ECB members stress that any policy change to be gradual

Notes/Observations

- UK Monthly GDP registered its best growth in 7 months, surges past pre-pandemic size; outlook has since deteriorated due to the Russia-Ukraine conflict.

- Talks between Ukraine and Russia on Thursday made little apparent progress towards ending a war.

Asia

- Japan Q1 BSI Large All Industry Q/Q: -7.5% v +9.6 prior; Large Manufacturing Q/Q: -7.6% v +7.9 prior (weakness attributed to rising raw material costs and curbs to combat the COVID-19 pandemic).

- China Premier Li Keqiang stated that hitting 5.5% GDP target would not be easy; Low rate of inflation in China showed right policies were being used.

- BoJ Head of Monetary Affairs Dept Shimizu reiterated no need to withdraw ultra-easy.

- Japan Fin Min Suzuki: stated that the govt was not considering a fresh economic stimulus package at this time. To focus on passing the fiscal 2022 budget through parliament.

- US govt could announce new sanctions against North Korea soon over its recent missile tests.

- China Cybersecurity Emergency body had been continually attacked from abroad since Feb; Most attacks came from US.

- CNBC's Faber tweets: "Big decline in $JD and $BABA appears related to naming of first 5 Chinese ADR's by SEC in the 3 years de-listing process established by the Holding Foreign Companies Accountable Act, which requires mainly China based registrants to disclose government control and influence".

Russia/Ukraine

- EU Commission President Von der Leyen stated that would propose plan in mid-May to phase out dependence upon Russia fossil fuels by 2027..

- IMF stated that Russia debt default wa no longer an improbable event; To likely cut 2022 world GDP forecast over the Ukraine war.

- UN Security Council to convene on Friday at Russia's request regarding US biological activities in Ukraine.

- President Biden to speak on Russia at 10:15ET (16:15 GMT) Friday; set to call for the end of Russia's preferred trade status.

Europe

- Reports circulated that a few ECB policymakers favored keeping APP open-ended at March meeting; Agreed that 1.9% inflation expected in 2024 is at target. One person at the meeting said that inflation dominated and prevailed over all else, including the Ukraine conflict uncertainty and the growth fears.

- Netherlands PM Rutte was no fast track procedure to become a member of the EU. Important was that Ukraine had requested to join the EU.

Americas

- Treasury Sec Yellen noted that the Russia’s invasion of Ukraine would exacerbate inflation. Believed labor market would remain strong; Did not expect a recession in the US and expected a soft landing for the economy.

- Senate passed Omnibus spending bill and averted a shutdown through the end of Sept. Legislation also included $13.6B for both humanitarian and military assistance for Ukraine.

- Goldman Sachs analyst cuts US 2022 GDP growth forecast from 3.1% to 2.9%; cites higher oil prices and Ukraine war. Saw risk that the US enters a recession during the next year.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 +0.89% at 430.92, FTSE +1.07% at 7,175.14, DAX +1.25% at 13,609.99, CAC-40 +0.57% at 6,242.66, IBEX-35 +0.59% at 8,116.85, FTSE MIB +0.58% at 23,020.00, SMI +1.11% at 11,517.01, S&P 500 Futures +0.34%].

Market focal points/key themes: European indices open generally higher and consolidated advances as the session progressed; sectors among those leading to the upside are financials and energy; while sectors dragging their feet include technology and materials; focus on conclusion of EU leader summit on Ukraine; earnings expected during the upcoming US session include The Buckle.

Equities

- Information Technology: SAP [SAP.DE] +1% (Oracle earnings).

- Healthcare: EssilorLuxottica [EL.FR] +2.5% (earnings), Orphazyme [ORHA.DK] -22% (restructuring, job cuts).

- Industrials: Leonardo [LEO.IT] +10% (earnings).

- Materials: Lanxess [LXS.DE] +3% (earnings).

Speakers

- ECB's Villeroy (France) stated that would be more inflation and more economic uncertainty in region; no longer automatic link between QE and rates. Policy remained very accommodative. Council lifting the foot from the accelerator without stepping on the break in responding to inflationary pressures.

- ECB's Rehn (Finland): Any interest rate adjustment will be gradual. New rate guidance did not signal either earlier or later hike. Decision was a compromise and supported unanimously.

- ECB's Centeno (Portugal) stated that monetary policy must seek a more neutral and less accommodative position; Switch must be done gradually and carefully.

- Chancellor of the Exchequer Sunak (Fin Min) stated that Russia's invasion of Ukraine was creating significant economic uncertainty and would continue to monitor its impact on the economy.

- Russia Govt spokesperon Peskov confirmed Putin to hold talks with Belarus President Lukashenko on Friday (Mar 11th). he added would need agreement in talks before any meeting between the Putin and Zelenskiy.

- Various EU leaders commented ahead of Summit.

- Belgium PM Croo stated that energy supply to EU would not be discussed today. Would be a mistake if EU closed the door to the Ukraine.

Currencies

- USD was firmer in the session ahead of next week’s FOMC decision where the Fed is expected to begin hiking rates.

- EUR/USD moved off its post ECB high of 1.11 and was back below the 1.10 area despite ECB’s decision to accelerate its move toward monetary policy normalization. Dealers noted that rising stagflation worries arising from the Ukraine war continued to add pressure on the euro.

- GBP/USD softer at 1.3070 despite better monthly GDP data for Jan. UK Monthly GDP registered its best growth in 7 months and surged past pre-pandemic size. Dealer keenly point out that the outlook had since deteriorated due to the Russia-Ukraine conflict.

- USD/JPY hit a 5-year high as the pair tested above the 117 handle. BOJ meets next week as well.

Economic data

- (FI) Finland Jan Current Account Balance: €0.1B v €1.2B prior.

- (DE) Germany Feb Final CPI M/M: 0.9% v 0.9% prelim; Y/Y: 5.1% v 5.1% prelim.

- (DE) Germany Feb Final CPI EU Harmonized M/M: 0.9% v 0.9% prelim; Y/Y: 5.5% v 5.5% prelim.

- (UK) Jan Monthly GDP M/M: 0.8% v 0.1%e; 3M/3M: 1.1% v 0.8%e.

- (UK) Jan Industrial Production M/M: 0.7% v 0.1%e; Y/Y: 2.3% v 1.9%e.

- (UK) Jan Manufacturing Production M/M: 0.8% v 0.2%e; Y/Y: 3.6% v 3.1%e.

- (UK) Jan Construction Output M/M: 1.1% v 0.5%e; Y/Y: 9.9% v 9.1%e.

- (UK) Jan Index of Services M/M: 0.8% v 0.2%e; 3M/3M1.0% v 0.8%e.

- (UK) Jan Visible Trade Balance: -£26.5B v -£12.6Be; Overall Trade Balance: -£16.2B v -£2.4Be; Trade Balance Non EU: -£13.7B v -£7.9B prior.

- (DK) Denmark Jan Current Account Balance (DKK): 3.7B v 17.2B prior; Trade Balance: 3.7B v 4.8B prior.

- (TR) Turkey Jan Current Account Balance: -$7.1B v -$7.3Be.

- (TR) Turkey Jan Industrial Production M/M: -2.4% v -2.2%e; Y/Y: 7.6% v 8.4%e.

- (TR) Turkey Central Bank TCMB Expected Inflation Survey: Next 12 Months: 26.4% v 24.8% prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 161.7K v 168.0K tons prior.

- (ES) Spain Feb Final CPI M/M: 0.8%e v 0.6% prelim; Y/Y: 7.6% v 7.4% prelim.

- (ES) Spain Feb Final CPI EU Harmonized M/M: 0.8%e v 0.7% prelim; Y/Y: 7.6% v 7.5% prelim.

- (ES) Spain Feb CPI Core M/M: +0.6% v -0.7% prior; Y/Y (final): 3.0% v 3.0% prelim.

- (HU) Hungary Jan Preliminary Trade Balance: -€0.2B v -€0.4B prior.

- (CZ) Czech Jan Industrial Output Y/Y: 3.7% v 4.6%e; Construction Output Y/Y: 6.4% v 9.8% prior.

- (RU) Russia Narrow Money Supply w/e Mar 4th (RUB): 17.23T v 15.27T prior.

- (CN) China Feb Aggregate Financing (CNY): 1.190T v 2.200Te.

- (CN) China Feb New Yuan Loans (CNY): 1.450Te v 3.980T prior.

- (CN) China Feb M2 Money Supply Y/Y: 9.2% v 9.6%e; M1 Money Supply Y/Y: 4.7% v 3.8%e; M0 Money Supply Y/Y: 5.8% v 18.0%e.

- (IT) Italy Q4 Unemployment Rate: 9.1% v 9.0%e.

- (UK) BoE/Kantar Quarterly Inflation Attitudes Survey: Next 12 Months: 4.3% v 3.2% prior.

Fixed income issuance

- (ZA) South Africa sold total ZAR1.13B vs. ZAR1.2B indicated in I/L 2025, 2033 and 2038 Bonds.

- (IT) Italy Debt Agency (Tesoro) sold total €7.75B vs. €6.25-7.75B indicated rangein 3-year, 7-year and 15-year BTP Bonds.

- Sold €2.75B vs. €2.5-2.75B indicated range in 0.0% Dec 2024 BTP; Avg Yield: 0.57% v 0.69% prior; bid-to-cover: 1.52x v 1.38xprior (Feb 11th 2022).

- Sold €3.0B vs. €2.5-3.0B indicated range in 0.45% Feb 2029 BTP; Avg Yield: 1.47% v 1.52% prior; bid-to-cover: 1.39x v 1.46x prior (Feb 11th 2022).

- Sold €2.0B vs €1.25-2.0B in 0.95% Mar 2037 BTP; Avg Yield: 2.11% v 1.19%prior; bid-to-cover:1.37 x v 1.54x prior.

Looking ahead

- (FR) Bank of France Feb Industrial (Business) Sentiment: 106e v 106 prior.

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

- 06:00 (PT) Portugal Jan Trade Balance: No est v -€2.4B prior.

- 06:00 (UK) DMO to sell £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively).

- 06:30 (IN) India Weekly Forex Reserve w/e Mar 4th: No est v $631.5B prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IN) India announces upcoming bill issuance (held on Wed).

- 07:00 (IN) India Jan Industrial Production Y/Y: 1.4%e v 0.4% prior.

- 07:00 (MX) Mexico Jan Industrial Production M/M: -0.3%e v +1.2% prior; Y/Y: 2.2%e v 3.0% prior; Manufacturing Production Y/Y: 2.2%e v 3.8% prior.

- 07:00 (BR) Brazil Feb IBGE Inflation IPCA M/M: 1.0%e v 0.5% prior; Y/Y: 10.5%e v 10.4% prior.

- 08:00 (UR) Ukraine Q4 Final GDP Q/Q: No est v 1.8% prelim; Y/Y: No est v 5.9% prelim.

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

- 08:30 (CA) Canada Feb Net Change in Employment: +130.0Ke v -200.1K prior; Unemployment Rate: 6.2%e v 6.5% prior; Full Time Employment Change: No est v.

-82.7K prior; Part Time Employment Change: No est v -117.4K prior; Participation Rate: 65.2%e v 65.0% prior; Hourly Wage Rate Y/Y: 2.7%e v 2.4% prior.

- 08:30 (CA) Canada Q4 Capacity Utilization Rate: 81.9%e v 81.4% prior.

- 10:00 (US) Mar Preliminary University of Michigan Confidence: 61.0e v 62.8 prior.

- 11:00 (EU) Potential sovereign ratings after European close.

- 13:00 (US) Weekly Baker Hughes Rig Count.