Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY:
- E.U.'S VON DER LEYEN: "MISTAKES MADE" ON ARTICLE 16; "LESSONS TO BE LEARNED" ABOUT VACCINE
- GERMANY PLANS TO EXTEND LOCKDOWN UNTIL MARCH 14
- RIKSBANK HOLDS RATES AND QE POLICY AS EXPECTED
- SLOWER ECONOMY TO DENT B.O.J. POLICY TWEAK PLANS (MNI INSIGHT)
- RBNZ SHOULD HIKE RATES, EX-CHAIR GRIMES SAYS (MNI EXCLUSIVE INTERVIEW)
Fig.1: US Stocks Keep Gaining
BBG, MNI
NEWS:
E.U.: Speaking to the European Parliament plenary session, Commission President Ursula von der Leyen says that "Mistakes were made on the process leading up to the decision [on Article 16]. But in the end we got it right. We are fully committed to protecting peace in Northern Ireland."
- Other VdL comments: "The EU was late in authorizing, and was too confident in believing supply would be delivered but the plan to negotiate on behalf of all 27 was correct. [...] We made a choice not to cut take shortcuts when it comes to injecting a biologically active substance into a person who's in good health. But there are lessons to be learned about more swift process of authorisation. Lessons to be learned about vaccine production too. We were too concerned with development. But production is complex. Vaccines contain 400 ingredients We will set up a task force to increase production under Thierry Breton.[...] Industry needs to catch up with science. We don't intend to restrict vaccines of companies serving their contracts with the EU, and there are exemptions. [...] We'll need to adapt EU regulations for future variants."
- The Article 16 incident saw a hard border created for a short period of time on the island of Ireland at the behest of the Commission in order to stop the export of COVID-19 vaccines from the EU to the UK, sparking outrage in Belfast, Dublin, and London.
GERMANY (BBG/TAGESSPIEGEL): A draft resolution for today's meeting between federal and state leaders declares lockdown measures will be extended until March 14, Tagesspiegel reports, citing an internal government memo. Opening of schools and daycare centers should be prioritized when relaxing current measures, according to resolution. Hair salons to be allowed to reopen from March 1 under strict hygiene specifications, Funke media group reports, citing the draft resolution.
RIKSBANK (BBG): Sweden's central bank said the severity of the current crisis means it will take years before inflation is even close to its target, requiring continued "extensive" monetary support. The Stockholm-based Riksbank kept its benchmark interest rate at zero, as expected, and maintained its quantitative easing program. "To facilitate the recovery and help inflation rise towards the target, monetary policy needs to remain expansionary," it said in a statement on Wednesday.
U.K. (BBG): U.K. Prime Minister Boris Johnson will make a statement on Feb. 22 regarding ending the country's coronavirus lockdown, Transport Secretary Grant Shapps tells Sky News.Shapps says: "Then we will have a series of dates during which we will be able to gradually unlock things"
BOJ (MNI INSIGHT): The continued state of emergency in Japan is making it difficult for the Bank of Japan to take advantage of market conditions and ease longer-term JGB yields higher in an attempt to gain ammunition for future policy challenges, MNI understands. For full article contact sales@marketnews.com
BOJ (RTRS/ JIJI): The Bank of Japan may seek to clarify in its March policy review that it has room to deepen negative interest rates, Jiji news agency reported on Wednesday. With the coronavirus pandemic seen forcing it to maintain a massive stimulus programme for a prolonged period, the BOJ plans to conduct in March a review of its policy tools to make them more sustainable.
BOJ: The Bank of Japan's buying of exchange-traded funds (ETFs) helped control risk premiums, which tend to decline sharply in Japan, and the central bank's actions had helped soften any impact, new board member Toyoaki Nakamura said on Wednesday. He added that the BOJ needs a tool that will help underpin sentiment in the economy and ETFs can help.
RBNZ (MNI EXCLUSIVE): The reintroduction of limits on mortgage borrowing will have no effect on New Zealand's overheated housing market and the country's central bank should raise interest rates, former Reserve Bank of New Zealand chairman Arthur Grimes told MNI, adding that he expected his advice to be ignored. For full article contact sales@marketnews.com
NORGES BANK: There were mixed messages for the Norges bank in the January inflation data published Wednesday, as headline inflation spiked to 2.5%, above both December's 1.4% and the consensus expectation of a rise to 1.8%. However, the Norge Bank targets the core CPI-ATE rate which fell from 3.0% last month. to 2.7% in January. Although lower, the rate is above the central bank's 'close to 2% over time' target for a 13th consecutive month. But this will now likely fade as 2020's krone weakness has reversed course and will likely be a drag on prices going forward, helping the Norges Bank meet their forecasts laid out in January.
DATA:
FIXED INCOME: Powell and Bailey's speeches in focus
Fixed income has stuck to pretty narrow ranges this morning, with both core and Eurozone peripheral bonds trading within yesterday's ranges.
- Focus will look ahead to speeches later today. From the Europeans, little will be expected of the speeches from ECB's Lagarde and Visco at 13:00GMT.
- BoE's Bailey gives his annual Mansion House speech at 17:00GMT. If he sticks to discussing negative rates and the current outlook there is unlikely to be much new relative to last week's MPR/press conference. However, there is the potential that he discusses the BoE's exit strategy given that Bank staff have been instructed to work on that. It would be interesting if he discusses passive run-off or active sales of QE or makes references to having to change how the exit strategy is viewed given the size of the balance sheet now. Not much is expected from Tenreyro at 18:00GMT (although it might be interesting to see any comments she has regarding the 6-month period for banks to get ready for negative rates).
- Across the pond, we have CPI at 13:30GMT. Powell's comments to the Economic Club of New York (at 19:00GMT) will be eyed in particular for his assessment of the latest employment report and fiscal developments.
- TY1 futures are down -0-1 today at 136-22 with 10y UST yields up 0.2bp at 1.161% and 2y yields down -0.1bp at 0.116%.
- Bund futures are down -0.06 today at 176.15 with 10y Bund yields up 0.4bp at -0.443% and Schatz yields down -0.1bp at -0.718%.
- Gilt futures are down -0.19 today at 132.35 with 10y yields up 1.4bp at 0.476% and 2y yields up 0.1bp at -0.37%.
FOREX: Commodity Tied Currencies Edge Lower, Scandis Buoyed
Commodity-tied currencies are modestly weaker early Wednesday, with AUD, NZD and CAD all underperforming against the rest of G10. Despite this, there's been no parallel softening in commodities pricing, with WTI hitting new cycle highs of $58.69 in Asia-Pac trade, suggesting positioning and consolidation behind this morning's market moves.
The USD is mixed and is a little weaker against the EUR. EUR/USD's follow-through rally stopped short of a test on the 50-dma at 1.2157, but a break above here would extend the recovery from the Thursday lows at 1.1952.
Scandi currencies outperform - the SEK is strong following the Riksbank rate decision which, while maintaining their QE program, prompted markets to price out the odds of further stimulus down the line. EUR/SEK touched new multi-week lows in response.
Focus turns to speeches, with Fed's Powell, BoE's Bailey and ECB's Lagarde all on the docket. Powell's comments to the Economic Club of New York will be eyed in particular for his assessment of the latest employment report and fiscal developments.
US CPI also crosses, with core inflation expected to have ticked higher to 0.2% for the m/m reading.
EQUITIES: S&P Eminis Hit Fresh Highs
- Asian markets closed higher, with Japan's NIKKEI up 57 pts or +0.19% at 29562.93 and the TOPIX up 5.28 pts or +0.27% at 1930.82. China's SHANGHAI closed up 51.599 pts or +1.43% at 3655.088 and the HANG SENG ended 562.53 pts higher or +1.91% at 30038.72
- European equities are flat-to-higher, with the German Dax down 14.2 pts or -0.1% at 14028.75, FTSE 100 up 15.92 pts or +0.24% at 6531.56, CAC 40 up 6.97 pts or +0.12% at 5691.54 and Euro Stoxx 50 up 2.4 pts or +0.07% at 3673.49.
- U.S. futures continue to touch fresh highs, with the Dow Jones mini up 91 pts or +0.29% at 31369, S&P 500 mini up 13.5 pts or +0.35% at 3919, NASDAQ mini up 63.5 pts or +0.46% at 13743.75.
COMMODITIES: Copper And Platinum Outperforming
- WTI Crude up $0.19 or +0.33% at $58.19
- Natural Gas down $0.07 or -2.61% at $2.762
- Gold spot up $3.04 or +0.17% at $1842.67
- Copper up $3.6 or +0.97% at $376
- Silver up $0.04 or +0.16% at $27.3485
- Platinum up $36.63 or +3.1% at $1209.06
LOOK AHEAD:
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.