Focus remains on Ukraine crisis, EU Jan CPI revised to a record high

- Focus remains on the geopolitical tension; bracing for further developments in the Ukrainian crisis after Western countries announced sanctions against Russia.

- Risk aversion sentiment subsiding for the time being as initial sanctions against Russia are not the worst case scenario.

- Risk aided on premise that potential for more aggressive central bank hiking cycles has moved off the agenda somewhat.

Asia

- RBNZ raised the Official Cash Rate (OCR) by 25bps to 1.00% (as expected). Appropriate to continue to reduce monetary stimulus. It noted that the OCR decision was finely balanced between 25 and 50bps hike. Saw OCR peaking at higher level than previously seen and willing to increase OCR by larger increments if needed.

- Japan closed for holiday.

Russia/Ukraine

- President Biden announced sanctions on Russia which implemented a comprehensive set of sanctions on Russian sovereign debt. Placed them on two large Russian financial institutions (VEB and its military bank additionally sanctions placed on Russia’s elites and their family members.

- Biden administration said to have prepared export controls to hit Russian companies with alleged military ties, and deny them access to global tech including computers and electronics.

- Senior US administration official stated that Sberbank and VTB would face US sanctions if Russia invasion proceeded; No Russian financial institutions were safe. Not taking SWIFT financial system sanctions off the table.

- Russia President Putin stated that the Minsk peace agreement no longer existed and was nothing to fulfill.

- US Sec of State Blinken canceled planned meeting with Russia's Foreign Min Lavrov over Ukraine.

- UN urged diplomacy in Ukraine. Noted that conflict would be 'catastrophic'.

Europe

- ECB’s Holzmann (Austria) stated that the Council should consider two rate hikes in 2022 and saw the neutral rate at 1.50% as realistic by 2024.

Americas

- Fed's Bostic (non-voter, hawk) stated that the economy was still quite strong. Current policy stance was an emergency position; Fed needed to move out of emergency posture and could do so without jeopardizing employment.

- Fed Discount Rate Minutes: 3 of 12 Fed banks voted to raise discount rate ahead of Jan meeting.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +0.86% at 459.04, FTSE +0.48% at 7,529.91, DAX +1.06% at 14,849.28, CAC-40 +1.36% at 6,880.16, IBEX-35 +1.06% at 8,583.50, FTSE MIB +1.01% at 26,308.00, SMI +1.26% at 12,109.60, S&P 500 Futures +0.84%].

Market Focal Points/Key Themes: European indices open generally higher and drifted further into the green as the session progressed; sectors among those leading to the upside are industrials and financials ; consumer discretionary and materials sectors among the underperformers; Hochtief to buy out remaining interest in CIMIC; Darktrace acquires Cyberspirit; earnings expected in the upcoming US session include Lowe’s, Entergy, NiSource and HollyFrontier.

Equities

- Consumer discretionary: Stellantis [STLA.IT] +5% (earnings), Aston Martin Lagonda Global Holdings [AML.UK] +0.5% (earnings), Puma [PUM.DE] -1.5% (earnings), LVMH [MC.FR] +2% (acquisition speculation).

- Consumer staples: Danone [BN.FR] +3.5% (earnings), Henkel [HEN3.DE] +4% (earnings).

- Financials: Barclays [BARC.UK] +3% (earnings), Munich Re [MUV2.DE] -2% (earnings; buyback).

- Materials: Rio Tinto [RIO.UK] +1% (earnings).

Speakers

- ECB's Villeroy (France) stated that it would assess Ukraine impact on prices and economy at the March meeting. Reiterated that optionality and flexibility are more important than ever.

- ECB's Simkus (Lithuania) saw upside risks to inflation; There was still a lot of uncertainty on inflation outlook.

- Various BOE members testified to Treasury Select Committee. Gov Bailey noted that the word 'transitory' for inflation was becoming overused. Goal was to bring inflation back to target. Had two-sided risks in its inflation outlook and added that there was a risk that inflation fell quicker than expected. MPC watching both wages and price setting; there was clearly an upside risk to inflation. If UK received 2nd round effects the BOE would need to react with higher rates. Higher interest rates to raise unemployment and slow economic growth. Member Broadbent noted that most challenging period for MPC since inflation targeted began back in 1992. No guarantee that inflation impact of higher import prices to fade quickly. Member Haskel (hawkish dissenter) stressed the need to be vigilant on inflation. Saw a risk that high level of inflation might led to upward pressure on nominal wages. Member Tenreyro noted that the shock currently facing are transitory but becoming more persistent.

- France Fin Min Le Maire stated that Russian sanctions to have a limited impact on the French economy. Needed to protect French consumers from rising energy prices. Monitoring evolution of oil prices.

- Ukraine Govt said to seek a nationwide State of Emergency, apart of Donetsk and Luhansk regions.

- Iran Foreign Min Amirabdollahian reiterated its stance to EU's Borrell that Iran would never cross its red lines. Few remaining points needed a realistic approach from the West.

Currencies/Fixed income

- Risk aversion sentiment subsided for the time being as initial Western sanctions against Russia were deemed as not the worst case scenario. Risk aided on premise that potential for more aggressive central bank hiking cycles has moved off the agenda somewhat.

- EUR/USD inching higher in a quiet session towards the 1.1350 area. Euro aided by hawkish commentary from ECB’s Holzmann (Austria) who noted that it was possible for ECB to hike rates before ending conventional QE program; He added that the General Council should consider two rate hikes in 2022.

- NZD/USD pair (kiwi) was higher as RBNZ hinted that it could become more aggressive in its tightening cycle.

Economic data

- (DE) Germany Mar GfK Consumer Confidence Index: -8.1 v -6.3e.

- (FR) France Feb Business Confidence: 112 v 108e; Manufacturing Confidence: 112 v 112e ; Production Outlook Indicator: 22 v 15 prior; Own-Company Production Outlook: 24 v 22 prior.

- (CZ) Czech Jan PPI Industrial M/M: 6.9% v 1.3%e; Y/Y: 19.4% v 13.2%e.

- (AT) Austria Jan Final CPI M/M: -0.1% v 0.0% prelim; Y/Y: 5.0% v 5.1% prelim.

- (TW) Taiwan Jan Industrial Production Y/Y: 10.0% v 9.0%e.

- (HU) Hungary Dec Average Gross Wages Y/Y: 9.7% v 10.5%e.

- (TW) Taiwan Q4 Current Account Balance: $32.2B v $28.0B prior.

- (CH) Swiss Feb Expectations Survey: 9.0 v 9.5 prior.

- (PL) Poland Feb Consumer Confidence: -27.7 v -29.9e.

- (PL) Poland Jan Unemployment Rate: 5.5% v 5.6%e.

- (PL) Poland Q4 Unemployment Rate: 2.9% v 3.0%e.

- (EU) Euro Zone Jan Final CPI Y/Y: 5.1% v 5.0% advance (record high); CPI Core Y/Y: 2.3e v 2.3% advance.

Fixed income issuance

- (IN) India sold total INR260B vs. INR260B indicated in 3-month, 6-month and 12-month bills.

- (SE) Sweden sold total SEK2.5B vs. SEK2.5B indicated in 2029 and 2032 Bonds.

- (IT) Italy Debt Agency (Tesoro) sold €B vs. €2.5-3.0B indicated range in 0.00% Nov 2023 BTP Bonds; Avg Yield: +0.14% v -0.13% prior; bid-to-cover: 1.58x v 1.41x prior.

Looking ahead

- (IL) Israel Feb 12-month CPI Forecast: No est v 2.0% prior.

- (RO) Romania Jan M3 Money Supply M3 Y/Y: No est v 15.8% prior.

- (CO) Colombia Jan Retail Confidence: No est v 41.3 prior; Industrial Confidence: No est v 11.6 prior.

- (PE) Peru Q4 GDP Y/Y: 3.2%e v 11.4% prior.

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

- 05:30 (DE) Germany to sell €1.5B in 0.0% May 2036 Bunds.

- 05:30 (GR) Greece Debt Agency (PDMA) to sell €625M in 26-week Bills.

- 05:30 (EU) ECB allotment in its Monthly 3-month LTRO operation.

- 06:00 (BR) Brazil Feb FGV Construction Costs M/M: 0.5%e v 0.6% prior.

- 06:00 (CZ) Czech Republic to sell 2029, 2035 and 2057 bonds.

- 06:30 (ES) ECB's De Guindos (Spain).

- 06:45 (US) Daily Libor Fixing.

- 07:00 (US) MBA Mortgage Applications w/e Feb 18th: No est v -5.4% prior.

- 07:00 (BR) Brazil mid-Feb IBGE Inflation IPCA-15 M/M: 0.9%e v 0.6% prior; Y/Y: 10.6%e v 10.2% prior.

- 07:00 (ZA) South Africa Fin Min presents National Budget Speech.

- 07:30 (BR) Brazil Jan Current Account Balance: -$7.8Be v -$5.9B prior; Foreign Direct Investment (FDI): $3.5Be v -$3.9B prior.

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

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

- 10:00 (UK) BOE Tenreyro at NIESR Institute.

- 12:30 (BR) Brazil Jan Total Federal Debt (BRL): No est v 5.614T prior.

- 13:00 (US) Treasury to sell 2-Year FRN Reopening.

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

- 14:00 (AR) Argentina Dec Economic Activity Index (Monthly GDP) M/M: 0.9%e v 1.7% prior; Y/Y: 11.0%e v 9.3% prior.

- 15:10 (NZ) RBNZ Gov Orr in Parliament.

- 15:30 (US) Fed's Daly.

- 16:00 (KR) South Korea Jan PPI Y/Y: No est v 9.0% prior.

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

- 16:45 (NZ) New Zealand Jan Trade Balance (NZD): No est v -0.5B prior; Exports: No est v 6.1B prior; Imports: No est v 6.6B prior.

- 19:30 (KR) Bank of Korea (BoK) Interest Rate Decision: Expected to leave 7-Day Repo Rate unchanged at 1.25%.

- 19:30 (AU) Australia Q4 Private Capital Expenditure: +2.5%e v -2.2% prior.

- 20:10 (JP) BOJ Outright Bond Purchase Operation for 3~5 Years and 5~10 Years maturities.

- 22:00 (TH) Thailand Central Bank to sell THB30B in 2023 Bonds.

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

- 23:00 (MY) Malaysia Jan CPI Y/Y: 2.5%e v 3.2% prior.