From Marc to Market:
Overview: There are two important developments. First, the stronger than expected February inflation reports from France and Spain have sparked a jump in European interest rates and the swaps market is beginning to price in a 4% terminal rate by the European Central Bank. The deposit rate is now at 2.50% and is widely expected to rise to 3.0% in the middle of next month. Second, a tentative agreement to resolve the dispute over the Northern Ireland protocol has helped lift sterling. The US dollar is mixed and poor GDP figures are weighing on the Swedish krona, the weakest among the G10 currencies today, while rising rates weigh on the yen following the large contraction in Japan's industrial output (-4.6%) that was not completely offset by the stronger retail sales (1.9%), which appear to have been flattered by tourism.
Asia Pacific equities were mixed, with China, Japan, South Korea, and Australia posting modest gains, while most of the other large bourses fell. Europe's Stoxx 600 is little changed after yesterday's 1% advance. US equity futures are steady to a little firmer. European 10-year benchmark rates are mostly 6-8 bp higher, while two-year yields are 5-7 bp higher. The 10-year US Treasury yield is a couple of basis points firmer near 3.94%. Gold snapped a five-day decline yesterday but has given the gains back and made a marginal new low for the year, slightly below $1805. April WTI is up about a dollar, and it could be the third advance in four sessions. US natgas bottomed last week slightly below $2, gapped higher yesterday to reach $2.74 and is consolidating so far today. Europe's benchmark remains in its trough, straddling the 50-euro mark.Asia PacificChina's economic recovery is gaining ground and the forecasts for tomorrow's PMI looks for more gains. The composite was below the 50 boom/bust level in the last three months of 2022 (finishing at 42.9) but jumped back to 52.9, the highest since last June in January. The February reading is expected to rise further as the manufacturing and service PMIs likely rose. It will be reported early on March 1....
