Bond yields continue to drift higher

Notes/Observations

- European bourses advance steadily higher as markets attempt to rebound from weak ending of last week; Yields continue to drift higher on expectations that central banks will continue to hike for longer.

- UK news in focus as PM Sunak and EU's Von Der Leyen expected to conduct a press conference this afternoon on latest Brexit developments, including finalized revisions to the Northern Ireland Protocol; Focus to be on speculated concessions the EU has supposedly agreed to. Currently goods travelling from mainland UK to Northern Ireland undergo European customs checks due to its land border with Ireland despite the journey being technically domestic.

- UK Energy Regulator Ofgem cuts the annual price cap by approx 25% to £3,280 after wholesale energy prices have fallen notably in last few months; Analysts note household bills still expected to rise in the short term due to lag as the new cap is implemented.

- Asia closed lower with ASX200 underperforming by -1.1%. EU indices are +0.6-1.6%. US futures are +0.4-0.6%. Gold -0.1%, DXY -0.1%; Commodity: Brent +0.4%, WTI +0.4%, TTF -2.7%; Crypto: BTC +0.4%, ETH +2.1%.

Asia

- BOJ Gov Nominee Ueda reiterated view in upper House testimony that current BOJ monetary easing was appropriate and that it would will take time to achieve the price stability target. Extremely important to convey intention of monetary policy to financial markets, but policy shift may have to be a surprise sometimes.

Ukraine conflict

- US raised tariffs on over 100 Russian metals, minerals and chemicals worth around $2.8B; Confirmed new sanctions and also sanction 3rd-country companies – including China and Europe.

- US Pres Biden in interview asked how does this war end, and what does victory look like, answered: "Well, that depends on what the Ukrainians decide. But here's what we have to do in the meantime. We have to put the Ukrainians in a position where they can make advances this spring and summer and move to a place where they can negotiate from a position of strength."

Europe

- ECB chief Lagarde: Need to ensure that inflation returns to the 2% target; Core CPI is at record level. Every reason to believe ECB to hike by 50bps in March. Rate decisions to be data dependent after March.

- ECB's Visco (Italy) stated that policy would be as restrictive as needed; decisions to be made meeting by meeting.

- PM Sunak said to be preparing to announce new Brexit deal on Mon, Feb 27th; Unclear whether Sunak intended to give MPs an explicit vote on his new Northern Ireland Protocol deal. Sunak to meet EU's Van der Leyen to finalize the agreement before holding a cabinet meeting to sign off on the deal.

Americas

- Treasury Sec Yellen said to be willing to negotiate with Republicans over Biden’s budget proposal next month but not as a condition of raising debt ceiling.

- According to revised US Energy Dept report, COVID with 'low confidence' arose from a lab leak.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +1.12% at 462.82, FTSE +0.88% at 7,948.22, DAX +1.46% at 15,431.65, CAC-40 +1.49% at 7,294.57, IBEX-35 +1.23% at 9,313.40, FTSE MIB +1.68% at 27,441.00, SMI +0.57% at 11,245.80, S&P 500 Futures +0.48%].

Market Focal Points/Key Themes: European indices open higher across the board and maintained the upward momentum through the early hours of the session; sectors leading to the upside include consumer discretionary and technology; lagging sectors include telecom and real estate; reportedly Halion looking to sell its ChapStick brand; earnings expected in the upcoming US session include Zoom, Alcon and Saipem.

Equities

- Consumer discretionary: adidas [ADS.DE]
+3.5% (strength being attributed to press report that Kanye West and Adidas reached agreement to sell $500M in Yeezy shoes leftovers), H&M [HMB.SE] +3.5% (analyst upgrade), Caverion [CAV1V.FI] -1.0% (Board of directors continues to evaluate Triton's improved tender offer), Bunzl [BNZL.UK] +2.5% (reports FY22, outlook unchanged; acquisition).

- Consumer staples: Associated British Foods [ABF.UK] +1.5% (H1 update - FY22 expectations improved).

- Healthcare: Bayer [BAYN.DE] +0.5% (prostate cancer drug approved by Japan Health Ministry).

- Industrials: PostNL [PNL.NL] -10.0% (reports Q4, plans 200-300 job cuts, delays second tranche of buyback), Fluidra [FDR.ES] +7.5% (reports FY22, guides initial FY23), DX Group [DX.UK] +6.0% (earnings).

- Telecom: SES [SESG.FR] -8.0% (reports FY22, guides initial FY23).

Speakers

- UK Energy regulator OFGEM cut the price cap from £4,279 to £3,280, effective in April.

- China military official stated it was tracking US military aircraft's transit through the Taiwan strait. Reiterated stance that opposed such moves by US as such actions deliberately interferes and disrupts the regional situation.

- China Foreign Ministry spokesperson Mao Ning stated that it would take resolute countermeasures on US sanctions against Chinese firms.

Currencies/fixed income

- USD holding on to the bulk of recent gains as Yields continued to drift higher on expectations that the Fed and other central banks would continue to hike rates for longer.

- EUR/USD at 1.0550 area despite German 10-year bunds hitting its highest level since 2011.

- USD/JPY at 136.40 as Ueda continued his Parliamentary testimony and reiterated that current policy was appropriate.

Economic data

- (NL) Netherlands Feb Producer Confidence: 3.7e v 3.6 prior.

- (FI) Finland Feb Consumer Confidence: -11.9 v -12.7 prior; Business Confidence: -6 v -4 prior.

- (FI) Finland Jan PPI M/M: -2.1% v -0.8% prior; Y/Y: 10.7% v 14.5% prior.

- (SE) Sweden Jan Household Lending Y/Y: 3.2% v 3.5% prior.

- (SE) Sweden Jan Retail Sales M/M: -0.1% v -1.0% prior; Y/Y: -7.5% v -6.9% prior.

- (NO) Norway Jan Retail Sales M/M: 1.3% v 0.5%e.

- (TR) Turkey Feb Economic Confidence: 99.1 v 99.3 prior.

- (TR) Turkey Jan Preliminary Trade Balance: -$14.2B v -$14.4Be.

- (HK) Hong Kong Jan Trade Balance (HKD): -25.B v -17.0Be; Exports Y/Y: % v -27.6%e; Imports Y/Y: % v -23.1%e.

- (EU) Euro Zone Jan M3 Money Supply Y/Y: 3.5% v 3.9%e.

- (CH) Swiss weekly Total Sight Deposits (CHF): 520.7B v 526.8B prior; Domestic Sight Deposits: 506.0B v 512.4B prior.

- (IS) Iceland Feb CPI M/M: 1.4% v 0.9% prior; Y/Y: 10.2% v 9.9% prior.

- (IT) Italy Feb Consumer Confidence: 104.0 v 101.3e; Manufacturing Confidence: 102.8 v 103.0e; Economic Sentiment: 109.1 v 109.1 prior.

- (PT) Portugal Feb Consumer Confidence: -35.0 v -37.0 prior; Economic Climate Indicator: 1.7 v 1.4 prior.

- (EU) Euro Zone Feb Economic Confidence: 99.7 v 101.0e; Industrial Confidence: 0.5 v 1.8e; Services Confidence: 9.5 v 12.1e r; Consumer Confidence (final): -19.0 v -19.0 advance.

Fixed income issuance

- (DK) Denmark sold total DKK4.0B in 3-month and 6-month Bills.

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month bills; Avg Yield: 3.38% v 3.02% prior; Bid-to-cover: 4.33x v 3.14x prior.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (BE) Belgium Feb CPI M/M: No est v 0.1% prior; Y/Y: No est v 8.1% prior.

- 05:30 ((DE) Germany to sell combined €6.0B in 6-month and 12-month BuBills.

- 05:30 (EU) European Union to sell combined €4.0B in 2-year and 6-year NGEU bonds.

- 06:00 (BR) Brazil Feb FGV Inflation IGPM M/M: 0.1%e v 0.2% prior; Y/Y: 2.1%e v 3.8% prior.

- 06:00 (IL) Israel to sell combined ILS1.30B in 2025, 2026, 2030, 2031, 2032 and 2052 bonds.

- 06:00 (RO) Romania to sell RON500M in 3.5% Nov 2025 Bonds.

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 07:00 (MX) Mexico Jan Trade Balance: No est v $1.0B prior.

- 07:00 (CL) Chile Jan Unemployment Rate: 8.0%e v 7.9% prior.

- 07:30 (BR) Brazil Jan Total Outstanding Loans (BRL): No est v 5.326T prior; M/M: No est v 1.3% prior; Personal Loan Default Rate: No est v 5.9% prior.

- 08:00 (RU) Russia Gold and Forex Reserve w/e Feb 17th: $B v $589.0B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement.

- 08:30 (US) Jan Preliminary Durable Goods Orders: -4.0%e v +5.6% prior; Durables (Ex-Transportation): +0.2%e v -0.2% prior; Capital Goods Orders (non-defense/ex-aircraft): -0.1%e v -0.1% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.0%e v -0.6% prior.

- 08:30 (CA) Canada Q4 Current Account Balance: -$11.0Be v -$11.1B prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €4.7-6.3B in 3-month, 6-month and 12-month bills (4 tranches).

- 10:00 (US) Jan Pending Home Sales M/M: 1.0%e v 2.5% prior; Y/Y: No est v -34.3% prior.

- 10:30 (US) Feb Dallas Fed Manufacturing Activity: -9.3e v -8.4 prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 12:30 (BR) Brazil Jan Central Govt Budget Balance (BRL): 79.6Be v 4.4B prior.

- 14:00 (AR) Argentina Dec Supermarket Sales Y/Y: No est v 2.5% prior; Shop Center Sales Y/Y: No est v 7.2% prior.

- 18:50 (JP) Japan Jan Preliminary Industrial Production M/M: -2.9%e v +0.3% prior; Y/Y: -0.7%e v -2.4% prior.

- 18:50 (JP) Japan Jan Retail Sales M/M: 0.7%e v 1.1% prior; Y/Y: 4.1%e v 3.8% prior; Dept. Store, Supermarket Sales Y/Y: No est v 3.6% prior.

- 19:00 (NZ) New Zealand Feb ANZ Business Confidence: No est v -52.0 prior; Activity Outlook: No est v -15.8 prior.

- 19:01 (UK) Feb Lloyds Business Barometer: No est v 22 prior.

- 19:30 (AU) Australia Q4 Current Account Balance (A$): +5.0Be v -2.3B prior; Net Exports of GDP: +1.3%e v -0.2% prior.

- 19:30 (AU) Australia Jan Retail Sales M/M: No est v -3.9% prior.

- 19:30 (AU) Australia Jan Private Sector Credit M/M: No est v 0.3% prior; Y/Y: No est v 8.3% prior.

- 21:00 (SG) Singapore Jan M2 Money Supply Y/Y: No est v 1.9% prior; M1 Money Supply Y/Y: No est v -10.7% prior.

- 21:30 (SG) Singapore Jan Unemployment Rate: No est v2.0% prior.

- 23:00 (TH) Thailand Jan Manufacturing Production Y/Y: No est v -8.2% prior; Capacity Utilization: No est v 59.7% prior.

- 21:30 (KR) South Korea to sellKRW1.0T in 20-Year Bonds.

- 22:00 (TH) Thailand Central Bank to sell THB60B in 3-month bills.

- 22:35 (JP) Japan to sell 2-year JGB bonds.