MNI US OPEN - Russia Seize One of Europe's Largest Nuclear Plants

NEWS: 

• Russian troops in Ukraine seized Europe’s largest nuclear power plant this morning after another night of shelling and bombardment of city centres and as President Zelensky accused Russia of “nuclear terror”.
• A fire had earlier broken out in a building at the Zaporizhzhya plant after shelling by Vladimir Putin’s forces, triggering widespread condemnation of a “horrific” and “reckless” act.
• Ukraine’s nuclear regulator said Zaporizhzhia plant personnel were monitoring the state of power units to ensure safety protocols were maintained. The brief fire in a training complex at the plant was out, local emergency services said.
• Russian troops are encircling Ukraine’s capital, Kyiv, while continuing attempts to advance on the port city of Mariupol in the south, the general staff of the Ukrainian army said, adding that preparations continue for the landing of Russian assault troops near Odesa. Ukraine’s Navy sunk its flagship frigate to avoid potential Russian capture.
• Both houses of Russia’s parliament are sitting on Friday, with a specially convened meeting of the Federation Council.

NATO (MNI): Sec-Gen Jens Stoltenberg has delivered doorstep comments alongside US Secretary of State Anthony Blinken ahead of foreign ministers' meeting getting underway shortly in Brussels. Attack on nuclear power station in Ukraine "just demonstrates the recklessness of this war, the importance of ending it and the importance of Russia withdrawing its troops" says Stoltenberg. Blinken says NATO is a defensive alliance, "We seek no conflict. But if conflict comes to us, we're ready for it."

• The BBC says it's trying to keep its news service accessible in Russia, following reports that it has been blocked.
  
• "Access to accurate, independent information is a fundamental human right which should not be denied to the people of Russia, millions of whom rely on BBC News every week," a spokesperson said.
• "We will continue our efforts to make BBC News available in Russia, and across the rest of the world."

CEE (BBG): The Czech and the Polish central banks stepped in to protect their currencies, which are among the hardest hit by the market impact of Russia’s invasion of Ukraine. In Poland, the central bank’s third intervention this week let the zloty recoup some of the losses that pushed it to the weakest against the euro since 2009. The Czech move helped the koruna rebound and made it the best performing emerging market currency on Friday.

US: MNI Payrolls Preview
February nonfarm payrolls are expected to have risen by +420k according to the Bloomberg survey median with dispersion of views quite evenly spread. The strength is seen coming from a rebound after Omicron-related disruption in January, even though January was surprisingly strong. Distortions dropping out from annual adjustments should make the report easier to digest. We see potential asymmetric upside risks to March pricing of hikes but more balanced risks to the broader rate path, all ahead of CPI on Mar 10. See the full report below with previews from 10 sell-side analysts: https://roar-assets-auto.rbl.ms/documents/14079/US...

DATA:

MNI: EZ JAN RETAIL SALES +0.2% M/M, +7.8% Y/Y; DEC +2.1%r Y/Y

MNI: ITALY FINAL ADJ Q4 GDP +6.2% Y/Y (DOWN FROM PRELIM. DATA)
*Q4 2021 GAINS FUELED BY DOMESTIC DEMAND--ISTAT
*Q4 2021 POSTED 4TH CONSECUTIVE Q/Q AND Y/Y GAINS--ISTAT

MNI: FRANCE JAN IP +1.6% M/M, -1.5% Y/Y; DEC -0.1%r M/M
FRANCE JAN MANUFACTURING +1.8% M/M, -1.1% Y/Y; DEC +0.2%r M/M

FOREX: EUR/USD Flirting With 1.10 as Single Currency Suffers

• Regional currencies in close proximity to Ukraine remain weak on further reports of clashes and conflict in south-eastern Europe. Markets were particularly unsettled by reports of shelling and explosions at the Zaporizhzhia nuclear power plant, with emergency services having to attend fires at one of the continent's largest nuclear centres. This puts the likes of SEK, HUF, CZK and PLN on the backfoot, forcing the hand of both the Polish and Czech central banks, who've had to coordinate currency intervention already on Friday.
• EUR is just behind SEK as the worst performer in G10, putting EUR/USD toward the 1.10 handle - a level last broken in 2020 during the worst of the COVID crisis. Haven currencies remain far more solid, with CHF, JPY faring better.
• EUR/AUD, meanwhile, has broken considerably lower, hitting new multi-year lows and extending through key horizontal support. This marks the 11th consecutive day of declines for the cross, with support seen scant until 1.4794. Monetary policy expectations continue to play out, with the cross correlating well with market pricing for ECB vs. RBA rate hikes across 2022.
• Focus turns to the February payrolls report, with markets expecting 423k jobs added over the month, pressing the unemployment rate lower by 0.1ppts to 3.9%. See MNI's preview here: https://roar-assets-auto.rbl.ms/documents/14079/US...
• Outside of the US data, focus rests on the extraordinary NATO meeting with defence ministers Friday. NATO's Stoltenberg holds a post-meeting press conference at 1130GMT/0630ET.

BOND SUMMARY: Awaiting payrolls amid risk-off concerns

Core fixed income is higher on the day, but still off the spikes seen overnight. Reports of Russian shelling a building on the perimeter of the largest nuclear power station in Europe (with a fire ensuing) has seen risk assets under pressure and core FI catch a bid. We are off the overnight highs (when it wasn't clear the fire was contained to a perimeter building).

• The February US employment report is the highlight for the session ahead. Despite the geopolitical tensions, labour market data is still very important for markets here. Strength is seen after Omircron disruption in January. We see potential asymmetric upside risks to March pricing of hikes but more balanced risks to the broader rate path. See the full MNI preview here.
• TY1 futures are up 0-17+ today at 128-02 with 10y UST yields down -5.0bp at 1.792% and 2y yields down -2.6bp at 1.506%.
• Bund futures are up 0.57 today at 169.77 with 10y Bund yields down -2.8bp at -0.12% and Schatz yields down -5.4bp at -0.695%.
• Gilt futures are up 0.42 today at 124.83 with 10y yields down -1.8bp at 1.280% and 2y yields up 0.6bp at 1.122%.

EQUITIES: Stocks lower on concerns of Ukraine nuclear power plant safety

• Japan's NIKKEI down 591.8 pts or -2.23% at 25985.47 and the TOPIX down 36.86 pts or -1.96% at 1844.94.
• China's SHANGHAI closed down 33.464 pts or -0.96% at 3447.649 and the HANG SENG ended 562.05 pts lower or -2.5% at 21905.29.
• German Dax down 449.95 pts or -3.28% at 13246.91, FTSE 100 down 222.03 pts or -3.07% at 7016.31, CAC 40 down 233.05 pts or -3.65% at 6149.21 and Euro Stoxx 50 down 126.8 pts or -3.39% at 3613.8.
• Dow Jones mini down 248 pts or -0.74% at 33480, S&P 500 mini down 33.25 pts or -0.76% at 4325.5, NASDAQ mini down 100.5 pts or -0.72% at 13927.75.

COMMODITIES: European natgas up almost 10% (but way below yday's intraday high)