MNI US OPEN - Markets Stabilise With CPI in the Balance
- MNI US CPI PREVIEW: CORE CPI SEEN HOLDING JAN PACE AFTER HISTORICAL RALLY
- MNI ECB PREVIEW: 50BP HIKE STILL ON THE CARDS, EXPLICIT GUIDANCE FOR MAY UNLIKELY
- RUSSIA-UKRAINE GRAIN DEAL EXTENSION TALKS ONGOING
- UK JOBS MARKET ROBUST, UNLIKELY TO SHIFT BOE
Figure 1: Recent US Inflation Dynamics
MNI US CPI PREVIEW: Core CPI Seen Holding Jan Pace After Historical Rally
Core CPI inflation is seen holding a 0.4% M/M clip for the third month running in February. It is however expected to have been boosted by a bounce in used car prices rather than more broad-based pressure, especially in light of a sizeable easing in supply chain pressures. Core non-housing services will again be in focus after moderating to a mixed extent in January, whilst OER and primary rents inflation are seen slowing slightly further.
MNI ECB PREVIEW - MARCH 2023: 50bp Hike Still on the Cards, Explicit Guidance for May Unlikely
President Lagarde has strongly guided the market to a 50bp hike in March and stressed that this would happen unless an extreme scenario materialises. Cleary the failure of Silicon Valley Bank (SVB) is an extreme event. With the fallout of SVB ongoing at the time of writing, and the situation fluid, the ECB’s prior pre-commitment for March is clearly in doubt. Absent any further communication from the ECB, we still expect the ECB to hike by 50bp in March given the persistence of underlying inflation and resilience of the euro area economy, but our conviction is much weaker at this point.
ECB (BBG): ECB’s Stournaras Sees No Impact on Eurozone Banks From SVB
“We don’t see any impact from SVB on Eurozone banks and of course nor on Greek ones,” ECB Governing Council member Yannis Stournaras tells Kathimerini newspaper. SVB is “a special case” whose operating model isn’t found in Europe, Stournaras who also heads the Bank of Greece says.
US (WaPo): Biden, in a Challenge to China, Announces Major Submarine Deal
President Biden appeared at a naval shipyard here on Monday afternoon with his British and Australian counterparts to announce a major new plan to supply Australia with nuclear-powered submarines in what amounts to a direct counter to China's growing influence in the region. Standing with British Prime Minister Rishi Sunak and Australian Prime Minister Anthony Albanese, Biden unveiled details of the arrangement at a time of rising tensions with China and amid a global realignment that is triggering dramatic increases in military spending in the wake of Russia's invasion of Ukraine.
FRANCE (BBG): Macron’s Reformist Legacy Tested as Pension Bill Reaches Endgame
Emmanuel Macron faces parliamentary brinkmanship and protests this week over his plan to raise the retirement age, with the potential for a politically bruising outcome that would shape the French president’s capacity to keep pushing a pro-business agenda. The test begins on Wednesday as a group of 14 lawmakers from the National Assembly and Senate meets behind closed doors to finalize a single bill to be presented for a vote in both houses. At the same time, unions will gather their forces for another day of strikes and protests against the proposed changes.
MNI BOJ REVIEW - MARCH 2023: No Surprises as the Baton is Passed
Outgoing Governor Kuroda met the wider consensus view as he chose not to tweak policy settings at his final monetary policy meeting atop the central bank. The post-meeting statement was mostly a copy and paste exercise, reaffirming the Bank’s overarching view surrounding the economy (albeit with a slight downgrade to its view on exports), alongside a reiteration of its forward guidance. This left the future of monetary policy settings to the incoming leadership, as opposed to making any attempt to deploy the ‘transition-smoothing’ tweaks that some had called for.
RUSSIA/UKRAINE (MNI): Kyiv Says It Has No Update on Grain Deal, Turkey Calls on Parties to Renew Agreement
Ukraine's Infrastructure Ministry said it has no update on any grain deal extension, while Turkey's Defence Ministry called on parties to renew the agreement after TASS news agency cited a Russian official as suggesting that the deal has been extended by 60 days. A spokesperson for the Ukrainian Infrastructure Ministry said that Kyiv had no update on the grain deal, while a senior Ukrainian government official told Reuters that the country was planning to "strictly" follow the terms of a 120-day extension of the deal signed last year.
TURKEY/SWEDEN/FINLAND (BBG): US Urges Turkey to Ratify NATO Enlargement by July Summit
US National Security Adviser Jake Sullivan urged Turkey to ratify the membership bids of Sweden and Finland into NATO as pressure builds on two remaining holdouts to approve the expansion of the military alliance. Officials from Turkey, Sweden and Finland have been trying to break an impasse that has held up the North Atlantic Treaty Organization’s expansion since the two Nordic countries were invited to join in June. Turkey, the only holdout besides Hungary, wants Sweden to crack down on groups Ankara considers as terrorist in exchange for agreeing to accession.
EQUITIES (BBG): Goldman Strategists See Upside Potential in European Banks Rout
The selloff in European banks might offer “upside opportunities” as they remain well capitalized, according to Goldman Sachs strategists. The team led by Cecilia Mariotti says regional lenders continue to trade at a large discount versus US banks. In a note dated March 13, they write that Goldman’s credit strategists highlight limited signs of systemic risk from the failure of SVB and “limited contagion risks from small to large banks especially in the IG space”
CORPORATE (BBG): Credit Suisse Finds ‘Material’ Control Lapses After SEC Prompt
Credit Suisse Group AG said it found “material weaknesses” in its reporting and control procedures for the past two years, after questions from US regulators last week. The Zurich-based bank said Tuesday it will take steps to fix ineffective checks on the process it follows to pull together its financial reports.
UK DATA (MNI): UK Jobs Market Robust, Unlikely to Shift BOE
- UK JAN ILO UNEMPLOYMENT RATE +3.7%
- UK FEB CLAIMANT RATE +3.8%
- UK PAYROLLS +98,000 JAN-FEB: HMRC/ONS
- UK JAN AVE WEEKLY EARNINGS +5.7% YY
- UK JAN AVE WEEKLY EARNINGS EX-BONUS +6.5% YY
The latest UK labour market data showed a continuation in the trend of slowing vacancies, whilst employment held steady at 3.7%. Tentative signs that wages may have have peaked were evident. A strong uptick in payrolled employees of +98k was recorded in February, after a substantial downwards revision to +42k (from 102k) in January. This, alongside the employment rate edging up 0.1pp and inactivity down 0.2pp on the quarter implies an increase in returns to the workforce, namely 16-24 year-olds, students and retirees according to the ONS. Meanwhile job vacancies cooled by 51k in the three months to February, but remain a robust 328k above pre-Covid levels.
ITALY JAN IP -0.7% M/M, +1.4% Y/Y (MNI)
SPAIN DATA (MNI): HICP Revised 0.1pp Lower to +6.0% y/y
- SPAIN FEB FINAL HICP +0.9% M/M (FLASH +1.0%); JAN -0.4% M/M
- SPAIN FEB FINAL HICP +6.0% Y/Y (FLASH +6.1%); JAN +5.9% Y/Y
Spanish harmonised inflation was revised 0.1pp lower across the m/m and y/y headline prints, confirming February HICP at +0.9% m/m and +6.0% y/y. This implies a softer 0.1pp uptick to +6.0% y/y from January and the second consecutive month of higher y/y HICP. With German HICP confirmed at flash levels of +9.3% y/y and French and Italian prints to be released over the next two days, a revision to eurozone HICP is not yet anticipated.
AUSTRALIA DATA (MNI): Confidence Weak & Volatile, Components & Costs Robust
After two months in positive territory, NAB business confidence fell to -4 in February from +6, driven by services and finance & property. The series has been volatile since June 2022. Business conditions were stable at a robust 17after 18 in January with the strength broad based. While confidence was soft, the other components of the survey remained robust pointing to a further RBA hike in April if considered in isolation.
NEW ZEALAND DATA (MNI): House Price Index Down 14.2% In Feb
New Zealand house prices continue to feel the pain of sharply higher interest rates, while Cyclone Gabrielle meant lower listings and sales in affected areas in the North Island. The Real Estate Institute of New Zealand's House Price Index fell 14.2% y/y in February, or 12.3% y/y excluding Auckland. The HPI fell at a 13.9% y/y pace in January.
FOREX: USD Regathers, NOK Extends 2023 Weakness
- JPY is sliding against all others - typifying the price action so far Tuesday, which has been largely corrective in nature as markets moderate after a frantic Monday session. The USD is favoured on the margin, although yesterday's wide ranges have been wholly respected so far. The USD Index appears to have found some support at the 50-dma, undercutting at 103.448.
- NOK is extending 2023's losing streak, weaker against most others and within range of the cycle lows against the EUR and USD as the wave of global rate re-pricing crimps market expectations that the Norges Bank could return to the recent pace of rate hikes.
- GBP saw a brief spell of support on the back of the UK jobs data, which saw the ILO unemployment rate slip below forecast, although weekly earnings data showed the rally in wages may be close to peaking. GBP/USD briefly saw support up to 1.2180 before stalling, and returning to minor negative territory ahead of the NY crossover.
- Focus rests solely on the US CPI release later today, at which markets look for Y/Y CPI to slow to 6.0%, and 5.5% for the core metric.
BONDS: Short-End Moves Feature In Broader Retracement
Weakness at the short end of the US curve is the standout move in early Tuesday trade, with some of Monday's huge moves in Global FI partially reversing ahead of the US CPI report later today.
- Early rallies in Tsys, Gilts and Bunds (triggered in part by concerning - though not clearly new - headlines on Credit Suisse's financial situation) have since faded.
- After Monday's 57bp trading range, 2Y Tsys have traded in a 37bp range, with a post-Sept low of 3.8243% hit before bouncing to 4.188% (up 21bp). FOMC March 25bp hike is around 70% implied vs a pause, vs ~50% at Monday's low.
- The US curve has twist flattened (30Y yields are lower, 10s up just 1bp), with the UK's bear steepening and Germany's twist steepening.
- ECB terminal hike pricing has bounced after hitting 3.08% (autumn), last 3.37%. For Thursday's decision, there's around 50%/50% prob of 25bp/50bp hikes. UK jobs data was mixed, and unlikely in our assessment to change BoE MPC policy views.
- While CPI is the US highlight, we also get the latest NFIB report, while Fed's Bowman speaks at a community banking event after the close.
- Jun 10-Yr US futures (TY) down 20/32 at 114-1 (L: 114-00.5 / H: 115-07.5)
- Jun Bund futures (RX) down 67 ticks at 135.53 (L: 135.53 / H: 137.03)
- Jun Gilt futures (G) down 83 ticks at 104.04 (L: 104 / H: 105.49)
- Italy / German 10-Yr spread 0.6bps wider at 193bps
EQUITIES: Eurostoxx Futures More Steady Following Sharp Monday Sell Off
Eurostoxx 50 futures started the week on a bearish note with price trading lower Monday. This reinforces Friday’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 been breached and this opens the 4000.00 handle next. On the upside, initial firm resistance is seen at 4238.20, the 20-day EMA. The short-term condition in S&P E-Minis remains bearish and Monday’s move lower reinforces this theme. Price last week cleared key short-term support at 3960.75, the Mar 2 low to confirm a resumption of the bear cycle that has been in place since the Feb 2 reversal. The move lower signals scope for an extension towards 3822.00 next, the Dec 22 low. Initial firm resistance is seen at 4039.14, the 50-day EMA.
- Japan's NIKKEI closed lower by 610.92 pts or -2.2% at 27222.04 and the TOPIX ended 53.45 pts lower or -2.67% at 1947.54.
- Elsewhere, in China the SHANGHAI closed lower by 23.384 pts or -0.72% at 3245.312 and the HANG SENG ended 448.01 pts lower or -2.27% at 19247.96.
- Across Europe, Germany's DAX trades higher by 61.74 pts or +0.41% at 15019.18, FTSE 100 lower by 25.28 pts or -0.33% at 7523.15, CAC 40 up 2.57 pts or +0.04% at 7014.53 and Euro Stoxx 50 up 9.31 pts or +0.23% at 4105.1.
- Dow Jones mini up 125 pts or +0.39% at 31975, S&P 500 mini up 19 pts or +0.49% at 3877, NASDAQ mini up 65.5 pts or +0.55% at 11999.25.
COMMODITIES: WTI Futures Vulnerable After Piercing $72.64 Feb 6 Low
A sharp sell-off in WTI futures last week has defined a key resistance at $80.94, Feb 7 high. A break of this hurdle is required to reinstate a bullish theme that would open $82.89, the Jan 23 high and a key resistance. The contract remains vulnerable and support at $72.64, Feb 6 low, has been pierced. A clear breach would strengthen a bearish threat and open $70.86, Dec 9 low and a bear trigger. Initial firm resistance is $78.06, the Mar 9 high. Gold rallied sharply higher last week and yesterday started the week on a firm note. Resistance at $1858.3, the Mar 6 high has been cleared. This 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 $1847.0, 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 down $1.6 or -2.14% at $73.14
- Natural Gas up $0.04 or +1.61% at $2.647
- Gold spot down $10.69 or -0.56% at $1902.13
- Copper down $3.8 or -0.94% at $401.6
- Silver down $0.1 or -0.46% at $21.6883
- Platinum down $9.58 or -0.96% at $992.56
|14/03/2023||1000/1000||**||UK||Gilt Outright Auction Result|
|14/03/2023||1000/0600||**||US||NFIB Small Business Optimism Index|
|14/03/2023||-||EU||ECB de Guindos at ECOFIN Meeting|
|14/03/2023||1230/0830||**||CA||Monthly Survey of Manufacturing|
|14/03/2023||1255/0855||**||US||Redbook Retail Sales Index|
|14/03/2023||2120/1720||US||Fed Governor Michelle Bowman|
|15/03/2023||0200/1000||**||CN||Surveyed Unemployment Rate|
|15/03/2023||1000/1000||**||UK||Gilt Outright Auction Result|
|15/03/2023||1100/0700||**||US||MBA Weekly Applications Index|
|15/03/2023||-||UK||Chancellor Delivers Spring Budget, OBR Forecasts, Likely DMO Remit|
|15/03/2023||1215/0815||**||CA||CMHC Housing Starts|
|15/03/2023||1230/0830||**||US||Empire State Manufacturing Survey|
|15/03/2023||1300/0900||*||CA||CREA Existing Home Sales|
|15/03/2023||1400/1000||**||US||NAHB Home Builder Index|
|15/03/2023||1430/1030||**||US||DOE Weekly Crude Oil Stocks|