MNI US OPEN - US Plans to Unveil Latest Russia Sanction Package

NEWS

FED (MNI): Fed’s Waller on Rate Cuts – ‘What’s The Rush?’

The Federal Reserve can take its time as it considers when to begin cutting interest rates because the economy and employment remain robust, Fed Governor Christopher Waller said Thursday. A hotter-than-expected January CPI reading was a reminder that the path back to the central bank’s 2% inflation target will not be a straight one, he said, adding that he needs “at least another couple of months” of additional data on inflation before making a judgment as to whether disinflation is stalling.

US/RUSSIA (BBG): US Plans Biggest Russia Sanction Package of Two-Year War

The US will sanction more than 500 people and entities linked to Russia’s war machine, in its most sweeping single push to to squeeze the Russian economy nearly two years after President Vladimir Putin’s forces invaded Ukraine, according to a Treasury Department spokesperson. The actions will be announced Friday by the State and Treasury Departments, the spokesperson said. Earlier this week, President Joe Biden had said the US planned to unveil a “major” sanctions package following the death of Russian opposition leader Alexey Navalny in a remote Arctic prison.

US/CHINA (BBG): US, China Discuss Plans to Avoid Emerging-Market Defaults

The US and China are discussing new measures to prevent a wave of emerging market sovereign defaults, according to people familiar with the situation, one of the most significant attempts in years at economic cooperation between the rival superpowers. The talks — including ways to preemptively extend loan periods before countries miss payments — are broadly aimed at both easing the $400 billion-plus annual debt service burden for poor countries and finding an alternative to the high borrowing rates those nations now face in the market.

US (BBG): Trump Seeks Dismissal of US Charges Over Handling of Documents

Donald Trump has asked a judge to toss out federal criminal charges over his alleged mishandling of classified US records after leaving the White House and obstruction of government efforts to get them back, arguing his actions were protected by presidential immunity. The motion to dismiss, filed Thursday by the former president’s legal team in Florida, sets up a high-stakes ruling by US District Judge Aileen Cannon, a Trump appointee who will decide if the case brought last year by Special Counsel Jack Smith can proceed to trial as soon as May 20.

ECB (BBG): ECB Unlikely to Cut Interest Rates Before Fed, Holzmann Says

European Central Bank Governing Council member Robert Holzmann said he doesn’t see reductions in interest rates coming before the US — suggesting he reckons any move by policymakers in Frankfurt may still be some way off. “If the Fed changes its policy hiking, then I assume it will have the same conditions like in Europe, because these currency areas are interrelated so this would then also mean that we have to rethink,” the hawkish Austrian official told Bloomberg TV.

ECB (BBG): ECB Must Avoid Temptation to Lower Rates Earlier, Nagel Says

The European Central Bank shouldn’t be lured into lower borrowing costs prematurely as there’s insufficient evidence at present that inflation is under control, Governing Council member Joachim Nagel said. Officials will only receive a more detailed picture on price pressures inside the 20-nation euro zone during the second quarter, the Bundesbank president said Friday. Only then can the ECB contemplate easing, he stressed, urging policymakers to avoid moving too soon and having to reverse course down the line.

ECB (MNI): ECB Tightening Conditions Peak Has Passed - Schnabel

The peak of tightening financial conditions coming from the European Central Bank's hiking cycle is "now behind us", executive board member Isabel Schnabel said in a speech in Milan on Friday. Since the ECB paused in October, Eurozone financial conditions have come down "quite a bit" after markets started to anticipate cuts "quite aggressively", loosening financial conditions, Schnabel said in her speech.

NATO (MNI): Orban to Discuss Fighter Jet Deal w/Swedish PM Ahead of NATO Approval

Hungarian PM Viktor Orban hosts his Swedish counterpart Ulf Kristersson in Budapest today. The meeting comes ahead of the expected final ratification of Sweden's NATO accession by the Hungarian National Assembly, set to take place on Monday 26 Feb. Rather than focusing on the contentious claims from Orban "that Sweden had insulted Hungary by speaking out against his abuse of rule of law", Bloomberg reports talks today are likely to focus on an arms deal between the two nations.

RBNZ (MNI): MPC to Consider Pause and Keep Hawkish Stance

The Reserve Bank of New Zealand's monetary policy committee will strongly consider holding the Official Cash Rate at 5.5% when it next meets on Feb 28, maintaining its hawkish stance while revising its long-term OCR projections higher as it grapples with labour-market strength and a refreshed mandate. Economic data has been mixed since the MPC left rates on hold when it last met in November 2023, however, unemployment remains lower than expected. This, coupled with higher household inflation expectations and strong non-tradable inflation will keep the RBNZ hawkish.

CORPORATE (BBG): StanChart Unveils $1 Billion Share Buyback as Profit Beats

Standard Chartered Plc pledged to hand back more money to shareholders as it outlined efforts to improve returns and reduce complexity at the emerging markets-focused lender. Reporting fourth-quarter profits that beat analyst estimates, the London-headquartered bank said it would kick off a fresh $1 billion buyback. The firm said a new “Fit for Growth” program will save about $1.5 billion in expenses over the next three years, but also add a similar amount to costs for the permanent organizational changes.

DATA

EUROZONE DATA (MNI): February EZ Inflation Expectations Little Changed

• ECB 1-YEAR CONSUMER INFLATION EXPECTATIONS 3.3%
• ECB 3-YEAR CONSUMER INFLATION EXPECTATIONS 2.5%

Eurozone consumer inflation expectations for the next 12 months inched higher to 3.3% in January from 3.2% in December, an ECB survey showed. Expectations for the next three years -- more closely watched by policymakers -- were unchanged at 2.5%. Inflation expectations at the one-year and three-year horizons remained well below the perceived past inflation rate of 6.0%, but uncertainty about inflation expectations over the next 12 months remained unchanged. The ECB rejigged its Consumer Expectations Survey earlier this month, adding five new countries to the survey.

GERMANY DATA (MNI): IFO Improves But Shows Little Signal of Growth Momentum Returning

• GERMANY FEB IFO CURRENT CLIMATE INDEX 86.9; FCST 86.7
• GERMANY FEB IFO EXPECTATIONS 84.1; FCST 84.0
  
• GERMANY FEB IFO BUSINESS CLIMATE INDEX 85.5

Germany's IFO Business Confidence Index edged up to 85.5 in February, in line with expectations and higher than the 85.2 prior. It also marked a modest divergence with February's flash Composite PMI which weakened - but both surveys pointed to poor economic momentum to start the year, and suggested further deterioration in manufacturing contrasting with solidifying services.

UK DATA (MNI): Mixed Messages in Feb From UK Consumer - GfK

• UK FEB GFK CONSUMER CONFIDENCE INDEX -21

UK GfK Consumer Confidence fell -2 points to -21 in February, slightly weaker than expected (-18 forecast, -19 prior). It remains below the long-run average of -10, although, on a year-on-year basis, this months reading is a +17 point improvement. There are still headwinds holding back the UK consumer but the outlook for personal finances over the coming year remains a relative positive, the head of a leading consumer sentiment survey told MNI. "Higher real disposable incomes as inflation slows is certainly helping the consumer feel a little better about their own financial outlook, but the latest survey offers both good and bad news in February," Joe Staton, Client Strategy Director GfK, said in an interview.

CHINA DATA (MNI): House Prices Still Fall, But at Slower Pace Compared to Dec

Jan house price data saw a slight improvement on the Dec outcomes. New home prices fell -0.37% m/m, versus -0.45% in Dec. Existing home prices were down-0.68% m/m, versus a -0.79% fall in Dec. Still for new home sales this marks the 8th straight month of price falls. For used homes this was the 9th straight monthly drop. In y/y terms new home prices were down -1.24% y/y (versus -0.89% in Dec). For existing homes, we are down -4.45% (versus -4.07% in Dec).

FOREX: USD/JPY Streak of Higher Lows Brings Key Resistance Into Range

• The USD remains firmer off the Thursday lows, with the ability of US stock futures to hold the NVIDIA-triggered rally helping aid greenback sentiment. A Japanese market holiday kept Asia-Pac trade muted, but firmer front-end US yields upon the re-opening of trade has also proved USD-supportive.
• USD/JPY continues to print higher lows, with the new weekly high in spot at 150.77 well within range of key resistance and the bull trigger at 150.89. Any clearance here would put the pair at the best levels since late November, and could re-trigger concern in Japan over the weakness in the JPY, particularly as EUR/JPY's uptrend continues to bed in.
• NOK sits at the other end of the table, softer against broader G10 despite few domestic cues in Norway. Brent prices sit softer, which could be undermining the currency - however a decent gap remains between current levels and key resistance at 11.5004.
• Data releases are few and far between for the Friday session, with no Fed speakers on the docket. ECB's Schnabel is set to speak, but fresh policy messaging is unlikely at this stage.

EGBS: Remain Under Pressure; Peripheries Mixed

Core/semi-core EGBs remain under pressure, as this morning's ECB speakers stuck close to their usual stances.

• ECB's Schnabel noted again that the "last mile" of disinflation may be the hardest, but did note that the peak tightening impact from past hikes may be over.
• Elsewhere, Nagel and Holzmann remained on the hawkish end, with the former stressing the importance of Q2 data for rate cut decisions (most of the Governing council have been focused on the Q1 figures thus far).
• The German IFO was pretty much in line, while the ECB's 1-year ahead expectations rose a touch to 3.3% (3-year ahead remained at 2.5%).
• Bunds are -43 ticks at 132.15, with the first support still at 131.73 (1.0% 10-dma envelope). OAT and BTP futures are also around 40 ticks lower.
• The German and French curves have bear flattened, while periphery spreads to Bunds are mixed. The 10-year BTP/Bund spread is +1.2bps wider at 148.7bps, roughly in the middle of this week's range.
• A second appearance from ECB's Schnabel at 1300GMT/1400CET highlights the remainder of today's regional docket.

GILTS: Holding Softer on Day, Recent Ranges Respected

Gilt futures operate a little above worst level but haven’t challenged this week’s lows, which protect the ’24 base.

• Wider core global FI weakness filter in.
• Domestically, OFGEM announced a 12.3% move lower in the Q2 energy price cap, a slightly shallower fall than the benchmark exp. of circa -14%.
• That means that the household reprieve, while still notable, will not be quite as meaningful as many had hoped and may be applying some modest pressure to gilts & STIRs, even though it shouldn’t meaningfully impact wider policy settings.
• Futures last print -47 at 97.14, sticking in a 97.10-97.47 band thus far.
• Roll turnover continues to garner a greater proportion of broader volume, as flagged elsewhere.
• Cash gilt yields are 2.5-3.5bp higher on the day, with a light bear flattening impulse.
• SONIA futures are little changed vs. levels seen shortly after the gilt open, last showing +0.25 to -8.5.
• BoE-dated OIS is little changed to 1.5bp firmer through ’24 contracts, showing ~60bp of cuts through ’24.
• The strip is generally respecting the YtD shallows in terms of the pricing of rate cuts (which were printed late last week/early this week).
• The local docket is slim to end the week.

EQUITIES: Trend Condition in E-Mini S&P Resolutely Bullish

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. 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 giving way to new highs at 5107.75. 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 5107.75, the Feb 22 high.

• In China the SHANGHAI closed higher by 16.523 pts or +0.55% at 3004.881 and the HANG SENG ended 17.09 pts lower or -0.1% at 16725.86.
• Across Europe, Germany's DAX trades lower by 6.54 pts or -0.04% at 17363.6, FTSE 100 higher by 5.12 pts or +0.07% at 7688.4, CAC 40 up 4.34 pts or +0.05% at 7916.02 and Euro Stoxx 50 down 1.75 pts or -0.04% at 4853.78.
• Dow Jones mini down 23 pts or -0.06% at 39100, S&P 500 mini down 4.75 pts or -0.09% at 5092.75, NASDAQ mini down 43 pts or -0.24% at 18004.25.

COMMODITIES: WTI Futures Struggle to Make Clear Break of Key Short-Term Resistance

Gains in WTI Futures off the Feb 5 low still appear corrective at these levels. Key short-term resistance has been defined at $78.52, the Feb 16 high - a level briefly pierced by the recovery off this week’s low. 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-month, but is building well off lows and has pierced 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 down $1.04 or -1.32% at $77.57
• Natural Gas down $0.07 or -3.81% at $1.666
• Gold spot down $7.57 or -0.37% at $2016.77
• Copper down $4.85 or -1.24% at $386.45
• Silver down $0.18 or -0.78% at $22.5735
• Platinum down $11.66 or -1.29% at $889.98