MNI US OPEN - Stock Futures Pull Back as Dollar Gains Ground

NEWS

US (BBG): Biden, Trump Win in Michigan, Edging Closer to 2024 Rematch

US President Joe Biden and Republican frontrunner Donald Trump both cruised to victory in their party’s Michigan primary elections Tuesday, with results for the two candidates indicating discontent among Democrats and Republicans for the likely nominees. Detractors had urged Democrats to either sit out the contest or cast “uncommitted” ballots in protest over Biden’s handling of the Israel-Hamas war. Michigan is home to a large Arab-American population where many had criticized Biden for failing to stop the fighting following the deadly Oct. 7 attacks by Hamas, which is designated as a terrorist organization by the US and European Union.

US (WaPo): Biden, Congressional Leaders Sound Optimistic on Funding Government

President Biden and congressional leaders appear to be closing in on a deal that could keep the government open past the weekend — but lawmakers don't seem any closer on a breakthrough to send more U.S. aid to Ukraine, even as supplies on the front lines of the war against Russian invaders dwindle. Facing a Saturday deadline, Biden and leaders in the House and Senate said Tuesday that they hoped to pass legislation to avert a looming partial shutdown, after what lawmakers described as a productive and intense Oval Office meeting on federal spending.

ECB (MNI): Inflation Certainty Needed Before Cuts - De Guindos

Inflation will continue to slow across the eurozone in coming months but the ECB's Governing Council will need to be “absolutely convinced” that is converging towards the 2% target before starting to cut interest rates, Vice President Luis de Guindos said Wednesday“(Interest rates) will go down only when we are convinced that inflation will converge toward price stability levels,” he said in an interview on Spanish TV, adding that recent inflation data have been positive since the December projections.

MNI EUROZONE INFLATION PREVIEW - FEBRUARY 2024: Services Under Scrutiny Ahead of March ECB Meeting

Eurozone core and headline inflation are expected to resume their downtrends in February on an annual basis, with headline printing a 3-month low 2.5% Y/Y (vs 2.8% prior) and core returning to below 3% for the first time since February 2022 at 2.9% (3.3% prior). February marks the first of a two-month sequence that typically sees reaccelerations in non-seasonally adjusted HICP (both core and headline), with March being typically pronounced, though the base effects from an especially strong Feb 2023 (especially in categories such as food) will help keep a lid on the overall print.

GERMANY (MNI): Tax Reforms Limited to E3.2bln; Friday's Acceptance Doesn't Imply Passing

The German government's plans on a fiscal package ("Wachstumschancengesetz") to combat the struggling economy, whose 2024 growth projection was recently downward revised to +0.2% (from +1.3%) by the federal ministry of economic affairs, face ongoing misalignment between the traffic light coalition and opposition parties. This might result in the act not being put into place eventually even though it was approved by the parliament (Bundestag) since approval of the state legislative chamber (Bundesrat) is still outstanding.

GERMANY (MNI): Fewer German Firms Looking to Hike Prices - Ifo

Fewer German companies looked to increase their selling prices in February, the IFO Institute said Wednesday, suggesting a further slowing of inflationary pressures in coming months. The IFO Price Expectation Index fell to 15.0, down from 18.8 in January, largely driven by the consumer-related sectors, where price expectations fell from 32.4 to 28.9. “This suggests that in the coming months, inflation will continue to decline,” said Timo Wollmershäuser, Head of Forecasts at ifo.

CHINA (BBG): China Tells Quants to Phase Out Strategy Blamed for Turmoil

Chinese regulators are taking steps to gradually shrink the size of a popular quantitative trading strategy that contributed to turmoil in the nation’s stock market this month, according to people familiar with the matter. Some quantitative funds that manage money for external clients were told to stop accepting new inflows and phase out existing products for “Direct Market Access,” which typically use swap contracts and are often highly leveraged, the people said, requesting not to be named because they weren’t authorized to speak publicly. The gradual exit would help prevent drastic selloffs, the people said.

CHINA (MNI): Little Global Deflationary Threat From China-IMF

MNI (Beijing) Fears that China will export deflation to the world are overblown, with the country’s inflation likely to move out of negative territory as domestic demand picks up and the drag from commodity prices wanes, the International Monetary Fund’s deputy mission chief for China told MNI. Chinese inflation will turn positive this year and is likely to reach 1.4% y/y, while declines in producer prices, which slid 2.5% y/y in January for their 16th straight monthly fall, have mainly been driven by global factors, Nir Klein said in an interview.

CHINA (MNI): PBOC to Upgrade Yuan CIPS for Global Use - Pan

MNI (Beijing) The People’s Bank of China will broaden coverage of its Cross-Border Interbank Payment System (CIPS) as it seeks to further facilitate cross-border trade and investment and to support Shanghai’s development as a centre for yuan financial asset allocation, PBOC governor Pan Gongsheng said on Wednesday. The PBOC will assist Shanghai’s drive to become an international financial hub with greater financial openness, and help it deepen a pilot program for the digital yuan, and to develop the key high-tech and green sectors, Pan said in a meeting with city officials.

RBNZ (MNI): RBNZ Leaves Rates on Hold, Downgrades OCR Peak

The Reserve Bank of New Zealand left its Overnight Cash Rate on hold at 5.5% on Wednesday in a decision largely anticipated by markets, and downgraded its peak OCR call in its Monetary Policy Statement by10bp to 5.6% by the third quarter. RBNZ-dated Overnight Index Swap rates had priced in a 30% chance of a hike at Wednesday’s meeting, with cuts to follow soon after. OIS pricing closed 5-21 basis points softer. The Reserve has held the OCR at 5.5% since May.

G20 (MNI): Fin Min & CB Gov Meet to Start in Brazil, FT Report Divisions on Global Tax

The G20 Finance Ministers and Central Bank Governors meeting gets underway later today in the Brazilian city of Sao Paulo. Follows on from the foreign ministers’ meeting in Rio de Janeiro last week and is intended to prepare for the leaders’ summit taking place in November. Brazil is set to present a short closing statement, limiting the prospect for geopolitical divisions among members over the wars in Ukraine or Gaza. Instead, Brazil wants the meeting to focus on “ending inequality, reforming international taxation, addressing sovereign debt distress and working toward sustainable development.”

OIL (BBG): Oil Inventories Fall to Four-Year Low in OECD on Red Sea Attacks

Oil stockpiles in developed nations have tumbled to the lowest seasonal level in at least four years after Red Sea attacks led to some tankers avoiding the waterway, keeping crude in transit for longer. Onshore commercial and strategic inventories were at 1.62 billion barrels as of Feb. 26 for Organization for Economic Cooperation and Development members, according to data analytics firm Kpler. That’s the smallest volume in tanks for this time of the year since at least 2020, the figures show.

DATA

BELGIUM DATA (MNI): Core CPI Continuing Downtrend; Headline Higher on Base Effects

Belgian February HICP was +3.6% Y/Y, up from +1.5% in December, the highest since March 2023. This is up from -1.7% in October 2023. Belgium HICP has previously peaked at 13.1% in October 2022.

SWEDEN DATA (MNI): Continued Moderation in Core Goods PPI

Swedish January PPI fell -2.3% Y/Y (vs -7.7% prior). The core goods components continued to moderate in January, an encouraging signal for continued disinflation in core goods CPI. Capital goods PPI was 4.0% Y/Y (vs 5.0% prior) while consumer goods PPI fell to 1.5% Y/Y (vs 3.4% prior). In January, core goods CPI was 3.5% Y/Y (vs 4.0% prior). While still in deflation, base effects relating to energy are fading (energy PPI was -10.9% Y/Y, vs -37.6% prior).

ITALY FEB CONSUMER CONFIDENCE 97 (MNI)
ITALY FEB BUSINESS CONFIDENCE 95.8 (MNI)

MNI CHINA LIQUIDITY INDEX: PBOC Prompts 22-Month Low

• MNI FEB CHINA LIQUIDITY CONDITION INDEX 26.8 VS JAN 34.1

MNI (Beijing) China’s interbank market liquidity eased in February, with MNI’s China Liquidity Index hitting a 22-month low, as the central bank moved to support spring festival demand and a patchy economic recovery, despite risks that looser funding could fuel financial arbitrage. The MNI China Liquidity Condition Index read 26.8 in February, down from 34.1 in January, with traders pointing to a PBOC reserves requirement cut and injections of CNY1.3 trillion via reverse repos before the holiday. Higher index readings indicate tighter conditions.

AUSTRALIA DATA (MNI): Steady January Inflation as Goods Prices Stabilise Too

January CPI inflation printed below expectations holding steady at 3.4% y/y and ex volatile items & holiday travel dipped 0.1pp to 4.1% and the trimmed mean 0.2pp to 3.8%. The first month of the quarter doesn't include updates for the services component but even so is unlikely to drive a shift in the RBA's on hold stance or tightening bias. Headline inflation rose 0.4% m/m but 3-month momentum continued to ease and is around the mid-point of the band. The ABS said that the 3.4% y/y increase in prices was driven by housing (+4.6% y/y), food (+4.4%, fresh food was negative) and insurance (+8.2%) but holiday travel & accommodation fell 7.1% y/y.

FOREX: Holding Onto Gains Going Into the US Session

• The dollar has held onto gains going into the European early session and heading into the US session.
• Risk has been tilted to the downside, but moves have been fairly limited, this combined with overall higher yields have been supporting factors, despites US treasuries futures showing in green territory.
• The greenback saw some early extensions vs PLN, CAD, MXN, SGD, CZK, NOK, SEK, GBP and JPY.
• But despite some of the moves, most G10 pair/crosses still trade within past ranges, USDJPY is still in a 150/151 range, with the immediate resistance unchanged at 150.89 High Feb 13 intact, failed at 150.80 for now. Cable has mostly traded in a 1.2600/1.2700 range for the past 6 sessions, and is now sitting at the middle of that range at 1.2644.
• NZDUSD was the biggest mover overnight following a dovish rate hold from the RNBZ.
• NZDUSD is now down 1.17%, with the initial support seen at 0.6090 holding in early trade, printed a 0.6493 low.
• Looking ahead, out of the US, will see 2nd readings for GDP/Core PCE, and Wholesales Inventories.
• Speakers include, BoE Mann, Fed Bostic Collins, Williams.

EGBS: Futures a Touch Lower; Peripheries Wider

Core/semi-core EGB futures are broadly unchanged to a touch lower this morning, with Bunds having traded in a tight 36 tick range.

• Bunds are -3 at 132.23, with the Feb 22 low at 131.78 still the first support and bear trigger.
• Today's sovereign supply slate (most notably new 5/10-year BTP issues from Italy) will be helping to cap rallies.
• The EC February business confidence survey printed below consensus, with a pullback in services and manufacturing sector price expectations of particular note, but the release had a limited impact on the space.
• Comments from the ECB's de Guindos did not add much new to the policy debate (reiterating data, not date, dependency).
• The French and German cash curves have steepened for the third consecutive day, but most of last week's bear flattening has still held.
• 10-year Periphery spreads to Bunds are generally wider, with European equities down a touch this morning.
• The remainder of today's regional docket is light.

GILTS: Tight Start, Mann Eyed

Gilt futures operate within the lower end of yesterday’s range.

• Contract last -3 at 97.49 (97.43-71 range).
• Cash gilt yields are little changed to 1bp lower.
• Hedging flow surrounding the GBP4bn launch of the new 7-year gilt have passed, with auction metrics mixed (strong cover wide tail).
• SONIA futures are essentially flat on the day, while end of ’24 BoE-dated OIS pricing is little changed, showing 60bp of cuts.
• Local headline flow continues to be dominated by Budget speculation, with a focus on limited room for fiscal easing.
• Comments from BoE hawk Mann headline Wednesday’s UK calendar.

EQUITIES: E-Mini S&P Trend Condition Bullish Despite Slight Pullback This Week

The bull cycle in Eurostoxx 50 futures remains firmly intact and the contract traded higher yesterday. Moving average studies remain in a bull-mode position too, highlighting positive market sentiment. Sights are on 4904.40 next, a Fibonacci projection. Further out, scope is seen for a climb towards a bull channel top at 4975.20. The channel is drawn from the Oct 27 low. Initial firm support lies at 4762.00, the 20-day EMA. The trend condition in S&P E-Minis remains bullish following last week’s gains and pullbacks are considered corrective. The move higher continues to highlight the fact that corrections remain shallow - a bullish signal. Support to watch is 5009.39, the 20-day EMA. A clear break of this EMA would signal potential for a deeper retracement towards the 4936.50 support, the Feb 13 low. A resumption of gains would open vol-band based resistance at 5142.10.

• Japan's NIKKEI closed lower by 31.49 pts or -0.08% at 39208.03 and the TOPIX ended 3.51 pts lower or -0.13% at 2674.95.
• Elsewhere, in China the SHANGHAI closed lower by 57.629 pts or -1.91% at 2957.852 and the HANG SENG ended 253.95 pts lower or -1.51% at 16536.85.
• Across Europe, Germany's DAX trades higher by 17.81 pts or +0.1% at 17573.99, FTSE 100 lower by 43.64 pts or -0.57% at 7639.35, CAC 40 down 6.58 pts or -0.08% at 7941.82 and Euro Stoxx 50 down 9.11 pts or -0.19% at 4876.63.
• Dow Jones mini down 149 pts or -0.38% at 38867, S&P 500 mini down 24.25 pts or -0.48% at 5066, NASDAQ mini down 120 pts or -0.67% at 17900.75.

COMMODITIES: WTI Futures' Short-Term Resistance at $79.09 Remains Intact

WTI futures traded higher Tuesday and the contract is holding on to its gains. The latest bull cycle still appears corrective and key S/T resistance at $79.09, Jan 29 high, remains intact. Clearance of this level would alter the picture and highlight a bullish development, opening $81.70, a Fibonacci retracement. Key support lies at $71.49, Feb 5 low. A breach of this level would reinstate the recent bearish theme. Initial support is at $75.69, the 50-day EMA. Gold is in consolidation mode. Recent activity has defined a key resistance at $2065.5, the Feb 1 high, and a key support at $1984.3, the Feb 14 low. Both levels represent important short-term directional triggers. A clear break of the Feb 1 high would highlight a short-term reversal and open $2088.5, the Dec 28 high. For bears, clearance of $1984.3 would expose an important support and bear trigger at $1973.2, the Dec 13 low.

• WTI Crude down $0.8 or -1.01% at $78.04
• Natural Gas down $0.02 or -1.05% at $1.789
• Gold spot down $5.22 or -0.26% at $2025.13
• Copper down $2.6 or -0.68% at $382.5
• Silver down $0.15 or -0.67% at $22.311
• Platinum down $9.91 or -1.11% at $880.5