EUROPEAN INFLATION: MNI Projects 2.3% Y/Y German National CPI, Core 2.7%
Feb-28 10:46
From state-level data that equates to 89.1% weighting of the national February flash German CPI print (due at 13:00 GMT / 14:00 CET), MNI estimates that national CPI (non-HICP print) rose by 0.4% M/M (Jan -0.2%) and rose 2.3% Y/Y (Jan 2.3%). See the tables below for full calculations.
- Analyst consensus stands at 2.3% Y/Y and 0.4% M/M, so the release appears to come in inline.
- Current tracking of core CPI (ex-energy and food, based on 50% of the national index) implies around 2.7% Y/Y (2.9% in Jan) and 0.3% M/M (-0.3% Jan).
- We will provide a follow-up bullet looking at underlying drivers in due course.
- Note: These estimates are in relation to the national CPI print, not the HICP print which feeds into the Eurozone HICP print that the ECB targets. The magnitude of surprises to consensus can sometimes be different due to the different methodologies and weights used in national CPI vs HICP - but the direction of the surprise is normally the same.
| Y/Y | February (Reported) | January (Reported) | Difference |
| North Rhine Westphalia | 1.9 | 2.0 | -0.1 |
| Hesse | 2.3 | 2.5 | -0.2 |
| Bavaria | 2.4 | 2.5 | -0.1 |
| Brandenburg | 2.3 | 2.3 | 0.0 |
| Baden Wuert. | 2.5 | 2.3 | 0.2 |
| Berlin | 2.0 | 2.1 | -0.1 |
| Saxony | 2.3 | 2.4 | -0.1 |
| Rhineland-Palatinate | 2.4 | 2.7 | -0.3 |
| Lower Saxony | 2.5 | 2.5 | 0.0 |
| Saarland | 2.4 | 2.6 | -0.2 |
| Saxony-Anhalt | 3.0 | 2.9 | 0.1 |
| Weighted average: | 2.29% | for | 89.1% |
| M/M | February (Reported) | January (Reported) | Difference |
| North Rhine Westphalia | 0.4 | -0.1 | 0.5 |
| Hesse | 0.3 | 0.1 | 0.2 |
| Bavaria | 0.4 | -0.3 | 0.7 |
| Brandenburg | 0.6 | 0.0 | 0.6 |
| Baden Wuert. | 0.5 | -0.2 | 0.7 |
| Berlin | 0.4 | -0.2 | 0.6 |
| Saxony | 0.3 | -0.4 | 0.7 |
| Rhineland-Palatinate | 0.2 | 0.0 | 0.2 |
| Lower Saxony | 0.4 | -0.2 | 0.6 |
| Saarland | 0.3 | 0.0 | 0.3 |
| Saxony-Anhalt | 0.5 | -0.2 | 0.7 |
| Weighted average: | 0.41% | for | 89.1% |
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SLOVAKIA: Coalition Resorts To Obstruction To Block Repeat No-Confidence Debate
Jan-29 10:46
The opposition is struggling to call an extraordinary session of the National Council and force a debate on a no-confidence motion against the government, despite repeated efforts this morning. Pravda reports that Slovakia's unicameral parliament has just failed to reach a quorum of 76 (50%+1) of all MPs on second attempt, following two unsuccessful attempts on Tuesday.
- The original no-confidence motion was tabled earlier this month, but the opposition withdrew it when Prime Minister Robert Fico requested that the debate was held behind closed doors, arguing that he had to present confidential information obtained from the Slovak intelligence agency. Fico subsequently revealed that coalition MPs would not support another motion to open an extraordinary meeting of the legislature.
- It seems that the ruling coalition has managed to cling onto a tentative razor-thin majority of 76 MPs for the duration of the ordinary February parliamentary session. SME reports that Roman Malatinec (Hlas) and three rebel MPs from SNS will help the government open the meeting and vote on the proposed healthcare and construction laws. Meanwhile, the ruling coalition will likely pull more controversial items from the agenda.
- At the same time, the coalition's control over the legislature remains exceedingly fragile and contingent. The coalition can count on the stable support of just 72 lawmakers, with another seven votes hanging in the air. The opposition would need 76 votes to oust the government and 90 votes to dissolve the legislature and force a snap election.
- The next opportunity to table a no-confidence motion will be during the aforementioned regular session, which is scheduled to begin on February 4. However, the opposition would need active support from some of the rebel MPs, which may be difficult to achieve, given that some of them signalled their intention to vote with the government at this session.
- Amid difficulties with securing stable parliamentary support, Finance Minister Ladislav Kamenicky yesterday said that the bulk of fiscal consolidation measures will be delayed until 2026. However, he noted that his ministry is working on a package that would reduce deficit by at least EUR650mn in 2026, with the intention to boost this figure to EUR800-850mn.
EGBS: Bund Futures Off Session Highs As Euro Equities Find A Base
Jan-29 10:42
Bund futures are +29 ticks at 131.70, off earlier session highs as European equities find a short-term base. The downtick in crude oil futures is somewhat offset by a ~3% rally in natural gas, limiting the feedthrough into core EGBs.
- The 10-year OAT/Bund spread has widened back to ~74bps after reaching a low of 72bps earlier. Markets are digesting a rift between the Socialists and the government, following PM Bayrou’s comments around immigration yesterday.
- German cash yields are 2-3bps lower across the curve. E4.5bln of the 10-year 2.50% Feb-35 Bund was sold this morning.
- Eurozone lending to households and firms accelerated in December, in a signal that ECB policy rate cuts are continuing to be fed through the real economy.
- 10-year peripheral spreads to Bunds have tightened alongside the equity rally. The 10-year BTP/Bund spread has fully retraced the widening seen into yesterday’s close, now ~2.5bps tighter at ~107bps. Yesterday’s widening came on news that PM Meloni has been placed under investigation in a case relating to the repatriation of a Libyan police officer.
- Broader global focus turns to the BoC and Fed decisions later today, before the ECB decision tomorrow (a 25bp cut remains essentially fully priced in ECB-dated OIS).
OUTLOOK: Price Signal Summary - S&P E-Minis Trend Needle Points North
Jan-29 10:40
- In the equity space, the S&P E-Minis contract remains above Monday’s low. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the recent sharp pullback appears corrective, however, a clear breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement, towards 5943.94, 61.8% of the Jan 13 - 24 bull leg. Key resistance is 6178.75, the Dec 6 high.
- A bull cycle in the EUROSTOXX 50 futures contract remains intact and the move lower from last Friday’s high, appears to have been a correction. A deeper retracement would allow an overbought trend condition to unwind. Moving average studies are in a bull-mode set-up highlighting a dominant uptrend. The first important support to watch is 5108.69, the 20-day EMA. A resumption of the uptrend would open 5298.50, the 1.500 projection of the Nov 21 - Dec 9 - 20 price swing.
