Stock markets plunge further, but others remain stable

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Markets remain risk averse today with strong equity selling. Expectations for the negotiation between Ukrainian President Volodymyr Zelenskyy and Russian President Vladimir Putin are low. Meanwhile, other markets are relatively stable. In forex, the Swiss Franc, Yen and Dollar are still the strongest, while the Euro is the weakest. But still, most pairs and crossovers remain within last week’s range.

Technically, commodity currencies are resisting the risk aversion environment quite well. If sentiment improves, there are prospects for further recovery. Attention will be on the temporary high of 0.7282 in AUD/USD and the support of 1.2680 in USD/CAD. A break of these levels could trigger more buying in Aussie and Loonie.

In Europe, at the time of writing, the FTSE is down -1.48%. The DAX is down -2.31%. The CAC is down -2.95%. Germany’s 10-year yield is down -0.052 to 0.178. Earlier in Asia, the Nikkei rose 0.19%. Hong Kong’s HSI index fell -0.24%. China Shanghai SSE rose 0.32%. The Singapore Strait fell -1.59%. Japan’s 10-year JGB yield fell from -0.023 to 0.185.

US trade deficit in goods widened to USD 107.6 billion in January

US exports of goods fell -$2.8 billion to $154.8 billion in January. Imports of goods rose $4.4 billion to $262.5 billion. The trade deficit widened from -7.2 billion USD to -107.6 billion USD, above expectations of -98.5 billion USD. Wholesale inventories rose 0.8% month-on-month to $798.2 billion. Retail inventories rose 1.9% month-on-month to $658.1 billion.

In Canada, the current account balance fell to -C$0.8 billion in the fourth quarter. The IPPI rose 3.0% m/m in January, while the RMPI rose 6.5% m/m.

ECB Panetta: The world is getting darker, our steps should be smaller

ECB executive board member Fabio Panetta said: “We need to carefully adjust policy and recalibrate it according to the effects of our decisions, in order to avoid stifling the recovery,” he said.

Speaking of the invasion of Russia, he said: “This terrible event has heightened the need for caution. The world has become darker and our steps should be even smaller.

“The most important thing right now is that we are ready and available to preserve financial stability,” he added.

ECB Centeno: Risks of stagflation have increased with Russia’s invasion of Ukraine

Mario Centeno, Member of the Governing Council of the ECB “I am convinced that the growth momentum that the economy has been following will prevail.” But, “a scenario close to stagflation is not excluded from the possibilities that we can face. So we have to adapt our policies to that.

He added that policymakers had considered the threat of stagflation before. “After the invasion, those risks only increased,” he said. The Russian invasion of Ukraine has the potential “to have a positive impact on inflation, a few decimal places, and a negative impact on growth”.

The Swiss KOF fell to 105 in February, mainly on manufacturing

Switzerland’s KOF economic barometer rose from 107.2 to 105 in February, below expectations of 108.5. The KOF said that “indicators from the manufacturing sector are mainly responsible for the decline, followed by those from the financial sector. The signals for Swiss exporters are somewhat more favorable than before. ”

Also reported, retail sales rose 5.1% y/y in January, versus expectation of 0.4% y/y. GDP rose 0.3% quarter-on-quarter in the fourth quarter, below expectations of 0.4% quarter-on-quarter.

Japanese industrial production fell -1.3% m/m in January, retail sales rose 1.6% y/y

Japanese industrial production fell -1.3% m/m in January, worse than expected -0.7% m/m. Production fell for the second month, after contracting -1.0% m/m in December. Production of cars and other auto parts fell -17.2% month on month, for the first time in four months.

Nevertheless, according to a survey by the Ministry of Economy, Trade and Industry (METI), production is expected to rebound 5.7% m/m in February and 0.1% m/m in March. But the predictions were made before Russia invaded Ukraine, the impact of which is still unknown.

Retail sales rose 1.6% year-on-year, above expectations of 1.1% year-on-year, the fourth consecutive month of expansion.

Retail sales in Australia rose 1.8% m/m in January, above expectations

Retail sales in Australia rose 1.8% m/m in January, above expectations of 0.4% m/m.

The director of quarterly statistics for the whole economy, Ben James, said: “The emergence of the Omicron variant and the increase in the number of cases of COVID-19, combined with the absence of mandatory lockdowns, have resulted in a range of different consumption behaviors. We have seen the kind of spending previously associated with lockdowns occur simultaneously with those associated with easing lockdown conditions.

“This has led to variations across industries, with food retail seeing an increase in sales consistent with previous COVID-19 outbreaks as consumers exercise caution amid rising case numbers. However, the lack of lockdown means other discretionary industries that would typically see a slump during the pandemic have seen mixed results.

Also released, credit to the private sector rose 0.6% m/m, against an expectation of 0.7% m/m.

New Zealand ANZ business confidence fell to -51.8, a difficult year in 2022

New Zealand ANZ business confidence fell to -51.8 in February from -23.2 in December. The outlook for own activity fell from 11.8 to -2.2. Export intentions fell from 8.8 to 0.9. Investment intentions fell from 11.4 to 4.5. Hiring intentions fell from 10.5 to 2.3. The cost forecast has increased from 88.2 to 92.0. Earnings forecast fell from -13.1 to -32.7. Price intentions fell from 63.6 to 74.1. Inflation expectations fell from 4.42 to 5.29.

ANZ said: “Overall, 2022 is shaping up to be a tough year economically, and tackling overstuffed inflation without an outright recession looks increasingly difficult. But with CPI inflation well above 6%, the RBNZ has no choice but to keep climbing. And now, global geopolitical developments threaten even more imported inflation via energy markets. Buckle up.

EUR/USD mid-day outlook

Daily Pivots: (S1) 1.1201; (P) 1.1238; (R1) 1.1309; Continued…

EUR/USD remains consolidating above 1.1105 and the intraday bias remains neutral at this point. On the downside, a sustained break of 1.1120 will confirm a resumption of a broader downtrend from 1.2348. The next target is a 61.8% projection of 1.2265 to 1.1120 from 1.1494 to 1.0786. However, a firm break of 1.1287 will dampen this bearish view and bring the bias to the upside for the resistance at 1.1494.

Overall, the decline from 1.2348 (2021 high) is seen as a leg inside the range pattern from 1.2555 (2018 high). Sustained trade above the 55 week EMA (now at 1.1582) will argue that it is over and a bigger upside would be seen towards the top of the range between 1.2348 and 1.2555 . However, a firm break of 1.0635 (2020 low) will increase the chances of a resumption of the long-term downtrend and target a retest at 1.0339 (2017 low) thereafter.

Economic Indicators Update

GMT Ccy Events Real Forecast Previous amended
23:50 JPY Industrial production H/M Jan P -1.30% -0.70% -1.00%
23:50 JPY Retail Y/Y Jan 1.60% 1.10% 1.40% 1.20%
00:00 NZD ANZ Business Trust Feb F -51.8 -23.2
00:00 USD TD Securities Inflation M/M February 0.50% 0.40%
00:30 USD Private sector credit M/M Jan 0.60% 0.70% 0.80%
00:30 USD Retail sales M/M Jan. 1.80% 0.40% -4.40%
05:00 JPY Housing Starts Y/Y Jan 2.10% 2.60% 4.20%
07:30 CHF Actual Retail Sales Y/Y Jan 5.10% 0.40% -0.40% -0.50%
08:00 CHF KOF Economic Barometer Feb. 105 108.5 107.8 107.2
08:00 CHF GDP Q/Q Q4 0.30% 0.40% 1.70%
13:30 BODY Industrial Product Price M/M Jan 3.00% 0.40% 0.70%
13:30 BODY January M/M Commodity Price Index 6.50% -0.20% -2.90%
13:30 BODY Current account (CAD) T4 -0.8B 2.2B 1.4B
13:30 USD Goods Trade Balance (USD) Jan P -107.6B -98.5B -101.0B -100.5B
13:30 USD Wholesale inventories Jan P 0.80% 0.90% 2.20%
14:45 USD Chicago PMI February 63.9 65.2
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