MNI US MARKETS ANALYSIS - Ukraine Crisis Sends Stocks Spiraling

US TSYS SUMMARY: Flight To Safety Dominates

• Cash Tsys have rallied aggressively through the day as the breadth of the Russian invasion becomes apparent, although yields have pulled back recently off new session lows on Stoltenberg saying NATO has no plays to deploy troops to Ukraine.
• 2YY -11.8bps at 1.484%, 5YY -11.6bps at 1.780%, 10YY -11.5bps at 1.877% and 30YY -10.8bps at 2.186%, leaving the curve relatively unchanged with 2s10s at 39bps.
• TYH2 is up 0-27 on the day at 127-04 on double the average volumes. It’s just off session highs of 127-12+ having briefly cleared resistance of 127-09 (Feb 22 high) after which it could open 127-24 (Feb 4 high).
• Fedspeak: Heavy schedule with Barkin (2024 voter), Bostic (2024), Mester (2022), Daly (2024) and Waller (permanent), watched eagerly.
• Data: The second Q4 GDP print is the pick today along with other more second tier releases.
• NY Fed buy-op: Tsy 0Y-22.5Y, appr $6.225B (1030ET)
• Note issuance: US Tsy $50B 7Y note auction (1300ET)
• Bill issuance: US Tsy $45B 4W, $35B 8W bill auctions (1130ET)

EURODOLLAR FUTURES: Up Across The Curve

• Eurodollars are sitting back close to session highs, up 12-15 ticks across most of the curve.
• Compared with after the Jan FOMC, there is 46-48bps of additional hikes through Dec whites-Jun reds, yet implied yields for 2025 are up to 13bps lower with an implied yield of 2%.

EGB/GILT SUMMARY: Safe Haven Flows

European government bonds have rallied sharply amid the Russian invasion of Ukraine. Gilts and bunds have been the outperformers in the region.

• Equities have posted losses across the board while the dollar is making gains across G10 FX with the exception of USDJPY.
• Western leaders have threatened even more severe sanctions on Moscow, but there is little sign of a near-term reprieve.
• Gilt yields are now 9-10bp lower with the curve close to flat overall.
• Bund yields are similarly 8-10bp lower.
• OATs have marginally underperformed bunds with yields pushing down 6-8bp.
• BTPs have underperformed core EGBs with yields down 4-5bp on the day.
• Supply this morning came from Italy (BOT, EUR5.5bn).
• There was no tier one European data this morning. Focus shifts to US GDP and jobless claims later today.

Statement: Additional Land, Air, Sea Forces To Eastern Part Of Alliance

NATO has released a statement confirming that additional military forces will be sent to the eastern members of the alliance as a result of the ongoing conflict in Ukraine. Comes as NATO alliance leaders including UK PM Johnson and French President Macron call for a leaders summit ASAP.

• Full statement can be found byclicking here.
• "NATO will continue to take all necessary measures to ensure the security and defence of all Allies. We are deploying additional defensive land and air forces to the eastern part of the Alliance, as well as additional maritime assets. We have increased the readiness of our forces to respond to all contingencies."
• "We condemn in the strongest possible terms Russia’s horrifying attack on Ukraine, which is entirely unjustified and unprovoked. [...] We also condemn Belarus for enabling this attack."
• "Russia’s leaders must bear full responsibility for the consequences of their actions. Russia will pay a very heavy economic and political price. NATO will continue to coordinate closely with relevant stakeholders and other international organisations including the EU."
• "We have decided, in line with our defensive planning to protect all Allies, to take additional steps to further strengthen deterrence and defence across the Alliance. Our measures are and remain preventive, proportionate and non-escalatory."

FOREX: Regional Currencies Dive, Havens Surge as Russia Commits to Invasion

• The severe escalation of the Ukraine Crisis into an Russian invasion into Ukraine has unsettled global markets, with equities diving (the e-mini S&P touches new YTD lows of 4101.75), havens rallying (gold surging to $1960, highest since mid-2020) and bond yields diving.
• Haven currencies have received a solid tailwind, with the greenback, JPY and CHF at the top of the G10 table, while growth and commodity proxies are under pressure - putting AUD and NZD on the backfoot.
• The hardest hit currencies rest in those territories with the closest proximity to Ukraine and Russia, putting the likes of NOK and SEK at the bottom of the pile in G10. The move puts USD/SEK at the highest levels since mid-2020, with USD/NOK creeping toward first resistance at 9.0286.
• Data highlights Thursday include weekly jobless claims and secondary GDP figures for Q4, but these will likely take a backseat with the Ukraine crisis escalating considerably. The central bank speakers slate is also busy, with BoE's Bailey, Broadbent and Pill on the docket as well as Bostic, Mester, Barkin and Daly of the Fed.

Price Signal Summary - Risk-Off Drives USD, Gold And Oil Higher

• In the equity space, the S&P E-minis technical condition remains bearish and a strong impulsive sell-off has resumed once again today. The move lower has resulted in a break of support at 4212.75, the Jan 24 low, resulting in fresh lows for the year and a resumption of the current bearish cycle. The focus is on the 4100.00 handle and 3990.50, 0.764 proj of the Jan 4 - 24 - Feb 2 price swing. EUROSTOXX 50 futures have traded sharply today as a risk averse mood weighs on price. The break lower confirms a resumption of the bear cycle that started on Nov 18 last year. Futures have this week cleared a number of key support levels and from a technical viewpoint, this suggests scope for a deeper sell-off. Sights are on 3727.00, Mar 25 2021 low.
• In FX, EURUSD is under pressure. Today’s weakness has resulted in a break of support at 1.1280, the Feb 14 low. This has also led to a breach of the 76.4% retracement of the recent Jan 28 - Feb 10 upleg and paves the way for a sell-off towards key support at 1.1121, the Jan 28 low and a bear trigger. GBPUSD weakness is extending this morning following the break of a key short-term support at 1.3487, Feb 15 low. This signals potential for weakness towards 1.3358, the Jan 27 low. USDJPY has this week traded below its 50-day EMA - at 114.77 - The next key short-term support to watch is 114.16, the Feb 2 low. In EURJPY, the cross is through support at 128.25. This exposes 127.52, the Dec 20 low and 127.39, the Dec 3 and 6 low.
• On the commodity front, Gold has surged higher today and cleared the top of its bull channel drawn from the Aug 9 2021 low. The channel top intersects $1938.4. The move higher reinforces the current bullish technical condition and opens $1980.8, the 2.00 projection of the Dec 15 - Jan 25 - 28 price swing. WTI futures remain in an uptrend and today’s impulsive rally has resulted in a break of the $100.00 psychological handle. This reinforces bullish conditions and sets sights on $102.01 next - 3.382 projection of the Dec 2 - 9 - 20 price swing
• In the FI space, Bund futures have traded sharply higher today, reversing Tuesday’s pullback and have breached resistance at 167.17, Feb 22 high plus trendline resistance at 167.20. The trendline is drawn from the Dec 20 high. This signals scope for a stronger short-term correction and has opened the 50-day EMA at 168.66. The trend condition in Gilts resistance to watch is at 123.53, the Feb 18 high. A break would signal potential for a stronger short-term climb. Key short-term support is at 121.10, the Feb 16 low.

FX OPTIONS: Expiries for Feb24 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1200-15(E1.8bln), $1.1225(E627mln), $1.1245-55(E1.5bln), $1.1265(E548mln), $1.1290-00(E3.4bln), $1.1315-35(E2.3bln), $1.1345-50(E752mln), $1.1385-00(E1.4bln), $1.1425-35(E1.0bln)
• USD/JPY: Y113.50($715mln), Y114.30-50($592mln), Y115.25-30($781mln), Y116.40($1.4bln)
• EUR/GBP: Gbp0.8335-55(E807mln)
• EUR/JPY: Y128.65-70(E591mln)
• AUD/USD: $0.7225-35(A$2.7bln), $0.7270(A$541mln)
• USD/CAD: C$1.2645-50($1.5bln), C$1.2695-10($827mln), C$1.2800-10($849mln)
• USD/CNY: Cny6.3700($675mln)

EQUITIES: Stocks Sink, With Banks Leading Losses

• Global equity markets are uniformly lower ahead of the Thursday US open, with the EuroStoxx50 future shedding over 5%. Perhaps unsurprisingly, sentiment in Russian equities is the most hard hit, with the MOEX Index off as much as 50% on the week at some points of the session.
• Banks and European financials are leading the decline, with the EuroStoxx Bank Index off over 8% at pixel time. Firms with particular Russian exposure are seeing the most acute losses, with the likes of Raiffeisen Bank and Polymetal International seeing the most notable losses.
• The S&P E-minis technical condition remains bearish and a strong impulsive sell-off has resumed once again today. The move lower has resulted in a break of support at 4212.75, the Jan 24 low, resulting in fresh lows for the year and a resumption of the current bearish cycle. The focus is on the 4100.00 handle and 3990.50, 0.764 proj of the Jan 4 - 24 - Feb 2 price swing.

EuroStoxx Bank Index dives, hits new YTD lows:

COMMODITIES: WTI-Brent Spread Blows Wider as Seaborne Premium Surges

• The WTI-Brent spread has blown wider early Thursday, with the surge in Brent crude oil prices adding a considerable premium over West Texas grade, with Russia's full blown invasion into Ukraine raising the risk of supply disruptions across Europe.
• The Brent premium over WTI is now over $5/bbl for the first time since the COVID crisis (and the notorious episode of negative crude futures prices) while the Brent crude futures curve steepens aggressively.
• Market focus turns to any further sanctions and counter-sanctions traded between Russia and the West, while the weekly DoE data also crosses (one day delayed due to the US market holiday on Monday).
• Markets expect a build of ~150k bbls for headline stockpiles, while gasoline and distillate inventories are seen showing a draw of 1.4-1.9mln bbls.