Notes/Observations

– Powell on Tuesday confirmed the prospect of further interest-rate rises to tame inflation.

– European bourses move higher in wake of US market momentum following Fed Chair Powells comments which initially resulted in choppy trading for risk appetite.

– India Central Bank (RBI) hike by 25bps, as expected but vote was not unanimous at 4-2; Noted core inflation remained sticky. Iceland Central Bank hiked by 50bps to continue its tightening cycle.

– Earnings season continues as Equinor follows energy sector status quo and raises buyback as part of Q4 results; Shipping giant Maersk sees significant inventory adjustment and expects ocean business to be a lot worse in H2.

– Asia closed mixed with KOSPI outperforming at +1.3%. EU indices are +0.6-0.8% higher. US futures are -0.3%. Gold +0.6%, DXY -0.4%; Commodity: Brent +1.2%, WTI +1.5%, TTF -4.7%; Crypto: BTC +0.7%, ETH +1.7%.

Asia

– India Central Bank (RBI) raised Repurchase Rate by 25bps to 6.50% (as expected) and to remain focused on withdrawal of accommodation.

– Japan PM Kishida reiterated BOJ Governor choice concerned basic economic policy and was mindful of very strong market at.

Ukraine conflict

– Germany govt approved transfer of 178 Leopard-1 tanks to Ukraine.

Europe

– ECB’s Schnabel (Germany) reiterated stance that inflation momentum was still quite elevated. She could not yet give all clear on inflation. Reiterated Council view that it intended to hike rates by 50bps in March.

– UK National Institute of Economic and Social Research (NIESR) raised forecasts for UK CPI in 2023 and 2024 while cutting the 2023 and 2024 GDP forecasts.

Americas

– Fed Chair Powell: Disinflationary process has begun, but we are at the very early stages.

– President Biden State of the Union Address reiterated stance that US sought competition and not conflict with China. Vowed he would not let the US default over the debt limit and asked Congress to raise the debt ceiling.

– Canada BOC Gov Macklem reiterated stance that any pause on rates was conditional on outlook evolving as expected, prepared to hike again if CPI did not fall as expected.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 % at #, FTSE +0.66% at 7,916.75, DAX +0.79% at 15,442.45, CAC-40 +0.49% at 7,167.24, IBEX-35 +0.76% at 9,241.68, FTSE MIB +0.61% at 27,284.00, SMI +0.69% at 11,311.00, S&P 500 Futures -0.30%].

Market Focal Points/Key Themes: European indices open higher across the board and stayed upbeat through the early part of the session; all sectors start the day in the green; Slovenia closed for holiday; sectors leading the way higher include materials and technology; lagging sectors include industrials and financials; oil & gas subsector weighed on by disappointing results from TotalEnergies; reportedly CDP planning counter offer for Telecom Italia network; earnings expected during the upcoming US session include Disney, Metro, Uber and Under Armour.

Equities

– Consumer discretionary: Pandora [PNDORA.DK] +7.5% (reports Q4 – DKK2.4B buyback announced), Scout24 [G24.DE] -1.0% (analyst action – cut to neutral at UBS), HelloFresh [HFG.DE] +2.0% (analyst action – cut to neutral at Credit Suisse).

–Utilities: E.ON [EOAN.DE] +2.0% (reports prelim FY22 – post close).

– Energy: TotalEnergies [TTE.FR] -3.0% (reports Q4 – beats estimates, $2B buyback, raises div), Equinor [EQNR.NO] +6.5% (reports Q4 – raises div, increases buyback).

– Financials: Societe Generale [GLE.FR] -1.0% (earnings), ABN AMRO [ABN.NL] +5.5% (reports Q4 – €500M buyback announced).

– Healthcare: Synlab [SYAB.DE] -3.0% (multiple analyst cuts).

– Industrials: Volkswagen [VOW3.DE] -1.5% (prelim earnings), Maersk [MAERSKB.DK] +2.0% (reports Q4 – misses estimates / weak FY23 guidance).

– Technology: Adyen [ADYEN.NL] -12.5% (reports H2 – misses estimates / appoints co-CEO).

– Materials: Akzo Nobel [AKZA.NL] +6.0% (earnings).

Speakers

– ECB 2022 SREP Results maintained its capital requirements for 2023 as banking sector remained resilient.

– ECB’s Enria (SSM chief): Bank payouts are compatible with capital plans.

– Iceland Central Bank (Sedibanki) Policy Statement noted that it would have to tighten further in coming meetings to ensure inflation target was reached within acceptable time frame.

– UK Supreme Court rejected a challenge by Unionist MPs on lawfulness of the Northern Ireland Protocol.

– RBI Gov Das post rate decision press conference stressed he would not provide forward guidance on rates. Inflation had shown signs of moderation, worst was behind us.

– Iran Dep Min stated that it sought oil market to be depoliticized in order to guarantee supply. Saw oil prices rising to $100/barrel in H2. OPEC+ likely to continue its current policy at the next meeting.

– India Oil Min Puri stated that he had been invited to the next OPEC+ meeting.

Currencies/fixed income

– USD was softer in the session despite Fed’s Powell having passed up an opportunity to tamp down market optimism for looser policy front. Powell noted that he saw a long fight against inflation and that rates might need to move higher than expected if the economy remained strong. The greenback retraced as participants noted Powell reiterated he felt a process of “disinflation” was underway.

– EUR/USD drifting higher to test above 1.0750 in the session. ECB recently reiterated its rhetoric on intending to hike by 50bps at the next meeting in March.

– GBP/USDD back at 1.21 area. Dealers noted that UK Supreme Court could issue its verdict on the on lawfulness of the Northern Ireland (**Reminder: Protocol created a trade border between Northern Ireland and the rest of the UK).

– USD/JPY below the 131 level as markets await word on who would be nominated to replace Kuroda as the next BOJ Gov.