UKRAINE: BBG-US & Ukraine Could Sign Natural Resources Deal Today

German February retail sales volumes were notably stronger than expected as they increased 0.8% M/M (sa, cons 0.0) along with an upward revised 0.7% M/M in Jan (from 0.2%). It has seen retail sales start the year on a more robust note after a mixed Christmas last year, which included a heavy -1.0% M/M in December. 

• It left sales up 4.9% Y/Y on a calendar-adjusted basis, admittedly driven by some strong increases in mid-2024, with recent moderation fading. Whilst the latest two months have clearly been strong, the 3M/3M metric stood at -0.2% non-annualised.
• Looking ahead, 3M/3M momentum should mechanically firm in March but there are signs of mixed trends. GfK consumer confidence for instance missed expectations last week and remained broadly unchanged despite its survey period at least partially being able to capture any shift in sentiment following the German fiscal announcement on March 4.
• Across categories, February's uptick appears broad-based, with food sales up 0.8% M/M, and non-food sales up 0.6% (both in real terms). Internet and mail orders meanwhile ticked up 1.0% M/M.

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• In the FI space, Bund futures have started the week on a bullish note, extending the recovery that started Mar 11. Recent gains are considered corrective, however, the breach of the 20-day EMA has exposed resistance at 129.41, the Jan 14 low (pierced). Clearance of this level would strengthen a bullish theme and open the 130.00 handle and 130.26, the 61.8% retracement of the Feb 28 - Mar 11 bear leg. Key short-term support to watch lies at 127.74, the Mar 25 low.
• The short-term trend outlook in Gilt futures remains bearish, however, today’s gap higher highlights a bullish start to this week’s trading session, and signals scope for a stronger recovery near-term. An extension would open 92.55, a trendline resistance drawn from the Mar 4 high. Clearance of this level would strengthen the short-term bull cycle. Key support and the bear trigger has been defined at 90.55, the Mar 27 low.

Portugal HICP decelerated to 1.9% Y/Y in March, clearly below February's 2.5% and back at December 2023's 1.9%. The national CPI measure also saw some deceleration this month, for both headline (1.87% vs 2.39% Feb) and core (1.90% vs 2.45% Feb) with core defined as all items excl. unprocessed food and energy.

• Within the details, CPI excl. housing decelerated from 1.71% to 2.24% Y/Y (-0.53pps), a broadly similar moderation to that of headline, indicating that rental inflation saw a similar decrease as the wider index.
• Energy CPI played a large role in this moderation, easing from 1.50% to 0.04% Y/Y, with the deceleration driven by a sequential drop of -1.36% M/M. That's in line with Eurozone-wide sequential expectations for lower fuel prices in March. Unprocessed food CPI on the other hand accelerated to 2.76% Y/Y (2.40% Feb).
• For reference, Portugal contributes 2.6% to the overall Eurozone HICP 2025 basket.