Thursday, March 9, 2023

Daily Market Overview

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• Where to begin. There’s so much that didn’t happen today. Let’s take a look at equity markets. European stocks opened in red. The likes of the Euro Stoxx 50 (-0.25%) were off intraday lows but never left negative territory. Wall Street loses between 0.1-0.5% in a session devoid of important news or data. We did have weekly jobless claims coming in above the symbolical 200k for the first time in almost two months. It even pulled US yields a bit lower for the day. The move feels exaggerated but note that labour market tightness is the number one key concern to the Fed. Any sign of job market conditions softening is going to be picked up, no matter what. Markets were also put on high alert by Powell after the Fed chair said that “the totality” of the data will decide over the central bank’s next move (25 or 50 bps). We’d be cautious to read a lot in the move though. Tomorrow’s payrolls report combined with next week’s CPI reading are the critical data points. Current yield changes range between -0.3 bps to -5.6 bps with the front-end outperforming. Losses are building as the first US investors are joining. The 2y yield is testing the recently conquered 5% barrier. European yields follow the flattening trend with a remarkable underperformance of the long end of the curve (German and European (swap) yield +5 bps). Currency markets have little going on too. The dollar faces a bit more selling pressure following the jobless claims. EUR/USD advances from 1.0545 to 1.057 currently. The trade-weighted DXY finds support at 105.34 (November 2022 interim low). The Japanese yen is taking the lead on the G10 scoreboard. The decline in core bond yields as well as vulnerable risk sentiment aids the currency. USD/JPY eases to 136.48 after hitting resistance at the 200dMA yesterday and this morning around 137.15. EUR/JPY drifted south to 143.98. The Bank of Japan convenes for a last time under governor Kuroda tomorrow. There are no policy changes expected but markets stick to the idea that it is only a matter of time before the central bank will ditch yield curve control when Ueda takes over. Japan’s 10y yield continues to hit the upper bound of the 0% +/- 50 bps tolerance range. After hitting a 49 bps high mid-January, the spread with the Japanese 10y swap yield, which is out of the BoJ’s scope, remains at an elevated 37 bps today. Sterling is able to eke out some gains against a lackluster dollar and euro. EUR/GBP eases from 0.89 to 0.8878 currently.
• tldr; come back tomorrow with the much-anticipated February US jobs report scheduled for release.
News & Views

• European energy chief Simson said that the EC will propose to extend the current voluntary consumption cut target (15%) by a year after its expiry end March. Beneficial winter weather helped to reduce demand by nearly 20% over the past months. Simson said that “it’s the best guarantee to achieve another great level storage by November.” The EC aims to fill its storage sites to 90% before next winter. The energy chief also vowed to get rid of Russian LNG completely, as soon as possible. “Committing not to renew existing contracts with Russia is the best way to give a long-term assurance to our reliable partners that meaningful demand will stay.” Benchmark European gas prices (Dutch TTF future) keep setting new cycle lows on a daily basis, approaching €40/MWh for the first time since September 2021.
• National Bank of Poland governor Glapinski sounded somewhat more dovish at today’s press conference compared to yesterday’s policy meeting. Glapinski expects Polish inflation to drop very quickly to target and slow more than expected in yesterday’s new projections (2023: 11.9%; 2024: 5.7%; 2025: 3.5%). He’s not calling the formal end to the tightening cycle yet, but is clearly looking in the direction of rate cuts. It’s too early to say whether this will happen this year still or next. Polish money markets were already playing with the notion that a first policy rate cut could happen around the turn of next year. The Polish zloty holds its ground around 4.68.

Graphs & Table

US2 yield revisits symbolic 5% barrier after weekly jobless claims surpass 200k

EUR/PLN: zloty holds near recent highs. NBP governor Glapinski eying rate cuts end this year or early next year doesn’t come as a surprise

Euro Stoxx 50 remains vulnerable from a technical point of view.

Dutch TTF gas future (EUR/MWh): low, lower …

Note: All times and dates are CET. More reports are available at which you may sign up to.

This document has been prepared by the KBC Economics Markets desk and has not been produced by the Research department. The desk consists of Mathias Van der Jeugt, Peter Wuyts and Mathias Janssens, analists at KBC Bank N.V., which is regulated by the Financial Services and Markets Authority (FSMA). Read the full disclaimer.

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