MNI US OPEN: Bonds Bounce As Biden Heads To Brussels

MNI: UK FEB CPI +0.8% M/M, +6.2% Y/Y

MNI: UK FEB OUTPUT PPI +0.8% M/M, +10.1% Y/Y

MNI BRIEF: UK Inflation Surges, Outpaces Analysts Expectations

UK consumer price inflation rose to 6.2% year-on-year in February, the highest level since the latest series began in 1997, the Office for National Statistics said Tuesday. The rate, up from 5.5% in February and higher than currently expected by the Bank of England or City analysts, was the highest since March 1992 in a historically modelled series, when it stood at 7.1%. Although the BOE saw inflation lower at this stage in the cycle, it expects prices to rise by around 8% per annum by April.

In February, CPI rose by 0.8% m/m, compared with a rise of 0.1% in the same month last year. This was the largest monthly CPI increase between January and February since 2009.

Factory gate inflation also rose sharply, underlining just how embedded inflation is becoming in the supply chain, with the headline rate of output prices showed positive growth of 10.1% on the year to February 2022, up from 9.9% in January 2022.

The headline rate of input prices showed positive growth of 14.7% on the year to February 2022, up from 14.2% in January 2022. Food products and metals and non-metallic minerals provided the largest upward contributions to the annual rates of output and input inflation, respectively.

MNI BRIEF: German Inflation Outlook Revised Higher - Ifo

Germany will see higher inflation through 2022 than previously expected the Munich-based Ifo Institute said Wednesday, with the annual rate now seen rising as higher as between 5.1 to 6.1%. That forecast rate is sharply higher than the 3.3% seen in the Ifo's December forecast.

Russia's invasion of Ukraine is also curtailing economic growth, with Ifo now expecting growth to reach no more than between 2.2 and 3.1 percent this year.

FIXED INCOME: Core FI moves higher with Spring Statement in focus

Core fixed income continued to drift lower overnight, but has reversed all of these losses so far in European trading with Bund and gilt futures approaching yesterday's highs at the time of writing.

• There has not been too much in terms of headline flow driving markets this morning, instead it seems as though investors are reacting to yields moving to cycle highs and buying the dip.
• Gilts continue to outperform Bunds which outperform USTs. This despite UK headline and core CPI suprising consensus by 0.2ppt to the upside.
• Peripheral spreads are mixed with Italy, Spain and Portugal seeing spreads tighten but eastern European states and semi-core are generally seeing spreads widen a little today.
• The focus later today will be on the release of the gilt remit and the Chancellor's Spring Statement (mini-budget). This will begin around 12:30GMT / 8:30ET with the remit normally out around an hour or so later. For our full preview click here.
• Elsewhere we have a number of central bankers speaking. At the BIS Innovation Summit we have a panel consisting of Fed's Powell, BOE's Bailey and ECB's Nagel at midday GMT / 8:00ET (monpol probably won't be discused) while we also have ECB's Visco and Fed's Daly and Bullard due to speak.
• TY1 futures are unch today at 122-24 with 10y UST yields down -1.6bp at 2.368% and 2y yields down -1.9bp at 2.148%.
• Bund futures are up 0.40 today at 159.83 with 10y Bund yields down -2.6bp at 0.476% and Schatz yields down -2.3bp at -0.266%.
• Gilt futures are up 0.42 today at 120.84 with 10y yields down -5.0bp at 1.657% and 2y yields down -5.6bp at 1.347%.

FOREX: USD/JPY Consolidates After Hitting New Cycle High

• Risk sentiment is generally slightly firmer, with European equities following the Wall Street lead after Tuesday's positive close. JPY was initially offered further in Asia-Pac trade, putting USD/JPY at a new multi-year high of 121.41 - before consolidating a profit-taking brought the pair slightly lower into the NY crossover.
• GBP is the poorest performer so far Wednesday, despite headline CPI data coming in ahead of expectations - mimicking the higher-than-forecast inflation releases across Europe and the US. The 0.2ppt increase marked the 5th consecutive upside surprise. GBP/USD has ebbed off the overnight high of 1.3298, erasing a small part of the sizeable Tuesday rally.
• SEK has firmed, with EUR/SEK returning back toward the 100-dma support at 10.3666 following a somewhat hawkish speech from Riksbank deputy governor Breman, who noted that policy rates may need to be hiked earlier, shrugging off the February rate path which is "now a thing of the past".
• Focus turns to US new home sales data for February, the Spring Statement from the UK Chancellor and the BIS Innovation Summit, at which Fed's Powell, BOE's Bailey and ECB's Nagel are due to speak. Monetary policy may not be discussed, but markets will keep a close eye regardless. ECB's Visco, Fed's Daly & Bullard are also due.

EQUITIES: European Stocks Higher, Led By Energy

• Asian markets closed sharply higher: Japan's NIKKEI closed up 816.05 pts or +3% at 28040.16 and the TOPIX ended 44.96 pts higher or +2.33% at 1978.7. China's SHANGHAI closed up 11.17 pts or +0.34% at 3271.032 and the HANG SENG ended 264.8 pts higher or +1.21% at 22154.08
• European equities are gaining, with the German Dax up 54.8 pts or +0.38% at 14528.09, FTSE 100 up 39.33 pts or +0.53% at 7515.4, CAC 40 up 20.17 pts or +0.3% at 6681.59 and Euro Stoxx 50 up 8.95 pts or +0.23% at 3935.57.
• U.S. futures are a little lower, with the Dow Jones mini down 38 pts or -0.11% at 34671, S&P 500 mini down 4.5 pts or -0.1% at 4500.5, NASDAQ mini down 13.75 pts or -0.09% at 14640.

COMMODITIES: Oil, Precious Metals Tick Higher From Overnight Lows

• WTI Crude up $1.07 or +0.98% at $110.29
• Natural Gas down $0.06 or -1.06% at $5.132
• Gold spot up $1.9 or +0.1% at $1923.63
• Copper up $4.1 or +0.87% at $474.1
• Silver up $0.2 or +0.8% at $24.9842
• Platinum down $3.98 or -0.39% at $1021.68