Sense of calm returns aiding to unwind safe-haven flows

Notes/observations

- All eyes on upcoming FOMC decision on Wed with volatile rate expectations ahead of the meeting (Markets currently price in chances at 16% pause, 84% 25 bps hike).

- Focus remains on banking sector distress as AT1 bonds and EU bank stocks bounce back slightly on optimism following the weekend crisis. ECB's Lagarde and De Cos declared the ECB has sufficient tools available to ensure financial stability and maintain liquidity in the banking system. Over in the US, fears of contagion spreading from SVB and Signature seemingly parted for the time being and US said to be looking at methods to guarantee all deposits without approval from Congress if situation deteriorates. Mid-regional banks have called for all deposits over $250K to be insured for next 2 years.

- On the continent, France continues to be heavily handicapped by widespread strikes over pension reforms for raising retirement ages. French Govt narrowly survived 2 non-confident votes overnight.

- UK attention on party acceptance of the new Brexit deal (Windsor Framework). Northern Ireland's DUP stated they will vote against the deal.

- Asia closed mostly higher with Hang Seng Outperforming at +1.4%. EU indices are +1.2-2.3%. US futures are +0.2-0.5%. Gold -0.6%, DXY +0.1%; Commodity: Brent +0.8%, WTI +0.9%, TTF +0.5%; Crypto: BTC -2.0%, ETH -2.5%.

Asia

- RBA Mar Minutes saw members agree to consider rate pause at the next meeting in April.

- AT1 dollar bonds traded higher in Hong Kong.

- Japan markets close for spring equinox.

Europe

- ECB chief Lagarde noted that without tensions if would had indicated that further hikes would be needed. Already seeing policy having impact on financial conditions. ECB currently providing sufficient financing to banks.

- French government narrowly survived a no-confidence vote over pension reform in Parliament by 9 votes.

- Northern Ireland DUP leader Donaldson noted that Brexit deal was not enough to return to power-sharing agreement.

- Times shadow monetary policy committee urges BOE to continue raising interest rates. Majority of five said a slower 25 basis-point change was more appropriate.

Americas

- US Officials said to be studying ways to guarantee all bank deposits if crisis worsened.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +1.25% at 446.10, FTSE +1.33% at 7,502.61, DAX +1.29% at 15,126.65, CAC-40 +1.29% at 7,103.43, IBEX-35 +2.02% at 9,011.67, FTSE MIB +2.13% at 26,450.00, SMI +1.17% at 10,767.90, S&P 500 Futures +0.32%].

Market focal points/key themes: European indices open higher across the board; sectors leading to the upside include financials and energy; among lagging sectors are telecom and consumer discretionary; banking subsector supported by improved confidence following clarification of asset write-downs; oil & gas subsector supported by rebound in crude prices; Ordina to be acquired by Sopra Steria; reportedly CVC considering bid for Thyssenkrupp’s steel unit; earnings expected in the upcoming US session include Nike, AAR, GameStop and Deutsche Euroshop.

Equities

- Consumer discretionary: Kingfisher [KGF.UK] +3.0% (reports FY22), Richemont {CR.CH] +2.0% (Swiss trade balance).

- Financials: Credit Suisse [CSGN.CH] -2.0%, UBS [UBCG.CH] +3.5% (merger could result in tens of thousands job cuts), Commerzbank [CBK.DE] +4.0% (bounce of European banking sector), Partners Group [PGHN.CH] +1.5% (reports FY22).

- Healthcare: Oxford Nanopore [ONT.UK] +3.0% (initial collaboration with PathoQuest to bring the first GMP-accredited, nanopore-based biologics genetic characterisation test to market), Ambu [AMBUB.DK] -3.5% (affirms FY23 guidance, provides 5-year targets).

- Industrials: Thyssenkrupp [TKA.DE] +3.5% (CVC mulls €1B bid for Thyssenkrupp's Steel unit), Pfeiffer Vacuum [PFV.DE] -1.5% (guides FY23).

- Technology: Ordina [ORDI.NL] +23.5% (to be acquired).

- Utilities: RWE [RWE.DE] +2.0% (reports FY22 - beats estimates).

Speakers

- ECB's de Cos (Spain) reiterated ECB was ready to react to maintain financial stability and price stability; Could not validate market expectations of 3.25% terminal rate.

- ECB's Kazaks (Slovenia) stated that uncertainty in financial markets was high; It is not possible to say that we had stopped hiking. Currently too much uncertainty to say what will happen in May.

- Swiss KOF Institute updated its Spring economic forecasts which raised the 2023 GDP growth from 1.0% to 1.1% and set the 2024 GDP growth at 1.7%. It raised the 2023 CPI from 2.3% to 2.6% and set the 2024 CPI at 1.5% (below 2% target).

- Swiss Banking Association stated that the credibility in Swiss banking was not destroyed by Credit Suisse crisis, but situation was not good.

- Goldman Sachs Commodity Strategist Currie believed a Fed pause on rates would be bullish for oil; Saw upside of $5-10/bbl.

Currencies/fixed income

- Focus turned to upcoming rate decisions as financial crisis fears ease for the time being. Dealers noted that banking stress would keep the Fed from hiking rates much further, or at all, on Wed. Currently the probability of a 25bps hike was approx. 70% but some analysts believed the FOMC could keep rates unchanged. Most Fed attention would likely focus on the all-important forward-looking comments.

- Both the SNB and BOE are still expected to hike later this week as inflation remained too high.

- EUR/USD at 1.0735 and USD/JPY at 132.22 as dollar and yen softened as safe haven flows unwound..

Economic data

- (FI) Finland Feb Unemployment Rate: 6.7% v 7.6% prior.

- (UK) Feb Public Finances (PSNCR): -£0.2B v -£29.3B prior; PSNB (Ex-Banking Groups): £16.7B v £11.7Be; Net Borrowing: £15.9B v £10.2Be; Central Govt NCR: +£6.8B v -£20.9B prior.

- (EU) EU27 Feb New Car Registrations: 11.5% v 11.3% prior (7th straight increase).

- (CH) Swiss Feb Trade Balance (CHF): 3.3B v 4.9B prior; Real Exports M/M: -2.7% v +2.6% prior; Real Imports M/M: -0.5% v +0.1% prior; Watch Exports Y/Y: 12.2% v 8.7% prior.

- (CH) Swiss Feb M3 Money Supply Y/Y:+0.1 % v -0.1% prior.

- (HK) Hong Kong Q4 Current Account: $63.8B v $117.1B prior; Balance of Payments (BOP): -$16.5B v -$138.4B prior.

- (PL) Poland Feb Real Retail Sales M/M: -3.6% v +0.8%e; Y/Y: -5.0% v -1.5%e; Retail Sales (current prices) Y/Y: 10.8% v 13.9%e.

- (PL) Poland Feb Construction Output Y/Y: 6.6% v 1.3%e.

Fixed income issuance

- (ID) Indonesia sold total IDR11.0T vs. IDR11.0T target in Islamic bills and bonds (sukuk).

Looking ahead

- (RU) China President Xi visit to Russia.

- (NG) Nigeria Central Bank Interest Rate Decision: Expected to raise Interest Rate unchanged by 50bps to 18.00%.

- (FR) France Feb Retail Sales Y/Y: No est v -2.6% prior.

- 06:00 (DE) Germany Mar ZEW Current Situation Survey: -44.3e v -45.1 prior; Expectations Survey: 15.0e v 28.1 prior.

- 06:00 (EU) Euro Zone Mar ZEW Expectations Survey: No est v 29.7 prior.

- 06:00 (EU) Euro Zone Jan Construction Output M/M: No est v -2.5% prior; Y/Y: No est v -1.3% prior.

- 06:00 (BE) Belgium Mar Consumer Confidence: No est v -8 prior.

- 06:00 (EU) Daily Euribor Fixing.

- 06:00 (UK) DMO to sell £2.0B in 3.75% Oct 2053 green Gilts.

- 06:00 (AT) Austria Debt Agency (AFFA) to sell 3-month and 6-month bills.

- 06:15 (CH) Switzerland to sell 3-month Bills.

- 06:30 (DE) Germany to sell €1.5B in 1.3% Oct 2027 BOBL.

- 06:25 (EU) Daily ECB Liquidity Stats.

- 06:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 06:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 07:00 (IL) Israel Jan Manufacturing Production M/M: No est v 0.0% prior.

- 07:00 (FI) Finland to sell combined €2.0B in 2028 and 2026 RFGB bonds.

- 07:30 (EU) ESM to sell €1.1B in 6-month Bills.

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:30 (US) Mar Philadelphia Fed Non-Manufacturing Regional Index: No est v 3.2 prior.

- 08:30 (CA) Canada Feb CPI M/M: 0.6%e v 0.5% prior; Y/Y: 5.4%e v 5.9% prior; CPI Core-Median Y/Y: 4.8%e v 5.0% prior; CPI Core-Trim Y/Y: 4.9%e v 5.1% prior; Consumer Price Index: 154.6e v 153.9 prior.

- 08:30 (EU) ECB chief Lagarde.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (UK) Daily Baltic Dry Bulk Index.

- 10:00 (US) Feb Existing Home Sales: 4.20Me v 4.00M prior.

- 11:30 (US) Treasury to sell 52-Week Bills.

- 13:00 (US) Treasury to sell 20-Year Bond Reopening.

- 15:00 (AR) Argentina Feb Trade Balance: No est v -$0.5B prior.

- (MX) Mexico Banamex Survey of Economists.

- 16:00 (NZ) New Zealand Q1 Westpac Consumer Confidence: No est v 75.6 prior.

- 16:30 (US) Weekly API Oil Inventories.

- 19:00 (NL) Netherlands Feb House Price Index M/M: No est v 1.5% prior; Y/Y: No est v 1.1% prior.

- 20:00 (AU) Australia to sell A$700M in 3.00% Nov 2033 bonds.

- 22:35 (CN) China to sell 1-year and 5-year Upsized Bonds.