Traders wants more evidence to be convinced of BoJ leaving negative rates

EU mid-market update: Traders wants more evidence to be convinced of BOJ leaving negative rates, despite wage hikes at 30-year highs.

Notes/observations

- Risk off flows seen during US session, translated to Asia markets but then steadied as Europe opened. Sell-off on Wall-Street was attributed to hotter than expected PPI (inflation gauge). Will see US Empire Manufacturing and University of Michigan Confidence later.

- Yen weakened after results of wage talks with Rengo (largest trade union) come in at 5.28%. Although pay hikes are at 30-year highs, the market sees BOJ as needing more data and expecting BOJ to providing a signal first, before raising rates. Recent ‘optimism’ of leaving NIRP being pared ahead of BOJ decision on Mon/Tues.

- Focus is on the macro events next week, including 14 rate decisions, highlighted by FOMC and BOE, and BOJ.

- Bitcoin tanks -8.5% as volatility remains high ahead of halving event in Apr.

- Asia closed lower with KOSPI under-performing at -1.9%. EU indices are -0.1% to +0.8%. US futures are -0.1% to +0.1%. Gold +0.4%, DXY 0.0%; Commodity: Brent -0.7%, WTI -0.7%, TTF +0.2%; Crypto: BTC -8.7%, ETH -8.1%.

Asia

- China PBoC Monthly 1-year Medium Term Lending Facility (MLF) Setting Allots CNY387.0B vs. CNY550Be at rate of 2.50% (unchanged rate).

- China PBOC said to have no intention of actively draining cash; current market funding conditions have been generally loose; monetary policy remained supportive of the real economy.

- Japan Fin Min Suzuki stated that was seeing strong pay hike move in wage talks; country was not experiencing deflation.

Europe

- ECB’s De Guindos (Spain) stated that Inflation was heading to 2% but wages were still at risk. Saw Europe's economy is picking up in 2H of 2024.

- ECB's Stournaras (Greece) stated that Europe had achieved an economic soft landing. Region not experiencing considerable growth not having a recession.

- France Central Bank (BdF) Monthly Economic Survey maintained its Q1 GDP growth forecast at 0.1% then growing to 0.3% in Q2.

- UK PM Sunak ruled out a May 2nd election.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.07% at 506.06, FTSE -0.06% at 7,738.62, DAX +0.09% at 17,939.15, CAC-40 +0.11% at 8,170.47, IBEX-35 +0.54% at 10,546.80, FTSE MIB +0.12% at 33,828.00, SMI -0.15% at 11,703.40, S&P 500 Futures -0.01%].

Market focal points/key themes: European indices open generally higher, but took on a mixed trend through the early part of the session; among sectors inclined to the upside are utilities and materials; lagging sectors include real estate and consumer discretionary; utilities sector supported after natural gas prices decline in Europe on higher storage; Swisscom confirms to acquire Vodafone Italia; UK CMA announces probe into Barratt-Redrow deal; ENI confirms to sell stake in or spin off Enilive unit; earnings expected in the upcoming US session include Groupon and Jabil.

Equities

- Consumer discretionary: HelloFresh [HFG.DE] +7.0% (results), BayWa [BYW6.DE] -3.5% (resolves proposal to suspend dividend).

- Materials: Salzgitter [SZG.DE] +0.5% (results, guidance).

- Industrials: Barratt Developments [BDEV.UK] -1.0% (UK CMA probes Barratt/Redrow deal), Lenzing [LNZ.AT] -5.5% (results, guidance).

- Materials: Salzgitter [SZG.DE] +0.5% (results, guidance).

- Telecom: Swisscom [SCMN.UK] +2.5%, Vodafone [VOD.UK] +5.0% (Swisscom confirms to acquire Vodafone Italy for an EV of €8B; Vodafone buyback).

Speakers

- ECB's Rehn (Finland) stated that inflation was set to enable easing near summer. Watching core inflation dynamics and policy transmission. Reiterated decisions were data dependent.

- Sweden Central Bank (Riksbank) Bunge stated that recent inflation decline provides confidence that CPI will return to target but risks remain.

- Norway Stats Agency (SSB) updates its Economic Outlook which maintained 2024 GDP growth at 0.9% and cut the Underlying CPI from 4.5% to 4.3%.

- Poland Central Bank (NBP) Duda stated that any discussion about rate cuts was premature; Inflation would likely slow to 2.5% in March, but could increase to 8% by end-2024.

- German Economy Ministry noted that it saw no tangible economic recovery yet in sight.

- German Chemical Industry Association (VCI) saw 2024 revenues lower by 3.5%; expects production to stagnate from a low level.

- Japan unions said to have won over 5% wage hike.

- Japan's Rengo Union [largest trade union in Japan] stated that the prelim FY24 annual wage hikes of 5.28% v 3.80% y/y (largest in 30 years and first time above 5% since 1991); Base pay to rise 3.70% v 2.33% y/y [**Note: last key data point ahead of BOJ meeting next week].

- Japan PM Kishida commented in Parliament that wage increases were flowing strongly.

Currencies/fixed income

- USD holding steady following recent data that suggested the Fed could still keep rates higher for longer. Recent data suggested that risk that the last mile on taming inflation in the might not be as easy as progress made to date.

- USD/JPY at 148.40 with focus on Tuesday’s BOJ rate decision. Dealers continued to debate whether the central bank would move away from its negative interest rate policy now that corporate wage negotiations suggested a bumper wage hikes.

- EUR/USD at 1.0890 with GBP/USD at 1.2750 by mid-session.

Economic data

- (NL) Netherlands Jan Trade Balance: 12.6B v €11.0B prior; Exports Y/Y: -3.1% v -1.6% prior; Imports Y/Y: -12.0% v -1.1% prior.

- (FI) Finland Jan GDP Indicator Y/Y: -1.3% v -2.3% prior.

- (SE) Sweden Feb Unemployment Rate: 8.5% v 8.5% prior; Unemployment Rate (seasonally adj): 8.0% v 8.2%e; Trend Unemployment Rate: 8.1% v 8.1% prior.

- (NO) Norway Feb Trade Balance (NOK): 51.8B v 65.B prior.

- (DK) Denmark Feb PPI M/M: -1.2% v 2.5% prior; Y/Y: -1.1% v -0.2% prior.

- (TR) Turkey Central Bank (TCMB) Mar Inflation Expected Survey: Next 12 Months: 36.7% v 37.8% prior.

- (TH) Thailand Mar Foreign Reserves w/e Mar 8th: $225.4B v $223.1B prior.

- (CN) Weekly Shanghai copper inventories (SHFE): 286.4K v 239.3K tons prior.

- (FR) France Feb Final CPI M/M: 0.9% v 0.8% prelim; Y/Y: 3.0% v 2.9% prelim; CPI Index (ex-tobacco): 118.15 v 118.10e.

- (FR) France Feb Final CPI EU Harmonized M/M: 0.9% v 0.9% prelim; Y/Y: 3.1% v 3.1% prelim.

- (ES) Spain Q4 labour Costs Y/Y: 5.0% v 5.0% prior.

- (CZ) Czech Jan Industrial Output Y/Y: 0.0% v 2.0%e; Construction Output Y/Y: -5.9% v -3.4% prior.

- (TR) Turkey Feb Central Govt Budget Balance (TRY): -153.8B v -150.7B prior.

- (RU) Russia Narrow Money Supply w/e Mar 8th (RUB): 18.06T v 17.98T prior.

- (CN) China Feb New Yuan Loans (CNY): 1.45T v 1.550Te.

- (CN) China Feb Aggregate Financing (CNY): 1.56T v 2.340Te.

- China Feb M2 Money Supply Y/Y: 8.7% v 8.8%e; M1 Money Supply Y/Y: 1.2% v 2.0%e; M0 Money Supply Y/Y: 12.5% v 5.9% prior.

- (IN) India Feb Trade Balance: -$18.7B v -$18.7Be; Exports Y/Y: 11.9% v 3.1% prior; Imports Y/Y: 12.2% v 3.0 prior.

- (IT) Italy Feb Final CPI M/M: 0.1% v 0.1% prelim; Y/Y: 0.8% v 0.8% prelim.

- (IT) Italy Feb Final CPI EU Harmonized M/M: 0.0% v 0.1% prelim; Y/Y: 0.8% v 0.9% prelim.

- (PL) Poland Feb CPI M/M: 0.3% v 0.5%e; Y/Y: 2.8% v 3.2%e.

- (CZ) Czech Jan Current Account Balance (CZK): 6.9B v 13.6Be.

- (IS) Iceland Feb International Reserves (ISK): 794B v 784B prior.

- (UK) Mar BoE/Ipsos Quarterly Inflation Attitude Survey: Next 12 Months: % v 3.3% prior.

- (IT) Italy Jan General Government Debt: T v €2.863T prior.

Fixed income issuance

- None seen.

Looking ahead

- (NG) Nigeria Feb CPI Y/Y: 31.2%e v 29.9% prior.

- 06:00 (IT) Italy Jan Retail Sales M/M: No est v -0.3% prior; Y/Y: No est v 0.3% prior.

- 06:00 (EU) Daily Euribor Fixing.

- 06:00 (FR) France Debt Agency (AFT) announcements on upcoming issuance.

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

- 07:00 (IT) Italy Jan Total Trade Balance: No est v €5.6B prior; EU Trade Balance: No est v -€2.8B prior.

- 07:00 (IE) Ireland Jan Trade Balance: No est v €4.1B prior.

- 07:00 (UK) DMO to sell £5.5B in 1-month, 3-month and 6-month bills (£0.5B, £2.5B and £2.5B respectively).

- 07:30 (IN) India Forex Reserve w/e Mar 8th: No est v $625.6B prior.

- 08:00 (IL) Israel Feb CPI M/M: 0.3%e v 0.0% prior; Y/Y: 2.5%e v 2.6% prior.

- 08:00 (BR) Brazil Jan IBGE Services Volume M/M: -0.4%e v -0.3% prior; Y/Y: +1.7%e v -2.0% prior.

- 08:15 (CA) Canada Feb Annualized Housing Starts: 227.5Ke v 223.6K prior.

- 08:30 (US) Mar Empire Manufacturing: -7.0e v -2.4 prior.

- 08:30 (US) Feb Import Price Index M/M: 0.3%e v 0.8% prior; Y/Y: -0.8%e v -1.3% prior; Import Price Index (ex-petroleum) M/M: -0.2%e v +0.6% prior.

- 08:30 (US) Feb Export Price Index M/M: 0.4%e v 0.8% prior; Y/Y: -2.4%e v -2.4% prior.

- 08:30 (CA) Canada Jan Wholesale Sales (ex-petroleum) M/M: -0.6%e v +0.3% prior.

- 08:30 (CA) Canada Jan Intl Securities Transactions (CAD): No est v 10.4B prior.

- 09:00 (PL) Poland Jan Current Account Balance: +€1.5Be v €0.0B prior; Trade Balance: +€1.0Be v -€0.6B prior; Exports: €27.2Be v €24.8B prior; Imports: €26.4Be v €25.4B prior.

- 09:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming issuance.

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

- 09:15 (US) Feb Industrial Production M/M: 0.0%e v -0.1% prior; Capacity Utilization: 78.5%e v 78.5% prior; Manufacturing Production: +0.3%e v -0.5% prior.

- 10:00 (US) Mar Preliminary University of Michigan Confidence: 77.2e v 76.9 prior.

- 10:30 (IE) ECB’s Lane (Ireland, chief economist).

- 11:00 (PE) Peru Jan Economic Activity Index (Monthly GDP Y/Y: +1.8%e v -0.7% prior.

- 11:00 (CO) Colombia Jan Industrial Production Y/Y: -2.4%e v -3.2% prior; Manufacturing Production Y/Y: -5.0%e v -6.8% prior.

- 11:00 (CO) Colombia Jan Retail Sales Y/Y: -2.2%e v -4.7% prior.

- 12:00 (EU) Potential sovereign ratings after European close.

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