US PPI and Retail Sales data in focus – ECB's Stournaras hints that two rate cuts needed before summer

Notes/observations

- Fairly muted trade overall except for a slight risk on bid at European open, with US futures rising and US dollar falling.

- Italy/German 10-year bond yield spread continues to narrow towards ~120bps, down from over 200bps in Oct 2023. Transmission fears dissipating.

- ECB’s Stournaras sees 4 rate cuts in 2024 as reasonable, the first ECB member to comment about number of hikes, as opposed to just timing of the first one.

- US retail sales, PPI and jobless claims at 08:30 ET.

- Upcoming BOJ meeting (Tues, Mar 19th) likely to see BoJ lay the foundations for a policy change.

- Asia closed mixed with KOSPI outperforming at +0.9%. EU indices are -0.2% to +0.7%. US futures are +0.3-0.5%. Gold -0.1%, DXY +0.1%; Commodity: Brent +0.8%, WTI +0.9%, TTF -0.5%; Crypto: BTC +0.1%, ETH -1.9%.

Asia

- BOJ to discuss impact of negative interest rate next week due to pay hikes bringing the bank's target of 2% in line with expectations.

Global conflict/tensions

US held talks with Iran to convince Tehran to influence Yemen's Houthi to stop attacks in the Red Sea.

Europe

- UK Feb RICS House Price Balance: -10% v -10%e (highest since October 2022).

Americas

- Treasury Sec Yellen: Seems unlikely that interest rates will return to levels as low as before COVID-19 pandemic.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.22% at 508.46, FTSE +0.05% at 7,775.75, DAX +0.04% at 17,993.85, CAC-40 +0.75% at 8,198.49, IBEX-35 +0.15% at 10,575.92, FTSE MIB +0.13% at 33,928.00, SMI -0.17% at 11,770.50, S&P 500 Futures +0.33%].

Market focal points/key themes: European indices traded generally higher through the early part of the session; among sectors leading the way higher are consumer discretionary and real estate; lagging sectors include materials and financials; Encavis receives takeover offer from KKR; AstraZeneca to acquire Amolyt Pharma; earnings expected in the upcoming US session include Adobe, Dollar General and Canadian Solar.

Equities

- Consumer discretionary: Deliveroo [ROO.UK] +3.5% (earnings).

- Telecom: Helios Towers [HTWS.UK] -1.0% (earnings).

- Financials: Deutsche Bank [DBK.DE] -1.0% (comments on outlook).

- Healthcare: AstraZeneca [AZN.UK] +0.5% (acquisition).

- Industrials: Hapag-Lloyd [HLAG.DE] -1.5% (earnings), Rheinmetall [RHM.DE] +4.0% (results).

- Energy: Eni [ENI.IT] +1.0% (final results).

- Utilities: RWE [RWE.DE] +1.5% (earnings).

Speakers

- ECB's Stournaras (Greece): Need to cut interest rates soon. Did not by the argument that ECB cannot cut rates before the Fed. total of 4 rate cuts in 2023 seemed reasonable.

- ECB's Muller (Estonia, hawk) commented that needed more information before rate cuts could commence; possible to get such info in the coming months.

- Sweden Central Bank (Riksbank) Breman stated that inflation was moving in the right direction.

- Poland Central Bank (NBP) Wnorowski stated that MPC might cut rates slightly in 2024, but definitely again in 2025.

- China Commerce Ministry (MOFCOM) stated that it was very concerned about EU customs action on China EVs.

- IAEA Chief Grossi reportedly discussed Iran's nuclear program with Russia Pres Putin during recent visit.

- IEA Monthly Oil Report (OMR) raised 2024 global oil demand growth from 1.2M bpd to 1.3M bpd (demand seen at 103.2M vs. 103.0M bpd prior. It cut the 2024 global oil supply growth from 1.7M bpd to 1.6M bpd (supply seen at 102.9M bpd vs. 103.8M bpd prior).

Currencies/fixed income

- FX price action for European pairs was once again muted in the session. Focus turns to upcoming US PPI data later today.

- USD/JPY was steady around the 148 area with focus on Tuesday’s BOJ rate decision. Dealers noted that the meeting likely to see BoJ lay the foundations for a policy change. Recent days has seen a majority of companies agreeing to unions demands on wages. The latest speculation is that BOJ to discuss impact of negative interest rate next week due to pay hikes bringing the bank's target of 2% in line with expectations. A former BoJ Director Hayakawa suggested that it would be more appropriate for the BoJ to abandon NIRP in April following adjustments to forward guidance this month.

- EUR/USD at 1.0940 by mid-session with the GBP/USD pair moving back above the 1.28 level.

Economic data

- (FI) Finland Feb CPI M/M: 0.5% v 0.3% prior; Y/Y: 3.0% v 3.3% prior.

- (IN) India Feb Wholesale Prices (WPI) Y/Y: 0.2% v 0.2%e.

- (SE) Sweden Feb CPI M/M: 0.2% v 0.4%e; Y/Y: 4.5% v 4.7%e; CPI Level: 413.76 v 413.85e.

- (SE) Sweden Feb CPIF M/M: 0.2% v 0.3%e; Y/Y: 2.5% v 2.8%e.

- (SE) Sweden Feb CPIF M/M (ex-energy M/M: 0.6% v 0.7%e; Y/Y: 3.5% v 3.6%e.

- (CH) Swiss Feb Producer & Import Prices M/M: +0.1% v -0.5% prior; Y/Y: -2.0% v -2.3% prior.

- (ES) Spain Feb Final CPI M/M: 0.4% v 0.3% v 0.3% prelim; Y/Y: 2.8% v 2.8% prelim.

- (ES) Spain Feb Final CPI EU Harmonized M/M: 0.4% v 0.4% prelim; Y/Y: 2.9% v 2.9% prelim.

- (ES) Spain Feb CPI Core M/M: +0.5% v -0.4% prior; Y/Y (final): 3.5% v 3.4% prelim.

- (HK) Hong Kong Q4 PPI Y/Y: 2.7% v 3.0% prior.

- (HK) Hong Kong Q4 Industrial Production Y/Y: 4.1% v 4.3% prior.

- (NO) Norway Q1 Regional Output Survey: Q/Q: -0.1% v 0.0% prior; Next Quarter Q/Q: 0.0% v -0.3% prior.

- (ZA) South Africa Jan Total Mining Production M/M: -0.8% v -4.6% prior; Y/Y: -3.3% v +0.4%e; Gold Production Y/Y: -12.7% v -3.6% prior; Platinum Production Y/Y: 3.3% v 9.0% prior.

Fixed income issuance

- (TR) Turkey to sell EUR-denominated 6-year bonds via syndicate; yield guidance seen 6.50%.

Looking ahead

- (DE) Germany Jan Current Account Balance: No est v €31.4B prior.

- 06:00 (EU) Daily Euribor Fixing.

- 06:00 (UK) BOE allotment in 7-day short-term repo operation (prior £1.1B).

- 06:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

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

- 07:00 (IE) Ireland Feb CPI M/M: No est v -1.3% prior; Y/Y: No est v 4.1% prior.

- 07:00 (IE) Ireland Feb CPI EU Harmonized M/M: No est v -1.4% prior; Y/Y (final): No est v 2.2% prelim.

- 07:00 (ZA) South Africa Jan Manufacturing Production M/M: +0.6%e v -1.7% prior; Y/Y: 0.9%e v 0.7% prior.

- 07:00 (DE) ECB’s Schnabel (Germany).

- 08:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to leave Key Rate unchanged at 15.00%.

- 08:00 (BR) Brazil Jan Retail Sales M/M: +0.2%e v -1.3% prior; Y/Y: 0.8%e v 1.3% prior.

- 08:00 (BR) Brazil Jan Broad Retail Sales M/M: +0.4%e v -1.1% prior; Y/Y: 3.4%e v 0.0% prior.

- 08:30 (US) Feb Advance Retail Sales M/M: +0.8%e v -0.8% prior; Retail Sales (ex-auto) M/M: +0.5%e v -0.6% prior; Retail Sales (ex-auto/gas): +0.3%e v -0.5% prior; Retail Sales (control group): +0.4%e v -0.4% prior.

- 08:30 (US) Feb PPI Final Demand M/M: 0.3%e v 0.3% prior; Y/Y: 1.2%e v 0.9% prior.

- 08:30 (US) Feb PPI (ex-food/energy) M/M: 0.2%e v 0.5% prior; Y/Y: 1.9%e v 2.0% prior.

- 08:30 (US) Feb PPI (ex-food/energy/trade) M/M: 0.3%e v 0.6% prior; Y/Y: No est v 2.6% prior.

- 08:30 (US) Initial Jobless Claims: 218Ke v 217K prior; Continuing Claims: 1.91Me v 1.906M prior.

- 08:30 (CA) Canada Jan Manufacturing Sales M/M: +0.4%e v -0.7% prior.

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

- 09:00 (RU) Russia Gold and Forex Reserve w/e Mar 8th: No est v $581.1B prior.

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

- 10:00 (US) Jan Business Inventories: 0.2%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.

- 12:00 (CA) Canada to sell 5 Year Bonds.

- 14:00 (ES) ECB’s de Guindos (Spain).

- 14:30 (GR) ECB’s Stournaras (Greece).

- 17:00 (KR) South Korea Feb Import Price Index M/M: No est v 2.2% prior; Y/Y: No est v 0.2% prior.

- 17:00 (KR) South Korea Feb Export Price Index M/M: No est v 3.2% prior; Y/Y: No est v 3.7% prior.

- 17:30 (NZ) New Zealand Feb Manufacturing PMI: No est v 47.3 prior.

- 21:10 (JP) BOJ bond buying operation.

- 21:20 (CN) China PBoC Monthly 1-year Medium Term Lending Facility (MLF) Setting: CNY550Be at rate of 2.50% (unchanged rate).

- 22:00 (ID) Indonesia Feb Trade Balance: $2.4Be v $2.0B prior; Exports Y/Y: -6.3%e v -8.2% prior (revised from -8.1%); Imports Y/Y: 9.3%e v 0.3% prior (revised from 0.4%).

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

- 23:00 (KR) South Korea Jan M2 Money Supply Y/Y: No est v 0.8% prior; “L” Money Supply Y/Y: No est v 0.0% prior.

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

- 00:30 (JP) Japan Jan Tertiary Industry Index M/M: 0.1%e v 0.7% prior.