MNI US OPEN - Focus Narrows in on ECB, Fed & BoE Speakers

NEWS

US (BBG): Trump’s NATO Remark Sparks Political Storm in World Capitals

Donald Trump’s comments over the weekend that he once told a European leader he’d abandon NATO members to a Russian invasion if they hadn’t met defense-spending commitments have renewed talk about what a second term would mean for allies. Trump’s comments on NATO send a “horrible message” to Russian President Vladimir Putin “and to America,” Democratic Senator Joe Manchin said Sunday. His party colleague John Fetterman blasted them as “astonishing “ and “wild.”

US/ECB (BBG): Yellen to Meet With ECB President Lagarde on Monday

US Treasury Secretary Janet Yellen will meet with Christine Lagarde, president of the European Central Bank, on Monday in Washington, according to a government statement. The two will hold a working lunch at 12pm ET, with the meeting closed to the media. No further details were provided.

US (BBG): Goldman’s Kostin Raises Forecast for US Dividend Growth in 2024

Goldman Sachs strategists lifted their expectations for US dividend growth this year on the back of resilient earnings as well as Facebook parent Meta Platforms’ dividend initiation announcement. The team led by David Kostin says it expects dividends-per-share to rise by 6% in 2024 compared with their earlier projection of 4%. The strategists maintain their target of 5% DPS growth in 2025, they write in a note dated Feb. 9

ISRAEL (WaPo): Israel’s Military Says It Conducted Strikes in Rafah, Rescued Two Hostages

Israel's military said it rescued two hostages and carried out a series of strikes in southern Gaza in the early hours Monday local time, sparking confusion and panic in Rafah, where more than 1 million people have fled to escape conflict elsewhere in the Palestinian enclave. The two hostages, Fernando Simon Merman, 60, and Luis Har, 70, were taken from Kibbutz Nir Yitzhak on Oct. 7, Israel's military said, adding that both were in "good medical condition" and were taken for further medical examination in Israel.

BOE (The Times): Hunt Adviser and OECD Chief Favourites for Bank of England Deputy Job

One of the chancellor’s independent economic advisers and the chief economist of the Organisation for Economic Co-operation and Development are frontrunners to become the next deputy governor of the Bank of England. Gertjan Vlieghe, a former external member of the Bank's monetary policy committee (MPC), and Clare Lombardelli, an ex-Treasury official now at the OECD in Paris, are the leading contenders to replace Ben Broadbent, who will end his decade-long tenure as one of the Bank's deputies this summer.

ECB (BBG): ECB’s Centeno Prefers ‘Gradual’ Drop in Interest Rates, TSF Says

European Central Bank Governing Council member Mario Centeno said he would prefer that interest rates fall gradually and in a steady way instead of dropping more rapidly. “In the logic of stability, I would prefer that interest rates fall in a gradual way, without hesitations, rather than in a hurry,” the Portuguese central bank governor said in an interview published Saturday on TSF radio’s website. “Normally, when central banks have to act in a more rapid way, it means that something isn’t going well in this process.”

EU (MNI): Investment Leeway Seen for Small EU States in Fiscal Deal

Changes agreed to the European Union’s proposed new fiscal rules will make it easier for smaller countries in particular to boost public investment, members of the European Parliament and other officials told MNI. In a deal early on Saturday, Trilogue talks including the European Parliament, European Commission and Council ended with agreement on the legislature’s call for more flexibility over investment spending when calculating compliance with the new debt rules. In return, parliament accepted proposals agreed by member states in December for budget deficits to be limited to 1.5% of gross domestic product over the medium-term.

GERMANY (BBG): German Coalition Punished in Repeat of 2021 Election in Berlin

The three parties in Germany’s unpopular ruling coalition suffered losses in Sunday’s partial repeat in Berlin of the 2021 federal election, continuing a national trend that is likely to be repeated in four key votes this year. Germany’s highest court last year ordered a rerun of the ballot in about a fifth of the capital’s electoral districts due to irregularities in the voting process. According to preliminary results early Monday, Chancellor Olaf Scholz’s Social Democrats and his Greens and Free Democrat partners lost ground compared with 2021, while the conservative Christian Democrats and far-right Alternative for Germany gained.

FINLAND (MNI): Alexander Stubb Wins Race to Become Finnish President

Centre-right former Prime Minister Alexander Stubb defeated ex-Foreign Minister Pekka Haavisto in a historically tight race to become Finland's President, garnering 51.6% of the vote in the run-off, and hence will take office on March 1. Stubb advanced to the run-off as a front-runner, having secured 27.2% of all votes. In the second round, he won in 261 out of 309 municipalities but his rival was more popular in more densely populated areas. The Finnish President has limited powers, despite formally ranking first in the protocol. However, they play some role in foreign and defence policy. Domestically, they can act as a mediator and have some appointing powers.

JAPAN (BBG): Cabinet Minister Shindo Says It’s Time for Japan to Raise Wages

Japan’s robust economy calls for a hike in wages and the country should make use of this year’s spring pay negotiations to obtain results, economic policy minister Yoshitaka Shindo says on NHK. “I want to make it happen no matter what. I’d like to make use of whatever means available” for higher wages, Shindo said on a program aired by the TV broadcaster

FOREX: USD Mid-Range as Focus Narrows in on ECB, Fed & BoE Speakers

• The USD is mid-range Monday, with newsflow and market price action relatively scant so far in Europe. Lighter volumes aided by the formal beginning of the Chinese Lunar New Year holidays has muted price action, with the US 10y yield still yet to challenge last week's highs and make any material test on the key 4.20% mark. NOK and SEK are modestly the best performers so far Monday, with NZD the weakest as markets trim the solid gains posted last week on the back of renewed hiking expectations from the RBNZ.
• EUR is weaker Monday, slipping against most others in G10 as EUR/USD slippage extends into NY hours. EUR/USD is now well within range of the Friday low and initial intraday weak support at 1.0762, and 1.0742 below. As mentioned above, small bid tone in the greenback is aiding the move.
• Despite stabilising off the late January lows, EUR/GBP has struggled to build any bounce off lows, and the sell-on-rallies theme remains dominant - particularly evident in the reversal of the Feb 5 high of 0.8572. Sights are on 0.8493, the Aug 23 '23 low and a key support - and could come into play on a firm UK inflation release on Wednesday (consensus already looks for services CPI to tick up to 6.8% from 6.4% prior).
• In typical Monday fashion, datapoints are few and far between, although the NY Fed 1-yr inflation expectations release should see some focus at 1600GMT/1100ET. The central bank speaker slate is busier, with ECB's Lane & Cipollone, Fed's Bowman, Barkin & Kashkari and BoE's Bailey all on the docket.

BONDS: Curves See Light Bull Steepening

Core/semi-core EGBs and Gilts sit slightly firmer to start the week, but remain comfortably within Friday's range with few macro catalysts thus far.

• Bunds are +32 ticks at 133.62, toward the top end of today's 30 tick range. Technical studies remain bearish after the contract fell -160 ticks last week.
• Weekend headline flow saw comments from dovish-leaning ECB members Panetta, Centeno and de Cos, where the former two expressed a preference for gradual easing of policy once rate cuts begin, rather than rapid adjustments. Elsewhere, Moody's affirmed Germany's sovereign rating at Aaa; Outlook Stable.
• The German and French cash curves have lightly bull steepened, while 10-year periphery spreads to Bunds are tighter, aided by the uptick in European equities. The 10-year BTP/Bund spread is -2.6bps narrower at 155.8bps, still around 5bps wider than January's tightest levels.
• Gilt futures are last +37 at 97.87, with the curve having lightly bull steepened. News-flow over the weekend was largely political/fiscal-centric, with Labour's decision to reduce the size of their green investment pledge still in focus.
• Today's data docket is light, though there are scheduled remarks from ECB Chief Economist Lane at 1315GMT and Executive Board member Cipollone at 1550GMT (though the latter is unlikely to be monetary policy-related). In the UK, Governor Bailey speaks at 1800GMT, for which text will be released.

EQUITIES: Trend Condition in E-Mini S&P Unchanged and Bullish

Eurostoxx 50 futures traded higher again Friday delivering another fresh cycle high that confirms a resumption of the current uptrend. This reinforces bullish conditions and the importance of the recent break of a key resistance at the Dec 14 high of 4634.00. The clear breach of the 4700.00 handle paves the way for a climb towards 4753.50, a Fibonacci projection. Initial firm support lies at 4629.10, the 20-day EMA. The trend condition in S&P E-Minis is unchanged and remains bullish - last week’s gains reinforce current conditions. The contract traded to a fresh cycle high again on Friday, confirming a resumption of the uptrend. Recent corrections have been shallow - this highlights a strong uptrend. The focus is on 5050.14, a Fibonacci projection. On the downside, initial key short-term support has been defined at 4866.00, the Jan 31 low.

• Across Europe, Germany's DAX trades higher by 62.46 pts or +0.37% at 16988.39, FTSE 100 lower by 6.91 pts or -0.09% at 7565.41, CAC 40 up 28.97 pts or +0.38% at 7676.33 and Euro Stoxx 50 up 14.83 pts or +0.31% at 4730.47.
• Dow Jones mini down 49 pts or -0.13% at 38698, S&P 500 mini down 0.25 pts or -0.01% at 5043.75, NASDAQ mini up 14.5 pts or +0.08% at 18053.25.

COMMODITIES: Recent Recovery in WTI Futures Still Deemed Corrective, For Now

The recent recovery in WTI futures appears to be a correction - for now. Key short-term resistance has been defined at $79.29, the Jan 29 high. Clearance of this level would be a bullish development. On the downside, support to watch lies at $71.41, the Feb 5 low. A break of this level would reinstate the recent bearish theme and pave the way for a move towards $69.56, the Jan 3 low. Gold continues to trade above the Jan 17 low of $2001.9. Recent short-term gains improved a bullish condition and a resumption of the bull cycle would signal scope for a climb towards $2088.5, the Dec 28 high and a key resistance. For bears, a stronger reversal lower would instead refocus attention on $2001.9, where a break is required to reinstate the recent bearish theme.

• WTI Crude down $0.36 or -0.47% at $76.4
• Natural Gas down $0.03 or -1.35% at $1.823
• Gold spot down $2.81 or -0.14% at $2021.64
• Copper down $0.65 or -0.18% at $367.5
• Silver up $0.24 or +1.08% at $22.854
• Platinum down $1.74 or -0.2% at $875.26