MNI US OPEN: Ukraine Tensions Ratchet Up Again

EXECUTIVE SUMMARY:

• UKRAINE TENSIONS RATCHET UP AGAIN AMID ALLEGATIONS OF CEASEFIRE VIOLATIONS
• ECB'S DE COS: POLICY DIRECTION CLEAR BUT PROCESS TO BE GRADUAL
• MNI HOSTING WEBINAR W ECB'S LANE TODAY
• JAPAN CUTS OVERALL ECONOMIC VIEW, SPENDING, BUT UPS CAPEX

Fig. 1: The Rise And Rise Of Long-End JGB Yields

Source: BBG, MNI

NEWS:

UKRAINE (WSJ): Pro-Russian separatists and Ukrainian authorities on Thursday traded allegations of cease-fire violations along the tense front line separating the two sides, as Western officials said Moscow continued to mass troops along the border of its smaller neighbor. Representatives of two breakaway Russian-backed and Russian-armed statelets in Ukraine's eastern Donbas region, known as the Luhansk People's Republic and the Donetsk People's Republic, said Ukraine's armed forces had launched grenades and mortars into their territory. Ukraine's military said Russian-controlled forces had violated the cease-fire at eight places in the 24 hours up to 7 a.m. local time with mortars, antitank grenades and small arms. Later Thursday, Ukrainian state media said a projectile hit a kindergarten building.

UKRAINE (RTRS): Artillery shelling was heard on Thursday near Donetsk airport and Elenovka, a village in Donetsk province, both parts of eastern Ukraine controlled by Russian-backed rebels, a witness told Reuters. Fuelling Russia-West tensions over Ukraine, the rebels and Ukrainian government forces accused each other of violating ceasefire agreements on Thursday and using heavy weaponry including mortars and artillery.

UKRAINE (BBG): Kindergarten in Stanytsya Luhanska town in Luhansk region was hit by separatist shelling, Ukrainian United Forces Operation says in statement on Facebook. Two civilians were concussed by shelling; half of town suffered power cut. Town in Ukraine’s east is controlled by government, but near areas held by separatists. Separately, Ukrainian railway company Ukrzaliznytsia says its depot in Luhansk was hit by separatist artillery; no casualties, as per preliminary information. No immediate comment was available from the separatist groups.

RUSSIA-US (RTRS): Russia will send a reply to the United States on the issue of security guarantees on Thursday, the TASS news agency quoted Russian Foreign Minister Sergei Lavrov as saying. Moscow will make the letter public, Lavrov said. Russia has demanded that Ukraine not be allowed to join NATO, something that Washington and Brussels have so far refused to promise.

RUSSIA-NATO (AP): NATO allies accused Russia of misleading the world by saying it was returning some troops to bases, reporting that Moscow has instead added as many as 7,000 more forces near its tense border with Ukraine. The alliance warned Thursday that the buildup has only strengthened its resolve. After a handful of positive signals from Russia that eased tensions earlier in the week, the pendulum appeared to be swinging in the opposite direction again. The NATO chief welcomed Kremlin offers to keep pursuing diplomatic solutions, but he and others warned that the U.S.-led alliance has still seen no sign of the military withdrawal that Moscow announced. “We have seen the opposite of some of the statements. We have seen an increase of troops over the last 48 hours, up to 7,000," said British Defense Secretary Ben Wallace ahead of a meeting of the western alliance in Brussels. “We are deadly serious,” he added, “and we’re going to face the threat that is currently being posed.”

RUSSIA-US-UK (BBG): Russia’s Foreign Ministry denied a claim by the U.S. and Britain that it’s added as many as 7,000 troops to what President Joe Biden has said are around 150,000 soldiers already near Ukraine’s borders.Russian state media cited Moscow-backed separatists as saying Ukrainian forces violated cease-fire rules in eastern Ukraine overnight. The Organization for Security and Co-operation in Europe, which monitors cease-fire compliance, regularly reports dozens of violations from both sides on a daily basis.

RUSSIA (RTRS) : Russia and Belarus will end their joint military drills on Feb. 20 as previously planned, Russian Foreign Minister Sergei Lavrov said on Thursday, addressing Western concerns that Russian troops may stay in Belarus for a longer time. Separately, the RIA news agency quoted Kremlin spokesman Dmitry Peskov as saying that the matter of extending Russian troops' stay in Belarus was not on the agenda. The drills in Belarus have added to Western fears of a possible Russian invasion of neighbouring Ukraine. Moscow has denied planning such an attack.

ECB (BBG): European Central Bank Governing Council member Pablo Hernandez de Cos cautions against rushing to determine the timing of policy changes. “The direction in which we need to head is clear, but we should not draw premature conclusions as to the time frame,” De Cos tells online event. “The process will be both gradual and data-dependent”.“The probability of inflation stabilizing at around 2% in the medium term has clearly increased”. Warns that premature tightening would risk negative consequences for demand. “I see no reason to overreact”. “The ECB should not constitute an additional source of uncertainty, but should rather maintain a clear, gradual and predictable path for its policy”.

JAPAN: Japan's government lowered its monthly main economic assessment for the first time since September 2021 along with private consumption, but upgraded its views on capital investment, the Cabinet Office said on Thursday. The Cabinet Office said the Japanese economy “continues to show movements of pickup up, although some weaknesses are seen as a severe situation due to the Novel Coronavirus remains."

ECB / MNI WEBCAST: MNI is hosting a webcast event today with Philip R. Lane, Member of the Executive Board of the European Central Bank and Chief Economist. To register please go to: MNI Webcast Registration

Topic of discussion: 'The Eurozone Economy and ECB Policy'

• Time: 9am-10:30am New York time; 2pm-3:30pm London time; 3pm-4:30pm Frankfurt time
• Date: Thursday 17th February 2022
• This event is on the record.

IMF/ECB (BBG): Supply disruptions took a chunk out of euro-area economic growth last year and may persist into 2023 because of the pandemic, presenting a test for the European Central Bank, the International Monetary Fund warned.“The prospect of prolonged supply bottlenecks raises challenges for monetary-policy makers,” the Washington-based lender said Thursday in a report. “Keeping medium-term inflation expectations stable despite transient boosts to inflation, including from supply disruptions and surging energy prices, is key.”

ECB (BBG): The European Central Bank’s profit was decimated last year as a result of negative interest rates and financial risks tied to pandemic rescue measures.Profit fell to 192 million euros ($218 million) from 1.6 billion euros the year before, owing largely to a 610 million-euro risk provision as well as lower income from foreign reserve assets and securities bought as part of its monetary policy. The ECB launched a 1.85 trillion-euro bond-buying program in 2020 to contain the fallout of the coronavirus pandemic. Negative interest income on that portfolio amounted to 252 million euros last year because of depressed sovereign-bond yields.

NORGES BANK (BBG): “If prospects continue more or less as we saw it in our December report, and there’s not that much new information, of course there are uncertainties around and every focus would change, but I think there are all the reasons to be quite optimistic on behalf of the Norwegian economy going forward,” Norges Bank Governor Oystein Olsen says in an interview on Bloomberg TV.

RIKSBANK (BBG): The Riksbank looks a lot at underlying inflation as forecasting price developments has become more difficult amid volatility during the pandemic, Deputy Governor Anna Breman says at seminar. Says there is “clearly” an upside risk to food prices in coming years.

CHINA FX: The Chinese yuan's position as a currency for global payment jumped to a record high in January as the internationalisation of the currency gets promoted, according to a payments trade body on Thursday. The Society for Worldwide Interbank Financial Telecommunications (SWIFT), the usage of the yuan in international transactions climbed to 3.2% of market share, ranking the fourth most active currency , the highest level ever.

DATA:

LOOK AHEAD:

Date	GMT/Local	Impact	Flag	Country	Event
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
18/02/2022	0700/0800	***		SE	Inflation report
18/02/2022	0700/0700	***		UK	Retail Sales
18/02/2022	0745/0845	***		FR	HICP (f)
18/02/2022	0900/1000	**		EU	EZ Current Acc
18/02/2022	1000/1100	**		EU	construction production
18/02/2022	1300/1400			EU	ECB Elderson speech on industry climate risks
18/02/2022	-			EU	ECB Lagarde at G20 CB Governors Meeting
18/02/2022	1330/0830	**		CA	Retail Trade
18/02/2022	1500/1000	***		US	NAR existing home sales
18/02/2022	1500/1000	*		US	Services Revenues
18/02/2022	1500/1600	**		EU	consumer confidence indicator (p)
18/02/2022	1515/1015			US	Chicago Fed's Charles Evans
18/02/2022	1515/1015			US	Fed Governor Christopher Waller
18/02/2022	1600/1100			US	New York Fed's John Williams
18/02/2022	1830/1930			EU	ECB Panetta on CB digital currencies
18/02/2022	1830/1330			US	Fed Governor Lael Brainard