MNI US MARKETS ANALYSIS - Stocks Up, Oil Down as Markets Watch Peace Talks

US TSYS SUMMARY: Treasuries Soften On Weekend Ceasefire Rhetoric

• Cash Tsys opened softer overnight and then continued the move as London came in, with the driver seemingly hopes of a ceasefire after weekend commentary.
• The move has been led by the belly but still sees 2YY rise to the highest since Aug-2019.
• 2YY +7bps at 1.818%, 5YY +8.8bps at 2.035%, 10YY +8.6bps at 2.078%, 30YY +8.2bps at 2.436%.
• TYM2 is 20 ticks lower at 125-10 but off session lows of 125-05 having cleared the bear trigger of 125-14+ (Feb 10 low) and very briefly the further support of 125-06+ (May 30, 2019 low (cont)). Volumes are modestly above average.
• Data: NY Fed survey of consumer expectations. PPI/Empire Mfg for Feb/Mar tomorrow.
• T-bill issuance: $60B 13W, $51B 26W bill auctions (1130ET).

STIR FUTURES: 7 Fed Hikes For 2022

• Hikes implied by Fed Funds futures opened higher overnight and have more recently continued the move, seemingly on ceasefire potential carried over from the weekend.
• The 7 hikes priced for the Feb 1, 2023 meeting as of last Thursday have now very nearly been pulled into 2022 (Dec-2022 +174bps).
• The profile is becoming more front-loaded with a cumulative +97bps priced over the next three meetings.
• A 25bp hike on Wednesday remains heavily priced (28bps).

FOMC-dated Fed Funds cumulative hiking as specific meetings (bps)Soruce: Bloomberg

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.

FX OPTIONS: Expiries for Mar14 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0900(E1.4bln), $1.1000(E1.5bln), $1.1050-60(E1.2bln)
• USD/JPY: Y115.85-00($1.2bln)
• EUR/GBP: Gbp0.8350-70(E535mln)
• EUR/JPY: Y126.50(E677mln), Y129.00-15(E612mln)
• AUD/USD: $0.7200(A$618mln)

Price Signal Summary - Bunds Under Pressure And Key Support Remains Exposed

• In the equity space, S&P E-Minis trend needle continues to point south. The contract remains above the Jan 24 low of 4094.25 and the key support. A break of this level would confirm a resumption of the downtrend. The 20-day EMA, at4314.09, represents an important near-term resistance. A clear break of this EMA is required to suggest scope for a stronger short-term recovery towards the 50-day EMA at 4415.63. EUROSTOXX 50 futures remain vulnerable however a bullish corrective cycle is still in play following last week’s gains. The move higher is allowing an oversold condition to unwind. Resistance to watch is at 3817.30, the 20-day EMA. Clearance of this average would open the 50-day EMA at 3985.70.
• In FX, EURUSD remains below its key short-term resistance at 1.1121, the Jan 28 low, a recent breakout level plus last week’s high. The downtrend remains intact - a resumption of weakness would open 1.0767 next, the May 7 2020 low. Clearance of 1.1121 is needed to suggest scope for a stronger short-term correction. GBPUSD has traded lower again today registering a fresh cycle low print of 1.3010. This reinforces current bearish conditions and opens; 1.2954, the 1.764 projection of the Jan 13 - 27 - Feb 10 price swing and 1.2933, the Nov 5 2020 low. Last week’s key technical development in USDJPY was the break of resistance at 116.34/35, the Feb 10 / Jan 4 highs and a bull trigger. The break higher confirms a resumption of the broader uptrend that started early Jan 2021. The next objective is 118.19, the Jan 4 2017 high.
• On the commodity front, the all-time high print in Gold of $2075.5 on Aug 7 2020 remains intact following the strong sell-off on Mar 9. The broader trend condition is bullish and the pullback is considered corrective that is allowing an overbought condition to unwind. The next support is seen at $1938.2, the 20-day EMA. Oil markets traded in a volatile manner last week and remain below recent highs. The move lower in WTI is allowing the recent overbought trend condition to unwind. The next firm area of support is seen at the 20-day EMA, at $102.88. A break of this average is required to signal scope for a deeper retracement.
• In the FI space, Bund futures maintain last week’s bearish theme. The move lower has exposed key support at 161.50, the Feb 10 low and a medium-term bear trigger. A break of this level would confirm a resumption of this year’s downtrend and open the 161.00 handle. Gilts have breached a number of important short-term supports. This has exposed the key support at 121.10, Feb 16 low.

EQUITIES: Stocks Firmer as Markets Watch Next Round of Peace Talks

• Equities across Europe trade firmer, with US futures following suit as market focus turns to the next round of peace talks held between Russian and Ukrainian representatives this afternoon. Reports of progress across the weekend have raised hopes of a potential ceasefire or more solid use of humanitarian corridors in the near future, helping indices retrace some of last week's lost ground.
• Europe's financials and industrials sectors are leading gains, with energy the sole underperformer as oil prices retrace the recent rally. Germany's DAX is the best performing market on the continent, with significant rallies in the likes of Deutsche Bank (+8%) and Volkswagen (+7%) fuel strength.
• S&P E-Minis trend needle continues to point south. The contract remains above the Jan 24 low of 4094.25 and the key support. A break of this level would confirm a resumption of the downtrend. The 20-day EMA, at 4314.09, represents an important near-term resistance. A clear break of this EMA is required to suggest scope for a stronger short-term recovery towards the 50-day EMA at 4415.63.

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