EQUITIES: Volatility Clouds Technical Picture
A short-term reversal in S&P E-Minis yesterday highlights the start of what appears to be a corrective cycle. The trend condition has been oversold following recent weakness and the move higher is allowing this set-up to unwind. Eurostoxx 50 futures have traded in an extremely volatile manner and rallied sharply higher from this week’s lows. The climb highlights the start of a corrective cycle and if this is correct, marks an unwinding of the recent oversold trend condition.
- Japan's NIKKEI closed higher by 2894.97 pts or +9.13% at 34609 and the TOPIX ended 190.07 pts higher or +8.09% at 2539.4.
- Elsewhere, in China the SHANGHAI closed higher by 36.828 pts or +1.16% at 3223.638 and the HANG SENG ended 417.29 pts higher or +2.06% at 20681.78.
- Across Europe, Germany's DAX trades higher by 1019.08 pts or +5.18% at 20696.08, FTSE 100 higher by 298.6 pts or +3.89% at 7978.84, CAC 40 up 347 pts or +5.06% at 7210.2 and Euro Stoxx 50 up 245.86 pts or +5.32% at 4867.93.
- Dow Jones mini down 644 pts or -1.58% at 40196, S&P 500 mini down 105 pts or -1.91% at 5387.25, NASDAQ mini down 429.5 pts or -2.23% at 18861.75.
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GERMAN AUCTION PREVIEW: 2.20% Mar-27 Schatz
This morning, Germany will hold its fourth Schatz auction of the year. On offer will be E4.5bln of the 2.20% Mar-27 Schatz.
- The E4.5bln size is in line with the last Schatz auction on February 18.
- Recent Schatz auctions have passed smoothly, with solid bid-to-covers (in a 2.09x to 2.81x range since August), bid-to-offers (1.69x to 2.17x range since August) and the low prices above the secondary market mid-prices throughout 2024/5 (low price equal to mid-price on the last Schatz auction in February, but the auction passed smoothly).
- For the last Schatz auction on 18 February, the bid-to-cover stood at 2.68x, while the bid-to-offer came in at 2.11x.
- The fiscal situation in Germany is characterized by some uncertainty at the moment as an announcement on additional military and infrastructure spending last week saw German yields jump across the curve - however, for the announced deal to pass, approval from party "the Greens" is likely needed, who today have mentioned they are ready to negotiate after rejecting the initial CDU/CSU/SPD draft proposal earlier. We'd expect today's auction to pass smoothly nonetheless.
- Schatz positioning currently is short (indeed there is short positioning across the German curve) see our latest Europe PI below.
- The next German auction will be tomorrow's E4.5bln of the 2.50% Feb-35 Bund (ISIN: DE000BU2Z049), while the 2.20% Mar-27 Schatz will be reopened next on April 1, for another E4.5bln.
- Timing: Results will be available shortly after the bidding window closes at 10:30GMT / 11:30CET.
NORWAY: Finance Ministry Revises 2025 Mainland GDP Projection Down To 2.0%
The Norwegian finance ministry revised its 2025 mainland GDP growth projection down by 0.3pp to 2.0% Y/Y compared to its October forecast round, while the 2026 mainland GDP projection was revised a tenth higher to 2.2%. The softer outlook for 2025 reflects a sharp downward revision to housing investment (-4.7% vs 12.1% in October), which was offset a little by upgrades to consumption and government spending.
- The 2025 GDP forecast (including offshore sectors) was 0.6% Y/Y (vs 2.1% in October), reflecting much lower crude oil and natural gas export expectations (-2.0% Y/Y vs 1.5% in October).
- The registered unemployment projections were revised a tenth lower for 2025 and 2026 to 2.1%.
- Today’s forecast updates come as the Government kicks off work for the 2026 state budget.
- From the press release: “Next year's budget will be characterized by the fact that we live in turbulent times, with the ongoing war in Ukraine, international unrest and the risk of increasing trade conflicts”….“We must strengthen our defense to secure Norway.
- “Next year's budget must be based on the fact that growth is on the rise. The government will pursue a responsible economic policy that facilitates a further decline in price inflation, increased purchasing power for households, and strengthened competitiveness for companies”.
