On the Russia-Ukraine front, Ukrainian President Zelenskyy noted that “the positions of Ukraine and Russia at negotiations sound more realistic, but more time is still needed,” ahead of another round of Russia-Ukraine discussions and U.S. President Biden’s Wednesday address re: aide for Ukraine.
  • JGB futures benefitted from the presence of the latest round of BoJ Rinban operations during the Tokyo morning, while a modest uptick in the U.S. Tsy space provided some further support, outweighing growing expectations re: the declaration of a fresh Japanese fiscal stimulus package. Still, the contract failed to breach its overnight high on a couple of occasions, even with a supportive Rinban breakdown evident. The space subsequently backed off from best levels during the afternoon, showing little reaction to the aforementioned headlines re: Chinese equities. That left futures +5 at the bell, while cash JGBs twist flattened, running 0.5bp cheaper to ~2bp richer, with 20s outperforming.
  • Aussie bond futures stuck to fairly limited ranges, with YM +5.5 and XM +2.4 come the bell, back from best levels. There wasn’t much in the way of notable headline flow driving the space. ACGB May-32 supply stuck to the recent trend, with pricing comfortably through prevailing mids (to the tune of 0.69bp, per Yieldbroker), while a lack of relative value appeal and the ongoing market volatility limited the cover ratio a little, although that metric still printed comfortably above the 3.00x level. Thursday’s post-FOMC calendar will be headlined by the release of the latest Australian labour market report.

JGBS AUCTION: Japanese MOF sells Y2.8376tn 1-Year Bills:

The Japanese Ministry of Finance (MOF) sells Y2.8376tn 1-Year Bills:

  • Average Yield -0.0602% (prev. -0.0551%)
  • Average Price 100.060 (prev. 100.055)
  • High Yield: -0.0552% (prev. -0.0491%)
  • Low Price 100.055 (prev. 100.049)
  • % Allotted At High Yield: 20.9719% (prev. 46.1531%)
  • Bid/Cover: 3.380x (prev. 2.732x)

AUSSIE BONDS: The AOFM sells A$1.0bn of the 1.25% 21 May ‘32 Bond, issue #TB158:

The Australian Office of Financial Management (AOFM) sells A$1.0bn of the 1.25% 21 May 2032 Bond, issue #TB158:

  • Average Yield: 2.4911% (prev. 2.2870%)
  • High Yield: 2.4925% (prev. 2.2900%)
  • Bid/Cover: 3.3550x (prev. 3.3650x)
  • Amount allotted at highest accepted yield as percentage of amount bid at that yield 94.9% (prev. 38.8%)
  • Bidders 45 (prev. 47), successful 14 (prev. 18), allocated in full 6 (prev. 11)

EQUITIES: Higher In Asia; Chinese, Hong Kong Stocks Rebound

Major Asia-Pac equity indices are firmer, following a positive lead from Wall St. High-beta equities (particularly in China and Hong Kong) outperformed, while materials and energy stocks across the region lagged peers, as commodity prices have made limited headway during Asia hours (BBG Commodity Index: +0.2% at writing).

  • Gains in the Hang Seng are the most pronounced amongst major Asia-Pac equity indices, adding 6% at typing to rise from fresh six-year lows made on Tuesday. A strong rebound was observed in heavily depressed sectors (particularly China-based tech), with the Hang Seng Tech Index adding 11.6% at writing (the most on record), outstripping a 5.0% rise in the NASDAQ Golden Dragon China Index (made up of ADRs of several large-cap Chinese tech companies) in Tuesday’s session.
  • The Chinese CSI300 was ahead of most regional peers as well, sitting 2.1% higher at writing. The index surged after extensive comments from China’s Vice Premier Liu He, announcing the government's intention to support the economy and promote stock market stability. This also factored into the bid in the Hang Seng.
  • U.S. e-mini equity index futures also drew support from Liu He’s comments, last printing 0.1-0.4% firmer on the day.

OIL: Slight Bid In Asia

WTI is +$0.70 and Brent is +$1.20 at writing, operating just above two-week lows made on Tuesday.

  • To recap, WTI and Brent both shed ~$7 on Tuesday to close below $100, with the move lower facilitated by elevated hope surrounding ongoing Russia-Ukraine ceasefire negotiations, as well as developments in talks for an Iranian nuclear deal. On the latter issue, Russian FM Lavrov confirmed on Tuesday that Russia has received previously requested written guarantees re: uninterrupted Russia-Iran trade and cooperation, removing a major sticking point in recent talks that the U.S. had earlier in the month labelled as “unacceptable”.
  • Elsewhere, worry re: a possible economic slowdown arising from an ongoing COVID-19 outbreak in China remains elevated, with pandemic control measures estimated to apply to over 40 million people. While data released on Wednesday by the country’s National Health Commission pointed to a slowdown in freshly confirmed cases, locally transmitted infections were shown to have spread to over a dozen new provincial-level regions.
  • Looking to the U.S., reports re: the latest round of weekly API inventory estimates pointed to a drawdown in gasoline inventories while there was a surprise build in U.S. crude stocks, with increases observed in Cushing hub and distillate stockpiles as well.
  • From a technical perspective, both benchmarks trade below their 20-day EMAs. Support for WTI (J2) and Brent (K2) is situated at their 50-Day EMAs at ~$93.69 and $96.32 respectively, and a break below these levels will expose further support at $90.06 (Feb 23 low) for WTI, and $92.75 (Feb 25 low) for Brent.

GOLD: Hovering Above Two-Week Lows

Gold is virtually unchanged at typing, printing $1,918/oz in very limited Asia-Pac dealing. The precious metal operates around the lower end of Tuesday’s range.

  • To recap Tuesday’s price action, gold closed ~$30/oz lower to lodge a third consecutive day of losses, hitting two-week lows amidst an uptick in U.S. real yields (ahead of the FOMC’s monetary policy announcement, due later Wednesday), while the major crude oil benchmarks also registered their own two-week lows.
  • Looking to ongoing Russia-Ukraine ceasefire talks, both sides will meet for a third day of negotiations on Wednesday. Uncertainty remains re: the prospect for a diplomatic resolution, with Russian President Putin stating that Ukrainian leaders are not “demonstrating a serious attitude” towards resolving the conflict, coming as Ukrainian negotiator and presidential aide Podolyak has highlighted “fundamental contradictions” in the talks (reports point to no let up in the Russian bombardment of Ukrainian cities). Overall progress remains incremental, with Russian FM Lavrov revealing that negotiators were discussing a neutral military status for Ukraine and “demilitarising” the country, while Ukrainian President Zelensky has stated that talks were sounding more “realistic”, although emphasising that more time was needed.
  • From a technical perspective, gold trades below its 20-Day EMA, although recent pullbacks are still considered corrective. Support is now located at $1,901.5 (Mar 1 low), and a break below that level will expose further support at the 50-Day EMA (~$1,888.7/oz).

FOREX: Greenback Shows Pre-Fed Weakness, Kiwi Slips On Domestic Data Miss

The gauge of broader U.S. dollar strength (DXY) ground lower ahead of today's monetary policy announcement from the Fed and press conference with is Chair Jerome Powell. Headlines surrounding Russia's war on Ukraine failed to provide much to move the markets, although President Zelensky tipped hat to peace talks becoming more "realistic."

  • The kiwi dollar retreated after New Zealand's BoP current account data showed that quarterly deficit narrowed less than expected in the three months through December. Annual deficit widened to 5.8% of GDP from 4.6% in Q3, topping expectations and reaching highest levels since 2009. Worth noting that the data came out on the eve of the release of New Zealand's Q4 GDP report.
  • Offshore yuan caught a mild bid after fluctuating on the back of today's PBOC fix. The People's Bank set the USD/CNY mid-point just 11 pips above sell-side estimate, which stood in contrast to wider discrepancies seen Monday (150 pips) and Tuesday (129 pips).
  • The monetary policy decision of U.S. FOMC will steal the limelight today, with policymakers expected to deliver a 25bp rate hike. Elsewhere, comments from Riksbank's Ingves & Ohlsson, Canadian CPI & U.S. retail sales may provide some interest.

FOREX OPTIONS: Expiries for Mar16 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.0750(E591mln), $1.0955-65(E542mln), $1.0985-00(E1.2bln), $1.1015-35(E716mln), $1.0045-50(E951mln), $1.1100(E823mln), $1.1150(E2.6bln)
  • USD/JPY: Y117.95-05($808mln)
  • USD/CAD: C$1.2600($678mln), C$1.2665-85($1.1bln), C$1.2695-00($1.4bln), C$1.2760-80($1.2bln)

UP TODAY (Times GMT/Local)

DateGMT/LocalImpactFlagCountryEvent
16/03/20220900/1000**IT Italy Final HICP
16/03/20220900/1000EU ECB Panetta at Italian Banking Association Meeting
16/03/20220930/1030EU ECB Elderson Panels Asia High-level Meeting
16/03/20221100/0700**US MBA Weekly Applications Index
16/03/20221230/0830***US Retail Sales
16/03/20221230/0830**US Import/Export Price Index
16/03/20221230/0830***CA CPI
16/03/20221230/0830**CA Wholesale Trade
16/03/20221400/1000*US Business Inventories
16/03/20221400/1000**US NAHB Home Builder Index
16/03/20221430/1030**US DOE weekly crude oil stocks
16/03/20221530/1130*US US Treasury Auction Result for Cash Management Bill
16/03/20221800/1400***US FOMC Statement
17/03/20222145/1045***NZ GDP
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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