MNI US OPEN - BoJ Seen Watching Wages to Greenlight March Hike

NEWS

ECB (BBG): ECB’s Simkus Says Interest-Rate Cuts May Begin in June
European Central Bank Governing Council member Gediminas Simkus backed President Christine Lagarde’s suggestion that reductions in borrowing costs may begin in three months.“ June is the possible month for a rate cut,” the Lithuanian official said Friday. “I go to each meeting open-minded. I can’t rule out a possibility of a cut in April but the likelihood is low.”

ECB (BBG): ECB’s Muller Says Inflation Slowing But More Confidence Needed
European Central Bank Governing Council member Madis Muller said inflation in the euro area is gradually approaching the 2% target, but officials still need more confidence that the trend will persist.

ECB (BBG): ECB Will Discuss Rate Cuts in April and June, Rehn Says
The European Central Bank will discuss lowering borrowing costs at its next two meetings, according to Governing Council member Olli Rehn. “My own assessment is that based on the forecast that has now been received, the risks of premature interest rate cuts in terms of inflation control have substantially decreased — this is also affected by the lowering of the growth forecast,” he said in a blog post on Friday. “We will come back to the matter in the upcoming April and June meetings based on the latest information.”

ECB (BBG): ECB Will Very Likely Cut Rates in April or June, Villeroy Says
The European Central Bank is very likely to cut interest rates at its April or June meetings as there is now broad consensus on making a move soon, Bank of France Governor Francois Villeroy de Galhau said. “It seems very probable that there will be a first rate cut in the spring,” he said on BFM Business television on Friday. “Spring goes from April until June 21.”

ECB (BBG): ECB to Avoid ‘Autopilot’ on Rates Once Cuts Begin, Kazaks Says
The European Central Bank won’t necessarily lower interest rates at every meeting once cuts commence, according to Governing Council member Martins Kazaks. Monetary easing could include pauses along the way if conditions call for it, the Latvian central bank head told Bloomberg from Riga. While he didn’t exclude an eventual return to some form of forward guidance, he said it’s not appropriate now due to elevated uncertainty.

ECB (BBG): ECB’s Nagel Sees Rising Chance of Rate Cut Before Summer Break
The European Central Bank might be able to lower borrowing costs before policymakers break for the summer, according to Bundesbank President Joachim Nagel.“ The probability is increasing that we could see an interest-rate cut before the summer break,” Nagel told the table.media podcast. “This will be data dependent, but the prospects have brightened.” The ECB has monetary policy decisions scheduled for April 11, June 6 and July 18. After that it doesn’t meet again until Sept. 12.

JAPAN (JiJi): BOJ considers new quantitative policy framework, Jiji reports
The Bank of Japan is considering a new quantitative monetary policy framework that will show the outlook for upcoming government bond buying amounts, Jiji news agency reported on Friday.

BOJ (Reuters): BOJ leaning toward exiting negative rates in March - sources
A growing number of Bank of Japan policymakers are warming to the idea of ending negative interest rates this month on expectations that this year's annual wage negotiations will yield strong results, four sources familiar with its thinking said, But an imminent policy shift is hardly a done deal as there is no consensus within the nine-member board on whether to pull the trigger at its upcoming March 18-19 meeting, or hold off at least until the subsequent meeting on April 25-26, they say. Many BOJ policymakers are closely watching the outcome of big firms' annual wage negotiations with unions on March 13 to determine how soon to phase out their massive stimulus.

US (Reuters): Biden takes on Trump and Republicans in fiery State of the Union speech
President Joe Biden on Thursday laid out his case for re-election in a fiery State of the Union speech that accused Donald Trump of threatening democracy, kowtowing to Russia and torpedoing a bill to tackle U.S. immigration woes. In a 68-minute address to Congress, Biden, a Democrat, drew sharp contrasts with his Republican rival and gamely challenged Trump's supporters in the chamber during a speech that was watched as much for the 81-year-old president's performance as it was for his policy proposals.

US ENERGY (BBG): US Pause on New LNG Export Licenses May Last Months Under Review
The Biden administration’s pause on new liquefied natural gas export licenses could last months as the Department of Energy reviews the issue, according to a US energy official. “We anticipate the analysis that’s underway now taking several months because this is an issue of such significant importance,” Brad Crabtree, assistant secretary for the department’s Office of Fossil Energy and Carbon Management, said in an interview. Responding “responsibly” to comments and analysis will “take a significant period of time,” he said in Tokyo on Friday.

CHINA (BBG): China’s 30-Year Bond Auction Sees Lower Yield Amid Market Frenzy
An auction of China’s 30-year sovereign notes drew solid demand, as traders look past a heavy supply pipeline ahead. The Finance Ministry sold 28 billion yuan ($3.9 billion) of 30-year government bonds at an average yield of 2.42% in a reopening issuance Friday, according to traders who bid at the auction. The average auction yield for 30-year notes has extended its drop to hit a new record low, according to data compiled by Bloomberg dating back to 2008.

CHINA/US (BBG): China Readies $27 Billion Chip Fund To Counter Growing US Curbs
China is in the process of raising more than $27 billion for its largest chip fund to date, accelerating the development of cutting-edge technologies to counter a US campaign to thwart its rise. The National Integrated Circuit Industry Investment Fund is amassing a pool of capital from local governments and state enterprises for its third vehicle that should exceed the 200 billion yuan of its second fund, according to people familiar with the matter.

CHINA (BBG): Ex-PBOC Chief Yi Urges Fiscal Stimulus for Consumption: Paper
Yi Gang, former governor of the People’s Bank of China, suggested the country’s fiscal support should be inclined more toward improving people’s livelihoods and promoting consumption, Securities Times reported, citing a proposal by Yi to the country’s top political advisory body.

CHINA (MNI): China To Extend Debt, Reform Local Gov Tax
China will increase off-the-book special government debt issuance and extend its maturity to raise funds for medium- and long-term growth initiatives, while considering additional revenue sources for local governments to ease their fiscal challenges, a prominent policy advisor told MNI in an interview.

DATA

MNI: EUROZONE Q4 GDP +0% Q/Q, +0.1% Y/Y

German Industrial Production SA (Jan) M/M +1.0% vs. Exp. +0.6% (Prev. -1.6%, Rev. -2.0%), WDA Y/Y -5.5% vs. Exp. -4.8% (Prev. -3.0%, Rev. -3.5%)

German PPI (Jan) M/M +0.2% vs. Exp. +0.1% (Prev. -1.2%), Y/Y -4.4% vs. Exp. -6.6% (Prev. -8.6%)

MNI BRIEF: Japan Feb Sentiment, Outlook Indexes Rise
Japan's sentiment index posted its first rise in two months at 51.3% seasonally adjusted in February, up from 50.2% the prior month, while the two-three month outlook index rose 0.5 points to 53.0, the Cabinet Office's Economy Watchers report released Friday showed. The indexes linked to households and businesses rose, but those of the labour market fell. “The economy is recovering moderately as a trend but it is marking time," the government noted. "Looking ahead, a moderate economic recovery is likely to continue, although there is concern over the impact of high prices.”

EGBs: Firmer As ECB Speakers Converge Toward June

Core/semi-core EGBs sit firmer, with this morning's raft of ECB speakers indicating a growing consensus for a June cut while some of the centrists leave an April cut on the table. ECB-dated OIS contracts currently fully price the first full 25bp cut through the June meeting.

• This has prompted a dovish reaction in STIRs, with OIS now pricing 103bps of cuts through '24 (vs 95bps yesterday afternoon).
• Bunds are +46 ticks at 133.80, with the first resistance at 134.18 (Feb 7 high).
• Core global bonds have largely looked through the weakness in JGB futures/hawkish BoJ speculation in recent trade.
• Cash curves have bull steepened across the major EZ countries, while 10-year peripheral spreads to Bunds are wider. The 10-year BTP/Bund spread is 0.8bps wider at 132.50bps, but has still tightened around 15bps this week alone.
• The US labour market release at 1330GMT/1430CET provides the next event of interest across global markets.

GILTS: Rallying On Spill Over From ECB Speak

Spill over from ECB speak has underpinned gilts this morning, with expectations for a June rate cut solidifying.

• Also note that some ECB GC centrists have kept the possibility of an April hike on the table.
• Gilt futures +47 at 99.80, 99.49-82 range.
• Yesterday’s range remains intact.
• Gilt yields 2.5-5.0bp lower on the day, 5s lead the rally.
• As flagged earlier, bulls will want to overcome 100.00 in futures and close the Feb 5 opening gap higher in 10-Year yields (3.918%).
• SONIA futures underpinned alongside the latest rally in gilts, last flat +6.0.
• BoE-dated OIS shows ~65bp of ’24 cuts.
• Domestic news flow has been light, leaving cross-market flow & macro headlines at the fore.
• That is set to continue with the UK release calendar empty ahead of the weekend.

FOREX: JPY at New Highs on Fresh Hike Chatter, ECB Members Coalesce Around June

• After a quiet start to Friday trade, JPY is once again the best performer in G10 - tipping USD/JPY over 300 pips off the mid-week high. JPY added to recent gains on the back of concurrent BoJ sources reports from both JiJi News and Reuters - who eye the possibility of a March BoJ rate hike should the wage negotiation phase with unions next week continue to show signs of healthy wage growth. USD/JPY traded well through overnight Asia-Pac lows to extend losses off the weekly high to over 320 pips. A close at current or lower levels would confirm a clean break of both the 50- and 100-dma supports and a print through 146.24 would fully reverse the NFP-inspired rally.
• EUR/JPY pull back was a touch shallower after the cross found support at the 50-dma (160.61 today) - highlighting that USD weakness is also playing a part.
• The single currency is seen softer - weaker against most others - with ECB members out in force this morning following Lagarde's press conference yesterday. Members are coalescing around the June meeting for the first potential ECB rate cut - communication that is inline with market pricing. EUR/GBP has printed a new weekly low this morning, rejected yesterday's early test on 50-dma resistance at 0.8564. Next notable support a little way off, but weakness through 0.8498 would be bearish - exposing the cross to last August's low and the bear trigger at 0.8493.
• Nonfarm payrolls data ahead takes focus, with markets expecting payrolls growth to slow to 200k from January's bumper 353k reading. The unemployment rate is expected to come in unchanged at 3.7%. Central bank speak is seen quieter into US hours, with just Fed's Williams scheduled to appear at a moderate discussion just ahead of the US open.

EQUITIES: Crest at New Cycle Highs

The trend condition in S&P E-Minis is bullish and yesterday’s fresh cycle high reinforces current conditions. Price action continues to highlight the fact that corrections are shallow - this is a bullish signal that highlights positive market sentiment. A bullish theme in Eurostoxx 50 futures remains intact and Thursday’s rally and fresh cycle high reinforces this theme. Moving average studies remain in a bull-mode position, highlighting positive market sentiment.

• Japan's NIKKEI 225 closed higher by 90.23 pts or +0.23% at 39688.94 and the TOPIX ended 8.26 pts higher or +0.3% at 2726.8.
  
• Elsewhere, in China the SHANGHAI closed higher by 18.618 pts or +0.62% at 3046.019 and the HANG SENG ended 123.61 pts higher or +0.76% at 16353.39.
  
• Across Europe, Germany's DAX trades lower by 14.19 pts or -0.08% at 17833.93, FTSE 100 lower by 17.56 pts or -0.23% at 7677.55, CAC 40 up 12.55 pts or +0.16% at 8031.01 and Euro Stoxx 50 up 9.83 pts or +0.2% at 4985.37.
  
• Dow Jones mini down 41 pts or -0.11% at 38784, S&P 500 mini up 5.25 pts or +0.1% at 5167.75, NASDAQ mini up 14.75 pts or +0.08% at 18329.

COMMODITIES: Gold Momentum Remains Firm to Record Highs

Gold remains firm on the back of its latest rally. The yellow metal has this week traded above resistance at $2135.4, the Dec 4 high to deliver a fresh all-time cycle high. The break reinforces bullish conditions and signals scope for a climb towards $2177.6 next. The WTI futures trend condition remains bullish and the contract is trading closer to its recent highs. The recent breach of key resistance at $79.09, Jan 29 high, reinforces this theme. The clear break highlights potential for a continuation towards $81.70.

• WTI Crude up $0.15 or +0.19% at $79.21
  
• Natural Gas down $0.02 or -0.99% at $1.797
  
• Gold spot up $9.31 or +0.43% at $2169.8
  
• Copper up $1.4 or +0.36% at $394.05
  
• Silver up $0.18 or +0.73% at $24.5022
  
• Platinum up $0.56 or +0.06% at $921.91