No surprises this week from BoJ, Fed and SNB

EU Mid-Market Update: No surprises this week from BOJ, Fed and SNB; World agrees tariff uncertainty is weighing on forecast confidence; BOE expected to be unchanged at 4.50%.

Notes/observations

- European equities opened mixed, reflecting a cautious tone following Wednesday’s mixed session. The DAX dipped the most, weighed down by weak German producer inflation data (+0.7% y/y, below forecasts of +1.0%) and corporate earnings disappointments. RWE led decliners after announcing investment cuts, while Rheinmetall and Commerzbank also dragged. In contrast, Italian FTSE MIB hovered near 2007 highs, supported by strong gains in Nexi and utilities like Snam and A2A. Italian construction output surged 4.2% in January, the fastest pace since July 2024, providing a bright spot.

- Central banks dominated the narrative: SNB cut rates by 25bps to 0.25%, citing low inflation and economic uncertainty. Swiss franc weakened, while Swiss bonds outperformed, with 10-year yields falling 4bps. Riksbank held rates at 2.25%, as expected, but flagged risks from global trade tensions and geopolitical uncertainty. Swedish krona briefly dipped before stabilizing. BoE decision due at 12pm GMT: Markets expect a hold at 4.5%, with focus on the MPC’s tone amid rising labor costs and fiscal uncertainty. UK gilt yields fell 3bps after mixed labor data (wage growth steady at 5.9%, but jobless claims doubled to 44.2K).

- Microsoft introduced KBLaM, a novel approach to integrating structured knowledge into LLMs, overcoming the limitations of fine-tuning, RAG, and in-context learning. It uses a rectangular attention mechanism to embed key-value knowledge pairs directly into attention layers, enabling efficient retrieval with linear scaling. This method allows dynamic updates, reduces hallucinations, and outperforms RAG in speed and memory usage, making it ideal for knowledge-driven applications like medicine and finance.

- US futures edged higher after Wednesday’s gains. Fed’s signal of two rate cuts this year continues to support risk sentiment, though tariff risks from Trump’s trade policies linger.

- Asia closed mixed with Hang Seng underperforming -2.2%. EU indices -0.1% to -1.2%. US futures +0.2-0.4%. Gold -0.1%, DXY +0.4%; Commodity: Brent +0.4%, WTI +0.5%; Crypto: BTC +2.9%, ETH +3.2%.

Asia

- New Zealand Q4 GDP Q/Q: 0.7% v 0.4%e Y/Y: -1.1% v -1.4%e (country moved out of a technical recession).

- Australia Feb Employment Change: -52.8K v +30.0Ke; Unemployment Rate: 4.1% v 4.1%e.

- China PBOC Monthly Loan Prime Rate (LPR) Setting left both 1-year and 5-year LPR rates unchanged at 3.10% and 3.60% respectively (as expected).

Europe

- UK Chancellor of the Exchequer (Fin Min) Reeves said to not be making tax changes at the upcoming spring statement. Expected to announce broad cuts to public spending.

- France succeeded in blocking EU countries from using a €150B fund to procure British arms industry weapons. The money could not be used to buy weapons from Britain. UK PM Spokesperson stated that its govt would militarily support Ukraine in all scenarios.

Americas

- FOMC left Target Range unchanged at 4.25-4.50% (as expected) . Vote to keep policy steady was 11-1 with Waller dissented against the change in QT. Statement noted that it would slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25B to $5B. Uncertainty around the economic outlook has increased.

- Fed DOT Plots cut 2025 GDP growth forecast from 1.8-2.2% range to1.5-1.9%. It also cut the 2026 GDP growth forecast from 1.9-21% range to 1.6-1.9%. Forecasts raised the inflation outlook with 2025 PCE seen between 2.6-2.9% (prior: 2.3-2.6%) and 2026 PCE seen between 2.1-2.3% (prior: 2.0-2.2%). Summary of Economic Projections showed that policymakers still projected a total of 50 basis points (bps) reduction in rates in 2025.

- Fed Chair Powell post rate-decision press conference noted that recent indications pointed to moderation in consumer spending; Inflation remained somewhat elevated; Remained to be seen how uncertainty will affect outlook; Inflation expectations had recently moved up, with tariffs as a driving factor. Did not need to be in a hurry, well positioned to wait for better clarity.

- US Jan Net Long-Term TIC Flows: -$45.2B v -$75.0B prior; Total Net TIC Flows: $-48.8B v +$103.2B prior.

- Brazil Central Bank (BCB) raised Selic Target Rate by 100bps to 14.25% (as expected) for its 5th straight rate hike in the current tightening cycle. Anticipated another adjustment of smaller magnitude in the next meeting. Inflation scenarios remained titled to the upside.

- President Trump: reiterated view that Fed would be 'much better off' cutting rates; Apr 2nd was 'liberation day in America.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.21% at 554.18, FTSE +0.14% at 8,718.50, DAX -0.71% at 23,135.14, CAC-40 -0.36% at 8,142.04, IBEX-35 -0.36% at 13,365.67, FTSE MIB -0.60% at 39,476.00, SMI +0.12% at 13,074.60, S&P 500 Futures +0.40%].

Market Focal Points/Key Themes: European indices opened mixed and failed to gain direction through the early hours of trading; better performing sectors include real estate and consumer discretionary; among underperforming sectors are materials and financials; Sanofi acquires certain assets from Dren Bio; focus on BOE rate decision later in the day; earnings expected in the upcoming US session include Accenture, Nike, Micron and FedEx.

Equities

- Consumer discretionary: Sodexo [SW.FR] -15.0% (cut outlook citing North America business), Puma [PUM.DE] -1.0% (Kepler resumes at hold).

- Financials: Crest Nicholson [CRST.UK] +12.5% (trading update), Nexi [NEXI.IT] +4.5% (TPG has submitted €850M offer to Nexi for the system that allows banks to settle their give and take relationships), Lloyds [LLOY.UK] +1.0% (HSBC raises to buy).

- Utilities: RWE [RWE.DE] -4.5% (FY24 results) - Technology: STMicroelectronics [STM.FR] +0.5% (Nvidia to spend "hundreds of billions of dollars over next 4 years" on US chipmaking - FT) - Materials: Lanxess [LXS.DE] -8.0% (FY24 results).

Speakers

- ECB Economic Bulletin stressed that Council was determined to ensure that inflation stabilized sustainably at its 2% medium-term target. Risks to economic growth remained tilted to the downside. Domestic inflation remained high, mostly because wages and prices in certain sectors.

- ECB chief Lagarde testified in EU Parliament that the disinflation process was well on track.Reiterated stance that was not on any pre-set rate path; to remain data-dependent. Increase in US tariffs of 25% would lower the Euro Zone GDP growth by 0.3%.

- Swiss National Bank Policy Statement noted that it was ensuring that monetary conditions remained appropriate, given the low inflationary pressure and the heightened downside risks to inflation. Reiterated stance that is prepared to intervene on FX market as necessary. Economic outlook for had become considerably more uncertain

- SNB updated its Staff Projections which maintained 2025 GDP growth forecast between 1.0-1.5% and set 2026 GDP growth at 1.5%. Projections raised 2025 CPI forecast from 0.3% to 0.4% while maintaining the 2026 CPI at 0.8%.

- SNB' President Schlegel post rate decision press conference noted that inflation outlook was uncertain; to monitor situation closely and adjust policy if necessary.

- Sweden Central Bank Policy Statement noted that Repo Rate would remain at the current level of 2.25% going forward.as its outlook for inflation & economy were 'largely intact’. Uncertainty abroad was unusually high.

- Riksbank updated its Staff Projections which raised 2025 CPIF forecast from 2.0% to 2.5% while maintaining the 2026 CPIF forecast at 1.9%. Projections raised the 2025 Avg GDP from 1.8% to 1.9% while cutting 2026 Avg GDP from 2.6% to 2.4%. The rate path was seen at 2.25% for the horizon period.

- France Fin Min Lombard stated that aimed to raise €5.0B in additional public and private funding for the defense sector.

- Taiwan Central Bank Policy Statement noted that the decision to keep policy steady was unanimous. Leaving interest rate unchanged would help maintain economy and financial stability. Continued to monitor domestic inflation; Might revise up domestic inflation to ~2% this year.

- Taiwan Central Bank updated its Staff Projections which maintained 2025 GDP growth at 3.1% and maintained 2025 Headline CPI forecast at 1.9% and Core CPI forecast at 1.8%.

- Taiwan Central Bank (CBC) Gov Yang Chin-long post-rate decision press conference stressed that it saw no conditions for easing.

- China PBOC reiterated stance to drive coordination of fiscal and money polices.

- Iran Foreign Min Araghchi stated that would respond to Trump's letter in coming days; policy remains to avoid direct talks with US. Noted that would consider both the threats and opportunities contained in a letter.

- Canada PM Carney expected to call snap election for April 28th.

Currencies/fixed income

- USD was a touch firmer in the session with focus on key rate decisions. Fed Chief Powell reiterated that they would not be in a hurry to move on rate cuts, adding that they could maintain policy restraint for longer if the economy remained strong. Dealers noted that the prospects of rate cuts would reduce chances of recession and support the USD.

- GBP/USD drifted lower after unemployment rate remained unchanged and wage growth steadied. BOE largely expected to keep its policy steady later today.

- EUR/USD moving away from the key 1.10 resistance area. Pair tested 1.0850 in the session. ECB Chief Lagarde warned of weaker growth in the region while downplaying the prospect of higher inflation.

- USD/JPY probed into the 148 area as markets speculated on the timing of the next BOJ rate hike.

- 10-year German Bund yield at 2.76% and 10-year Gilt yield at 4.58%. 10-year Treasury yield at 4.22%

Economic data

- (NL) Netherlands Feb Unemployment Rate: 3.8% v 3.8% prior.

- (DE) Germany Feb PPI M/M: -0.2% v +0.2%e; Y/Y: 0.7% v 1.0%e.

- (UK) Feb Jobless Claims Change: 44.2K v +2.8K prior; Claimant Count Rate: 4.7% v 4.5% prior; Payrolled Employees (monthly change): +21K v -21Ke.

- (UK) Jan Average Weekly Earnings 3M/Y: 5.9% v 5.9%e; Weekly Earnings (ex-bonus) 3M/Y: 5.9% v 5.9%e.

- (UK) Jan ILO Unemployment Rate: 4.4% v 4.4% prior; Employment Change 3M/3M: +144K.

- (CH) Swiss Feb Trade Balance (CHF): 4.8B v 6.2B prior; Real Exports M/M: +4.2% v -3.9% prior; Real Imports M/M: +3.3% v -1.4% prior; Watch Exports Y/Y: -8.2% v +4.1% prior.

- (ES) Spain Jan Home Sales Y/Y: 11.0% v 37.7% prior.

- (TW) Taiwan Feb Export Orders Y/Y: 31.1% v 24.3 %e.

- (TW) Taiwan Feb M2 Money Supply Y/Y: 5.2% v 5.5% prior; M1 Money Supply Y/Y: 3.1% v 4.4% prior.

- (TW) Taiwan Central Bank (CBC) left its Benchmark Interest Rate unchanged at 2.00% (as expected) for its 3rd straight pause under the current phase of its tightening cycle.

- (CH) Swiss National Bank (SNB) cut its Policy Rate by 25bps to 0.25% (as expected) for its 5th straight cut in the current easing cycle.

- (SE) Sweden Central Bank (Riksbank) left Repo Rate unchanged at 2.25% (as expected) for its 1st pause in 7 decisions under the current phase of its easing cycle.

- (HK) Hong Kong Feb CPI Composite Y/Y: 1.4% v 1.9%e.

- (NO) Norway Q1 Regional Network Output Survey (Current Quarter) Q/Q: 0.4% v 0.2% prior; Output Survey (Next Quarter) Q/Q: 0.4% v 0.3% prior.

- (PL) Poland Feb Sold Industrial Output M/M: -0.4% v 0.0%e; Y/Y: -2.0% v -1.1%e.

- (PL) Poland Feb Construction Output Y/Y: 0.0% v 2.3%e.

- (PL) Poland Feb Employment M/M: -0.1% v 0.0%e; Y/Y: -0.9% v -0.9%e.

- (PL) Poland Feb Average Gross Wages M/M: 1.5% v 2.1%e; Y/Y: 7.9% v 8.7%e.

- (PL) Poland Feb PPI M/M: -0.2% v -0.2%e; Y/Y: -1.3% v -1.2%e.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €6.475B vs. €5.5-6.5B indicated range in 2030, 2035 and 2043 SPGB bonds.

- Sold €1.699B in 0.50% Apr 2030 SPGB bonds; Avg Yield: 2.757% v 2.701% prior; bid-to-cover: 1.99x v 1.70x prior.

- Sold €3.189B in 3.15% Apr 2035 SPGB bonds; Avg Yield: 3.382% v 3.507% prior; bid-to-cover: 1.54x v 1.88x prior.

- Sold €1.587B in 3.45% July 2043 SPGB bonds; Avg Yield: 3.900% v 3.527% prior; Bid-to-cover: 1.76x v 1.71x prior.

Looking ahead

- 05:50 (FR) France Debt Agency (AFT) to sell €11.5-13.5B in 2028, 2030, 2032 and 2033 Bonds.

- 06:00 (EU) Euro Zone Jan Construction Output M/M: No est v 0.0% prior; Y/Y: No est v -0.1% prior.

- 06:00 (SE) Sweden Central Bank (Riksbank) Gov Thedeen.

- 06:00 (EU) Daily Euribor Fixing.

- 6:00 (SE) Sweden to sell combined SEK750M in 2036 and 2039 I/L Bonds.

- 06:00 (IE) Ireland Debt Agency (NTMA) to sell combined €1.0B in 2034 and 2037 IGB bonds.

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

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

- 06:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 06:50 (FR) France Debt Agency (AFT) to sell €1.5-2.0B in inflation-linked 2034, 2036, 2040 and 2053 bonds.

- 07:00 (UK) Mar CBI Industrial Trends Total Orders: -30e v -28 prior; Selling Prices: 20e v 19 prior.

- 07:00 (RO) Romania to sell RON300M in 7.4% 2040 Bonds.

- 08:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Bank Rate unchanged at 4.50%.

- 08:00 (MX) Mexico Q4 Aggregate Supply and Demand: 1.9%e v 2.3% prior.

- 08:00 (IE) ECB’s Lane (Ireland, chief economist).

- 08:30 (US) Mar Philadelphia Fed Business Outlook: 9.0e v 18.1 prior.

- 08:30 (US) Q4 Current Account Balance: -$330.0Be v -$310.9B prior.

- 08:30 (US) Initial Jobless Claims: 224Ket v 220K prior; Continuing Claims: 1.89Me v 1.870M prior.

- 08:30 (CA) Canada Feb Industrial Product Price Index M/M: 0.3%e v 1.6% prior; Raw Materials Price Index M/M: -0.4%e v +3.7% prior.

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

- 08:40 (UK) BOE 7-day short-term repo operation (STR).

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

- 09:00 (RU) Russia Gold and Forex Reserve w/e Mar 14th: No est v $639.1B prior.

- 09:00 (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to cut Interest Rates by 25bps to 7.25%.

- 9:00 (FR) ECB's Villeroy (France) in Paris.

- 10:00 (US) Feb Existing Home Sales: 3.95Me v 4.08M prior.

- 10:00 (US) Feb Leading Index: -0.2%e v -0.3% prior.

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

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

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

- 13:05 (CA) Bank of Canada (BOC) Gov Macklem.

- 15:00 (AR) Argentina Q4 Unemployment Rate: No est v 6.9% prior.

- (AR) Argentina Mar Consumer Confidence: No est v 47.3 prior.

- (MX) Mexico Citi Survey of Economists.

- 17:00 (KR) South Korea Feb PPI Y/Y: No est v 1.7% prior.

- 17:45 (NZ) New Zealand Feb Trade Balance (NZD): No est v -0.5B prior; Exports: No est v 6.2B prior; Imports: No est v 6.7B prior.

- 19:30 (JP) Japan Feb National CPI Y/Y: 3.5%e v 4.0% prior; CPI (Ex Fresh Food) Y/Y: 2.9%e v 3.2% prior; CPI (Ex Fresh Food, Energy) Y/Y: 2.6%e v 2.5% prior.

- 20:00 (KR) South Korea Mar 1-20 Day Exports Y/Y: No est v 16.0% prior; Imports Y/Y: No est v 7.7% prior.

- 20:01 (UK) Mar GfK Consumer Confidence: -20e v -20 prior.

- 22:00 (KR) South Korea to sell KRW1.2T in 1-year Bonds.

- 23:30 (JP) Japan to sell 3-Month Bills.

**TTN Chart of The Day: