MNI US OPEN - China Growth Forecasts More Conservative Than Expected

NEWS

ECB (BBG): ECB’s Lane Says Core Inflation Suggests More Rate Hiking Needed

European Central Bank will probably need to raise borrowing costs again after an increase already penciled in for next week, according to Chief Economist Philip Lane. “The current information on underlying inflation pressures suggests that it will be appropriate to raise rates further beyond our March meeting,” he said in a speech Dublin on Monday, highlighting that the “impact of the cumulative tightening in the monetary policy stance that has already occurred” must be considered as part of the ECB’s meeting-by-meeting approach.

ECB (MNI): ECB Should Consider Lower EZ Price Outcomes - Centeno

The European Central Bank's Governing Council should take account that inflation in January and February was lower than projected in the December forecast when it meets next week, Bank of Portugal’s Governor Mario Centeno told La Stampa in an interview published Monday.

ECB (MNI): ECB Set for ‘Fairly Significant’ March Rate Hike, Rehn Tells YLE

The European Central Bank is likely to continue tightening monetary policy by implementing “a fairly significant interest-rate increase,” according to Governing Council member Olli Rehn. The Governing Council will assess how much and for how long rates need to rise based on the March economic forecasts due in connection with its next rate meeting, Rehn told Finnish state-owned broadcaster YLE in an interview Sunday. The goal is to slow inflation and keep inflation expectations anchored, he said.

JAPAN (MNI): US Growth in Focus as BOJ Weighs YCC Tweak Risks

Bank of Japan officials have sharpened their focus on the outlook for global growth, especially the U.S. economy, as they assess the risks to Japan's economy from any possible tweaks to monetary policy under the central bank's new leadership, MNI understands.

JAPAN/SOUTH KOREA (MNI): Japan & South Korea Reach Breakthrough in Dispute Over Wartime Forced Labour

South Korea's President Yoon Suk-yeol announced a solution to end his country's long-running dispute with Japan over compensation for wartime forced labourers, which has weighed over bilateral relations in the recent years. Efforts to restore bilateral relations intensified amidst geopolitical threats shared by the two East Asian democracies, with increasingly assertive posturing by China and North Korea forcing local policymakers to rethink foreign policy.

JAPAN (MNI): Senior LDP Aide Sees No Need to Alter Joint Statement

A senior Liberal Democratic Party’s official said on Sunday that he sees no need to change a joint statement between the government and the Bank of Japan made in 2013. Hiroshige Seko, the LDP’s Upper House secretary-general, told a NHK talk show that a revision of the statement would be disruptive for financial markets. Seko also said that the now isn’t time to consider an exit from easy policy.

CHINA (MNI): China’s Prudent Targets, Stimulus Show Risks to Recovery

The conservative 2023 growth target and stimulus unveiled at China’s National People’s Congress underscored the challenges confronting Beijing in its drive to deliver a recovery amid sluggish domestic demand, softer exports, a weak property market and high local government debt, policy advisers and economists told MNI.

CHINA (MNI): 5% GDP Target Allows High Quality Growth - NDRC

China’s 2023 national growth target of around 5% can allow for high quality development and the construction of a new development pattern, said an NDRC spokesperson on Monday. Following the optimisation of epidemic control measures, the economy has steadily improved with a significant rebound seen in tourism, catering and retail services. Among 31 provinces, 23 are targeting GDP growth of 5.5% or more, demonstrating confidence is returning, the NDRC said.

CHINA (MNI): Foreign Investors Welcome in China - NDRC

Foreign investors are welcome to play a greater role in China’s new pattern of development and dual circulation model, according to an NDRC spokesperson on Monday. Beijing will reduce restrictions on its negative list for foreign market access, and ensure overseas companies receive equal treatment.

MNI RBA Preview - March 2023: 25bp In March, Guidance The Focus

As the RBA is widely expected to hike rates 25bp to 3.6% at its March 7 meeting, the focus is likely to be on the statement and any changes to the forward guidance. There may be a tempering of February's more hawkish language given the softer data since that decision but while inflation remains "too high", the message in the inflation phrases in the statement will probably be unchanged. But the RBA is likely to keep its options open.

DATA

EUROZONE DATA (MNI): Jan Retail Sales Weaker on Falling Auto Fuel Sales

• EUROZONE JAN RETAIL SALES +0.3% M/M (FCST +0.6%); DEC -1.6%r M/M
• EUROZONE JAN RETAIL SALES -2.3% Y/Y (FCST -1.8%); JAN -2.8% Y/Y

Euro area retail trade was weak in January, rising a modest +0.3% m/m after the upwardly revised -1.6% m/m contraction in December. Sales remained -2.3% lower than January 2022 levels. With both headline prints below consensus expectations, the January data implies a weak start to 2023 after a contractive Q4.

EUROZONE FEB CONSTRUCTION PMI 47.6; JAN 46.1 (MNI)

UK FEB CONSTRUCTION PMI 54.6 (FCST 48.6); JAN 48.4 (MNI)

SWITZERLAND DATA (MNI): Upside Surprise to CPI as Core Pressures Intensify

• SWISS FEB CPI +0.7% M/M (FCST +0.5%); JAN +0.6% M/M
• SWISS FEB CPI +3.4% Y/Y (FCST +3.1%); JAN +3.3% Y/Y

Swiss CPI surprised to the upside in February, accelerating by 0.1pp to +3.4% y/y against consensus expectations of a 0.2pp slowdown. Prices increased by +0.7% m/m, 0.1pp above the January rate and again above expectations. Flight costs, package holidays, accommodation, rents and petrol prices were all upwards drivers of Swiss prices in February, whilst heating oil and new car prices eased.

FOREX: Dollar Off European Morning Lows - But Only Just

• After a softer start to the session across Asia-Pac trade and the European morning, the dollar is off lows, dragging the EUR/USD rate off overnight highs at 1.0657. While the USD is inching more favourably, the USD Index is still in close proximity to the intraday supports at 104.345 and 104.093 for the USD Index.
• At the top end of the table, CHF outperforms following a higher-than-expected outturn for February CPI. M/M inflation rose to 0.7% vs. Exp. 0.5%, while Y/Y rose to 3.4% vs. Exp. 3.1%. EUR/CHF slipped to 0.9924 in response, putting the cross at the lowest level since Feb28.
• AUD, NZD trade to the bottom end of the G10 table, prompting AUD/USD to fade ahead of the test on the 200-dma resistance at 0.6789, mimicking the moderation US equity futures ahead of the Monday open. Moves in commodity-tied currencies follow the decision on China's GDP growth target for this year - a more conservative 5% relative to expectations.
• Focus Monday shifts to the January Factor Order release from the US as well as the final durable goods orders report for the same month. Canadian interest lies in the Ivey PMI for February.
• Outside of Monday, risk events and activity pick up later in the week, with rate decisions due from the Australian, Canadian and Japanese central banks before Friday's Nonfarm Payrolls report.

BONDS: Volatile Start to the Day

• It has been a relatively volatile start to the day with core fixed income continuing Friday's moves higher, and helped by a Chinese growth target announcement of "around 5%", towards the bottom of expectations. We have also had some relatively dovish comments from ECB's Centeno, but overall the rally doesn't really seem to be driven by headlines this morning. Lane has also said this morning that there are some signs of inflation easing but that there are still strong inflationary pressures.
• Looking ahead we will receive US factory orders data this week while the main event of the week will be the US employment report on Friday.
• TY1 futures are up 0-9 today at 111-12 with 10y UST yields down -4.1bp at 3.914% and 2y yields down -2.3bp at 4.836%.
• Bund futures are up 0.92 today at 131.72 with 10y Bund yields down -6.9bp at 2.642% and Schatz yields down -1.7bp at 3.184%.
• Gilt futures are up 0.77 today at 100.39 with 10y yields down -4.8bp at 3.799% and 2y yields down -0.6bp at 3.676%.

EQUITIES: Eurostoxx Futures Test 4323.00 -  Feb 16 High and Bull Trigger

Eurostoxx 50 futures have recovered from recent lows and importantly, this has left a key support intact - the base of a bull channel drawn from the Oct 13 low. The line intersects 4211.90. While channel support holds, the broader uptrend remains intact. Today’s gains have resulted in a test of 4323.00, the Feb 16 high and bull trigger. A clear would resume the uptrend. On the downside, a breach of the channel base would alter the picture. S&P E-Minis trend conditions are bearish, however, the strong bounce late last week has eased bearish pressure. Note that the contract has traded above both the 20- and 50-day EMAs. An ability to hold on to the latest gains would signal scope for a recovery towards 4100.20, a Fibonacci retracement. On the downside, key support has been defined at 3925.00, the Mar 2 low. A break of this level would reinstate the recent bearish theme.

• Japan's NIKKEI closed higher by 310.31 pts or +1.11% at 28237.78 and the TOPIX ended 16.97 pts higher or +0.84% at 2036.49.
• Elsewhere, in China the SHANGHAI closed lower by 6.367 pts or -0.19% at 3322.026 and the HANG SENG ended 35.65 pts higher or +0.17% at 20603.19.
• Across Europe, Germany's DAX trades higher by 44.75 pts or +0.29% at 15622.86, FTSE 100 lower by 15.58 pts or -0.2% at 7931.36, CAC 40 up 34.04 pts or +0.46% at 7382.16 and Euro Stoxx 50 up 19.91 pts or +0.46% at 4314.71.
• Dow Jones mini down 31 pts or -0.09% at 33381, S&P 500 mini down 1.25 pts or -0.03% at 4048.25, NASDAQ mini up 7.25 pts or +0.06% at 12319.25.

COMMODITIES: WTI Futures Breach 50-Day EMA, Opening $80.78 Feb 13 High

WTI futures remain bullish following last week’s appreciation. The contract cleared resistance at the 50-day EMA which intersects at $77.99 today. The breach reinforces short-term bullish conditions and paves the way for a climb towards $80.78, the Feb 13 high and $82.89, the Jan 23 high and a key resistance. On the downside, a breach of support at $73.80 is required to reinstate the recent bearish theme. Trend conditions in Gold remain bearish, however, the metal traded higher last week and traded through resistance at $1846.4, the 50-day EMA. A clear break of this hurdle would strengthen short-term bullish conditions and signal scope for an extension - this would open $1870.5, the Feb 14 high. On the downside, key short-term support has been defined at $1804.9, the Feb 28 low. A break would resume recent bearish activity.

• WTI Crude down $0.48 or -0.6% at $79.2
• Natural Gas down $0.32 or -10.6% at $2.698
• Gold spot down $3.74 or -0.2% at $1852.19
• Copper down $2.45 or -0.6% at $404.35
• Silver down $0.07 or -0.33% at $21.1833
• Platinum down $10.08 or -1.03% at $971.72