MNI US OPEN - Dollar Fades Off Monthly High as Focus Turns to CB Speak

NEWS

ECB (MNI): Take Small Steps to Avoid Over-Tightening - Panetta

The ECB should hike rates in small increments, mindful of monetary policy lags and simultaneous tightening by other major central banks, Executive Board member Fabio Panetta said in a speech on Thursday, with the length of time rates remain in restrictive territory now at least as important as the terminal rate of interest.

POLITICAL RISK (MNI): Not the First Time Lockheed Martin, Raytheon Have Been Targeted Over Taiwan Sales

Due to arms sales to Taiwan, Raytheon and Lockheed Martin will be barred from making onshore investments in China and are excluded from all exports and imports to and from China. The companies will be fined twice the value of the contracted arms sales to Taiwan. This isn't the first time these companies have been targeted: in February 2022 and October 2020 both companies were the target of trade sanctions, to which Lockheed Martin confirmed they have limited presence in the country.

CHINA/US (BBG): China Warns US That Rising Tensions Could Jeopardize Talks

China questioned whether the US genuinely seeks to repair ties damaged by the dispute over a balloon just as the two nations’ top diplomats head to a security conference in Germany, where they may have an opportunity to meet on the sidelines. The balloon saga “tests the US’s sincerity and capability to properly handle crises and stabilize relations with China,” Foreign Ministry spokesman Wang Wenbin said Thursday at a regular press briefing in Beijing.

JAPAN (MNI): Govt to Hold Hearings for BOJ Nominees on Feb 24

The government will conduct hearings for the Bank of Japan nominees at the Lower House’s steering committee on Feb. 24, a Diet official said. The schedule of the Upper House’s Steering committee will be discussed this afternoon, another official said. Japan's government on Tuesday officially nominated Kazuo Ueda, an economist and former BOJ board member, as the BOJ’s next governor to replace Haruhiko Kuroda, whose term ends on April 8.

CHINA/AUSTRALIA (MNI): China-Australia Trade In "Important Period" - MOFCOM

The China-Australia trade relationship is mutually beneficial, and both sides should take positive steps to improve relations as trade ties between Beijing and Canberra move into an “important period”, according to a Ministry of Commerce (MOFCOM) spokesperson on Thursday.

DATA

AUSTRALIA DATA (MNI): Aussie Jan Unemployment Rate Rises, Jobs Fall

• AUSTRALIA JAN UNEMPLOYMENT RATE +3.7%
• AUSTRALIA JAN LABOR PARTICIPATION RATE +66.5%
• AUSTRALIA JAN F-T EMPLOYED PERSONS CHANGE -43.3K
• AUSTRALIA JAN EMPLOYED PERSONS CHANGE -11.5K

Australia's unemployment rate jumped to its highest level since May as the economy shed jobs for a second month in January, offering the Reserve Bank of Australia some relief given its concerns about the risk of a wage-price spiral. The ABS noted that along with a larger-than-usual increase in unemployed people in January, there was also a larger-than-usual rise in the number of unemployed people who had a job to go to in the future.

JAPAN DATA (MNI): Jan Exports Up For 23rd Month as Autos Slow

• JAPAN POSTS JPY3.5 TLRN TRADE DEFICIT IN JAN
• JAPAN JAN EXPORTS +3.5% Y/Y; DEC +11.5%
• JAPAN JAN IMPORTS +17.8% Y/Y; DEC +20.7%

January exports continued to support the Bank of Japan's view of a rising trend as supply-side constraints ease, but banks officials are worried about the impact of the slowing global economy in the first quarter of 2023. Bank officials expect the slowing U.S. economy - caused by Federal Reserve rate hikes - to become apparent this year, slowing an increase in Japan’s exports and production. However, bank officials don’t expect a big economic downturn.

JAPAN DATA (MNI): BOJ's Jan Real Export Index Drops 2.9% M/M

The Bank of Japan's real export index, calculated using Ministry of Finance trade data, fell 2.9% m/m in January for the second straight drop following a revised 4.5% decline in December The figures were calculated by MNI based on BOJ data and confirmed by bank officials. The BOJ will release details of the index on Tuesday. The December data was revised up from a preliminary 4.7% decline. The January real export index fell 5.8% from the average index in the fourth quarter.

JAPAN DEC CORE MACHINE ORDERS +1.6% M/M; NOV -8.3% (MNI)
JAPAN Q1 CORE MACHINE ORDERS SEEN +4.3% Q/Q; Q4 -5.0% (MNI)

FOREX: AUD Recoups Jobs-Inspired Losses

• AUD saw early pressure in Asia-Pac trade on the back of a poorer-than-expected January jobs data release, with employment change dropping 11.5k vs. an expected gain of 20k positions. AUD/USD dropped to 0.6868 upon release, before the pair stabilised well through the European open as markets coined the stronger underlying tone in the jobs release, with seasonal factors helping contribute to the outsized portion of the workforce falling into the 'unemployed with a job to go to' cohort.
• As a result, AUD/USD has staged a near 50 pip recovery off the lows, although the Wednesday highs remain a way off for now.
• The USD trades softer headed through to the NY crossover, but has only faded slightly off yesterday's highs, which marked the strongest level for the USD Index since early January. The 50-dma remains carefully watched for direction, currently moderating its downtrend at 103.365.
• GBP trades slightly firmer, as markets close off positions after yesterday's CPI-inspired downtick. EUR/GBP is back in negative territory after a solid rally on Wednesday. 0.8816 marks first support ahead of 0.8804 and vol-band based support at 0.8790.
• US PPI for January is the data highlight Thursday, released alongside weekly jobless claims and housing starts/building permits. The speaker slate will likely garner more attention, with Fed's Mester, Bullard & Cook all due as well as ECB's Nagel, Lane, Makhlouf & Stournaras and BoE's Pill.

BONDS: Bull Steepening As Peak Rate Expectations Soften Pre-US PPI

Bund and Treasury futures have bounced back after hitting 6-week lows in early European trade Thursday, while UK short-end yields continue to outperform.

• The US, UK, and German curves are bull steepening, with implied central bank terminal pricing continuing to pull back from Tuesday's post-US CPI highs.
• Safe-haven instruments saw a modest bid after China announced sanctions against against US defense companies Raytheon and Lockheed Martin.
• Little European data of note, but solid auctions for Spain Oblis and French OATs this morning, with Italy 30Y syndication underway; in the US we get 30-Year TIPS supply.
• ECB's Panetta called for small rate hikes, cautioning against overtightening. More central bank speakers ahead, including BoE's Pill; ECB's Lane, Nagel, Makhlouf, and Stournaras; and Fed's Bullard, Cook, and Mester.
• Another heavy slate of US data ahead, including jobless claims, housing starts, and the Philly Fed business outlook.

Latest levels:

• Mar 10-Yr US Tsy futures (TY) up 6.5/32 at 112-8 (L: 111-29.5 / H: 112-11.5)
• Mar Bund futures (RX) up 8 ticks at 134.82 (L: 134.62 / H: 135.11)
• Mar Gilt futures (G) down 2 ticks at 103.23 (L: 103.1 / H: 103.45)
• Italy / German 10-Yr spread 0.2bps tighter at 185.4bps

EQUITIES: Eurostoxx Futures Continue Uptrend, Prints 4323.0 Fresh Cycle High

EUROSTOXX 50 futures are tilted higher through the Thursday open, with a late US rally persisting across Asia hours. This puts prices north of first resistance at 4303.20, the 2.382 proj of the Sep 29 - Oct 4 rise from Dec 20 low, the last week to breach 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 4167.50, the 20-day EMA. The S&P E-Minis trend condition is bullish and the latest pullback is considered corrective. The contract has pierced initial support at 4069.52, the 20-day EMA. Firmer support lies at the 50-day EMA, at 4006.63. A clear break of this average would signal scope for a deeper pullback and potentially highlight a reversal. Key resistance and the bull trigger intersect at 4208.50, the Feb 2 high. A breach would resume the uptrend.

• Japan's NIKKEI closed higher by 194.58 pts or +0.71% at 27696.44 and the TOPIX ended 13.35 pts higher or +0.67% at 2001.09.
• Elsewhere, in China the SHANGHAI closed lower by 31.462 pts or -0.96% at 3249.03 and the HANG SENG ended 175.5 pts higher or +0.84% at 20987.67.
• Across Europe, Germany's DAX trades higher by 56.6 pts or +0.37% at 15564.32, FTSE 100 higher by 19.45 pts or +0.24% at 8017.45, CAC 40 up 47.19 pts or +0.65% at 7350.21 and Euro Stoxx 50 up 17.26 pts or +0.4% at 4298.31.
• Dow Jones mini up 25 pts or +0.07% at 34197, S&P 500 mini up 4.5 pts or +0.11% at 4162.5, NASDAQ mini up 23.75 pts or +0.19% at 12753.5.

COMMODITIES: WTI Futures Consolidate Recent Recovery

WTI futures showed above the Friday high ahead of the Monday close, marking an extension of the recovery from $72.25, the Feb 6 low. The rally has confirmed a break of the 50-day EMA, at $78.34, strengthening the current bull cycle. Prices have faded slightly since, 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 $76.52, the Feb 9 low. Trend conditions in Gold are bearish for now, and the yellow metal remains in a corrective cycle. This follows the strong sell-off on Feb 2 / 3 as well as the break of support at the 50-day EMA early Wednesday. A clear break here would strengthen a bearish case and suggest scope for a deeper pullback - towards $1825.2, the Jan 5 low. On the upside, key resistance and the bull trigger is at $1959.7, the Feb 2 high.

• WTI Crude up $0.34 or +0.43% at $78.97
• Natural Gas up $0.05 or +2.14% at $2.527
• Gold spot up $2.34 or +0.13% at $1838.83
• Copper up $6.65 or +1.65% at $409.1
• Silver up $0.04 or +0.18% at $21.6837
• Platinum up $0.85 or +0.09% at $918.64