Trumps confrontational comments on NATO member spending spooks EU senior officials

Notes/observations

- Light session for news and events with most of Asia closed for holidays. China does not return until next week, after the end of Lunar New Year break.

- Some focus seen on oil as Saudi Arabia energy min noted OPEC was ready to tweak policy at any time. Reminder that OPEC Monthly Report is tomorrow. Brent and WTI dropped, but since has pared some of the losses.

- Over the weekend in US politics/geopolitics, Trump said NATO allies should “pay their bills” or Russia can “do whatever it wants”. Saw bid in EU defense stocks this morning.

- S&P500 closed over 5,000 level on Friday, for the first time in history.

- Asia closed lower with NZX50 under-performing at -0.9%. EU indices are -0.4% to +1.0%. US futures are -0.1% to +0.1%. Gold -0.2%, DXY +0.1%; Commodity: Brent -0.6%, WTI -0.6%, TTF -3.4%; Crypto: BTC -0.5%, ETH -1.8%.

Asia

- RBNZ Gov Orr testified that inflation was still too high; system could cope with high interest rates.

- Markets were closed in China, Hong Kong, Japan, Malaysia, Singapore, South Korea, Taiwan and Vietnam; Mainly due to the Lunar New Year.

Global conflict/tensions

- Israel PM Netanyahu stressed that conquering Rafah in southernmost Gaza was essential to defeating Hamas; Victory was within reach.

- Iran Foreign Min Kanaani: Gaza war is moving toward diplomatic solution.

Europe

- ECB's Panetta (Italy, dove) noted that the time for reversal of the monetary policy stance was fast approaching; Disinflation at advanced stage and saw rapid progress toward 2%.

- ECB De Cos (Spain noted that the March Staff Projections would be key to assessing whether could sufficiently be confident that 2% medium-term target would be achieved and will be pivotal for deciding when to start cutting interest rates.

- ECB's Centeno (Portugal, voter, dove) noted that Council would not wait until inflation hits 2% target to cut rates.

- EU said to have agreed on its long-delayed reform of fiscal rules. Article noted that changes to Stability and Growth Pact would increase pressure on governments to spend less.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.35% at #, FTSE -0.46% at 7,560.83, DAX +0.43% at 16,999.45, CAC-40 +0.44% at 7,681.49, IBEX-35 +0.65% at 9,960.83, FTSE MIB +1.11% at 31,408.00, SMI +0.43% at 11,138.90, S&P 500 Futures -0.01%].

Market Focal Points/Key Themes:

European indices open slightly higher across the board, staying in the green through the early part of the session with UK’s FTSE-100 underperforming others; sectors leading to the upside include consumer discretionary, while among lagging sectors include healthcare and technology; on corporate front, shares of Rheinmetall and some other European defense sector names trade higher today following former Pres Trump comments on NATO; shares of semiconductor giant ASML slightly higher following unveiling new chip making machine; on M&A front, shares of Tod's Spa in Milan are trading sharply higher after LVMH-backed offer to be taken private; earnings expected in the upcoming US session include Monday.com, Trimble and WM.

Equities

- Consumer discretionary: Tod's Spa [TOD.IT] +17.0% (offer to be de-listed at €43/shr), Believe [BLV.FR] +10.0% (offer to be acquired at €15/shr).

- Energy: Nordex [NDX1.DE] +4.0% (prelim FY23), GALP Energia [GALP.PT] -1.0% (earnings and FY24 guidance).

- Financials: UK Commercial Property Trust [UKCM.UK] +4.5% (offered to be acquired).

- Industrials: Rheinmetall [RHM.DE] +2.5% (comments from Trump on NATO spending commitments).

- Technology: ASML [ASML.NL] +0.5% (unveiled new $350M chip making machine), Atos [ATO.FR] -1.5% (S&P cut rating to CCC.

Speakers

- IMF Chief Georgieva stated that she was expecting a soft landing for world economy and interest rates to start coming down from mid-year.

- Saudi Energy Min Abdulaziz stressed that OPEC was ready to tweak policy at any time; Saudi Aramco was not necessarily abandoning capacity expansion; Ready to tweak up or downwards at any time, whatever market necessity dictated.

Currencies/fixed income

- Over FX markets focus was on expectations of when and how quickly central banks would cut interest rates as inflation declined.

- USD was steady in quiet trading on Monday. Focus will be on Tuesday’s US CPI data for clues on when the Fed might begin potential rate cuts.

- GBP/USD was at 1.2620 as key UK data will be released during the week (CPI on Wed and GDP on Thurs).

- EUR/USD staying below 1.09 in quiet trade. Plethora of ECB speak painted a dovish picture on the rate path.

- USD/JPY holding above the 149 level.

Economic data

- (SE) Sweden SEB Swedish Housing-Price Indicator: 25 v 19 prior.

- (FI) Finland Dec Current Account: €0.0B v €1.7B prior.

- (DK) Denmark Jan CPI M/M: +0.9% v -0.5% prior; Y/Y: 1.2% v 0.7% prior.

- (DK) Denmark Jan CPI EU Harmonized M/M: 1.0% v -0.5% prior; Y/Y: 0.9% v 0.4% prior.

- (TR) Turkey Dec Unemployment Rate: 8.8% v 8.9% prior.

- (CZ) Czech Dec Export Price Index Y/Y: -2.4% v -2.1% prior; Import Price Index Y/Y: -6.2% v -5.7% prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 482.3B v 481.2B prior; Domestic Sight Deposits: 473.8B v 470.5B prior.

Fixed income issuance

- (ID) Indonesia sold total IDR24.0T vs. IDR24.0T target in bills and bonds.

Looking ahead

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

- 05:30 ((DE) Germany to sell combined €4.0B in 3-month and 9-month BuBills.

- 06:00 (PT) Portugal Jan Final CPI M/M: No est v 0.1% prelim; Y/Y: No est v 2.3% prelim.

- 06:00 (PT) Portugal Jan Final CPI EU Harmonized M/M: No est v -0.1% prelim; Y/Y: No est v 2.6% prelim.

- 06:00 (PT) Portugal Q4 Labour Costs Y/Y: No est v 4.9% prior.

- 06:00 (IL) Israel to sell combined ILS3.35B in 2027, 2029, 2030, 2031, 2025 and 2051 bonds.

- 06:00 (TR) Turkey to s ell Bonds (2 tranches).

- 06:00 (RO) Romania to sell RON500M in 7.35% Apr 2031 Bonds.

- 07:00 (IN) India Dec Industrial Production Y/Y: 2.5%e v 2.4% prior.

- 07:00 (IN) India Jan CPI Y/Y: 5.0%e v 5.7% prior.

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

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 08:00 (RU) Russia Dec Trade Balance: No est v $8.7B prior; Exports: No est v $33.4B prior; Imports: No est v $24.7B prior.

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

- 08:15 (EU) ECB's Lane (Ireland, chief economist).

- 09:00 (FR) France Debt Agency (AFT) to sell €5.5-7.1B in 3-month, 6-month and 12-month bills.

- 10:50 (IT)) ECB's Cipollone (Italy).

- 11:00 (US) NY Fed Jan 1-year Inflation Expectations: No est v 3.0% prior.

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

- 12:00 (US) Fed's Barkin at Atlanta Economics Club Event.

- 13:00 (US) Fed's Kashkari moderates Economic Club of Minnesota Discussion.

- 13:00 (UK) BOE Gov Bailey.

- (MX) Mexico ANTAD Jan Same-Store Sales Y/Y: No est v 5.2% prior.

- (CO) Colombia Consumer Jan Confidence: -16.3e v -17.3 prior.

- 14:00 (US) Jan Monthly Budget Statement: -$21.0Be v -$129.4B prior.

- 16:55 (AU) RBA's Kohler.

- 18:30 (AU) Australia Feb Westpac Consumer Confidence: No est v 81 prior.

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence: No est v 83.8 prior.

- 18:50 (JP) Japan Jan PPI M/M: 0.1%e v 0.3% prior; Y/Y: 0.1%e v 0.0% prior.

- 19:30 (AU) Australia Jan NAB Business Confidence: No est v -1 prior; Business Conditions: No est v 7 prior.

- 20:30 (KR) Bank of Korea (BOK) to sell KRW1.0T in 3-month Monetary Stabilization Bonds (MSBs).

- 21:00 (NZ) New Zealand Q1 Inflation Expectation Survey (2-year outlook): No est v 2.8% prior.

- 21:30 (KR) South Korea to sell KRW2.5T in 10-year bonds.

- 22:00 (TH) Thailand Central Bank to sell 6B in 3-month bills.

- 22:30 (TH) Thailand Jan Consumer Confidence: No est v 62 prior; Economic Confidence: No est v 56 prior.