MNI US OPEN: Cooling Price Expectations and PPI Eases ECB Concerns

NEWS

ECB (MNI): Boost for ECB as Consumer Price Expectations Slow

Consumer expectations for eurozone inflation in coming months declined again in February, offering some comfort to European Central Bank policymakers concerned about the possibility of a wage-price spiral from elevated negotiated pay deals. Median expectations for inflation over the next 12 months fell to 4.6%, down from 4.9% in January, while the consumer outlook for inflation three years ahead edged down from 2.5% to 2.4%, the ECB's latest survey showed.

BOE (MNI): Tenreyro Giving Little Indication Whether She Will Vote for Cut or Not

This is the key part of Tenreyro's speech. She's clearly not going to change to vote for a hike - but this doesn't really provide much guidance as to whether she will continue to vote for rates on hold in the May/June meetings (her last before her term ends) or if she ends up voting for a cut in one of those meetings: "With Bank Rate moving further into restrictive territory, I think a looser stance is needed to meet the inflation target in the medium term. In general, a looser stance can be achieved either through lower Bank Rate today, or through lower Bank Rate in future, which leads to a lower market curve."

POLITICAL RISK (MNI): EU's Borrell-China Has 'Moral Duty' to Support Ukraine

US Secretary of State Anthony Blinken and EU High Representative for Foreign Affairs and Security Josep Borrell have been speaking ahead of the NATO foreign ministers' meeting in Brussels taking place today and tomorrow. Borrell argues that "China has a moral duty to contribute to a fair peace [in Ukraine], they cannot be siding with the aggressor," adding "it's position on Russian war crimes will determine the quality of our relationship with Beijing".

NATO (MNI): Russia Building Up in North, but No Change in Nuclear Posture - Secretary General

NATO Secretary-General Jens Stoltenberg delivering doorstep comments ahead of foreign ministers' meeting in Brussels. States that 'We have seen a Russian build-up in the north over previous years, this is part of a pattern...NATO is constantly assessing its posture and its exercises.' Says that 'We have not seen so far any changes in Russia's nuclear posture that would require any change in NATO posture.'

CHINA (MNI): Foreign Ministry Spokesperson Warns US on Taiwan President Meeting

Wires carrying comments from the Chinese Foreign Ministry. Regarding Taiwanese President Tsai Ing-wen's planned meeting with Speaker of the US House of Representatives Kevin McCarthy (R-CA) in California, states that 'China firmly opposes US' arrangement for the trip, any meeting between her and McCarthy seriously contravenes one-China principle.

RBA (MNI): Rates on Hold, Bank Charts Cautious Path

The Reserve Bank of Australia choose caution at its April meeting, pausing rates at 3.6% and making dovish tweaks to its guidance on potential future hikes. RBA Governor Philip Lowe warned in the accompanying statement that “further tightening may well be needed” – a slight change from March’s text that said, “further tightening will be needed.” Markets had expected the pause and the overnight index swap rate remained largely unchanged with a 25bp cut priced in by December.

MNI RBNZ Preview - April 2023: Another 25bp, Tightening Bias To Stay

A step down to 25bp from February’s 50bp is widely expected at the April 5 meeting bringing the OCR to 5%, the highest since 2008. A pause and 50bp hike are also likely to be discussed. The February forecasts had rates peaking at 5.5%. Given that another 25bp rise is expected, the guidance part of the accompanying statement will be particularly important to the outlook for monetary policy.

DATA

EUROZONE DATA (MNI): PPI Slows for Sixth Consecutive Month in Feb

• EUROZONE FEB PPI -0.5% M/M (= FCST); JAN -2.8% M/M
• EUROZONE FEB PPI +13.2% Y/Y (FCST +13.3%); JAN +15.1%r Y/Y

Factory-gate inflation for February was largely equal to consensus expectations, cooling by -0.5% m/m, with annualised prices easing 1.8pp to +13.2% y/y. This follows the sharp 9.4pp y/y drop in January due to a steep decline in energy prices. The February PPI ex. energy edged up by a modest +0.2% m/m, whilst slowing by 0.9pp to +10.2% y/y. In contrast to recent months, Irish PPI is unlikely to have distorted the headline aggregate index after posting a more mild -0.8% m/m print in February.

FOREX: Cable Tests the 1.2500 Handle

• The Dollar started the European session flat against G10s, but has since lost some ground, after taking its cue from the Risk On tone, some follow through after Data missed expectations yesterday for Equities.
• The drift lower in Gilt weighted by the supply and the Weaker Dollar has helped the Pound to be the best performer against the Greenback in G10s, and testing the 1.2500 handle at typing.
• Next resistance in Cable comes at 1.2555 2.0% 10-dma envelope.
• AUD is still the red, despite the risk on tone and the offered Dollar, with the Currency in the red after the RBA kept their rate unchanged, which was widely expected.
• The Yen is also in the red, as the USDJPY test the 133.00 handle, led by higher Yields.
• Looking ahead, on the data front sees, US Factory order, JOLTS, final Durable Goods.
• Speakers include, ECB Centeno, BoE Pill, Tenreyro, Fed Cook, Collins, Mester.

BONDS: Retracing Post-ISM Gains

Global core FI futures are trading near session lows with steady weakness seen through European morning trade Tuesday. Treasuries have faded about half of the gains made after Monday's weak ISM print.

• Bellies are underperforming on the US and German curve, with UK 10s weakest.
• With futures volumes relatively limited, price action so far has mostly been eclipsed by cross-asset moves, with yields rising on sharp moves lower in the dollar vs G10 counterparts, and higher equities.
• Indeed despite the belly underperformance (DE/US 5Y yields up 4-5bp vs 4bp in 2s and 10s), not much change in central bank hike expectations: ECB/BoE/Fed terminal rates each up around 1bp.
• Data hasn't had much of an impact this morning (EU PPI was in line; ECB's consumer survey saw inflation expectations dip slightly).
• An appearance by BoE's Pill will be eyed later, while the key US releases are JOLTS and Factory Orders (out simultaneously at 1000ET).
• We also hear from the FOMC's Cook, Collins and Mester.

Latest levels:

• Jun US 10Y futures (TY) down 5/32 at 115-09.5 (L: 115-08 / H: 115-20)
• Jun Bund futures (RX) down 71 ticks at 135.87 (L: 135.81 / H: 136.59)
• Jun Gilt futures (G) down 92 ticks at 103.71 (L: 103.64 / H: 104.43)
• Italy / German 10-Yr spread 0.4bps wider at 185bps

EQUITIES: Eurostoxx Futures Target 4300.00 Resistance Handle

Eurostoxx 50 futures traded higher last week and the contract is holding on to its latest gain. Price has pierced resistance at 4268.00, the Mar 6 high and a key hurdle for bulls. A clear break of this level would strengthen bullish conditions and open 4300.00 next. Moving average studies are in a bull-mode set-up and this highlights a broader uptrend. Initial firm support lies at 4156.40, the 20-day EMA. S&P E-minis maintains a bullish tone and the contract traded higher Monday. Price has breached resistance at 4119.50, reinforcing bullish conditions. The move higher has also resulted in a breach of 4148.48, 76.4% of the Feb 2 - Mar 13 downleg. This signals scope for an extension towards 4205.50, the Feb 16 high ahead of 4244.00, the Feb 2 high and a key medium-term resistance. Firm support lies at 4032.81, the 50-day EMA.

• Japan's NIKKEI closed higher by 99.27 pts or +0.35% at 28287.42 and the TOPIX ended 5.08 pts higher or +0.25% at 2022.76.
• Elsewhere, in China the SHANGHAI closed higher by 16.162 pts or +0.49% at 3312.558 and the HANG SENG ended 113.25 pts lower or -0.55% at 20301.05.
• Across Europe, Germany's DAX trades higher by 35.42 pts or +0.23% at 15618.51, FTSE 100 higher by 23.41 pts or +0.31% at 7699.9, CAC 40 up 9.52 pts or +0.13% at 7358.57 and Euro Stoxx 50 up 5.03 pts or +0.12% at 4317.4.
• Dow Jones mini down 26 pts or -0.08% at 33762, S&P 500 mini down 3.25 pts or -0.08% at 4151.25, NASDAQ mini down 29.5 pts or -0.22% at 13243.75.

COMMODITIES: Monday Price Action Strengthens Bullish WTI Conditions

WTI futures remain in a bull cycle and Monday’s gap higher strengthens this current condition. The contract has touched a high of $81.69, just above resistance at $81.04, the Mar 7 high. A clear break of $81.04 would signal scope for a continuation higher and open $83.04, the Jan 23 high. Key support is seen at $75.72, the Mar 31 high and the gap low on the daily chart. A pullback, if seen, would be considered corrective. Trend conditions in Gold remain bullish and short-term pullbacks are considered corrective. Note that price action since Mar 20 appears to be a pennant - a continuation pattern. This reinforces bullish conditions and signals scope for an extension higher near-term. The recent test above $2000.0 opens $2034.0 next, a Fibonacci projection. $1918.3 marks a firm support, the Mar 17 low - a break would signal scope for a deeper pullback.

• WTI Crude up $0.84 or +1.04% at $81.22
• Natural Gas up $0.02 or +0.81% at $2.118
• Gold spot down $1.51 or -0.08% at $1979.96
• Copper up $1.25 or +0.31% at $405.15
• Silver up $0.03 or +0.13% at $23.9306
• Platinum down $0.09 or -0.01% at $989.9