EQUITIES: Estoxx futures is closing the small Opening gap

Although still a volatile release month-to-month, the recovery in Norwegian manufacturing industrial production extended in February, led by non-petroleum-related components. Overall, IP looks to be a positive contributor to Q1 mainland and headline GDP growth. 

• The prospect of increased European defence spending in the coming years should provide a medium-term tailwind to Norwegian industry, but still-restrictive policy rates may limit upside in the short-term. Additionally, headline IP may be weighed down by weaker global growth prospects, with crude oil and natural gas prices down sharply since last week’s US tariff announcements.
• The 16% US tariff on Norwegian imports shouldn’t have too much of a direct impact. Norwegian exports to the US only accounted for ~3.5% of total exports in the 12-months to February.
• February manufacturing industrial production rose 1.4% M/M (vs -1.6% in January), corresponding to a 6.1% Y/Y rate. On a 3m/3m basis, production rose 2.8% for the third consecutive rise from -1.7% in November.
• Headline IP rose 1.6% M/M and 2.3% 3m/3m, but was flat on an annual basis. 

(Source BBG)

The pullback from early session highs extends a little further, with equities finding a bit of a base as the initial rounds of Monday risk-off flow linked to heightened trade war worry slow a little.

• Gilt futures printed as high as 94.50, piercing Friday’s peak, before fading back to ~93.50. The contract has since recovered to ~93.80.
• The short-term technical outlook now looks much more bullish.
• A break above session highs would expose the 76.4% retracement of the Dec 3-Jan 13 bear leg (94.75).
• Initial support of note at the Mar 20 high (93.01)
• Yields 8bp lower to 2bp higher, curve twist steepens.
• 2s10s and 5s30s have registered fresh multi-year highs.
• Gilt bulls managed to force a break below the Feb 2 lows in 10s, but the move hasn’t stuck, with the benchmark now ~7bp off session lows, last ~4.43%.
• GBP STIRs move off dovish session extremes.
• BoE-dated OIS now fully discounts a cut at the May meeting, while showing 38.5bp of easing through June, 58bp through August and 85.5bp through year-end.
• ’25 MPC contracts are 2.5-12bp more dovish through year-end. ~93bp of cuts were priced through December at one stage today.
• SONIA futures are off highs but still 1.0-9.5 firmer on the day after most contracts hit the highest levels seen since October.
• Expect macro cues to continue to dominate today, with no meaningful UK event risk scheduled.