MNI EUROPEAN OPEN: Nvidia Earnings Boost Sentiment, Japan's Nikkei At Fresh Highs

US TSYS: Treasury Yields Lower, Remain Rangebound Ahead of US Data

TYH4 is currently trading at 109-22+, up - 02 + from New York closing levels

Treasury futures have traded in a tight range today, currently just off daily highs as we head into the Asia lunch break, while yields are 1-3bps lower in yield terms.

• Mar'24 10Y futures are trading in tight range today, currently 109-22+ sitting just below daily highs of 109-24, while daily lows are 109-18+. Initial technical support holds at 109-17/16+ (50.0% of Oct 19 - Dec 27 climb / Low Feb 14), a break here will open up 109-05+ Low Nov 28, while to the upside initial technical resistance sits at 110-17.5 (Feb 15 high).
• Yield curves are slightly steeper, curve trades 1-2bps lower in yield terms. Currently the 2Y yield is -2.1bps lower at 4.645%, 10Y yield is -1.4bp lower at 4.305%, while the 2s10s +0.759 at -34.193.
• Biden stated earlier that he would support a 28% minimum tax for corporations.
• WSJ's Nick Timiraos was out earlier today writing about the Fed minutes where he mentioned that Federal Reserve officials, in the January meeting, expressed concerns about cutting interest rates too quickly and allowing inflation pressures to persist. Despite prior expectations of rate cuts, economic data showing job growth and higher-than-expected inflation has shifted the outlook, with the Fed now more cautious about immediate rate reductions. (WSJ)
• Looking ahead: Chicago Fed Nat Activity Index, Jobless Claims, S&P Global US PMI & Existing Home Sales

JGBS: Ueda Comments Help Drive Futures Off Highs, Onshore Markets Closed Tomorrow

JGB volatility has continued post the lunch time break. We were last 146.17, -.02. Earlier highs rested at 146.45. We remain above lows that were seen close to the open of 146.06.

• BoJ Governor Ueda is before parliament at the moment and is generally giving upbeat comments around Japan's inflation and growth backdrop. The economy is expected to strengthen, and that Japan is experiencing inflation. This has likely weighed on futures to a degree.
• Ueda also noted companies are becoming more active in terms of wage hikes, which is consistent with recent BBG reports from automakers, which granted larger rises this year compared to last year.
• In the cash JGB space, we are firmer in yield terms, but only modestly and for the most part remain sub earlier highs. The 10yr was last near 0.73%. For swap rates, the 10yr was last just above 0.89%.
• Tomorrow onshore markets are closed for the Emperor's Birthday holiday.

AUSSIE BONDS: Early Yield Gains Not Sustained, AU-US 10yr Spread Sits At Multi-Month Lows

Back end Aussie bond yields sit comfortably off earlier highs. The 10yr last tracked at 4.15% (against an earlier high of near 4.215%. This keeps us comfortably within ranges for Feb for the 10yr yield. The shorter end has proven to be stickier from a yield standpoint, with the 2 and 3 yr holding +1bps firmer, albeit down from earlier highs.

• This is similar trends to NZ and leaves the yield curve flatter. In the futures space, XM sit +.02, well up from earlier lows. YM is still softer at -.02.
• Support has been evident from firmer US TSYs. The AU-US 10yr spread sits at -15bps, fresh lows back to late Oct last year.
• On the macro front, Governor Bullock has emphasised to the Treasurer that the continuity between the old and new monetary policy boards is extremely important and he assured her that he understands and will provide continuity when making the appointments (this was before a Senate hearing).
• On the data front, Australia’s Judo Bank preliminary composite PMI for February returned to growth territory driven by the services sector. It came in at 51.8 up from 49.0 in January with services recovering to 52.8 from 49.1. Manufacturing activity contracted at 47.7 down from 50.1. Composite selling prices picked up in Q1 2024 after easing in Q4 2023, signalling that early 2024 inflation may look more persistent around 4-5%, according to Judo Bank, suggesting RBA easing is some way off.
• The data calendar is empty tomorrow.

NZGBS: Yields Off Highs, Retail Sales Volumes Tomorrow, RBNZ Next Week

NZ yields finished away from best levels, albeit more so at the back end. The 10yr yield finished near 4.775%, down from intra-session highs above 4.79%. The 2yr year yield was stickier, holding close to 4.92% (earlier highs were above 4.93%). This left the 2/10s curve slightly flatter at around -14bps.

• NZ bonds saw support from a firmer US Tsy backdrop. TYH4 is +03 firmer versus opening levels. Outside of buoyant Nvidia earnings news, macro news flow has been light.
• In the swap space, the 2yr sits off earlier highs, last near 5.11%, while the 10yr rate is down around 2.5bps to 4.59%. Both benchmarks have followed the equivalent NZGB yield trajectory to large extent.
• We had early data on Jan trade, with a wider deficit relative to Dec, but this didn't impact sentiment. Tomorrow we have Q4 retail sales volumes.
• Next Wednesday the RBNZ outcome is due. OIS pricing has a rough 30% pricing of a hike, with rate cuts expected towards the end of the year.

FOREX: NZD/JPY Hits Fresh Multi-Year Highs As Risk Mood Buoyed By Nvidia Earnings

The BBDXY sits down modestly, versus end Wednesday levels, last near 1241.4. US equity futures have surged, driven by the Nasdaq (+1.45%) post Nvidia's positive earnings beat and guidance. This drove a risk-on theme to markets early, although we didn't see much follow through.

• NZD/USD continues to see a positive beta with respect to equity risk moves. The pair got close to 0.6200 but couldn't breach the level (we were last in the 0.6190/95 region). Initial technical resistance holds at 0.6206 the Jan 16 high, while support sits at 0.6163 (lows from Feb 21)
• AUD/USD has lagged, the pair last near 0.6555. AUD/NZD broke below 1.060 earlier making fresh yearly lows of 1.0586, before quickly reversing however the pair was unable to break back above 1.060 and currently hovers above the new yearly lows at 1.0588, technical support holds at 1.0560 the lows from May 2023.
• Both NZD and AUD saw sensitivity to HK/China equity moves, coming off highs as these markets soften. They are firmer at the Asia lunch time break though, which has helped push both currencies back into positive territory.
• USD/JPY was higher in early trade, as risk on flows boosted yen crosses. However, we sit back unchanged now at 150.30/35. A slight US yield pull back today, likely helping yen. NZD/JPY got to fresh highs of 93.215 earlier, but we sit back at 93.10 in latest dealings.
• Looking ahead, the Fed’s Jefferson, Harker, Cook and Kashkari speak later. Also, the ECB’s Tuominen and Fernandez-Bollo appear and the January meeting accounts are published. In terms of data, US/Europe preliminary February PMIs are released, as well as US jobless claims, Chicago Fed index, US existing home sales, final January euro area CPI and Canadian retail sales.

CHINA/HONG KONG EQUITIES: Hong Kong & China Equities Grind Higher

Hong Kong & China equity markets are slightly higher today heading into the Asia break. The ban on institutional investors selling stock in the first 30 minute of trading didn't seem to have too much of an impact, as stocks moved higher for the first hour of trading, while China northbound flows turn positive.

It has been a relatively subdued day for HK and China equities today, with little in the way of headlines, or data.

• Hong Kong Equities have see-sawed today, the HSI is currently 0.15% higher after being down 0.50% at one stage, HSTech down 0.27% while Mainland property is down 1.05%
• China mainland equities are slightly outperforming HK equities today. Currently the CSI300 is up 0.28%, while the Shanghai Composite is 0.50% higher.
• China Coal stock have benefited from a crack down on coal miners exceeding permitted output quotas.
• Elsewhere, it has been reported that China will continue to roll out a series of regulations on Quant funds one by one aimed the reducing the amount of illegal quantitative transactions on the market
• Looking ahead Hong Kong has CPI Composite data out at 4.30pm Local time

ASIA PAC EQUITIES: Asia Equities Higher As Tech Leads The Way, Nikkei 225 Makes New ATHs

Regional Asian Equities are higher today with markets in the region getting a boost from strong earning results from Nvidia.

• Japan equities are higher today, tech names lead the way. The Nikkei 225 up 1.67%, and made fresh all time highs earlier, we sit just off those levels now. Japanese export names are also seeing support as the yen stayed weaker, currently at 150.29, while foreigners bought a net of ¥382b of Japanese stocks for the week ended Feb 16, marking the 7th straight week of net buying. The Topix is lagging the Nikkei 225 today, up about 1.00%.
• Taiwan Equities are pushing higher today mostly due to higher Tech stocks, with TMSC leading the way up 1.47%. Yesterday Taiwan saw -$466m in foreign equity outflow and -$843m for the week, expect this to change as investors look to get back into semiconductor names now that Nvidia has reported earnings. Taiex is up 0.84%
• South Korean equities are also higher today, again largely due to strength in the semiconductor space. Similar to Taiwan, SK saw net selling by foreigners yesterday as -$133m left the market. Currently the Kospi is 0.38% higher
• Australian Equities are flat today, weakness in the financials sectors was offset by strength in Health Care and Construction sector. Currently the ASX200 is 0.03% higher
• Elsewhere in SEA, New Zealand Equities trade 0.86% higher, Thailand up 0.20% while Indonesia, India Singapore and Malaysian Equities trade off 0.40-0.50%

OIL: Crude Steady, EIA Data & Fed Speakers Later May Give It Some Direction

Oil is little changed during APAC trading today after rising around a percent on Wednesday and is finding support from generally positive equities. Brent is up 0.1% to $83.11 having dipped briefly below $83 earlier and WTI is 0.1% higher at $78.02 after a low of $77.87. Crude may find direction later from the EIA data and Fed speakers. The USD is slightly lower.

• Demand concerns persist with China’s consumption outlook uncertain and the Fed minutes signalling that FOMC members are concerned regarding easing too soon.
• Bloomberg reported a US crude inventory build of 7.168mn last week after 8.52mn previously, according to people familiar with the API data, whereas market prompt spreads are pointing to tight supplies. Distillate stocks fell 2.91mn while gasoline rose 415k. The data reflect shortages of refined products which have increased refining margins. The official EIA data is out later today.
• The Fed’s Jefferson, Harker, Cook and Kashkari speak later. Also the ECB’s Tuominen and Fernandez-Bollo appear and the January meeting accounts are published. In terms of data, US/Europe preliminary February PMIs are released, as well as US jobless claims, Chicago Fed index, US existing home sales, final January euro area CPI and Canadian retail sales.

GOLD: Bullion Steady, Upcoming Fed Speakers May Give Some Direction

Gold continues to trade around $2026/oz, where it closed on Wednesday and around the mid-point of its range this year. With the USD little changed and few major data releases, there is not much to drive bullion. Fed speakers coming up later today may give it some direction. It is currently at $2026.59.

• Gold is moving well below resistance at $2065.50, February 1 high, and it needs to clear this level in order for the bullish theme to be reinstated. It is currently just below its 50-day simple moving average.
• Increasing “high-for-longer” Fed views have stalled gold prices. There are a number of Fed speakers later but the focus is likely to be on Fed Governor Waller as he is speaking on the economic outlook and he’s on the FOMC. He has said that he’s cautious re easing.
• The Fed’s Waller, Jefferson, Harker, Cook and Kashkari speak later. In terms of data, US/Europe preliminary February PMIs are released, as well as US jobless claims, Chicago Fed index, US existing home sales, final January euro area CPI and Canadian retail sales.