Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY:
- CHINA STATE FUNDS SAID TO BUY STOCKS TO SLOW MARKET DECLINE
- BOJ SEES NEAR-TERM UPSIDE RISK TO INFLATION (MNI INSIGHT)
- DRAGHI TO GET TOUGH ON MINISTERS IN PUSH FOR EU CASH (MNI)
- ECB'S DE COS: POLICY ADJUSTMENT MUST BE GRADUAL
- MACRON: TALKS WITH PUTIN HELPED AVOID FURTHER ESCALATION ON UKRAINE
Fig. 1: CSI 300 Pares Losses, State Buying Eyed
Source: Bloomberg, MNI
NEWS:
BOJ (MNI INSIGHT): The Bank of Japan thinks near-term upside price risks have increased since its January policy review due to rising energy costs, which are squeezing consumer spending and are likely to lead to weaker-than-expected exports and factory output in the first quarter, MNI understands. For full article contact sales@marketnews.com
CHINA STOCKS (BBG): Chinese state-backed funds intervened in the stock market on Tuesday, helping the benchmark index stage a strong recovery from its biggest intraday drop since August 2021.The CSI 300 Index ended down just 0.6% at the close, paring an earlier slump of 2.4%. State-related funds entered the market to buy A-shares in the afternoon session, according to two people with direct knowledge of the matter, who declined to be identified because the matter is private. The move by state funds was intended to slow the pace of declines, one of the people said. Financial shares including brokerages were among those to have been purchased, the person said. Sub-gauges of cyclical sectors such as energy, utilities and financials posted gains in Tuesday’s session even as the benchmark ended lower.
ITALY (MNI): Italian Prime Minister Draghi has signalled a tougher approach to members of his coalition government, and will order new checks on ministers to ensure they are on track to meet targets that must be achieved in order to obtain funds from Europe's NextGenerationEU Covid aid package, government sources told MNI. For full article contact sales@marketnews.com
ITALY: Wires and social media relaying unconfirmed reports that head of the right-wing populist League Matteo Salvini has stated that the gov't is working on an emergency decree worth EUR5bn intended to ease the energy price crisis currently hitting households in Italy and Europe. Salvini's claim appears to back up an MNI article outlining potential divisions between PM Draghi and his ministers as the PM calls for accelerated efforts to reach EU goals to recieve COVID-19 aid funding.
ECB (RTRS): European Central Bank monetary governing council member Pablo Hernandez de Cos on Tuesday said any future potential monetary policy tightening will be gradual and depend on incoming macroeconomic data. "The degree of uncertainty is high and any normalization in monetary policy has to be gradual," Hernandez De Cos told a financial event in Bilbao.
ECB: Following last week's ECB decision, UBS put their ECB call 'officially under review'. Today they've clarified that they now expect the ECB to end the APP in August and then hike rates by 25bp each in September and December, followed by another 75bp of hikes in 2023.
FRANCE-RUSSIA (RTRS): French President Emmanuel Macron, after his meeting with Russia's Putin, on Tuesday told journalists that the talks had helped reach the goal of preventing a further deterioration of the security crisis concerning Ukraine. Macron, in his remarks on the meeting, also said that he never thought "for one second" that Putin was prepared to make any gestures.
SWEDEN / COVID (BBG): Sweden’s government says it is not planning to extend the majority of current Covid-measures further as the country is lifting most restrictions from Feb. 9, Finance Minister Mikael Damberg says at a news conference.The already decided support measures to companies are to stay in place through February, Damberg saysThe Swedish economy has “managed the crisis well” but now it’s “time for normality” and a return to a “more normal budgetary process”
HONG KONG / COVID (BBG): Hong Kong will limit the size of gatherings in private venues, Chief Executive Carrie Lam says in a briefing Tuesday. City will tighten public gathering limit to two people from four. City will include religious venues, shopping malls, department stores, wet markets, supermarkets and hair salons in its vaccine passport.
DATA:
No key data released in the European morning session.
EQUITIES: Focus remains on EGBs
- Bund futures hit new lows overnight as Asia reacted to the moves seen previously. During the European morning session we have reversed these moves and are now 65 ticks off the lows, largely in line with Friday's close. BTP futures have also moved off their lows, with peripheral generally around unchanged on the day (with GGB-Bund yields a bit tighter).
- Treasuries and gilts are also off their overnight/early European lows, but remain lower on the day. With some optimism surrounding the Ukraine situation in particular, we have seen the short-end of the curve see yields move higher (in contrast to Schatz).
- TY1 futures are down -0-4+ today at 126-24+ with 10y UST yields up 1.3bp at 1.930% and 2y yields up 2.4bp at 1.316%.
- Bund futures are up 0.38 today at 165.98 with 10y Bund yields down -1.7bp at 0.208% and Schatz yields down -4.0bp at -0.335%.
- Gilt futures are down -0.14 today at 120.81 with 10y yields up 2.7bp at 1.434% and 2y yields up 2.7bp at 1.289%.
FOREX: Quieter Markets Allow for EUR Consolidation
- The greenback trades in minor positive territory, with the USD Index briefly inching above the Friday highs to make further progress through last week's losses. This keeps the index pinned between the 100- and 50-dmas of 95.241 and 96.019 respectively.
- Newsflow and macro catalysts have been few and far between Tuesday, with US equity futures trading wholly inside the Monday range so far. The pause in stock market volatility is allowing markets to consolidate, prompting some weakness across the single currency and putting the EUR at the bottom of the pile across G10.
- Elsewhere, GBP trades more favourably, helping GBP/USD trade either side of the 1.3550 level. The 100-dma remains a near-term solid support, undercutting at 1.3509.
- US and Canadian trade balance data takes focus, alongside annual CPI revisions data ahead of the more in-focus inflation release on Thursday. The central bank speaker slate is lighter, with just ECB's Villeroy on the docket.
EQUITIES: China Stocks Reportedly Underpinned By State Buying
- Asian markets closed mostly higher (note BBG reported after the close that Chinese state-backed funds bought equities Tuesday to pare intraday losses): Japan's NIKKEI closed up 35.65 pts or +0.13% at 27284.52 and the TOPIX ended 8.07 pts higher or +0.42% at 1934.06. China's SHANGHAI closed up 23.048 pts or +0.67% at 3452.629 and the HANG SENG ended 250.06 pts lower or -1.02% at 24329.49
- European equities are higher, with the German Dax up 110.98 pts or +0.73% at 15308.85, FTSE 100 up 52.82 pts or +0.7% at 7625.28, CAC 40 up 66.82 pts or +0.95% at 7077.21 and Euro Stoxx 50 up 30.42 pts or +0.74% at 4147.62.
- U.S. futures are advancing, with the Dow Jones mini up 129 pts or +0.37% at 35098, S&P 500 mini up 14.5 pts or +0.32% at 4490.25, NASDAQ mini up 36.5 pts or +0.25% at 14595.5.
COMMODITIES: Copper Falls To Lowest In 4 Sessions
- WTI Crude down $0.34 or -0.37% at $90.89
- Natural Gas up $0.02 or +0.57% at $4.264
- Gold spot down $0.51 or -0.03% at $1819.65
- Copper down $5.25 or -1.18% at $440.9
- Silver down $0.07 or -0.32% at $22.9184
- Platinum down $11.61 or -1.13% at $1012.36
LOOK AHEAD:
| Date | GMT/Local | Impact | Flag | Country | Event |
| 08/02/2022 | 1100/0600 | ** |  | US | NFIB Small Business Optimism Index |
| 08/02/2022 | 1330/0830 | ** | | US | trade balance |
| 08/02/2022 | 1330/0830 | ** |  | CA | International Merchandise Trade (Trade Balance) |
| 08/02/2022 | 1355/0855 | ** | | US | Redbook Retail Sales Index |
| 08/02/2022 | 1500/1000 | ** | | US | IBD/TIPP Optimism Index |
| 08/02/2022 | 1630/1130 | ** | | US | NY Fed Weekly Economic Index |
| 08/02/2022 | 1800/1300 | *** | | US | US Note 03 Year Treasury Auction Result |
| 09/02/2022 | 0700/0800 | ** |  | DE | trade balance |
| 09/02/2022 | 0900/1000 | * |  | IT | industrial production |
| 09/02/2022 | 1200/0700 | ** | | US | MBA Weekly Applications Index |
| 09/02/2022 | 1310/1310 |  | UK | BOE Pill at UK Monetary Policy outlook conference | |
| 09/02/2022 | 1500/1000 | ** | | US | wholesale trade |
| 09/02/2022 | 1530/1030 | ** | | US | DOE weekly crude oil stocks |
| 09/02/2022 | 1530/1030 | | US | Fed Governor Michelle Bowman | |
| 09/02/2022 | 1700/1200 | | CA | BOC Governor Macklem speaks to Chamber of Commerce | |
| 09/02/2022 | 1700/1200 | *** | | US | USDA Crop Estimates - WASDE |
| 09/02/2022 | 1700/1200 | | US | Cleveland Fed's Loretta Mester | |
| 09/02/2022 | 1800/1300 | ** | | US | US Note 10 Year Treasury Auction Result |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.