MNI US OPEN - Stronger France, Weaker Germany Make for Mixed PMIs

NEWS

CORPORATE (BBG): Nvidia Surges After AI Boom Shows No Signs of Letting Up

Nvidia Corp. surged in late trading after delivering another eye-popping sales forecast, adding fresh momentum to a stock rally that already made it the world’s most valuable chipmaker. Revenue in the current period will be about $24 billion, the company said in a statement Wednesday. Analysts had predicted $21.9 billion on average. Results in the fourth quarter also sailed past Wall Street estimates. The outlook extends a streak of Nvidia shattering expectations, thanks to insatiable demand for its artificial intelligence accelerators — highly prized chips that crunch data for AI models.

US/ISRAEL (WaPo): U.S. Backs Israel Before U.N. Court as Biden-Netanyahu Tension Simmers

The United States again diverged from allies Wednesday to back Israel before the International Court of Justice, despite growing tension between President Biden and Israeli Prime Minister Benjamin Netanyahu over the war in Gaza. In a presentation in The Hague, U.S. officials warned that an advisory opinion from the top U.N. court, if not properly written, could frustrate peace efforts. "A movement toward Israel's withdrawal from the West Bank and Gaza requires consideration of Israel's very real security needs," State Department official Richard Visek told the court.

BOE (MNI): Greene Needs to See "More Evidence Inflation Isn't as Entrenched" to Vote for a Cut

Greene says the data has taught us "a little" about underlying persistence in inflation. Core services inflation is trending in the right direction, wage growth surprised to the downside. "Need to see more evidence inflation isn't as entrenched" as she is concerned that it is in order to vote for a cut. This is largely in line with her previous comments. Greene says signs inflation and wage growth has peaked but still risks: from Red Sea and she is worried about another energy price shock (and what that would do to inflation expectations).

BOJ (RTRS): BOJ May End Negative Rates in March if Strong Wage Hikes Seen, Says Ex-Policymaker

The Bank of Japan may exit negative interest rates as soon as March if this year's wage negotiations result in bumper pay hikes exceeding 4%, former central bank board member Makoto Sakurai said on Thursday. BOJ Governor Kazuo Ueda has said this year's annual wage talks, which set pay for 2025, will be a key factor in deciding when to phase out the bank's massive monetary stimulus. Big firms will settle wage talks with unions on March 13, which precedes a BOJ policy meeting on March 18-19. Economists project hikes of about 3.9% on average, exceeding a 3.58% pay rise deal struck in 2023 that was the highest in three decades.

BOJ (BBG): BOJ’s Ueda Signals Confidence Inflation Moving Toward Target

Bank of Japan Governor Kazuo Ueda signaled continuing confidence over the prospects for achieving stable inflation by predicting Japan’s virtuous economic cycle will strengthen, supporting prevailing views that policy normalization is coming. “I expect that a virtuous economic cycle in which inflation rises gradually with an increase in wages and employment will strengthen,” Ueda said in response to questions in parliament Thursday. “Signs have been observed that businesses are becoming more active when deciding wages as labor demand tightens.”

CHINA (MNI): Consumption to Grow Steadily After Spring Festival

MNI (Beijing) Beijing believe Chinese consumption will show steady growth in Q1 after strong sales during the Spring Festival, according to He Yadong, spokesperson for the Ministry of Commerce on Thursday. At a press conference, He highlighted Spring Festival passenger flows on major pedestrian streets increased by 32.9% y/y, while cinema tickets set a new record raising CNY8.01 billion yuan.

JAPAN (BBG): Japan Shares Open New Chapter as Nikkei Reclaims Its 1989 Peak

Japanese stocks reclaimed a historic peak reached more than three decades ago as investors pour money into a country that’s finally escaped deflation and is on a path to sustainable growth. The Nikkei 225’s stellar rally over the past year caps a recovery that’s made the nation’s equities a top pick among global funds after being overlooked in favor of faster-growing markets like China. The roller-coaster ride saw shares go from the most richly valued in the world to among the most depressed — before finding an equilibrium now in between these extremes.

MIDEAST (MNI): UKMTO Confirms Fire Onboard Vessel Under Houthi Attack

Following on from our 0814GMT bullet, the UKMTO has issued an updated incident alert regarding the presumed Houthi attack on a ship in the Gulf of Aden. States that "It has been reported that a vessel was attacked by two missiles, resulting in a fire onboard. Coalition forces are responding." While details remains scarce on the scale of the attack and the damage to the as-yet-unnamed ship, coming so soon after the crew was forced to abandon the UK-registered Rubymar following a Houthi attack this latest incident will garner notable interest. Comes as French frigates in the area begin to engage with takign down Houthi drones and missiles, while the EU launched its naval mission to protect EU-related shipping earlier this week.

RBA (MNI): RBA Relief as Productivity Weakness Unwinds

The Reserve Bank of Australia is counting on a further 0.4 percentage point reduction in total hours worked alongside modest GDP growth in Q4, which will drive productivity growth higher, a key focus as the bank aims to pull inflation back to its 2-3% target band, MNI understands. A dip in productivity growth, which has concerned the RBA and caused some former officials to question its forecasts, has begun to ease, as a temporary surge in hours worked by less-skilled employees drawn into a hot-running economy draws to a close.

BOK (MNI): BOK Leaves Policy Rate Unchanged At 3.5%

The Bank of Korea board left its key policy rate unchanged at 3.5% and maintained its growth forecast at 2.1%, noting inflation may rise slightly before falling further, according to a BOK statement on Thursday. "While it is forecast that domestic economic growth will continue its improving trend and that inflation will maintain its slowing trend, it is premature to be confident that inflation will converge on the target level,” the board noted.

THAILAND (BBG): Thai PM Doubles Down on Rate-Cut Call as Easing Bets Mount

Thailand’s prime minister pledged to keep up his campaign to pressure the central bank into a rate cut, fueling a buildup of market sentiment that the dispute will result in monetary easing. “There is plenty of room” to cut the benchmark rate, leaving enough monetary policy space in case of future crisis, Prime Minister Srettha Thavisin told reporters in Bangkok. He cited Thailand’s shrinking economy and negative inflation as evidence of weak business and consumption activity, that’s compelling enough for an off-cycle rate decision.

LATAM (MNI): Latam Neutral Rates Stable Through Pandemic

The pandemic and subsequent supply-side shocks had little effect on the neutral real rates of interest for Brazil, Mexico and Chile, according to a market-based measure that suggests policy reached highly restrictive levels in all three countries by late last year, one of the authors of a Federal Reserve Bank of San Francisco working paper told MNI. In findings the authors believe could extend across other emerging markets, they detected relatively stable real neutral rates despite sometimes violent moves in short-term yields.

DATA

EUROZONE DATA (MNI): EZ PMI Services Moves Back to 50

• EUROZONE FEB FLASH MANUFACTURING PMI 46.1 (FCST 47.0); JAN 46.6
• EUROZONE FEB FLASH SERVICES PMI 50.0 (FCST 48.8); JAN 48.4

The EZ manufacturing PMI was a little lower than expected (largely driven by the German disappointment) but the services number came in at the 50 breakeven level. Highlights from the press release: "The rest of the eurozone meanwhile collectively reported growth of output for a second month running, contrasting with the declines seen over the prior five months, enjoying the largest monthly improvement since last May. Faster service sector growth was accompanied by a near stabilisation of manufacturing output."

EUROZONE DATA (MNI): EZ Final Inflation Confirms Flash

Eurozone Final HICP confirms flash, January inflation falls with Processed food, alcohol and tobacco, and Core Goods (NEIG) contributions falling from December to January, confirming flash estimates at+2.8% Y/Y (vs +2.9% Y/Y prior) and -0.4% M/M (vs +0.2% M/M prior). Similarly, Core inflation printed in line with flash at +3.3% Y/Y (vs +3.4%Y/Y prior), and -0.9% M/M (vs +0.5% M/M prior).

UK DATA (MNI): PMI Should Push Back on Expectations of an Early Cut

• UK FEB FLASH MANUFACTURING PMI 47.1 (FCST 47.5); JAN 47.0
• UK FEB FLASH SERVICES PMI 54.3 (FCST 54.1); JAN 54.3

Significant news in the UK PMI release. In contrast to the flash French, German and EZ releases there is a rise in input prices and lengthening of suppliers lead times to the greatest extent since July 2022. However, even more significant is that labour service costs remain high and this is lead in to a "renewed acceleration in prices charges" across the private sector. This will be a concern for the MPC - and should push back further expectations of an early cut.

GERMANY DATA (MNI): Disappointing Details Behind Disappointing Manufacturing PMI

• GERMANY FEB FLASH MANUFACTURING PMI 42.3 (FCST 46.0); JAN 45.5
• GERMANY FEB FLASH SERVICES PMI 48.2 (FCST 48.0); JAN 47.7

The German manufacturing PMI was a poor print - and there was little in the details of the data to redeem it from the downward surprise for the headline. New orders, manufacturing confidence, domestic demand and export orders all deteriorated. As with France, there are limited supply chain issues from the Red Sea. And employment is still holding up. The manufacturing print fell to a 4-month low (remember it had been sub-40 in mid-2023). The services side was broadly in line with expectations with confidence picking up.

FRANCE DATA (MNI): Flash PMI Sees Limited Impact From Red Sea Tensions

• FRANCE FEB FLASH MANUFACTURING PMI 46.8 (FCST 43.5); JAN 43.1
• FRANCE FEB FLASH SERVICES PMI 48.0 (FCST 45.6); JAN 45.4

The French flash February PMI comfortably surpassed expectations in both the manufacturing and services components. A first glance at the data seems positive, with limited impact cited from Red Sea tensions (though we note that higher wages were still noted as an upside inflation driver). While output remains subdued, conditions appear to be improving, which has supported employment. Manufacturing printed at an 11-month high at 46.8 (vs 43.5 cons, 43.1 prior)while services rose to 48.0 (vs 45.6 cons, 45.4 prior), which was an 8-month high.

FRANCE FEB MANUF SENTIMENT AT 100 (MNI)

FOREX: Equity Surge Favours Weaker USD, JPY

• USD and JPY selling has been dominant across the European morning, with both currencies among the poorest performers across G10. Moves across currency markets are being led by volatile equities, as index futures on both sides of the Atlantic surge after the better-then-expected NVidia earnings released after the Wednesday bell.
• PMI data from across Europe also generally fared better than expected, with the Eurozone and French figures topping forecast, and countering modest weakness in Germany manufacturing. Post-data EUR strength tipped EUR/USD above 1.0880 in a momentum-driven move, before prices faded on the failure to break the 1.0888 50-dma.
• G10 FX implied vols extend recent lows, with EUR/JPY 6m implied nearing on 8 vol points and the lowest level since Feb'22. With lower vols tied to JPY weakness over the past 12 months, EUR/JPY has extended the YTD rally, putting the cross within range of key resistance at the bull trigger of the cycle high from late 2023 at 164.30.
• GBP saw only scant support on the back of a better-than expected February composite prelim PMI, with markets preferring to sell rallies in the currencies. A bounce off lows for the greenback aided the move, however GBP selling was also highly evident against CAD, JPY and others.
• US takes focus going forward, with weekly jobless claims numbers and the prelim February PMI data on the docket. Minutes from the ECB's January meeting and Fed speakers including Jefferson, Harker, Cook and Kashkari are set to make appearances.

EGBS: Remain Weaker Amid Mixed PMI Signals

Core/semi-core EGBs continue to trade weaker this morning, as markets digest the totality of this morning's flash PMI round.

• After reaching the lowest levels since November '23 following a strong French PMI print, Bund futures more than recovered after Germany's manufacturing PMI was weaker than expected. The overall Eurozone services print was above consensus, reaching a 50-handle for the first time since July '23.
• Within the PMIs, we note that there was a seemingly limited impact from Red Sea tensions on manufacturers, though services firms in France and Germany continue to cite wage pressures as a source of inflationary pressure.
• Bunds are -19 ticks at 132.40, with the first support now at 131.73 (1.0% 10-dma envelope). The contract reached an intraday low of 131.78 following the French data.
• The German cash curve has bear flattened on the day (a continuation of yesterday afternoon's dynamics), with yields just off year-to-date highs recorded this morning.
• Periphery spreads to Bunds are tighter, with European equity markets still higher on the day, even as Estoxx futures have moved off intraday (and near-record) highs.
• Eurozone final February inflation was in line with flash estimates.
• The remainder of today's regional docket is light, with this afternoon's US data (IJC, flash PMI) likely to garner cross-market interest.

GILTS: Off Lows Despite PMIs, Wider Matters Eyed

Futures last show -20 at 97.17 (range 96.92-97.49).

• The Feb low/bear trigger (96.81) was untouched during the early sell off, which was driven by wider weakness in core global FI.
• Futures roll activity picks up and is starting to account for a greater share of outright volume.
• Cash gilt yields are little changed vs. yesterday’s closing levels outside of 2s which are ~3bp lower on the day.
• Only 5s managed to register an incremental fresh YtD high during the early sell off.
• There has also been some interest in Winterflood Securities offering primary gilt market access to retail investors (more on that to come), with an eye on growing demand/global trends.
• SONIA futures are +0.5 to -3.0 through the blues, with global core FI swings.
• BoE-dated shows 66bp of ’24 cuts after printing closer to 60bp during the early bond weakness.
• Wider FI swings have driven the short end, with no change in tone from BoE MPC member Greene earlier today.
• The local docket is slim for the remainder of the day.

EQUITIES: Eurostoxx 50 Futures Clear 4800 Handle

The bull cycle in Eurostoxx 50 futures extended sharply early Thursday, with psychological resistance at 4800 cleared in style, and first modest resistance at 4548.00 cracking in the process. The intraday high of 4864.00 looks extended having pierced the 2.0% Upper Bollinger Band, however the outlook is resolutely bullish the longer these levels hold. The upleg reinforces current conditions and the importance of the recent break of resistance at 4634.00, the Dec 14 high. Moving average studies are in a bull-mode position, highlighting positive market sentiment. The trend condition in S&P E-Minis is resolutely bullish, with the upside trigger at 5066.50 already under pressure. This erases the pullback off last week’s highs, confirming S/T weakness as corrective. Support to watch lies at 4967.25, the 20-day EMA. A clear break of this average would suggest potential for a deeper retracement, possibly towards the 4866.00 key support, the Jan 31 low. The trigger for a resumption of gains is 5066.50, the Feb 12 high.

• Japan's NIKKEI closed higher by 836.52 pts or +2.19% at 39098.68 and the TOPIX ended 33.41 pts higher or +1.27% at 2660.71.
• Elsewhere, in China the SHANGHAI closed higher by 37.402 pts or +1.27% at 2988.358 and the HANG SENG ended 239.85 pts higher or +1.45% at 16742.95.
• Across Europe, Germany's DAX trades higher by 176.5 pts or +1.03% at 17294.68, FTSE 100 lower by 1.41 pts or -0.02% at 7661.04, CAC 40 up 53.14 pts or +0.68% at 7864.91 and Euro Stoxx 50 up 51.19 pts or +1.07% at 4826.25.
• Dow Jones mini up 92 pts or +0.24% at 38762, S&P 500 mini up 56 pts or +1.12% at 5051.75, NASDAQ mini up 344 pts or +1.96% at 17877.5.

COMMODITIES: Gains in WTI Futures Still Appear Corrective, S-T Resistance Marked at $78.52

Gains off the Feb 5 low in WTI Futures still appear corrective at these levels. Key short-term resistance has been defined at $78.52, the Feb 16 high. Clearance of this level would be a bullish development. On the downside, support to watch lies at $71.49, the Feb 5 low. A break of this level would reinstate the recent bearish theme and pave the way for a move towards $69.79, the Jan 3 low. Gold traded lower into mid-February, but is building well off lows and challenging the 50-dma of $2031.71. Clearance here and above the Feb 1 high of $2065.50 would reinstate a bullish theme, with the mid-month weakness proving corrective in nature. Any reversal and continuation lower would open $1973.2, the Dec 13 low and the next key support.

• WTI Crude up $0.2 or +0.26% at $78.12
• Natural Gas down $0.03 or -1.69% at $1.745
• Gold spot up $4.67 or +0.23% at $2030.42
• Copper down $0.35 or -0.09% at $388.35
• Silver up $0.2 or +0.86% at $23.075
• Platinum up $5.64 or +0.64% at $893.05