MNI US OPEN: Stocks Jump On Apparent De-Escalation

UK PAYROLLS +108,000 IN JAN

MNI: UK ILO DEC UNEMPLOYMENT RATE 4.1%

MNI DATA BRIEF: UK Q4 Employment Down; Real Earnings Negative

UK employment declined by 38,000 in the fourth quarter, according to the LFS survey, the first fall since the three months to February 2021, the Office for National Statistics said Tuesday. The decline accompanied a sharp fall in real earnings, with inflation-adjusted total earnings declining by an annual rate of 0.1%, while real regular earnings slumped by 0.8%, the first declines since the third quarter of 2020.

Nominal earnings actually rose in the fourth quarter, defying analysts’ expectations of a decline. Total earnings rose to an annual rate of 4.3%, while ex-bonus wages slipped to 3.7% from 3.8% previously.

Payroll employment rose by 108,000 in January to stand 436,000 above pre-pandemic levels. The December outturn was revised downward to an increase of 130,000 from the originally-reported 184,000 increase. The employment rate steadied at 75.5%, matching the level recorded in the three months to November, while the unemployment rate was unchanged at 4.1%. The fall in LFS employment was largely due to a drop in employment amongst the over-65’s, according to an ONS official.

Spanish Inflation Mixed; Jan CPI Softer than Flash, HICP revised higher

FINAL HICP JAN -0.8%r M/M, +6.2%r Y/Y; DEC +6.6% Y/Y

SPAIN FINAL CPI JAN -0.4%r M/M, +6.1%r Y/Y; DEC +6.5% Y/Y

• The final inflation print for January CPI confirmed that Spanish headline inflation has eased a touch, slipping to +6.1%r y/y, down from +6.5% y/y in December following ten months of growth.
• Headline CPI numbers were weaker than flash estimates and the consensus forecasts by 0.1% on both month on month and annualised readings.
• On the month HICP weakened by -0.8%r m/m, just below the -0.9% m/m preliminary reading, whilst HICP fell to an upwardly revised +6.2%r y/y (flash +6.1% y/y) from +6.6% y/y in December.
• Housing prices (including utilities) were a downwards driver, moderating 0.5% to +18.1% y/y due to lower electricity prices. Food costs also softened 0.2% to +4.8% y/y, as well as leisure services down by 0.5% to +1.2% due to cuts in tourism prices.
• However, transport costs continued to rise, up 0.4% to +11.3% y/y due to the jump in fuel prices.
• January prints are based on the adjusted 2021 basket weights.

Source: INE

GERMANY FEB ZEW CURRENT CONDITIONS -8.1

*MNI: GERMANY FEB ECONOMIC SENTIMENT INDEX 54.3

MNI: EZ FLASH Q4 GDP +0.3% Q/Q, +4.6% Y/Y

MNI: EZ FLASH Q4 EMPLOYMENT +0.5% Q/Q; Q3 +1.0% Q/Q

FIXED INCOME: Risk recoveries see core FI under pressure

Reports that Russia have been pulling back troops from the Ukrainian border has helped risk appetite through the European morning session with equities moving higher and core fixed income selling off (although there has been some pause in the FI moves lower following further headlines).

• Treasuries have seen the biggest moves, with the curve bear steepening and 10-year yields up 4.7bp on the day at writing.
• Gilts have been the exception. After decent labour market data this morning, we initially saw the whole SONIA futures curve move lower and gilts move lower on the open. However, we have now seen a decent reversal based on little new news - possibly positioning ahead of tomorrow's inflation data with the market looking overstretched and due for a bit of a move higher.
• Peripheral spreads (other than Greek) are generally a bit tigther today.
• TY1 futures are down -0-8+ today at 125-23 with 10y UST yields up 4.7bp at 2.036% and 2y yields up 1.2bp at 1.589%.
• Bund futures are down -0.44 today at 164.79 with 10y Bund yields up 1.5bp at 0.296% and Schatz yields up 0.8bp at -0.361%.
• Gilt futures are up 0.04 today at 119.68 with 10y yields down -1.8bp at 1.570% and 2y yields up 0.8bp at 1.512%.

FOREX: Markets Reverse Risk-Off Poise as Russian Troops Demobilize

• Markets are reversing the risk-off posture seen since the beginning of the week, with signs that Russia are pulling back troops from both the eastern and southern Ukrainian borders the latest catalyst for a risk-on rally. As a result, the currencies that were hardest hit yesterday (namely SEK, AUD and EUR) are among the strongest performers so far.
• Equities have rallied sharply, with US futures pointing to a solidly positive open of 1.5-2.0% later today. Markets clearly have some way to go before retracing the Russia-inspired sell-off, with EUR/JPY still much closer to recent lows relative to recent highs. 131.39 marks first resistance for the cross ahead of 131.60 and the 132 handle.
• UK jobs data came in largely inline with expectations, leaving little reason for the MPC to change tack on their current tightening path. Sell side consensus continues to shift toward a protracted tightening cycle in the UK, with both HSBC and Goldman Sachs steepening their BoE rate path assumptions in the past few days.
• Focus turns to the US PPI release for January, with markets expecting headline final demand PPI to moderate to 9.1% from 9.7% on a Y/Y basis. There are few central speakers of note, with just ECB's Villeroy on the docket.

EQUITIES: Stocks Reverse Higher On Calmer Geopolitics

• Asian equities closed mixed: Japan's NIKKEI closed down 214.4 pts or -0.79% at 26865.19 and the TOPIX ended 15.95 pts lower or -0.83% at 1914.7. China's SHANGHAI closed up 17.206 pts or +0.5% at 3446.088 and the HANG SENG ended 200.86 pts lower or -0.82% at 24355.71
• European equities have rebounded sharply from earlier losses, with the German Dax up 200.79 pts or +1.33% at 15325.08, FTSE 100 up 56.24 pts or +0.75% at 7590.67, CAC 40 up 84.24 pts or +1.23% at 6941 and Euro Stoxx 50 up 51.81 pts or +1.27% at 4118.17.
• U.S. futures are also gaining, led by tech, with the Dow Jones mini up 305 pts or +0.88% at 34776, S&P 500 mini up 53.75 pts or +1.22% at 4447.75, NASDAQ mini up 247 pts or +1.73% at 14500.

COMMODITIES: Oil And Precious Metals Lower On Ukraine/Russia De-Escalation

• WTI Crude down $2.46 or -2.58% at $92.7
• Natural Gas up $0.22 or +5.15% at $4.413
• Gold spot down $13.53 or -0.72% at $1858.59
• Copper up $2.1 or +0.47% at $452.8
• Silver down $0.39 or -1.64% at $23.4658
• Platinum down $3.79 or -0.37% at $1028.15