MNI EUROPEAN OPEN: EU Assets Up On Ukraine Peace Hopes

Feb-13 05:39By: Jonathan Cavenagh

Europe

EXECUTIVE SUMMARY

TRUMP AND PUTIN AGREE TO UKRAINE TALKS IN US POLICY REVERSAL - BBG
CHINA TRIES TO PLAY THE ROLE OF PEACEMAKER IN UKRAINE - WSJ
FED’S POWELL WANTS TO KEEP POLICY RESTRICTIVE - MNI BRIEF
BANK OF ENGLAND'S PILL 'CAUTIOUS' ABOUT FURTHER RATE CUTS - RTRS
FORMER STAFF DOUBT THE RBA WILL SHIFTS ITS COMMUNICATION STRATEGY - MNI

Fig 1: EUR/USD & EU Equities

Source: MNI - Market News/Bloomberg/Refinitiv.

BOE (RTRS): "The Bank of England needs to move cautiously with cutting interest rates because the long process of wrestling down inflation is not yet complete, BoE Chief Economist Huw Pill told Reuters."

HOUSING (BBG): “- UK estate agents said interest in buying houses stagnated in January amid the market rout that pushed up the cost of borrowing.”

POLITICS (BBC): “New guidance states that anyone who enters the UK illegally having made a dangerous journey, which could be via boat, but also by means such as hiding in a vehicle, will normally be refused citizenship, regardless of the time that has passed.”

ECB (MNI BRIEF): It would be risky to base monetary policy decisions on estimates of the neutral rate of interest alone, with additional data needed to assess the current monetary policy stance and the optimal policy path for the near future, Bundesbank President Joachim Nagel said on Wednesday.

FRANCE (BBG): “French Prime Minister Francois Bayrou survived another no-confidence vote Wednesday, clearing a key political hurdle toward implementing a delayed 2025 budget.”

UKRAINE (POLITICO): “High-stakes negotiations that could decide the future of Eastern Europe must include Ukraine, top European diplomats have warned, after U.S. President Donald Trump and Russian leader Vladimir Putin agreed to hold talks.”

RUSSIA (POLITICO): “U.S. President Donald Trump said Wednesday he expects to see his Russian counterpart Vladimir Putin in Saudi Arabia for their first meeting since the Republican took office.”

AUSTRIA (BBC): “Austria's far-right populist Freedom Party says it has ended its attempts to form a coalition government with the conservative People's Party, ÖVP. The announcement follows several weeks of heated negotiations and marks the second time coalition talks have failed since September's election.”

GEOPOLITICS (BBG): “President Donald Trump agreed in a phone call with Russian President Vladimir Putin to start negotiating an end to the war in Ukraine, sweeping aside three years of US policy and blindsiding European allies who feared the more conciliatory American stance amounted to a giveaway to the Russian leader.”

FED (MNI BRIEF): Federal Reserve Chair Jerome Powell said Wednesday interest rate policy should stay restrictive for now because inflation is still too high despite significant strides over the past year.

GROWTH (MNI BRIEF): The trend potential GDP growth rate in the United States could be rising to as high as 2.25%, Fed Chair Jerome Powell told lawmakers on Wednesday, pointing to increases in productivity over the last few years.

FED (MNI BRIEF): The FOMC expects to make "discreet" changes to its monetary policy operating framework by late summer, Federal Reserve Chair Jerome Powell told the House Financial Services Committee on Wednesday after committee chair French Hill began the session by calling the Fed's shift to average inflation targeting "ill timed" and "ill fitted for a post-pandemic world."

FED (MNI BRIEF): Federal Reserve Bank of Atlanta President Raphael Bostic said Wednesday the Fed is in no rush to change rates until it sees how tariffs and other policy changes play out, echoing Fed Chair Jerome Powell's message to Congress this week.

BUDGET(MNI BRIEF): The U.S. budget deficit has grown to a record USD840 billion in the first four months of the fiscal year, up USD308 billion or 58% from the same time last year, the Treasury Department reported Wednesday.

NATO (BBC): “European nations must provide the "overwhelming" share of funding for Ukraine, the new US Defence Secretary Pete Hegseth has said. Speaking at a defence summit in Brussels, Hegseth said the US would no longer "tolerate an imbalanced relationship" with its allies and called on Nato members to spend much more on defence. He also said it was "unrealistic" to expect Ukraine to return to its pre-2014 borders and downplayed the prospect of Ukraine joining Nato.”

BUSINESS (BBC): “Chevron plans to slash its workforce by as much as 20% by the end of 2026, as it embarks on a wider cost-cutting effort. The oil giant employed more than 45,000 people at the end of 2023, roughly half of them in the US.”

OTHER

MIDDLE EAST (WAPO/RTRS): "U.S. intelligence warns that Israel is likely to launch a preemptive attack on Iran's nuclear program by midyear, the Washington Post reported on Wednesday, citing multiple intelligence reports."

CANADA (MNI BRIEF): Bank of Canada officials see exporters at risk of going out of business in any long U.S. trade war even with some cushion from a weaker currency, according to deliberations published Wednesday from the Jan. 29 decision to lower interest rates a sixth time.

CANADA (MNI BRIEF): Canada should consider an export tax on products such as aluminum in retaliation to any U.S. tariffs, the leader of the country's main producer of that metal told reporters Wednesday ahead of meetings with lawmakers in Washington.

CANADA (BBC): “Canada's provincial and territorial leaders say they had a "constructive" meeting at the White House as they sought to make their case against the tariffs the US president has threatened to impose on the country. It is the first time all 13 premiers have visited the US capital together, illustrating how seriously a potential trade war is viewed by Canada.”

JAPAN (MNI BRIEF): Japan's corporate goods price index rose 4.2% y/y in January, accelerating from December’s 3.9%, while import prices on a yen basis rose 2.3%, their second straight rise and up from December's 1.4%, data released by the Bank of Japan showed on Thursday.

AUSTRALIA (MNI): Former staff doubt the RBA will shift its communication strategy following next week's decision. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.

CHINA

HOUSING (ECONOMIC INFORMATION DAILY/BBG): “The real estate market in China is showing clear signs of stabilization and recovery, thanks to supportive policies and improving market confidence, underscored by high-premium land auctions in key cities, according to a report in the Economic Information Daily.”

GEOPOLITICS (WSJ): "As President Trump and Russian President Vladimir Putin signal they are prepared to start negotiations to end the Ukraine war, China is pushing to play a role."

CHINA MARKETS

MNI: PBOC Net Drains CNY149.7 Bln via OMO Thursday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY125.8 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY149.7 billion after offsetting the maturity of CNY275.5 billion today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.7028% at 09:45 am local time from the close of 1.8500% on Wednesday.

The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 48 on Wednesday, compared with the close of 43 on Tuesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1719 Thurs; -1.52% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1719 on Thursday, compared with 7.1710 set on Wednesday. The fixing was estimated at 7.3105 by Bloomberg survey today.

MARKET DATA

AUSTRALIA MELBOURNE INSTITUTE INFLATION EXPECTATIONS FEB. 4.6%; FEB. 4.0%

NEW ZEALAND JAN. RETAIL CARD SPENDING -1.6% M/M; DEC. +2.4%
NEW ZEALAND JAN. TOTAL CARD SPENDING UNCHANGED M/M; DEC. +1.6%

NEW ZEALAND RBNZ Q1 AVERAGE 1-YR INFLATION EXPECTATIONS 2.15%; Q4 2.05%
NEW ZEALAND RBNZ Q1 2-YEAR INFLATION EXPECTATIONS 2.06%; Q4 2.12%

JAPAN JAN. PRODUCER PRICES +0.3% M/M; EST. +0.3%; DEC. +0.4%
JAPAN JAN. PRODUCER PRICES +4.2% Y/Y; EST. +4.0%; DEC. +3.9%" - BBG

MARKETS

US TSYS: Tsys Futures Find Support Ahead Of PPI

It has been a quiet session for Tsys after a sell-off overnight following stronger-than-expected CPI. The 2yr is hovering near it's highest levels since July, however earlier JPM put out a buy recommendation on the 2yr, we then saw heavy block buying in the TU contract with a total of 26k TU contracts blocked across four trades for DV01 $955k. TU is currently +01¾ at 102-19+, while TY is +05 at 108-13+
Key levels to watch on the TY contract are, initial resistance at 109-10 (50-day EMA) above here 110-00 (High Feb 7 and the bull trigger), while to the downside, initial support is at 108-00 (Low Jan 16)
Cash tsys yields are trading 1-2bps richer today, the curve has steepened slightly. The 2yr is -1.9bps at 4.336%, while the 10yr is -1.2bps. The 2s10s is +0.5bps at 26.710.
JPM see value in 2yr tsys, noting that markets now price in just one more Fed rate cut for this cycle. They highlight that yields are near the top of a well-established range, making the front end attractive. The main risk would be unexpected labor market tightening, but with the next jobs report still weeks away, this isn’t an immediate concern.
The 2yr has spent the past 4 months trading between 4.40% and 4.20% after hitting a low of 3.50% in September, we last trade at 4.345%.
OIS pricing has firmed slgihtly during Asia today, following last nights stronger-than-expected CPI number, we saw OIS push the expected rate cut out to December from September, however we are now back to pricing in a full cut in October (note there is no November meeting).
Later today the focus will be on US PPI data, consensus is for 0.3% m/m in Jan, up from 0.2% in December, we also have Jobless claims which are expected to come in at 216k, down from 219k.

JGBS: Cheaper But Off Worst Levels Ahead Of US PPI, Q4 GDP On Monday

JGB futures are weaker, -16 compared to settlement levels, but well off the session’s worst level.

Outside of the previously outlined PPI, there hasn't been much by way of domestic drivers to flag.
Japan's Prime Minister Shigeru Ishiba stated in parliament that the economy is progressing toward wage-driven inflation and emphasized the importance of stable US-China relations for global stability.
Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s aggressive post-CPI sell-off. Fed chair Powell cautioned against getting "excited" about yesterday's CPI report ahead of PPI (today 0830 ET), reminding that the latter report carries potentially different implications for the Fed's preferred PCE gauge.
Cash JGBs are 1bp lower to 2bps cheaper across benchmarks, with the 7-10-year zone underperforming. The benchmark 10-year yield is 1.4bps at 1.357% after setting a fresh cycle high of 1.377%.
Swap rates are flat to 2bps lower, with a steepening bias. Swap spreads are tighter.
Tomorrow, the local calendar will see Weekly International Investment Flow data alongside 5-year supply. Q4 GDP (P) is due on Monday.

AUSSIE BONDS: Cheaper But Near Session Bests Ahead Of US PPI Data

ACGBs (YM -2.0 & XM -2.5) are weaker but well off Sydney session cheaps.

Outside of the previously outlined MI inflation expectations, there hasn't been much by way of domestic drivers to flag.
Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s aggressive post-CPI sell-off. Fed chair Powell cautioned against getting "excited" about yesterday's CPI report ahead of PPI (today 0830 ET), reminding that the latter report carries potentially different implications for the Fed's preferred PCE gauge.
Cash ACGBs are 2bps cheaper with the AU-US 10-year yield differential at -13bps.
Swap rates are 2-3bps higher.
The bills strip has bear-steepened, with pricing -1 to -3.
RBA-dated OIS pricing is flat to 4bps firmer across 2025 meetings today, led by late-2025 contracts. A 25bp rate cut in April remains fully priced (115%), while the probability of a February cut stands at 82%, based on an effective cash rate of 4.34%.
The local calendar is empty until the RBA Policy Decision next Tuesday.
Tomorrow, the AOFM plans to sell A$700mn of the 1.50% 21 June 2031 bond.

BONDS: NZGBS: Closed Cheaper But At Session Bests After Infl Exps Data
NZGBs closed modestly cheaper but at session bests, benchmark yields 2bps higher, after the release of RBNZ inflation expectations data.
The RBNZ’s Q1 survey showed inflation expectations hovering just above the 2% midpoint of the target band. The 1-year measure picked up to 2.15% from 2.05%, while 2 years ahead moderated to 2.06% from 2.12%, just below Q4’s headline 2.2% rate but above core at 3.1%.
The outcomes should reassure the MPC that inflation expectations remain well anchored and allow it to ease by 50bp again on February 19 given weak activity. The Q1 household survey measure of inflation expectations is to be released on February 18 and while it tends to run above the business measure, it also has moderated significantly.
Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s aggressive post-CPI sell-off. Fed chair Powell cautioned against getting "excited" about yesterday's CPI report ahead of PPI (today 0830 ET), reminding that the latter report carries potentially different implications for the Fed's preferred PCE gauge: "The CPI reading was above almost every forecast.”
Swap rates closed 2-4bps higher.
Tomorrow, the local calendar will see BusinessNZ Manufacturing PMI and Food Prices.

FOREX: EUR/USD Testing 50-day EMA Resistance, EU Equity Futures Up Firmly

The USD has lost ground as the Thursday Asia Pac session has unfolded. The BBDXY index sits around 0.25% lower, last back under 1298. The EU bloc of currencies are outperforming at the margins, with hopes of an end or progress towards ending the Ukraine conflict a positive for sentiment.

The BBDXY index is back close to the 50-day EMA. Dips sub this support level have held since late Jan.
EU equities are firmer, the Euro Stoxx up close to 1% at this stage, just off session best levels. US yields have also ticked lower, led by the front end, with the 2yr off 2bps to 4.335%. This is likely weighing on broader USD sentiment.
Regional equity market sentiment is mostly positive except for China markets. US tech futures are up close to 0.50%.
SEK is the best performing currency, albeit in lighter liquidity conditions. We are up 0.70%, leaving USD/SEK down with a 10.81 handle in latest dealings. This is back to levels last seen in early Nov last year.
EUR/USD is above 1.0430 and challenging a break above the 50-day EMA (near 1.0425). EUR is up 0.50% so far today. NOK is up 0.45%, last near 11.2175.
AUD and NZD are ticking higher, both up close to 0.30%, but lagging these broader EU related FX moves. AUD/USD still hasn't recaptured the 0.6300 handle though.
Yen is a notable laggard compared to these broader USD losses. USD/JPY was last near 154.35/40, little changed for the session. EUR/JPY is up over 161.00.
Looking ahead, the Fed’s Goolsbee appears and US January PPI and jobless claims print as well as UK December IP, trade, construction and preliminary Q4 GDP, and euro area December IP and EC forecasts. The ECB’s Cipollone also speaks.

ASIA STOCKS: Asian Equities Edge Higher, Tech Stocks Fuel The Rally

Asian markets extended gains for a second session, with sentiment buoyed by an AI-fueled rally in Chinese tech stocks, as investors bet on Alibaba as a major AI beneficiary. Risk appetite also improved on US-Russia talks aimed at ending the Ukraine war, easing geopolitical concerns and contributing to a decline in oil prices on speculation of reduced risks to Russian supply. While hotter-than-expected US CPI data triggered a Treasuries selloff on Wednesday, Asian equities largely shrugged off the impact, focusing instead on China’s tech momentum and broader risk-on sentiment, The MSCI Asia Pacific Index climbed 0.9%, with Alibaba and Toyota Motor among the biggest contributors. Meanwhile, gold remained near record highs, reflecting persistent safe-haven demand.

Japan's Topix is +1.3% and the Nikkei +1.5%, boosted by a weaker yen and strength in exporters. Rakuten Bank surged 12% after raising its full-year net income forecast, while SoftBank fell 5.2% after reporting a larger-than-expected Q3 net loss.
In Hong Kong & China the Hang Seng Index jumped 1.6%, with the Hang Seng Tech Index on track for its highest close since February 2022, up 1.50%. Alibaba hit a 2yr high, benefiting from AI optimism. However, China’s CSI 300 slipped 0.1%, weighed by renewed concerns over the property sector. China Vanke fell 7.9%, as skepticism grew over whether Beijing’s proposed 50B yuan ($6.8B) funding plan would be enough to stabilize the firm. BBG China property Developer gauge was down 3% at one stage, however has recovered somewhat to trade 0.75% lower at the break.
South Korea's Kospi gained 1%, while the Taiwan's Taiex rose 0.3%, following global risk-on sentiment.
Very little happening in Australian & New Zealand with key benchmarks in both regions little changed
India's Nifty 50 is 0.4% higher, with traders eyeing PM Modi’s meeting with Trump in Washington, though sentiment was cautious amid skepticism over potential trade benefits.
Elsewhere in asia we have seen a mixed performance, with Thailand (+0.7%) and the Philippines (+0.6%) higher, while Indonesia (-0.9%) and Malaysia (-0.5%) lagged.

OIL: Crude Continues Slide As US Talks About Peace In Ukraine

Oil prices have continued moving lower during APAC trading today after falling almost 3% yesterday. They have been pressured by the prospect of peace in Ukraine possibly allowing Russia to export more oil, another large US crude inventory build and maybe less Fed easing following higher-than-expected January inflation. The weaker US dollar (USD BBDXY -0.2%) is unable to support crude.

WTI is 1.0% lower at $70.64, close to the intraday low, while Brent is also down 1% to $74.44/bbl. Both benchmarks are holding above initial support at $70.43 and $74.10 respectively.
The US administration spoke further today about Ukraine/Russia. President Trump is likely to meet Russian President Putin in person in Saudi Arabia some time. Also it’s not “realistic” for Ukraine to join NATO. Trump has said negotiations will begin imminently but there is a long way to go before there is a truce and so markets may be volatile in the meantime.
The US’ EIA increased its forecast for excess global supply in 2025 and 2026. The IEA’s monthly report is out later today. Markets have been concerned about the impact of protectionism on global demand.
Later the Fed’s Goolsbee appears and US January PPI and jobless claims print as well as UK December IP, trade, construction and preliminary Q4 GDP, and euro area December IP and EC forecasts. The ECB’s Cipollone also speaks.

Gold Bulls Resume in Asian Trading.

Given gold’s sensitivity to interest rates, last night’s stronger than expected inflation data had the potential to derail golds recent record rally.
The data confirmed that US inflation is on the rise again, thereby challenging market expectations for rate cuts.
Opening the trading day at US$2,904.18 gold gradually lost ground throughout the day only to fall rapidly on the data release to $2,864.21.
However the current environment for gold remains strong and buyers emerged immediately taking gold up to intra-day highs of $2,909.11, before closing at $2,904.18 and then resuming its rally in Asian trading to reach a new all time high of $2,917.67.
Reporting for key listed miners started with Barrick Gold corp where despite record prices, the company’s output continues to decline driven by a dispute with the Government over it’s operations in Mali.
In Australia, the second largest gold producer Evolution Mining’s CEO said in an interview on BBG TV Wednesday that safe haven demand, Central Banks resuming purchasing and news that changes in China’s regulatory regime means their insurance companies can buy gold, all point to a bullish demand outlook for bullion.
Australian miner Northern Star Resources reported a 155% rise in Q2 earnings which is supportive of their bid to purchase De Grey Mining announced in December.

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
13/02/2025	0700/0700	**	GB	UK Monthly GDP
13/02/2025	0700/0700	**	GB	Trade Balance
13/02/2025	0700/0700	**	GB	Index of Services
13/02/2025	0700/0700	***	GB	Index of Production
13/02/2025	0700/0800	***	DE	HICP (f)
13/02/2025	0700/0700	**	GB	Output in the Construction Industry
13/02/2025	0700/0700	***	GB	GDP First Estimate
13/02/2025	0730/0830	***	CH	CPI
13/02/2025	0840/0940		EU	ECB's Cipollone pre-recorded interview at Frankfurt Digital Finance conference
13/02/2025	1000/1100	**	EU	Industrial Production
13/02/2025	-	***	CN	Money Supply
13/02/2025	-	***	CN	New Loans
13/02/2025	-	***	CN	Social Financing
13/02/2025	1330/0830	***	US	Jobless Claims
13/02/2025	1330/0830	**	US	WASDE Weekly Import/Export
13/02/2025	1330/0830	***	US	PPI
13/02/2025	1530/1030	**	US	Natural Gas Stocks
13/02/2025	1630/1130	*	US	US Bill 08 Week Treasury Auction Result
13/02/2025	1630/1130	**	US	US Bill 04 Week Treasury Auction Result
13/02/2025	1800/1300	***	US	US Treasury Auction Result for 30 Year Bond
14/02/2025	0800/0900	***	ES	HICP (f)
14/02/2025	1000/1100	***	EU	GDP (p)
14/02/2025	1330/0830	**	CA	Monthly Survey of Manufacturing
14/02/2025	1330/0830	**	CA	Wholesale Trade
14/02/2025	1330/0830	***	US	Retail Sales
14/02/2025	1330/0830	**	US	Import/Export Price Index