MNI US OPEN - NYC Bancorp's "Material Weaknesses" Prompts Worry

NEWS

FED (MNI): Fed’s Williams Sees No Urgency to Cut Rates

The Federal Reserve can take its time to see if monetary policy is convincingly bringing inflation back to the central bank's 2% target before lowering interest rates, New York Fed President John Williams said Thursday, adding that he expects cuts are likely at some point later this year. “We can take time, analyze the data, see ‘is monetary policy getting the job done,’” Williams said during a Q&A. “I do expect us to cut interest rates later this year. There’s not a sense of urgency to do that.”

US/CHINA (MNI): Biden Admin May Bar Chinese Vehicle Imports, Cites National Security

MNI (London) The US Department of Commerce has released a statement confirming the start of a 'regulatory process' investigating the potential national security risks posed by the information and communications technology and services (ICTS) in connected vehicles. While the US imports a relatively small number of Chinese autos, the row risks escalating trade tensions between the two powers that had in recent months appeared to be improving following a number of high-profile meetings between senior politicians, including Presidents Biden and Xi.

US (BBG): Congress Approves Interim Funds to Avert US Government Shutdown

Congress approved temporary funding to avert a Saturday partial US government shutdown, sending the bill to President Joe Biden for his signature. The interim measure would extend funds for some departments through March 8 and others through March 22 as lawmakers work out differences on delayed full-year spending packages for the fiscal year that began Oct. 1. The Senate passed the bill on a 77-13 vote on Thursday night, hours after the House acted on it. The White House has said Biden supports the temporary funding.

CORPORATE (BBG): NYCB Flags Weaknesses in Loan Oversight and Names New CEO

Commercial real estate lender New York Community Bancorp said it discovered “material weaknesses” in how it tracks loan risks, wrote down the value of companies acquired years ago and replaced its leadership to grapple with the turmoil. The stock plunged. Alessandro DiNello will become chief executive officer effective immediately, succeeding Thomas Cangemi, the lender said in a statement late Thursday. The company expects to miss a deadline for filing an annual report as it shores up controls.

SBN (MNI): SNB's Jordan to Step Down in September

Swiss National Bank Governing Board chair Thomas Jordan will step down from his position at the end of September 2024, the bank announced Friday. Jordan, an SNB staffer since 1997, played a pivotal role in the development of the new monetary policy strategy introduced at the end of 1999, then becoming an Alternate Member of the Governing Board in 2004. In May 2007 he was appointed Member of the Governing Board.

ECB (BBG): Holzmann Says ECB Can’t Rush on Cuts, Still Sees Inflation Risks

European Central Bank Governing Council member Robert Holzmann warned against early interest-rate cuts after fresh data showed euro-area price growth slowed less than anticipated in February. “We watched inflation data coming in from European and country level, and what we see is that they confirm my view that we have to wait, have to be attentive and cannot rush to a decision,” Holzmann said in Vienna on Friday. “What I’ve seen so far it confirms my view.”

UK (BBG): Galloway Wins UK Parliament Seat in Vote Dominated by Gaza

Left-wing disrupter George Galloway won a seat in the UK Parliament in a special election that underscored how the Israel-Hamas war has exacerbated community tensions and sowed division across British politics. Galloway, leader of the Workers Party of Britain, won 40% of the vote in Rochdale, northwest England, with a campaign focused on calling for an end to the conflict in Gaza. David Tully, an independent, came in second on 21%, beating Paul Ellison, for the UK’s governing Conservative Party on 12% and Azhar Ali, a candidate for the Labour Party until he was dropped over comments about the war, on 7.7%. Turnout was just under 40%.

CHINA (BBG): China Banks Approve $28 Billion Loans for Property Market

China’s housing ministry said more than 200 billion yuan ($28 billion) of bank loans have been approved for property projects, the latest indication that lenders are heeding the government’s push to support the embattled real estate market. Commercial banks had approved that amount as of Feb. 28, the ministry said Friday. That’s a jump from about 29 billion yuan as of Feb. 20. About 6,000 projects are now included on so-called white lists that make them eligible for housing support.

CHINA (MNI): China to Target 3% CPI Rise Despite Deflation Pressure

MNI (Beijing) China will likely set its inflation target at around 3% y/y for 2024, despite the real level likely printing closer to about 1% due to sluggish demand, which will boost the chance of further central bank policy action, advisors and economists told MNI. Chinese Premier Li Qiang will present the annual CPI target within his 2024 government working report on March 5 during the opening ceremony of the National Peoples’ Congress. The government has set the target at “around 3%” every year since 2015 except in 2022 when it increased it to “around 3.5%”.

RBNZ (BBG): RBNZ’s Orr Says All Measures of Inflation Are Declining

Reserve Bank of New Zealand Governor Adrian Orr speaks at Business Canterbury event Friday in Christchurch: Economy has evolved broadly as expected, “Inflation has declined and is declining further. All measures of inflation, tradable, non-tradable, core, are all coming back down, which is wonderful news”, “Inflation is still too high” but “is on a downward trajectory” and “all measures of inflation expectations have come down. That’s really critical for us”

DATA

EUROZONE DATA (MNI): HICP Headline and Core In Line With Tracking Estimates

• EUROZONE FEB FLASH CORE HICP +3.1% Y/Y
• EUROZONE FEB FLASH CORE HICP +3.1% Y/Y

Eurozone flash inflation for February printed at +2.6% Y/Y (vs +2.5% cons;+2.8% prior) while core (ex-energy/food) was +3.1% Y/Y (vs 2.9% cons; +3.3% prior). Monthly NSA prints were 0.6% for headline and 0.7% for core. The unrounded prints were 2.58% Y/Y, 0.62% M/M for headline inflation, and 3.08% Y/Y for core. The national releases over the past two days have been come in firmer than expected for the core measure, driven by services stickiness. This has led analysts to increase their estimates for the core rate to 3.0-3.2% Y/Y, suggesting the figures out now were largely priced in.

EUROZONE JAN UNEMPLOYMENT RATE 6.4% (MNI)

ITALY FEB FLASH HICP +0.1% M/M, +0.9% Y/Y (MNI)

SPAIN DATA (MNI): Red Sea Disruption Leads to Rise in Delivery Times

• SPAIN FEB MANUFACTURING PMI 51.5 (FCST: 50.0); JAN 49.2

The Spanish February manufacturing PMI was 51.5, above 50 for the first time since March 2023 and the highest reading since June 2022 (vs 49.8 cons, 49.2prior). However, in contrast to the German and French flash prints, Red Sea disruptions "led to the steepest lengthening of delivery times since September 2022". However, competition amongst manufacturers meant the pass-through into output charges was limited - for now. A reminder that the EZ flash PMI release already signalled that the region ex-France and Germany saw a stabilisation of manufacturing output in February.

ITALY DATA (MNI): Manufacturing PMI Highest Since Mar '23

• ITALY FEB MANUFACTURING PMI 48.7 (FCST: 49.1); JAN 48.5

The February Italian manufacturing PMI came in below consensus expectations at 48.7 (49.1 cons, 48.5 prior), in contrast to Spain earlier today. This was nonetheless the highest reading since March 2023 (though the index has remained below 50 since then). Red Sea disruptions were again noted, but seemingly to a lesser extent than in the Spanish survey.

EUROZONE FEB MANUFACTURING PMI 46.5 (FLASH: 46.1); JAN 46.6 (MNI)
GERMANY FEB MANUFACTURING PMI 42.5 (FLASH: 42.3); JAN 45.5 (MNI)
FRANCE FEB MANUFACTURING PMI 47.1 (FLASH: 46.8); JAN 43.1 (MNI)
UK FEB MANUFACTURING PMI 47.5 (FLASH: 47.1); JAN 47.0 (MNI)

GERMANY DATA (MNI): Labour Market Softening Despite Employment Rise

German employment rose further in January at +0.1% M/M (+57k) in seasonal-adjusted terms, according to Destatis. However, the details on the German labour market, which are reported by the federal employment agency, look less positive (although some of these refer to December). The recent increases in employment have largely been driven by part-time employees according to the employment agency press release (in the year to December, part-time employment increased +1.9% Y/Y to 10.53m (+199k) vs +0.4% Y/Y for total employment).

GERMANY DATA (MNI): Weak Start to 2024 for Retail Sales Points to Struggling Consumption

German retail sales were slightly weaker in January than expected at -0.4% M/M (seasonally- and calendar-adjusted, vs +0.5% cons), though the soft outturn partially reflected a base effect from a large upward revision to December (-0.5% prior, revised from -1.6%). The Y/Y print (which is calculated on an ex-auto sales basis) was basically in line at -1.6% Y/Y (-1.7% cons; -3.4%prior, revised from -4.4%). Overall, the data - which are in real terms - suggests that conditions in German retail remain very weak though are not deteriorating rapidly.

SWEDEN (MNI): Manufacturing PMI Below 50 for 19th Consecutive Month

The February Swedish manufacturing PMI rose to 49.0 from 47.1, remaining in contraction for the 19th consecutive month. Even though the manufacturing component in the Economic Tendency Indicator fell in February (to 98.4 from 99.2), both surveys remain in contractionary territory. All sub-components other than planned production were below the 50-handle in February. Production saw the most notable rise to 49.1 from 42.8, while the rise in new orders to 48.5 from 46.5 was driven by domestic orders. The input prices component rose to 47.3 from 45.7.

SWISS JAN RETAIL SALES +0.7% M/M, +0.3% Y/Y (MNI)

CHINA DATA (MNI): China Feb Mfg. PMI Contracts Further on Holiday

• CHINA FEB MANUFACTURING PMI 49.1 VS 49.2 IN JAN

MNI (Beijing) China's manufacturing Purchasing Managers' Index declined by 0.1 points to 49.1 in February, remaining in the contractionary zone below the breakeven 50 mark for the fifth month, amid the traditional off-season due to Chinese New Year holiday, data from the National Bureau of Statistics showed Friday. The production sub-index decelerated by 1.5 points to 49.8 from the previous month, while the new orders sub-index remained flat at 49.0. External demand weakened with the new export orders sub-index dropping by 0.9 points to 46.3.

CHINA DATA (MNI): Caixin Feb Manufacturing PMI Edges Up to 50.9

• CHINA FEB CAIXIN MANUFACTURING PMI 50.9 VS 50.8 IN JAN

MNI (Beijing) China's Caixin manufacturing PMI registered 50.9 in February, up 0.1 points from January, staying in the expansionary zone above the breakeven 50 mark for the fourth month, driven by pro-growth policies, the financial publisher said Friday. Both the production and new orders sub-indices rose within the expansionary zone. The new export orders sub-index standing above 50 hit a one-year high, as surveyed manufacturers said overseas demand for Chinese goods has generally improved with the number of customers and their purchasing power rising last month.

JAPAN DATA (MNI): Unemployment Rate Back to Early 2020 Lows, New Job-To-Applicant Ratio Ticks Up

• JAPAN JAN JOBLESS RATE FALLS TO 2.4% FROM DEC 2.5%

Japan's Jan jobless rate and job-to-applicant ratio were in line with market expectations. The jobless rate printing at 2.4% (which was down from a revised 2.5% in Dec last year). This lows back in the unemployment rate back to early 2020. The job-to-applicant ratio at 1.27 was in line with the prior outcome. The participation rate was 62.6%, versus 62.8% in Dec. The number of employed fell by 30k in the month, while those unemployed rose by 130k.

FOREX: JPY Gives Back Gains, CHF Sinks as Jordan Resigns

• Having been the strongest performing currency across the Thursday session - JPY is giving back the gains headed through Friday morning, with Y150.50 being topped ahead of the NY crossover. Moves build on the solid equity rally into the Thursday close (triggered by a particularly soft MNI Chicago PMI), and support from the 3bps uptick in yields through the European morning.
• For now, the USD/JPY bounce is infitting with the underlying uptrend, which faces fierce resistance at Y150.89 - above which markets may garner the attention of the Japanese authorities and their discomfort with JPY weakness.
• EUR/USD inched higher to touch new session highs of 1.0822 following a 0.1ppts beat on forecast for the Eurozone prelim CPI headline - but gains are short-lived and the rally contained given the track higher for regional inflation releases out over the past ~24 hours. EURUSD remains well below the Feb 22 heigh and resistance clustered around the 50-day EMA - at 1.0834.
• CHF sits alongside the JPY in trading poorly, with markets selling the currency on the unexpected announcement of the departure of President Jordan later this year. The SNB President is set to leave his position early - at the end of September - opening the position for either an outside candidate, or for Vice President Schlegel to step up into the role. Either way, the uptrend in EUR/CHF remains on track, with the cross touching new 2024 highs of 0.9596 today and breaking the 200-dma in the process.
• Focus for the Friday session turns to final US PMI data for February, the ISM manufacturing release as well as the final UMich survey for the latest month.

EGBS: Little Impact From EZ Flash HICP; NYCB Worries Prompt Core FI Bid

A strong move off intraday lows for core FI markets came as headlines related to NYC Bancorp's "material weaknesses" crossed, prompting a safe haven bid for core FI.

• The Eurozone flash February inflation release had little lasting impact on core/semi-core EGBs, with the firmer-than-expected print telegraphed by the national data released over the past two days.
• Upward revisions to the Eurozone manufacturing PMI may have helped cap rallies prior to the NYCB headlines, while Eurozone unemployment was in line with consensus at 6.4%.
• Bunds are flat at 132.65, trading at intraday highs after coming under pressure earlier in the session.
• 10-year periphery spreads to Bunds are a wider as equities come under pressure.
• ECB-dated OIS contracts operate within yesterday's range, with 91bps of rate cuts priced through the remainder of 2024. ECB Holzmann's comments were in line with his hawkish bias.
• The remainder of today's calendar is US centric - with ISM manufacturing highlighting on the data side alongside a number of Fed speakers.

GILTS: Futures Show Above Yesterday's High as NYCB Worry Returns

Gilt futures look through yesterday’s high (98.18).

• Worry surrounding troubled U.S. bank NYCB dominates as pre-market U.S. equity indications are seen and broader equity markets come under pressure.
• This more than counters any impact from UK/European data.
• Futures last +5 at 98.14 (range of 97.42-98.21).
• A fresh move higher would expose the Feb 27/26 highs (98.26/98.53), with the latter representing key short-term resistance.
• Cash gilt yields are 1-2bp higher, light bull steepening seen.
• SONIA futures are flat to +2.0 through the blues.
• BoE-dated OIS shows 66bp of cuts through ’24 after testing 60bp earlier.
• Comments from BoE’s Pill are due this afternoon, although he has spoken on several occasions in recent times.
• Fiscal speculation remains evident ahead of next week’s Budget (expect our full preview early next week).
• Discussions surrounding incoming BoE Deputy Governor Lombardelli also remain evident.

EQUITIES: E-Mini S&P Trading Close to Recent Highs

A bull cycle in Eurostoxx 50 futures remains firmly intact and the contract has again traded higher this week. Moving average studies remain in a bull-mode position, 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 4988.60. The channel is drawn from the Oct 27 low. Initial firm support lies at 4785.90, the 20-day EMA. The trend condition in S&P E-Minis remains bullish and the contract continues to trade closer to its recent highs. Price action continues to highlight the fact that corrections remain shallow - a bullish signal. Support to watch is 5024.54, the 20-day EMA. A clear break of this average would signal potential for a deeper retracement towards 4936.50, the Feb 13 low. A resumption of gains would open vol-band based resistance at 5153.29.

• Japan's NIKKEI closed higher by 744.63 pts or +1.9% at 39910.82 and the TOPIX ended 33.69 pts higher or +1.26% at 2709.42.
• Elsewhere, in China the SHANGHAI closed higher by 11.85 pts or +0.39% at 3027.021 and the HANG SENG ended 78 pts higher or +0.47% at 16589.44.
• Across Europe, Germany's DAX trades higher by 114.17 pts or +0.65% at 17792.56, FTSE 100 higher by 59.52 pts or +0.78% at 7688.78, CAC 40 up 14.78 pts or +0.19% at 7942.74 and Euro Stoxx 50 up 20 pts or +0.41% at 4897.99.
• Dow Jones mini down 15 pts or -0.04% at 39030, S&P 500 mini up 5.75 pts or +0.11% at 5110, NASDAQ mini up 54.25 pts or +0.3% at 18139.

COMMODITIES: Gold Holds Onto Bulk of Thursday's Gains

WTI futures traded higher Wednesday and in the process, the contract delivered a print above key resistance at $79.09, the Jan 29 high. This threatens the recent bearish theme and instead highlights potential for a continuation higher near-term, towards $81.70, a Fibonacci retracement. On the downside, support to watch is at $75.90, the 50-day EMA. A break would instead signal a possible top. Gold has traded higher this week and the yellow metal is holding on to its latest gains. Recent activity has defined a key resistance at $2065.5, Feb 1 high, and a key support at $1984.3, Feb 14 low. They represent important short-term directional triggers. A clear break of the Feb 1 high would highlight a reversal and open $2088.5, the Dec 28 high. For bears, clearance of $1984.3 would expose an important support at $1973.2, the Dec 13 low.

• WTI Crude up $0.85 or +1.09% at $79.08
• Natural Gas up $0.02 or +0.81% at $1.874
• Gold spot up $2.2 or +0.11% at $2046.71
• Copper down $1.9 or -0.49% at $382.85
• Silver down $0.03 or -0.15% at $22.6447
• Platinum down $5.39 or -0.61% at $875.35