Central banks continue to hike despite easing of inflation

Notes/Observations

- Powell on Tuesday confirmed the prospect of further interest-rate rises to tame inflation.

- European bourses move higher in wake of US market momentum following Fed Chair Powells comments which initially resulted in choppy trading for risk appetite.

- India Central Bank (RBI) hike by 25bps, as expected but vote was not unanimous at 4-2; Noted core inflation remained sticky. Iceland Central Bank hiked by 50bps to continue its tightening cycle.

- Earnings season continues as Equinor follows energy sector status quo and raises buyback as part of Q4 results; Shipping giant Maersk sees significant inventory adjustment and expects ocean business to be a lot worse in H2.

- Asia closed mixed with KOSPI outperforming at +1.3%. EU indices are +0.6-0.8% higher. US futures are -0.3%. Gold +0.6%, DXY -0.4%; Commodity: Brent +1.2%, WTI +1.5%, TTF -4.7%; Crypto: BTC +0.7%, ETH +1.7%.

Asia

- India Central Bank (RBI) raised Repurchase Rate by 25bps to 6.50% (as expected) and to remain focused on withdrawal of accommodation.

- Japan PM Kishida reiterated BOJ Governor choice concerned basic economic policy and was mindful of very strong market at.

Ukraine conflict

- Germany govt approved transfer of 178 Leopard-1 tanks to Ukraine.

Europe

- ECB’s Schnabel (Germany) reiterated stance that inflation momentum was still quite elevated. She could not yet give all clear on inflation. Reiterated Council view that it intended to hike rates by 50bps in March.

- UK National Institute of Economic and Social Research (NIESR) raised forecasts for UK CPI in 2023 and 2024 while cutting the 2023 and 2024 GDP forecasts.

Americas

- Fed Chair Powell: Disinflationary process has begun, but we are at the very early stages.

- President Biden State of the Union Address reiterated stance that US sought competition and not conflict with China. Vowed he would not let the US default over the debt limit and asked Congress to raise the debt ceiling.

- Canada BOC Gov Macklem reiterated stance that any pause on rates was conditional on outlook evolving as expected, prepared to hike again if CPI did not fall as expected.

Energy

- Weekly API Crude Oil Inventories: -2.2M v +6.3M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 % at #, FTSE +0.66% at 7,916.75, DAX +0.79% at 15,442.45, CAC-40 +0.49% at 7,167.24, IBEX-35 +0.76% at 9,241.68, FTSE MIB +0.61% at 27,284.00, SMI +0.69% at 11,311.00, S&P 500 Futures -0.30%].

Market Focal Points/Key Themes: European indices open higher across the board and stayed upbeat through the early part of the session; all sectors start the day in the green; Slovenia closed for holiday; sectors leading the way higher include materials and technology; lagging sectors include industrials and financials; oil & gas subsector weighed on by disappointing results from TotalEnergies; reportedly CDP planning counter offer for Telecom Italia network; earnings expected during the upcoming US session include Disney, Metro, Uber and Under Armour.

Equities

- Consumer discretionary: Pandora [PNDORA.DK] +7.5% (reports Q4 - DKK2.4B buyback announced), Scout24 [G24.DE] -1.0% (analyst action - cut to neutral at UBS), HelloFresh [HFG.DE] +2.0% (analyst action - cut to neutral at Credit Suisse).

-Utilities: E.ON [EOAN.DE] +2.0% (reports prelim FY22 - post close).

- Energy: TotalEnergies [TTE.FR] -3.0% (reports Q4 - beats estimates, $2B buyback, raises div), Equinor [EQNR.NO] +6.5% (reports Q4 - raises div, increases buyback).

- Financials: Societe Generale [GLE.FR] -1.0% (earnings), ABN AMRO [ABN.NL] +5.5% (reports Q4 - €500M buyback announced).

- Healthcare: Synlab [SYAB.DE] -3.0% (multiple analyst cuts).

- Industrials: Volkswagen [VOW3.DE] -1.5% (prelim earnings), Maersk [MAERSKB.DK] +2.0% (reports Q4 - misses estimates / weak FY23 guidance).

- Technology: Adyen [ADYEN.NL] -12.5% (reports H2 - misses estimates / appoints co-CEO).

- Materials: Akzo Nobel [AKZA.NL] +6.0% (earnings).

Speakers

- ECB 2022 SREP Results maintained its capital requirements for 2023 as banking sector remained resilient.

- ECB's Enria (SSM chief): Bank payouts are compatible with capital plans.

- Iceland Central Bank (Sedibanki) Policy Statement noted that it would have to tighten further in coming meetings to ensure inflation target was reached within acceptable time frame.

- UK Supreme Court rejected a challenge by Unionist MPs on lawfulness of the Northern Ireland Protocol.

- RBI Gov Das post rate decision press conference stressed he would not provide forward guidance on rates. Inflation had shown signs of moderation, worst was behind us.

- Iran Dep Min stated that it sought oil market to be depoliticized in order to guarantee supply. Saw oil prices rising to $100/barrel in H2. OPEC+ likely to continue its current policy at the next meeting.

- India Oil Min Puri stated that he had been invited to the next OPEC+ meeting.

Currencies/fixed income

- USD was softer in the session despite Fed's Powell having passed up an opportunity to tamp down market optimism for looser policy front. Powell noted that he saw a long fight against inflation and that rates might need to move higher than expected if the economy remained strong. The greenback retraced as participants noted Powell reiterated he felt a process of "disinflation" was underway.

- EUR/USD drifting higher to test above 1.0750 in the session. ECB recently reiterated its rhetoric on intending to hike by 50bps at the next meeting in March.

- GBP/USDD back at 1.21 area. Dealers noted that UK Supreme Court could issue its verdict on the on lawfulness of the Northern Ireland (**Reminder: Protocol created a trade border between Northern Ireland and the rest of the UK).

- USD/JPY below the 131 level as markets await word on who would be nominated to replace Kuroda as the next BOJ Gov.

Economic data

- (SE) Sweden Jan Maklarstatistik Housing Prices Y/Y: -12.0% v -10.0% prior; Apartment Prices Y/Y: -10.0% v -9.0% prior.

- (SE) Sweden Dec Private Sector Production M/M: -0.4% v 0.2%e; Y/Y: -0.8% v +0.9% prior.

- (SE) Sweden Dec Industrial Orders M/M: 25.1% v -0.6% prior; Y/Y: +24.9% v -7.0% prior.

- (SE) Sweden Dec Industry Production Value Y/Y: -2.5% v -0.6% prior; Service Production Value Y/Y: -0.1% v 12.0% prior.

- (SE) Sweden Dec Household Consumption M/M: -0.8% v 0.0% prior; Y/Y: -1.8% v -0.7% prior.

- (DK) Denmark Dec Current Account Balance (DKK): 32.8B v 16.0B prior; Trade Balance: 10.2B v 7.8B prior.

- (DK) Denmark Dec Industrial Production M/M: 15.3% v 2.4% prior.

- (HU) Hungary Dec Preliminary Trade Balance: -€0.2B v -€1.4B prior.

- (FR) France Q4 Preliminary Private Sector Payrolls Q/Q: 0.0% v 0.3%e.

- (CZ) Czech Jan Unemployment Rate: 3.9% v 3.9%e.

- (IS) Iceland Central Bank (Sedibanki) raised the 7-Day Term Deposit Rate by 50bps to 6.50%.

- (IT) Italy Dec Retail Sales M/M: -0.2% v -0.7%e; Y/Y: 3.4% v 4.4% prior.

Fixed income issuance

- (VN) Vietnam sold total VNM10.2T vs. VND10.5T indicated in 2030, 2033 and 2038 bonds.

- (DK) Denmark sold DKK4.99B in new 2.25% Nov 2033 DGB bonds; Avg Yield: 2.57%, bid-to-cover: 1.29x.

- (IN) India sold total INR290B vs. INR290B indicated in 3-month, 6-month and 12-month bills.

- (SE) Sweden sold SEK17.5B vs. SEK17.5B indicated in 3-month Bills; Avg Yield: 2.8267% v 2.7169% prior; Bid-to-cover: 1.76x v 1.75x prior.

- (UK) DMO sold £2.0B 1.125% Jan 2039 Gilts; Avg Yield: 3.736% v 3.514% prior; bid-to-cover: 2.42x v 2.35x prior; Tail: 0.7bps v 0.2bps prior.

Looking ahead

- (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 6.75% (no set time).

- 05:15 (CH) Switzerland to sell 2029, 2036 and 2045 bonds.

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

- 05:30 (DE) Germany to sell €4.0B in 2.1% Nov 2029 bunds.

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0B in 1.65% July 2032 OT bonds.

- 06:00 (PT) Portugal Q4 Unemployment Rate: No est v 5.8% prior.

- 06:00 (CL) Chile Jan CPI M/M: 0.5%e v 0.3% prior; Y/Y: 12.1%e v 12.8% prior.

- 06:00 (CZ) Czech Republic to sell 2031Bonds (3 tranches).

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

- 06:45 (US) Daily Libor Fixing.

- 07:00 (US) MBA Mortgage Applications w/e Feb 3rd: No est v -9.0% prior.

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

- 08:00 (HU) Hungary Central Bank (MNB) Jan Minutes.

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

- 09:15 (US) Fed’s Williams at WSJ Event.

- 09:30 (US) Fed’s Cook.

- 10:00 (US) Dec Final Wholesale Inventories M/M: 0.1%e v 0.1% prelim; Wholesale Trade Sales M/M: -0.2%e v -0.6% prior.

- 10:00 (NL) ECB's Knot (Netherlands).

- 10:00 (US) Fed members Barr and Bostic at school event.

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

- 11:00 (RU) Russia Dec Unemployment Rate: 3.8%e v 3.7% prior; Nov Real Wages Y/Y: No est v 0.4% prior.

- 11:00 (RU) Russia Dec Real Retail Sales Y/Y: -8.7%e v -7.9% prior.

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

- 12:00 (CA) Canada to sell C$3.5B in 3.5% 2025 Bonds.

- 12:30 (US) Fed’s Kashkari at Boston Economic Club.

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

- 13:45 (US) Fed’s Waller.

- 14:00 (AR) Argentina Dec Industrial Production Y/Y: No est v 1.4% prior; Construction Activity Y/Y: No est v -1.5% prior.

- 18:30 (AU) Australia to sell combined A$2.0B in 3-month and 6-month Bills (3 tranches).

- 18:50 (JP) Japan Jan M2 Money Supply Y/Y: No est v 2.9% prior; M3 Money Supply Y/Y: No est v 2.5% prior.

- 19:01 (UK) Jan RICS Housing Balance: -45.0%e v -42.0% prior.

- 22:00 (KR) South Korea Jan Total Bank Lending to Households (KRW(: No est v 1058.1T prior.

- 22:00 (TH) Thailand Jan Consumer Confidence: No est v 49.7 prior; Economic Confidence: No est v 43.9 prior.

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

- 22:35 (JP) Japan to sell 10-Year inflation-linked Bonds.