MNI US OPEN - Focus Shifts to Busy Global Central Bank Slate

NEWS

US/N.KOREA (BBG): North Korea Fires Ballistic Missiles as Blinken Visits Seoul

North Korea fired multiple ballistic missiles in a defiant show of force that coincided with a visit to Seoul by US Secretary of State Antony Blinken for a Summit for Democracy. North Korea fired three ballistic missiles Monday toward waters off its east coast that reached a maximum altitude of about 50 kilometers (31 miles) and flew some 350 km to land outside of Japan’s exclusive economic zone, the Ministry of Defense in Tokyo said.

US (WaPo): Trump is Eyeing Paul Manafort for 2024 Campaign Role

Former president Donald Trump is expected to enlist Paul Manafort, the former campaign manager he pardoned, as a campaign adviser later this year, according to four people familiar with the talks. Manafort worked for Trump in 2016 before being ousted and later convicted of tax and bank fraud felonies as part of Robert S. Mueller III's investigation into Russian interference in the 2016 election. He served time in prison before receiving a pardon in the final days of Trump's time in office.

UK (The Telegraph): Sunak Urges Tories to ‘Stick with the Plan’ as Leadership Talk Grows

Rishi Sunak has urged Tory MPs to stick with him and see his economic plan through amid speculation about a challenge to his leadership. On Sunday, the Prime Minister told backbenchers that “the economy is turning a corner” and urged them to hold their nerve despite the Conservative Party’s dire poll ratings. Mr Sunak was forced to speak out following days of speculation that Right-wing Conservatives were lining up Penny Mordaunt to replace him. On Sunday night, Number 10 issued his comments in a sign of growing concern amongst his aides about leadership plotting by Tory MPs.

EU/CHINA (BBG): EU Weighs Joining US in Reviewing Risks of Chinese Legacy Chips

The European Union is considering a formal review of how widely its businesses use mature or lower-end chips from China, joining the US in flagging a potential risk to national security and global supply chains. The EU is weighing whether to investigate how deeply such semiconductors are embedded across industry networks, according to a draft working statement seen by Bloomberg News. Such a move would mirror a Biden administration initiative to assess the risks of relying on the chips, which aren’t cutting-edge but are vital to militaries and sectors from electric-vehicles to infrastructure.

CHINA (BBG): China Is Considering Swiss Peace Talks on Ukraine, NZZ Reports

China is considering taking part in a Ukraine peace conference planned by Switzerland, according to Wang Shihting, its ambassador to the European country. In an interview with the Neue Zuercher Zeitung newspaper, Wang said China is following the plans for the talks closely and is “looking into the possibility of participating.” “All parties should work toward ending the war,” he said. “The crisis must be prevented from worsening or even getting out of control.”

CHINA (MNI): Real-Estate Still Adjusting - NBS

MNI (Beijing) The property sector remains in the process of adjustment and transformation given January and February data results, Liu Aihua, spokesperson for the National Bureau of Statistics said on Monday. China’s real-estate investment fell 9% y/y during the first two months of the year following the previous 9.6% decrease, while retail sales decelerated to 5.5% y/y from December's 7.4% gain. Liu said consumer prices were expected to show a moderate upward trend along with the continued recovery of goods and services, but overall demand in the economy remained insufficient.

RUSSIA (BBG): Putin Warns Russia Won’t Stop After Predictable Election Win

A defiant Vladimir Putin said Russia won’t be stopped from pursuing its goals after he swept to a record victory in a presidential election whose outcome was pre-determined. Putin spoke after preliminary results showed him with 87.2% support in the election that ended Sunday. The outcome far exceeded his previous record of 77% in 2018 elections. Long lines formed at noon outside some polling stations after allies of opposition leader Alexey Navalny, who died last month in an Arctic prison camp, called on people to protest Putin’s election by turning up at that time.

COMMODITIES (BBG): Oil Rises on Strong Chinese Data and Hits on Russian Refineries

Oil hit a fresh four-month high — building on the biggest weekly advance in a month — as macro-economic data from China came in ahead of expectations, and Ukrainian attacks on Russian refineries heightened geopolitical risks. Global benchmark Brent rose toward $86 a barrel after gaining 4% last week, while West Texas Intermediate was above $81. China’s factory output and investment grew more strongly than expected at the start of the year, figures on Monday showed. In refining, processing hit a record.

CENTRAL BANK PREVIEWS

MNI FED PREVIEW - MARCH 2024: Countdown to Confidence

The FOMC will hold rates at the presumed peak of 5.25-5.50% at its March 19-20 meeting, while reiterating its cut-leaning forward guidance. Incoming data provides the FOMC with both the justification and the flexibility to be patient before making the first cut. It’s unlikely the signal provided by the Dot Plot / economic projections will be much different to the last edition in December, while the Statement will be little changed after January’s overhaul. It would only take two participants getting slightly more hawkish on 2024 rate prospects to move the median dot from 3 cuts to 2. While a close call, we think the median will stay unchanged, leaving focus on Chair Powell's Q&A and how recent above-expected inflation data squares with his stated requirement of "a little more" evidence before having the confidence to initiate rate cuts.

MNI BOJ PREVIEW - MARCH 2024: Policy Normalisation is Here

Regarding the decision this week the primary question revolves around whether the central bank will immediately terminate its negative interest rate policy (NIRP) or postpone such action for another month and a half. While a move in March is not set in stone, we anticipate the BoJ to announce the attainment of its 2% price stability target and exit NIRP. This decision is likely to have been ‘green-lighted’ by the technical recession in 2H-23 being revised away, recent wage negotiations indicating a significant increase, and the BoJ’s preferred inflation measure expected to remain above 2% this year.

MNI RBA PREVIEW - MARCH 2024: No Reason to Pivot in March

The RBA meets on March 19, six weeks since the last meeting, and is unanimously expected to leave rates at 4.35%. We expect some form of tightening bias to be retained in March as the data since the last meeting has been broadly in line with the RBA’s projections, while the significant uncertainties discussed last month have not dissipated and the risks are still “broadly balanced”. Thus the meeting statement will probably be little changed compared with February.

DATA

NORWAY DATA (MNI): Norges Bank Likely to Revise Q1 Mainland GDP Projection Higher

• NORWAY JAN MAINLAND GDP +0.4% M/M, AGG GDP +0% M/M

The Norwegian monthly mainland GDP indicator was stronger than expected in January, at 0.4% M/M (vs 0.0% cons). The Norges Bank's December MPR expected a weaker -0.2% M/M, but this forecast is stale and will be updated at Thursday's March meeting. The Norges Bank's -0.3% Q/Q mainland GDP expectation for Q1 2024 is expected to be revised higher somewhat, and the January data strengthens this case. However, December's -0.1% M/M was revised to -0.3% M/M, tempering the January beat somewhat.

CHINA DATA (MNI): China Jan-Feb Investment Rebounds, Consumption Slows

• CHINA JAN-FEB FIXED-ASSET INVESTMENT +4.2% Y/Y VS MEDIAN +3.4%
• CHINA JAN-FEB RETAIL SALES +5.5% Y/Y VS DEC +7.4% Y/Y
• CHINA JAN-FEB INDUSTRIAL OUTPUT +7.0 Y/Y VS DEC +6.8% Y/Y
• CHINA FEB UNEMPLOYMENT RATE +5.3% VS JAN +5.2%

MNI (Beijing) China investment rebounded more than expected at the beginning of the year, with declines narrowing in the real-estate sector, though consumption failed to increase over the Luna New Year holiday, data released by the National Bureau of Statistics on Monday showed. Retail sales decelerating to 5.5% y/y from December's 7.4% gain, though outperforming the expected 5.0%. The NBS traditionally combines data released for the first two months to rule out the impact of Chinese New Year.

JAPAN DATA (MNI): Japan Jan Machine Orders -1.7% M/M

• JAPAN JAN CORE MACHINE ORDERS -1.7% M/M; DEC +1.9%

Japan's core machinery orders, excluding those for power generation equipment and ships, fell 1.7% m/m in January, down from last 1.9% m/m growth, posting the first monthly drop in two months. Orders from manufacturing sectors, decreased 13.2% m/m, largely down from the increase of 6.0% m/m made in December. Orders from the non-manufacturing sector, rose 6.5% m/m, up from the previous 2.3% m/m decrease. The outlook for the January-March period is for an increase of 4.9%, compared with the 1.3% decrease over the previous quarter.

FOREX: Currencies Tread Water, An Eye on CBs

• Markets are treading water ahead of a particularly busy week of global central bank rate decisions, as the BoJ, RBA, BoE, Fed, Norges Bank and SNB are all set to make rate announcements by the end of the week. As a result, recent market ranges are being respected and there are few fresh technical signals to trigger conviction in either direction.
• On the day, the JPY is marginally weaker as the USD/JPY bounce off lows persists. This puts prices just shy of the Y149.50 level and extends the bounce off lows to 300 pips.
• NOK is modestly outperforming all others, building on the back of positive crude oil prices and a generally stronger European equity market. USD/NOK has slipped off last week's highs as a result, with the 50-dma below marking the first area of interest at 10.5037.
• Focus for the session ahead turns to the final Eurozone CPI reading for February, and the NAHB Housing Index for March from the US. The Fed remain inside their pre-meeting media blackout period, leaving the central bank speaker slate muted. ECB's Centeno is set to appear at an awards ceremony, but policy-relevant comments are likely to be minimal.

US TSYS: Holding Above Asia Lows

Tsys stick to a narrow range through early London trade, little impact from the light downtick in Bund futures.

• TYM4 unchanged at 110-02+ (109-30+-110-05+ range).
• Any extension lower would expose the bear trigger at the Feb 23 low (109-25+).
• Cash Tsy yields 2bp lower to 0.5bp higher, twist steepening.
• Year-to-date highs in benchmark yields remained intact during last week’s sell off.
• Higher for longer talk surrounding the Fed over the weekend (FT survey, Trump reportedly eying hawks to lead the Fed if successful in Presidential run) and hawkish BoJ sources weighed at the CME re-open.
• That was before a BoJ bond buying announcement countered weakness.
• Lower tier U.S. data is due today, with broader macro focus on this week’s heavy central bank decision schedule.
• The Fed remains in its pre-meeting blackout.
• FOMC-dated OIS little changed to start the week. 1~6bp of cuts priced through June, ~72.5bp of easing priced through year end.

EGBS: Softer Ahead of This Week's Risk Events

Core/semi-core EGBs are slightly softer to start the week, with a cautious tone ahead of this week's risk events.

• Notable headline flow has generally been light.
• Bunds are -14 ticks at 131.69, just below Friday's low of 131.71. A continuation lower would expose key support and the bear trigger at 131.23, the Feb 29 low.
• Brent crude futures are off intraday highs, but remain firmer on the day and will have weighed on the wider core FI space earlier.
• Weekend drivers include hawkish Fed and BoJ speculation, while ECB-speakers (de Cos and Rehn) did little to change the narrative around current ECB rate cut pricing (currently centred around the June meeting).
• 10-year periphery spreads to Bunds are generally tighter, After hours Friday, Moody’s moved Spain’s Outlook to positive on Friday but left their rating unchanged at Baa1. SPGB's did not see major tailwinds though, with Moody's rating still one notch below S&P's.
• The 10-year SPGB/Bund spread is -0.6bps at 79.6bps, while the BTP/Bund spread is -1.2bps at 124.5bps, still off last week's tightest levels around 116bps.
• Final Eurozone CPI data headlines the regional calendar today.
• Looking ahead, the regional calendar is highlighted by survey evidence (INSEE, ZEW, PMIs, IFO, Belgian Business Confidence) as well as focus on external events such as the Fed, BOE and SNB decisions.

GILTS: Curve A Little Steeper, Early Rallied Countered by Bund Weakness

Spill over from weakness in Bunds helps counter early buying in gilts.

• Futures -4 at 98.28 (range 98.22-44).
• Cash gilt yields 1bp lower to 0.5bp higher, curve twist steepens.
• 2s10s and 5s30s remain comfortably below Feb highs.
• SONIA futures +1.0 to -1.0 on the day,
• BoE-dated OIS shows ~62bp of ’24 cuts little changed on the day.
• Domestic fiscal speculation and firmer Rightmove house price data have little impact.
• The BoE will sell GBP750mn of medium-term gilts from its APF later today.
• Elsehwere, the DMO will hold its quarterly consultation meetings with investors (15:30) and GEMMs (17:00) in which it will discuss more details regarding FQ1 (Apr-Jun) issuance. We will post more on this later.
• Further out, Wednesday’s UK CPI release and Thursday’s BoE decision provide the domestic highlights of the week.

EQUITIES: E-Mini S&P Conditions Unchanged and Bullish, Corrections Lower Shallow

A bullish theme in Eurostoxx 50 futures remains intact and the contract traded to a fresh cycle high last week. Moving average studies are in a bull-mode position and this continues to highlight positive market sentiment. Price is approaching the psychological 5000.00 handle. A break of this level would strengthen the bullish condition. On the downside, initial firm support lies at 4859.40, the 20-day EMA. The trend condition in S&P E-Minis is unchanged and remains bullish. Recent fresh cycle highs reinforce current conditions. Note too that price action continues to highlight the fact that corrections remain shallow. This is an important bullish signal, reflecting positive market sentiment. Support to watch is 5163.37 the 20-day EMA. A clear break of this average would open 5051.40, the 50-day EMA. Sights are on 5300.00 next.

• Japan's NIKKEI closed higher by 1032.8 pts or +2.67% at 39740.44 and the TOPIX ended 51.19 pts higher or +1.92% at 2721.99.
• Elsewhere, in China the SHANGHAI closed higher by 30.29 pts or +0.99% at 3084.926 and the HANG SENG ended 16.23 pts higher or +0.1% at 16737.12.
• Across Europe, Germany's DAX trades higher by 27.33 pts or +0.15% at 17963.59, FTSE 100 higher by 6.2 pts or +0.08% at 7733.56, CAC 40 down 8.17 pts or -0.1% at 8155.52 and Euro Stoxx 50 up 1.22 pts or +0.02% at 4987.12.
• Dow Jones mini down 58 pts or -0.15% at 39094, S&P 500 mini up 11.25 pts or +0.22% at 5193.75, NASDAQ mini up 93.75 pts or +0.52% at 18151.5.

COMMODITIES: WTI Futures Pierce Above Last Week's Multi-Month Highs

WTI futures traded higher last week and this resulted in a break of resistance at $80.85, the Mar 1 high. The move higher confirms a resumption of the uptrend that has been in place since mid-December last year. Sights are on $81.70 next, a Fibonacci retracement point. A break of this level would open $84.66, the Oct 20 ‘23 high. On the downside, support to watch is $77.07, the 50-day EMA. The trend condition in Gold remains bullish and the latest pullback is considered corrective. The yellow metal recently cleared $2135.4, the Dec 4 high, to deliver a fresh all-time cycle high. The break reinforces bullish conditions and signals scope for $2206.6 next, a Fibonacci projection. Short-term conditions are overbought, a deeper retracement would allow this set-up to unwind. Firm support is at $2112.9, the 20-day EMA.

• WTI Crude up $0.91 or +1.12% at $81.94
• Natural Gas up $0.1 or +6.04% at $1.755
• Gold spot down $3.61 or -0.17% at $2151.97
• Copper down $1.6 or -0.39% at $410.8
• Silver down $0.06 or -0.24% at $25.121
• Platinum down $13.98 or -1.49% at $925.16