Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY:
- EUROPEAN GAS SLUMPS, STOCKS AND YIELDS RISE AS RUSSIA, UKRAINE TO HOLD FURTHER TALKS
- EU MULLS RUSSIA EXPORT BAN ON CARS WORTH MORE THAN 50K EUROS
- WALL STREET'S CHINA STOCK ROUT NEARS DOT-COM CRASH LEVELS
Fig. 1: 10Y Yield Hits Highest Since 2019
Source: BBG, MNI
NEWS:
RUSSIA - EUROPE ENERGY (BBG): European natural gas prices extended last week’s slump on signs that talks to stop the war in Ukraine may advance, easing tensions over potential Russian supply curbs. Any progress in negotiations toward a possible ceasefire would give the gas market a breather after record prices and high volatility in the past few weeks. The war has roiled commodity markets from gas to grains, with the sanctions aimed at isolating Moscow putting traders on edge. Dutch front-month gas, the European benchmark, fell as much as 16% in early Monday trade. Flows into the region from top supplier Russia were at normallevels both via Ukraine and on other routes. Demand may also ease because of milder weather arriving.
EU-RUSSIA (BBG): The EU is discussing a ban on exports of luxury vehicles worth more than 50,000 euros ($54,760) to Russia as part of its latest sanctions package, according to two diplomats familiar with the plan. The proposed ban, which is set to be approved as early as Monday and could still change, would apply to models from several European car brands, including Audi, BMW, Mercedes, Ferrari and Porsche. The EU measure would also include boats and planes, as well as chairlifts and motorbikes worth more than 5,000 euros.
RUSSIA-CHINA (BBG): U.S. officials say Russia has asked China for military assistance for its war in Ukraine, a sign that the Biden administration is increasingly concerned about the role Vladimir Putin’s most powerful diplomatic partner could play in the conflict. A U.S. official, speaking on condition of anonymity to discuss delicate matters, did not specify what kind of equipment Moscow had requested. The official declined to say how the administration knows these details. Another U.S. official said the request is not new, and was made just after Russia’s Feb. 24 invasion. White House spokespeople declined to comment.
CHINA STOCKS (BBG): Only a year ago Chinese stocks in the U.S. were enjoying an unprecedented boom. Now they’re mired in a 72% plunge that’s on the cusp of matching losses during the 2008 financial crisis -- and within spitting distance of the Nasdaq Composite Index’s 78% peak-to-trough slump during early 2000s dot-com bust. Alibaba Group Holding Ltd. alone has lost about $522 billion of value, the biggest wipeout of shareholder wealth worldwide.
CHINA STOCKS (BBG): Tencent Holdings Ltd. extended losses to close more than 10% lower after the Wall Street Journal reported it faced a record fine for violating Chinese anti-money laundering regulations.The People’s Bank of China found Tencent’s WeChat Pay had allowed the transfer of funds for illicit purposes such as gambling, the newspaper reported, citing unidentified people familiar with the matter. WeChat Pay was also judged non-compliant with other rules that required Tencent to identify users and merchants transacting on the platform, the Journal said.
GERMANY / COVID (BBG): Germany’s coronavirus infection rate hit a record for the third straight day on Monday, with the renewed surge prompting the country’s top health official to issue a grim warning. Covid-19 cases climbed to 1,543 per 100,000 people over seven days, continuing its steady rise since the beginning of March, according to data from the RKI public-health institute. The outbreak shows signs of worsening and causing “many deaths,” Health Minister Karl Lauterbach said Sunday in a tweet. He urged vaccine holdouts to urgently get their Covid shots.
DATA:
FIXED INCOME: Conflict talks push core FI lower
Core fixed income remains under pressure this morning, with weekend rhetoric from both sides of the Russia-Ukraine conflict talking up the potential of a ceasefire as early as later this week.
- 10-year yields uniformly higher with increases on a 9bp handle for Treasury, Bund and gilt yields. Gilts have seen a more parallel shift higher, while the German and US curves have both steepened.
- Interestingly, Schatz yields are 7.5bp higher on the day while 2-year UST yields are only 6.2bp higher. This suggests the beta of Schatz yields to geopolitical events has increased since last week's more hawkish ECB meeting.
- It's a light day on the calendar today with the FOMC (Wed) and BOE (Thurs) decisions due. Tomorrow has a busier data schedule with UK labour market data, the German ZEW survey and US PPI all due for release.
- TY1 futures are down -0-18 today at 125-12 with 10y UST yields up 9.8bp at 2.093% and 2y yields up 6.2bp at 1.812%.
- Bund futures are down -0.86 today at 161.58 with 10y Bund yields up 9.9bp at 0.345% and Schatz yields up 7.5bp at -0.344%.
- Gilt futures are down -0.68 today at 121.58 with 10y yields up 9.8bp at 1.587% and 2y yields up 9.4bp at 1.398%.
FOREX: Regional Currencies Recover on Prospect of Peace Talks
- Currencies with a higher beta toward the Ukraine crisis are outperforming early Monday, looking through the continued conflict in south-eastern Europe as representatives from both Ukraine and Russia meet again on Monday in the latest round of peace talks. Focus will be on the outcome of these negotiations as well as the meeting held between the US and China this week, as the two sides discuss the Ukraine crisis directly.
- Resultingly, NOK and SEK are the best performing currencies in G10, with regional equity markets also trading favourably. Haven currencies are on the backfoot, with USD/JPY extending the recent bull run to make a decent test on the Y118.00 handle - a level not topped since late 2016.
- AUD and NZD are among the session's poorest performers, with AUD/USD still under pressure following the bearish shooting star candle pattern printed early last week. AUD/USD sees next support at the 0.7226 100-dma.
- Central banks remain in focus, with meetings from the Fed, the BoE and the BoJ due over the coming days, with the first two banks seen raising interest rates.
- A light data schedule - typical for a Monday - keeps attention on the Ukraine crisis. There is no fixed time due for the next round of Russia-Ukraine talks, but these have historically taken place in the European afternoon.
EQUITIES: Ukraine-Russia Talk Optimism Buoys European Stocks
- Asian markets closed mixed, with a large sell-off in Hong Kong: Japan's NIKKEI closed up 145.07 pts or +0.58% at 25307.85 and the TOPIX ended 12.74 pts higher or +0.71% at 1812.28. China's SHANGHAI closed down 86.214 pts or -2.6% at 3223.533 and the HANG SENG ended 1022.13 pts lower or -4.97% at 19531.66
- European equities are higher, with the German Dax up 401.48 pts or +2.95% at 14029.37, FTSE 100 up 19.95 pts or +0.28% at 7176.92, CAC 40 up 72.91 pts or +1.16% at 6337.45 and Euro Stoxx 50 up 82.79 pts or +2.25% at 3768.95.
- U.S. futures are gaining, with the Dow Jones mini up 318 pts or +0.97% at 33243, S&P 500 mini up 34 pts or +0.81% at 4235.5, NASDAQ mini up 72 pts or +0.54% at 13364.
COMMODITIES: Falls Across The Board, Led By Oil
- WTI Crude down $4.62 or -4.23% at $104.79
- Natural Gas down $0.14 or -2.92% at $4.587
- Gold spot down $25.41 or -1.28% at $1963
- Copper down $7.55 or -1.63% at $454.95
- Silver down $0.42 or -1.64% at $25.4521
- Platinum down $35.56 or -3.29% at $1046.77
LOOK AHEAD:
| Date | GMT/Local | Impact | Flag | Country | Event |
| 14/03/2022 | 1000/1100 |  | EU | ECB Elderson Speech at European Banking Institute | |
| 14/03/2022 | - | | EU | ECB Lagarde & Panetta at Eurogroup Meeting | |
| 14/03/2022 | 1500/1100 | ** |  | US | NY Fed survey of consumer expectations |
| 14/03/2022 | 1530/1130 | * | | US | US Treasury Auction Result for 26 Week Bill |
| 14/03/2022 | 1530/1130 | * | | US | US Treasury Auction Result for 13 Week Bill |
| 15/03/2022 | 0700/0700 | *** |  | UK | Labour Market Survey |
| 15/03/2022 | 0745/0845 | *** |  | FR | HICP (f) |
| 15/03/2022 | 1000/1000 | * | | UK | Index Linked Gilt Outright Auction Result |
| 15/03/2022 | 1000/1100 | *** |  | DE | ZEW Current Expectations Index |
| 15/03/2022 | 1000/1100 | *** | | DE | ZEW Current Conditions Index |
| 15/03/2022 | 1000/1100 | ** | | EU | industrial production |
| 15/03/2022 | - | | EU | ECB de Guindos at ECOFIN Meeting | |
| 15/03/2022 | 1215/0815 | ** |  | CA | CMHC Housing Starts |
| 15/03/2022 | 1230/0830 | *** | | US | PPI |
| 15/03/2022 | 1230/0830 | ** | | US | Empire State Manufacturing Survey |
| 15/03/2022 | 1230/0830 | ** | | CA | Monthly Survey of Manufacturing |
| 15/03/2022 | 1255/0855 | ** | | US | Redbook Retail Sales Index |
| 15/03/2022 | 1300/0900 | * | | CA | Home Sales – CREA (Canadian real estate association) |
| 15/03/2022 | 2000/1600 | ** | | US | TICS |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.