Concerns over impact of Russian sanctions weighs upon risk appetite

Notes/Observations

- Risk aversion flows pick up as EU pondered impact from sanctions against Russia on economic growth and inflation.

- Markets continue to push back expectations of the 1st ECB rate hike into 2023.

- German State Feb CPI readings higher m/m and a further rise now looks almost certain given Ukraine war impact; Overall Germany's annual rate of inflation seen remaining below the December peak of 5.3%.

- Major Feb PMI Manufacturing mixed in session but remaining in expansion (Beats: Italy, Spain; Misses: Euro Zone, Germany, France).

Asia

- RBA left Cash Rate Target unchanged at 0.10% (as expected). Reiterated forward guidance that would not raise cash rate until inflation was sustainably within target range. Too early to conclude it has returned to target band. Ukraine was a major source of uncertainty; prices of many commodities had increased further due to the war.

- China Feb Manufacturing PMI (Govt official) registered its 1st expansion in 3 months) (50.2 v 49.8e).

- China Feb Caixin PMI Manufacturing registered its 1st expansion in 3 months (50.4 v 49.1e).

- Australia Jan Final PMI Manufacturing confirmed its 21st month of expansion: (57.0 v 57.6 prelim).

- Japan Jan Final PMI Manufacturing confirmed its 13th consecutive expansion (52.7 v 52.9 prelim).

Russia/Ukraine

- Ukraine President Zelenskiy said to be urging US President Biden and NATO to impose a no-fly zone over significant parts of Ukraine.

- US noted that a no fly zone would be a step toward sending US troops to fight a war with Russia.

- Ukrainian Ambassador to the US stated that Russia used a vacuum bomb on Monday (Feb 28th).

- State Dept spokesperson stated that US would do more on sanctions as it had seen no indications that Russia is prepared to de-escalate in Ukraine.

Energy

- Canada PM Trudeau stated that Canada would ban Russia crude oil imports; Imports of Russian crude oil were small. Canada military would provide airlift support to transport supplies and aid as contribution to NATO efforts.

- IEA’s Birol announced that: IEA will hold extraordinary ministerial meeting on Tuesday, Mar 1st.

- State Dept spokesperson stated prepared to walk away from Iran talks if Iran displays intransigence to making progress.

- EU Commission said to to propose EU countries tax energy companies windfall profits from gas price rise. Revenues from windfall taxes should be invested in renewable energy, could compensate business users and consumers.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -1.51% at 446.26, FTSE -0.62% at 7,412.20, DAX -2.02% at 14,168.40, CAC-40 -2.20% at 6,512.31, IBEX-35 -1.36% at 8,363.50, FTSE MIB -1.94% at 24,924.00, SMI -1.23% at 11,839.80, S&P 500 Futures -0.70%].

Market Focal Points/Key Themes: European indices open mixed but quickly turned to trade in the red and continued lower as the session wore on; better performing sectors include industrials and financials; sectors leading to the downside include consumer discretionary and utilities; focus on upcoming OPEC technical meeting later today; earnings expected during the upcoming US session include Hormel Foods, Target, AutoZone and Baidu.

Equities

- Consumer discretionary: Beiersdorf [BEI.DE] +5% (earnings), HelloFresh [HFG.DE] -8% (earnings), Zalando [ZAL.DE] -7% (earnings).

- Energy: TotalEnergies [TTE.FR] -2% (no longer participate in projects in Russia).

- Healthcare: Bayer [BAYN.DE] +1% (earnings).

- Materials: Covestro [1COV.DE] +3% (earnings; buyback).

Speakers

- EU Finance Ministers said to be holding an emergency meeting on Wed, Mar 2nd.

- ECB's Rehn (Finland) noted that it was possible that Russia’s invasion of Ukraine would lead to stagflation but was still too early to assess the impact.

- EU Competition Commissioner Vestager stated that the EU could not ban Russian gas completely.

- Italy said to call for extended suspension of the EU Stability pact citing Russian sanctions.

- Italy PM Draghi stated in Parliament that Russia's threat of nuclear weapons demanded swift and strong response. Tolerating invasion would threaten EU security and prepared for further Russian sanctions if needed.

- Belarus President Lukashenko stated that Belarus had no plans to take part in Russian operation in Ukraine.

- Russia Foreign Min Lavrov reiterated stance that the West must not build military facilities in countries of former Soviet Union and was time for US nuclear weapons in Europe to be returned home.

- Russia Defense Min Shoigu reiterated that operations to continue until Ukraine goals accomplished and protect Russia from threats created by the West. Reiterated Russia objective was de-militarization and not occupation of Ukraine's territory.

- OPEC said to see smaller oil surplus of 1.1M bpd for 2022.

Currencies/Fixed income

- The concerns over Russia’s invasion of Ukraine continued to aid safe-haven flows with USD, JPY and CHF remaining supported in the near term amid lingering uncertainty over the conflict and the impact of sanctions.

- EUR/USD drifted back below the 1.12 level as the session progressed as market participants pondered the impact from sanctions against Russia on economic growth and inflation in the region..

- European bond yields continued to fall as markets continue to push back expectations of the 1st ECB rate hike into 2023.

- Bitcoin rises as Russians and Ukrainians are relying on the cryptocurrency to get their funds out of the traditional system.

Economic data

- (DE) Germany Feb CPI North Rhine Westphalia M/M: 1.0% v 0.7% prior; Y/Y: 5.3% v 5.1% prior.

- (RU) Russia Feb PMI Manufacturing: 48.6 v 51.8 prior (1st contraction in 5 months).

- (TR) Turkey Feb PMI Manufacturing: 50.4 v 50.5 prior (9th month of expansion).

- (TH) Thailand Feb Business Sentiment Index: 47,8 v 47.2 prior.

- (SE) Sweden Feb PMI Manufacturing: 58.6 v 62.0e (21st month of expansion).

- (NL) Netherlands Feb Manufacturing PMI: 60.6 v 60.1 prior (19th straight expansion).

- (PL) Poland Feb PMI Manufacturing: 54.7 v 54.8e (20th straight expansion).

- (HU) Hungary Feb PMI Manufacturing: 53.2 v 55.0e (11th straight expansion).

- (HU) Hungary Jan PPI M/M: 0.6% v 1.6% prior; Y/Y: 22.3% v 22.3% prior.

- (CZ) Czech Q4 Preliminary GDP (2nd reading) Q/Q: 0.9% v 0.9% advance; Y/Y: 3.6% v 3.6% advance.

- (TW) Taiwan Jan Monitoring Indicator: 36 v 38 prior.

- (ES) Spain Feb Manufacturing PMI: 56,9 v 56.0e (13th month of expansion).

- (CH) Swiss Feb PMI Manufacturing: 62.6 v 64.3e (19th straight expansion).

- (CZ) Czech Republic Feb PMI Manufacturing: 56.5 v 58.5e (18th straight expansion).

- (NG) Nigeria Feb PMI Manufacturing: 57.3 v 53.7 prior.

- (IT) Italy Feb Manufacturing PMI: 58.3 v 58.0e (20th month of expansion).

- (FR) France Feb Final Manufacturing PMI: 57.2 v 57.6 prelim (confirmed 15th month of expansion).

- (DE) Germany Feb Final Manufacturing PMI: 58.4 v 58.5 prelim (confirmed 20th month of expansion).

- (EU) Euro Zone Feb Final Manufacturing PMI: 58.2 v 58.4 prelim (confirmed 20th month of expansion).

- (GR) Greece Feb Manufacturing PMI: 58.4 v 57.9 prior (12th month of expansion).

- (NO) Norway Feb PMI Manufacturing: 55.9 v 56.8e.

- (ZA) South Africa Feb Manufacturing PMI: 58.6 v 56.2e.

- (DE) Germany Feb CPI Hesse M/M: 0.8% v 0.8% prior; Y/Y: 5.7% v 5.6% prior.

- (DE) Germany Feb CPI Bavaria M/M: 1.2% v 0.4% prior; Y/Y: 5.3% v 4.8% prior.

- (DE) Germany Feb CPI Brandenburg M/M: 0.8% v 0.4% prior; Y/Y: 5.4% v 5.2% prior.

- (DE) Germany Feb CPI Baden Wuerttemberg M/M: 0.8% v 0.1% prior Y/Y: 4.7% v 4.7% prior.

- (UK) Feb Final Manufacturing PMI: 58.0v 57.3 prelim(confirmed 21st straight expansion).

- (UK) Jan Net Consumer Credit: £0.6B v £1.0Be; Net Lending: £5.9B v £4.1Be.

- (UK) Jan Mortgage Approvals: 74.0K v 72.0Ke.

- (UK) Jan M4 Money Supply M/M: 0.1% v 0.1% prior; Y/Y: 5.7% v 6.4% prior; M4 (ex-IOFCs) Annualized: 3.6% v 4.3% prior- 05:00 (DE) Germany Feb CPI Saxony M/M: % v 0.2% prior; Y/Y: %v 4.8% prior.

- (IT) Italy Feb Preliminary CPI M/M: 0.9% v 0.5%e; Y/Y: 5.7% v 5.3%e.

- (IT) Italy Feb Preliminary CPI EU Harmonized M/M: 0.8% v 0.2%e; Y/Y: 6.2% v 5.4%e.

- (CY) Cyprus Q4 Final GDP Q/Q: 0.7% v 0.9% prelim; Y/Y: 6.4% v 6.5% prelim.

- (DK) Denmark Feb PMI Survey: 50.7 v 59.4 prior (12th straight expansion).

Fixed income issuance

- (DE) Germany opened its book to sell 0.0% Aug 2052 Bund via syndicate; guidance seen +4bps to Aug 2050 Bund.

- (ID) Indonesia sold total IDR19.0T vs. IDR23.0T target in bills and bonds.

- (ZA) South Africa sold total ZAR3.9B vs. ZAR3.9B indicated in 2026, 2032 and 2035 bonds.

- (ES) Spain Debt Agency (Tesoro) sold total €5.24B vs. €4.5-5.5B indicated range in 6-month and 12-month bills.

Looking ahead

- (IL) Israel Jan Leading 'S' Indicator M/M: No est v -0.1% prior.

- (RO) Romania Feb International Reserves: No est v $48.5B prior.

- (US) Feb Total Vehicle Sales data.

- 05:15 (CH) Switzerland to sell 3-month Bills.

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

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

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 6-month bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €436.0M with 13 bids recd).

- 06:00 (IT) Italy 2022 Annual GDP Y/Y: No est v -8.9% prior; Budget Deficit to GDP: 7.8%e v 9.5% prior.

- 06:30 (CL) Chile Jan Economic Activity Index (Monthly GDP) M/M: No est v -0.4% prior; Y/Y: 10.7%e v 10.1% prior.

- 06:30 (EU) ESM to sell €1.1B in 3-month Bills.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (TR) Turkey to sell Bonds.

- 07:00 (IT) ECB’s Panetti (Italy) at virtual G7.

- 08:00 (DE) Germany Feb Preliminary CPI M/M: 0.8%e v 0.4% prior; Y/Y: 5.0%e v 4.9% prior.

- 08:00 (DE) Germany Feb Preliminary CPI EU Harmonized M/M: 0.8%e v 0.9% prior; Y/Y: 5.3%e v 5.1% prior.

- 08:00 (CZ) Czech Feb Budget Balance (CZK): No est v 3.9B prior.

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

- (ZA) South Africa Feb Naamsa Vehicle Sales Y/Y: 12.5%e v 19.5% prior.

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:00 (EU) ECB chief Lagarde with German Chancellor Scholz.

- 08:30 (CA) Canada Dec GDP M/M: 0.0%e v 0.6% prior; Y/Y: 3.8%e v 3.8% prior; Quarterly GDP Annualized: 6.5%e v 5.4% prior.

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

- 09:00 (EU) Weekly ECB Forex Reserves.

- 09:00 (EU) ECB weekly QE bond buying update.

- 09:30 (CA) Canada Feb Manufacturing PMI: No est v 56.2 prior.

- 09:45 (US) Feb Final Markit Manufacturing PMI: 57.5e v 57.5 prelim.

- 10:00 (US) Feb ISM Manufacturing: 58.0e v 57.6 prior; Prices Paid: 77.5e v 76.1 prior.

- 10:00 (US) Jan Construction Spending M/M: -0.1%e v +0.2% prior.

- 10:00 (MX) Mexico Jan Total Remittances: $4.2Be v $4.8B prior.

- 10:00 (MX) Mexico Weekly International Reserve data.

- 10:00 (CO) Colombia Feb PMI Manufacturing: No est v 52.6 prior.

- 10:00 (PE) Peru Feb CPI M/M: No est v 0.0% prior; Y/Y: No est v 5.7% prior.

- 10:30 (MX) Mexico Feb PMI Manufacturing: No est v 46.1 prior.

- 11:00 (US) Treasury to sell $45B 4-week, $35B 8-week bills.

- 12:00 (IT) Italy Feb New Car Registrations Y/Y: No est v -19.7% prior.

- (IT) Italy Feb Budget Balance: No est v -€0.9B prior.

- 13:00 (MX) Mexico Feb IMEF Manufacturing Index: 50.3e v 48.8 prior; Non-Manufacturing Index: 50.1e v 49.0 prior.

- 13:30 (UK) BOE Saunders.

- 14:00 (US) Fed’s Bostic.

- 14:00 (UK) BOE’s Mann (hawkish dissenter).

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

- 16:45 (NZ) New Zealand Jan Building Permits M/M: No est v % prior.

- 16:45 (NZ) New Zealand Q4 Terms of Trade Index Q/Q: No est v 0.7% prior.

- 18:00 (KR) South Korea Jan Industrial Production M/M: -1.5%e v +4.3% prior; Y/Y: 6.4%e v 6.2% prior.

- 18:50 (JP) Japan end-Feb Monetary Base: No est v ¥663.2T prior.

- 18:50 (JP) Japan Q4 Capital Spending Y/Y: 2.9%e v 1.2% prior; Capital Spending (ex-software) Y/Y: 4.4%e v 2.2% prior.

- 19:01 (UK) Feb BRC Shop Price Index Y/Y: No est v 1.5% prior.

- 19:30 (AU) Australia Q4 GDP Q/Q: +3.0%e v -1.9% prior; Y/Y: 3.6%e v 3.9% prior.

- 19:30 (KR) South Korea Feb PMI Manufacturing: No est v 52.8 prior.