MNI US OPEN: China Peace Plan Falls on Deaf Ears

NEWS

RUSSIA/CHINA (MNI): China Proposes 12-Point Peace Plan, Favouring Moscow

China called for a cease-fire between Russia and Ukraine in a 12-point proposal for ending the war that appears to offer some reprieve to Moscow, though little chance of winning broad support, Bloomberg report. US National Security Advisor Jake Sullivan, speaking on CNN, said China’s proposal should have ended after the first bulletpoint, which calls for “respecting the sovereignty of all countries.”

RUSSIA/CHINA (BBG): China Dismisses US Claim Over Possible Weapons Sales to Russia

China pushed back on US accusations that it has considered providing lethal aid to Russia in its war in Ukraine, saying it never sells arms to parties involved in a conflict. Foreign Ministry spokesman Wang Wenbin was asked Friday about a report in Germany’s Der Spiegel that Beijing is negotiating to send Russia armed drones. He answered by saying: “China has always taken a cautious and responsible approach to military exports, and does not offer any arms sales to conflict zones or parties involved in wars.”

JAPAN (MNI): Ueda Pledges Easy Policy, Flags YCC Options

Bank of Japan governor nominee Kazuo Ueda said shortening the long-term interest rate target may be an option that emerged from a review as he pledged to maintain easy policy to ensure the 2% price target was achieved in a stable and sustainable manner.

Ueda, who will replace Governor Haruhiko Kuroda on April 9, told a Lower House steering committee that easy policy should be maintained to ensure the 2% target came within sight, adding recent inflation data had been favourable. A move to normalise policy would be considered if the inflation target came into sight, he said without elaborating on the timing.

JAPAN (MNI): Kishida Seeks New Russia Sanctions w/G7, Looks for Support Boost for LDP

Wires carrying comments from Japanese PM Fumio Kishida. States that he would like to present new sanctions on Russia alongside other nations in the G7. Says that he is planning to call for third parties to suspend military support for Russia. Confirms that he is 'considering visiting Ukraine' but no decisions have been made yet, no specific window has been identified, and that he is in close contact with Ukrainian President Volodymyr Zelenskyy.

CHINA (BBG): China Set to Overhaul Financial System Giving Xi More Control

Chinese President Xi Jinping is set to bring decision-making of the financial system further under his control with the likely revival of a powerful committee to coordinate financial policy and the possible appointment of a key ally in a top position at the central bank.

CHINA (MNI): Investment Off to Strong Start in 2023

Provincial data shows investment in major projects around China are off to a strong start in 2023 and will play an important foundation in the economic recovery this year, according to Sheng Chaoxun, Director of the China Macroeconomic Research Institute. Guangzhou authorities are targeting CNY1 trillion in fixed asset investment across 2023, and have signed or started projects worth CNY680 billion so far this year.

SOUTH AFRICA (BBG): South Africa Will Be Added to Watchdog Gray List, Tax Chief Says

South Africa will be added to a global watchdog’s list of nations that have failed to adequately tackle illicit financial flows, the head of the nation’s tax agency said. The Financial Action Task Force, which polices compliance with anti-money laundering and terror-financing measures, is expected to give its decision on Friday whether to include South Africa on its so-called gray list.

REAL ESTATE (BBG): Credit Suisse Cuts Property Fund Payouts as Investors Exit

Credit Suisse Group AG cut payouts on a 3.25 billion Swiss franc ($3.5 billion) real estate fund, as clients sought to pull their cash after valuations were hit by rising interest rates.The Credit Suisse Real Estate Fund International’s net asset value is expected to drop as much as 10%, according to a statement Friday. That will likely limit distributions to investors to as low as 35 francs a share, down from 40 francs a share, it said.

DATA

UK (MNI): Early Signs UK Consumer Sentiment Improving - Gfk

• UK FEB GFK CONSUMER CONFIDENCE INDEX -38

UK consumers are starting to feel less downbeat about the prospects for the economy, although sentiment still sits close to historically low levels, the head of a closely-watched monthly survey told MNI. "The headline consumer confidence score is still severely depressed and the mood as well as the economy remain a long way off pre-lockdown levels, but a little consumer resilience might be what we need to soften any downturn in 2023," Joe Staton, Client Strategy Director at GfK told MNI.

GERMAN DATA (MNI): German Consumer Confidence Up as Energy Prices Cool

• GERMANY MAR GFK CONSUMER CONF -30.5 (= FCST); FEB -33.8r

German consumer confidence is projected to recover for a fifth consecutive month in the GfK March outlooks, up 3.3 points at -30.5, in line with consensus expectations. Declining energy prices (supported by government price caps) and reports of an avoidable recession have underpinned confidence.

GERMAN DATA (MNI): Downwards Revision to GDP to Drag on EZ

• GERMANY Q4 GDP FINAL -0.4% Q/Q (FLASH -0.2%); Q3 +0.5% Q/Q
• GERMANY Q4 GDP FINAL +0.9% Y/Y (FLASH +1.1%); Q3 +1.4% Y/Y

German GDP was revised down by 0.2pp on both the quarter to -0.4% q/q, and on the year to +0.9% y/y. This downward revision to the largest eurozone economy, if combined with downward revisions from other countries, could push the eurozone economy into contractionary territory in Q4 (final print due March 8)..

FRANCE DATA (MNI): Consumer Sentiment Weakens as Inflation Expectations Edge Up

• FRANCE FEB CONSUMER CONFIDENCE 82, JAN 83

French consumer confidence edged down by one point to 82 in February, following the upwardly revised Jan data (due to a calculation error). The indicator remains only a few points above the September low and in deeply negative territory. Personal finance outlooks weakened and propensity to make major purchases was stable, dragging further on household consumption in the near-term.

SWEDEN FEB ECONOMIC TENDENCY SURVEY 85.7 (FCST 81); JAN (MNI)

JAPAN DATA (MNI): Japan's Jan Core CPI Rises 4.2% To 41-Year High

• JAPAN JAN CORE CPI +4.2% Y/Y; DEC +4.0%
• JAPAN JAN CORE-CORE CPI +3.2% Y/Y; DEC +3.0%
• JAPAN JAN CPI FOOD EX-PERISHABLES +7.4% Y/Y; DEC +7.4%
• JAPAN JAN CPI ENERGY COST +14.6% Y/Y; DEC +15.2%
• JAPAN JAN HOUSEHOLD DURABLE GOODS +11.1% Y/Y; DEC +10.8%

Japan's annual core consumer inflation rate accelerated to 4.2% y/y in January, up from December's 4.0% and the highest level since September 1981 when it also rose 4.2%, data from the Ministry of Internal Affairs and Communications released Friday showed. The pace of the core CPI rise, which was in line with the Bank of Japan's expectations, will likely slow in or after February due to government’s subsidies to lower electric and gas charges, although electricity firms have applied to raise electricity charges in April.

RATINGS: Friday’s Sovereign Rating Slate

Sovereign rating reviews of note schedule for after hours on Friday include:

• Fitch on the Netherlands (current rating: AAA; Outlook Stable)
• Moody’s on Austria (current rating: Aa1; Outlook Stable) & Sweden (current rating: Aaa; Outlook Stable)
• S&P on Austria (current rating: AA+; Outlook Stable)
• DBRS Morningstar on Slovakia (current rating: A (high), Negative Trend)

FOREX: USD Index Sits Just Below Resistance Ahead of Friday Fedspeak

• Focus for Asia-Pac trade was on Ueda's appearance in front of Japan's Lower House lawmakers, who signaled a continuity for BoJ policy should he receive full backing to take over Kuroda at the helm of the central bank. Nonetheless, markets eyed Ueda's apparent acknowledgement of the side effects of ultra-easy monetary policy, suggesting more uncertainty over BoJ policy across the medium-term. JPY is among the poorest performers in G10 early Friday, although USD/JPY remains shy of the Thursday high at 143.51.
• AUD maintains its position as one of the poorest performing currencies in G10 this week, slipping alongside global equities as the e-mini S&P technical outlook tilts bearish. The move, initially triggered by Wednesday's Wage Price Index, has extended Friday, puting AUD/USD at the lowest levels since early January and further through the 200-dma at 0.6801.
• The USD Index is inching higher ahead of the NY crossover, and a move north of 104.779 for the USD Index would mark the highest level since early January. Fedspeak and incoming data could be key for any break of this level.
• US PCE data for January will take focus going forward, with new home sales also on the docket. The final reading for University of Michigan sentiment is set to cross, but markets see little change relative to the prelim release.
• The central bank speaker slate is relatively busy, with appearances from Fed's Jefferson, Mester, Bullard and Collins all due as well as BoE's Tenreyro.

BONDS: Tsys Underperforming Ahead of PCE and Fed Speakers

US Treasuries are underperforming in early Friday trade, ahead of another busy data and Fed speaker slate to close out the week.

• Modest overnight strength across core FI - underpinned amid non-hawkish comments by BOJ Gov nominee Ueda - has faded in the European morning, with the German and UK curves flattening amid weakness at the short end (ECB's Nagel saw potential for large hikes beyond March).
• The US cash curve meanwhile has bear steepened ahead of the PCE release.
• European data was mixed (and not market-moving): a downward revision in the second reading of German Q4 GDP vs a better-than-expected French consumer confidence figure.
• The January US personal income/spending report highlights the docket, with close attention paid to the PCE inflation readings. Also due are Jan new home sales and final UMichigan sentiment.
• BoE's Tenreyro speaks later, and on the Fed speaker front, we get comments from Jefferson, Mester, Bullard, Collins, and Waller.

Latest levels:

• Mar 10-Yr futures (TY) down 4.5/32 at 111-9.5 (L: 111-08.5 / H: 111-19)
• Mar Bund futures (RX) up 13 ticks at 134.79 (L: 134.69 / H: 135.3)
• Mar Gilt futures (G) up 16 ticks at 102 (L: 101.99 / H: 102.67)
• Italy / German 10-Yr spread 2.4bps tighter at 188bps

EQUITIES: E-Mini S&P Recovers From Thursday's Fresh February Low

Dip buyers emerged in EUROSTOXX 50 futures again Wednesday, with prices rapidly bouncing off the 4211.00 lows. Momentum carried through to the Thursday close, to keep the very short-term view somewhat constructive. Nonetheless, prices remain just below first major resistance at 4303.20, the 2.382 proj of the Sep 29 - Oct 4 rise from Dec 20 low, but still above 4265.00, the Feb 3 high. Note that the trend is overbought. A pullback would represent a healthy correction. Key support lies at 4097.00, the Jan 19 low. Initial support is at 4231.1, the 20-day EMA. Further slippage Wednesday put the S&P E-Minis to fresh February lows, with weakness extending through the close. This puts prices below first support at the 50-day EMA at 4031.50 and tilts the near-term view lower. 3901.75 marks next support, the Jan 19 low, although vol band support at 3954.8 could slow any decline. For the outlook to improve, bulls look for a close above the mid-week high at 4034.25.

• Japan's NIKKEI closed higher by 349.16 pts or +1.29% at 27453.48 and the TOPIX ended 13.15 pts higher or +0.67% at 1988.4.
• Elsewhere, in China the SHANGHAI closed lower by 20.317 pts or -0.62% at 3267.16 and the HANG SENG ended 341.31 pts lower or -1.68% at 20010.04.
• Across Europe, Germany's DAX trades higher by 15.07 pts or +0.1% at 15492.17, FTSE 100 higher by 24.38 pts or +0.31% at 7931.72, CAC 40 up 19.48 pts or +0.27% at 7336.3 and Euro Stoxx 50 up 8.06 pts or +0.19% at 4266.32.
• Dow Jones mini down 57 pts or -0.17% at 33121, S&P 500 mini down 10.75 pts or -0.27% at 4007.75, NASDAQ mini down 73.75 pts or -0.6% at 12134.

COMMODITIES: Gold Extends Losses, Drifting Lower to $1800 Handle

WTI futures drifted lower into the Wednesday close, returning the outlook to neutral for now. Prices now sit back below the 50-day EMA, at $78.34, however the medium-term view remains unchanged. Key resistance remains at $82.66, the Jan 18 high. On the downside, initial firm support has been defined at $72.25, the Feb 6 low for the continuation contract. Trend conditions in Gold are bearish for now, with prices extending losses ahead of the Thursday close. This marks an extension of the pullback after the strong sell-off on Feb 2 / 3 as well as the break of support at the 50-day EMA. The clear break strengthens the bearish case and suggests scope for a deeper pullback. Vol band support (the 2.0% 10-dma envelope), successfully contained prices so far, keeping the focus on the level this week.

• WTI Crude up $0.62 or +0.82% at $76.01
• Natural Gas up $0.04 or +1.6% at $2.351
• Gold spot up $0.78 or +0.04% at $1823.07
• Copper down $2.2 or -0.54% at $403.4
• Silver down $0.06 or -0.27% at $21.252
• Platinum down $8.03 or -0.84% at $943.15