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Euro Market Open: Firmer US close echoed into APAC, Central Bank speak ahead

  • US stocks were higher and finished near the best levels of the day; S&P 500 +0.8% at 4,520
  • Asian stocks traded higher with earnings releases in focus and following the positive handover from Wall St
  • European futures are indicative of a firmer open with the Eurostoxx 50 future up by 0.9% after the cash market closed higher by 0.2% yesterday
  • DXY hovers around 95.50, EUR/USD maintains 1.14 status and antipodeans lead in the G10 space
  • ECB's Villeroy said the market reaction to the ECB meeting may have been too strong
  • Looking ahead, highlights include German Trade Balance, Speeches from Fed's Bowman, Fed's Mester and BoE's Pill, Supply from Germany and US, Earnings including Walt Disney, Akzo Nobel, Equinor, Pandora, Maersk, L'Oreal, Barratt Development and GSK.

As of 06:24GMT/01:24EST

Click here for the Week Ahead preview

US TRADE

  • US stocks were higher and finished near the best levels of the day despite participants remaining in limbo ahead of the approaching US inflation data.
  • CLOSES: S&P 500 +0.8% at 4,520, Nasdaq 100 +1.2% at 14,747, Dow Jones +1.1% at 35,463, Russell 2000 +1.6% at 2,045.

NOTABLE US HEADLINES

  • Fed's Daly (2024 voter) said inflation could get worse before it gets better and doesn't expect to get to 2% inflation rate by year-end, while she favours a March hike but noted the Fed cannot be too aggressive with hikes, according to CNN.
  • US House voted 272-162 to extend government funding through to March 11th and avert a shutdown next week, according to CNN.
  • US Senate Majority Leader Schumer said he wants to pass a lawmaker stock trading ban, according to Punchbowl.

APAC TRADE

EQUITIES

  • Asian stocks traded higher with earnings releases in focus and following the positive handover from Wall St where the major indices finished near the best levels of the day despite participants remaining in limbo ahead of US CPI.
  • ASX 200 (+1.1%) was lifted by notable outperformance in the tech and financials sectors with the latter boosted by firm gains in Australia’s largest lender CBA which reported a 22% jump in H1 cash profit.
  • Nikkei 225 (+1.1%) rose above 27,500 with biggest gaining stocks driven by earnings releases including IHI, AGC and Nissan, while Toyota reported a record 9-month profit and SoftBank was boosted after it began to pitch the ARM IPO.
  • Hang Seng (+1.9%) and Shanghai Comp. (+0.7%) conformed to the constructive mood after reports yesterday that Chinese state funds stepped in to slow the market decline and with Hong Kong firmly boosted by a rebound in tech.
  • US equity futures extended on gains overnight; E-mini S&P +0.5%, E-mini Nasdaq 100 +0.5%.
  • European futures are indicative of a firmer open with the Eurostoxx 50 future up by 0.9% after the cash market closed higher by 0.2% yesterday.

FX

  • DXY traded around 95.50 as catalysts remained light and with a lack of firm commitment ahead of Thursday’s CPI data.
  • EUR/USD eked marginal gains but with upside capped after ECB's Villeroy added to the ECB's dovish reawakening.
  • GBP/USD oscillated around 1.3550 with little in the way of newsflow to drive price action.
  • USD/JPY pulled back but with downside stemmed by the positive risk tone and given BoJ-Fed policy divergences.
  • Antipodeans were kept elevated amid gains in stocks and resilience in the metals complex, as well as the recent backdrop of hawkish central bank calls on both sides of the Tasman.
  • Russian government and CBR have agreed on crypto regulation and Russia will recognise crypto assets as currencies, according to Kommersant.

FIXED INCOME

  • 10-year USTs found some reprieve overnight from recent selling pressure in which T-notes attempted to nurse losses as yields took a breather with participants awaiting upcoming Fed speakers and Thursday’s US inflation data.
  • 10-year JGBs were choppy with only brief support seen from the BoJ’s presence in the market for over JPY 1.3tln of 1yr-10yr JGBs, while the benchmark 10yr yield initially touched 0.218% which was the highest since January 2016.
  • Bund nursed some of the recent losses after yesterday’s rebound off support at 165.00.

COMMODITIES

  • WTI and Brent were marginally higher amid the constructive mood and bullish private sector inventory data.
  • US Private Inventory Data (bbls): Crude -2.0mln (exp. +0.4mln), Cushing -2.5mln, Gasoline -1.1mln (exp. +1.6mln), Distillate -2.2mln (exp. -1.7mln)
  • US EIA STEO sees US Crude output to rise 770k BPD to 11.97mln BPD in 2022 (prev. saw a fall of 640k BPD) and to rise 630k BPD to 12.60mln BPD in 2023 (prev. saw rise of 610k BPD).
  • White House Economic Adviser Bernstein told CNN that releasing more oil reserves from the SPR is an option.
  • Japan, at the request of the US government, has decided to secure necessary LNG stocks and accommodate some of this for Europe, via NHK citing sources.
  • Spot gold was uneventful as price action reflected a rangebound dollar.
  • Turkey will announce a scheme this weekend to encourage households to convert gold into Lira according to Reuters.
  • Copper initially benefitted from the upbeat risk sentiment but then faltered in late trade and with China eyeing iron ore price stability measures.
  • China's market regulator says will take further measures to ensure iron ore price stability, while it will strengthen market supervision and crackdown on price irregularities and hoarding.

NOTABLE APAC HEADLINES

  • PBoC injected CNY 20bln via 7-day reverse repos with the rate at 2.10% for a CNY 180bln net drain.
  • PBoC set USD/CNY mid-point at 6.3653 vs exp. 6.3654 (prev. 6.3569)
  • White House Press Secretary said China has not met its trade commitments of 2020 and 2021, according to Reuters.

DATA RECAP

  • Australian Westpac Consumer Sentiment Index (Feb) 100.8 (Prev. 102.2)
  • Australian Consumer Sentiment MM (Feb) -1.3% (Prev. -2.0%)

EUROPE-SPECIFIC HEADLINES

  • ECB's Villeroy said the inflation hump should be temporary and French inflation is to gradually diminish within months, while he guarantees they will do what is needed for inflation to return to around 2% over time and said the market reaction to the ECB meeting may have been too strong, according to Reuters.
  • French Q1 GDP growth seen at 0.3% (prev. 0.4%) and Q2 seen at 0.6% (prev. 0.5%), while inflation seen rising rising from 2.9% in January to 3.4% in June on higher oil prices, according to Insee.

GEOPOLITICS

  • German Chancellor Scholz said Germany, France and Poland’s view on Russia is 'identical' and the common goal is to prevent a war in Europe, according to Reuters.
  • French Presidency said leaders of Germany, France and Poland expressed joint support for Ukrainian sovereignty and implementation of Minsk ceasefire agreement, according to Reuters.
  • French President Macron mentioned "new approaches" to talks with Russia that emerged in the last few days, but did not provide more details, according to Politico's Burchard.
  • European and US regulators told banks to prepare for the threat of a Russian cyberattack, according to Reuters.
  • US Senate Majority Leader Schumer said negotiators are getting closer to a deal on Russia sanctions legislation.
  • Satellite images showed unusual activity at a North Korean shipyard, according to Yonhap citing a US think. tank
  • Syrian air defences downed a number of missiles from Israeli aggression, while the Israeli military said a Syrian anti-aircraft missile fired towards Israel exploded in mid-air, according to Reuters.
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