REFINING: Pemex Refinery Run Rates Rise to Highest Since May 2017

The Spanish gov't suffered a damaging defeat in the Congress of Deputies on 30 Jan after the hard-line Catalan separatist Junts per Catalunya (Junts, Together) voted against legislation intended to bring around an amnesty for those involved in the illegal Oct 2017 Catalan independence referendum. While the legislation was a key demand for Junts supporting the re-election of Pedro Sanchez as PM, the party argued that the proposed law did not go far enough. It argued that all cases related to the secession attempt were included in the amenesty, even those related to terrorism.

• The Sanchez gov't and Junts have two weeks to come to an agreement on amended legislation and get it through. Sanchez risks aggravating his own centre-left Spanish Socialist Workers' Party (PSOE), with many disinclined to offer more concessions to separatist parties.
• As Bloomberg notes, "An outright collapse of the government is unlikely given Spanish parliamentary rules, under which a prime minister can only be removed if their opponents can rally behind an alternative government." The alternative gov't is one involving parties of the right, even more staunchly opposed to Catalan independence, making Sanchez's replacement a difficult prospect.
• Nevertheless, the gov't could find itself unable to pass legislation if Junts refuses to cooperate (its seven votes are crucial for maintaining a majority). This in turn could eventually force the gov't into early elections, risking further political paralysis.

Eurostoxx 50 futures trend conditions remain firm and the contract is holding on to its recent gains. Key resistance at 4634.00, the Dec 14 high, has recently been cleared. The break confirms a resumption of the medium-term uptrend and sights are on the 4700.00 handle next. Initial firm support lies at 4549.60, the 20-day EMA. Key trend support has been defined at 4402.00, the Jan 17 low. The uptrend in S&P E-Minis remains intact and this week’s fresh cycle highs, reinforces current conditions. Resistance at 4841.50, the Dec 28 high, has recently been cleared. This confirmed an extension of the price sequence of higher highs and higher lows. Moving average studies remain in a bull-mode condition too, highlighting positive market sentiment. Sights are on 4982.62 next, a Fibonacci projection. Key support lies at 4753.05, the 50-day EMA.

• Japan's NIKKEI closed higher by 220.85 pts or +0.61% at 36286.71 and the TOPIX ended 24.17 pts higher or +0.96% at 2551.1.
• Elsewhere, in China the SHANGHAI closed lower by 41.979 pts or -1.48% at 2788.548 and the HANG SENG ended 218.38 pts lower or -1.39% at 15485.07.
• Across Europe, Germany's DAX trades lower by 19.73 pts or -0.12% at 16954.34, FTSE 100 lower by 5.92 pts or -0.08% at 7659.51, CAC 40 up 9.41 pts or +0.12% at 7686.58 and Euro Stoxx 50 up 1.99 pts or +0.04% at 4664.75.
• Dow Jones mini up 34 pts or +0.09% at 38646, S&P 500 mini down 25.5 pts or -0.52% at 4925.25, NASDAQ mini down 226.75 pts or -1.29% at 17362.

When it comes to NOK swings Nordea believe that “NOK sales will move into the background, but interest rates will remain important for the NOK.”

• “A further decline in inflation abroad will pave the way for rate cuts in both the U.S. and in Europe.”
• “In that regard, tonight’s Fed meeting will be key for markets and the NOK in the weeks to come.”
• “The Fed is unlikely to rock the boat and at least two inflation prints will come before their March meeting, when new forecasts will be presented.”
• “If the upcoming inflation data disappoints, the Fed would be forced to wait until the summer to cut, leading to a somewhat weaker NOK than we have today.”
• “Also keep in mind that Norges Bank is highly unlikely to start cutting rates before the Fed and ECB.”
• “With small shifts in interest rates toward the summer, we see EUR/NOK rangebound in the NOK11.20-11.50 area. When rates abroad are lowered during the second half of 2024, we see NOK faring better and expect EUR/NOK to reach NOK11.00 by the end of 2024.”
• “We still believe the biggest risk to NOK is inflation abroad surging again. This could delay the expected rate cuts elsewhere. Near term, heightened geopolitical tensions, not least in the Middle East, are a major risk factor.”