Awaiting Russia-Ukraine talks

Notes/Observations

- Russia-Ukraine situation still impacting the sentiment; awaiting talks between parties.

- Major EU PMI Services data mixed in session (Beats: Italy, Spain; Misses: Euro Zone, Germany, France, UK).

Asia

- South Korea Q4 Final GDP Q/Q: 1.2% v 1.1% prelim; Y/Y: 4.2 v 4.1% prelim.

- Australia Jan Trade Balance: A$12.9B v A$9.1Be; Exports M/M: 8% v 6%e; Imports M/M: -2% v +3%e.

- Japan Feb Final Services PMI: 44.2 v 42.7 prelim (2nd straight contraction).

- China Feb Caixin PMI Services: 50.2% v 50.8e (6th month of expansion).

- BOJ Official Nakagawa reiterated need to continue with easing persistently; Goal was not simply 2.0% CPI. Added that was keeping easy policy to ensure economy gains were enough strength to sustain 2% inflation.

Russia/Ukraine

- Russian military captured the Ukrainian city of Kherson. UK Intelligence noted that five Ukrainian cities were surrounded by the Russian military.

- US State Dept called on Russia President Putin and his govt to immediately cease the bloodshed and withdraw troops from Ukraine.

- Russian negotiator stated that ceasefire would be discussed at talks with Ukrainian delegation.

- Russian equities excluded from more benchmark indexes. MSCI to reclassify Russia Indexes from Emerging Markets to Standalone Market; deleted from all FTSE Russel Equity indices.
set to rise in next few months; UK inflation would rise due to external factors.

- Moody's cut Russia sovereign rating to B3 [junk status] from Baa3 [6 notch downgrade].

- Fitch cut Russia sovereign rating to junk status; Cuts six notches from BBB to B; Warns may be cut further.

- Hungary PM Orban stated that its govt would not veto EU Sanctions on Russia noting that unity of the EU was paramount.

Europe

- ECB's Centeno (Portugal) warned of stagflation; to depend on the duration of the Ukraine conflict.

- BOE Dep Gov Cunliffe: Russia sanctions were not a material risk to UK finance. Saw risk of a big fall in asset prices. Added that expectations for higher rates could also hurt asset prices.

- BOE’s Tenreyro stated that inflation pressures had intensified in recent days with the war on Ukraine. Inflation was.

Americas

- Fed Chair Powell: inclined to support a 25bps hike at the upcoming March meeting.

- Fed Beige Book noted that economic activity had expended at a modest-to-moderate pace since mid-January; Prices charged increased at a robust pace.

Energy

- US Deputy National Security Adviser Singh stated that Biden administration was looking at ways to reduce use of Russian oil.

- US Sen Manchin (D-WV): Bipartisan bill is in the works to ban Russian oil imports.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -0.37% at 444.66, FTSE -0.31% at 7,406.25, DAX -0.73% at 13,898.40, CAC-40 -0.13% at 6,489.81, IBEX-35 -1.02% at 8,236.17, FTSE MIB -0.25% at 24,473.00, SMI -0.77% at 11,780.01, S&P 500 Futures -0.17%].

Market Focal Points/Key Themes: European indices open modestly higher across the board but later turned around to trade generally negative; sectors among those leading to the upside are materials and energy; while laggard sectors include consumer discretionary and utilities; oil and gas subsector supported following higher crude prices; Lufthansa results dragging on the travel and leisure subsector; Xaar acquires Magnajet; focus on testimony of Fed Chair Powell before the Senate; earnings expected during the upcoming US session include Universal Music, Costco, Best Buy and Broadcom.

Equities

- Consumer discretionary: Finnair [FIA1S.FI] +10% (furlough negotiations), Asos [ASC.UK] -4% (update on Russia/Ukraine).

- Healthcare: Merck KGaA [MRK.DE] +3% (earnings).

- Industrials: Thales [HO.FR] +5% (earnings), Lufthansa [LHA.DE] -6% (earnings).

- Technology: Darktrace [DARK.UK] +13% (earnings).

Speakers

- ECB de Cos (Spain) noted that the banking sector exposure to crypto asset raised stability concerns; called for very proactive regulatory response on issue.

- German Association of Chambers of Trade and Industry (DIHK): 2022 GDP growth forecast of 6.0% was no longer achievable.

- Sweden Central Bank (Riksbank) Gov Ingves noted that the Ukraine situation reinforced uncertainty on inflation.

- Sweden Central Bank (Riksbank) member Breman noted that it must be prepared to change monetary policy.

- Ukraine Pres Zelenskiy stated that the country’s defense lines were intact.

- EU Commission President Von der Leyen stated that would take additional steps on Russia if situation deteriorated on the ground.

- EU official noted that sanctions on Russia were beginning to have effect. Noted that was picking up speculation via social media about potential plans for martial law in Russia.

- EU Commission said to seek at least 80% of gas storage facilities in the EU to be filled by Sept. 30th to reduce the bloc’s dependence on Russian gas.

- Russia Foreign Min Lavrov reiterated that cannot allow military threat from Ukraine to Russia. No doubt solution to Ukraine crisis will be found. Expected talks with Ukraine on Thursday (Mar 3rd) and was ready for dialogue based upon mutual respect.

- Russia Deputy Foreign Min: Russia sees prospects for negotiations with Ukraine in Belarus. Ready to continue dialogue on security guarantees and strategic stability; continued to talk with US mainly through embassies.

- Russia govt spokesperson Peskov noted that reports that Russia would impose martial law and stop men leaving the country was fake news.

- Malaysia Central Bank Policy Statement reiterated that monetary policy stance was appropriate and accommodative. Fiscal and financial measures to continue to provide support to economic activity. Saw 2022 inflation outlook as moderate as base effect from fuel dissipates and core inflation to normalize around the long-term average. Recovery should strengthen on higher global demand and private sector expenditure. Omicron economic impact should be considerably less severe compared to prior waves.

- Chinese People's Political Consultative Conference (CPPCC): long-term positive direction of the domestic economy was unchanged. Trade to stay within a reasonable range in 2022.

- Japan PM Kishida: To raise the cap on subsidies to gasoline wholesalers from ¥5/liter to ¥25/liter.

Currencies/Fixed income

- USD continued its form support being aided by safe-haven demand and prospects of higher rates from the Fed. During testimony on Wed Fed Chair Powell noted he would support an interest-rate rise of 25 basis points at the March meeting.

- BOE officials noted that Ukraine situation would impact growth and inflation. Markets increased bets on BOE rate hikes after the most dovish member of the MPC Tenreyro, saw the potential for upside surprises on inflation.

- Both WTI and Brent higher by over 5%. Traders noted that over 8% of global oil supplies had been disrupted as companies and countries shun Russia. Some refiners were refusing to take Russian oil and banks were refusing to finance shipments of Russian commodities.

Economic data

- (RU) Russia Feb PMI Services: 52.1 v 49.8 prior (1st expansion in 5 months); PMI Composite: 50.8 v 50.3 prior.

- (MY) Malaysia Central Bank (BNM) left Overnight Policy Rate unchanged at 1.75% (as expected).

- (DK) Denmark Jan Unemployment Rate (seasonally adj): 2.3% v 2.1% prior; Gross Unemployment Rate: 2.7% v 2.5% prior.

- (TR) Turkey Feb CPI M/M: 4.8% v 3.8%e; Y/Y: 54.4% v 52.5%e (highest annual pace since 2002); CPI Core Index Y/Y: 44.1% v 42.4%e.

- (TR) Turkey Feb PPI M/M: 7.2% v 10.5% prior; Y/Y: 105.0% v 103.0%e.

- (ZA) South Africa Feb PMI (whole economy): 50.9 v 50.3e (2nd straight expansion).

- (SW) Sweden Feb PMI Services: 68.0 v 68.6 prior; PMI Composite: 65.3 v 66.8 prior.

- (CH) Swiss Feb CPI M/M: 0.7% v 0.3%e; Y/Y: 2.2% v 1.8%e (moves above target); CPI Core Y/Y: 1.3% v 0.9%e.

- (CH) Swiss Feb CPI EU Harmonized M/M: 0.6% v 0.2% prior; Y/Y: 1.9% v 1.4% prior.

- (HU) Hungary Jan Retail Sales Y/Y: 4.1% v 4.9%e.

- (HU) Hungary Dec Final Trade Balance: -€0.3B v +€0.2B prelim.

- (ES) Spain Feb Services PMI: 56.6 v 51.6e (moved back into expansion); Composite PMI: 56.5 v 52.0e.

- (HU) Hungary Central Bank raised the One Week Deposit Rate by 75bps to 5.35% (more-than-expected).

- (IT) Italy Feb Services PMI: 52.8 v 52.5e (moved back into expansion); Composite PMI: 53.6 v 53.6e.

- (FR) France Feb Final Services PMI: 55.5 v 57.9 prelim (confirmed 11th straight expansion); PMI Composite: 55.5 v 57.4 prelim.

- (DE) Germany Feb Final Services PMI: 55.8 v 56.6 prelim (confirmed 2nd month of expansion); PMI Composite: 55.6 v 56.2 prelim.

- (EU) Euro Zone Feb Final Services PMI: 55.8 v 55.8 prelim (confirmed 11th month of expansion); PMI Composite: 55.8 v 55.8 prelim.

- (IT) Italy Jan Unemployment Rate: 8.8% v 9.0%e.

- (UK) Feb Final Services PMI: 60.5 v 60.8 prelim (confirmed 12th month of expansion); PMI Composite: 59.9 v 60.2 prelim.

- (UK) Feb Official Reserves Changes: +$1.2B v -$1.4B prior.

- (EU) Euro Zone Jan Unemployment Rate: 6.8% v 6.9%e.

- (EU) Euro Zone Jan PPI M/M: 5.2% v 2.8%e; Y/: 30.6% v 27.3%e.

- (BE) Belgium Jan Unemployment Rate: 5.6% v 5.7% prior.

- (CY) Cyprus Feb CPI M/M: +1.2% v -0.5% prior; Y/Y: 6.6% v 5.4% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.066B vs. €4.5-5.5B indicated range 2025, 2029 and 2042 bonds.

- Sold €1.996B in 0.00% May 2025 SPGB bonds; Avg Yield: 0.065% v -0.300% prior; Bid-to-cover: 1.31x v 1.33x prior.

- Sold €2.068B in new 0.80% July 2029 SPGB bond; Avg Yield: 0.664% v 0.122% prior; bid-to-cover: 1.34x v 1.66x prior.

- Sold €1.002B in 1.00% July 2042 green SPGB bond; Avg Yield: 1.471%; bid-to-cover: 1.41x.

- (ES) Spain Debt Agency (Tesoro) sold €553M v €250-750M indicated range in 0.70% Nov 2033 inflation-linked bonds (SPGBei); Real Yield: -1.036% v 1.047% prior; Bid-to-cover: 1.75x v 1.80x prior.

- (FR) France Debt Agency (AFT) sold total €9.999B vs. €8.5-10.0B indicated range in 2032, 2045 and 2053 Bonds.

- Sold €6.339B in 0.00% May 2032 Oat; Avg Yield: 0.52% v 0.45% prior; Bid-to-cover: 1.75x v 2.62x prior.

- Sold €1.874B in 3.25% May 2045 Oat Avg Yield: 1.00% v 0.50% prior; Bid-to-cover: 1.78x v 2.70x prior.

- Solds €1.786B in 0.75% May 2053 Oat; Avg Yield: 1.18% v 1.05% prior; bid-to-cover: 2.06x v 2.00x prior.

Looking ahead

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 06:00 (ZA) South Africa Jan Electricity Consumption Y/Y: No est v -2.7% prior; Electricity Production Y/Y: No est v -3.7% prior.

- 06:00 (IL) Israel Jan Chain Store Sales M/M: No est v -0.3%e.

- 06:00 (ES) ECB’s De Guindos (Spain).

- 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to leave Key Rate unchanged at 10.00%.

- 07:30 (US) Feb Challenger Job Cuts: -19.6K prior; Y/Y: No est v -76.0% prior.

- 08:00 (BR) Brazil Feb PMI Manufacturing: No est v 47.8 prior.

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

- 08:00 (RU) Russia Gold and Forex Reserve w/e Feb 25th: No est v $643.2B prior.

- 08:30 (US) Q4 Final Nonfarm Productivity: 6.7%e v 6.6% prelim; Unit Labor Costs: 0.3%e v 0.3% prelim.

- 08:30 (US) Initial Jobless Claims: 225Ke v 232K prior; Continuing Claims: 1.42Me v 1.476M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:45 (US) Feb Final Markit Services PMI: 56.7e v 56.7 prelim; PMI Composite: 56.0e v 56.0 prelim.

- 10:00 (US) Feb ISM Services Index: 61.1e v 59.9 prior.

- 10:00 (US) Jan Factory Orders: +0.7%e v -0.4% prior; Factory Orders (ex-transportation): No est v 0.1% prior.

- 10:00 (US) Jan Final Durable Goods Orders: 1.6%e v 1.6%e prelim; Durables (ex-transportation): 0.7%e v 0.7% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v 0.9% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v 1.9%prelim.

- 10:00 (MX) Mexico Central Bank Economist Survey.

- 10:00 (CO) Colombia Jan Exports: $3.9Be v $4.4B prior.

- 10:00 (US) Fed Chair Powell testifies before Senate.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (CA) Bank of Canada (BOC) Gov Macklem.

- 11:30 (US) Treasury'to sell 4-week bills.

- 13:00 (BR) Brazil Feb Trade Balance: $3.5Be v -$0.2B prior; Total Exports: $21.4Be v $19.7B prior; Total Imports: $18.0Be v $19.8B prior.

- 16:00 (NZ) New Zealand Feb Consumer Confidence Index: No est v 97.7 prior.

- 16:00 (KR) South Korea Feb Foreign Reserves: No est v $B prior.

- 18:00 (KR) South Korea Feb CPI M/M: 0.5%e v 0.6% prior; Y/Y: 3.5%e v 3.6% prior; CPI Core Y/Y: 3.0%e v 3.0% prior.

- 18:00 (US) Fed’s Williams.

- 18:30 (JP) Japan Jan Jobless Rate: 2.7%e v 2.7% prior; Job-To-Applicant Ratio: 1.15e v 1.16 prior.

- 20:00 (PH) Philippines Feb CPI Y/Y: 3.2%e v 3.0% prior.

- 21:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision.

- 22:00 (CN) China to sell CNY-denominated 3-month and 6-month Bills.

- 22:30 (TH) Thailand Feb CPI M/M: -0.2%e v +1.1% prior; Y/Y: 4.1%e v 3.2% prior; CPI Core Y/Y: 0.7%e v 0.5% prior.