MNI US MARKETS ANALYSIS - NVIDIA Earnings Prompt Indices to Narrow in on Bull Trigger

US TSYS: Holding Above Support Ahead Wkly Claims, Flash PMIs, Fed Speakers

• Cash Tsys are running steady to mixed at the moment. Narrow ranges and flatter curves taking cues from core/semi-core EGBs after varied European flash PMIs overnight: France stronger, Germany weaker than expected while overall measures were above consensus in the Eurozone.
• TYH4 currently +1 at 109-21 vs. 109-18.5 low - just above initial technical support at 109-17/15 (50.0% of Oct 19 - Dec 27 climb / Low Feb 16); technical resistance above at 110-17.5 (Feb 15 high). Heavy volumes tied to Mar'24/Jun'24 quarterly futures roll. Curves flatter: 2s10s -1.444 at -36.396, 10Y yield at 4.3069% -.0118.
• US data schedule limited to the first half with Initial Jobless/Continuing Claims and Chicago Fed Nat Activity Index at 0830ET. S&P flash PMIs up next at 0945ET followed by Existing Home Sales at 1000ET.
• Several Fed speakers are scheduled mostly in the afternoon. Atlanta Fed President Jefferson starts off at 1000ET at a moderated Q&A international economics event (text, Q&A, livestreamed). Philly Fed President Harker Economic Outlook (text, Q&A and livestreamed) follows at 1515ET. Separate events after the close at 1700ET: Fed Gov Cook speaks at a macro-finance conference, MN Fed President Kashkari panel discussion on outlook, (Q&A, livestreamed). Fed Gov Waller Speaks on Economic Outlook (text, Q&A and livestreamed) at 1935ET.
• US Treasury auction supply: $95B 4W, $90B 8W Bill auctions at 1130ET, $9B 30Y TIPS auction (912810TY4) at 1300ET.

STIR: FOMC-dated OIS pricing is little changed vs. levels seen late on Wednesday

• Markets price ~90bp odds of a 25bp cut through the June ’24 FOMC (~22.5bp of easing seen over that horizon). Beyond there, ~37.5bp of cuts are priced through the July gathering, while ~86.5bp of cuts are showing through ’24 on the whole.
• A degree of caution re: the prospect of imminent rate cuts remained evident in the minutes covering the Jan ’24 FOMC. Discussions setting the scene/timeline for QT decisions also generated interest.
• Elsewhere, Fedspeak from Barkin & Bowman dovetailed with an unwind of some rate cut pricing in the European front end/pressure in the wider bond markets, which allowed some rate cut premium to be removed on Wednesday. A reminder that participants did not want to probe the 75bp of cuts in’24 mark post-PPI data (last week), with that marker in line with the median FOMC dot (as of the Dec ’24 FOMC).
• A raft of Fedspeak (Jefferson, Cook, Harker & Kashkari) will be further supplemented by the release of the weekly jobless claims data and flash PMI prints in NY hours.

OI Points To Mix Of Short Setting & Long Cover In SOFR Futures On Wednesday

The combination of yesterday's downtick in SOFR futures and preliminary OI data point to a relatively modest round of net positioning swings on Wednesday, consisting of net short setting and net long cover.

• The whites and greens seemingly saw long cover in net pack terms, while the reds and blues seemed to have a bias towards net short setting.
• Feedthrough from the European short end and broader weakness in bonds factored into price action on Wednesday, with little input from the Jan '24 FOMC meeting minutes.

GILTS: Winterflood Securities Give Retail Investors Access To Auctions

Winterflood Securities have opened up primary market access for retail investors in gilts through two major retail investment platforms (Hargreaves Lansdown & Interactive Investor).

• This comes after the well-documented grab for fixed rates/bonds that has taken place as developed market central bank hiking cycles mature.
• Secondary market gilt demand had already swelled, largely owing to tax benefits for higher earners.
• Retail demand isn’t a UK phenomenon, with demand at retail-specific bond offerings in Italy and Belgium getting plenty of airtime in recent months.
• The DMO had previously flagged an examination of the “potential for retail investors to contribute more significantly to meeting the overall financing requirement.”
• The FT notes that the DMO head has said that the Office “very much welcome this collaborative, market-led initiative. We value the importance of having as diverse an investor base as possible and this initiative will provide retail investors with an additional opportunity to access gilts.”
• The process will start with next Wednesday’s GBP4bn offering of the 4.00% Oct-31 gilt.
• Hargreaves Lansdown write “clients will have until 16:00 the day before the auction to apply. This means that clients have 6 days to review the prospectus and submit an order. Our clients will receive the Average Accepted Price determined during the auction.”
• The Winterflood release on the matter can be found here.

FOREX: Equity Surge Favours Weaker USD, JPY

• USD and JPY selling has been dominant across the European morning, with both currencies among the poorest performers across G10. Moves across currency markets are being led by volatile equities, as index futures on both sides of the Atlantic surge after the better-then-expected NVidia earnings released after the Wednesday bell.
• PMI data from across Europe also generally fared better than expected, with the Eurozone and French figures topping forecast, and countering modest weakness in Germany manufacturing. Post-data EUR strength tipped EUR/USD above 1.0880 in a momentum-driven move, before prices faded on the failure to break the 1.0888 50-dma.
• G10 FX implied vols extend recent lows, with EUR/JPY 6m implied nearing on 8 vol points and the lowest level since Feb'22. With lower vols tied to JPY weakness over the past 12 months, EUR/JPY has extended the YTD rally, putting the cross within range of key resistance at the bull trigger of the cycle high from late 2023 at 164.30.
• GBP saw only scant support on the back of a better-than expected February composite prelim PMI, with markets preferring to sell rallies in the currencies. A bounce off lows for the greenback aided the move, however GBP selling was also highly evident against CAD, JPY and others.
• US takes focus going forward, with weekly jobless claims numbers and the prelim February PMI data on the docket. Minutes from the ECB's January meeting and Fed speakers including Jefferson, Harker, Cook and Kashkari are set to make appearances.

FX OPTIONS: Expiries for Feb22 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0730-50(E1.2bln), $1.0770-85(E1.7bln), $1.0870-80(E724mln), $1.0900-05(E1.1bln), $1.0914-30(E1.5bln)
• GBP/USD: $1.2803(Gbp703mln)
• USD/CAD: C$1.3470($509mln), C$1.3500($850mln)
• USD/CNY: Cny7.1870($826mln)

EGBS: Remain Weaker Amid Mixed PMI Signals

Core/semi-core EGBs continue to trade weaker this morning, as markets digest the totality of this morning's flash PMI round.

• After reaching the lowest levels since November '23 following a strong French PMI print, Bund futures more than recovered after Germany's manufacturing PMI was weaker than expected. The overall Eurozone services print was above consensus, reaching a 50-handle for the first time since July '23.
• Within the PMIs, we note that there was a seemingly limited impact from Red Sea tensions on manufacturers, though services firms in France and Germany continue to cite wage pressures as a source of inflationary pressure.
• Bunds are -19 ticks at 132.40, with the first support now at 131.73 (1.0% 10-dma envelope). The contract reached an intraday low of 131.78 following the French data.
• The German cash curve has bear flattened on the day (a continuation of yesterday afternoon's dynamics), with yields just off year-to-date highs recorded this morning.
• Periphery spreads to Bunds are tighter, with European equity markets still higher on the day, even as Estoxx futures have moved off intraday (and near-record) highs.
• Eurozone final February inflation was in line with flash estimates.
• The remainder of today's regional docket is light, with this afternoon's US data (IJC, flash PMI) likely to garner cross-market interest.

EQUITIES: Eurostoxx 50 Futures Clear 4800 Handle

• The bull cycle in Eurostoxx 50 futures extended sharply early Thursday, with psychological resistance at 4800 cleared in style, and first modest resistance at 4548.00 cracking in the process. The intraday high of 4864.00 looks extended having pierced the 2.0% Upper Bollinger Band, however the outlook is resolutely bullish the longer these levels hold. The upleg reinforces current conditions and the importance of the recent break of resistance at 4634.00, the Dec 14 high. Moving average studies are in a bull-mode position, highlighting positive market sentiment.
• The trend condition in S&P E-Minis is resolutely bullish, with the upside trigger at 5066.50 already under pressure. This erases the pullback off last week’s highs, confirming S/T weakness as corrective. Support to watch lies at 4967.25, the 20-day EMA. A clear break of this average would suggest potential for a deeper retracement, possibly towards the 4866.00 key support, the Jan 31 low. The trigger for a resumption of gains is 5066.50, the Feb 12 high.

COMMODITIES: Gains in WTI Futures Still Appear Corrective, S-T Resistance Marked at $78.52

• Gains off the Feb 5 low in WTI Futures still appear corrective at these levels. Key short-term resistance has been defined at $78.52, the Feb 16 high. Clearance of this level would be a bullish development. On the downside, support to watch lies at $71.49, the Feb 5 low. A break of this level would reinstate the recent bearish theme and pave the way for a move towards $69.79, the Jan 3 low.
• Gold traded lower into mid-February, but is building well off lows and challenging the 50-dma of $2031.71. Clearance here and above the Feb 1 high of $2065.50 would reinstate a bullish theme, with the mid-month weakness proving corrective in nature. Any reversal and continuation lower would open $1973.2, the Dec 13 low and the next key support.