Calm remains in the banking sector aiding risk appetite

Notes/observations

- With banking sector confidence driving market sentiment, European bourses are higher on calming basis of 'no news is good news'. Risk appetite tentatively creeping back in but underlying fears remain as overall financial system stress indications have not subsided and Central Banks remain on tightening path.

- Corporate bond issuance picks up as we approach quarter end.

- BoE’s Bailey and Ramsden testifying at Treasury Committee on current financial system stability in UK and SVB UK collapse; Bailey noted we are in a period of heightened tension around banks.

- Asia closed mixed with NZX50 outperforming at +1.4%. EU indices are +0.3-0.8%. US futures are -0.2% to +0.1%. Gold -0.1%, DXY -0.1%; Commodity: Brent +0.4%, WTI +0.6%, TTF -2.7%; Crypto: BTC -3.0%, ETH -1.6%.

Asia

- Australia Feb Retail Sales M/M: 0.2% v 0.2%e (**Note: cost of living weighing on consumption).

-South Korea Feb Retail Sales Y/Y: 7.9% v 6.7% prior (Dec) (**Note: return to pre-pandemic levels).

- BOJ Gov Kuroda reiterated view that a sustainable inflation target still not met yet. Reiterates that is premature to debate exit from easy policy; more time needed to sustainably hit price target.

Europe

- ECB's Schnabel (Germany, Hawk) noted that she was not seeing any signs of weakening in a labor market. Was not easy to say how restrictive rates were. ECB had no real concern about financial stability risks, situation is still fragile.

- BOE Gov Bailey reiterated recent MPC statement that if persistent inflationary pressures became evident, further monetary tightening would be required.

- UK Mar BRC Shop Price Index Y/Y: 8.9% v 8.4% prior (record high). Shop price inflation had yet to peak.

- EU froze €19B tranche of post-pandemic funds for Italy seeking clarification on the 55 targets and milestones in Italy's pandemic Recovery Plan that were supposed to be reached in the second half of last year.

Americas

- Fed Vice Chair for Supervision Barr stated that the banking system was sound and resilient: Remain committed to ensuring all deposits are safe.

- Fed's Jefferson (voter): Inflation had been longer lasting and current rate was too high.

Speakers/fixed income/FX/commodities/erratumEquities

Indices [Stoxx600 +0.20% at 445.62, FTSE +0.37% at 7,499.19, DAX +0.25% at 15,166.15, CAC-40 +0.39% at 7,105.73, IBEX-35 +0.69% at 8,967.13, FTSE MIB +0.41% at 26,314.00, SMI +0.48% at 10,837.80, S&P 500 Futures -0.07%].

Market Focal Points/Key Themes: European indices open higher across the board; all sectors start the day in the green; sectors leading the way higher include financials and energy; while sectors such as utilities and real estate lagged; banking subsector continues rebound, with analysts upgrading European banks; UK retail subsector supported by Ocado results; Norway publishes amended resource tax proposal, dragging on Norwegian fish farm producers; oil & gas subsector supported on yesterday’s rise in crude prices; Adnoc and BP reach deal to take Newmed Energy private; Iveco CEO said looking at M&A opportunities over the coming two years; earnings expected in the upcoming US session include Micron, TD SYNNEX and Walgreens Boots Alliance.

Equities

- Consumer discretionary: Ocado [OCDO.UK] -1.0% (Q1 Trading Update - better than expected; Kantar sales and inflation data), Zalando [ZAL.DE] +1.0% (analyst action - raised to buy at HSBC), Rational [RAA.DE] -4.0% (reports FY22).

- Energy: bp [BP.UK] +2.0% (acquisition).

- Financials: Credit Suisse [CSGN.CH] +1.5%, UBS Group [UBSG.CH] +1.5% (ongoing bank sector rebound).

- Industrials: Manz Automation [M5Z.DE] +11.0% (order award), Wacker Neuson [WAC.DE] +1.0% (reports FY22 - beats estimates, guides FY23), VAT Group [VACN.CH] +1.5% (analyst action - raised to buy at Berenberg), Norma Group [NOEJ.DE] -10.5% (guides FY23 - light).

- Technology: Xaar [XAR.UK] +8.5% (earnings).

- Materials: Synthomer [SYNT.UK] -12.0% (earnings).

Speakers

- ECB's Rehn (Finland) stated that a decision on digital euro was expected in Autumn.

- ECB’s Muller (Estonia, Hawk) stated that inflation was slowing but too early to declare a victory.

- ECB's Enria (SSM chief): Current events confirmed that strong, demanding supervision was needed more than ever.

- France Fin Min Le Maire stated that the govt aimed to cut the budget deficit to 3% of GDP by 2027 (**Note: 2022 was at 4.7%).

- Greece PM Mitsotakis announced that the country to hold general election on May 21st.

Currencies/ Fixed Income

- USD remained on soft-footing as safe-haven flows subsided. This has prompted some buying in equity markets and higher bond yields. The hope of more support from US authorities lifted sentiment towards the banking sector.

- USD/JPY hovering around the 131 area. Dealers noted that flows related to the end of the Japan fiscal year on Friday aiding sentiment.

- EUR/USD holding above the 1.08 area while GBP/USD above 1.23.

Economic data

- (FI) Finland Feb House Price Index M/M: +1.2% v -2.6% prior; Y/Y: -5.2% v -5.4% prior.

- (HU) Hungary Jan Average Gross Wages Y/Y: 16.3% v 16.4%e.

- (HU) Hungary Q4 Current Account Balance: -€4.3B v -€4.0Be.

- (FR) France Mar Business Confidence: 103 v 103e; Manufacturing Confidence: 104 v 103e; Production Outlook Indicator: -1 v 0 prior; Own-Company Production Outlook: 11 v 14 prior.

- (IT) Italy Mar Consumer Confidence Index: 105.1 v 104.0e; Manufacturing Confidence: 104.2 v 103.0e; Economic Sentiment: 110.2 v 109.2 prior.

- (IS) Iceland Mar CPI M/M: 0.6% v 1.4% prior; Y/Y: 9.8% v 10.2% prior (annual pace moves off cycle highs).

Fixed income issuance

- (EU) European Union opened its book to sell €6.0B in 2.625% Feb 2048 green NGEN bond via syndicate; guidance seen +70bps to mid-swaps.

- (PL) Poland to sell USD-denominated 10-year and 30-year notes via syndicate.

- (ID) Indonesia sold total IDR20.0T vs. IDR20.0T target in bills and bonds.

- (NL) Netherlands Debt Agency (DSTA) sold €1.99B vs. €1.0-2.0B indicated range in 3.0% Jan 2052 DSL Bonds; Avg Yield: 2.501%.

- (IT) Italy Debt Agency (Tesoro) sold total €4.0B vs. €3.25-4.0B indicated range in 2024 and 2025 BTP Bonds.

- Sold €1.5B vs. €1.0-1.5B indicated range in 2.50% Dec 2024 BTP Bonds; Avg Yield: 2.02%, bid-to-cover: 1.37x (no recent history).

- Sold €2.75B vs. €2.25-2.75B indicated range in 3.40% Mar 2025 BTP Bonds; Avg Yield: 3.29% v 3.67% prior, bid-to-cover: 1.48x v 1.51x prior.

- (IT) Italy Debt Agency (Tesoro) sold €1.5B vs. €1.0-1.5B indicated range in 0.1% May 2033 Inflation-linked bonds (BTPei); Real Yield: 2.020% v 2196% prior; bid-to-cover: 1.37x v 1.43x prior.

Looking ahead

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

- 05:30 (ZA) South Africa Q4 Non-farm Payrolls Q/Q: No est v 0.1% prior; Y/Y: No est v 0.3% prior.

- 05:30 (DE) Germany to sell €5.5B in 2.50% Mar 2025 Schatz.

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

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

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2032, 2035 and 2040 bonds.

- 06:00 (IE) Ireland Feb Retail Sales Volume M/M: No est v 0.1% prior; Y/Y: No est v 3.0% prior.

- 06:45 (US) Daily Libor Fixing.

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

- 07:00 BR) Brazil Mar FGV Construction Costs M/M: 0.2%e v 0.2% prior.

- 07:00 (BR) Brazil Central Bank (BCB) Mar Minutes.

- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 13.00%.

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

- 08:30 (US) Feb Advance Goods Trade Balance: -$90.0Be v -$91.5B prior.

- 08:30 (US) Feb Preliminary Wholesale Inventories M/M: -0.1%e v -0.4% prior (revised from -0.4%); Retail Inventories M/M: 0.2%e v 0.3% prior.

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

- 09:00 (US) Jan FHFA House Price Index M/M: -0.3%e v -0.1% prior.

- 09:00 (US) Jan S&P/Case-Shiller House Price Index (20-City) M/M: -0.50%e v -0.51% prior; Y/Y: 2.55%e v 4.65% prior; House Price Index (Overall) Y/Y: No est v 5.76% prior.

- 09:00 (HU) Hungary Central Bank Gov post rate decision statement.

- 09:15 (EU) ECB chief Lagarde with Nagel (Germany) at BIS.

- 10:00 (US) Mar Consumer Confidence: 101.0e v 102.9 prior.

- 10:00 (US) Mar Richmond Fed Manufacturing Index: -10e v -16 prior; Business Conditions: No est v -6 prior.

- 10:30 (US) Mar Dallas Fed Services Activity: No est v -9.3 prior.

- 13:00 (US) Treasury to sell 5-Year Notes.

- 15:00 (AR) Argentina Q4 Current Account: No est v -$3.0B prior.

- 16:30 (US) Weekly API Oil Inventories.

- 17:00 (KR) South Korea Mar Consumer Confidence: No est v 90.2 prior.

- 20:30 (AU) Australia Feb CPI Y/Y: 7.2%e v 7.4% prior.

- 21:10 (JP) BOJ Outright Bond Purchase Operation for 3~5 Years; 5~10 Years and 10~25Years maturities.