Upcoming US CPI to paint the rate path for the Fed and dial in on the timing of a first cut

EU mid-market update: Upcoming US CPI to paint the rate path for the Fed and dial in on the timing of a first cut; NY's 3rd Congressional district special elections set for today.

Notes/observations

- Market for the most part in a holding pattern ahead of US CPI at 08:30 ET (13:30 GMT). Key points will be whether headline and core YoY cools from last month, as estimates suggest, or whether persistent pressures on pricing remain, which would likely reverse more of the rate cut expectations. Has recent Red Sea shipping disruption had any impact? Fed seems to think inflation will be sticky and that they need ‘a few more good months’ before cutting.

- European data was divergent, with stronger UK weekly earnings and lower unemployment pushing both GBP (sterling) and Gilt yields higher as rate cut expectations were pared. However, Swiss CPI came in much cooler than expected, despite already being within target, weakening CHF (Swiss Franc) notably.

- Later today, New York's 3rd Congressional district special elections are taking place over former George Santos seat between former congressman Tom Suozzi (Dem) and Nassau County legislator Mazi Pilip (R).

- OPEC Monthly Oil Report to be released around 07:30 ET (12:30 GMT).

- Asia closed mixed with Nikkei225 outperforming at +3.0%. EU indices are -0.5% to +0.3%. US futures are -0.2% to -0.5%. Gold +0.3%, DXY +0.1%; Commodity: Brent +0.9%, WTI +0.9%, TTF +2.0%; Crypto: BTC +4.7%, ETH +7.8%.

Asia

- Japan Jan PPI (Domestic CGPI) M/M: 0.0% v 0.1%e; Y/Y: 0.2% v 0.1%e.

- Australia Feb Westpac Consumer Confidence: 86.0 v 81.0 prior (highest since Jun 2022).

- New Zealand Q1 Inflation Expectation Survey (2-year outlook): 2.5% v 2.8% prior (4th straight reading within target band and lowest since Q3 2021).

- RBA's Kohler [Head of Economic Analysis Dept] reiterated Board view that inflation was coming down, but was still too high. Inflation was not expected to return to the 2-3% band until late 2025 and not reach the midpoint of 2.5% until 2026.

- New Bank of Korea (BOK) board member Hwang Kun-il noted that saw positive signs of inflation slowdown and an exports-led economic recovery, inflation was far exceeding the target while real estate and household debt-related risks remained.

Europe

- BOE Gov Bailey stated that was at the beginning of seeing signs of an upturn in growth; wouldn't put too much weight on whether the UK entered a technical recession and a recession would be shallow.

Americas

- Fed’s Bowman (voter, hawk) stated that did not see cuts as appropriate in the immediate future; Many risks remained for Fed's inflation fight.

- Fed’s Barkin (voter) stated that was closing in on the inflation target but not there yet.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.26% at 11,220.60, FTSE -0.07% at 7,568.72, DAX -0.62% at 16,932.41, CAC-40 -0.35% at 7,662.91, IBEX-35 -0.09% at 9,975.67, FTSE MIB -0.37% at 31,339.00, SMI +0.37% at 11,220.60, S&P 500 Futures -0.34%].

Market focal points/key themes: European indices open mixed, but later turned to the downside; among sectors inclined to the upside are industrials and materials; sectors trending lower include technology following Siltronic’s profit warning/outlook, and consumer discretionary; automotive subsector supported following Michelin’s results, while travel and some airlines names helped by TUI color on summer bookings; shares of German defense giant Rheinmetall trading higher again following Germany's Scholz pledge to meet 2% NATO spending target; focus on release of US CPI later in the day; earnings expected in the upcoming Americas session include Shopify, Datadog, Lyft, Hasbro, Moody’s, and Coca Cola.

Equities

- Consumer discretionary: TUI [TUI1.DE] +4.5% (earnings beat, positive outlook and bookings), Believe [BLV.FR] +19.0% (offer to be acquired), Air France-KLM [AF.FR] -1.5% (analyst downgrade).

- Healthcare: GSK [GSK.UK] +1.0% (analyst action), Basilea Pharmaceutica [BSLN.CH] +3.5% (earnings and FY24 guidance).

- Industrials: Rheinmetall [RHM.DE] +4.0% (Germany's Scholz pledge to meet 2% NATO spending target; Estonia's Foreign Intelligence Service report), Michelin [ML.FR] +4.5% (earnings).

- Technology: Siltronic [WAF.DE] -7.0%, ASML [ASML.NL] -3.0% (Siltronic earnings and outlook).

Speakers

- Sweden Central Bank (Riksbank) Jansson noted that geopolitics, Swedish krona (SEK) and price plans remained as risks to inflation. Hard to believe that rates would be cut at every meeting once started. Noted that had not a zero chance that the 1st rate cut could come after summer.

- German ZEW Economists commented that the domestic economy was in a bad place. More than two-thirds of the respondents expected the ECB to make interest rate cuts over the next six months in light of falling inflation rates.

- IEA Dir Birol commented that he expected comfortable oil market and moderate prices in 2024. Oil supply growth would more than satisfy demand in 2024.

- OPEC Sec Gen Al Ghais stated that firmly believed OPEC long term demand outlook was robust. Voluntary cuts show inherent flexibility in OPEC+ approach to management market. Saudi decision to postpone capacity expansion should not be confused with a view that demand is falling.

Currencies/fixed income

- USD remained within a narrow trading range against most pairs ahead of the US CPI data on Wed.

- GBP/USD edged higher as better UK unemployment data and wage growth data suggested some caution for the BOE. Dealers noted Q4 wage growth slowed less than expected which underscored the case for the Bank of England to wait. GBP/USD at 1.2660 by mid-session.

- CHF currency was broadly weaker after Swiss Jan CPI data slowed by more than forecast and opened the door for SNB easing bets with Sept now seen as a likely starting date. USD/CHF at a 9-week low at 0.8805.

Economic data

- (SE) Sweden Jan PES Unemployment Rate: 3.5 v 3.4% prior.

- (FR) France Q4 ILO Unemployment Rate: 7.5% v 7.5%e; Mainland Unemployment Rate: 7.3% v 7.3%e.

- (UK) Jan Jobless Claims Change: +14.1K v +5.5K prior; Claimant Count Rate: 4.0% v 4.0% prior; Payroll Employees Monthly Change: K v -18Ke.

- (UK) Dec Average Weekly Earnings 3M/Y: 5.8% v 5.6%e; Weekly Earnings (ex-bonus) 3M/Y: 6.2% v 6.0%e.

- (UK) Dec ILO Unemployment Rate: 3.8% v 3.9% prior; Employment Change 3M/3M: +72K v +50Ke.

- (TR) Turkey Dec Current Account Balance: -$2.1B v -$3.3Be.

- (TR) Turkey Dec Retail Sales Y/Y: 11.4% v 12.6% prior.

- (CH) Swiss Jan CPI M/M: 0.2% v 0.6%e; Y/Y: 1.3% v 1.7%e; CPI Core Y/Y: 1.2% v 1.6%e.

- (CH) Swiss Jan CPI EU Harmonized M/M: 0.1% v 0.3% prior; Y/Y: 1.5% v 2.0%e.

- (CZ) Czech Dec Current Account Balance (CZK): 13.2B v 4.9Be.

- (ZA) South Africa Dec Total Mining Production M/M: -4.2% v -0.3%e; Y/Y: 0.6% v 4.9%e; Gold Production Y/Y: -3.4% v -2.9% prior; Platinum Production Y/Y: 9.4% v 15.2% prior.

- (DE) Germany Feb ZEW Current Situation Survey: -81.7 v -79.0e; Expectations Survey: 19.9 v 17.3e.

- (EU) Euro Zone Feb ZEW Expectations Survey: 25.0 v 22.7 prior.

Fixed income issuance

- (ZA) South Africa sold total ZAR3.9B vs. ZAR3.9B indicated in 2032, 2040 and 2048 bonds.

- (ES) Spain Debt Agency (Tesoro) sells total €2.04B vs. €1.5-2.5B indicated range in 3-month and 9-month bills.

- (UK) DMO sold £1.5B in 0.75% Nov 2033 Inflation-linked Gilts; Real Yield: 0.634% v 0.423% prior; bid-to-cover: 2.97x v 3.04x prior.

- (IT) Italy Debt Agency (Tesoro) sold total €8.5B vs. €6.0-8.5B indicated range in 3-year, 7-year and 20-year BTP bonds.

- Sold €3.5B vs. €3.0-3.5B indicated range in 2.95% Feb 2027 BTP; Avg Yield: 3.15% v 3.03% prior; bid-to-cover: 1.39x v 1.48x prior (Jan 11th 2024).

- Sold €1.5B vs. €1.25-1.5B indicated range in 3.70% Jun 2030 BTP; Avg Yield: 3.48% v 3.90% prior; bid-to-cover: 1.71x v 1.40x prior (July 13th 2023).

- Sold €2.0B vs. €1.5-2.0B range in 4.00% Nov 2030 BTP; Avg Yield: 3.53% v 3.63% prior; bid-to-cover: 1.55x v 1.54x prior.

- Sold €1.5B vs. €1.25-1.5B indicated in 4.45% Sept 2043 BTP; Avg Yield: 4.38% v 5.03% prior, bid-to-cover: 1.51x v 1.65x prior.

Looking ahead

- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to leave Interest Rates unchanged at 7.00%.

- (DE) Germany Dec Current Account Balance: No est v €30.8B prior.

- OPEC Monthly Oil Report.

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

- 05:30 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €4.0B in 2.1% Apr 2029 BOBL.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:00 (US) Jan NFIB Small Business Optimism: 92.1e v 91.9 prior.

- 06:00 (IL) Israel Jan Trade Balance: No est v -$1.8B prior.

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

- 06:00 (FI) Finland to sell combined €2.0B in 6-month and 9-month bills.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:00 (PL) Poland Dec Current Account Balance: -€0.4Be v €1.3B prior; Trade Balance: -€0.5Be v +€0.2B prior; Exports: €25.5Be v 29.7B prior; Imports: €25.8Be v €29.5B prior.

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

- 08:30 (US) Jan CPI M/M: 0.2%e v 0.2% prior (revised from 0.3%); Y/Y: 2.9%e v 3.4% prior.

- 08:30 (US) Jan CPI (Ex Food and Energy) M/M: 0.3%e v 0.3% prior; Y/Y: 3.7%e v 3.9% prior.

- 08:30 (US) Jan CPI Index NSA: 308.014e v 306.746 prior; Core Index: 313.996e v 313.216 prior.

- 08:30 (US) Jan Real Avg Hourly Earning Y/Y: 0.8%e v 1.0% prior (revised from 0.8%); Avg Weekly Earnings Y/Y: 0.5%e v 0.7% prior (revised from 0.5%).

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

- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills.

- 11:30 (US) Treasury to sell 42-Day CMB.

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

- 16:45 (NZ) New Zealand Jan Total Card Spending M/M: No est v -0.6% prior; Retail Card Spending M/M: No est v -2.0% prior.

- 16:45 (NZ) New Zealand Jan Food Prices M/M: No est v -0.1% prior.

- 20:30 (KR) Bank of Korea to sell KRW800B in 1-Year Bonds.

- 22:35 (JP) Japan to sell 10-Year Climate Transition Bonds.