MNI US OPEN - Medvedev Sees US Relations at Lower Level Than Cuban Missile Crisis

NEWS

US (WaPo): U.S. Plans More Airdrops Into Gaza Amid Hope for Ramadan Cease-fire

The United States says it plans to airdrop more food aid into Gaza, after completing its first successful drop on Saturday, parachuting in packages that contained more than 38,000 meals intended to help alleviate hunger in the besieged enclave. The operation marked an expansion of the United States' direct role in addressing a growing humanitarian crisis in Gaza — where a lack of food and acute hunger have forced some people to eat weeds and animal feed — though aid groups have warned that the airdrops are insufficient for the enormous need.

US (BBG): Haley Gets First Primary Win in D.C. With Super Tuesday Ahead

Nikki Haley won the Republican primary in the District of Columbia Sunday, giving her the first victory in the nominating contests of 2024 and slowing Donald Trump’s march to the Republican nomination. Haley won the district 63% to 33%, according to the Associated Press. In winning the 19 delegates from the nation’s capital, Trump’s former ambassador to the United Nations nearly doubled her voting strength at the Republican National Convention in Milwaukee in July. But her 43 delegates still trail the former president, who won the first nine contests and has amassed 244 delegates.

US (BBG): Goldman’s Kostin Sees Limited US Stocks With Extreme Valuations

The number of US stocks with extremely high valuations is currently limited, even as the total market capitalization of such names is similar to levels seen during the growth stock rally in 2021, according to Goldman Sachs strategists. Stocks with an enterprise value-to-sales ratio of above 10x account for 24% of US equity market cap, versus 28% during 2021 and 35% during the tech bubble, the team led by David Kostin writes in a note.

US/N.KOREA/S.KOREA (BBG): US, South Korea Start Military Drills Set to Anger Kim Jong Un

The US and South Korea started one of their largest annual joint military drills in a move certain to raise tempers in North Korea, which began the year by threatening to destroy its neighbor to the south. The Freedom Shield exercises that run from Monday through March 14 include training on land, sea and in the air with an emphasis on countering nuclear operations, US Forces Korea said. These are also the first large-scale joint exercises since political acrimony led to the two Koreas scrapping a 2018 agreement designed to reduce tensions on their heavily armed border.

US/RUSSIA (MNI): US/Russia Relations Worse Now Than Cuban Missile Crisis - Medvedev

Deputy chairman of the Security Council of Russia Dmitry Medvedev speaking at the World Youth Festival in the Black Sea town of Sirius. Makes a number of high-profile and inflammatory comments. Says that the "situation between the US and Russia now is worse than the 1962 Cuban Missile Crisis." This is a significant claim given that the world was seen as hours, if not minutes, from US-Soviet nuclear warfare at that time. Medvedev also claims that "US special forces and advisers are waging war against Russia."

UK (BBG): Hunt Announces UK Manufacturing Funding in Budget Growth Push

Chancellor of the Exchequer Jeremy Hunt announced new funding to support the UK’s manufacturing sector, ahead of his budget Wednesday that he said would focus on long-term growth. The Treasury said in a statement that firms across the life sciences, automotive and aerospace sectors would benefit from a £360 million ($456 million) package of government and industry investment. The statement didn’t specify how much of the £360 million would be coming from the government.

CHINA (MNI): China Cancels Decades-Old Routine Premier Presser

MNI (Beijing) Chinese Premier Li Qiang will not hold a press conference after the National People’s Conference, Lou Qinjian, the spokesman of the NPC, told reporters on Monday in a brief. “Unless there are special circumstances, there will be no more press conferences by the Premier in the next few years after the NPC,” he said. It is the first time the press conference has been canceled since 1991.

CHINA (BBG): Vanke Shares, Dollar Bonds Drop After Asset Manager Statement

China Vanke’s shares and dollar bonds decline after New China Asset Management Sunday refutes “false information” about their ties and says they have “always maintained normal business cooperation.” Shares of Vanke, one of China’s largest developers, drop as much as 6.5% in Hong Kong, the most since Feb. 9Vanke’s 3.975% dollar note due 2027 falls 1.6 cents to 52.1 cents on the dollar, lowest level since last November and set for a sixth straight day of declines, Bloomberg-compiled prices show

CHINA (MNI): China Consumption Key to Growth - Advisor

MNI (Beijing) Greater fiscal support and higher income growth will boost Chinese consumer activity in 2024, a key driver of GDP growth this year, however, retail sales will likely not match last year's levels, an advisor from a policymaking think tank told MNI in an interview. Retail sales will likely increase by 5-6% y/y, said Zou Yunhan, deputy director at the Economic Forecasting Department of the State Information Center, which is affiliated with the National Development and Reform Commission.

CHINA (MNI): China to Strengthen Fund Management

MNI (Beijing) Authorities have successfully issued all of the CNY1 trillion yuan of additional government bonds announced last year to assist disaster recovery, according to Lou Qinjian, spokesperson for the 14th National People's Congress. Lou said this year, authorities will strengthen project and fund management across 15,000 different projects to ensure the bonds are used well. The central government could issue CNY1 trillion in special treasuries later this year given the expected GDP growth target, an advisor recently told MNI.

JAPAN (BBG): Japan’s Nikkei 225 Breaches Key 40,000 Level for First Time

Japan’s Nikkei 225 Stock Average climbed above the psychological level of 40,000 for the first time, opening the door to further gains in its historic rally. The blue-chip gauge rose 0.5% to close at 40,109.23 on heavy market turnover. Tech shares, which have helped push equities higher over the past year, led the way, with Advantest Corp. among the top performers. The Nikkei rose as much as 1% earlier in the day.

RBNZ (MNI): RBNZ "Nowhere Near" Rate Cuts Discussion - Conway

The Reserve Bank of New Zealand is likely “nowhere near” rate cut discussions, and last week’s 10-basis-point reduction in its estimate of the peak Official Cash Rate track is not a dovish signal, the Reserve’s Chief Economist Paul Conway told MNI. The RBNZ has maintained its Official Cash Rate track at about the same level for the past year, noted Conway in an interview after the decision to hold the Official Cash Rate at 5.5% for a fifth consecutive time, when the accompanying Monetary Policy Statement (MPS) downgraded the peak OCR call to 5.6% by the third quarter.

TURKEY (BBG): Turkey’s Inflation Spirals Closer to 70% in Worry for Peak Rates

Turkey’s annual inflation swung to a 15-month high with a faster pickup than forecast, an acceleration closely watched by a central bank that’s still on alert after ending interest-rate hikes. Stoked in part by this year’s sharp increase in the minimum wage, price growth in February quickened for a fourth straight month to 67.1% from 64.9% in January. The median estimate in a Bloomberg poll of economists was 66%.

THAILAND (BBG): Thai PM Aide Renews Call for Interest-Rate Cuts to Aid Economy

Thailand’s central bank faced renewed calls from the government camp to start easing monetary policy, with Prime Minister Srettha Thavisin’s top aide arguing that Southeast Asia’s second-largest economy needed cheaper borrowing costs to spur growth. The Bank of Thailand’s Monetary Policy Committee has some room to reduce the key rate to provide “immediate relief” to the people as budgetary support was still at least a month away, Prommin Lertsuridej, the secretary-general to Srettha, said Monday.

COMMODITIES (BBG): OPEC+ Extends Oil Cuts, With Russia Bolstering Its Effort

OPEC+ extended its oil supply cutbacks to the middle of the year in a bid to avert a global surplus and shore up prices. The curbs — which on paper total roughly 2 million barrels a day — will remain in place until the end of June, according to statements from members such as Saudi Arabia, which accounts for half of the pledged reduction. Russia promised to strengthen its role by focusing more on cuts to production than exports.

DATA

SWITZERLAND DATA (MNI): CPI Slightly Firmer Than Consensus But Still Below SNB Forecast

• SWISS FEB CPI +0.6% M/M, +1.2% Y/Y

Swiss February headline CPI came in slightly firmer than expected at +1.2% Y/Y(vs +1.1% cons; +1.3% prior) and 0.6% M/M (vs +0.5% cons; +0.2% prior). The core rate came in at 1.1% Y/Y (vs +1.0% cons; +1.2% prior). Looking at the inflation release on a more granular basis, MNI's calculations show that the closely-watched housing and energy category, within which the SNB projected inflation ticking up in Q1 2024, slowed but remained elevated on a sequential seasonally-adjusted basis.

SPAIN DATA (MNI): Unemployment Claims Fall In NSA and SA Terms

Spanish unemployment claims fell by 7,452 in February after January's 60.4krise. The total stock of claims was 2,760,408, which the Spanish Labour Ministry notes is the lowest February figure since 2008. A reminder that the data are not seasonally adjusted. Claims often see a large rise in January and a smaller change in February. At a sector level, claims fell by -8.5k in services (after rising 58.7k in Jan), and fell for the second consecutive month in construction (-2.4k vs -1.2k prior).

JAPAN DATA (MNI): Japan Q4 Capex Up Q/Q; GDP Seen Revised Higher

Combined capital investment by non-financial companies excluding software rose 8.0% q/q in Q4 of 2023, accelerating from 1.0% in Q3, a quarterly survey released by the Ministry of Finance showed on Monday. The MOF survey, based on the demand side and key to calculate Q4 GDP revisions due March 11, indicated authorities will revise capex higher from the preliminary estimate of -0.1%, based solely on supply side data. Based on the MOF data on capex and inventories, the government will also likely revise up from its Q4 estimate.

AUSTRALIA DATA (MNI): MI Inflation Gauge Lowest in Almost Two Years

The Melbourne Institute inflation gauge for February fell 0.1% m/m and the annual rate eased substantially to 4.0% from 4.6% in January, the lowest since April 2022. The trimmed mean measure rose 0.1% m/m to also be 4% y/y down from 4.6%. The 3-month average rates were in line with the average of the last two months. While the series is running above monthly CPI, which is not unusual, it is signalling that the moderation in inflation is likely to continue. January CPI was steady at 3.4% y/y and the February data will be released on March 27.

AUSTRALIA JAN DWELLING APPROVALS +4.8% Y/Y (MNI)
AUSTRALIA JAN DWELLING APPROVALS -1% M/M (MNI)
AUSTRALIA FEB BUILDING APPROVALS -1% M/M, +4.8% Y/Y (MNI)
AUSTRALIA Q4 BIZ INDICATORS INVENTORIES -1.7% (MNI)

RATINGS: Fitch Affirmed U.S., S&P Upgraded Portugal

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

• Fitch affirmed the United States at AA+; Outlook Stable
• S&P upgraded Portugal to A-; Outlook Positive
• DBRS Morningstar confirmed Latvia at A, Stable Trend
• DBRS Morningstar confirmed the Netherlands at AAA, Stable Trend

FOREX: EUR Furtively Firmest, But Ranges Contained For Now

• The single currency is furtively the strongest performer in G10 - showing above the Friday high with little difficulty, allowing EUR/GBP to edge further off the 50-dma resistance tested, but not broken, last week at 0.8575.
• JPY trades poorly, softer against most others after last week's uptick in volatility. Low levels of implied vols persist, with G10 and EM currency vols holding close to cycle lows - and allowing carry trade dynamics to persist and weaken the JPY.
• GBP fares well, but ranges are generally contained, as local press continues to speculate and run ahead of this week's pre-election Spring Budget. Space for tax giveaways is seen as slim - which should keep the budget less eventful and more contained, despite the generally poor polling of the ruling Conservative Party.
• GBP/USD remains gravitated to the 1.2675 50-dma, with 1.2709 marking the next resistance.
• The Monday data schedule is typically light, with few macro cues ahead of the Fed chair Powell's semi-annual testimony on Wednesday. Fed's Harker is set to speak, however his topic of focus is higher education, meaning policy-relevant comments could be limited.

EGBS: Firmer Amid Little Newsflow; Peripheries Tighten

Core/semi-core EGBs are a touch firmer to begin the week, with little in the way of domestic drivers or meaningful headline flow to note.

• Bunds are +2 at 132.78, though technical studies continuing to point to a bearish outlook. The first support is the Feb 29 low at 131.62, while the 20-day EMA at 133.18 remains the first resistance.
• Hedging surrounding EU bond supply may have helped the space away from best levels. The auctions saw smooth enough demand.
• The German and French cash curves have seen some light bull flattening.
• Since Jan 30, the German 2s10s curve has flattened 22.5bps, with short-end yields rising more aggressively than 10-year counterparts as ECB rate cut expectations have moderated.
• 10-year Periphery spreads to Bunds are generally tighter.
• The 10-year BTP/Bund spread is -2bps at 145bps, while PGBs are also supported following S&P's rating upgrade on Friday (see earlier post for details).
• The Euro Sentix survey for March showed a modest improvement vs February.
• A reminder that the ECB are in their pre-meeting quiet period ahead of Thursday's decision.
• The remainder of today's schedule is light.

GILTS: Futures Respect Friday's High, Fiscal Speculation Dominates

Gilt futures have moved away from session lows alongside global peers, although Friday’s high (98.43) in the contract has capped rallies so far (range 98.00-43).

• Futures last -11 at 98.21.
• Cash gilt yields are -/+1bp on the day.
• Macro headline flow has been limited.
• Weekend comments from Chancellor Hunt pointed to a “responsible” approach to fiscal easing.
• Local press source reports are seemingly biased towards slightly larger tax/national insurance cuts than they were 1 week ago, which presents some modest upside risk to DMO remit consensus and potential headwinds for gilts.
• SONIA futures are flat to -5.0 through the blues.
• BoE-dated OIS is also off session extremes, last showing 63bp of ’24 cuts, with 24bp of cuts priced through the end of the June ’24 MPC.
• GBP750mn of medium-term gilt sales will come from the BoE later today.
• The local release & speaker calendar is empty on Monday, with focus centred on fiscal speculation ahead of Wednesday’s Budget.

EQUITIES: Trend Condition in E-Mini S&P Bullish With Contract Close to Cycle Highs

Eurostoxx 50 futures traded higher Friday, delivering a fresh cycle high and this confirms a resumption of the current uptrend. Moving average studies remain in a bull-mode position too, highlighting positive market sentiment. Sights are on 4939.30 next, a Fibonacci projection. Further out, scope is seen for a climb towards a bull channel top at 4995.30. The channel is drawn from the Oct 27 low. Initial firm support lies at 4796.80, the 20-day EMA. The trend condition in S&P E-Minis remains bullish and the contract traded higher last week. Price action also continues to highlight the fact that corrections remain shallow - a bullish signal. Support to watch is 5036.11, the 20-day EMA. A clear break of this average would signal potential for a deeper retracement towards 4936.50, the Feb 13 low. For bulls, sights are on 5170.86, a Fibonacci projection.

• Japan's NIKKEI closed higher by 198.41 pts or +0.5% at 40109.23 and the TOPIX ended 3.14 pts lower or -0.12% at 2706.28.
• Elsewhere, in China the SHANGHAI closed higher by 12.284 pts or +0.41% at 3039.305 and the HANG SENG ended 6.53 pts higher or +0.04% at 16595.97.
• Across Europe, Germany's DAX trades higher by 20.15 pts or +0.11% at 17754.19, FTSE 100 lower by 14.93 pts or -0.19% at 7668.08, CAC 40 down 0.15 pts or 0% at 7933.07 and Euro Stoxx 50 up 12.4 pts or +0.25% at 4906.97.
• Dow Jones mini down 61 pts or -0.16% at 39082, S&P 500 mini down 4.75 pts or -0.09% at 5141.5, NASDAQ mini up 1 pts or +0.01% at 18339.75.

COMMODITIES: WTI Futures Trading Above Key Resistance at $79.09

WTI futures traded higher last week and in the process, the contract delivered a print above key resistance at $79.09, the Jan 29 high. The clear breach of this hurdle strengthens a bullish theme and highlights potential for a continuation higher near-term, towards $81.70, a Fibonacci retracement. On the downside, support to watch is $76.06, the 50-day EMA. A break would instead signal a possible top. Gold traded sharply higher Friday, extending the recovery that started Feb 14. The climb has resulted in a break of resistance at $2065.5, the Feb 1 high. This strengthens a bullish theme and attention turns to resistance at $2088.5, the Dec 28 high. Clearance of this level would open $2097.1, a Fibonacci retracement point. Initial firm support to watch lies at $2025.8, the 50-day EMA.

• WTI Crude down $0.14 or -0.18% at $79.81
• Natural Gas up $0.04 or +2.34% at $1.878
• Gold spot up $2.49 or +0.12% at $2085.32
• Copper up $2.3 or +0.6% at $388.45
• Silver up $0.04 or +0.16% at $23.156
• Platinum up $7.32 or +0.82% at $894.78