MNI US OPEN - Riksbank Boost SEK With Need for More Tightening

NEWS

RIKSBANK (MNI): Riksbank Hikes 50 bps, Sees At Least One More Hike

The Riksbank delivered its expected 50 basis point hike at its February meeting, lifting the policy rate to 3.0% and made clear that it would likely hike at least once more. The central bank's 's Executive Board raised the projected policy peak to 3.3%.from close to 3.0% and the board stated that "the policy rate will probably be raised further during the spring," which points to a 25bps hike at its next policy meeting in late April. We flagged government bond sales as a risk in our preview but our based case thought it wouldn't happen until later in the year. The Riksbank has announced these will begin in April. This was not expected by the market.

EU (MNI): EUCO Gets Underway as Foreign Policy Chief Promises More Military Aid for Ukraine

The special European Council summit of member state leaders is getting underway in Brussels, with Ukrainian President Volodymyr Zelenskyy set to be in attendance following his visits to London and Paris on 8 Feb.

EU (MNI): 'Inappropriate' For Zelenskyy to Visit Paris Ahead of EUCO - Italian PM

Wires reporting comments from Italian Prime Minister Giorgia Meloni at the start of the special EUCO summit in Brussels. She says that it is 'inappropriate' for Ukrainian President Volodymyr Zelenskyy to have visited Paris last night for talks with French President Emmanuel Macron and German Chancellor Olaf Scholz, adding that Europe should adopt a unitary approach.

BOE (MNI): Haskel Still Sees Upside Risks to Inflation

Haskel said he "considered seriously an increase of 100bps" in the November meeting. In December he "also considered a stronger increase of 75bps". Regarding his February vote he doesn't say he considered anything other than 50bp. “Economic theory suggests that uncertainty around the persistence of inflation should be met with more forceful action, and so I shall remain alert to indications that inflation is more persistent than we expected, and act forcefully if necessary", he said.

FRANCE (BBG): ECB’s Villeroy Sees French Inflation Easing From Mid-Year

Bank of France Governor Francois Villeroy de Galhau said inflation in the euro area’s second-largest economy should peak in the first half and start to ease from the middle of the year. The peak could even come before June, he told France 2 television in an interview on Thursday.

ITALY (BBG): Italy Seeks Flexibility on EU Funds in Compromise on State Aid

Italy is ready to support relaxing European Union state aid rules to boost investments in green technologies in exchange for more flexibility on how to use EU recovery funds, Finance Minister Giancarlo Giorgetti told Sole 24 Ore. The request was echoed by Premier Giorgia Meloni, who — in a separate interview with the paper — asked for “as much flexibility as possible.”

JAPAN (MNI): Flexible CPI Horizon Key to YCC Tweaks - Yamamoto

The Bank of Japan's new governor must change the timeframe of the 2% inflation target as a key step towards reviewing its yield curve control policy that has produced negative side-effects like impaired bond market functioning, former BOJ executive director Kenzo Yamamoto told MNI.

NORTH KOREA (MNI): New Missiles on Display at North Korea's Military Parade

North Korean state media confirmed that Kim Jong-un's regime staged a large military parade last night to mark the 75th anniversary of the founding of its armed forces. The official Korean Central News Agency (KCNA) described the intercontinental ballistic missiles (ICBMs) showcased yesterday as representing Pyongyang's "maximum nuclear attack capabilities."

BANKS (BBG): Abu Dhabi’s FAB Is Quietly Readying Another Run at StanChart

First Abu Dhabi Bank PJSC is pressing ahead with a potential offer for Standard Chartered Plc, after a move to put earlier takeover plans on hold didn’t halt its ambitions to become a global financial powerhouse. FAB — which is worth about twice as much as Standard Chartered — is exploring an all-cash bid of in the range of $30 billion to $35 billion.

DATA

GERMANY JAN FLASH HICP +9.2% Y/Y (FCST +10.0%) (MNI)
GERMANY JAN FLASH HICP +0.5% M/M (FCST +1.3%) (MNI)
GERMANY JAN FLASH CPI +8.7% Y/Y (FCST +8.9%) (MNI)
GERMANY JAN FLASH CPI +1.0% M/M (FCST +1.0%) (MNI)

AUSTRALIA DATA (MNI): SEEK Job Ads Point To Continued Strong Labour Demand

NAB-SEEK job ads rose 2.8% m/m in January, the first rise since May 2022. Although off of the outsized May peak, they remain elevated and are 39.3% above December 2019 (pre-pandemic). The January rise may indicate that ads have normalised and are now stabilising at high levels but that labour demand remains strong. While the increase in applicants per ad may help to reduce pressure on wages, the SEEK information and bank transaction data showing solid services spending are likely to keep the RBA hiking for now.

NEW ZEALAND DATA (MNI): Rise in SEEK Job Ads Likely a Blip but Labour Market Still Tight

BNZ/SEEK job ads rose 2% m/m in January, the first rise since August 2022. They are down 13.3% y/y and 18.1% off of their May peak but remain elevated compared to most of the 2000s signalling that labour demand remains strong. BNZ notes that the trend is still downwards and that January's rise is not significant given other indicators are pointing to a slowdown in the economy following 400bp of tightening and more expected.

FOREX: SEK Surges as Riksbank Eye More Tightening

• Having suffered alongside the NOK YTD, SEK has sprung to the top-end of the G10 leaderboard following the Riksbank rate decision, which not only saw a 50bps rate hike, but projected further tightening in the Spring and committed to unwinding their balance sheet from April onwards. This has resulted in the largest one-day downtick for EUR/SEK since March last year, with the cross fast approaching the next medium-term support at 11.1411, the 50-dma. The NOK is the second best performer in G10 in sympathy, putting Scandi currencies above all others.
• The greenback is backtracking, putting the USD Index off any imminent challenge of the 103.525 resistance. This puts the USD at the week's lowest levels ahead of the NY crossover, although the early Feb lows are still a way off for now.
• The EUR is more mixed following the delayed release for German January CPI - which fell short of forecast. EUR/GBP is at the lowest level since February 1st, with EMA supports next up, 0.8846 marks the 20-day EMA, while 0.8796 marks the 50-day EMA.
• Weekly US jobless claims are the data highlights Thursday, with the Banxico rate decision also on the docket. Speakers of not include ECB's Nagel, de Cos and de Guidnos - with no Fed members scheduled until Friday.

BONDS: Govies and Equities Are Trending Higher

• Govies have extended gains this morning, with the initial push higher provided by the lower German inflation data.
• Futures market saw some upside continuation, helped by the bid in Equities.
• Risk On tone, has been helped by German inflation, Astrazeneca beat and FAB/Stanchart takeover talks.
• Resistance in Bund is at 137.03, printed at 136.94 high at the time of typing.
• Peripheral spread are mixed, Italy is 1.1bps tighter, while the Greek/Bund spread is 2.8bps wider.
• Gilt trades inline with EGBs and similar price action in Rate markets, with the SONIA strip trading at the upper end of its range.
• BoE Bailey, Pill, Tenreyro, Haskel are at the Treasury committee, but so far, nothing really new from Bailey's testimony, he has reiterated what he has said previoulsy.
• There's been some early divergence between Treasuries and Europe, given that EGBs have taken their cue from German data and European Equity news.
• The Tnote/Bund spread is 7bps wider, but trades within February's range.
• Looking ahead, there's no Tier 1 data, with the only notable release being the US IJC, but unlikely to really move the needle.
• ECB Nagel, de Cos and Guindos are still scheduled to speak later today.

EQUITIES: Eurostoxx Futures Print Fresh Cycle High at European Open

The EUROSTOXX 50 futures trend needle is pointing north. Resistance at 4206.00, the Jan 18 high, has been breached. The break confirms a resumption of the current uptrend and paves the way for gains towards 4269.50, a Fibonacci projection. Note that the trend remains overbought. A pullback, if seen, would represent a healthy correction. Key support to watch lies at 4097.00, the Jan 19 low. S&P E-Minis are consolidating. The trend condition is bullish. The contract traded higher last week and confirmed a resumption of the bull cycle that started Dec 22. A key resistance and a bull trigger at 4180.00, Dec 13 high, has been pierced. A clear break would confirm a resumption of a broader uptrend and open 4250.00, the Aug 26 2022 high. Initial firm support to watch lies at 4002.94, Jan 31 low. A pullback would be considered corrective.

• Japan's NIKKEI closed lower by 22.11 pts or -0.08% at 27584.35 and the TOPIX ended 1.03 pts higher or +0.05% at 1985.
• Elsewhere, in China the SHANGHAI closed higher by 38.277 pts or +1.18% at 3270.383 and the HANG SENG ended 340.84 pts higher or +1.6% at 21624.36.
• Across Europe, Germany's DAX trades higher by 166.18 pts or +1.08% at 15611.21, FTSE 100 higher by 44.05 pts or +0.56% at 7930.77, CAC 40 up 75.75 pts or +1.06% at 7206.35 and Euro Stoxx 50 up 43.2 pts or +1.03% at 4260.43.
• Dow Jones mini up 214 pts or +0.63% at 34213, S&P 500 mini up 27.75 pts or +0.67% at 4158.75, NASDAQ mini up 107.75 pts or +0.86% at 12656.

COMMODITIES: WTI Futures Hold on to Week's Gains, Piercing 50-Day EMA

WTI futures are holding on to this week’s gains. The contract has pierced resistance at the 50-day EMA - at $78.34. A clear break of this hurdle would strengthen this week’s recovery and open $80.22, a Fibonacci retracement. Clearance of $80.22 would expose the key resistance at $82.66, the Jan 18 high. On the downside, a break of $72.25, the Feb 6 low, would reinstate a bearish theme. Trend conditions in Gold are bearish for now, and the yellow metal remains in a corrective cycle. This follows the strong sell-off on Feb 2 / 3 and sights are on the 50-day EMA, at $1855.2. The average represents a key support and if breached, would strengthen a bearish case and suggest scope for a deeper pullback. On the upside, key resistance and the bull trigger, is at $1959.7, the Feb 2 high.

• WTI Crude up $0.22 or +0.28% at $78.68
• Natural Gas down $0.01 or -0.54% at $2.391
• Gold spot up $8.82 or +0.47% at $1884.05
• Copper up $5.6 or +1.39% at $409.35
• Silver up $0.18 or +0.82% at $22.5014
• Platinum up $11.82 or +1.21% at $986.6