From Marc Chandler at Bannockburn Global Forex:
Overview: The eurozone's unexpected rise in January CPI did not appear to change the swaps curve which has about 30 bp of higher rates discounted over the next 12 months. However, it underscored ideas that the ECB is going to be less dovish today. After a bit of a wobble after the CPI report, Germany's two-year yield rose a single basis point to extend its advance for the seventh consecutive session. Germany's 10-year yield spent the entire session above zero for the first time since early May 2019. However, it was poor earnings from the renamed Facebook that set the tone for today's risk-off posture. The NASDAQ futures are off slightly more 2%, while the S&P 500 is off more than 1%. Most Asia Pacific markets are still on holiday, but the Japan, Australia, and India bourses were lower. South Korea re-opened with a nearly 1.7% gain. Europe's Stoxx 600 advance has stopped at three sessions. Information technology is the biggest drag, and the benchmark is off around 0.7%. Benchmark bond yields are narrowly mixed. The US 10-year yield is hovering around 1.77%, while European yields are slightly firmer. Of note, the German 2-year yield ended up extending its advance to a seventh day yesterday but is coming back softer today. The dollar is around 0.20%-0.40% higher against most major currencies. The New Zealand dollar and Swedish krona are the most resilient. Another jump in Turkey's inflation (11.1% in January for a 48.69% year-over-year pace) has weighed on the lira. The Russian rouble's five-day advance has been arrested. It is off about 0.7%. The JP Morgan Emerging Market Currency Index is softer for the second session. It is paring the ~1.2% rise posted Monday-Tuesday. Gold is straddling the 200-day moving average (~$1806) in quiet dealing. March WTI has a heavier bias after having been turned back from almost $90 a barrel yesterday. It is approaching the week's low near $86.35. US natgas is retracing nearly a third of yesterday's 15.8% jump, while Europe’s benchmark is rising for the second session after sliding more than 19% in the first two sessions this week. Copper's three-day 4.2% rally is at risk. It is off about 1.1%.
Asia Pacific
Although Japan's flash service and composite PMI were revised higher, the sub-50 readings underscore ideas that the world's third-largest economy may be contracting here in Q1. New social restrictions were imposed late last month and run toward the middle of February. The service PMI was revised to 47.6 from 46.6. It was at 52.1 in December. The final composite reading was 49.9, up from the preliminary estimate of 48.8, but well off the 5.25 reading at the end of 2021. Japan's 10-year yield is trading sideways in the 0.17%-0.18% area after surging in the second half of last week and the start of this week.Ahead of tomorrow's monetary policy statement, the central bank is likely to see the poor final PMI readings as lending more credence to its reluctance to raise rates. Like we saw in Japan, Australia's service and composite PMI were revised higher but from the flash but still below the 50 boom/bust level. The services PMI stands at 46.7, up from the lowly 45 flash reading, but well off the 55.1 seen in December. The composite reading is 46.6, up from 45.3 preliminary estimate, and 54.9 at the end of last year. Separately, Australia reported poor December trade figures. Imports rose 1% after a revised 4% increase in November. Imports fared better, rising by 5% after a revised 8% increase in the previous month. The net result was a smaller trade surplus. The surplus fell to A$8.36 bln from A$9.76 bln. It was the fifth consecutive month that the trade surplus fell....
....MUCH MORE
