MNI US OPEN - USD Fades, Equities Firm Pre-CPI

NEWS

MNI US CPI PREVIEW: Watching If Newfound Strength Sustained

Core CPI inflation is seen at 0.4% M/M in January with a survey skewed to a miss, holding at its recently revised rate for Dec after what was originally a 0.30% increase before new seasonal adjustment factors. Those SA revisions plus (known) revisions to CPI weights might muddy initial market reaction, potentially increasing volatility whilst the report is assessed.

JAPAN (MNI): Ueda's YCC Concerns Hint at BOJ Policy Shift

Bank of Japan governor-elect Kazuo Ueda, who is set to take office on April 9, will likely keep interest rates at low levels but may quicken the scrapping of yield curve control to restore functioning in financial markets, MNI understands. Japan's government on Tuesday officially nominated Kazuo Ueda, an economist and former Bank of Japan board member, as the BOJ’s next governor to replace Haruhiko Kuroda, whose term ends on April 8, a Diet official said.

JAPAN (MNI): BOJ Wary on Risks to Q1 Exports, Production

Bank of Japan officials remain vigilant against the risk of weaker exports and production in the first quarter due to a slowing global economy, as well as the threat of weaker private consumption amid ongoing high prices, MNI understands.

FRANCE (MNI): Fin Min Talks Up Econ, But Strikes Still Pose Political Risk

Reuters carrying comments from French Finance and Economy Minister Bruno Le Maire. States that he welcomes the latest Q4 French jobs figures, the gov't is sticking to its goal of 'full employment' by 2027. Says he wants all countries in the eurozone to come back to having 'healthy public finances'.

NATO (MNI): Kremlin Thinks it Can Wait Us Out on Ukraine - US Def Sec

US Secretary of Defense Lloyd Austin III speaking ahead of the meetings of NATO defence ministers and the Ukraine Defense Contact Group. States that "We reaffirm our support to a free Ukraine... Ukraine has shown that it will prevail.... [the US and NATO] will support Ukraine over the long haul.... That shared resolve will sustain Ukraine's momentum in the weeks ahead... The Kremlin is still betting that it can wait us out."

GLOBAL (BBG): World Economy Faces Growing Headwind of Services-Trade Barriers

The world economy’s recovery from the consequences of the Covid pandemic and the war in Ukraine is increasingly hampered by governments slapping more restrictions on services trade. According to an OECD index, the average increase in new measures across all sectors was five times higher in 2022 than in 2021. Audio-visual, computer and physical infrastructure services were particularly affected.

TURKEY (BBG): Turkey Wealth Fund to Support Equities With New Mechanism

Turkey’s sovereign wealth fund will support equities with a new, internal mechanism established to contain the market fallout from Feb. 6 earthquakes, according to officials with direct knowledge of the matter. Turkey Offers Support for Stocks as Trading to Resume Wednesday. The so-called price stability fund will receive capital from state lenders and use the cash to buy stocks at times of volatility, the officials said, asking not to be identified as the decision hasn’t been made public.

EQUITIES (BBG): BofA Survey Shows Investors Don’t Expect the Stock Rally to Last

While equity markets are on a relentless march higher amid optimism around stronger economic growth and cooling inflation, most investors aren’t convinced the gains will last, according to Bank of America Corp.’s latest global fund manager survey.

CORPORATE (BBG): Tesla Autopilot Workers Launch Union Campaign in New York

Tesla Inc. workers in New York state are launching a unionization campaign, teeing up a potential first for the electric-vehicle maker and the latest labor challenge for Chief Executive Officer Elon Musk. The employees, who label data for Tesla’s Autopilot technology at the company’s plant in Buffalo, New York, sent an email to Musk early Tuesday with their intent to unionize.

DATA

EUROZONE DATA (MNI): GDP Second Flash Unchanged, Likely Boosted by Irish Data

• EUROZONE FLASH Q4 GDP +0.1% Q/Q, +1.9% Y/Y

Eurozone Q4 2022 second flash estimates confirmed a +0.1% q/q GDP expansion, having initially outpaced forecasts of a -0.1% q/q contraction in the first flash estimates. The annualised Q4 GDP estimate remained at +1.9% y/y. This data is likely skewed upwards marginally by the Irish print, which recorded a +3.5% q/q 'boom' in Q4. The boost from strong Irish manufacturing sector data was likely subject to multinational reporting distortions.

UK DATA (MNI): Payrolls Jump, Strongest UK Wages Growth Ex Pandemic

• UK DEC ILO UNEMPLOYMENT RATE +3.7%
• UK JAN CLAIMANT RATE +3.9%
• UK DEC AVE WEEKLY EARNINGS +5.9% YY
• UK DEC AVE WEEKLY EARNINGS EX-BONUS +6.7% YY

Payrolled employees jumped 102k in January, over double that of December and markedly outpacing forecasts of +15k. The inactivity rate fell 0.3pp on the quarter to December, together implying continued labour market tightness. Though historically very high, the quarter to January saw job vacancies decline by 76k, implying the seventh consecutive recorded fall. Firms cited economic pressures as the grounds for lower recruitment levels.

JAPAN DATA (MNI): Govt Official Warns of Weaker Spending Amid High Prices

• JAPAN Q4 REAL GDP +0.6% ANNUALIZED; MNI MEDIAN +1.9%
• JAPAN Q4 REAL GDP +0.2% Q/Q; MNI MEDIAN +0.5%

Japan’s economy rebounded in the fourth quarter from a contraction in the third quarter due to stronger private consumption, but the government must pay attention to downward pressure from high prices on spending in the first quarter, a senior official at the Cabinet Office said on Tuesday. “The number of infections increased and private consumption is being affected by high prices, but consumption is in a rising trend in the wake of solid spending on goods and services,” the official told reporters.

AUSTRALIA DATA (MNI): Westpac Survey Signals Households About to Cut Back

Westpac consumer confidence slumped in February as cost-of-living pressures and rising rates weigh on households. It fell 6.9% m/m to 78.5, its lowest since February and close to historic lows after the RBA hiked again during the survey week and indicated that there was more to come. Spending has been holding up well but may be about to change. The RBA will be monitoring closely to see if consumers follow these responses with a sharp cut to their spending.

FOREX: USD Fades as Equities Look Constructive Pre-CPI

• The EUR trades well, with the single currency firmer against most others. EUR/USD has traded an intraday high at 1.0767, although prices remain shy of the 1.0791 Thursday high for now. Equity futures are modestly firmer, with the e-mini S&P building on the late Monday gains and helping drive a modest USD downtick into NY hours.
• NZD is underperforming, slipping against all others in G10 following inflation expectations data overnight. 2y inflation is seen at 3.30% for Q1, down from 3.62% late last year - feeding into the view that inflation may have peaked for now.
• USD/JPY has snapped overnight Asia-Pac weakness to rise back above the Y132 handle at the crossover, narrowing the gap with first resistance at Y132.91.
• The US inflation report is the highlight Tuesday, with markets expecting a pick up in monthly CPI to 0.5%, but a moderation in headline CPI to 6.2% and 5.5% for core metrics. Post-inflation Fedspeak will also be carefully watched, with Barkin, Logan, Harker and Williams all slated to speak.

BONDS: UK Short End Underperforming Ahead of US CPI

European curve flattening continues in early Tuesday trade, with the US cash curve mostly outperforming ahead of the Jan US CPI report.

• BoE hike pricing firmed on UK employment data showing the strongest wage growth rate on record outside the pandemic period. A 25bp hike in March is fully priced with another 25bp beyond that, pushing 2Y UK yields up by 5+bp.
• EGB periphery spreads have tightened, with BTPs holding up well despite large auction sizes this morning.
• The main event of course is the US inflation report at 0830ET/1330UK, with core % M/M seen +0.4%. The Tsy curve is bull steepening in early trade, with modest belly outperformance.
• Whatever the CPI result, we get plenty of Fed commentary afterwards, including Barkin, Logan, Harker, and Williams. In Europe we hear from ECB's Makhlouf.

Latest levels:

• Mar US 10Y Tsy futures (TY) up 4/32 at 112-29 (L: 112-26.5 / H: 113-01.5)
• Mar Bund futures (RX) up 25 ticks at 136.09 (L: 135.99 / H: 136.56)
• Mar Gilt futures (G) down 6 ticks at 103.72 (L: 103.69 / H: 104.28)
• Italy / German 10-Yr spread 0.6bps tighter at 179.8bps

EQUITIES: E-Mini S&P Trend Conditions Bullish Following Monday Price Action

EUROSTOXX 50 futures traded higher Thursday last week to breach 4265.00, the Feb 3 high. Despite the pullback from last week’s best levels, the fresh cycle high confirms a resumption of the uptrend and opens 4303.20, the 2.382 projection of the Sep 29 - Oct 4 rise from the Dec 20 low. Note that the trend is overbought. A pullback would represent a healthy correction. Key support lies at 4097.00, the Jan 19 low. Initial support is at 4167.50, the 20-day EMA. The S&P E-Minis trend condition is bullish and the latest pullback is considered corrective. The contract has pierced initial support at 4069.52, the 20-day EMA. Firmer support lies at the 50-day EMA, at 4006.63. A clear break of this average would signal scope for a deeper pullback and potentially highlight a reversal. Key resistance and the bull trigger intersect at 4208.50, the Feb 2 high. A breach would resume the uptrend.

• Japan's NIKKEI closed higher by 175.45 pts or +0.64% at 27602.77 and the TOPIX ended 15.42 pts higher or +0.78% at 1993.09.
• Elsewhere, in China the SHANGHAI closed higher by 9.122 pts or +0.28% at 3293.282 and the HANG SENG ended 50.66 pts lower or -0.24% at 21113.76.
• Across Europe, Germany's DAX trades higher by 45.21 pts or +0.29% at 15444.22, FTSE 100 higher by 39.17 pts or +0.49% at 7986.45, CAC 40 up 29.84 pts or +0.41% at 7238.59 and Euro Stoxx 50 up 13.52 pts or +0.32% at 4255.07.
• Dow Jones mini down 10 pts or -0.03% at 34264, S&P 500 mini down 1 pts or -0.02% at 4147.75, NASDAQ mini down 3.25 pts or -0.03% at 12545.25.

COMMODITIES: WTI Futures Contract Print Fresh Feb High Monday

WTI futures showed above the Friday high ahead of the Monday close, marking an extension of the recovery from $72.25, the Feb 6 low. The rally has confirmed a break of the 50-day EMA, at $78.34, strengthening the current bull cycle and note that price has pierced $80.22, 76.4% of the Jan 18 - Feb 6 bear leg. A clear break of this level would expose the key resistance at $82.66, the Jan 18 high. On the downside, initial firm support has been defined at $76.52, the Feb 9 low. Trend conditions in Gold are bearish for now, and the yellow metal remains in a corrective cycle. This follows the strong sell-off on Feb 2 / 3 and sights are on the 50-day EMA, at $1855.5. The average represents a key support and has been pierced. A clear break would strengthen a bearish case and suggest scope for a deeper pullback - towards $1825.2, the Jan 5 low. On the upside, key resistance and the bull trigger is at $1959.7, the Feb 2 high.

• WTI Crude down $0.82 or -1.02% at $79.28
• Natural Gas up $0.06 or +2.37% at $2.464
• Gold spot up $7.18 or +0.39% at $1860.25
• Copper up $1.05 or +0.26% at $406.65
• Silver down $0.15 or -0.7% at $21.8225
• Platinum down $3.76 or -0.39% at $953.93