Risk off moves with adjusted rate expectations

EU Mid-Market Update: Risk off moves with adjusted rate expectations. Market ignoring Powell's slightly dovish TV comments in light of payrolls surprise.

Notes/observations

- Friday’s blowout nonfarm payrolls continued to influence trade this morning, with elevated bond yields and a stronger dollar as rate cut expectations are pared. Fed’s Bowman over the weekend (after jobs data) said labor market re-balancing has stalled. Powell’s ’60 minutes’ interview was seen as slightly dovish in general but attempting to push back against market optimism for March cut. Interview was filmed before job data on Friday so can be mostly considered as outdated.

- Overnight, China’s Shanghai Composite remained electric, with larges moves seen from heavy selling and buying. After Shanghai Composite fell >6% last week, CSRC said to take forceful measures to prevent the risk of stock market plunges.

- European Services PMI came in mixed with beats from UK, Germany, France and Italy (Italy expanded for 1st time in 6 months) and a miss from Spain. Euro Zone was unrevised.

- Asia closed mixed with Shanghai under-performing -1.0%. EU indices are -0.4% to +0.8%. US futures are -0.2% to -0.3%. Gold -0.8%, DXY +0.3%; Commodity: Brent -0.3%, WTI -0.4%, TTF -1.5%; Crypto: BTC +0.5%, ETH +1.0%.

Asia

- China Jan Caixin PMI Services: 52.7 v 53.0e; Composite: 52.5 v 52.6 prior.

- China CSRC (Securities Regulator): To take forceful measures to prevent the risk of stock market pledges; to closely monitor.

- China Foreign Ministry Daily Briefing Mao Ning: Urge relevant parties in Middle East to remain calm.

- BOJ said to be seeking public opinions on past policy decision as part of long-term review - press.

- Thailand PM Srettha: Fiscal and monetary policy must be aligned, negative inflation rate suggests economic weakness; Thailand Commerce Min Phumtham: Negative CPI in Jan shows Thailand's economy is 'still in crisis'.

Global conflicts/tensions

- Iran Foreign Min Kanaani: US/UK attacks in Yemen increase regional instability; Not looking to escalate tensions (On Feb 2nd US President Biden: This afternoon, at my direction, US military forces struck targets at facilities in Iraq and Syria that the IRGC and affiliated militia use to attack US forces).

- US National Security Advisor Sullivan: Israel-Hamas hostage deal is not around the corner.

- Ukraine Pres Zelenskiy: Confirms mulling to replace Ukraine army chief Zaluzhniy; We need a reshuffle.

- Japan Chief Cabinet Sec Hayashi: Need to carefully analyze North Korea's ability to launch nuclear cruise missiles.

Europe

- OECD updates its economic outlook; Notes monetary policy should remain restrictive for some time; If persist, Red Sea attacks could boost CPI 0.4ppts after a year.

- UK govt to accelerate rollout of EV changepoints and invests £45M into quantum computing, brain scanners and navigation systems.

- Turkey Fin Min Simsek: Inflation uptick was due to temporary effects.

- German IFO Institute: The lack of orders in manufacturing is increasingly becoming a burden on the German economy; In January, 36.9% of manufacturing companies reported a lack of orders v 36.0% in Oct 2023.

- Sweden Central Bank (Riksbank) publishes IMF statement on Swedish economy; IMF sees 2024 Sweden GDP growth at 0.2%; States Sweden should maintain contractionary monetary policy.

- Russia state election committee recommends not to register Russian anti-war presidential candidate Nadezhdin ahead of mid-March elections - press.

- Russia govt spokesperson Peskov: Nothing to announce yet whether or not Pres Putin to give interview to foreign media.

- Ukraine Central Bank (NBU) Jan Minutes: Vote was unanimous to keep Key Rate unchanged at 15.00%.

Americas

- Fed Chair Powell: "Almost all" 19 policy makers see it as appropriate to cut rates this year; Expects three rate cuts this year, but reiterates that March meeting is 'likely too soon' to start interest rate cuts - '60 Minutes' interview (prerecorded last Thur, before Nonfarm Payrolls).

- Traders circulating unverified chatter that CBS reporter Pelley in a voiceover said that Fed Chair Powell suggested the first cut could happen around midyear, though the transcript of the interview does not include this remark [**FOLLOW-UP: the information about this remark appear to be removed from major news outlet].

- US Former US Pres Trump confirms he would impose 60% tariffs on Chinese imports, or higher; As well as 10% blanket tariff on all US imports.

- US House Majority Leader Scalise (R): Senate Border Bill will not receive a vote in the House - US press.

- US Department of Commerce (DoC) announce to lower the anti-dumping tariffs for three Korean tire makers, including Hankook Tire & Technology, Kumho Tire and Nexen Tire - press.

Energy

- Germany reportedly agrees plan to subsidize hydrogen-ready gas-power units - press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.10% at 484.40, FTSE +0.25% at 7,634.71t, DAX -0.01% at 16,916.29, CAC-40 -0.04% at 7,589.00, IBEX-35 -0.37% at 10,025.23, FTSE MIB +0.96% at 31,014.00, SMI +0.16% at #, S&P 500 Futures -0.26%].

Market Focal Points/Key Themes: European indices open higher across the board, but turned mixed after the first hours of trading; sectors trending to the upside include consumer discretionary and financials; while industrials and energy are among those trending lower; oil & gas subsector under pressure as Brent records four consecutive days of losses; Yandex to sell its Russia-based operations; Acerinox to acquire Haynes; reportedly French government mulling Renault-Stellantis merger; reportedly German government considering taking stake in ThyssenKrupp’s marine systems unit; earnings expected in the upcoming US session include Caterpillar, McDonald’s, NXP Semi and Tyson Foods.

Equities

- Consumer discretionary: Delivery Hero [DHER.DE] +1.0% (prelim results), Adidas [ADS.DE] +3.0% (analyst upgrade).

- Financials: Unicredit [UCG.IT] +10.0% (earnings), CMC Markets [CMCX.UK] +12.5% (job cuts).

- Industrials: Acerinox [ACX.ES] +4.0% (acquires Haynes International), Airbus [AIR.FR} +0.5% (potential order with Saudis).

- Technology: Atos [ATO.FR] -24.0% (discussions with its banks with a view to reaching a refinancing plan for its financial debt), Infineon [IFX.DE] -0.5% (Foxconn monthly sales and outlook).

- Telecom: Vodafone [VOD.UK] -1.0% (trading update).

Speakers

-Fed Chair Powell: "Almost all" 19 policy makers see it as appropriate to cut rates this year; Expects three rate cuts this year, but reiterates that March meeting is 'likely too soon' to start interest rate cuts - '60 Minutes' interview (prerecorded last Thur, before Nonfarm Payrolls).

-ECB's Vujcic (Croatia): Need to ensure there are not any second-round effects on inflation from wages before cutting interest rates.

-ECB's Centeno (Portugal, voter): If inflation is going down and it is coming down very fast - actually faster than it went up - ECB monetary policy ought to respond to that.

Currencies/fixed income

-US dollar strength remains from better-than-expected nonfarm payrolls on Friday, as market sees rate cuts as very unlikely in near term given strength in labor market. Weighing on major pairs. Euro is seen weaker as Service PMI readings came in across Europe, although some better-than-expected readings from Germany, France and Italy. EUR/USD last seen at 1.0760. Cable (GBP/USD) last seen at 1.2608. No movement or news seen in USD/JPY.

Economic data

-(IN) India Jan Final PMI Services: 61.8 v 61.2 prelim (30th straight expansion); PMI Composite: 61.2 v 61.0 prelim.

-(SG) Singapore Dec Retail Sales M/M: -1.5% v +0.5% prior; Y/Y: -0.4% v -3.1%e; Retail Sales (ex-auto) Y/Y: -2.7% v 1.3% prior.

-(RU) Russia Jan Services PMI: 55.8 v 53.7e (12th straight expansion); Composite PMI: 55.1 v 53.2e.

-(TR) Turkey Jan CPI M/M: 6.7% v 6.5%e; Y/Y: 64.9% v 64.6%e; Core CPI Y/Y: 70.5% v 68.8%e; PPI M/M: 4.1% v 1.1% prior; Y/Y: 44.2% v 44.2% prior.

-(NO) Norway Q4 Average Monthly Earnings Y/Y: 6.3% v 6.4% prior.

-(DE) Germany Dec Trade Balance: €22.2B v €19.0Be; Exports M/M: -4.6% v -2.8%e; Imports M/M: -6.7% v -1.9%e.

-(ZA) South Africa Jan PMI (whole economy): 49.2 v 49.0 prior (2nd straight contraction).

- (HU) Hungary Dec Preliminary Trade Balance: -€0.2B v +€1.6B prior.

-(SE) Sweden Jan PMI Services: 51.8 v 50.5e (2nd straight expansion); PMI Composite: 50.5 v 49.8 prior.

-(ES) Spain Jan PMI Services: 52.1 v 52.3e (5th straight expansion and highest print since July 2023); PMI Composite: 51.5 v 52.0e.

-(TW) Taiwan Jan Foreign Reserves: $569.5B v $567.5B prior.

-(IT) Italy Jan PMI Services: 51.2 v 50.8e (1st expansion in 6 months and highest since July 2023); PMI Composite: 50.7 v 50.2e (1st expansion in 7 months).

-(FR) France Jan Final PMI Services: 45.4 v45.0e (confirms 8th straight contraction and highest since Aug 2023); Composite PMI: 44.6 v 44.2e.

-(DE) Germany Jan Final PMI Services: 47.7 v 47.6e (confirms 4th straight contraction and lowest print since Aug 2023);' Composite PMI: 47.0 v 47.1e.

-(EU) Euro Zone Jan Final PMI Services: 48.4 v 48.4e (confirms 6th straight contraction); Composite PMI: 47.9 v 47.9e.

-(CH) Swiss Weekly Total Sight Deposits (CHF): 481.2B v 472.2B prior; Domestic Sight Deposits: 470.5B v 463.2B prior.

-(UK) Jan Final New Car Registrations Y/Y: 8.2% v 9.8% prior.

-(UK) Jan Final PMI Services: 54.3 v 53.8e (confirms 3rd straight expansion and highest print since May 2023); Composite PMI: 52.9 v 52.5e.

-(EU) Euro Zone Feb Sentix Investor Confidence: -12.9 v -15.0e (highest since Apr 2023); Current Situation: -20.0 v -22.5 prior; Expectation Survey (6-months ahead): -5.5 v -8.8 prior.

-(UK) Jan Official Reserves Changes: -$0.6B v +$1.7B prior.

-(EU) Euro Zone Dec PPI M/M: -0.8% v -0.8%e; Y/Y: -10.6% v -10.5%e.

-(NO) Norway Jan House Price Index M/M: +3.4% v -0.9% prior; Y/Y: 1.4% v 0.5% prior; House Prices (seasonally adj) M/M: 0.7% v 0.2% prior.

Fixed income issuance

-South Korea sells 3-year bonds: Avg Yield: 3.285% v 3.300% prior.

-Japan sells ¥250B in 10-year inflation-linked JGB Bonds; Yield at lowest accepted price: -0.4680% v -0.480% prior, bid-to-cover: 3.00x v 2.73x prior.

-Philippines sells total PHP15.0B vs. PHP15.0B indicated in 3-month, 6-month and 12-month bills.

-Indonesia sells total IDR11.2T vs. IDR12.0T target in Islamic bills and bonds (sukuks).

- Received IDR23.7T in bids.

-South Africa announces details of upcoming I/L bond sale (held on Fridays); to sell combined ZAR1.0B in I/L 2031, 2046 and 2058 bonds on Feb 9th.

-Sweden sells SEK3.0B vs SEK3.0B indicated in 2.25% May 2035 bonds; Avg Yield: 2.3170% v 2.2400% prior; bid-to-cover: 2.06x v 0.87x prior.

Looking ahead

- 05:30 (DE) Germany to sell €2.0B in 6-month BuBills.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €3.0B in 3-month and 6-month Bills.

- 05:30 (EU) European Union to sell €5.0B in 2026 and 2044 NGEU bonds.

- 06:00 (IL) Israel to sell ILS3.15B in 2028, 2029, 2030, 2031, 2035 and 2052 bonds (6 tranches).

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (BR) Brazil Jan Services PMI: No est v 50.5 prior; Composite PMI: No est v 50.0 prior.

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

- 09:00 (FR) France Debt Agency (AFT) to sell €5.1-6.7B in 3-month, 6-month and 12-month bills.

- 09:30 (CA) Canada Jan PMI Services: No est v 44.6 prior; PMI Composite: No est v 44.7 prior.

- 09:45 (US) Jan Final S&P Services PMI: 52.9e v 52.9 prelim; Composite PMI: 52.3e v 52.3 prelim.

- 10:00 (US) Jan ISM Services Index: 52.0e v 50.6 prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 14:00 (US) Fed’s Bostic.

- 18:30 (JP) Japan Dec Labor Cash Earnings Y/Y: No est v 0.2% prior; Real Cash Earnings Y/Y: No est v -3.0% prior.

- 18:30 (JP) Japan Dec Household Spending Y/Y: No est v -2.9% prior.

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No es.t v 82.5 prior.

- 19:01 (UK) Jan BRC Sales LFL Y/Y: No est v 1.9% prior.

- 19:30 (AU) Australia Q4 Retail Sales Q/Q: No est v 0.2% prior.

- 20:01 (IE) Ireland Jan PMI Services: No est v 53.2 prior; PMI Composite: No est v 51.5 prior.

- 22:30 (AU) Reserve Bank of Australia (RBA) Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 4.35%.