MNI US OPEN - Sterling Sinks on Sour Services

NEWS

ECB (MNI): ECB Targets Green Data Via New Tool Box

The ECB on Monday published a new set of experimental climate-related statistical indicators, which it hopes will help it better analyse financial sector climate-related risks and monitor green transition.

The indicators, which are described as a “work in progress,” will provide information in the key areas debt instruments labelled as “green”, “social”, “sustainability” or sustainability-linked; on financial institutions’ financing of carbon emissions, and on the impact of natural hazards such as floods, wildfires and storms, on the performance of loans, bonds and equities portfolios.

JAPAN (MNI): New BOJ Gov Must Quash Normalisation Talk - Momma

The top priority confronting the new Bank of Japan governor is to correct misguided expectations among mainly foreign market participants that the central bank will move towards policy normalisation, a former BOJ chief economist said.

FINLAND (MNI): We Will Continue Tandem NATO Bid w/Sweden - Foreign Min

Wires carrying comments from Finnish Foreign Minister Pekka Haavisto. States that after talks with the Swedish FM Finland will maintain its policy of applying for NATO membership in tandem with Sweden. This comes in the wake of Turkish President Recep Tayyip Erdogan saying on 23 Jan that Turkey will not support Sweden's NATO bid due to protests in Stockholm that saw a copy of the Qur'an burned.

UKRAINE (MNI): No New Position On Leopard Tanks To Ukraine - German Defence Min

Comments from German Defence Minister Boris Pistorius hitting wires. States that there is, "No new position on Leopard tanks." Major international focus on whether Germany will export/allow the re-export of Leopard 2 main battle tanks to Ukraine. If a sizeable number of tanks are provided to Ukraine it could make a major difference in the outcome of the war, and indeed the war's duration. Could allow Ukrainian troops to retake and, crucially, hold territory in the south and east of the country.

DATA

EUROZONE DATA (MNI): PMIs Higher Output Inflation Underpins Hawkish ECB Rhetoric

• EUROZONE JAN MANUF. PMI FLSH 48.8 (FCST 48.5); DEC 47.8
• EUROZONE JAN COMPOSITE PMI FLSH 50.2 (FCST 49.8); DEC 49.3
• EUROZONE JAN SERVICES PMI FLSH 50.7 (FCST 50.1); DEC 49.8

• GERMANY CONSUMER CONF FEB -33.9 (FCST -33.3); JAN -37.6r
• GERMANY JAN MANUF. PMI FLSH 47.0 (FCST 48.0); DEC 47.1
• GERMANY JAN COMPOSITE PMI FLSH 49.7 (FCST 49.6); DEC 49.0
• GERMANY JAN SERVICES PMI FLSH 50.4 (FCST 49.5); DEC 49.2

• FRANCE JAN MANUF. PMI FLSH 50.8 (FCST 49.5); DEC 49.2
• FRANCE JAN COMPOSITE PMI FLSH 49.0 (FCST 49.5); DEC 49.1
• FRANCE JAN SERVICES PMI FLSH 49.2 (FCST 49.8); DEC 49.5

January flash PMI data recorded upside surprises for eurozone manufacturing and services, German services and French manufacturing. These signs of a steadying eurozone economy suggest the bloc may avoid a recession, as German/EZ services and French manufacturing PMIs edged back into expansive territory (over 50). Selling prices will be the key cause for concern in the reports. Output charges increased despite easing input inflation reflecting upward pressure from wages and elevated costs.

UK DATA (MNI): PMIs Signal Six Months of Contraction as Service Activity Dips

• UK JAN COMPOSITE PMI FLSH 47.8 (FCST 48.8); DEC 49.0
• UK JAN MANUF. PMI FLSH 46.7 (FCST 45.5); DEC 45.3
• UK JAN SERVICES PMI FLSH 48.0 (FCST 49.5); DEC 49.9

UK PMIs a sixth consecutive month of contraction to kick off 2023, underscoring recession risks as business activity experienced the fastest rate of decline in two years. Ahead of next Thursday's BOE rate decision, the January PMI data largely represents sustained economic weakness. Yet the continued growth in output charges and wage pressure may add to the argument for a 50bp hike (markets are currently pricing 45bp).

UK DATA (MNI): Public Finances: Debt Interest, Energy Support and Student Loans

• UK DEC PSNCR GBP17.21 BN
• UK DEC CGNCR GBP23.1 BN
• UK DEC PSNB GBP+26.58 BN
• UK DEC PSNB-X GBP+27.4 BN

Looking at the public finance data there were three main areas of interest: Interest payments were GBP17.3bln in Dec22 (of which GBP13.7bln is due to linkers) vs GBP8.7bln in Dec21 - and increase of GBP8.7bln. In terms of the calendar year, 2022 saw debt interest of GBP105.9bln which is GBP42.2bln higher than in 2021 (largely due to the linkers).

GERMAN DATA (MNI): Consumer Pessimism Subsides, but Consumption to Remain Weak

• GERMANY GfK FEB CONSUMER CONF -33.9 (FCST -33.3); JAN -37.6r

Germany's GfK consumer sentiment indicator rose for the fourth consecutive month, up 3.7 points in the February expectations at -33.9, just 0.6 points below consensus forecasts. Income expectations alongside economic outlooks improved, largely underpinned by government policies shielding consumers from high energy prices. Economic expectations rebounded to pre-Ukraine-Russia war levels.

FRANCE DATA (MNI): Manufacturing Sentiment Signals IP Upturn

• FRANCE JAN MANUF. SENTIMENT 103 (FCST 102); DEC 102r

The French manufacturing climate improved for a second consecutive month, up one point to 103 in January, from an upwardly revised December reading. This is above the long-run average.

JAPAN DATA (MNI): Japan's Trimmed Mean Hits Record 3.1% in Dec - BOJ

Japan’s trimmed mean measure of underlying inflation rose 3.1% y/y in December, a fresh record high pace as pass-through of cost increases continued, data released by the Bank of Japan on Tuesday showed. The trimmed mean accelerated from the previous high of 2.9% in November, and comes after data released on Friday showed Japan's annual core consumer inflation rate quickened to 4.0% y/y in December, up from November’s 3.7% and the highest level since December 1981 when it rose 4.0%.

FOREX: GBP Sinks on Six Months of Sour Services

• After a middling start, GBP is now comfortably the poorest performer in G10, with a soft set of UK PMI data undermining the currency. Services and composite PMI both fell short of expectations, with the data signalling siz consecutive months of contraction across the services sector, with business activity now declining at the fastest pace since the COVID pandemic.
• GBP/USD extended the losses below Monday's 1.2324, putting prices at the lowest level since January 18th. Markets are now within range of next support at 1.2215/2083, marking the 20-day EMA and Low Jan 9 respectively.
• JPY is stronger, although a similarly strong USD has kept USD/JPY within yesterday's range. The pair looked through comments from the Japanese economy minister, who quoted the BoJ governor as stating that market moves are becoming more stable.
• NOK is among the session's poorest performers so far, led lower by softer WTI and Brent crude futures prices. Nonetheless, USD/NOK remains shy of resistance at 9.9134 - yesterday's high - as well as the 50- and 200-dmas at 9.9360 and 9.9484 respectively.
• Prelim US PMI data crosses later today, with markets expecting a further slip for the manufacturing and services subindices. This is seen putting the composite headline at 46.4, just above the 45.0 previous. The speaker slate is light, with the Fed's media blackout keeping the calendar quiet. ECB's Knot, Vujcic and President Lagarde have already made appearances, but said little to sway markets in either direction.

BONDS: Gilts Outperform After Disappointing UK Services PMI

• Gilts are the outperformers this morning after a disappointing UK services PMI print which did little to alter pricing ahead of the upcoming February MPC meeting of 45bp, but pushed down terminal rate pricing in August from 104bp to around 99bp at the time of writing. This has helped the gilt curve to bull steepen with 2-year gilt yields down 6.6bp on the day at writing.
• French, German and Eurozone PMI prints were more mixed with the German curve moving higher, too, and dragging the UST curve with it.
• Looking ahead we have the UK CBI industrial trends report, the US flash PMI and the Richmond Fed manufacturing index.
• TY1 futures are up 0-6+ today at 114-28+ with 10y UST yields down -2.2bp at 3.493% and 2y yields down -1.1bp at 4.217%.
• Bund futures are up 0.15 today at 138.12 with 10y Bund yields down -2.6bp at 2.176% and Schatz yields down -1.6bp at 2.568%.
• Gilt futures are up 0.49 today at 104.73 with 10y yields down -5.6bp at 3.302% and 2y yields down -7.0bp at 3.364%.

EQUITIES: E-Mini S&P Breaches 4035.25 Jan 17 High, Resuming Bullish Conditions

EUROSTOXX 50 futures traded lower last Thursday but prices have since recovered. The trend outlook is bullish, however, the cycle is overbought and this warns of the potential for a short-term pullback. A move lower would allow the overbought reading to unwind and would open 4057.20, the 20-day EMA and a key near-term support. Key resistance and the bull trigger has been defined at 4206.00, the Jan 18 high. A break would resume the uptrend. S&P E-Minis traded higher Monday and breached resistance at 4035.25, the Jan 17 high. The break cancels a recent bearish threat and resumes short-term bullish conditions. Note that moving average studies are in a bull mode condition and this reinforces current trend conditions. The focus is on 4090.75 - last seen in mid-December. Key short-term support lies at 3901.75, the Jan 19 low. A break would reinstate a bearish threat.

• Japan's NIKKEI closed higher by 393.15 pts or +1.46% at 27299.19 and the TOPIX ended 27.54 pts higher or +1.42% at 1972.92.
• Across Europe, Germany's DAX trades higher by 4.93 pts or +0.03% at 15108.31, FTSE 100 lower by 35.96 pts or -0.46% at 7748.73, CAC 40 up 14.49 pts or +0.21% at 7046.51 and Euro Stoxx 50 up 3.62 pts or +0.09% at 4154.44.
• Dow Jones mini down 30 pts or -0.09% at 33697, S&P 500 mini down 2.75 pts or -0.07% at 4033.75, NASDAQ mini down 15 pts or -0.13% at 11919.25.

COMMODITIES: Gold Trades to Fresh Cycle High, Confirming Extension of Uptrend

WTI futures traded higher Monday and the contract is holding on to the bulk of its recent gains. Key short-term resistance is located at $82.66, the Jan 18 high. Clearance of this hurdle would reinstate the recent bullish theme and expose $83.14, the Dec 1 high and $85.33, a Fibonacci retracement. On the downside, the support to watch lies at $78.45, the Jan 19 low. A breach of this level would signal a potential reversal. Trend conditions in Gold remain bullish and the yellow metal has traded to a fresh cycle high today. This confirms an extension on the uptrend and maintains the price sequence of higher highs and higher lows. Moving average studies are in a bull mode position - reflecting the uptrend. The focus is on $1963.0 next, a Fibonacci retracement. Support to watch lies at $1878.5, the 20-day EMA. Short-term pullbacks are considered corrective.

• WTI Crude up $0.18 or +0.22% at $81.77
• Natural Gas up $0.07 or +2.06% at $3.519
• Gold spot up $4.63 or +0.24% at $1935.79
• Copper up $0.25 or +0.06% at $425.9
• Silver up $0.11 or +0.45% at $23.5617
• Platinum up $1.45 or +0.14% at $1052.82