- European bourses began the session on the backfoot with the risk tone dented as a few potential factors influenced, US futures modestly firmer pre-Fed
- USD firmer, EUR and GBP hit by JPY-action on Ueda's press conference; BoJ itself was as expected, Ueda began balanced but had some hawkish points in his presser
- Fixed income initially benefited on the slip in the risk tone but has since eased off best with USTs now slightly softer into the FOMC
- Crude remains pressured after Tuesday's geopolitical developments while Gas has picked up as strikes on energy infrastructure seemingly continue
- Ukraine's Zelensky to speak with US' Trump on Wednesday and hopes a ceasefire will eventually be implemented
- Looking ahead, highlights include NZ GDP, FOMC & BCB Policy Decisions, Speakers include Fed Chair Powell, ECB’s de Guindos, Elderson, NVIDIA CEO Huang, Earnings from General Mills
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TARIFFS/TRADE
- White House official said reciprocal tariffs are still intended to take effect from April 2nd, when asked about Treasury Secretary Bessent's comments.
EUROPEAN TRADE
EQUITIES
- European bourses kicked off the session on the backfoot amid a bout of general risk pressure following the European cash open with a few factors potentially influencing though there was not one clear driver; Stoxx 600 -0.1%.
- Sectors are mostly negative with Basic Resources lagging on pressure in Rio Tinto (-0.9%) after it pushed back on calls for a unified listing in Australia.
- Stateside, futures are firmer across the board but only modestly so; ES +0.3%, NQ +0.3%. Early doors, the benchmarks were knocked as part of a broader risk move with numerous factors potentially exerting influence; namely, Putin-Trump digestion and potential breach of the energy ceasefire, Ueda’s hawkish language, Turkish turmoil and ongoing tariff uncertainty. More broadly, focus remains on the Fed.
- NVIDIA's (+1%) GTC saw a flurry of partnership announcements, Apple's (+0.2%) Siri AI may miss Spring launch target, Oracle (+0.4%) mulls a stake in TikTok US, JPMorgan (+0.2%) hikes its dividend, Morgan Stanley (-0.1%) to cut jobs, Citi (+0.4%) lowers bonuses.
- Barclays lifts its Stoxx 600 end-2025 target to 580 (prev. 545)
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FX
- USD is firmer vs. peers as we count down to the FOMC. Focus for the meeting is on the dot plot, Powell/statement commentary on tariffs and the US economy in addition to anything on QT. DXY at the upper-end of a 103.25-103.71 band.
- EUR/USD lower early doors, hit by EUR/JPY action during the Ueda presser. Down to a 1.0874 base at worst. Specifics for the bloc a little light after the Bundestag vote and ahead of the Bundesrat on Friday.
- JPY choppy but ultimately softer in wake of the BoJ where rates were kept on hold, as expected. The subsequent presser sparked some JPY strength as Ueda turned slightly more hawkish throughout it and as the risk tone deteriorated. USD/JPY currently firmer but off best in a 149.15-150.15 band.
- Sterling on the backfoot given JPY action with general USD strength also factoring. Pressure which comes despite favourable EUR/GBP movement. For the UK, specifics are light as we count down to the BoE on Thursday. Cable finds itself at the lower-end of a 1.2958-1.3004 band and pulling back from Tuesday's 1.3010 YTD peak.
- TRY hit by the arrest of the likely main opposition candidate to Erdogan, with USD/TRY hitting a record 41.0132 peak after this.
- Antipodeans are both extending on the downside seen yesterday with the latest leg lower coinciding with selling in European equity futures ahead of the cash open. From a fundamental perspective, little reaction was seen from the relatively stable Australian Leading Index and softer-than-expected New Zealand Current Account data.
- PBoC set USD/CNY mid-point at 7.1697 vs exp. 7.2330 (Prev. 7.1733).
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FIXED INCOME
- Benchmarks bid early doors as the risk tone deteriorated with, as discussed elsewhere, no one factor behind this. Since, as sentiment recovers, benchmarks are off best with USTs just into the red, Gilts near-unchanged and Bunds around 30 ticks off best.
- JGBs came under pressure into and after the BoJ itself. Thereafter, Ueda’s press conference began with him sitting on the fence and as such JGBs got back to their 138.25 peak before pulling back sharply to a 138.07 base, where it remains, as Ueda turned slightly more hawkish.
- USTs hit a 110-27 peak on the deterioration in the risk tone, stalling just before the proceeding sessions’ 110-29 and 110-30 respective highs. Specifics a touch light this morning as we digest the readout from Putin-Trump and count down to the FOMC; USTs back toward 110-20+ lows most recently.
- Bunds are firmer but also off best as the general fixed income rally seen in the European morning takes a slight breather and with Bunds specifically also acknowledging dual tranche supply.
- Gilts find themselves back to trading between USTs and Bunds after leading the action for a change on Tuesday. Focus for today, aside from the above macro points, is on PMQs where details will be sought on the disability reform Labour announced and whether the cost savings from this go far enough to restore headroom.
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COMMODITIES
- Crude futures remain under pressure after Tuesday’s constructive geopolitical developments, with both WTI and Brent trading at weekly lows of USD 66.21/bbl and USD 69.90/bbl respectively.
- Trump-Putin talks were described as productive, with the leaders agreeing on a temporary halt to energy infrastructure strikes and immediate talks on a complete ceasefire. However, it does appear that this agreement may have already been breached by Russia, with attacks reported on power supplies in the Dnipropetrovsk region this morning. Most recently, IFX citing Russia’s Defence Ministry reports that Ukraine attacked Russian infrastructure overnight.
- Dutch TTF is firmer, supported by the lack of a full ceasefire in Ukraine, along with reports of Russian and Ukrainian breaches of this energy agreement, as mentioned in the crude section.
- Spot gold has given back some of the gains from Tuesday, with the yellow metal still comfortably clear of the USD 3k/oz mark, but shy of the USD 3045/oz ATH which printed after the Putin-Trump call.
- Base metals are, broadly speaking, little changed with the risk tone tentative as we count down to the FOMC and updates on the multiple other in-focus macro drivers.
- US Private Inventory Data (bbls): Crude +4.6mln (exp. +0.9mln), Distillate -2.1mln (exp. -0.3mln), Gasoline -1.7mln (exp. -2.4mln), Cushing -1.1mln.
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NOTABLE DATA RECAP
- EU HICP Final YY (Feb) 2.3% vs. Exp. 2.4% (Prev. 2.4%); MM (Feb) 0.4% vs. Exp. 0.5% (Prev. -0.3%)
NOTABLE EUROPEAN HEADLINES
- UK Chancellor Reeves is planning a new multi-billion pound public spending squeeze in next week's Spring Statement, following an announcement on Tuesday of GBP 5bln in welfare cuts, according to FT.
- Irish Central Bank warned of significant impact from higher tariffs and cannot rule out a recession, while it lowered its GDP growth forecast for 2025 to 4.0% from 4.2% and 2026 forecast to 4.0% from 4.5%.
- TRY and Turkish equities pressured after the detention of Imamoglue. Borsa Istanbul temporarily halted trading.
- Head of France's BNIC Cognac lobby says French Foreign Minister plans to visit China at the end of March.
NOTABLE US HEADLINES
- US President Trump posted an article on Truth Social stating “Trump’s tariffs are saving the American steel industry” and posted an article titled "President Trump Is Delivering Needed Economic Relief".
- WSJ's Timiraos wrote central banks can lower rates because of good or bad news and the window for ‘good’ cuts is closing due to new inflation risks, while he noted that most officials are expected to pencil in one or two rate cuts this year but projections are likely to obscure how the Fed’s wait-and-see holding pattern has undergone an important reset because of the threat of an expansive trade war that sends up prices.
GEOPOLITICS
MIDDLE EAST
- Israeli army attacked Khan Yunis and conducted heavy shelling in the southern Gaza Strip, according to Al Jazeera.
- Hamas leader said continuation of the Israeli bombardment of Gaza will lead to the death of many Israeli prisoners and the movement is communicating with mediators to force Israel to respect its commitments to the ceasefire.
- US bombed targets in areas east of Hodeidah in Yemen and there were at least 10 US strikes that targeted areas in Yemen, according to Houthi media.
RUSSIA-UKRAINE
- Russia's Medvedev said the Putin-Trump call showed there is only Russia and the US in the 'dining room' eating a 'Kyiv-style cutlet' as a main course.
- US Special Envoy Witkoff said talks with Russia on the Ukraine war will take place on Sunday in Jeddah.
- Ukrainian President Zelensky said Russia launched over 40 drones targeting civilian infrastructure and it is precisely such night attacks by Russia that destroy Ukraine’s energy and civilian infrastructure. Zelensky added the fact that Tuesday night attacks were no exception shows the need to continue pressure on Russia for the sake of peace, as well as noted that Russian President Putin de facto rejected the proposal for a complete ceasefire and it would be right for the world to reject any attempts by Putin to drag out the war in response.
- UK PM Starmer spoke with Ukrainian President Zelensky on Tuesday evening and discussed progress US President Trump had made towards a ceasefire in talks with Russia, according to Downing Street.
- Regional governor in Russia's Belgorod region said the situation remains difficult, a day after Russia said its forces had thwarted Ukrainian attempts to push across the border in Belgorod. It was separately reported that a drone attack sparked a fire at an oil depot in Russia's Krasnodar region, according to regional authorities.
- UK Foreign Secretary said the EU and UK are to accelerate shipments of arms to Ukraine ahead of a potential full ceasefire, according to Bloomberg.
- Russian Defence Ministry says Ukraine attacked Russia's energy infrastructure overnight, according to IFAX; CPC Kropotkinskaya oil pumping station stopped operating after damage, according to Tass.
- Ukraine State Railways in the Dnipropetrovsk region says Russian forces have attacked its power system on Wednesday morning.
- Finland President Stubb says if Russia refuses to agree, will need to increase its efforts to strengthen Ukraine and ratchet up pressure on Russia to convince it to come to the negotiating table.
- Ukrainian President Zelensky says he hopes a ceasefire will eventually be implemented; says Russian President Putin's words are at "odds with reality", in relation to the halt on energy strikes. Will speak to US President Trump on Wednesday.
OTHER
- US Secretary of State Rubio warned unless Venezuela's government accepts a flow of deportation flights, the US will impose new and escalating sanctions, while Venezuela's government said sanctions are an economic war and responsible for hardships.
CRYPTO
- Bitcoin is on the front foot above the USD 83k mark but within recent ranges.
APAC TRADE
- APAC stocks traded mixed as the region lacked firm conviction following the negative handover from Wall St and as participants braced for central bank announcements including the BoJ decision which lacked any major fireworks.
- ASX 200 was subdued for most of the session and finished lower in the absence of any fresh bullish catalysts.
- Nikkei 225 initially benefitted from recent currency weakness which helped the index shrug off disappointing machinery orders and weaker-than-expected trade data to briefly reclaim the 38,000 level. However, the index then gradually pared its gains following the lack of surprises from the BoJ's unsurprising decision to maintain rates at 0.50%,
- Hang Seng and Shanghai Comp were choppy with participants cautious as they digested recent earnings releases and with tech stocks contained heading into Tencent's results due later today.
BOJ
- Policy Announcement: maintained its short-term interest rate target at 0.5%, as expected with the decision made by unanimous vote. BoJ said Japan's economy is recovering moderately, albeit with some weak signs, while consumption is increasing moderately as a trend and inflation expectations are also heightening moderately. BoJ stated they must be vigilant to the impact of financial and FX market moves on Japan's economy but added that Japan's economy is likely to continue growing above potential. Furthermore, it expects underlying inflation to converge towards a level consistent with the price target in the latter half of the three-year period projected under the Outlook Report but noted uncertainty surrounding Japan's economy and prices remains high.
- Ueda: will adjust the degree of easing if its economic and price outlook is realised; not pessimistic about Q1 GDP growth compared to its recent forecast. Still the BoJ's view that the neutral rate has a wide range, BoJ has still not narrowed-down what the neutral rate is. The BoJ will respond 'nimbly' if there are abnormal long-term yield moves; adds that we are not in such a situation now. This Shunto result is largely in line with its view from January, wage trends are 'on track', or slightly stronger. There was a view at today's meeting that there was upward pressure on inflation. Will not raise interest rates when the economy is in bad shape.
NOTABLE HEADLINES
- Tencent Holdings (TCEHY) (CNY) Q4 adj. net of 55.3bln (exp. 53.3bln), revenue 172.5bln (exp. 168.7bln); to raise dividend and buyback
DATA RECAP
- Japanese Machinery Orders MM (Jan) -3.5% vs. Exp. -0.5% (Prev. -1.2%, Rev. -0.8%); YY (Jan) 4.4% vs. Exp. 6.9% (Prev. 4.3%)
- Japanese Trade Balance (JPY)(Feb) 584.5B vs. Exp. 722.8B (Prev. -2758.8B, Rev. -2736.6B)
- Japanese Exports YY (Feb) 11.4% vs. Exp. 12.1% (Prev. 7.2%, Rev. 7.3%); Imports YY (Feb) -0.7% vs. Exp. 0.1% (Prev. 16.7%, Rev. 16.2%)
