Fed's Williams says a debate around three 2024 cuts is reasonable, US PCE due - Newsquawk Europe Market Open

• APAC stocks were choppy at month-end after the lacklustre handover from the US ahead of PCE price data.
• Fed voter Williams said three interest rate cuts in 2024 is reasonable for Fed officials to debate.
• US Congressional leaders have reached a deal to avoid a March 2nd partial government shutdown.
• European equity futures indicate a steady open with Euro Stoxx 50 future flat after the cash market closed flat on Wednesday.
• DXY is back below 104 as USD/JPY sits south of 150 post-hawkish BoJ comments from board member Takata.
• Looking ahead, highlights include French, Spanish, German CPI, German Retail Sales, Unemployment, US PCE Price Index, IJC, Chicago PMI, Canadian GDP, Australian PMI, Japanese Unemployment Rate, Comments from Fed’s Bostic, Goolsbee & Mester

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US TRADE

EQUITIES

• US stocks suffered mild losses but were off the European morning lows with underperformance in the Nasdaq and Russell 2000 as communication, health and tech names lagged with the latter weighed on by chip names after AMAT received subpoenas related to China from the SEC and US Attorney's Office. Participants also digested the latest US data which ultimately had little sustainable reaction with Q4 '23 GDP revised down but the deflator, sales, PCE and Core PCE were revised up but did little to alter the Fed's narrative with all eyes on the January PCE report due Thursday.
• SPX -0.17% at 5,069, NDX -0.54% at 17,874, DJIA -0.06% at 38,949, RUT -0.77% at 2,040.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Williams (voter) said there is still some ways to go before hitting the 2% inflation target and sees a likely uneven path back to 2% inflation, while he said will let the incoming economic data determine the monetary policy path. Williams said the debate over rate cuts is a sign of progress on lowering inflation and the Fed is likely to cut rates later this year. Furthermore, he said three interest rate cuts in 2024 is reasonable for Fed officials to debate and data will drive when the Fed will cut rates.
• Fed's Collins (non-voter) repeated it will likely become appropriate to begin easing policy later this year and recent economic data highlights that progress toward the Fed's goals could continue to be bumpy. Collins added that more time is needed to discern if the economy is sustainably on the path to price stability and a healthy labour market, while she needs to see more evidence the disinflationary process will continue before starting to carefully normalise policy. Furthermore, Collins said it is premature to say whether the Fed could cut rates in May and sees risks as more balanced between cutting too early and too late.
• US Congressional leaders have reached a deal to avoid a March 2nd partial shutdown by providing a week of temporary funding, whilst providing funding for parts of the government through September 30th, according to Bloomberg. However, the rest of the US government still faces a potential shutdown on March 23rd. It was also reported that GOP. Rep. Hern said the House will vote on a continuing resolution this Thursday.
• US Senate Republican Leader McConnell is to step down from the Republican Senate Leader role in November, according to AP.

APAC TRADE

EQUITIES

• APAC stocks were choppy at month-end after the lacklustre handover from the US ahead of PCE price data.
• ASX 200 eventually shrugged off the initial indecision and briefly climbed above 7,700 to eke a fresh record high.
• Nikkei 225 briefly dipped below the 39,000 level amid a firmer currency and hawkish comments from BoJ's Takata, although the index gradually recovered all of its losses in late trade.
• Hang Seng and Shanghai Comp. were positive with outperformance in the latter which momentarily reclaimed the 3,000 level amid lower yields and after the PBoC voiced support for Shanghai's high-level opening up financially, while it was also reported that China is to crack down on illegal activity to maintain market order. Conversely, the gains in Hong Kong were limited with earnings on the radar.
• US equity futures edged slight gains as cautiousness remained heading into the incoming PCE data.
• European equity futures indicate a steady open with Euro Stoxx 50 future flat after the cash market closed flat on Wednesday.

FX

• DXY was rangebound beneath the 104.00 level after recent data releases had little lasting effect and with participants lacking commitment heading into the incoming PCE data.
• EUR/USD was uneventful and sat above its 200-DMA of 1.0827 as a slew of data approaches.
• GBP/USD traded sideways in the absence of any pertinent catalysts, while comments from BoE's Mann said a lack of "consumer discipline" complicated the BoE's task of hitting its price target.
• USD/JPY dipped beneath the 150.00 level after hawkish-leaning comments from BoJ Board Member Takata who said achievement of the price target is coming into sight and need to consider taking a flexible response including exit from monetary stimulus.
• Antipodeans got some respite from the recent selling but with the rebound lacking in strength amid the flimsy risk appetite and mixed Australian data in which Private Capex topped forecasts but Retail Sales disappointed.
• PBoC set USD/CNY mid-point at 7.1036 vs exp. 7.1938 (prev. 7.1075).

FIXED INCOME

• 10-year UST futures stalled after recent bull steepening as the focus remains on incoming PCE data.
• Bund futures languished near this week's lows ahead of a slew of data releases from the bloc.
• 10-year JGB futures pressured following hawkish comments from BoJ board member Takata with prices also not helped by the mildly softer results at this month's 2-year auction.

COMMODITIES

• Crude futures were contained after the recent whipsawing and bearish crude inventory data.
• Russian Deputy PM Novak said the ban on gasoline exports is a preventive measure ahead of seasonal growth in fuel demand and the gasoline export ban may be lifted at any moment once the market is saturated. Novak also stated that a ban on diesel exports is not under consideration and he sees a balance of supply and demand in the global oil market.
• Iran’s Oil Minister said Russian companies are ready to participate in petrochemical projects in Iran.
• Spot gold traded rangebound following the prior day's rebound and as PCE data looms.
• Copper futures eked slight gains but with upside capped amid the cautious risk tone.

CRYPTO

• Bitcoin extended on gains after the prior day's firm advances with its price now above USD 63,000.

NOTABLE ASIA-PAC HEADLINES

• US limits the sales of Americans' data to China and other rivals with President Biden signing an executive order restricting the ability of data brokers to sell sensitive information abroad, according to WSJ.
• BoJ Board Member Takata said Japan's economy is at an inflexion point of changing the 'norm' that people think wages and prices are not rising, while he added achievement of the price target is coming into sight despite the uncertainty of the economic outlook. Takata also said need to consider taking a flexible response including exit from monetary stimulus and that momentum is rising in this spring's wage talks with many companies offering higher-than-2023 wage hikes. BoJ Board Member Takata later stated that he would call for a gear shift in policy and not go backwards but added he has not made up his mind yet on a monetary policy decision when asked about whether to end negative interest rates in March or April, while he is not thinking of raising interest rates one after another and said gradual steps will be needed amid mixed circumstances surrounding small firms.
• RBNZ Governor Orr said as aggregate demand has slowed, it has been harder to pass on cost increases and he is confident the current level of the OCR is restricting demand, while the inflation outlook is very balanced. Orr said the economy has developed as they expected and the latest data confirmed inflation is slowing, while he added the easing of interest rates won't happen anytime soon.

DATA RECAP

• Japanese Industrial Production MM (Jan P) -7.5% vs. Exp. -7.3% (Prev. 1.4%)
• Japanese Retail Sales YY (Jan) 2.3% vs. Exp. 2.3% (Prev. 2.1%, Rev. 2.4%)
• Australian Capital Expenditure (Q4) 0.8% vs. Exp. 0.5% (Prev. 0.6%)
• Australian Retail Sales MM Final * (Jan) 1.1% vs. Exp. 1.5% (Prev. -2.7%)
• New Zealand ANZ Business Confidence (Feb) 34.7% (Prev. 36.6%)
• New Zealand ANZ Activity Outlook (Jan) 29.5 (Prev. 25.6)

GEOPOLITICS

MIDDLE EAST

• Hamas said the Paris negotiations may lead to a way out of the war and there is a preliminary agreement with Israel to bring aid into Gaza, while it added there will be no exchange of detainees with Israel without a ceasefire and this is the main point of contention, according to Al Arabiya.
• Negotiations of the exchange deal in Qatar have made little progress without breaking through, according to Al Arabiya citing Israeli media quoting an official.
• Explosions were reportedly heard in Damascus and Syrian air defences intercepted hostile targets in the vicinity of the capital, according to state media.

OTHER

• US State Department said the US is watching Russia's actions in Transnistria and the broader situation there very closely, while it supports Moldova's sovereignty and territorial integrity within its internationally recognised borders.
• Italy's Finance Minister discussed with US Treasury Secretary Yellen a path to use frozen Russian assets to compensate Ukraine for war damage, while it was separately reported that eight EU countries called for new sanctions on Russia over Navalny's death.
• Japan's top currency diplomat Kanda said using frozen Russian assets for Ukraine must be based on international law and he thinks EU's proposal is along those lines, while he added that Japan strongly condemned Russia's invasion of Ukraine at the G20 and that the G7 discussed ways to make use of frozen Russian assets for Ukraine reconstruction.

EU/UK

NOTABLE HEADLINES

• BoE's Mann said a lack of "consumer discipline" complicated the BoE's task of hitting its price target, while the BoE is struggling to bring inflation back to the target because price rises are increasingly driven by people who are immune to the pressures of higher interest rates.
• UK Chancellor Hunt is considering scrapping “non-dom” tax status in the Budget to fund pre-election tax cuts, according to FT.
• ECB's Nagel said it would be "fatal" if the ECB cut rates too early only for inflation to rebound and needs confirmation that wage growth is moderating to a level that will let inflation fall back to the target in 2025.
• ECB's Vasle said the ECB is looking at a rate-cutting phase if there are no big surprises and the timing of cuts depends on inflation.
• ECB will continue to put a 'floor' underneath market interest rates in the years ahead, though banks will have a greater role in determining how much liquidity they want, via Reuters citing sources.

DATA RECAP

• UK Lloyds Business Barometer (Feb) 42 (Prev. 44)