MNI US OPEN - PBoC Act to Shore Up Liquidity With RRR Tweak
- ECB’S KAZIMIR SAYS RATES WILL STILL NEED TO RISE IN DUE COURSE
- XI TO VISIT RUSSIA NEXT WEEK
- FIRST REPUBLIC SHARES RESUME SLIDE AS INVESTORS ASSESS AID
- PBOC TO CUT RRR BY 25BPS
- SWEDISH LABOUR MARKET DATA SIGNALS CONTINUED ROBUSTNESS
Figure 1: Fed Balance Sheet Bounces as Banks Rush to Backstops
ECB (BBG): ECB’s Kazimir Says Rates Will Still Need to Rise in Due Course
European Central Bank Governing Council member Peter Kazimir said current events in financial markets events haven’t altered his view that interest rates will need to keep rising in due course. “The 50 basis-point increase was inevitable and necessary,” the Slovak central-bank governor said in a statement published on its website on Friday, the day after the latest hike was announced. “The situation is delicate, but we are not yet at the finish line.”
ECB (BBG): Villeroy Says ECB Sent Strong Confidence Signal With Hike
The European Central Bank’s decision to stick to its 50 basis-point interest-rate increase on Thursday despite recent turmoil on financial markets sends a strong signal of confidence, Governing Council member Francois Villeroy de Galhau said. “The priority is fighting inflation, and we have one commitment, which is bringing inflation back toward 2%,” Villeroy said on BFM Business television.
ECB (BBG): ECB’s Muller Wouldn’t Want to Predict Next Rate Decisions
European Central Bank Governing Council member Madis Muller said he wouldn’t like to predict upcoming interest-rate decisions as recent problems with Silicon Valley Bank and Credit Suisse have raised uncertainty. Euro-area banks haven’t taken the same kind of risks as SVB and there have been problems for years at Credit Suisse, the hawkish Estonian central bank chief said Friday.
ECB (MNI): ECB Hikes 'Disastrous' For Italy, Europe - Salvini
The European Central Bank's decision to raise interest rates 50 basis points Thursday added to the current hiking cycle is “disastrous for Italy and Europe,” Italian deputy prime minister and Transport minister Matteo Salvini said in a radio interview on Friday.
CHINA/RUSSIA (MNI): Xi to Visit Russia on March 20-22
Wires report that Chinese President Xi Jinping will visit Russia next week, on March 20-22. This is in line with recent speculation, with press reports suggesting that Xi could call Ukrainian President Zelensky after his summit with Putin. Russia's state-owned TASS news agency notes that Putin and Xi are expected to sign a number of important documents.
EQUITIES (BBG): First Republic Shares Resume Slide as Investors Assess Aid
First Republic Bank shares fell again on Friday, set for their worst week ever, as sentiment around the lender remained fragile even after proposals for $30 billion of aid from Wall Street’s biggest banks. Shares in First Republic fell as much as 15% in US premarket trading, underperforming fellow regional banks, having already fallen by a record 60% so far this week.
GERMANY (MNI): China Strategy Divisions as One Min Visits Taiwan, Another to Beijing
FT reports that German Education and Research Minister Bettina Stark-Watzinger is set to visit Taipei next week, the first to Taiwan by a German minister in 26 years. The story also reports that according to its sources, Foreign Minister Annalena Baerbock is set to visit Beijing in April or May. The two separate visits highlight the divisions evident within the German gov't as to its China strategy.
JAPAN (BBG): BOJ, Japan Officials to Meet on Markets After SVB Collapse
Japanese officials from the central bank, finance ministry and financial regulator plan to meet Friday afternoon to discuss international markets following the recent turmoil in the global banking industry. While senior government officials have so far played down the likely impact of the failure of regional US banks including Silicon Valley Bank, the potential meeting points to concern over the fallout of recent financial-sector turbulence that has also hit Credit Suisse Group AG.
CHINA (MNI): PBoC to Cut Reserve Requirement Ratio by 25bps, Effective Mar 27
China's PBoC are to cut the reserve requirement ratio by 25bps to 10.75%, effective March 27th. It had been a topic of conversation for governor Yi Gang around a week or so ago, where he made comments in a media briefing stating that "a reduction in the reserve requirement ratio would be an effective way to inject liquidity" However he also suggested that there was limited room for policy rate cuts and the possibility of a lower RRR depending on the economic outlook.
CHINA (MNI): LPR On Hold Amid Rebound; Alert to SVB Fallout
China’s reference lending rate is expected to remain steady as the ongoing recovery keeps the central bank on the sideline with ample tools to boost growth if needed, while also monitoring any impact on the yuan or cross-border capital flows from the collapse of Silicon Valley Bank, economists and analysts said.
CHINA (MNI): Wider Yuan Use Needs More Assets, Offshore Hubs
A former People’s Bank of China deputy governor said further opening of China’s financial markets and the creation of more offshore yuan hubs were needed to attract central banks and foreign investors to hold yuan-denominated assets and grow the international use of the currency.
SWEDEN DATA (MNI): Feb Labour Market Data Signals Continued Robustness
- SWEDEN FEB UNEMPLOYMENT RATE SA 7.6% (FCST 7.3%); JAN 7.3%
Despite the upside surprise of a 0.3pp uptick in Swedish SA unemployment to 7.6%, the February report details continued labour-market robustness. Long-term unemployment fell further, and seasonally adjusted and smoothed data signalled further increases in the employment rate (+0.3pp to 68.2%), labour force participation (+0.5pp to 74.2%) and hours worked.
JAPAN DATA (MNI): Japan's Household Financial Assets Hit Record High
The balance of financial assets held by Japanese households stood at a record high of JPY2,023 trillion at the end of December, climbing 0.4% y/y and marking the 11th straight quarterly rise, preliminary fund circulation data released by the Bank of Japan on Friday showed.
RATINGS: Friday’s Sovereign Rating Slate
Sovereign rating reviews of note slated for after hours on Friday include:
- Fitch on Turkey (current rating: B; Outlook Negative)
- Moody’s on Greece (current rating: Ba3; Outlook Stable) & Luxembourg (current rating: Aaa; Outlook Stable)
- S&P on Belgium (current rating: AA; Outlook Stable), Croatia (current rating: BBB+; Outlook Stable) & Spain (current rating: A; Outlook Stable)
- DBRS Morningstar on Latvia (current rating: A, Stable Trend) & the Netherlands (current rating: AAA, Stable Trend)
FOREX: CNH Edges Off Highs as PBoC Look to Shore Up Liquidity
- The Chinese currency trades softer after the PBoC announced a 25bps cut to the reserve requirement ratio, effective March 27th. While policy action was expected, the decision may be coming sooner-than-expected, as Chinese authorities look to shore up banking sector liquidity given the recent spell of global uncertainty.
- Spot USD/CNH trimmed losses on the headline, with bears looking for a break below the 50-DMA at CNH6.8375 after piercing that moving average but failing to close below it on Mar 13. USD/CNY sits -127 pips at CNY6.8853 and bears would be pleased by a move through the 50-DMA, which intersects at CNY6.8438. Below there we have a key trendline which capped gains in December and then turned into a support this year, it kicks in at CNY6.8242.
- The greenback is weaker, extending the recovery in the major pairs off yesterday's lows, as the risk drop takes a breather and allows equities to hover close to the week's best levels.
- Elsewhere, NOK trades well, with USD/NOK over 1% lower on the day amid a stabilising oil price and local rate re-pricing. Prices are still some way off testing the next key support at 10.5105, the Wednesday low - and slippage here would open 10.4563, the 38.2% Fib for the Jan - Mar upleg. Norges Bank pricing took a knock late last week/early this week alongside the global rate re-pricing, but has recovered off lows, with the 3x6 NOK FRA clearing 3.50% today for the first time since late November.
- Focus Friday turns to final revisions for February Eurozone CPI and the prelim reading for the Uni of Michigan sentiment survey.
BONDS: Gilts Lead Early Gains With ECB Hawks Eyeing Further Hikes
Global curves are trading mixed, with the UK outperforming overall in a modest bull steepening move, with US Tsys bull flattening and Germany's twist flattening.
- It's been fairly quiet on the banking sector risk front for the first time this week, with most attention in the European morning on post-ECB communications.
- We've heard from multiple hawks (Simkus, Kazimir, Muller) who pointed to potential for further tightening ahead, as well as the more centrist Villeroy who said yesterday's 50bp raise sent a "signal of confidence".
- Periphery EGB spreads continue to tighten post-ECB, amid a constructive morning for equities.
- In a mild surprise helping lend a modest tailwind to global rates, China's PBOC announced a cut in banks' Reserve Requirement Ratio.
- A busy week of US data concludes with Industrial Production and the March prelim UMichigan survey.
- Jun US 10-Yr futures (TY) up 8.5/32 at 114-14.5 (L: 114-01.5 / H: 114-21)
- Jun Bund futures (RX) down 31 ticks at 136.24 (L: 135.76 / H: 136.68)
- Jun Gilt futures (G) down 17 ticks at 104.91 (L: 104.31 / H: 105)
- Italy / German 10-Yr spread 3.9bps tighter at 185.9bps
EQUITIES: E-Mini S&P Trade Above $4000 Despite Bearish Technical Conditions
The Eurostoxx 50 futures outlook remains bearish following recent weakness and Wednesday’s strong sell-off reinforces the current bear cycle. Short-term gains are considered corrective. The break of the 4000.00 handle signals scope for weakness towards 3865.00, the Jan 4 low and further out towards the 3800.00 handle. Initial resistance is seen at 4143.60, the 20-day EMA. Key resistance has been defined at 4268.00, the Mar 6 high. The trend condition in S&P E-Minis remains bearish and recent short-term gains are considered corrective. Price recently cleared a 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 4030.01, the 50-day EMA.
- Japan's NIKKEI closed higher by 323.18 pts or +1.2% at 27333.79 and the TOPIX ended 22.32 pts higher or +1.15% at 1959.42.
- Elsewhere, in China the SHANGHAI closed higher by 23.655 pts or +0.73% at 3250.546 and the HANG SENG ended 314.68 pts higher or +1.64% at 19518.59.
- Across Europe, Germany's DAX trades higher by 100.54 pts or +0.67% at 15072.79, FTSE 100 higher by 69.99 pts or +0.94% at 7482.01, CAC 40 up 35.46 pts or +0.5% at 7063.11 and Euro Stoxx 50 up 34.4 pts or +0.84% at 4152.13.
- Dow Jones mini up 12 pts or +0.04% at 32269, S&P 500 mini up 5 pts or +0.13% at 3965, NASDAQ mini up 8.25 pts or +0.07% at 12580.75.
COMMODITIES: Gold Trades Close to Recent Highs, Targets $1959.7 Feb 2 High
WTI futures remain vulnerable. Wednesday’s move lower resulted in the break of key support at $70.86, the Dec 9 low. The breach confirms a resumption of the medium-term downtrend and reinforces current bearish conditions. Note too that price has also cleared the psychological $70.00 handle. Attention is on $65.60, the Dec 3 2021 low. Initial resistance is at $72.56, Wednesday’s high. Gold remains bullish and the metal is trading at its recent highs. Resistance at $1858.3, the Mar 6 high, has recently been cleared and the latest rally signals scope for an extension towards $1959.7, the Feb 2 high and a key near-term resistance. On the downside, initial firm support is seen at $1854.6, 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 $0.56 or +0.82% at $68.78
- Natural Gas down $0.03 or -0.99% at $2.496
- Gold spot up $12.5 or +0.65% at $1931.68
- Copper up $7.75 or +2.01% at $393.95
- Silver up $0.17 or +0.77% at $21.8631
- Platinum up $12.3 or +1.26% at $988.05
|17/03/2023||0930/0930||**||UK||Bank of England/Ipsos Inflation Attitudes Survey|
|17/03/2023||1230/0830||*||CA||International Canadian Transaction in Securities|
|17/03/2023||1230/0830||*||CA||Industrial Product and Raw Material Price Index|
|17/03/2023||1400/1000||***||US||University of Michigan Sentiment Index (p)|
|20/03/2023||0730/0730||UK||DMO to Confirm Gilts on Offer at 4/5 April Auctions|
|20/03/2023||-||UK||DMO Quarterly Consultation with GEMMs / Investors|
|20/03/2023||1400/1500||EU||ECB Lagarde Intro at ECON Hearing|
|20/03/2023||1530/1130||*||US||US Treasury Auction Result for 13 Week Bill|
|20/03/2023||1530/1130||*||US||US Treasury Auction Result for 26 Week Bill|
|20/03/2023||1600/1700||EU||ECB Lagarde Intro as ESRB Chair at ECON|