MNI US OPEN - Dollar Starts Busy Week On Back Foot

NEWS

POLITICAL RISK (WaPo): U.S. Hopes Cease-fire Agreement in Gaza Can Be Reached in ‘Coming Days’

Officials negotiating Gaza cease-fire talks have tentatively agreed to the "basic contours" of a deal, White House national security adviser Jake Sullivan said Sunday, adding that the United States hopes a final agreement can be reached "in the coming days. "Sullivan, speaking on CNN's "State of the Union," declined to give specifics but urged negotiators to move swiftly on any deal, which could see ramped-up aid to Gaza and the release of some hostages still held by Hamas."We hope that in the coming days, we can drive to a point where there is actually a firm and final agreement on this issue," he said.

POLITICAL RISK (BBG): Palestinian PM Shtayyeh Resigns Amid Calls for Reform

The prime minister of the Palestinian Authority, Mohammad Shtayyeh, tendered his resignation amid a broad push by Arab states and the US for the governing agency to reform itself. It wasn’t immediately clear if President Mahmoud Abbas would allow Shtayyeh and the rest of his government to step down. But the prime minister’s announcement on Monday marks a likely shift within the Palestinian Authority, as it tries to carve out a role for itself in the governance of the Palestinian territories once the fighting between Israel and Hamas in Gaza comes to an end.

US (BBG): Biden, Congressional Leaders to Meet at White House Tuesday

President Joe Biden will meet with top congressional leaders including House Speaker Mike Johnson at the White House on Tuesday in a bid to unlock billions of dollars in emergency aid to allies including Ukraine and avert a US government shutdown. Biden “will discuss the urgency of passing the bipartisan national security supplemental and keeping the government open,” the White House said in a weekly schedule released Sunday.

US (MNI): Economists Boost 2024 US Growth Forecasts - NABE

Economists are marking up their forecasts for U.S. growth in 2024 and increasingly expect a soft landing with declining inflation and little rise in the unemployment rate, according to the latest National Association for Business Economics survey consisting of a panel of 41 forecasters. The economy is seen expanding an inflation-adjusted 2.2% in 2024, up from 1.3% forecasted in the December survey, the group said Monday. The headline PCE price index, the Federal Reserve’s preferred measure of inflation, is seen increasing 2.1% Q4/Q4 in 2024 and 2% Q4/Q4 in 2025.

RUSSIA (BBG): Russia Will Hit Back If Foreign Assets Seized, Siluanov Warns

Russia will give a “symmetrical” response to any actions by the US and its allies that target its frozen assets abroad, Finance Minister Anton Siluanov said. “We also have no fewer frozen” assets than the West holds, Siluanov said in an interview with the state-run RIA Novosti news service published Monday. He didn’t specify which Western assets he meant, though RIA reported his answer was in response to a question on Russia’s frozen foreign reserves.

ISRAEL (FT): Israel Plans $60bn Debt Raising and Tax Rises to Fuel Defence Spending

Israel plans to raise about $60bn in debt this year, freeze government hiring and increase taxes as it almost doubles its defence spending to support its war in Gaza, according to a senior finance official. Israel’s more than four-month conflict with Hamas has taken a severe toll on the economy, which shrank almost 20 per cent on an annualised basis in the last quarter of 2023. The hit came as the government mobilised a record 300,000 reservists; tens of thousands of people were displaced in the north and south of the country; and consumer spending slumped.

CHINA (MNI): China Denies U.S. WTO Report Claims

MNI (Beijing) China has called on the U.S. to follow World Trade Organisation rules and work with Beijing to jointly safeguard the multilateral trading system, a China Ministry of Commerce (MOFCOM) representative told reporters on Monday. Responding to the publication of U.S’ Report on China's Fulfilment of WTO Commitments, the representative denied claims that China's economic and trade policies pose a significant challenge to global trade.

CHINA (MNI): China Aims to Expand Carbon Trading Market Soon

MNI (Beijing) China will expand its national carbon emission trading market as soon as possible and extend the market mechanism to more sectors, said Zhao Yingmin, vice minister at the Ministry of Ecology and Environment at a press conference Monday. Authorities will prioritise the inclusion of key industries with large carbon emissions, serious overcapacity, and solid data quality, said Zhao. He noted the market currently includes the power generation industry which produces about 5.1 billion tons of carbon dioxide every year and accounts for over 40% of the total emissions.

CHINA (MNI): BA Cross-Border Wealth Management Connect Updated

MNI (Beijing) The updated version of Cross-Border Wealth Management Connect in the Greater Bay Area (GBA) came into effect today, aimed at attracting more domestic individual investors by integrating the region's financial markets, Guandong Province newspaper Nanfang Daily reported on Monday. The new rules will increase the individual investor quota from CNY1 million to CNY3 million. Meanwhile, the scope of the pilot program will expand to securities companies.

AUSTRALIA (MNI): Support for Government Drops But Opposition Struggling to Benefit

Two opinion polls taken in late February are pointing to a fall in primary support for the incumbent Labor government but the two-party preferred measure is still in their favour and PM Albanese remains the preferred PM. There is an important bi-election held on March 2 in Victoria with a federal election due before May 2025. The latest Newspoll from The Australian taken between February 19 and 23 saw support for Labor drop 1pp to 33% and the coalition steady on 36%, both in line with their May 2022 election results. Two-party preferred remained on 52% vs 48% though, where it has been since mid-December. The Greens were steady on 12% while support for independents rose 2pp to 13%.

BRAZIL (MNI): BCB Likely to Keep Cuts Guidance - Schwartsman

The Central Bank of Brazil is likely to maintain its forward guidance for further 50-basis-point cuts at its next meeting in March, meaning that cuts of that magnitude are almost guaranteed in March, May and June, its former director of international affairs Alexandre Schwartsman told MNI. "Accelerating the pace [of cuts]}was a relevant discussion at the end of 2023; now that discussion no longer exists. At some point, the central bank will have to consider a reduction in the pace,” Schwartsman said in an interview. “When it alters [its guidance] it will no longer be a discussion about accelerating, it won’t be about stopping, but it will be about a reduction in the pace to 25bp.”

INDIA (RTRS): India Cenbank Lifting Curbs on Forex Non-Deliverable Forward Arbitrage by Banks

India's central bank is easing restrictions on banks' arbitrage trades between the outright foreign exchange over-the-counter (OTC) and the non-deliverable forward (NDF) markets, four people familiar with the matter said. The Reserve Bank of India (RBI) has allowed banks, that have made requests, to resume such trades, a person directly familiar with the central bank’s thinking said. "There have been banks who have called and asked whether they can start doing it," and the central bank has approved, this person said.

INDIA (BBG): India Chip Strategy Makes Progress With $21 Billion in Proposals

The Indian government, after years of watching from the sidelines of the chips race, now has to evaluate $21 billion of semiconductor proposals and divvy up taxpayer support between foreign chipmakers, local champions or some combination of the two. Israel’s Tower Semiconductor Ltd. is proposing a $9 billion plant, while India’s Tata Group has put forward an $8 billion chip fabrication unit, people familiar matter said. Both projects would be in Prime Minister Narendra Modi’s home state of Gujarat, the people said, declining to be named as the matter is not public.

DATA

SPAIN DATA (MNI): PPI Remains in Deflation But Energy Base Effects Wane

While still in Y/Y deflation, Spanish headline PPI reached its highest level since April '23, as the downward impact of energy base effects continues to fade. However, the other major sub-components showed continued disinflationary progress - an encouraging sign for the core goods outlook ahead of Thursday's February CPI flash release. January headline PPI was -3.8% Y/Y vs -6.3% prior. There was no consensus for the print. At a component level, energy PPI remained in deflation, but the -12.6% Y/Y was the highest since February '23 (vs -20.6% in December).

JAPAN DATA (MNI): Japan Jan Services PPI Rises 2.1% vs. Dec +2.4%

• JAPAN JAN SERVICES PPI -0.5% M/M: DEC +0.1%
• JAPAN JAN SERVICES PPI +2.1% Y/Y; DEC +2.4%

Japan's services produce price index rose 2.1% y/y in January, marking the 35th straight rise but slowing from December's 2.4%, showing that the pass-through of cost increases to services prices is slowing, preliminary data released by the Bank of Japan on Monday showed. January’s y/y slowdown was driven mainly other by services, such as hotel fees (+27.0% in January vs. +56.6% in December), although the Bank of Japan observed pass-through of high labour costs to prices, an official said.

RATINGS: Friday’s Updates

Sovereign credit rating reviews of note from after hours on Friday included:

• Fitch affirmed Austria at AA+; Outlook Stable
• Fitch affirmed the Czech Republic at AA-; Outlook revised to Stable from Negative
• Moody's affirmed Sweden at Aaa; Outlook Stable

FOREX: EUR in the Green Against Most G10s

• A mix start for the Dollar ahead of a really busy week, with European CPIs, US PCE, Speakers, Rolling Bond positions for UK and US Govies, and Month End.
• The SEK still leads in early trade and has extended some small early gains, helped by an underlying bid in US Equities, Emini edges to session high.
• The Kiwi is still at the other end of the spectrum, as market participants turn their attention to the RNBZ rate decision on Wednesday, with the latter expected to stay unchanged.
• NZD has paired some of its losses, now down 0.32% vs 0.48% going into the European session.
• The EUR is underpinned and in the green against all G10, as the street await for the European CPIs this week.
• The Currency had edged higher against the USD, JPY, CNH, CAD, AUD, NOK.
• The Yen has seen broader selling interest vs GBP, USD, EUR and AUD.
• Immediate initial resistance in USDJPY is still at 150.89 High Feb 13.
• Looking ahead, there's no Tier 1 data for the session, speakers include, ECB Lagarde, Vujcic, Stournaras, BoE Breeden, Pill.

EGBS: Move Off Intraday Highs to Sit Near Flat

Core/semi-core EGBs have moved away from intraday highs to trade near unchanged on the day.

• There has been little in the way of notable headline flow this morning, with Spanish PPI the only scheduled data release. This was unsurprisingly was not a market mover.
• Bunds are -5 ticks at 133.12. Friday's gains are considered corrective and futures remain in a bear mode condition. The first support and bear trigger is the Feb 22 low at 131.78.
• German and French yields are 1-2bps higher today. Curve flattening continues to be apparent, with the German 2s10s -1.0bps flatter at -50.3bps on the day after falling almost 9bps through last week.
• 10-year periphery spreads to Bunds are mixed. The 10-year BTP/Bund spread is +0.9bps wider at 144.6bps, still holding onto the majority of last Friday's compression.
• Remarks are scheduled from ECB's Stournaras at 1130GMT/1230CET, while Lagarde speaks in EU Parliament at 1600GMT/1700CET.
• Thursday/Friday's inflation data provides the main focal point for the region this week.

GILTS: Little Changed, Bearish Technicals Intact

Gilts stick to narrow ranges.

• Futures last +28 at 98.23 (98.15-42 range).
• Bulls couldn’t test initial resistance at the 50-day EMA (98.48) early today, with the bearish technical picture remaining intact.
• Yields are unchanged to 1.5bp lower across the curve, withs 30s outperforming.
• Broader core global bond markets are off early London highs.
• Note that some BBG generic yield movements are being skewed by benchmark switches e.g. GUKG2 shows 29bp lower on the day.
• SONIA futures are -1.5 to +2.0 through the blues.
• ~67bp of cuts are priced through ’24 on the BoE-dated OIS strip, familiar levels.
• Local headline flow remains light, which leaves discussions centred on the building global IG issuance schedule and cross-asset moves.
• Comments from BoE’s Pill are due shortly.
• We will also see the results of the BoE’s APF sale of GBP650mn of long gilts.

EGB SYNDICATION: France 30-year OAT

"The REPUBLIC OF FRANCE has mandated BNP Paribas, Citi, Deutsche Bank, HSBC and Société Gén2rale to act as Joint Lead Managers on an upcoming new 30-year OAT EUR benchmark, due 25th May 2055. The transaction will be launched by syndication in the near future, subject to market conditions." From market source.

• MNI had been expecting this later in the year, noting that recent 30-year OATs have seen over E30bln issued before the next issue is launched, and at the time of writing only E26.0bln of the current 3.00% May-54 benchmark is outstanding.
• However, France will be looking to take advantage of some of the E31.0bln maturing from the formerly 3-year OAT (along with E22.1bln of a maturing formerly 10-year BTP). In total, there is E53.4bln of EGBs due to mature this week, and with auctions of just E14.5bln there is a very large negative cash flow this week.
• We pencil in a E5.0bln transaction tomorrow with risks of a larger size.

EQUITIES: Bull Cycle in Eurostoxx 50 Futures Remains Firmly Intact

The bull cycle in Eurostoxx 50 futures remains firmly intact and the contract is holding on to its recent gains. Moving average studies are in a bull-mode position too, highlighting positive market sentiment. Sights are on 4904.40 next, a Fibonacci projection. Further out, a bull channel top at 4955.20, marks an objective, The channel is drawn from the Oct 27 low. Initial firm support lies at 4734.40, the 20-day EMA. The trend condition in S&P E-Minis remains bullish, with the upside trigger at 5066.50 giving way to new highs at 5123.50 last week. This erases the initial pullback off last week and continues to highlight the fact that corrections remain shallow - a bullish signal. Support to watch is 4992.55, the 20-day EMA. A clear break of this EMA would signal potential for a deeper retracement towards the 4866.00 key support, Jan 31 low. A resumption of gains would open vol-band based resistance at 5133.43.

• Japan's NIKKEI closed higher by 135.03 pts or +0.35% at 39233.71 and the TOPIX ended 12.91 pts higher or +0.49% at 2673.62.
• Elsewhere, in China the SHANGHAI closed lower by 27.859 pts or -0.93% at 2977.022 and the HANG SENG ended 91.12 pts lower or -0.54% at 16634.74.
• Across Europe, Germany's DAX trades higher by 9.65 pts or +0.06% at 17428.83, FTSE 100 lower by 21.41 pts or -0.28% at 7685.74, CAC 40 down 36.19 pts or -0.45% at 7932.69 and Euro Stoxx 50 down 10.77 pts or -0.22% at 4862.43.
• Dow Jones mini down 71 pts or -0.18% at 39114, S&P 500 mini down 6.5 pts or -0.13% at 5095.25, NASDAQ mini down 21 pts or -0.12% at 17970.25.

COMMODITIES: Recent Price Activity in Gold Defines Key Resistance at $2065.5

Recent gains in WTI futures still appear corrective at these levels and key short-term resistance at $79.09, the Jan 29 high, remains intact. Clearance of this level would be a bullish development. On the downside, support to watch lies at $71.49, the Feb 5 low. A break of this level would reinstate the recent bearish theme and pave the way for a move towards $69.79, the Jan 3 low. Recent price activity in Gold has defined key resistance at $2065.5, the Feb 1 high, and key support at $1984.3, the Feb 14 low. Both levels represent important short-term directional triggers. A clear break of the Feb 1 high would highlight a short-term reversal and open $2088.5, the Dec 28 high. For bears, clearance of $1984.3 would expose an important support and bear trigger at $1973.2, the Dec 13 low.

• WTI Crude down $0.43 or -0.56% at $76.08
• Natural Gas up $0.07 or +4.05% at $1.669
• Gold spot down $1.96 or -0.1% at $2033.87
• Copper down $4.1 or -1.05% at $385.9
• Silver down $0.25 or -1.09% at $22.7109
• Platinum down $9.33 or -1.03% at $893.26