MARKET WRAPS
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UK monthly retail sales figures; Euro area balance of payments; EU Construction output; EU FCCI Flash Consumer Confidence Indicator; updates from EDF, Allianz, Danone, Renault, Hermes International, Eni, Sika, NatWest, SEGRO, Norwegian Air Shuttle.
Opening Call:
European stocks could open higher on hopes for a possible U.S.-Russia meeting. U.S. stock futures are set to rebound at the open. The dollar was steady in Asia trading. The pound continues to rally on BOE expectations for an interest rate rise. The yield on the 10-year Treasury note rose to 1.987% from 1.972% Thursday. Oil falls on ongoing concerns over a possible Iran nuclear deal. Gold was down.
Equities:
European stocks are set to open higher, buoyed by hopes for a possible U.S.-Russia meeting.
The State Department said U.S. Secretary of State Blinken and Russian Foreign Minister Lavrov would meet in Europe late next week, "provided there is no further Russian invasion of Ukraine." This news "could take some of the sting out of the negative sentiment for markets," Matthew Simpson, senior market analyst at City Index, told Dow Jones Newswires.
The Ukraine crisis has hung over markets for weeks, adding to volatility in markets. Russia is a major energy producer and if it invades Ukraine and other governments respond with economic sanctions, that could impede access to about 7% of the global energy market, said Tom Martin, a senior portfolio manager with Globalt Investments.
"Without any clear resolution in the near term, the uncertainty for a potential invasion is sufficient to keep market participants shunning from risk assets, while flocking to safe-havens," Yeap Jun Rong of IG said in a commentary
Market Insight:
An analysis of inflation in the world's largest economies finds the surge in price pressures in the US is "a likely sign of overheating." In the report from the Institute of International Finance, the study's authors found the situation is more mixed in other nations.
"The rise in US inflation is very broad-based to an extent that is unprecedented in recent history" and is suggestive of a broad demand driven inflation, but in the Euro-zone, it's more complicated, with Germany showing more broad-based inflation increases than other European nations, the report said.
Read: Fund Manager Roundup: Central Banks' Monetary Policy Tightening Is a Key Theme for Markets
Forex:
The dollar was steady in early Asia trading. USD/JPY was up following news that U.S. Secretary of State Antony Blinken and Russian Foreign Minister Sergey Lavrov have agreed to meet next week, said Akira Moroga, chief market strategist at Aozora Bank.
"Yesterday, we were thinking that attacks could take place anytime, but tensions have eased a bit," he said.
Moroga says USD/JPY is likely directionless for now, as traders avoid holding on to speculative positions over the weekend with a public holiday in the U.S. on Monday.
USD/JPY was at 115.18 after rising to as high as 115.27, compared with its level of 114.95 before the news of the upcoming meeting between U.S. and Russian officials.
The pound continued to rally on expectations the Bank of England will continue to raise interest rates to fight inflation.
"We are increasingly confident in our call for a 50 basis point move from the BOE when it next meets in March, and think that the aggressive pace of policy normalisation in the U.K. should provide solid support for the pound during the remainder of the year," Ebury analysts said.
Bonds:
The yield on the 10-year Treasury note rose to 1.987% from 1.972% Thursday.
"Treasuries held a solid bid throughout Thursday's trading session with 10-year yields slipping as low as 1.93% while 30s fell to 2.265%," BMO Capital Markets strategists Ian Lyngen and Ben Jeffery wrote in a note.
"The retracement from the recent yield peaks was primarily a function of the escalating tensions in Eastern Europe. More precisely, the ever-increasing uncertainties associated with Russia's intentions in the Ukraine."
"Dueling headlines and the mounting series of unknowns surrounding the possible outcomes in the region have contributed to the broader apprehension in risk assets and subsequently put in a stabilizing bid for Treasuries," they wrote in a note.
Energy:
Oil falls amid ongoing concerns over a possible Iran nuclear deal. The oil market seems to be more worried about the potential lifting of sanctions on Iran rather than a Russian invasion of Ukraine, ANZ said.
Reports suggest the U.S. and its allies are close to reviving a nuclear deal with Iran, ANZ said, adding that the prospects of a potential 1 million barrels per day hitting the market has put crude oil prices under pressure.
Metals:
Gold was down which suggests traders are a little wary--but hopeful--that the Ukraine tensions could end in a peaceful resolution.
Copper is higher in early Asian trading as slow production and low inventories support prices of the industrial metal, Fitch Solutions said.
High energy prices are raising metal production costs, "leading to production halts and low stocks in global warehouses," it said.
"We also see upside risk from the Russia-Ukraine tensions in case sanctions are imposed on Russia," it added, although U.S. Secretary of State Antony Blinken and Russian Foreign Minister Sergey Lavrov agreeing to meet next week could temper some of the risk. The three-month LME copper contract was 0.4% higher.
TODAY'S TOP HEADLINES
Blinken Sees Moment of Peril in Ukraine, Challenges Russia to Commit That It Won't Invade
WASHINGTON-Secretary of State Antony Blinken warned of a looming Russian offensive against Ukraine and proposed a last-ditch diplomatic meeting with his Russian counterpart next week that he said could lead to a summit of key leaders.
Mr. Blinken spoke at a United Nations Security Council meeting Thursday just hours after Russia told the U.S. in a formal document that it might resort to "military-technical measures" if it didn't receive legally binding security assurances.
Fed's James Bullard Again Calls for Front-Loaded Rate-Rise Campaign
Federal Reserve Bank of St. Louis President James Bullard said high levels of inflation call for a front-loaded policy response from the central bank, and that he believes bond markets should be able to smoothly navigate the looming shift in monetary policy.
Mr. Bullard said he is still on board with the Fed delivering a total of 1 percentage point's worth of rate rises by July, joined with actions to start shrinking the central bank's nearly $9 trillion balance sheet in the second quarter of this year. In a New York appearance Thursday, he said the Fed should be planning for asset sales from its holdings, but for now he is happy to start shrinking the balance sheet by not replacing securities that mature.
Inflation Should Moderate in Coming Months, White House Economist Says
President Biden's top economic adviser on Thursday sought to ease lawmakers' concerns about elevated inflation, saying that several factors in the coming months should help slow a steep rise in consumer prices over the last year.
"We expect inflation to moderate over the coming year, because we believe that the factors that have been causing high inflation will begin to ease as Covid cases gradually decrease," Cecilia Rouse, chair of the White House Council of Economic Advisers, said during a Senate Banking Committee hearing.
Senate Passes Stopgap Funding Bill After Rejecting GOP Amendments
WASHINGTON-The Senate passed a stopgap bill keeping the government funded beyond Friday after Democrats beat back measures related to drug paraphernalia and Covid-19 vaccine mandates, paving the way for President Biden to sign the measure into law.
The continuing resolution approved Thursday would fund the government through March 11.
Shelling Escalates Along Front Line Separating Ukraine and Pro-Russia Separatists
Violence escalated in eastern Ukraine on Thursday, with Russian-backed separatists and authorities in Kyiv trading accusations over cease-fire violations along the front line, as President Biden said Moscow was fabricating a pretext to invade its neighbor and warned the threat of a Russian incursion remained "very high."
Adding to the tension, the Kremlin threatened in a letter to the U.S. to resort to unspecified "military-technical measures" if it didn't receive from the U.S. and its allies legally binding guarantees of its security, which include a pledge from the North Atlantic Treaty Organization that it would never allow Ukraine to join, as well as curbs on troop deployments in Eastern Europe.
Biden's State of the Union to Focus on Inflation, Covid-19
WASHINGTON-President Biden will emphasize his efforts to curb inflation in a State of the Union speech before lawmakers who will be required to wear masks, with words and visuals that will highlight the administration's challenges on the economy and Covid-19.
The March 1 prime-time address will be Mr. Biden's next big effort to rally support for his agenda with lawmakers and voters headed into the midterm elections. Some Democratic allies have been pushing him to more forcefully tackle rising prices and signal a new phase in the fight against Covid-19, as many states continue to lift restrictions related to the virus.
Pipelines Will Get Tougher Environmental Reviews, Regulators Decide
The Federal Energy Regulatory Commission voted on Thursday to give more weight to the environmental concerns over new natural-gas pipeline projects when deciding whether to approve them.
In a 3-2 vote divided along party lines, commission members changed the policy that lays out the process for reviewing and approving applications for new natural-gas pipeline projects to take into consideration a project's environmental impact and the steps a developer has taken to limit that impact. It marked the first policy update since 1999.
Allianz Says Legal Bill for Investment-Fund Losses May Top $4 Billion
(MORE TO FOLLOW) Dow Jones Newswires
02-18-22 0037ET
