MNI US OPEN - Russia Make Headway Across Ukraine's Southern Coast

NEWS: 

UKRAINE UPDATE (MNI/BBG/BBC)

• Russia’s foreign minister says that Moscow is ready for talks to end the fighting in Ukraine but will continue to press its effort to destroy Ukraine’s military infrastructure.
• Lavrov added that the Russian delegation submitted its demands to Ukrainian negotiators earlier this week and is now waiting for Kyiv’s response in talks set for Thursday.
• Russia is sending four amphibious assault ships to land troops near Odesa, a city of 1 million and a major seaport. Images on social media purported to show the landing craft and their escort standing off the southern coast of Crimea, opposite the coastline that includes Odesa.
• The Black Sea port of Kherson was overrun by Russian forces yesterday, according to local officials. Another southern city, Mariupol, came under heavy and apparently indiscriminate Russian shelling, and hundreds of people were feared to have been killed or wounded.

NATO (MNI): NATO has called an extraordinary meeting of defence ministers for the morning of 4 March to discuss the situation in Ukraine as the Russian offensive claims its first major city in the form of the southern port of Kherson. Major issue for NATO members at present it getting military support to Ukraine. Major cities of Mariupol, Kharkiv and Kyiv either engaged in direct conflict with Russian forces or swiftly becoming encircled. Airdrops to Ukrainian forces risks NATO aircraft being shot down by Russian jets.

US DATA (MNI): St. Louis Fed Model Signals 450k Gain For Feb Jobs
U.S. employment likely rose by 450,000 in February as measured by the BLS's household survey, according to St. Louis Fed economist Max Dvorkin's analysis of real-time employment data from scheduling software company Homebase. Annual revisions to the BLS's population estimates at the start of the year complicate how to read the model's output for February. The St. Louis Fed model had undershot the better-than-expected January jobs report, but the improvement in the household survey at the start of the year largely reflected a 1 million increase in U.S. population and less so the growing share of employed people, Dvorkin said.

AUSTRALIA (MNI): RBA's Harper Says Wages Need 4% Growth
Reserve Bank of Australia board member and academic Ian Harper says that wages growth needs to be "about 4%" to drive inflation sustainably within the RBA's target range and create the conditions for interest rates to rise. In an interview with MNI on Thursday, Harper - the Dean of the Melbourne Business School - said that wages growth of around 4% should create 1.5% labour productivity growth and drive inflation sustainably into the mid-point of the RBA's 2% to 3% target.

JAPAN (MNI): BOJ's Nakagawa: Energy Cost Impact From Ukraine War
Moscow's invasion of Ukraine will impact the global economy through higher energy prices that will affect Japan commercially via slower growth in Europe, which has deep financial links with Russia, Bank of Japan board member Junko Nakagawa told reporters on Thursday. Nakagawa said the BOJ must carefully watch economic and price conditions, but did not elaborate on how seriously Japan's outlook will be weighed down by an economic slowdown in Europe or any steps in response the central bank could consider

MALAYSIA (MNI) Malaysia Cites Ukraine In Steady Rates Call
Malaysia's central bank has cited new uncertainties over the Russian invasion of Ukraine and the risk to global growth and commodity prices in its decision to leave its Overnight Policy Rate unchanged at 1.75% on Thursday. Bank Negara Malaysia's statement said that although the domestic economy grew by 3.1% in 2021 and would likely strengthen this year with moderate headline inflation, it was appropriate for monetary policy to be accommodative "amid the prevailing uncertainties,"

DATA:

MNI BRIEF: EZ Factory Gate Inflation A Fresh ECB Comms Problem
Eurozone producer prices rise by 5.2% between December and January, taking the annual pace of factory gate to 30.6%, from an upwardly-revised 26.3% in December. Energy prices accounted for much of the jump, rising by 11.6% in January for a 85.6% annual surge. Excluding energy, PPI increased by 2.2% in the opening month of the year taking intermediate prices 11.7% above the same period of last year. Already priced into consumer prices across the eurozone, there will be little new in the latest data to surprise ECB policymakers, who have the task of navigating between the crisis in Ukraine and higher costs across the economy when the meet on March 10.

**MNI: EUROZONE FINAL FEB SERVICES PMI 55.5 (55.8 FLASH); 51.1

• UK FINAL FEB SERVICES PMI 60.5 (FLASH 60.8); JAN 54.1
• FRANCE FINAL SERVICES PMI 55.5 (FLASH 57.9); JAN 53.1
• GERMANY FINAL SERVICES PMI 55.8 (FLASH 56.6); JAN 56.6
• SPAIN FEB SERVICES PMI 56.6; JAN 46.6
• ITALY FEB SERVICES PMI 52.8; JAN 48.5

BOND SUMMARY: Core FI moves lower with gilts underperforming

• Core FI is generally lower across the board as the market continues to digest yesterday's comments from Powell with Treasuries and gilts having now largely retraced Tuesday's rally, but Bunds still remaining higher as expectations of ECB tightening policy remain pushed into the future.
• Gilts are the underperformers this morning following on from comments from BOE's Tenreyro last night that sounded further concerns on inflationary pressures. Although she didn't expect a wage-price spiral in the UK, she noted that the BOE would need to act if inflationary pressures ramped up. She also said that the increase in wages in the BOE Agent's survey was a surprise and something that would have a significant impact if followed through in the data. This has seen the SONIA strip underperform this morning and led to a bear flattening of the gilt curve, led by the front-end.
• Looking ahead we have part two of Powell's testimony today. His comments saw core FI move lower yesterday and the Eurodollar curve steepen as he seemed to endorse a 25bp March hike but kept the door well and truely open to 50bp hikes down the line if inflationary pressures did not fade.
• We are also due to hear from Fed's Barkin and Williams, BoC's Macklem while the Accounts of the ECB February meeting are also due for release (although these will be stale given geopolitical developments).
• TY1 futures are down -0-0+ today at 127-08+ with 10y UST yields down -0.7bp at 1.872% and 2y yields down -1.7bp at 1.498%.
• Bund futures are down -0.48 today at 168.90 with 10y Bund yields up 2.4bp at 0.047% and Schatz yields up 3.3bp at -0.594%.
• Gilt futures are down -0.79 today at 124.24 with 10y yields up 7.4bp at 1.331% and 2y yields up 9.0bp at 1.155%.

FOREX: AUD Outperformance Extends, Narrows in on 200-dma

• The single currency remains weak, with EUR/USD retracing much of Wednesday's late bounce, re-circling key support at the YTD low printed this week at 1.1058. The pair remains a victim of monetary policy expectations, with the Fed policy arc for 2022 being re-priced at a faster rate relative to the Eurozone.
• NOK continues to diverge from oil prices, with further strength in Brent crude futures failing to be reflected in the currency. NOK is the weakest in G10 so far, putting USD/NOK back above the 50-dma, but still well shy of the week's highs at 9.0391.
• AUD continues the recent streak of outperformance, with AUD/USD narrowing in on key resistance at the 200-dma. 0.7326 marks the bull trigger, and progress through here opens 0.7331, the 61.8% retracement of the October - January downleg.
• The ISM Services Index is the data highlight Thursday, with the weekly jobless claims also due. Central bank speakers include the second part of Powell's testimony in front of lawmakers, with BoC's Macklem also likely to take focus following the decision to raise rates yesterday.

EQUITIES: Some stabilisation for European / US stocks

• Japan's NIKKEI up 184.24 pts or +0.7% at 26577.27 and the TOPIX up 21.86 pts or +1.18% at 1881.8.
• China's SHANGHAI closed down 3.079 pts or -0.09% at 3481.113 and the HANG SENG ended 123.42 pts higher or +0.55% at 22467.34.
• German Dax down 118.56 pts or -0.85% at 13882.19, FTSE 100 down 13.37 pts or -0.18% at 7416.16, CAC 40 up 2.59 pts or +0.04% at 6501.52 and Euro Stoxx 50 down 20.49 pts or -0.54% at 3800.53.
• Dow Jones mini up 2 pts or +0.01% at 33850, S&P 500 mini down 5.75 pts or -0.13% at 4376, NASDAQ mini down 50.75 pts or -0.36% at 14188.

COMMODITIES: Brent backs away from $120/bbl (but still higher on the day)

• WTI Crude up $2.64 or +2.39% at $113.21
• Natural Gas (NYM) up $0.07 or +1.49% at $4.83
• Natural Gas (ICE Dutch TTF) up $2.93 or +1.77% at $168.47
• Gold spot up $2.12 or +0.11% at $1930.46
• Copper up $9.7 or +2.08% at $476.3
• Silver up $0.01 or +0.03% at $25.2979
• Platinum up $17.61 or +1.64% at $1091.69