Swiss National Bank fires rate cut starting gun

Notes/observations

- Major surprise from SNB with unexpected 25bps rate cut to take Policy Rate down to 1.50%, juxtaposed by Taiwan Central Bank unexpectedly hiking rates 12.5bps to 2.00% (reminder BoJ hiked rates earlier in week for first time since 2007). SNB is the first major western central bank to begin easing. Market expectations are heavily predicting June for Fed, ECB and BoE to pull the trigger. Norges bank left rates unchanged.

- Weakness in EU flash PMIs for France, Germany and Euro Zone provided additional evidence for ECB to cut rates.

- Bid seen in chip related stocks across EU and US after Micron Q2 results beat estimates and guided Q3 strong.

- Focus turns to Bank of England decision at 08:00 ET (12:00 GMT), widely expected to leave policy unchanged.

- Asia closed higher with KOSPI out-performing +2.4%. EU indices are +0.3-0.9%. US futures are +0.3-0.7%. Gold +0.8%, DXY -0.3%; Commodity: Brent -0.1%, WTI -0.2%; Crypto: BTC +6.1%, ETH +10.8%.

Asia

- Australia Feb Employment Change: +116.5K v +40.0Ke; Unemployment Rate: 3.7% v 4.0%e.

- Australia Mar Preliminary PMI Manufacturing registered its 2nd month of contraction (46.8 v 47.8 prior).

- Japan Mar Preliminary PMI Manufacturing registered its 10th month of contraction (48.2 v 47.2 prior).

- Japan Feb Trade Balance: -¥379.4B v -¥785.0Be; Exports Y/Y: 7.8% v 5.0%e; Imports Y/Y: 0.5% v 0.5%e.

- New Zealand Q4 GDP saw the country enter a technical recession (Q/Q: -0.1% v +0.1%e; Y/Y: -0.3%.

- China PBOC Dep Gov Xuan: Reiterates there is room for the RRR to decline, China monetary policy has ample room.

- China NDRC Vice Chairman stated that the govt to focus on promoting job creation in policy making.

- Japan Fin Min Suzuki reiterated stance that was important for currencies to move in a stable manner; Watching FX levels with a 'high sense of urgency.

- BOJ Gov Ueda testified in Parliament that inflation target had come within sight. Reiterated that BOJ was expected to maintain accommodative monetary policy for the time being.

Global conflict/tensions

- Israeli PM Netanyahu stated that it was preparing for Rafah invasion, it would take some time.

-US Sec of State Blinken said US submitted draft UN resolution calling for 'immediate ceasefire' in Gaza.

Americas

- FOMC left Interest Rates unchanged (as expected). Statement noted that did not expect to cut rates until had greater confidence inflation was moving back to 2% target sustainably. Fed remained highly attentive to inflation risk.

- Fed Chair Powell post rate decision press conference noted that his outlook for inflation to continue declining had not changed substantially in recent weeks. Fed was discussing slowing the pace of the runoff; In terms of timing, no more specific than fairly soon; Liquidity was not evenly distributed. Fed dot projections were little changed from December and showed most of his colleagues expect two or three cuts this year.

- Bank of Canada (BOC) Summary of Deliberations noted that it saw nothing in the data that would change their view that CPI inflation would remain around 3% in the coming months; Rebound in housing this spring could delay return to CPI target. Indicators of underlying inflation were suggesting slow progress getting inflation down to target.

- (BR) Brazil Central Bank (BCB) cut Selic Target Rate by 50bps to 10.75% (as expected) for its 6th straight rate cut in the current easing cycle. Expected one additional 50bps cut in this cycle.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.92% at 509.86, FTSE +0.92% at 7,808.83, DAX +0.54% at 18,110.85, CAC-40 +0.09% at 8,168.58, IBEX-35 +0.73% at 10,830.74, FTSE MIB +0.37% at 34,420.00, SMI +0.91% at 11,724.10, S&P 500 Futures +0.32%].

Market focal points/key themes

Equities

European indices opened generally higher to catch up with post-FOMC US indices’ gains and so far trading in the green despite weaker-than-expected PMI prints; among sectors trending to the upside are tech and communication services; lagging sectors include industrials and energy; EU chip names, including ASML, helped by Micron earnings and outlook; on corporate front, shares of UK retailer Next plc trading higher following earnings results; focus on Bank of England decision following surprise SNB cut and US jobless claims; earnings expected in the upcoming Americas session include Accenture, Intuitive Machines and Darden Restaurants.

- Consumer discretionary: Next plc [NXT.UK] +5.0% (earnings; outlook).

- Financials: Direct Line Insurance [DLG.UK] +1.0% (earnings), doValue [DOV.IT] +3.0% (CMD; in merger talks).

- Industrials: Porsche [P911.DE] +1.5% (final results), BMW [BMW.DE] -0.5% (final results).

- Technology: ASML [ASML.NL] +4.0%, BE Semiconductor [BESI.NL] +4.5% (read-across from Micron earnings), Nemetschek [NEM.DE] -2.5% (final results and guidance).

Speakers

- ECB’s Top Regulator Buch noted that profit outlook for banks might deteriorate if funding costs increase, loan growth weakens or losses materialize.

- Swiss National Bank Policy Statement reiterated stance that was prepared to intervene in FX market. Inflation would likely remain in stability range. Recently decline was due to lower goods inflation.

- SNB Staff Projections raised the 2024 GDP forecast from between 0.5-1.0% range to 1.0%. Projections cut the 2024 CPI from 1.9% to 1.4% and cut 2025 CPI from 1.6% to 1.2% (both below target).

- SNB President Jordan post rate decision press conference stated that would adjust policy again if necessary; Domestic growth was likely to remain modest in coming quarters.

- Norway Central Bank Policy Statement reiterated stance that policy rate would likely need to be maintained at the current level for some time ahead to bring inflation down. Stressed that If cost inflation remained elevated or NOK (krone) turned out to be weaker than projected, it was willing to consider raising rates. Economic growth was projected to remain low through H1 before picking up.

- Taiwan Central Bank Policy Statement noted that the rate hike was to curb inflation expectations. Looking ahead, domestic prices would rise mildly. Saw exports growth gaining momentum in 2024.

- Taiwan Central Bank Staff Projections raised the 2024 GDP growth from 3.1% to 3.2% and raised the 2024 Headline CPI forecast from 1.9% to 2.2%.

Currencies/fixed income

- USD regained some composure in the session following the post FOMC selloff. Greenback aided by weaker EU PMI data and a surprise rate cut by SNB.

- EUR/USD moved back below the 1.09 level after EU PMIs reading solidify June ECB rate cut pricing. Two-year German bonds are more than fully priced for that prospect.

- The CHF was weaker following the SNB rate cut. USD/CHF at a 4-month low testing 0.8975. Dealers noted that Swiss inflation pointed to more such cuts.

- USD/JPY moved higher above the 151 level despite pushback from both the Japanese Ministry of Finance and BOJ Gov Ueda. Dealers noted that the yen remain a preferred carry-trade currency.

Economic data

- (NL) Netherlands Feb Unemployment Rate: 3.7% v 3.7%e.

- (FR) France Retail Feb Sales Y/Y: -1.4% v -3.1% prior.

- (EU) EU27 Feb New Car Registrations: 10.1% v 12.1% prior.

- (UK) Feb Public Finances (PSNCR): +£3.0B v -£22.5B prior; PSNB (ex-Banking Groups): £8.4B v £6.0Be; Net Borrowing: £7.5B v £6.4Be; Central Govt NCR: £8.6B v v -£19.5B prior.

- (NO) Norway Feb Trend Unemployment Rate: 3.8% v 3.9% prior.

- (FR) France Mar Business Confidence: 100 v 99e; Manufacturing Confidence: 102 v 100e; Production Outlook Indicator: -7 v -5e; Own-Company Production Outlook: 10 v 5 prior.

- (ES) Spain Jan House transactions Y/Y: -2.1% v -15.6% prior.

- (CH) Swiss Feb M3 Money Supply Y/Y: -2.8% v -2.1% prior.

- (FR) France Mar Preliminary Manufacturing PMI: 45.8 v 47.6e (15th month of contraction); Services PMI: 47.8 v 48.8e; Composite PMI: 47.7 v 48.7e.

- (CH) Swiss National Bank (SNB) cut the Policy Rate by 25bps to 1.50% (not expected) to move into an easing cycle.

- (DE) Germany Mar Preliminary Manufacturing PMI: 41.6 v 43.0e (21st month of contraction); Services PMI: 49.8 v 48.8e; Composite PMI: 47.4 v 47.0e.

- (HK) Hong Kong Q4 Current Account Balance: $71.2B v $108.5B prior; Balance of Payments (BoP): -$9.1B v +$16.1B prior.

- (HK) Hong Kong Feb CPI Composite Y/Y: % v 2.2%e.

- (TW) Taiwan Central Bank (CBC) raised the Benchmark Interest Rate by 12.5bps to 2.00% (not expected).

- (NO) Norway Central Bank (Norges) left the Deposit Rate unchanged at 4.50% (as expected).

- (EU) Euro Zone Mar Preliminary Manufacturing PMI: 45.7 v 47.0e (21st month of contraction); Services PMI: 51.1 v 50.5e; Composite PMI: 49.9 v 49.7e.

- (EU) Euro Zone Jan Current Account Balance : €39,4B v €31.9B prior.

- (PL) Poland Feb Real Retail Sales M/M: -0.9% v -1.2%e; Y/Y: 6.1% v 4.9%e; Retail Sales (current prices) Y/Y: 6.7% v 7.4%e.

- (PL) Poland Feb Construction Output Y/Y: % v -1.0%e.

- (UK) Mar Preliminary Manufacturing PMI: 49.9 v 47.8e (20th month of contraction); Services PMI: 53.4 v 53.8e; Composite PMI: 52.9 v 53.1e.

- (IT) Italy Jan Current Account Balance: -€1.1B v +€1.1B prior.

- (GR) Greece Jan Current Account Balance: +€1.7B v -€2.2B prior.

- (PT) Portugal Jan Current Account Balance: +€0.9B v -€1.0B prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €6.07B vs. €5.5-6.5B in 2027, 2032 and 2043 SPGB bonds.

- Sold €2.90B in 2.50% May 2027 SPGB bonds; Avg Yield: 2.896% v 2.875% prior; bid-to-cover: 2.32x v 1.72x prior (Feb 15th 2024).

- Sold €1.46B in 5.75% July 2032 SPGB; Avg Yield: 2.976% v 1.737% prior; Bid-to-cover: 1.80x v 1.30x prior (Apr 21st 2022).

- Sold €1.71B in 3.45% July 2043 SPGB bonds; Avg Yield: 3.650% v 4.132% prior; Bid-to-cover: 1.90x v 1.34x prior.

Looking ahead

- 05:50 (FR) France Debt Agency (AFT) to sell €11.0-12.5B in 2027, 2029 and 2031 Bonds.

- 06:00 (EU) Daily Euribor Fixing.

- 06:00 (SE) Sweden to sell combined SEK500M in I/L 2030 and 2039 Bonds.

- 06:00 (IE) Ireland Debt Agency (NTMA) to sell combined €1.0B in 2034 and 2043 IGB Bonds.

- 06:25 (EU) Daily ECB Liquidity Stats.

- 06:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 06:40 (UK) BOE 7-day short-term repo operation.

- 06:50 (FR) France Debt Agency (AFT) to sell €1.5-2.0 in inflation-linked 2029, 2036 and 2040 bonds (Oatei).

- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave One-Week Repo Rate unchanged at 45.00%.

- 07:00 (CZ) Czech Republic to sell CZK5.0B in 9-month Bills.

- 07:00 (RO) Romania to sell RON600M in 8% Apr 2030 bonds.

- 08:00 (UK) Bank of England (BoE) Interest Rate Decision: Expected to leave Bank Rate unchanged at 5.25%.

- 08:00 (MX) Mexico Jan Retail Sales M/M: +0.3%e v -0.9% prior; Y/Y: +1.2%e v -0.2% prior.

- 08:30 (US) Mar Philadelphia Fed Business Outlook: -2.8e v +5.2 prior.

- 08:30 (US) Q4 Current Account Balance: -$209.0Be v -$200.3B prior.

- 08:30 (US) Initial Jobless Claims: 213Ke v 209K prior; Continuing Claims: 1.82Me v 1.811M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Mar 15th: No est v $591.2B prior.

- 09:00 (UK) Daily Baltic Dry Bulk Index.

- 09:45 (US) Mar Preliminary S&P Manufacturing PMI: 51.8e v 52.2 prior; Services PMI: 52.0e v 52.3 prior; Composite PMI: 52.2e v 52.5 prior.

- 09:50 (CA) Bank of Canada (BOC) Gravelle.

- 10:00 (US) Feb Existing Home Sales: 3.94Me v 4.00M prior; M/M: -1.5%e v +3.1% prior.

- 10:00 (US) Feb Leading Index: -0.1%e v -0.4% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

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

- 15:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to cut Overnight Rate by 25bps to 11.00%.

- 17:00 (KR) South Korea Feb PPI Y/Y: No est v 1.3% prior.

- 17:45 (NZ) New Zealand Feb Trade Balance (NZD): No est v -1.0B prior; Exports: No est v 4.9B prior; Imports: No est v 5.9B prior.

- 19:00 (NL) Netherlands Feb House Price Index M/M: No est v 1.2% prior; Y/Y: No est v 1.8% prior.

- 19:30 (JP) Japan Feb National CPI Y/Y: 2.9%e v 2.2% prior; CPI Ex Fresh Food (core) Y/Y: 2.8%e v 2.0% prior; CPI Ex Fresh Food, Energy (core-core) Y/Y: 3.3%e v 3.5% prior.

- 20:01 (UK) Mar GfK Consumer Confidence: -19e v -21 prior.

- 20:30 (AU) RBA Bi-annual Financial Stability Review.

- 21:10 (JP) BOJ Outright Bond Purchase Operation for 1~3 Years; 3~5 Years; 5~10 Years and 10~25 Years maturities.

- 22:35 (CN) China to sell 7-year and 50-year Bonds.

- 22:35 (CN) China to sell 3-month Bills.

- 23:30 (JP) Japan to sell 3-Month Bills.