ECB hawk Schnabel lifts EU bond yields with FT comments

EU mid-market update: ECB hawk Schnabel lifts EU bond yields with FT comments; Market waits for more Fed speak.

Notes/observations

- Mixed equity trade amid a sideways US dollar while market waits for further Fed speak from Barkin, Bowman, Collins and Kugler.

- Hawkish commentary from ECB’s Schnabel about inflation persistence if they cut rates too soon, gave EU traders no excuse not to continue trend in rising yields.

- Riksbank minutes painted some detailed color on timing of cuts for the central bank, putting timeline in similar ballpark with ECB, likely around May/June for first cut.

- US journalist Tucker Carlson widely expected to release interview with Russia Pres in the next few days, after Russia confirmed interview happened yesterday.

- EU Earnings Recap: Equinor down after Q4 net profit misses and rising capex, Siemens Energy higher after Q1 beat sees encouraging order intake and affirmed outlook, Pandora positive Q4 sees new DKK4.0B buyback and raised dividend, TotalEnergies misses on bottom line and plans $2.0B buyback in Q1.

- Upcoming US Premarket Earnings: BABA, BAM, BG, CVS, EMR, HLT, NYT, PAG, SMG, UBER.

- Asia closed mixed with Shanghai out-performing at +1.4%. EU indices are -0.8% to +0.2%. US futures are +0.1%. Gold -0.1%, DXY -0.2%; Commodity: Brent +0.8%, WTI +0.9%, TTF -1.3%; Crypto: BTC +0.3%, ETH +1.5%.

Asia

- Thailand Central Bank (BoT) left Benchmark Interest Rate unchanged at 2.50%, as expected, for 2nd straight pause in cycle. Decision was split 5-2 with dissenters for a 25bps cut. Council remains ready to adjust rates.

- China MOFCOM issues guidelines to support NEV industry - China press.

- China Jan Foreign Reserves: $3.219T v $3.220Te; Gold reserves notched 15th straight rise to 72.2M troy oz.

- China replaces head of Securities Regulator (CSRC) with appointment of Wu Qing as Chairman - press.

- Reserve Bank of New Zealand (RBNZ) said to note the economic environment is complex and challenging; cites briefing from Nov 2023 - US financial press.

- New Zealand Treasury Fortnightly Economic Update: Inflation is now clearly easing globally and in New Zealand, but it remains high.

- Australia introduces new foreign housing investment legislation - Press.

- India said to be considering extending parboiled rice export tax past Mar 2024 - press.

Global conflicts/tensions

- Hamas proposes three-stages 135-day truce ceasefire deal with Israel; Seeks complete withdrawal of Israeli forces under second 45-day stage - press citing draft proposal.

- Saudi Arabia says 'No Israel diplomatic ties unless Gaza aggression is stopped" - financial press.

- US NORAD: Four Russian aircraft detected in Alaska air defense zone; Not seen as a threat - financial press.

Europe

- Sweden Central Bank (Riksbank) Feb Minutes: Cut in Mar is neither impossible or probable; First cut in May or June is more realistic.

- Iceland Central Bank (Sedibanki) left 7-Day Term Deposit Rate unchanged at 9.25%.

- UK BOE told to ‘rethink’ QE asset sales; cites report by parliament committee - Press.

- EU Council and Parliament in provisional pact on tech investments - financial press.

- EU's Sefcovic: Conditions for conclusions of Mercosur trade deal are not met.

- Sweden Prosecutor's Office confirms to end its Nord Stream explosions investigation.

Americas

- Moody's cuts New York Community Bancorp rating to Ba2 (junk territory); May be cut further; Today's rating action reflects multi-faceted financial risk management and governance challenges facing the bank.

- US House lacks votes to pass standalone $17.6B Israel Aid bill - financial press.

Energy

- OPEC Exec: Sees 2024 global oil demand to grow at 2.2M bpd; Affirms tapering to 1.8M bpd 2025.

- UAE Energy Min Mazrouei: Plan to increase nuclear capacity to 10% of overall capacity by 2030.

Speakers/fixed income/FX/commodities/erratum

Equities

- Indices [Stoxx600 -0.07% at 486.42, FTSE -0.16% at 7,668.64, DAX -0.13% at 17,010.61, CAC-40 +0.09% at 7,646.01, IBEX-35 +0.63% at 9,939.76, FTSE MIB +0.21% at 31,181.00, SMI +0.03% at 11,248.90, S&P 500 Futures +0.02%].

Market focal points/key themes: European indices opened generally higher but lost momentum through the first hours of trading; ECB speak seen weighing on sentiment; among sectors trending to the upside are consumer discretionary and communication services; lagging sectors include energy and industrials; DAX dragged by continuation of Infineon and Deutsche Post; Redrow to be acquired by Barratt; Redx sells rights to its KRAS inhibitor program to Jazz Pharma; reportedly Shell looking to divest Sprng unit; focus on release of US trade data later in the day; earnings expected in the upcoming Americas session include Alibaba, Walt Disney, Uber and Arm Holdings.

Equities

- Consumer discretionary: Deutsche Post DHL [DPW.DE] -4.0% (Germany's KFW Bank to sell 4% stake), Carlsberg [CARLB.DK] +3.5% (earnings), Redrow [RDW.UK] +12.5% (to be acquired by Barratt), Pandora [PNDORA.DK] +0.5% (earnings; buyback; dividend hike).

- Consumer staples:

- Energy: TotalEnergies [TTE.FR] -1.5% (earnings; buyback; raises dividend; oil reaction to Hamas ceasefire proposal), Orsted [ORSTED.DK] -1.5% (earnings; to cut jobs; pauses dividend; trims outlook), Equinor [EQNR.NO] -5.5% (earnings; buyback).

- Financials: Banca Monte Paschi de Siena [BMPS.IT] +4.5% (earnings; resumes dividend first time in 13 years).

- Materials: Akzo Nobel [AKZA.NL] -2.0% (earnings).

- Technology: ASML [ASML.NL] +1.0% (TSMC monthly sales and Taiwan export data), TeamViewer [TMV.DE] +8.0% (earnings).

- Real Estate: SBB [SBBB.SE] -15.0% (legal proceedings).

Speakers

- ECB's Schnabel (hawk, Germany): Reiterates lower borrowing costs risk inflation flare-up; Must be "patient and cautious" as the last mile of disinflation may be the most difficult one - FT.

- Fed's Harker (non-voter): No comment on outlook for interest rates; Soft landing is in sight; Phillips Curve is helpful but may not be applicable now.

- BOE Dep Gov Breeden: Rates unlikely to return to near zero; Less concerned that rates need to be tightened; Will be focused on pay growth, demand and firms’ pricing decisions to monitor potential inflation persistence.

- Sweden Central Bank (Riksbank) Gov Thedeen: Monetary policy needs to be adapted cautiously.

- Japan Chief Cabinet Sec Hayashi: Govt in close communication with TSMC but nothing yet decided about subsidy for second plant - Japan press.

Currencies/fixed income

- US dollar struggles to find direction as traders wait for more Fed commentary to gauge latest views on US data and timing of rate cuts. Euro a little firmer after hawkish Schnable comments. EUR/USD last seen at 1.077. GBP/USD last seen at 1.263. USD/JPY last seen at 147.94.

Economic data

-(JP) Japan Dec Preliminary Leading Index CI: 110.0 v 109.3e; Coincident Index: 116.2 v 116.1e.

-(AU) Australia Jan Foreign Reserves (A$): 89.4B v 93.9B prior.

-(ZA) South Africa Jan Gross Reserves: $61.2B v $62.4Be; Net Reserves: $56.7B v $56.7Be.

-(CH) Swiss Jan Unemployment Rate: 2.5% v 2.5%e; Unemployment Rate (seasonally adj): 2.2% v 2.2%e.

-(UK) Jan Halifax House Price Index M/M: 1.3% v 1.1% prior; Y/Y: 2.5% v 1.7% prior (4th consecutive M/M rise and strongest annual pace in a year).

-(DE) Germany Dec Industrial Production M/M: -1.6% v -0.5%e; Y/Y: -3.0% v -2.4%e.

-(NO) Norway Dec Industrial Production M/M: 1.0% v 1.9% prior; -Y/Y: -1.0% v -6.2% prior; Manufacturing Production M/M: +0.3% v -0.2% prior; Y/Y: +0.8% v -0.6% prior.

-(DK) Denmark Dec Industrial Production M/M: 5.7% v 8.1% prior.

-(SE) Sweden Jan Budget Balance (SEK): -35.3B v -100.0B prior.

-(RU) Russia Jan YTD Budget Balance (RUB): -308B v -855Be.

-(FR) France Jan Trade Balance: -€6.8B v -€5.9B prior; Exports: +1.1% v -0.6% prior (€50.2B v €49.5B prior); Imports: +2.6% v -4.8% prior (€57.0B v €55.4B prior); Current Account: -€0.7B v -€2.8B prior.

-(FR) France Q4 Preliminary Private Sector Payrolls Q/Q: 0.0% v -0.1%e; Private sector employment 21.09M -8.4K q/q.

-(TW) Taiwan Jan Trade Balance: $2.5B v $8.8Be; Exports Y/Y: +18.1% v +19.5%e; Imports Y/Y: +19.0% v -4.8%e.

-(ES) Spain Dec Industrial Production M/M: -0.3% v -0.1%e; Y/Y: -0.2% v 0.9% prior; Industrial Output (unadj) Y/Y: -4.0% v 1.0% prior.

-(CH) Swiss Jan Foreign Currency Reserves (CHF): 662.4B v 654.2B prior.

-(CZ) Czech Dec Retail Sales (ex-auto) Y/Y: 1.6% v 0.7%e.

-(AT) Austria Jan Wholesale Price Index M/M: +1.0% v -1.0% prior; Y/Y: -3.8% v -3.3% prior.

-(HK) Hong Kong Jan Foreign Reserves: $423.2B v $425.6B prior.

-(CZ) Czech Jan International Reserves: $145.3B v $148.4B prior.

-(IS) Iceland Jan Preliminary Trade Balance (ISK): -5.0B v -29.5B prior.

-(IT) Italy Dec Retail Sales M/M: -0.1% v +0.3% prior; Y/Y: 0.3% v 1.4% prior.

-(SG) Singapore Jan Foreign Reserves: $357.8B v $351.0B prior.

Fixed income issuance

-Australia sells A$800M v A$800M indicated in 2.75% Nov 2028 bonds; Avg Yield: 3.6847% v 3.8331% prior; bid-to-cover: 3.37x v 3.25x prior.

-Philippines cancels Feb 13th 7-year Treasury Bond Auction due to the offering of the 5-year Retail Treasury Bonds Tranche 30.

-Vietnam Finance Ministry sells total VNM7.67T vs. VNM8.0T indicated in 5-year, 10-year, 15-year and 20-year bonds (4 tranches).

-India sells total INR270B vs. INR270B indicated in 3-month, 6-month and 12-month bills.

- Denmark sells DKK5.01B in 2.25% Nov 2026 DGB bonds; Avg Yield: 2.44%; Bid-to-cover: 2.74x (no prior history).

-UK DMO sells £4.0B in 3.75% Mar 2027 Gilts; Avg Yield: 4.131% v 3.887% prior; Bid-to-cover: 3.04x v 3.44x prior; Tail: 0.5bps v 0.2bps prior.

-Sweden sells SEK17.5B vs. SEK17.5B indicated in 3-month bills; Avg Yield: 3.982% v 3.963% prior; Bid-to-cover: 3.51x v 2.52x prior.

Looking ahead

- 05:30 (DE) Germany to sell €3.0B in 2.4% Nov 2030 Bunds.

- 05:30 (SE) Sweden Central Bank (Riksbank) Gov Thedeen.

- 06:00 (PT) Portugal Q4 Unemployment Rate: No est v 6.1% prior.

- 06:00 (EU) EU Commission to sell up to €2.5B in 3-month and 6-month bills.

- 06:00 (RU) Russia to sell 2 tranches of OFZ bonds.

- 06:30 (CL) Chile Jan Trade Balance: $2.0Be v $1.7B prior; Exports: No est v $8.0B prior; Imports: No est v $6.2B prior; Copper Exports: No est v $4.2B prior.

- 06:30 (BR) Brazil Dec Nominal Budget Balance (BRL): -179.0Be v -80.9B prior; Primary Budget Balance: -125.0Be v -37.3B prior; Net Debt to GDP Ratio: 60.0%e v 59.5% prior.

- 07:00 (US) MBA Mortgage Applications w/e Feb 2nd: No est v -7.2% prior.

- 07:00 (UK) Weekly PM Question time in House.

- 07:00 (BR) Brazil Dec Retail Sales M/M: -0.1%e v 0.1% prior; Y/Y: 2.9%e v 2.2% prior; Broad Retail Sales M/M: 0.3%e v 1.3% prior; Y/Y: 2.8%e v 4.3% prior.

- 07:00 (MX) Mexico Jan Vehicle Production: No est v 215.9K prior; Vehicle Exports: No est v 282.3K prior.

- 07:00 (MX) Mexico Jan Consumer Confidence: 47.0e v 46.8 prior.

- 07:00 (CL) Chile Dec Nominal Wage Y/Y: No est v 8.2% prior.

- 08:00 (PL) Poland Jan Official Reserves: No est v $193.8B prior.

- 08:00 (RU) Russia Jan Official Reserve Assets: No est v $598.6B prior.

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

- 08:30 (US) Dec Trade Balance: -$62.0Be v -$63.2B prior.

- 08:30 (CA) Canada Dec Int'l Merchandise Trade (CAD): 1.0Be v 1.6B prior.

- 09:30 (TR) Turkey Jan Cash Budget Balance (TRY): No est v -197.0B prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (RU) Russia Dec Unemployment Rate: 2.9%e v 2.9% prior; Nov Real Wages Y/Y: 8.0%e v 9.9% prior.

- 11:00 (RU) Russia Dec Real Retail Sales Y/Y: 11.9%e v 10.5% prior.

- 11:00 (US) Fed’s Kugler.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 11:30 (US) Fed’s Collins.

- 12:30 (US) Fed’s Barkin.

- 13:00 (US) Treasury to sell 10-Year Notes.

- 13:00 (BR) Brazil Jan Trade Balance: $7.4Be v $9.4B prior; Exports: $27.7Be v $28.8B prior; Imports: $20.3Be v $19.5B prior.

- 14:00 (US) Fed’s Bowman.

- 15:00 (US) Dec Consumer Credit: $16.0Be v $23.8B prior.

- 18:00 (CO) Colombia Jan CPI M/M: 1.0%e v 0.5% prior; Y/Y: 8.4%e v 9.3% prior.

- 18:00 (CO) Colombia Jan CPI Core M/M: 1.0%e v 0.7% prior; Y/Y: 9.7%e v 10.3% prior.

- 18:50 (JP) Japan Dec BoP Current Account: ¥1.138Te v ¥1.926T prior; Adj Current Account Balance: ¥1.934Te v ¥1.885T prior; Trade Balance (BoP basis): +¥183.1Be v -¥724.1B prior.

- 18:50 (JP) Japan Jan Bank Lending Y/Y: No est v 3.1% prior; Bank Lending (ex-trusts) Y/Y: No est v 3.4% prior.

- 19:01 (UK) Jan RICS House Price Balance: -22%e v -30% prior.

- 20:30 (CN) China Jan CPI Y/Y: -0.5%e v 0.1% prior; PPI Y/Y: -2.6%e v -2.7% prior.

- 21:00 (JP) Japan Jan Tokyo Avg Office Vacancies: No est v 6.0% prior.

- 22:30 (JP) Japan to sell 6-Month Bills.

- 23:30 (IN) India Central Bank (RBI) Interest Rate Decision: Expected to leave Repurchase Rate unchanged at 6.50%.