EU Core CPI hits fresh record high
|Notes/Observations
- Euro Zone Feb Flash CPI hotter than expected at 8.5% YoY with Core CPI at record highs of 5.6% YoY. Italy Prelim CPI also hotter than expected at 9.2% YoY.
- Focus remains on stubbornness of inflation and bond yields as global markets recalibrate peak rate expectations and length of time held at higher rates, amid accelerated Feb CPI readings.
- China's National People's Congress meeting begins on Sunday (Mar 5th); typical provided fiscal year targets.
- Asia closed mixed with Hang Seng under performing at -0.9%. EU indices are -0.3% to -0.8%. US futures are 0.0% to -0.8%. Gold -0.5%, DXY +0.3%; Commodity: Brent +0.4%, WTI +0.5%, TTF +2.9%; Crypto: BTC -1.6%, ETH -0.8%.
Asia
- South Korea Feb PMI Manufacturing: 48.5 v 48.5 prior (8th month of contraction).
- South Korea Jan Industrial Production M/M: +2.9% v -0.8%e; Y/Y: -12.7% v -9.5%e.
- Japan Q4 Capital Spending (Capex) Y/Y: 7.7% v 7.1%e; Capital Spending Ex-Software Y/Y: 6.3% v 5.5%e.
- China said to target 2023 GDP growth between 5.0-5.5%, potentially as high as 6.0% (prior 4.5-5.5) **Note: China’s upcoming National People’s Congress to begin on Mar 5th (Sun).
- BOJ Takata reiterated must maintain current massive monetary easing.
Taiwan
- US Pentagon: US State Dept approved the potential sale of F-16 munitions and related equipment to Taiwan.
Americas
- Fed's Bostic (non-voter) reiterated stance that Fed was not there yet on inflation. Needed to see monetary policy have greater dampening effect on demand.
Speakers/fixed income/FX/commodities/erratum
Equities
Indices [Stoxx600 -0.29% at 456.36, FTSE -0.40% at 7,883.37, DAX -0.73% at 15,193.95, CAC-40 -0.67% at 7,185.49, IBEX-35 -0.54% at 9,272.26 FTSE MIB -0.66% at 27,134.00, SMI -0.28% at 11,025.10, S&P 500 Futures -0.73%].
Market Focal Points/Key Themes: European indices open lower across the board and remained in the red through the early part of the session; better performing sectors include materials and energy; sectors trending lower include consumer discretionary and technology ; EDP to take control of its Brasil unit; reportedly Macquarie looking take over M&G; Renault, Geely and Saudi Aramco sign partnership on powertrain tech company; BP and Iberdrola enter JV for fast charge points; focus on release of ECB minutes later in the day; earnings expected in the upcoming US session include Hormel, Piaggio, Macy’s and Best Buy.
Equities
- Consumer discretionary: Tesla [TSLA.DE] -4.0% (investor day), Flutter Entertainment [FLTR.UK] -4.0% (reports FY22), SAS [SAS.SE] -1.5% (enters into sale-leaseback agreement for 10 A320's).
- Consumer staples: AB InBev [ABI.BE] -2.0% (reports Q4).
- Energy: Subsea 7 [SUBC.NO] +4.0% (reports Q4), Fortum [FORTUM.FI] -1.5% (reports Q4).
- Financials: London Stock Exchange [LSEG.UK] -1.5% (earnings), M&G plc [MNG.UK] +1.5% (merger speculation).
- Healthcare: Argenx [ARGX.BE] -3.5% (reports FY22), Merck KGaA [MRK.DE] -1.0% (reports FY22), Haleon [HLN.UK] -3.5% (earnings), Oxurion [OXUR.BE] -6.0% (subscription agreement with Atlas providing company with up to €20M in funding), GSK plc [GSK.UK] +1.0% (VRBPAC vote).
- Industrials: Hapag-Lloyd [HLAG.DE] +1.0% (earnings).
- Technology: GFT Technologies [GFT.DE] -4.5% (reports FY22).
- Utilities: Veolia [VIE.FR] -2.5% (reports FY22).
- Materials: Clariant [CLN.CH] -3.5% (reports Q4), Covestro [1COV.DE] -5.0% (reports FY22).
Speakers
- ECB chief Lagarde reiterated case for 50bps hike at March meeting remained on the table. Reiterated future rate path after March to be data-dependent. Needed to use all tools to bring inflation down.
- BoE Decision Maker Panel survey expected cooler inflation, higher wages, and tighter labor market. Saw 1-year ahead CPI at 6.4% vs. 7.4% prior survey and the 3-year ahead CPI seen at 3.4% vs. 4.0% prior survey.
- Czech Central Bank Dep Gov Frait stated that additional tightening could be done via rates or currency.
- Russia Deputy Foreign Min Ryabkov reiterated that US, NATO involvement could lead to direct nuclear powers' clash with catastrophic.
- China Commerce Ministry (MOFCOM) spokesperson Shu Jueting stated that China-US trade had been highly complementary and resilient but restrictive measures did hurt its potential.
Currencies/fixed income
- USD was steady aided by higher US bond yields.
- EUR/USD at 1.0630. Dealers noted that inflation accelerated in major countries in February, keeping the pressure on the ECB to raise interest rates further. EU Core reading hit a fresh record high at 5.6%. Pair unfazed by the EU data as it was foreshadowed by other member States.
- USD/JPY at 136.50 with focus turning to the upcoming BOJ rate decision next week (Kuroda’s last as Gov). BOJ said to prefer for now watching impact of earlier tweaks it did earlier.
Economic data
- (NL) Netherlands Feb Preliminary CPI Y/Y: 8.0% v 7.6% prior.
- (NL) Netherlands Feb Preliminary CPI EU Harmonized M/M: +1.3 v -1.9% prior; Y/Y: 8.9% v 8.2%e.
- (FI) Finland Jan House Price Index M/M: -2.4% v -0.5% prior; Y/Y: -5.3% v -2.5% prior.
- (DK) Denmark Jan Unemployment Rate: 2.3% v 2.3% prior; Gross Unemployment Rate: 2.8% v 2.7% prior.
- (HU) Hungary Q4 Final GDP Q/Q: -0.4% v -0.4% prelim; Y/Y: 0.4% v 0.4% prelim.
- (FR) France Jan YTD Budget Balance: -€21.1B v -€151.5B prior.
- (ES) Spain Feb Net Unemployment Change: +2.6K v +70.7K prior.
- (AT) Austria Feb Preliminary CPI M/M: 1.0% v 0.9% prior; Y/Y: 11.0% v 11.2% prior.
- (BR) Brazil Feb FIPE CPI (Sao Paulo) M/M: 0.4% v 0.5%e.
- (HK) Hong Kong Jan Retail Sales Value Y/Y: 7.0% v 4.5%e; Retail Sales Volume Y/Y: 5.1% v 2.2%e.
- (IT) Italy Jan Unemployment Rate: 7.9% v 7.8%e.
- (IS) Iceland Q4 Current Account (ISK): -20.2B v +26.4B prior.
- (EU) Euro Zone Feb CPI Estimate Y/Y: 8.5% v 8.3%e; CPI Core Y/Y: 5.6% v 5.3%e.
- (EU) Euro Zone Jan Unemployment Rate: 6.7% v 6.6%e.
- (IT) Italy Feb Preliminary CPI M/M: 0.3% v 0.1%e; Y/Y: 9.2% v 8.9%e.
- (IT) Italy Feb Preliminary CPI EU Harmonized M/M: +0.2% v -0.3%e; Y/Y: 9.9% v 9.5%e.
- (BE) Belgium Jan Unemployment Rate: 5.8% v 5.8% prior.
- (GR) Greece Jan Unemployment Rate: 10.8% v 11.6% prior.
Fixed income issuance
- (ES) Spain Debt Agency (Tesoro) sold total €5.978B vs. €5.0-6.0B indicated range in 2026, 2029 and 2033 SPGB bonds.
- Sold €2.139B in 2.8% May 2026 SPGB bonds; Avg Yield: 3.433% v 2.919% prior; Bid-to-cover: 2.02x v x 2.33x prior.
- Sold €1.475B in 0.80% July 2029 SPGB bond; Avg Yield: 3.520% v 3.206% prior; bid-to-cover: 1.88x v 1.76x prior.
- Sold €2.364B in new 3.15% 2033 SPGB bonds; Avg Yield: 3.765% v 3.399% prior; bid-to-cover: 1.85x v 1.83x prior.
- (ES) Spain Debt Agency (Tesoro) sold €502M vs. €250-750M indicated range in 0.7% Nov 2033 inflation-linked bonds (SPGBei); Real Yield: 1.164% v 1.018% prior; Bid-to-cover: 1.95x v 2.10x prior.
- (FR) France Debt Agency (AFT) sold total €11.999B vs. €10.5-12.0B indicated range in 2032, 2034, 2038 and 2060 Bonds.
- Sold €5.055B in 2.00% Nov 2032 Oat; Avg Yield: 3.20% v 2.68% prior; Bid-to-cover: 2.27x v 2.09x prior (Feb 2nd 2023).
- Sold €3.162B in 1.25% May 2034 Oat; Avg Yield: 3.31% v 1.57% prior; bid-to-cover: 2.18x v 2.31x prior (Aug 4th 2022).
- Sold €2.543B 1.25% May 2038 Oat; Avg Yield: 3.47% v 3.02% prior; bid-to-cover: 2.43x v 1.79x prior (Jan 5th 2023).
- Sold €1.239B in 4.00% Apr 2060 Oat; Avg yield: 3.49% v 0.57% prior; Bid-to-cover: 2.51x v 1.70x prior.
- (UK) DMO sold £650M in 0.125% Mar 2051 Inflation-Linked Gilts (UKTi); Real Yield: 0.835% v 1.551% prior; bid-to-cover: 2.40x v 2.75x prior.
Looking ahead
- 05:25 (EU) Daily ECB Liquidity Stats.
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.
- 06:00 (IL) Israel Jan Chain Store Sales M/M: No est v -2.1% prior.
- 06:00 (ZA) South Africa Jan Electricity Consumption Y/Y: No est v -7.6% prior; Electricity Production Y/Y: No est v -8.3% prior.
- 06:55 (US) Daily Libor Fixing.
- 07:00 (BR) Brazil Q4 GDP Q/Q: -0.2%e v +0.4% prior; Y/Y: 2.3%e v 3.6% prior; GDP 4 Quarters Accumulated: 3.0%e v 3.0% prior.
- 07:00 (MX) Mexico Jan Unemployment Rate (unadj): 3.1%e v 2.8% prior; Unemployment Rate (seasonally adj): No est v 3.0% prior.
- 07:00 (MX) Mexico Jan Leading Indicators M/M: No est v -0.1% prior.
- 07:00 (MX) Mexico Feb Domestic Vehicle Sales: No est v 94.4K prior.
- 07:30 (DE) ECB’s Schnabel (Germany).
- 08:00 (RU) Russia Gold and Forex Reserve w/e Feb 24th: No est v $582.1B prior.
- 08:00 (SG) Singapore Feb Purchasing Managers Index (PMI): 49.7e v 49.8 prior; Electronics Sector Index: No est v 49.1 prior.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 08:30 (US) Q4 Final Nonfarm Productivity: 2.5%e v 3.0% prelim; Unit Labor Costs: 1.6%e v 1.1% prelim.
- 08:30 (US) Initial Jobless Claims: 195Ke v 192K prior; Continuing Claims: 1.67Me v 1.654M prior.
- 08:30 (US) Weekly USDA Net Export Sales.
- 10:00 (MX) Mexico Central Bank Economist Survey.
- 10:00 (UK) BOE Pill (chief economist).
- 10:30 (US) Weekly EIA Natural Gas Inventories.
- 11:00 (DK) Denmark Feb Foreign Reserves (DKK): No est v 594.6B prior.
- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.
- 14:00 (US) Fed’s Waller.
- 16:00 (NZ) New Zealand Feb ANZ Consumer Confidence: No est v 83.4 prior.
- 17:00 (AU) Australia Feb Final PMI Services: No est v 49.2 prelim; PMI Composite: No est v 49.2 prelim.
- 18:30 (JP) Japan Feb Tokyo CPI Y/Y: 3.3%e v 4.4% prior; CPI (Ex-Fresh Food) 3.3%e v Y/Y: 4.3% prior; CPI (Ex-Fresh Food, Energy) Y/Y: 3.1%e v 3.0% prior.
- 18:30 (JP) Japan Jan Jobless Rate: 2.5%e v 2.5% prior; Job-To-Applicant Ratio: 1.36x v 1.35 prior.
- 19:30 (AU) Australia Jan Home Loans Value M/M: -3.0%e v -4.3% prior; Investor Loan Value M/M: No est v -4.4% prior; Owner-Occupier Loan Value M/M: No est v -4.2% prior.
- 19:30 (JP) Japan Feb Final PMI Services: No est v 53.6 prelim; PMI Composite: No est v 50.7 prelim.
- 19:30 (SG) Singapore Feb PMI (Whole economy): No est v 51.2 prior.
- 19:30 (HK) Hong Kong Feb PMI (Whole economy): No est v 51.2 prior.
- 20:01 (IE) Ireland Feb PMI Services: No est v 54.1 prior; PMI Composite: No est v 52.0 prior.
- 20:45 (CN) China Feb Caixin PMI Services: 54.5e v 52.9 prior; PMI Composite: No est v 51.1 prior.
- 22:30 (JP) Japan to sell 3-Month Bills.
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