Risk appetite aided by optimism on next round of Russia-Ukraine talks

Notes/Observations

- Optimism over diplomatic efforts to end the Ukraine war as both Russian and Ukrainian officials gave positive assessments of progress in their talks.

- European inflation data continued to accelerate (saw German and Swedish data in session).

- Focus on upcoming rate decisions with both Fed and BOE expected to hike.

Asia

- China places city of Shenzhen (17.5M of residents and tech hub) into a lockdown to last until Mar 20th.

Russia/Ukraine

- Russia govt official confirmed there has been "substantial progress" on talks with Ukraine, the parties to meet again early Monday, March 14th.

- Ukraine negotiator Podolyak stated that Russia was beginning to talk constructively and believed would achieve results in a matter of days.

- Reports circulated that negotiators were working to ensure Putin meeting: Zelenskyy.

- Russia said to have had asked China for military equipment and other assistance since the start of Ukraine's invasion; Signs that Russia was running out of some kinds of weaponry.

- Ukraine President Zelensky said to have asked Biden to tighten existing sanctions with a much expanded list of sanctioned Russians, and restrict Russia’s access to international waterways.

- German Chancellor Scholz, French President Macron and Russian President Putin held 90-conference call on Saturday (Mar 12th). Macron noted that the call was "very frank and also difficult". Putin repeated demands for Ukraine's demilitarization, drop bid to join NATO, adopt neutral statues and acknowledge Russian sovereignty over Crimea.

Europe

- UK Brexit negotiator Truss said to put the potential triggering of Article 16 on hold due to the war in Ukraine.

- UK Chancellor of the Exchequer Sunak (Fin Min) said to line up new measures to tackle cost-of-living crisis.

- Italy Agriculture Min Patuanelli stated that govt would have to plan for additional borrowing in 2022 to protect businesses and families from the fallout of Russia’s invasion of Ukraine.

- EU Parliament committee to vote on the Markets in Crypto Assets (MiCA) framework, final draft shows possible ban of proof of work consensus mechanism such as BTC and ETH by requiring crypto assets to adhere to the EU's minimum environmental sustainability standards.

Energy

- Biden administration perusing Venezuela oil said to be getting a lot of opposition among Democrats and Republicans.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 +0.95% at 435.26, FTSE +0.24% at 7,173.00, DAX +2.37% at 13,951.51, CAC-40 +0.26% at 7,174.00, IBEX-35 +1.73% at 8,282.90, FTSE MIB +1.93% at 23,487.00, SMI +0.64% at 11,569.25, S&P 500 Futures +0.70%].

Market Focal Points/Key Themes: European indices open higher across the board but pared some of the gains as the session progressed; improved risk sentiment attributed to positive comments from Russian and Ukrainian negotiators; sectors among those leading to the upside are industrials and financials; laggard sectors include health care and consumer discretionary; automotive subsector bolstered by Volkswagen results, also supporting DAX; oil and gas subsector dragged with crude prices lower; Turquoise Hill receives takeover offer from Rio Tinto; Alphawave acquires OpenFive; Atlas Copco acquires Lewa and Geveke; Kerry acquires Maui Jim; no major earnings expected in the upcoming US session.

Equities

- Energy: EDF [EDF.FR] -2.5% (updates on negative regulatory and nuclear output cut impact).

- Financials: Deutsche Bank [DBK.DE] +6% (statement on Russia ops).

- Industrials: Volkswagen [VOW3.DE] +6% (final results; outlook comments; Ford collaboration), Deutz [DEZ.DE] +7% (earnings).

Speakers

- ECB's Kazaks (Latvia, hawk) stated that was possible for APP bond buying (conventional QE) to end in Q3 (in-line with recent ECB statement). Cautioned that interest rate increase was not a good method to address energy price rise.

- France Fin Min Le Maire stated that Russian sanctions could be strengthened further.

- Swiss SECO March Economic Forecasts cut the 2022 GDP growth forecast from 3.0% to 2.8% while maintaining the 2023 GDP growth at 2.0%. It raised the 2022 CPI forecast from 1.1% to 1.9% and maintained the 2023 CPI at 0.7%.

- Russian Finance Ministry: stated that it would meet its debt obligations in full and in a timely manner; Freeze on reserves could be seen as intention to trigger artificial default on Russian debt. Stressed that Russia had enough funds to meet its obligations.

- Ukraine Presidential adviser: To discuss peace, ceasefire, immediate withdrawal of troops and security guarantees during next round of talks with Russia; Ukraine's position was unchanged.

- Japan PM Kishida stated that Increase in CPI remained limited until now but added that higher prices were beginning to affect the economy. Preparing policies to deal with price increases. Reiterated govt stance that not thinking about adjusting sales tax (in line).

- India said to be considering taking up a Russian offer to buy its crude oil and other commodities at discounted prices with payment via an Indian rupee-rouble transaction.

- South Korea Fin Min Hong Nam-ki: To take timely steps to prevent excessive FX volatility.

- Iran Foreign Ministry spokesperson noted that the nuclear talks taking a short break and not due to any impasse.

Currencies/Fixed income

- Optimism over diplomatic efforts to end the Ukraine war as both Russian and Ukrainian officials gave positive assessments of progress in their talks. The session saw an unwinding of safe haven flows which weakened the USD and JPY and pushed bond yields higher.

- EUR/USD drifted highet to test above 1.0950 level in the session.

- GBP/USD was back above the 1.30 level as participants looked ahead to Thursday’s BOE decision where the MPC was expected to against raise interest rates further in an effort to bring down inflation as energy prices soar.

-USD/JPY approaching the 118 area aided by yield differentials.

Economic data

- (SE) Sweden SEB Mar Housing-Price Indicator: 29 v 45 prior.

- (FI) Finland Feb CPI M/M: 0.5% v 1.2% prior; Y/Y: 4,5% v 4.4% prior.

- (FR) Bank of France Feb Industrial (Business) Sentiment: 107 v 106e.

- (IN) India Feb Wholesale Prices (WPI) Y/Y: 13.1% v 12.1%e.

- (DE) Germany Feb Wholesale Price Index M/M: 1.7% v 2.3% prior; Y/Y: 16.6% v 16.2% prior.

- (SE) Sweden Feb CPI M/M: 0.9% v 0.6%e; Y/Y: 4.3% v 4.0%e; CPI Level: 353.56 v 352.19e.

- (SE) Sweden Feb CPIF M/M: 0.9% v 0.4%e; Y/Y: 4.5% v 4.1%e

- (SE) Sweden Feb CPIF (ex-energy) M/M: 1.0% v 0.6%e; Y/Y: 3.4% v 3.0%e.

- (RO) Romania Feb CPI M/M: 0.6% v 0.9%e; Y/Y: 8.5% v 9.0%e.

- (CN) China Feb YTD Foreign Direct Investment FDI (CNY) Y/Y: 37.9% v 11.6% prior.

- (FR) France Jan Trade Balance: -€8.0B v -€9.7Be; Current Account Balance: -€1.8B v -€7.0B prior.

- (ES) Spain Jan Adjusted Retail Sales Y/Y: 4.0% v 4.7%e; Retail Sales (unadj) Y/Y: +3.8% v -3.1% prior.

- (CZ) Czech Jan Retail Sales Y/Y: 9.6% v 8.7%e; Retail Sales (ex-auto) Y/Y: % v 9.8%e.

- (HK) Hong Kong Q4 Industrial Production Y/Y: 5.8% v 7.8% prior.

- (HK) Hong Kong Q4 PPI Y/Y: +1.2% v -0.8% prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 728.0B v 725.2B prior; Domestic Sight Deposits: 659.5B v 660.9B prior.

Fixed income issuance

- None seen.

Looking ahead

- 06:00 (EU) Daily Euribor Fixing.

- 06:00 (NO) Norway to sell NOK8.0B in 12-month bills; Avg Yield: % v 0.90% prior; Bid-to-cover: x v 1.39x prior.

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

- 06:30 ((DE) Germany to sell €3.0B in 6-month BuBills.

- 07:00 (IL) Israel to sell 2024, 2026, 2030, 2031 and 2052 bonds.

- 07:45 (US) Daily Libor Fixing.

- 07:00 (RO) Romania to sell RON400M in 4.85% 2026 Bonds.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (IN) India Feb CPI Y/Y: 6.0%e v 6.0% prior.

- 09:00 (RU) Russia Jan Trade Balance: $22.0Be v $26.7B prior; Exports: $49.5Be v $57.4B prior; Imports: $29.5Be v $30.7B prior.

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

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 10:00 (FR) France Debt Agency (AFT) to sell €4.5-5.7B in 3-month, 6-month and 12-month bills.

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

- 12:00 (CA) Canada to sell 10-year Bonds.

- 17:00 (KR) South Korea Feb Export Price Index M/M: No est v 1.4% prior; Y/Y: No est v 22.3% prior.

- 17:00 (KR) South Korea Feb Import Price Index M/M: No est v 4.1% prior; Y/Y: No est v 30.1% prior.

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 100.1 prior.

- 20:30 (AU) Australia Q4 House Price Index Q/Q: 3.8%e v 5.0% prior; Y/Y: 21.9%e v 21.7% prior.

- 20:30 (AU) RBA Mar Minutes.

- 21:20 (CN) China 1-year MLF.

- 22:00 (CN) China Feb YTD Industrial Production Y/Y: 4.0%e v 9.6% prior.

- 22:00 (CN) China Feb YTD Fixed Urban Assets Y/Y: 5.0%e v 4.9% prior.

- 22:00 (CN) China Feb YTD Retail Sales Y/Y: 3.0%e v 12.5% prior.

- 22:00 (CN) China Feb YTD Property Investment Y/Y: -7.0%e +4.4% prior.

- 22:00 (CN) China Feb Surveyed Jobless Rate: 5.1%e v 5.1% prior.

- 22:30 (KR) South Korea to sell KRW1.0T in 2-year Bonds.

- 23:00 (TH) Thailand Central Bank to sell THB55B in 3-month bills.

- 23:30 (HK) Hong Kong to sell 3-month and 6-month bills.