MNI US OPEN: Markets More Sanguine With CPI, SVB Risks Fading

NEWS

ECB (RTRS): ECB Likely to Stick to Big Rate Hike Despite Banking Turmoil, Source Says

European Central Bank policymakers are still leaning towards a half-percentage-point rate hike on Thursday, despite turmoil in the banking sector, as they expect inflation will remain too high in coming years, a source told Reuters.
Investors had begun to doubt the ECB's commitment to another big rate hike this week after the collapse of Silicon Valley Bank (SVB) in the U.S. sent ripples through global financial markets.

• This piece is infitting with the MNI Exclusive transmitted on Monday, at which MNI cited sources in reporting that the ECB "hopes to push ahead with its plans to hike by 50 basis points in line with its guidance on Thursday despite the collapse of U.S. bank SVB and sliding market rate expectations"
• Also chimes with our MNI ECB Preview, in which we see the ECB hiking by 50bps as planned, however the SVB fallout could preclude further explicit rate guidance beyond March.

ECB (MNI): ECB Should Slow Rate Hikes After SVB - Bini Smaghi

Contagion risk from the collapse of SVB in America means policymakers should temporarily shelve plans to raise key interest rates by 50bps, in favour of a 25bps hike, former ECB Executive Board member Lorenzo Bini Smaghi said in an interview Wednesday, citing fears of repeating mistakes in 2011, when the central bank pressed ahead with hikes despite the emerging debt crisis.

MNI UK BUDGET 2023 PREVIEW: No Rabbits from the Hat; Focus on Gilt Issuance

There is little expectation that Hunt will deliver ‘rabbits from the hat' in the form of notable tax cuts or public sector spending hikes. The focus for investors may therefore be more on the gilt remit and the economic projections from the OBR as well as the underlying assumptions used. We discuss what this means for the remit, the maturity split and outline which new gilts we expect to see issued in the upcoming fiscal year. We also discuss the political implications and summarise key analyst views.

UK (MNI): Energy Price Guarantee Extended for 3 Months as Expected

The government has confirmed that the energy price guarantee will be continued for a further 3 months at 2,500 rather than rising to 3,000 as had been announced in the Autumn Statement. This was widely expected as we noted in our Budget Preview. There is no need at present to extend beyond Q2 as wholesale costs are due to see energy bills fall below 2,500 from Q3.

SECURITY (MNI): China, Russia & Iran Start Joint Naval Drill in Gulf of Oman

China's Ministry of National Defence said that the naval forces of China, Russia and Iran will hold a joint maritime military exercise in the Gulf of Oman from March 15-19. The Ministry said that the drill will help "deepen practical cooperation among the navies of participating countries." This comes after China and Russia held controversial joint naval exercises with South Africa last month.

JAPAN (BBG): Kishida to Meet With Largest Union as Major Firms Give Pay Hikes

Japanese Prime Minister Fumio Kishida is set to meet with the head of the country’s largest labor union as well as business leaders on Wednesday, as he tries to encourage employers to raise wages. The meeting represents the first formal gathering of leaders from government, labor and business in eight years, and comes as annual “shunto” wage negotiations reach an initial conclusion this week.

JAPAN (MNI): BOJ's Kuroda Monitoring SVB Fallout on Econ, Mkts

Outgoing Bank of Japan Governor Haruhiko Kuroda said on Wednesday that the BOJ continues to carefully monitor the impact of the collapse of Silicon Valley Bank on financial markets. Kuroda told lawmakers that market players are relieved at the quick decisions by U.S. authorities to avoid systemic risk caused by the SVB collapse. Kuroda, whose term ends on April 8, also said that the easy policy played a big role in Japan’s economy as the economy is no longer in a deflationary situation.

JAPAN (MNI): BOJ's Ueda to Wait and Watch as 10-Yr Yield Sinks

The fall in Japan's 10-year bond rate could make it easier for the Bank of Japan to tweak its yield curve control policy, though incoming governor Kazuo Ueda is unlikely to change policy in April given volatility triggered by the collapse of Silicon Valley Bank and a desire to establish good relations with the government, MNI understands.

JAPAN (MNI): BOJ Jan Minutes Show Criticism of YCC Tweak

Some Bank of Japan board members voiced criticisms of December’s decision to widen the range around the 10-year bond yield target despite the change receiving an unanimous vote, minutes of the January 17-18 meeting released on Wednesday showed. The minutes didn’t identify the members but the members were likely reflationist members, such as Deputy Governor Masazumi Wakatabe and board member Asahi Noguchi.

CHINA (MNI): Policies Needed to Stabilise China's Recovery - NBS

Policy support is needed to secure the economic recovery despite data from January and February highlighting strength in industrial production and retail sales, according to a spokesperson from the National Bureau of Statistics on Wednesday. China’s economy still faces adverse external factors such as geopolitics and inflation risk, as well as domestic structural problems. Policies are needed to promote domestic demand and increase investment.

OIL (BBG): Oil Market in Surplus as Russia Pumps More Crude, IEA Says

Global oil markets are contending with a surplus as Russian production defies predictions of a slump while fuel demand slowly picks up, the International Energy Agency said. Oil stockpiles have climbed to the highest in 18 months, with Russia managing to increase output last month despite warnings it would buckle under international sanctions, the Paris-based IEA said in its monthly report. Demand growth, while set to pick up, remains subdued amid lingering fears of recession.

CORPORATE (BBG): Credit Suisse Top Shareholder Rules Out More Assistance to Bank

Credit Suisse Group AG’s top shareholder ruled out providing more financial assistance to the struggling Swiss bank, citing regulatory issues. “The answer is absolutely not, for many reasons outside the simplest reason which is regulatory and statutory,” Saudi National Bank Chairman Ammar Al Khudairy said in an interview with Bloomberg TV on Wednesday when asked if the lender was open to assisting Credit Suisse if there was another call for additional liquidity.

DATA

FRANCE DATA (MNI): 0.1pp Upwards Revision to HICP in February

• FRANCE FINAL FEB HICP +1.1% M/M (FLASH +1.0%); JAN +0.4% M/M
• FRANCE FINAL FEB HICP +7.3% Y/Y (FLASH +7.2%); JAN +7.0% Y/Y

French HICP rose by +1.1% m/m and +7.3% y/y in the Final February data, implying a 0.1pp upwards revision to both headline prints. On the month, prices accelerated in a broad-based manner, with harmonised prices rising for manufactured goods +0.8% m/m and services +0.8% m/m. The upwards revision to HICP in French data will largely cancel out the downwards revision to Spanish HICP on Tuesday. As such, today's final data is unlikely to shift the final eurozone HICP print due on Friday.

SWEDEN DATA (MNI): Underlying CPIF Jump in February

• SWEDEN FEB CPIF +0.9% M/M, +9.4% Y/Y (FCST ); JAN +9.3% Y/Y
• SWEDEN FEB CPIF EX ENERGY +9.3% Y/Y (FCST +8.7%); JAN +8.7% Y/Y

Swedish inflation surprised to the upside in February, with the Riksbank's closely watched CPIF (ex. direct effects of monetary policy) accelerated by +0.9% m/m, rising 0.1pp to +9.4% y/y against expectations of a 0.1pp slowdown. Of concern will be the substantial 0.6pp uptick in CPIF excluding energy, which jumped to +9.3% y/y in February.

CHINA DATA (MNI): China's Production, Retail Sales Rebound in Jan-Feb

• CHINA JAN-FEB RETAIL SALES +3.5% Y/Y VS MEDIAN +3.0% Y/Y
• CHINA JAN-FEB INDUSTRIAL OUTPUT +2.4 Y/Y VS MEDIAN +2.8% Y/Y
• CHINA JAN-FEB FIXED-ASSET INVESTMENT +5.5% Y/Y VS MEDIAN +4.4%
• CHINA FEB UNEMPLOYMENT RATE +5.6% VS JAN +5.5%

Improved industrial production and retail sales provided evidence of the rebound in China's economy over January-February, while the struggling property sector posted the slowest decline in investment in seven months, data released by the National Bureau of Statistics on Wednesday showed.

FOREX: EUR Fades Gains Based Off ECB Report

• EUR trades under modest pressure ahead of the NY crossover as markets look to fade a Reuters ECB report suggesting that policymakers will stick to a 50bps rate rise this week in order to reinforce credibility and live up to the bank's communication strategy. The report was largely inline with the MNI Exclusive run on Monday evening, citing sources in seeing the bank sticking to their 50bps hike strategy despite the uncertainty surrounding the US banking sector.
• EUR/USD traded through the overnight lows shortly after the London open and within range of the late NY Tuesday lows of 1.0711. 1.0704 marks next support, the 23.6% retracement of the Weds - Weds upleg.
• NZD is the poorest performer in G10, flagging against most others as prices in NZD/USD oscillate either side of the 100-dma at 0.6254. Equities are modestly weaker across futures space in both the US and Europe, however the e-mini S&P holds well within range of yesterday's late recovery high at 3972.50.
• Eurozone industrial production data the next highlight, with markets expecting produtin to have risen 0.3% on both the month and the year. US PPI is due to follow, with February retail sales also on the docket.
• Outside of data, the UK Chancellor is set to present his latest Spring Budget, at which the UK government are expected to outline plans to return workers to the labour market and incentivise sluggish business investment.

BONDS: Schatz The Biggest Mover This Morning With UK Budget Due

• In core fixed income space Schatz has been the biggest mover this morning with yields hitting a high of 3.025% (13.2bp above yesterday's close) before fully reversing this move. The move higher in yields was triggered by the release of a Reuters ECB sources that suggested a 50bp hike in March was still the most likely outcome (which is a view that is in line with the MNI sources piece available here published two days ago).
• The change in ECB hike expectations saw similar but smaller moves across other core fixed income markets. Treasuries are underperforming this morning after some weakness after the close yesterday while gilts and Bunds are both off their lows and closer to flat on the day.
• Looking ahead we have the UK Budget today (probably starting shortly after 12:30GMT / 13:30CET) where there aren't expected to be too many rabbits out of the hat - and the markets instead focusing on the gilt remit.
• We also have US retail sales and PPI due at 12:30GMT / 13:30CET.
• TY1 futures are down -0-8+ today at 113-19 with 10y UST yields down -2.8bp at 3.665% and 2y yields up 7.7bp at 4.332%.
• Bund futures are up 0.03 today at 133.99 with 10y Bund yields up 3.5bp at 2.449% and Schatz yields up 3.1bp at 2.902%.
• Gilt futures are down -0.10 today at 103.45 with 10y yields up 3.3bp at 3.516% and 2y yields up 3.2bp at 3.496%.

EQUITIES: Tuesday's Move Higher in E-Mini S&P Considered Technically Corrective

Eurostoxx 50 futures started this week on a bearish note with price trading lower Monday. This reinforces last week’s breach of a key support at the base of a bull channel drawn from the Oct 13 low. The break highlights a reversal of the uptrend that has been in place since late September 2022. The 50-day EMA has also been breached and this opens the 4000.00 handle next. On the upside, initial firm resistance is seen at 4232.10, the 20-day EMA. The short-term condition in S&P E-Minis remains bearish and Tuesday’s move higher is considered corrective. Price last week cleared key short-term support at 3960.75, Mar 2 low to confirm a resumption of the bear cycle that has been in place since Feb 2. The move lower signals scope for an extension towards 3822.00 next, the Dec 22 low. Initial firm resistance is seen at 4035.81, the 50-day EMA.

• Japan's NIKKEI closed higher by 7.44 pts or +0.03% at 27229.48 and the TOPIX ended 12.58 pts higher or +0.65% at 1960.12.
• Elsewhere, in China the SHANGHAI closed higher by 18.003 pts or +0.55% at 3263.315 and the HANG SENG ended 291.91 pts higher or +1.52% at 19539.87.
• Across Europe, Germany's DAX trades lower by 102.21 pts or -0.67% at 15130.96, FTSE 100 lower by 72.18 pts or -0.95% at 7565, CAC 40 down 84.68 pts or -1.19% at 7056.89 and Euro Stoxx 50 down 40.69 pts or -0.97% at 4138.78.
• Dow Jones mini down 115 pts or -0.36% at 32046, S&P 500 mini down 10.25 pts or -0.26% at 3910.25, NASDAQ mini down 17 pts or -0.14% at 12190.

COMMODITIES: WTI Sell Off Yesterday Reinforces Strong Bearish Theme

WTI futures remain vulnerable and yesterday’s strong sell-off reinforces the current bearish theme. The contract has tested key support at $70.86, the Dec 9 low. A clear break of this level would highlight an important bearish development and confirm a resumption of the medium-term downtrend. This would open the psychological $70.00 handle and levels below it. Initial firm resistance is at $78.06, the Mar 9 high. Gold remains bullish and the metal is holding on to its recent gains. Resistance at $1858.3, the Mar 6 high has been cleared and the recent rally signals scope for an extension towards $1923.2, a Fibonacci retracement point and a key near-term resistance. On the downside, initial firm support is seen at $1849.2, the 50-day EMA. A break of this level is required to signal a top - this would expose the bear trigger at $1804.9, the Feb 28 low.

• WTI Crude up $0.42 or +0.59% at $71.79
• Natural Gas up $0 or +0.08% at $2.575
• Gold spot down $15.72 or -0.83% at $1888.72
• Copper down $3.95 or -0.99% at $396.15
• Silver down $0.07 or -0.33% at $21.629
• Platinum down $13.9 or -1.41% at $973.68