Newsquawk

Europe Market Open: US CPI dented APAC trade; MOF's Kanda spoke, USD/JPY still above 150.00

14 Feb 2024, 06:33 by Newsquawk Desk

APAC stocks declined amid headwinds from the US where hot inflation unwound Fed rate cut expectations.
European equity futures indicate a lower open with Euro Stoxx 50 future -0.2% after the cash market closed down 1.2% on Tuesday.
DXY held onto post-CPI gains but stopped shy of 105, JPY selling prompted jawboning from Japanese officials.
Japanese MOF's Kanda said they are ready to take action on FX anytime, 24 hours, all year round.
Looking ahead, highlights include UK CPI/PPI, EZ Employment, Industrial Production, GDP Estimate, US PPI Seasonal Factor Revisions, Japanese GDP, Comments from ECB’s de Guindos, Cipollone, BoE's Bailey hearing, Fed’s Goolsbee, Barr & BoC’s Mendes, Supply from Germany and UK.

US stocks and bonds suffered heavy losses while the dollar surged after the hot US CPI report for January triggered a large pullback in Fed easing expectations. The downside was led by the small-cap Russell 2k index where many of the constituents are in need of lower rates to refinance their debt, although losses in the NDX and SPX were also significant following their YTD rally.
SPX -1.37% at 4,953, NDX -1.58% at 17,600, DJIA -1.35% at 38,272, RUT -4.00% at 1,964.
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NOTABLE HEADLINES

US Treasury Secretary Yellen said the US economy continues to grow with a historically strong labour market despite lower inflation and January CPI shows significant progress in bringing down inflation.
US Defense Secretary Austin was released from the hospital and resumed his duties, according to the Pentagon.

APAC stocks declined amid headwinds from the US where hot inflation unwound Fed rate cut expectations.
ASX 200 declined with underperformance in the top-weighted financial sector after Australia's largest lender CBA reported a drop in H1 profit and warned of financial strain from higher rates in 2024.
Nikkei 225 retreated with the biggest stock movers influenced by earnings results, although further losses in the index were somewhat cushioned by the recent currency weakness.
Hang Seng conformed to the risk-off mood on return from the holiday and with mainland Chinese markets shut.
US equity futures traded sideways which provided some reprieve from the post-CPI selling.
European equity futures indicate a lower open with Euro Stoxx 50 future -0.2% after the cash market closed down 1.2% on Tuesday.

DXY held on to post-CPI gains but is off the prior day's highs after stalling on approach to the 105.00 level.
EUR/USD found some mild respite following the recent nose dive to the 1.0700 level where support held.
GBP/USD traded steadily around 1.2600 after yesterday's data-induced fluctuations and ahead of UK CPI data.
USD/JPY marginally pulled back from YTD high but retains a firm footing above the recently reclaimed 150.00 level which spurred renewed jawboning by officials including MOF's Kanda who said they are ready to take action on FX anytime, 24 hours all, year round.
Antipodeans eked mild gains in quiet trade amid a lack of tier-one data releases and subdued risk appetite.

10-year UST futures languished below 110.00 after firmer-than-expected inflation lifted yields to fresh YTD highs.
Bund futures remained depressed at a sub-133.00 level with a German 30-year auction scheduled later.
10-year JGBs tracked the losses in global counterparts as Japan's 10-year yield climbed above 0.75% to its highest since December, while prices were also pressured after Japan conducted the world's first sovereign GX climate bond auction.

Crude futures were contained in a thin range amid the downbeat risk tone and after mixed inventory data.
US Energy Inventory Data (bbls): Crude +8.5mln (exp. +2.6mln), Gasoline -7.2mln (exp. -1.2mln), Distillate -4.0mln (exp. -1.6mln), Cushing +0.5mln.
EU Commission's Sefcovic said after meeting White House officials that he understands the US pause in LNG export approvals will not affect US LNG shipments to Europe in the next two to three years.
Spot gold was stuck at the prior day's lows beneath the USD 2,000/oz level following the hot US CPI data.
Copper futures remained pressured after recent dollar strength and pushback on Fed rate cut expectations.

Bitcoin traded rangebound following its recent pullback from the USD 50,000 level.

NOTABLE ASIA-PAC HEADLINES

Japan's top currency diplomat Kanda said recent yen moves are rapid and is watching FX moves with a high sense of urgency, while he said they will take appropriate actions if needed on forex and are ready to take action on FX anytime 24 hours all year round. Furthermore, Kanda said rapid FX moves could have an adverse impact on the economy and he suggested appropriate responses to the weak yen could include intervention.
Japanese Finance Minister Suzuki said he is watching the FX market with even stronger urgency and that rapid FX moves are undesirable, while he won't comment on the FX level and intervention.

DATA RECAP

MIDDLE EAST

Israeli delegation left talks without any indication of progress, according to Israeli Channel 12, although an Egyptian source told Al Arabiya that the atmosphere of the Cairo quartet meeting was positive and that negotiations will continue over the next three days.
Negotiators in Cairo were reportedly moving forward without reaching a final agreement yet, while a Hamas source said they consider the next 24 hours of exchange and ceasefire talks crucial, according to CNN cited by Sky News Arabia.
Israel’s Chief of Staff said the war has changed and that it was difficult at first, while they now have turned to the offensive, according to Al Jazeera.

OTHER

Russian President Putin's suggestion of a ceasefire in Ukraine was rejected by the US, according to Reuters citing Russian sources.
North Korea fired multiple cruise missiles off its east coast, according to Yonhap.

NOTABLE HEADLINES

ECB's Lane said they are moving in the right direction in reducing inflation with the price trend good and the next move is a rate cut but the timing will depend on the data. Lane added it would be a risk to embark on rate cuts too early or too late and suggested the amount of interest rate cuts will depend on progress towards the price goal.
Germany's federal government is to lower its 2024 growth forecast to 0.2%, according to a Reuters source.