MNI US OPEN: Diplomacy Mostly Prevailing

EXECUTIVE SUMMARY:

• KREMLIN: NATO WRONG ON NO WITHDRAWAL, PUTIN SHOWING DESIRE TO TALK
• UK INFLATION HITS FRESH 30-YR HIGH IN JANUARY
• TOP EUROPEAN COURT RULES E.U. CAN FREEZE AID TO POLAND AND HUNGARY
• BIDEN ADMINISTRATION SAYS CHINA FAILED TRADE COMMITMENTS ON MULTIPLE FRONTS
• PBOC RRR CUT IN VIEW AS FED NARROWS POLICY WINDOW-ADVISORS (MNI EXCLUSIVE)

Fig. 1: UK Inflation Higher Than Expected, But Yields Pull Back

Source:BBG, MNI

NEWS:

RUSSIA-UKRAINE: A number of comments from the Kremlin hitting wires, seemingly seeking to double-down on previous comments hinting at a de-escalation of tensions on the Russian border.

• Overnight a number of Western nations have expressed scepticism of the shift in some Russian troops away from the Ukrainian border. This orning the Kremlin has stated that NATO is 'wrong' to suggest there is no evidence of a withdrawal.
• On the US' stance, Kremlin says that it is positive that President Joe Biden has expressed willingness to talk - with Kremlin also stating that Puting is 'stressing his desire to negotiate' - and that Russia welcomes fact that 'Biden is thinking about the Russian people'.
• Russia will seemingly not recognise the breakaway Ukrainian regions of Donetsk and Luhansk, stating that it woulnot be in line with the 'Minsk accords'.
• NATO, its members, and the Ukrainian gov't are still being extremely cautious with regards to the legitimacy of the Russian 'withdrawal', stating that there are still enough troops on the Ukrainian border to launch a major offensive at short notice.

E.U. (NY TIMES): Europe’s top court ruled on Wednesday that the European Union can withhold funding from member countries failing to uphold the rule of law, arming the bloc to step up its efforts to defend its core values. The ruling shoots down a lawsuit by Hungary and Poland, the two countries most directly and immediately affected, whose governments the European Union has been increasingly at odds with, and opens a new chapter in the dispute that could see the countries losing out on tens of billions of euros in aid. The European Court of Justice ruling, which is final, provides ample legal and political cover to the European Commission, the bloc’s executive, to flex its muscle and withhold vital aid to the two countries over what it has long seen as a pernicious and deliberate illiberal drift away from E.U. standards.

EU (MNI POLITICS): European Commission President Ursula von der Leyen is set to come under increasing pressure in the weeks and months ahead to impose financial and legal penalties on the gov'ts of Hungary and Poland for breaches of the EU's rule of law standards. MEPs from the centre and left of the political spectrum are likely to seek to pressure von der Leyen to hit both gov'ts with sizeable cuts to their structural funding budgets. However, there are concerns within some areas of EU leadership that hittingboth gov'ts hard could have the opposite effect from intended insofar as the sanctions pushing both countries further away from the EU rather than bringing them back in line with liberal democratic values.

US-CHINA (NY TIMES): The Biden administration criticized China in a new Wednesday morning for failing to uphold a wide range of trade commitments, including promises it had made when it joined the World Trade Organization in 2001 and others in a trade deal signed with the Trump administration in 2020.In its annual assessment of China’s compliance with its obligations to the W.T.O., the Office of the United States Trade Representative excoriated the Chinese government for flouting the global trade body’s rules and its transparent, market-oriented approach. Instead, China expanded its state-led approach to its economy and trade, causing serious harm to workers and businesses around the world, particularly in industries targeted by its industrial plans, Katherine Tai, the U.S. trade representative, said in a statement.

BOJ: Bank of Japan Governor Haruhiko Kuroda on Wednesday declined to rule out a possible wider the 10-year interest rate range - now around plus and minus 0.25% - although he reiterated there is no need to widen the range now. Kuroda told lawmakers that the BOJ does not intend to raise interest rates under its yield curve control policy and is aimed at forming :an appropriate yield curve. He did not elaborate on what "appropriate" meant, but added the BOJ has no plan to sharply steepen the yield curve.

PBOC (MNI EXCLUSIVE): The People's Bank of China may cut reserve requirement ratios before an expected Federal Reserve rate hike in March further crimps its policy space, and is likely to be increasingly cautious about pushing forward with an easing cycle as it watches to see whether credit demand improves in response to past stimulus, policy advisors and economists told MNI. For full article please contact sales@marketnews.com

OIL (BBG): The OPEC+ producers’ group needs to pump more oil to bridge a gap between supply and demand and to reduce price volatility that’s seen crude skyrocket towards $100 a barrel this year.Speaking by video link to a conference in Saudi Arabia, one of the leaders of the alliance, International Energy Agency Executive Director Fatih Birol told the group that it’s lagging in meeting output targets and needs to catch up. Prince Abdulaziz bin Salman Al Saud, the Saudi energy minister, is set to speak at the same conference later today in a session that’s closed to media.

CHINA/HONG KONG (BBG): President Xi Jinping called for Hong Kong officials to take “all necessary measures” in getting the city’s virus outbreak under control, an unusually direct intervention that could pave the way for stricter measures and possibly a broader lockdown in the Asian financial hub.The Chinese leader said Chief Executive Carrie Lam’s government should make stabilizing the Covid-19 situation its top priority, the state-run Wen Wei Po and Ta Kung Pao newspapers reported Wednesday, without saying where they got the information.

ECB: Combining the Headline Consumer Price Index (HCPI) with the Owner-Occupied Housing Index (OOHPI) would have resulted added between 0.4 and 0.6 percentage points to the euro area average inflation rate in the second and third quarters of 2021, preliminary calculations published in the latest ECB Economic Bulletin show, compared with a maximum of 0.3% from 2012-2020.

GERMANY (BBG): German national railway operator Deutsche Bahn AG has taken the first concrete steps to prepare for a potential sale or listing of its DB Schenker logistics unit, which could be around 20 billion euros ($23 billion), people familiar with the matter said. The government-owned company is working with a consultant and legal advisers to ready the business for a possible transaction later this year, said the people, who asked not to be identified because discussions are private.

ERICSSON (BBG): Ericsson may have made payments to the ISIS terror organization to gain access to certain transport routes in Iraq, the company’s chief executive officer Borje Ekholm told newspaper Dagens Industri.Shares in the Stockholm-based company fell as much as 8.5% in early trading Wednesday, the most since July.In an interview with the business daily, the CEO said that Ericsson had identified “unusual expenses dating back to 2018” but the company hasn’t yet determined who the final recipient of the money was. “What we are seeing is that transport routes have been purchased through areas that have been controlled by terrorist organizations, including ISIS,” Ekholm added.

CRYPTO: Crypto-asset markets are fast evolving and could reach a point where they represent a threat to global financial stability due to their scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system, the Financial Stability Board said in a report issued Wednesday.

DATA:

LOOK AHEAD:

Date	GMT/Local	Impact	Flag	Country	Event
16/02/2022	1200/0700	**		US	MBA Weekly Applications Index
16/02/2022	1330/0830	***		US	Retail Sales
16/02/2022	1330/0830	**		US	import/export price index
16/02/2022	1330/0830	***		CA	CPI
16/02/2022	1330/0830	**		CA	Monthly Survey of Manufacturing
16/02/2022	1330/0830	**		CA	Wholesale Trade
16/02/2022	1415/0915	***		US	Industrial Production
16/02/2022	1500/1000	*		US	business inventories
16/02/2022	1500/1000	**		US	NAHB Home Builder Index
16/02/2022	1530/1030	**		US	DOE weekly crude oil stocks
16/02/2022	1600/1100			US	Minneapolis Fed's Neel Kashkari
16/02/2022	1630/1130	*		US	US Treasury Auction Result for Cash Management Bill
16/02/2022	1800/1300	**		US	US Treasury Auction Result for 20 Year Bond
16/02/2022	1830/1330			CA	BOC Deputy Lane speech
16/02/2022	1900/1400	*		US	FOMC Minutes
17/02/2022	0030/1130	***		AU	Labor force survey
17/02/2022	0700/0800			EU	ECB Schnabel discussion with SPD
17/02/2022	1100/0600	*		TR	Turkey Benchmark Rate
17/02/2022	-			EU	ECB Lagarde at G20 CB Governors Meeting
17/02/2022	1330/0830	**		US	Jobless Claims
17/02/2022	1330/0830	***		US	housing starts
17/02/2022	1330/0830	**		US	Philadelphia Fed Manufacturing Index
17/02/2022	1330/0830	**		US	WASDE Weekly Import/Export
17/02/2022	1400/1500			EU	ECB Lane on MNI Webcast on ECB Policy
17/02/2022	1530/1030	**		US	Natural Gas Stocks
17/02/2022	1600/1100			US	St. Louis Fed's James Bullard
17/02/2022	1630/1130	**		US	US Bill 04 Week Treasury Auction Result
17/02/2022	1630/1130	*		US	US Bill 08 Week Treasury Auction Result
17/02/2022	1800/1300	**		US	US Treasury Auction Result for TIPS 30 Year Bond
17/02/2022	2200/1700			US	Cleveland Fed's Loretta Mester
18/02/2022	2330/0830	***		JP	CPI