ITALY DATA: IP Momentum Back On Recovering Trend, But Outlook Still Sluggish
Mar-14 14:12
Italian industrial production was much stronger-than-expected in January, printing at 3.2% M/M (vs 1.4% cons). December’s weak readding was also revised up to -2.7% M/M (vs -3.1% initially). The rebound was broad-based across consumer, capital and intermediate goods, while energy pulled back.
- The increase suggests the weak December reading was somewhat anomalous, with 3m/3m industrial production growth now back on a recovering path. 3m/3m growth was flat in January, after 15 consecutive months in negative territory.
- However, sentiment indices suggest any recovery in IP growth will be sluggish. Italy’s export-heavy manufacturing sector is sensitive global (especially Eurozone) demand conditions. Any support from increased fiscal spending on defence (e.g. for companies like Leonardo) will take time to feed through into IP data.
- The manufacturing PMI remains in contractionary territory (47.4 in February vs 46.3 prior), with the latest survey noting “Panellists mentioned weak market conditions both at home and abroad. In fact, the trend of decline in international sales was stretched to almost two years in February”.
- Meanwhile, the ISTAT manufacturing confidence series also is yet to register a clear upward trend.
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GILTS: Futures Through Initial Support On U.S. CPI
Feb-12 14:06
Gilts sell off on the back of the U.S. CPI data.
- Futures as low as 92.33, breaking through the 20-day EMA (92.63).
- Our technical analyst’s next support of note isn’t seen until the Jan 24 low (91.52).
- Intermediate support seen before there at the 38.2% retracement of the move from the ’25 low to ’25 high (92.29), followed by the Jan 29 low (91.96)
- Yields 5-7bp higher, curve steeper.
- 10s still 4.5bp below next resistance at the Jan 29 high (4.622%).
- 10s 2bp wider to Bunds on the day, last 209.5bp.
- BoE-dated OIS showing 56bp of cuts through year-end vs. ~58bp seen ahead of the U.S. data.
- SONIA futures +0.25 to -4.5.
STIR: Effective Fed Funds Rate
Feb-12 14:03
FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $92B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $278B
SECURITY: Return To Ukraine's Pre-2014 Borders "Unrealistic" - Hegseth
Feb-12 14:02
US Defense Secretary Pete Hegseth has stated at the first Ukraine Contact Group meeting since President Donald Trump returned to the White House, that although the US wants to see a "sovereign Ukraine," returning to Ukraine's pre-2014 borders is "unrealistic".
- Hegseth says Trump "intends to end the war through diplomacy". Adds that Ukraine's NATO membership should not be part of a peace plan and says "lower energy prices will help bring Russia to the table."
- Hegseth says, "as part of any security guarantee there will not be US troops deployed in Ukraine," noting that Europe needs to do more to cover the cost of Ukraine's security. Hegseth reiterates a Trump position that European NATO members should raise defence budgets to 5% of GDP - a target that only Poland is close to hitting.
- Hegseth says the US, "will no longer tolerate an unbalanced relationship," and says a greater division of labour needs to be struck so the US can prioritise other threats, including from China.
- Today's meeting is the first event in a flurry of diplomacy designed to kickstart peace talks. VP JD Vance will meet Ukrainian President Volodymyr Zelenskyy on Friday at the Munich Security Conference. Vance will be joined by Trump’s special envoy for Ukraine and Russia, Keith Kellogg, who is expected to travel onwards to Kyiv.
- Bloomberg reports Kellogg “plans to gather input” from Munich and Ukraine to “present Trump with options in the coming weeks to end the war”.
- US Treasury Secretary Scott Bessent will travel to Ukraine this week to discuss with Zelenskyy efforts to resolve the war and a plan for the US to secure access to critical minerals.
