Global bond yields continue to move higher

Notes/Observations

- Global bond yields continue to edge higher on recovery hopes

- UK ILO Unemployment rate hits 5-year high

- South Africa unemployment hits fresh record high ahead of Wed budget speech

Asia:

- Bank of Korea (BOK) Gov Lee reiterated to keep accommodative monetary policy and that conditions remained favorable for supplying foreign currency; saw a modest recovery with GDP growth path in line with Nov projections

Coronavirus:

- Total global cases 111,7M (+0.3% d/d); total deaths: 2.47M (+0.3% d/d)

- Macau and mainland China now fully open for quarantine free travel, effective Feb 23rd

- Japan Govt considering lifting emergency declaration outside of Tokyo as Osaka, Hyogo and Kyoto prefectures asked govt to end State of Emergency (Note: Japan State of Emergency currently has a March 7th end date)

Europe:

- BOE's Vlieghe stated that might not see interest rates similar to before the financial crisis during his lifetime. Might see decades of low interest rates

- ECB's Villeroy (France) reiterated stance there was no risk of overheating in the euro area economy; no risk of lasting pickup of inflation

- PM Johnson presented his 4-step road map on easing Covid restrictions with a minimum of five weeks between each step. Could not guarantee there would not be any more lockdowns

- EU said to urge G20 financial leaders not to withdraw fiscal stimulus too early amid pandemic

Americas:

- House budget committee approved $1.9T Covid-19 aid bill (sets up towards a full House vote towards the end of the week)

- Senate Majority Leader Schumer: Democrats were working to prepare to Covid-19 relief bill, on track to reach the President’s desk by Mar 14th

- US Delegation to the WTO said to support the Trump administrations' 'made in China' rule for Hong Kong exports; the delegation specifically said the WTO had no right to mediate the matter

- Canada Parliament declared China’s treatment of Uighurs as genocide

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -1.22% at 408.36, FTSE -0.40% at 6,585.85, DAX -1.49% at 13,742.70, CAC-40 -0.47% at 5,740.56, IBEX-35 +0.56% at 8,158.00, FTSE MIB -0.89% at 22,804.50, SMI -1.16% at 10,573.02, S&P 500 Futures -0.55%]

Market Focal Points/Key Themes: European indices opened mixed but later turned to trade broadly lower; sectors among better performers are energy and materials; sectors among those trending to the downside are technology and health care; travel stocks supported following UK announcement on easing lockdowns; Russia closed for holiday; Aveva sells French unit to Aena; Atlantia reportedly receives binding offer for Autostrade; corporate events expected in the upcoming US session include Apple annual meeting, Snap investor day and Software CMD

Equities

- Consumer discretionary: EasyJet [EZJ.UK] +7%, TUI [TUI.UK] +7% (UK lockdown exit plan), Atlantia [ATL.IT] +5% (CDP to present offer)

- Financials: HSBC [HSBA.UK] -1% (earnings)

- Industrials: Covestro [1COV.DE] +1% (earnings)

Speakers

- Chancellor of the Exchequer Sunak (Fin Min): Budget speech in March to provide support for jobs through the remainder of the pandemic and into the recovery.

- Sweden Central Bank (Riksbank) Breman stated that monetary policy needed a bigger toolbox and was fully possible to expand the toolbox further. She noted that QE, YCC and duel interest rates were options. Needed to examine what the boundary between monetary policy and fiscal policy should look like. Too early to talks about tapering of stimulus and could cut the Repo Rate at any time it is deemed effective

- China Foreign Ministry spokesperson stated that govt to make a resolute response to Canada over its recent vote on Uighur; rejected and condemned such a statement. Called Canada Uighur motion flagrant interference

- Japan govt to decide on Fri, Feb 26th whether to lift the State of Emergency for areas outside Tokyo

Currencies/Fixed Income

- USD was on the defensive in the early part of the EU session with focus on Fed Chair Powell semi-annual testimony in Congress later today. Dealers continue to believe the Fed chief will reiterate his stance that monetary policy needed to remain accommodative despite rising Treasury yields. Also optimism on the global economic recovery dampening safe haven appeal

- GBP currency was firmer as PM Johnson presented his gradual roadmap for exiting the current lockdown measures. GBP strength also aided by the rapid rollout of vaccinations and the likelihood of more fiscal support in March's budget. GBP/USD edging towards the 1.41 area for its highest level since Apr 2018 as markets believes that a meaningful relaxation of restrictions in 2Q would aid the UK’s economic recovery

Economic data

- (UK) Jan Jobless Claims Change: -20.0K v -20.4K prior; Claimant Count Rate: 7.2% v 7.3% prior

- (UK) Dec Average Weekly Earnings 3M/Y: 4.7% v 4.1%e; Average Weekly Earnings (ex-bonus) 3M/Y: 4.1% v 4.0%e

- (UK) Dec ILO Unemployment Rate: 5.1% v 5.1%e (highest level since early 2016); Employment Change 3M/3M: -114K v -30Ke

- (UK) Q4 Output Per Hour Y/Y: -1.1% v +4.0% prior

- (ZA) South Africa Dec Leading Indicator: 115.1 v 110.0e

- (CH) Swiss Jan Producer & Import Prices M/M: 0.3% v 0.5% prior; Y/Y: -2.1% v -2.3% prior

- (AT) Austria Jan CPI M/M: -0.8% v 0.6% prior; Y/Y: 0.8% v 1.2% prior

- (CZ) Czech Jan PPI Industrial M/M: 1.3% v 0.7%e; Y/Y: 0.0% v -0.6%e

- (SE) Sweden Jan Unemployment Rate: 9.3% v 8.2% prior; Unemployment Rate (seasonally adj): 8.9% v 8.9%e; Trend Unemployment Rate: 8.8% v 8.6% prior

- (IS) Iceland Jan Wage Index M/M: 3.7% v 0.2% prior; Y/Y: % v 7.2% prior

- (PL) Poland Jan Unemployment Rate:6.5 % v 6.5%e; Q4 Unemployment: 3.1% v 3.5%e

- (IT)) Italy Dec Industrial Sales M/M: +1.0% v -2.0% prior; Y/Y: % v -4.6% prior

- (IT)) Italy Dec Industrial Orders M/M: +1.7% v -1.4% prior; Y/Y: 7.0% v 5.0% prior

- (RO) Romania Jan M3 Money Supply Y/Y: 16.9% v 15.3% prior

- (ZA) South Africa Q4 Unemployment Rate: 32.0%e v 30.8% prior

- (IL) Israel Jan Leading 'S' Indicator M/M: -0.2% v +0.5% prior

- (EU) Euro Zone Jan Final CPI Y/Y: 0.9% v 0.9%e; CPI Core Y/Y: 1.4% v 1.4%e

- (CH) Swiss Jan CPI EU Harmonized M/M: 0.0% v 0.1% prior; Y/Y: -0.6% v -1.0% prior

Fixed income Issuance

- (ID) Indonesia sold total IDR5.0T vs. IDR12.0T target in Islamic bills and bonds (sukuk)

- (NL) Netherlands Debt Agency (DSTA) sold €1.7B vs. €1.5-2.5B in 0.50% Jan 2040 DSL green bond; Avg Yield: % v -0.019% prior (Jun 23rd 2020)

- (ZA) South Africa sold total ZAR6.6B vs. ZAR6.6B target in 2032, 2037 and 2044 bonds

- (UK) DMO sold £2.0B in 0.625% Oct 2050 Gilts; Avg Yield: 1.302% v 0.837% prior; bid-to-cover: 2.20x v 2.38x prior; Tail: 0.3bps v 0.3bps prior

- (IT) Italy Debt Agency (Tesoro) sold €2.5B vs. €2.0-2.5B indicated range in 0.00% Sept 2022 CTZ; Avg Yield: -0.308% v -0.277% prior; bid-to-cover: 1.66x v 1.46x prior

Looking Ahead

- (EU) Daily ECB Liquidity Stats

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)

- 06:00 (UK) Feb CBI Retailing Reported Sales: -40e v -50 prior; Total Distribution Sales: No est v -44 prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)

- 07:00 (TR) Turkey to sell bonds

- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.60%; Expected to leave Overnight Deposit Rate unchanged at -0.05%

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

- 08:55 (US) Weekly Redbook LFL Sales data

- 09:00 (US) Dec FHFA House Price Index M/M: 0.9%e v 1.0% prior; Q/Q: No est v 3.1% prior

- 09:00 (US) Dec S&P/Case-shiller House Price Index (20-City) M/M: 1.25%e v 1.42% prior; Y/Y: 10.00%e v 9.08% prior

- 09:00 Dec S&P/Case-shiller House Price Index (overall) YoY: No est v 9.49% prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision press conference

- 09:45 (UK) BOE to buy £1.48B in APF Gilt purchase operation (over 20-years)

- 10:00 (US) Feb Consumer Confidence: 90.0e v 89.3 prior

- 10:00 (US) Feb Richmond Fed Manufacturing Index: 16e v 14 prior

- 10:00 (US) Fed Chair Powell semi-annual testimony in Congress

- 12:30 (CA) Bank of Canada (BOC) Gov Macklem

- 14:00 (AR) Argentina Dec Shop Center Sales Y/Y: No est v -46.7% prior; Supermarket Sales Y/Y: No est v -1.1% prior

- 16:00 (KR) South Korea Mar Business Manufacturing Survey: No est v 81 prior; Non-Manufacturing Survey: No est v 70 prior

- 16:30 (US) Weekly API Oil Inventories

- 19:30 (AU) Australia Q4 Construction Work Done: +1.0%e v -2.6% prior

- 19:30 (AU) Australia Q4 Wage Price Index Q/Q: 0.3%e v 0.1% prior; Y/Y: 1.1%e v 1.4% prior

- 20:00 (NZ) Reserve Bank New Zealand (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate (OCR) unchanged at 0.25%

- 21:00 (NZ) New Zealand Central Bank (RBNZ) Gov Orr post rate decision press conference

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

- 23:00 (MA) Malaysia Jan CPI Y/Y: -0.8%e v -1.4% prior