MNI US OPEN - UK Annual Inflation Rate Unchanged in January

NEWS

US (WaPo): House Republicans Impeach Alejandro Mayorkas By a Single Vote

House Republicans moved in historic fashion and impeached Homeland Security Secretary Alejandro Mayorkas by a single vote on Tuesday night, succeeding on their second try in punishing the steward of President Biden's immigration policy. The unprecedented and partisan resolution — which cleared the House over opposition from Democrats and three GOP members — may not go very far in the Senate, as some Republicans in the upper chamber do not believe that Mayorkas's actions clear the bar as the "high crimes and misdemeanors" necessary for conviction.

US (MNI): Democrat Suozzi Takes Back NY-03 in Blow to Republicans

The Democrats have won an important special election for the House of Representatives, ensuring that the Republican majority in the chamber remains razor-thin and demonstrating the party's recent ability to win special elections in spite of tough polling for President Joe Biden. In the special election for New York's third congressional district Democrat Tom Suozzi - who held the seat from 2017-23 - defeated Republican Mazi Pilip by 53.9% to 46.1% with 93% of votes reported.

US OUTLOOK/OPINION (MNI): Analyst Single Line Takeaways From CPI

The 20 analysts below had already jettisoned a March start to rate cuts a while ago. With some questioning January seasonality potentially at least partly behind the surprise strength, they mostly keep to their calls for a first cut in May or June, with a couple already looking for July. Nomura formally pushed their view for a first rate cut out from May to June with one less cut for the year with now a FOMC SEP consistent 75bps for 2024. The full MNI US Inflation Insight report will follow later on.

ECB (MNI): Inflation on Track, But Must Keep Guard - De Guindos

Eurozone’s inflation is “on the right track” towards returning to 2% target and the trend is evident in both market and surveyed measures of inflation expectations, ECB Vice President, Luis de Guindos, said in a speech on Wednesday, but a risk remains from wages and profit margins that are “more resilient than anticipated”. “While we are heading in the right direction, we must not get ahead of ourselves”, he said at an event in Split, adding that it will take more time before confirming inflation is returning to 2% sustainably.

BOJ (BBG): MOF Will Take Appropriate Steps on FX as Needed

Japan’s top currency chief sought to put a floor under the yen with a barrage of warnings after US inflation data spurred a jump in the dollar overnight. “Recent moves by the yen have been pretty rapid,” vice finance minister for international affairs Masato Kanda told reporters Wednesday. “Some of the recent rapid moves are in line with fundamentals, but some are clearly speculative. I think the latter aren’t desirable.’ Kanda said authorities are on call 24 hours a day, 365 days a year and are always ready to take appropriate steps as needed.

BOJ (MNI): BOJ April Action Will Hinge on CPI Result

The Bank of Japan board's decision to exit negative rates policy at the April 25-26 session will hinge on services price inflation found with the Tokyo consumer price index due to publish the last day of the meeting, MNI understands. However, the government could pressure the BOJ to shift policy at the March 18-19 meeting should the yen weaken further. BOJ officials have found the relationship between wages and prices – or the so called secondary force – difficult to predict as Japanese businesses cannot pass on higher labour costs easily.

CHINA (BBG): State-Linked Chinese Builder’s Dollar Bonds Tumble After Default

China South City Holdings Ltd.’s notes plummeted at a record pace after the builder defaulted on a dollar bond for the first time, reflecting fresh concerns over the extent of government support for the beleaguered sector. The Shenzhen-based company’s dollar bond due December tumbled 17 cents to 25 cents on the dollar, set for its biggest one-day drop ever, according to Bloomberg-compiled prices. Four other of its dollar notes — three of which are due this year — all dropped by more than 10 cents.

GLOBAL (MNI): NYC Winner From Brexit-German Insurance Chief

New York’s financial markets are proving the main beneficiary from Britain’s withdrawal from the European Union, with the continent’s financial centres failing to muscle in on business lost to London after Brexit, former European Central Bank Executive Board member and current head of the German Insurance Association Joerg Asmussen told MNI. “Before Brexit we had the debate: will it be Frankfurt, Paris or Zurich which benefits most when London is outside the single market? Now we know: the financial centre that benefited most was New York,” said Asmussen.

BITCOIN (BBG): Bitcoin Weathers Global Market Slump Sparked by Inflation Jump

Bitcoin rode out a surprisingly strong US inflation print that roiled global markets by dimming hopes for rapid interest-rate reductions. The digital asset traded at $51,211.51 as of 9:20 a.m. Wednesday in London, near the highest level in over two years, recovering from a small correction since Tuesday’s publication of above-forecast figures on US consumer prices in January.

INDONESIA (MNI): Prabowo Still on Course for 1st Round Win According to Quick Count

Defense Minister Prabowo Subianto is on course for a comfortable first round win according to unofficial partial vote counts. Pollster Litbang Kompas has Prabowo on 59.8% of the vote with 50.7% of votes counted. Former Jakarta Governer Anies Baswedan is second on 22.8% and former Central Java Governor Ganjar Pranowo third on 17.3%. In order to win in the first round, Prabowo will not only require 50%+1 of the nationwide vote, but also more than 20% of the vote in over half of Indonesia's 38 provinces.

RUSSIA/UKRAINE (MNI): Kremlin Denies Putin Ceasefire Offer: RTRS

Reuters claiming that the Kremlin has refuted a 13 Feb report from the newswire claiming that according to its Russian sources President Vladimir Putin's suggestion of a ceasefire in Ukraine had been rejected by the US. Kremlin spox Dmitri Peskov, when asked about the report, stated that "No. It's not true". The original report claiming that Putin sent indirect hints to the White House - via intermediaries including Middle Eastern nations - that he would be willing to hold ceasefire talks garnered notable interest. The report came at the same time as a major political showdown looms in the US Congress over a massive Ukraine funding package.

Ukraine’s military said it destroyed a Russian warship off the south coast of Crimea, the latest in a string of operations targeting Kremlin navy vessels in the Black Sea. Ukrainian military intelligence said a special unit sank the Caesar Kunikov, a Russian large landing ship off Alupka in occupied Crimea, according to a video published by Ukraine’s military intelligence on the X social media platform. Naval drones were used in the attack, it said.

DATA

UK DATA (MNI): UK January Inflation Unchanged Despite Uptick Fears

• UK JAN CPI -0.6% M/M, +4% Y/Y
• UK JAN CORE CPI -0.9% M/M, +5.1% Y/Y
• UK JAN RPI -0.3% M/M, +4.9% Y/Y
• UK JAN OUTPUT PPI -0.2% M/M, -0.6% Y/Y
• UK JAN INPUT PPI -0.8% M/M, -3.3% Y/Y

Looking at the contributions to headline CPI, the biggest downside driver is "furniture and household goods" contributing -0.13ppt. Air fares contributed -0.09ppt - and that was expected to be a decent upside contributor so that accounts for a lot of the surprise today - and as noted is very volatile. Recreation and culture only contributed +0.01ppt - that was one of the categories expected to see big base effects driving higher. The fact that air fares accounted for a decent amount of the downside surprise today can explain a lot of the pullback in GBPUSD. This is still a softer number than expected, but with clothing also pulling headline CPI lower, it's not as soft as it appeared at first glance. However, there was a general broad-based fall outside of food and clothing which means this remains a soft print.

EUROZONE DATA (MNI): Industrial Production Ticked Up Even Excluding Questionable Ireland Data

• EUROZONE FLASH Q4 GDP +0% Q/Q, +0.1% Y/Y
• EUROZONE DEC IP +2.6% M/M, +1.2% Y/Y

Eurozone industrial production grew on a monthly basis in December in an upside surprise, at +2.6% M/M (vs -0.2% cons; +0.4% prior, revised from -0.3%), and+1.3% Y/Y (vs -4.0% cons; -6.8% prior). Total Eurozone figures were revised for 2023, with the index being corrected upwards by 0.1 points on average in each of the 12 months to December. The December increase was strongly driven by Ireland, which printed at +23.5% M/M, contributing +1.4pp to the total figure. Ireland is carrying out a review of the seasonal adjustment methodology currently, and figures have been notoriously highly volatile.

NORWAY DATA (MNI): Q4 GDP Stronger Than Norges Bank Projections

• NORWAY DEC MAINLAND GDP -0.1% M/M, AGG GDP +0.5% M/M

Norway Q4 mainland GDP was a touch stronger than expected at +0.2% Q/Q (vs 0.1%prior and cons). Overall, national GDP was +1.5% Q/Q (vs an upwardly revised-0.4% prior). Norges Bank had projected 0.0% Q/Q in its December MPR. Today's print aligns with the Norges Bank's commentary in the January Monetary Policy Assessment, where they noted "household consumption appears to have been somewhat higher than projected towards the end of last year". Looking at the expenditure side of the economy, household consumption rose 0.7%, though this was led by goods consumption (+2.0% Q/Q) while services consumption was subdued (+0.1% Q/Q).

NEW ZEALAND (MNI): Retail Spending Appears to Have Troughed

NZ card transactions continued to recover in January with the total rising 2% m/m to be up 3.2% y/y but the retail component softer up 1.7% m/m to be only +0.9% y/y. January unwound the December drop in retail sales though and 3-month momentum turned positive but the level is less than a percent higher than the H2 2023 average. Card spending is soft but looks to have troughed and may be tentatively recovering after a period of unchanged rates in line with improving consumer confidence.

FOREX: GBP Slides as CPI Undoes Wages-Inspired Strength

• Having traded firmer earlier this week, GBP is now the poorest performing currency across G10 after CPI data for January came in below expectations. Headline and core were softer by 0.1ppts relative to expectations, with the much-watched services CPI also erring to the low side of forecast.
• The data somewhat reversed the pullback in easing expectations that followed jobs numbers yesterday, tipping GBP/USD back below 1.2550 and within range of the next key support at 1.2519 - the Feb 5 low.
• The USD is more middling, with the USD Index close to flat, but just below yesterday's breakout high of 104.976 - which remains the bull trigger.
• NOK is the firmest performer in G10 on an intraday basis, aided by more strength in oil prices on top of firmer than expected mainland GDP data released at the open.
• Focus for the remainder of Wednesday trade turns to the central bank speaker calendar, with ECB's Cipollone & Nagel, Fed's Goolsbee & Barr and BoE's Bailey set to speak. Goolsbee and Barr's comments will be watched carefully - the first FOMC representatives to appear after yesterday's firmer-than-expected CPI.

BONDS: Gilts Outperform as UK CPI Feedthrough Continues to Dominate

Gilts outperform core/semi-core EGBs this morning following the lower than expected UK CPI print. Gilt futures are +67 ticks at 97.68, while Bunds are +27 at 133.38.

• This morning's UK print is not as soft as it appeared at first glance, with services CPI only just below the BoE's Feb MPR forecasts and driven largely by a downside surprise in the volatile air fares component. Gilts have nonetheless held onto the majority of their initial gains.
• Eurozone preliminary Q4 '23 GDP was in line with the advance reading, while industrial production was stronger than expected (even when excluding Ireland, which contributed +1.4pp to the total 2.6% M/M figure).
• Today's supply slate features EGB issuance from Greece, Germany and Portugal, while the DMO will re-open the Jan-34 Gilt later this morning.
• Cash curves have bull steepened, with Gilt yields unsurprisingly seeing the largest moves lower. 10-year periphery spreads to Bunds are tighter as European equities recover from yesterday's lows. GGB spreads are the exception, trading flat on the day, likely a function of this morning's supply.
• The remainder of today's docket is dominated by central bank speak: BoE Governor Bailey testifies to the House of Lords Economic Affairs Committee today at 1500GMT. For the ECB, Executive Board member Cipollone speaks on the digital Euro at 1400GMT/1500CET. The Bundesbank's Nagel rounds off the day at 1700GMT/1800CET joining a panel discussion on "How will financing work in the future?".

EQUITIES: Post-CPI Pullback in Eurostoxx 50 Futures Considered Technically Corrective

Eurostoxx 50 futures remain in an uptrend and the move lower Tuesday is considered corrective. The contract traded higher Monday delivering another fresh cycle high, confirming an extension of the current uptrend. The move higher reinforces bullish conditions and the importance of the recent break of resistance at 4634.00, the Dec 14 high. This signals scope for 4788.10, a Fibonacci projection. Initial firm support lies at 4647.70, the 20-day EMA. The trend condition in S&P E-Minis is unchanged and remains bullish. The pullback from Monday’s 5066.50 high is - for now - considered corrective. Support to watch lies at 4940.49, 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. For bulls, the trigger for a resumption of gains is 5066.50, the Feb 12 high.

• Japan's NIKKEI closed lower by 260.65 pts or -0.69% at 37703.32 and the TOPIX ended 27.44 pts lower or -1.05% at 2584.59.
• Across Europe, Germany's DAX trades higher by 6.8 pts or +0.04% at 16891.02, FTSE 100 higher by 42.8 pts or +0.57% at 7548.37, CAC 40 up 24.68 pts or +0.32% at 7649.07 and Euro Stoxx 50 up 7.85 pts or +0.17% at 4699.35.
• Dow Jones mini up 73 pts or +0.19% at 38394, S&P 500 mini up 17.75 pts or +0.36% at 4986.75, NASDAQ mini up 98.5 pts or +0.56% at 17764.

COMMODITIES: Short-Term Bounce in WTI Futures Remains in Play

The short-term bounce in WTI futures since Feb 5 remains in play but still appears to be a correction - for now. Key short-term resistance has been defined at $79.29, the Jan 29 high. Clearance of this level would be a bullish development. On the downside, support to watch lies at $71.41, the Feb 5 low. A break of this level would reinstate the recent bearish theme and pave the way for a move towards $69.56, the Jan 3 low. Gold traded lower Tuesday and in the process, this resulted in a break of $2001.9, the Jan 17 low and a key short-term support. The break highlights a resumption of the bear leg that started Dec 28. A continuation lower would open $1973.2, the Dec 13 low and the next key support. On the upside, the yellow metal needs to clear resistance at $2065.5, the Feb 1 high to reinstate a bullish theme.

• WTI Crude down $0.08 or -0.1% at $77.76
• Natural Gas down $0.02 or -1.01% at $1.668
• Gold spot down $2.54 or -0.13% at $1990.16
• Copper down $0 or 0% at $370.9
• Silver down $0.11 or -0.49% at $22.022
• Platinum up $7.06 or +0.81% at $881.28