MNI US OPEN - Revised Seasonal Factors Add Uncertainty to US CPI Print

NEWS

MNI US CPI PREVIEW: Used Cars Drag Seen Clashing With Firmer Non-Housing Services

Released at 0830ET, consensus puts core CPI inflation at 0.3% M/M in January with mild risk seen to the downside, for a very similar reading to December after Friday’s annual revisions. Those revised seasonal factors plus new weights aren’t seen having a large impact in January but nevertheless add to some uncertainty. A broad theme is that service inflation could have strengthened with an offset from a large drag from used cars.

US/ISRAEL (BBG): Biden Urges at Least Six-Week Pause in Israel-Hamas Conflict

US President Joe Biden said he’s pushing for a six-week pause in fighting between Israel and Hamas to allow for the release of hostages, saying that could lay the groundwork for broader peace. Such a pause “would bring an immediate and sustained period of calm into Gaza for at least six weeks, which we could then take the time to build something more enduring,” Biden said Monday following a meeting with Jordan’s King Abdullah II at the White House.

US (BBG): BofA Survey Shows Investors Are All In on US Tech Stock Rally

Investors are going “all in” on US technology stocks as they turn the most optimistic about global growth in two years, according to a survey by Bank of America Corp. Allocation to tech is now at the highest since August 2020, the global survey of fund managers showed. Exposure to US equities more broadly has also risen, while easing macro risks prompted investors to trim cash levels by 55 basis points from January.

CHINA (BBG): MSCI Cuts Swath of China Stocks From Indexes as Markets Sink

MSCI Inc. is cutting dozens of Chinese companies from its global benchmarks following a market rout that’s erased trillions of dollars in value from the nation’s stocks. The index provider is removing 66 companies from its MSCI China Index in its latest quarterly review, the highest tally in at least two years. The changes, effective as of the close on Feb. 29, also apply to the MSCI All Country World Index. Stocks to be cut include property developers Gemdale Corp. and Greentown China Holdings Ltd., as well as China Southern Airlines Co. and Ping An Healthcare and Technology Co.

OIL (BBG): IEA Expects Comfortable Oil Markets and Moderate Prices in 2024

Global oil markets should remain “comfortable” this year as new supplies satisfy demand and keep prices in check, according to the International Energy Agency. World consumption will increase by 1.2 million to 1.3 million barrels a day in 2024, a “significantly weaker” pace than last year as economic growth slows in China and elsewhere, Executive Director Fatih Birol said. This will be easily matched by swelling production from the Americas, predominantly the US, Canada, Brazil and Guyana.

RBA (MNI): Services Inflation Remains High - RBA's Kohler

Australian services price inflation remains high and broadly based, despite goods-price falls, and will continue to add pressure while the level of demand exceeds supply, said Marion Kohler, head of economic analysis department at the Reserve Bank of Australia. Speaking at an industry conference, Kohler noted firms continued to face pressure from higher labour and non-labour costs like professional services, logistics and insurance. “We are forecasting that services inflation will decline from here, but only gradually as demand moves into better balance with supply and domestic cost pressures moderate.”

INDIA (BBG): India Locks Down Capital as Farmers Mass Over Crop Prices

Police in Delhi and surrounding states have set up metal barriers, concrete barricades and barbed wire to block city access roads and halt thousands of farmers marching to demand guaranteed crop prices and loan waivers, three years after anti-reform demonstrations that choked the Indian capital for months. Footage broadcast on national television showed tear gas being used to disperse protesters in the state of Haryana, several hours from the capital, as farmers travel in from surrounding regions on tractors. Other images showed demonstrators facing off against police stationed behind fortified barriers.

DATA

UK DATA (MNI): Resillient UK Labour Market Beats BOE Expectation

• UK DEC AVE WEEKLY EARNINGS +5.8% YY
• UK DEC AVE WEEKLY EARNINGS EX-BONUS +6.2% YY
• UK JAN CLAIMANT RATE +4%
• UK JAN CLAIMANT CHG +14100

Employment growth in the UK has slowed in recent months, the Office for National Statistics said Tuesday, but overall, the labour market remains stronger than forecast by the Bank of England. The data follows the release of the rejigged Labour Force Survey publsihed last week, and confirms the jobs market could be tighter than previously assumed and with unemployment still below 4% and wage growth decelerating at a slower pace than expected.

GERMANY ZEW FEB ECONOMIC EXPECTATIONS 19.9 (MNI)
GERMANY FEB ZEW CURRENT CONDITIONS -81.7 (MNI)

SWITZERLAND DATA (MNI): Soft CPI With Disinflation in Housing and Energy Category

• SWISS JAN CPI +0.2% M/M, +1.3% Y/Y

Swiss December CPI came in clearly softer than expected at +1.3% Y/Y (vs +1.7% cons and prior) and +0.2% M/M (vs +0.6% cons; 0.0% prior). The core reading came in at +1.2% Y/Y (vs +1.6% cons; +1.5% prior). Looking at individual components, both goods and services prices inflated on a monthly basis, coming in at +0.1% M/M (-0.5% prior) and +0.2% M/M (+0.4% prior), respectively.

SWEDEN DATA (MNI): PES Unemployment Claims Rate Steady, LFS Data on Friday

The PES unemployment rate (seasonally adjusted registered unemployment claims rate tracked by the Swedish Public Employment Service) was broadly steady in January, printing at 6.62% (vs 6.59% prior). The LFS unemployment rate - which the Riksbank forecasts in its MPR - is due on Friday, and is expected at 8.2%.

JAPAN DATA (MNI): Japan Jan CGPI Rises 0.2% Y/Y vs. Dec +0.2%

• JAPAN JAN CORP GOODS PRICE INDEX +0.2% Y/Y; DEC REV +0.2%
• JAPAN JAN CORP GOODS PRICE INDEX 0.0% M/M; DEC UNREV +0.3%

Japan's corporate goods price index rose 0.2% y/y in January, its 35th straight rise and unchanged from December’s level, data released by the Bank of Japan showed on Tuesday. The data illustrated the pass-through of cost increases in the downstream continued but the pace slowed, indicating that the y/y rise of the consumer price index will slow in the coming months as the BOJ expected. Prices for beverages and foods rose 4.4% y/y in January, slightly slowing from December’s 4.5%.

AUSTRALIA DATA (MNI): NAB Survey Points to Slowing Growth But Prices/Costs Sticky

The January NAB business survey showed a further easing in conditions to 6 from an upwardly-revised 8. This has now moved just below the series average, the first time in two years. Confidence remains around breakeven at +1 up from 0, below the historical average where it has been since Q3 2022. The data is inline with the RBA's subdued growth expectations for H1 2024 but while the price/cost pressures are off their peaks they have stalled.

AUSTRALIA DATA (MNI): Easing Price Pressures & On Hold RBA Make Consumers Feel Better

Westpac consumer confidence jumped 6.2% to 86.0 in February to its highest since June 2022, the month following the first rate hike this cycle. Sentiment was boosted by lower-than-expected Q4 inflation reported at the end of January and the RBA being on hold again at its February meeting. Households remain depressed but are gradually feeling more positive following the trough a year ago.

FOREX: GBP/CHF Surges on Diverging Price Pressures

• GBP is comfortably the strongest performer in G10, rising against all others on the back of the better-than-expected wages data from the UK this morning. Average weekly earnings rose at a clip of 5.8% for the 3m into December vs. Exp. 5.6%.
• The release boosted Gilt yields across the curve, trimming the implied pricing for the BoE this year to ~77bps, from close to 85bps ahead of the release. Resultingly, GBP/USD has been bid up to 1.2656 - just above yesterday's highs to clear to the best levels since the bumper nonfarm payrolls release at the beginning of the month. The 50-dma cuts across as first resistance at 1.2677, the 50-dma today.
• CHF is the poorest performer so far, slipping against all others as CPI came in soft relative to expectations (+1.3% Y/Y vs Exp. +1.7%). The release prompted an extension of recent EUR/CHF gains, putting the cross well through the mid-January highs and within range of key resistance at the 100-dma of 0.9496.
• The USD is faring better, but price action is generally muted ahead of the US inflation release. As such, directional parameters for the USD Index are unchanged: 104.251 is the first upside intraday level ahead of 104.604, while 103.895 should act as first support.
• Focus going forward is on the US CPI release for January, at which markets expect headline Y/Y CPI to slip to 2.9% from 3.4% previously, and to 3.7% from 3.9% for the core metric. Fed's Goolsbee will be the first post-CPI Fed speaker, followed by Barr later in the session. ECB's Cipollone & Nagel are also due as well as another appearance from BoE's Bailey, who also spoke after-market on Monday.

BONDS: Recover Following UK Data; US CPI Next

Core/semi EGBs have recovered from intraday lows, with Bunds +2 ticks at 133.47 and OAT futures flat at 128.11. Gilts remain lower on the day (-15 ticks at 97.53), some 10 ticks above the day's worst levels.

• The initial weakness came as UK wages data printed firmer than expected, with a lower-than-expected unemployment rate also adding to the pressure. A reminder that January CPI is due tomorrow at 0700GMT/0800CET.
• The moves away from intraday lows came in spite of a heavy EGB supply slate from Italy and Germany and an uptick in Brent crude futures this morning. One explanation may be the weakness in European equities, with participants taking profit after a strong run higher in recent weeks and putting money to work elsewhere.
• The German ZEW saw mixed results, with the current situation component weaker than expected and the expectations component stronger. Bunds have drifted a few ticks lower on the latter's outperformance.
• The German and French cash curves have twist flattened, while UK yields are 3.0 - 4.0bps higher, with 5Y tenors under the most pressure.
• Periphery spreads are generally tighter to Bunds. The 10-year BTP/Bund spread is 0.9bps tighter at 153.8bps in spite of the equity market weakness, though the removal of hedging-related pressure will have promoted some compression in recent trade.
• The remainder of today's regional docket is light, with cross-market focus squarely on the US CPI print at 1330GMT/1430CET.

EQUITIES: Fresh Cycle Highs in Eurostoxx 50 Confirm Extension of Uptrend

Eurostoxx 50 futures traded higher again Monday delivering another fresh cycle high that confirms an extension of the current uptrend. This reinforces bullish conditions and the importance of the recent break of a key resistance at the Dec 14 high of 4634.00. The clear breach of the 4700.00 handle paves the way for a climb towards 4788.10, a Fibonacci projection. Initial firm support lies at 4641.70, the 20-day EMA. The trend condition in S&P E-Minis is unchanged and remains bullish - recent gains reinforce current conditions. The contract traded to a fresh cycle high again on Monday, confirming a resumption of the uptrend. Recent corrections have been shallow and this continues to highlight a strong uptrend. The focus is on the 5100.00 handle. On the downside, initial key short-term support has been defined at 4866.00, the Jan 31 low.

• Japan's NIKKEI closed higher by 1066.55 pts or +2.89% at 37963.97 and the TOPIX ended 54.15 pts higher or +2.12% at 2612.03.
• Across Europe, Germany's DAX trades lower by 106.89 pts or -0.63% at 16924.97, FTSE 100 lower by 9 pts or -0.12% at 7563.61, CAC 40 down 25.36 pts or -0.33% at 7664.12 and Euro Stoxx 50 down 34.85 pts or -0.73% at 4711.35.
• Dow Jones mini down 86 pts or -0.22% at 38804, S&P 500 mini down 16.75 pts or -0.33% at 5025.25, NASDAQ mini down 79.25 pts or -0.44% at 17890.75.

COMMODITIES: Corrective Recovery in WTI Futures Still in Play

The recent recovery in WTI futures while still in play, appears to be a correction - for now. Key short-term resistance has been defined at $79.29, the Jan 29 high. Clearance of this level would be a bullish development. On the downside, support to watch lies at $71.41, the Feb 5 low. A break of this level would reinstate the recent bearish theme and pave the way for a move towards $69.56, the Jan 3 low. Gold is unchanged and continues to trade above the Jan 17 low of $2001.9. Recent short-term gains improved a bullish condition and a resumption of the bull cycle would signal scope for a climb towards $2088.5, the Dec 28 high and a key resistance. For bears, a stronger reversal lower would instead refocus attention on $2001.9, where a break is required to reinstate a bearish theme.

• WTI Crude up $0.43 or +0.56% at $77.09
• Natural Gas up $0.02 or +0.96% at $1.782
• Gold spot up $6.15 or +0.3% at $2025.52
• Copper up $1.95 or +0.52% at $374.15
• Silver up $0.21 or +0.94% at $22.884
• Platinum up $6 or +0.67% at $897.88