MNI US OPEN - Annual CPI Revisions Watched for Any Extra Strength in Q4

NEWS

MNI US CPI REVISIONS PREVIEW - FEBRUARY 2024: Annual CPI Revisions Watched for Any Extra Strength in Q4

BLS will update seasonal factors affecting CPI inflation through 2019-23 on Friday, Feb 9 “from 0830ET”. This won’t impact the underlying NSA data, but will sway near-term trends and has been flagged by both Fed Governor Waller and Chair Powell referencing the upside surprise in last year’s annual revision. Analysts are mixed, seeing either very little impact or modest uplift in recent trend rates.

US (BBG): Biden Mishandled Classified Papers But Won’t Be Charged

President Joe Biden knowingly stored and disclosed classified information kept in unsecured locations at his homes in Virginia and Delaware, according to a scathing report released by the Justice Department Thursday. While federal investigators working for Special Counsel Robert Hur found Biden’s conduct was improper, they stopped short of charging him with any crimes. “Our investigation uncovered evidence that President Biden willfully retained and disclosed classified materials after his vice presidency when he was a private citizen,” according to the nearly 400-page report.

US (BBG): Trump Wins Nevada Republican Caucus in March to Nomination

Former President Donald Trump dominated the Nevada caucuses, notching another victory as he closes in on the Republican nomination in a state that will be a critical general-election battleground. News networks, including NBC, ABC and the Associated Press called the race for the former president about 40 minutes after caucus sites closed Thursday evening. Trump will receive all of Nevada’s delegates after rival former UN Ambassador Nikki Haley did not participate in the contest, opting instead to participate in the Nevada GOP primary on Tuesday.

US (MNI): Hot US Economy Complicates Fed Cut Calculus

U.S. economy that continues to defy expectations complicates Federal Reserve calculations on when to begin easing monetary policy, not only due to upside risks for inflation but because it also opens up alternative explanations for why inflation has fallen so quickly, Alan Detmeister, who previously headed the wages and prices section at the Fed Board of Governors, told MNI. Plugging current price trends into the Fed's own models would result in at least one cut by this point.

US (BBG): BofA’s Hartnett Says Stock Rally Close to Triggering Sell Signal

A speedy rally that sent US stocks on a record-setting spree is now close to triggering several sell signals, according to Bank of America Corp.’s Michael Hartnett. The bank’s custom bull-and-bear indicator rose to 6.8 in the week through Feb. 7, Hartnett wrote in a note. A reading above 8 would suggest the bullish trend has run too far, flashing a contrarian signal to sell, the strategist said.

US/ISRAEL (NYT): Biden Sharpens Criticism of Israel, Calling Gaza Response ‘Over the Top’

President Biden sharply escalated his criticism of Israel’s approach to the war against Hamas on Thursday, calling military operations in Gaza “over the top” and saying that the suffering of innocent people has “got to stop.” Mr. Biden, who has strongly supported Israel’s right to retaliate for the Oct. 7 terrorist attack by Hamas that killed an estimated 1,200 people, exhibited growing impatience with the scale and duration of Israel’s response during a nighttime meeting with reporters at the White House.

ECB (BBG): ECB’s Kazaks Says Bets on Spring Rate Cuts Look Optimistic

European Central Bank Governing Council member Martins Kazaks said investor hopes for monetary easing at one of the next two meetings might be too aggressive. Martins Kazaks “At the moment, there are expectations that the rates could be cut in the spring, in March or April — I wouldn’t be optimistic,” Kazaks told Latvijas Radio. “I would be cautious and I would wait until the inflation story is over. Then we can safely breathe and those rates can be lowered step by step.”

ECB (BBG): ECB Will Probably Cut Rates This Year, Villeroy Says

The European Central Bank will likely lower interest rates in 2024 as the pace of price increases eases toward 2% by next year, Bank of France Governor Francois Villeroy de Galhau said. “We will probably cut rates this year because we are making progress against inflation,” the policymaker said Friday on LCI television. “We are exiting the emergency of fighting inflation and are on the right path to overcome the sickness.”

BOE (RTRS): BoE's Haskel Wants More Evidence That Inflation Risks Are Waning

Bank of England policymaker Jonathan Haskel, who voted to raise interest rates last week, said he is encouraged by signs that Britain's inflation pressures might be on the wane but he would need more evidence of a cool-down before changing his stance. Haskel was one of two rate-setters who backed raising Bank Rate from 5.25% - its highest in almost 16 years - to 5.5%.

EUROPE (BBG): Europe Property Funds Hit as Investors Pull €1 Billion a Month

Retail investors are pulling more than €1 billion a month from real estate funds in Europe, with slumping demand and a surge in borrowing costs raising concerns about commercial property valuations. The redemptions meant total net assets held by European open-ended and exchange-traded property funds fell more than 10% to €180.7 billion from December 2022 through the end of last year, data compiled by Morningstar show. Outflows have now been recorded for 11 months in a row as the end of cheap money made the asset class less attractive.

RIKSBANK (MNI): FX Hedging Completed, No Plans to Extend

The Riksbank have completed their FX hedging programme in just over 5-months, with USD8bln and E2bln of reserves hedged overall. When initially announced, they had expected the programme to take 4 to 6-months to complete (from W/C Sep 25). Some analysts had speculated that the Riksbank may extend the programme ahead of last week's monetary policy meeting, but Governor Thedéen pushed back, stating that there were no such plans at this stage. Overall, the sales have not been material enough to prompt significant movements in the SEK, with global risk appetite the primary driver of the currency's move

BOJ (MNI): Expect Easy Conditions After Neg Rates - BOJ's Ueda

Bank of Japan Governor Kazuo Ueda said on Friday accommodative financial conditions will very likely continue even if the BOJ terminates its negative interest rate policy. Ueda told lawmakers that if the BOJ foresees the achievement of its 2% target in a stable and sustainable manner, the Bank will consider whether it is appropriate to continue with various large-scale easy policies, including the negative interest rate.

BOJ (MNI): BOJ Sees Intact Recovery, Policy Change Ahead

Bank of Japan officials believe recent weak domestic-demand data will not impede the Board’s desire to remove negative interest rates over the coming months as the economy will sustain the recovery, MNI understands. Private consumption has lacked strength and remained sluggish amid price hikes and the implementation of capital investment has remained weak due to high uncertainty, and despite strong plans. The slowing y/y rise of the consumer price index and wage-hike hopes will boost private consumption over the coming months, while falling material prices and solid demand linked to labour savings and R&D will increase capex, keeping the economy on a recovery footing.

BOJ (MNI): BOJ Should Exit YCC, Raise Policy Rate - IMF Article

The Bank of Japan should consider exiting yield curve control (YCC) and ending quantitative and qualitative easing (QQE) now while gradually raising short-term policy rates, the International Monetary Fund’s 2024 Article IV Mission said on Thursday. “If staff’s baseline inflation forecast bears out, the BOJ should gradually raise the policy rate over its policy horizon (i.e., three years) thereafter,” the IMF said.

JAPAN (BBG): Japan Allocates $300 Million to Fire Up Domestic Chip Research

Japan will spend as much as ¥45 billion ($300 million) to back a research group developing advanced chip technology, part of a national push to catch up in semiconductor manufacturing. The Ministry of Economy, Trade and Industry said it approved outsourcing research on cutting-edge fabrication tech to Leading-edge Semiconductor Technology Center. The year-old organization was set up to assemble Japan’s researchers in areas such as nanotechnology, materials and artificial intelligence and support chip manufacturing at state-backed Rapidus Corp.

RBA (MNI): RBA Will Take Cautious Approach to Rate Cuts

The Reserve Bank of Australia will take into account lags between monetary policy change and the impact on the economy before acting to ease its cash rate, Governor Michele Bullock told a parliamentary committee Friday. “We do need to take those [lags] into account, so that's the reason we're cautious and why you see all around the world, the central banks are cautious,” she noted. “They have stopped raising rates but they're cautious. Many of them are pushing back a lot on this. They're not ready to say 'job done' and that's because of the lags in policy.”

INDIA (BBG): India Relaxed About OPEC+ Cutting Oil Output, Minister Says

India’s oil minister said the country isn’t concerned about OPEC+’s output cuts and Saudi Arabia’s recent decision not to expand production capacity. “There is enough oil in the world and new suppliers are coming in,” Hardeep Singh Puri said on the sidelines of India Energy Week in Goa. “You decide, you want to sell it or you want to keep it in the ground.” The world’s third-biggest oil importer behind China and the US, India is set to be the single largest source of global oil demand growth between now and 2030 thanks to a booming economy, growing middle class and youthful demographics, according to the International Energy Agency.

RUSSIA/UKRAINE (BBG): Putin Takes Hard Line on Ukraine in Tucker Carlson Interview

President Vladimir Putin said Russia hasn’t achieved its objectives in Ukraine yet, adding in an interview with former Fox News host Tucker Carlson that he would consider negotiations if the US stops supplying weapons to Kyiv. “We haven’t yet achieved our goals,” Putin said in the Feb. 6 interview in Moscow, which Carlson posted on his website Thursday. “We’re conveying to the US leadership that if you really want to stop military action, then you need to stop supplying weapons, then it will all be over in a few weeks and we’ll be able to discuss some terms,” Putin said.

DATA

ITALY DEC IP +1.1% M/M, -2.1% Y/Y (MNI)

GERMANY DATA (MNI): Back to Broad-Based Disinflation Trend in January

German final January HICP was unrevised from the flash readings as expected at 3.1% Y/Y (+3.8% Dec) and -0.2% M/M (+0.2% Dec). The final reading of CPI was also unrevised at 2.9% Y/Y (+3.7% Dec) and +0.2% M/M (+0.1% Dec). Core CPI printed at +3.4% Y/Y (+3.5% Dec). For the monthly headline CPI Y/Y, this represented a return to the downtrend prevalent before December's expected uptick.

FRANCE DATA (MNI): Real Wages Rise for First Time in Cycle in Q4

French nominal wages increased in Q4 2023 by +0.3% Q/Q (vs +0.5% prior) and +3.8% Y/Y (vs +4.2% prior). This was the fourth consecutive slowdown in the Y/Y rate, but nonetheless marks the first time in the current cycle that the yearly wage growth rate exceeded the average CPI inflation rate (3.7% Y/Y) of the respective quarter. Looking at the individual sectors, wage growth developments were fairly uniform, with industrial wages excl. construction and services wages rising +0.3% Q/Q (vs +0.5% prior, both), and construction wages at +0.2% Q/Q (vs +0.4% prior).

NORWAY DATA (MNI): Core Components Accelerate in January

• NORWAY JAN CPI +0.1% M/M, +4.7% Y/Y
• NORWAY JAN CORE CPI +0% M/M, +5.3% Y/Y

Norway January CPI-ATE printed in line with consensus on an annual basis (5.3% Y/Y vs 5.5% prior), while the NSA monthly rate was a touch firmer than expected at 0.0% M/M (vs -0.1% cons, 0.2% prior). Norges Bank had forecasted 5.4% Y/Y in the December MPR. Overall, there was a broad-based acceleration in the annual rate of core components. EURNOK traded 17 ticks lower on release but has since pared losses.

CHINA DATA (MNI): China New Loans, TSF Record High; M2 Over 2-Yr Low

• CHINA JAN NEW LOANS CNY4.92 TRLN VS MEDIAN CNY4.5 TRLN
• CHINA JAN TSF CNY6.5 TRLN VS MEDIAN CNY5.6 TRLN
• CHINA END-JAN M0 +5.9% Y/Y VS +8.3% Y/Y END-DEC
• CHINA END-JAN M1 +5.9% Y/Y VS +1.3% Y/Y END-DEC
• CHINA END-JAN M2 +8.7% Y/Y VS MEDIAN +9.3%; END-DEC +9.7% Y/Y

MNI (Beijing) China new yuan loans and aggregate finance both hit record highs in January but money supply slowed more than expected to a more than two-year low, data released by the People's Bank of China showed Friday. Banks extended CNY4.92 trillion in new yuan loans in January, outperforming the CNY4.5 trillion expectation and surging from December's CNY1.17 trillion. Total social financing rose by CNY6.5 trillion, jumping from CNY1.94 trillion, beating the market consensus of CNY5.6 trillion. Outstanding TSF rose by 9.5% by the end of January, unchanged from the end-December reading.

RATINGS: Friday’s Slate

Potential sovereign rating reviews of note scheduled for after hours on Friday include:

• Fitch on Finland (current rating: AA+; Outlook Stable)
• Moody’s Germany (current rating: Aaa; Outlook Stable)
• S&P on Switzerland (current rating: AAA; Outlook Stable)
• DBRS Morningstar Slovakia (current rating: A, Stable Trend)
• Scope Ratings on Italy (current rating: BBB+; Outlook Stable), Slovakia (current rating: A+; Outlook Negative) & the USA (current rating: AA; Outlook Negative)

FOREX: NZD on the Up as ANZ Juice RBNZ Expectations

• NZD is Friday's best performing currency, pushing NZD/USD to a one-week high, briefing touching 0.6150 and topping resistance at the 0.6125 20-day EMA. A hold above here could see another attempt at 0.6150. Moves follow ANZ's view change that it sees 25bps hikes for the RBNZ across the February and April meetings this year.
• AUD/NZD is making fresh lows, hovering around 1.0600 breaking through the lows from Oct, next target would be May lows of 1.0560. Note, a cumulative 63bps of easing is priced by year-end versus 69bps yesterday. However, this is measured from a terminal OCR of 5.71% versus 5.58% yesterday.
• Weakness across the CHF has continued, with the currency the weakest again in G10. USD/CHF has again cleared to a new YTD high, printing higher highs for a seventh consecutive session.
• Some attention paid to the pick-up in Swiss FX reserves data earlier this week, and while FX revaluation and equity volatility since the December release may be flattering the headline – markets are wary of the currency after Jordan’s intervention in Davos (“strong CHF hurting Swiss companies”) and the more balanced currency language at the December decision (removing the phrase "the focus is on selling foreign currency.")
• CPI revisions data could take focus in the upcoming session, with Canadian jobs data also on the docket. Markets expect Canada to have added 15.0k jobs over the month of January, with an uptick in the unemployment rate to 5.9%. ECB's Nagel, Cipollone and Fed's Logan are also set to be making appearances.

EGBS: Off Lows to Trade Little Changed

Core/semi-core EGBs have recovered from intraday lows to trade close to unchanged on the day.

• Bunds are flat at 133.62, operating within well-defined technical levels. The first support is 132.89 (50.0% retracement of the Oct 4 - Dec 27 bull phase) while the first resistance is 134.72 (20-day EMA).
• Fundamental drivers have been limited this morning, with ECB-speak earlier/overnight largely re-iterating previous rhetoric (Holzmann and Kazaks leaning hawkish, Villeroy maintaining that rate cuts are likely "this year"). German final HICP and Italian IP data were not market movers.
• The German and French cash curves have twist flattened, pivoting around the 10-year tenor, while 10-year periphery spreads are generally little changed. The 10-year BTP/Bund spread is -0.5bps tighter at 157.2bps at typing.
• ECB's Nagel speaks at 1030GMT/1130CET, though his speech is at an award event for BdF Governor Villeroy, so may not be pertinent to monetary policy. ECB's Cipollone is also scheduled for 1415GMT - again unlikely to be monetary policy-relevant.
• The annual CPI revisions in the US from 1330GMT/1430CET will likely garner most cross-market attention today.

GILTS: Bouncing From Lows, Key Support Intact in Futures

Gilts have bounced from lows after futures and 10-Year yields registered fresh ’24 extremes.

• Futures based at 97.45 before rebounding to trade around 97.80 at typing, 10 ticks lower on the day.
• Key support at the Dec 11 low (97.39) was not breached and bulls have quickly forced the contact back above the bear trigger (97.57), although benchmark 10-Year yields had a look through their Dec 11 high (topping out at 4.092%) before the pullback from extremes.
• Cash gilt yields are flat to 2.5bp higher on the day, bear flattening.
• SONIA futures are now +0.25 to -4.0, also rebounding from extremes.
• BoE-dated OIS now shows ~77bp of cuts through ’24, after a brief foray below ~75bp this morning. Digestion of comments from BoE hawkish dissenter Haskel helped the initial pay-side move and pull lower in gilts,, as did broader moves in core global FI markets. A reminder that late December saw the strip price in a little over 150bp of ’24 cuts at one stage.
• The local docket is essentially empty through the weekend, which will leave focus on cross-market and macro matters, discussions surrounding BoE pricing and next week’s tier 1 domestic data (labour market prints, CPI, retail sales, as well as GDP and monthly economic activity data).

EQUITIES: This Week's Gains Reinforce Bullish Conditions in E-Mini S&P

Eurostoxx 50 futures traded higher again yesterday delivering another fresh cycle high that confirms a resumption of the current uptrend. This reinforces the bullish importance of the recent break of a key resistance at the Dec 14 high of 4634.00. The clear breach of the 4700.00 handle paves the way for a climb towards 4753.50, a Fibonacci projection. Initial firm support lies at 4618.30, the 20-day EMA. The trend condition in S&P E-Minis is unchanged and remains bullish - this week’s gains reinforce current conditions. The contract has traded to a fresh cycle high, confirming a resumption of the uptrend. Recent corrections have been shallow - this also highlights a strong uptrend. The focus is on 5050.14, a Fibonacci projection. On the downside, initial key short-term support has been defined at 4866.00, the Jan 31 low.

• Japan's NIKKEI closed higher by 34.14 pts or +0.09% at 36897.42 and the TOPIX ended 4.75 pts lower or -0.19% at 2557.88.
• Across Europe, Germany's DAX trades lower by 3.54 pts or -0.02% at 16961.43, FTSE 100 higher by 1.75 pts or +0.02% at 7595.82, CAC 40 down 20.89 pts or -0.27% at 7651.16 and Euro Stoxx 50 down 6.18 pts or -0.13% at 4706.4.
• Dow Jones mini down 15 pts or -0.04% at 38812, S&P 500 mini up 0.75 pts or +0.01% at 5020.75, NASDAQ mini up 26.75 pts or +0.15% at 17910.5.

COMMODITIES: Recovery in WTI Futures Still Considered Technically Corrective Despite Thursday's Gains

WTI futures traded higher Thursday. The recovery - for now - appears to be a correction. Key short-term resistance has been defined at $79.29, the Jan 29 high. Clearance of this level would be a bullish development. On the downside, support to watch lies at $71.41, the Feb 5 low. A break of this level would reinstate the recent bearish theme and pave the way for a move towards $69.56, the Jan 3 low. Gold is unchanged and the metal continues to trade above the Jan 17 low of $2001.9. Recent short-term gains improved a bullish condition and a resumption of the bull cycle would signal scope for a climb towards $2088.5, the Dec 28 high and a key resistance. For bears, a stronger reversal lower would instead refocus attention on $2001.9, where a break is required to reinstate the recent bearish theme.

• WTI Crude up $0.15 or +0.2% at $76.52
• Natural Gas down $0.09 or -4.59% at $1.824
• Gold spot down $1.41 or -0.07% at $2032.16
• Copper down $1.1 or -0.3% at $369
• Silver up $0.05 or +0.24% at $22.6355
• Platinum down $3.71 or -0.42% at $886.65