GGMA Morning Brief: JGB yields drop after Tokyo CPI, Fed's Goolsbee sees several more cuts, BOJ’s Takata calls for policy “gear shift”, Today: Swiss GDP & KOF, BOE’s Pill, US PPI & Chicago PMI, CFTC
Good morning,
I hope all is well.
Here are the main overnight news and market movers:
Markets: JGB yields drop after Tokyo CPI
Markets traded cautiously early on Friday as investors digested Nvidia’s post-earnings selloff and assessed progress in US-Iran nuclear negotiations. S&P 500 futures declined 0.2% to 6,906, and Nasdaq 100 futures dipped 0.1% to 25,055 after Nvidia fell sharply on Wall Street despite exceeding estimates; concerns about the chipmaker’s competitive moat overshadowed its strong guidance. Asian equities were mixed — Nikkei 225 futures rose 0.1%, while India’s Nifty 50 dropped 0.7%. The US 10-year yield edged lower to just below 4.00%, as JGB yields fell following the release of Tokyo CPI data. WTI crude increased 0.7% to $65.65 despite the US and Iran reporting “significant progress” in nuclear talks without reaching an agreement. Gold held steady around $5,196, while silver outperformed, gaining 1.9%. The US dollar index changed only slightly, while the Australian dollar was the strongest G10 performer.
China's central bank moved on Friday to slow the rapid appreciation of the yuan, announcing it will eliminate the foreign exchange risk reserves for certain forward contracts. This move could encourage dollar purchases. The decision followed the yuan reaching a near three-year high against the U.S. dollar in onshore trading on Thursday, continuing a rally driven by exporters rushing to sell dollars following last year's record trade surplus. (RTRS) Meanwhile, Bets on a stronger yuan are picking up in currency-option markets, with traders positioning for a move toward 6.50 per dollar by year's end, Bloomberg reports.
The UK is expected to reduce gilt sales in the upcoming year, offering rare good news for bond investors worried about the country’s strained finances. The Debt Management Office, responsible for issuing bonds for the UK government, is projected to announce gross sales of £245 billion ($331 billion) for the 2026/2027 fiscal year, based on the median estimate from 12 primary dealers surveyed by Bloomberg.
In the US, mortgage rates dropped below 6% this week for the first time in over three years, offering welcome news for waves of house hunters heading into the busy spring home-buying season. The average rate for a 30-year fixed mortgage was 5.98% this week, the lowest since September 2022 and a slight decrease from last week, Freddie Mac reported on Thursday. (WSJ)
Market Snapshot
Source: Tradingview.com
US-Iran nuclear talks report “significant progress”
The United States and Iran concluded their third round of nuclear talks in Geneva with “significant progress” according to Omani mediator FM Badr Albusaidi, though no final deal was reached. Key sticking points remain: the US insists on limiting uranium enrichment with long-term IAEA verification, while Iran demands the right to continue domestic enrichment. Technical teams will reconvene at IAEA headquarters in Vienna next week, and Albusaidi is scheduled to meet Vice President Vance in Washington on Friday. Oil prices initially spiked on headline uncertainty before easing as the progress narrative took hold, reducing the near-term strike-risk premium. Source: Investing.com
Fed's Goolsbee sees several more cuts this year, but not soon
Chicago Federal Reserve President Austan Goolsbee said on Thursday his forecast for several interest-rate cuts later this year makes him one of the more "optimistic" Fed policymakers, but said he wants the Fed to be "careful" in doing so because it could overheat the economy and inflation. "I have some confidence rates can come down several more times this year in 2026," Goolsbee said in an interview on Fox News. "I just don't want to front-load it too much before we actually have the evidence that the inflation is headed back down to the Fed's 2% goal. (RTRS – Continue Reading)
Trump faces first big tariff refund court deadline on Friday
The Trump administration’s Department of Justice is nearing its first big legal deadline in the wake of the U.S. Supreme Court ruling that President Donald Trump’s tariffs issued under the International Emergency Economic Powers Act are illegal. The DOJ needs to weigh in by Friday on one of the first legal fights over refunds, in which plaintiffs are asking for expedited payment of tariff refunds through the Court of International Trade (CIT), which typically handles tariff cases. Trade attorneys have told CNBC that there are upwards of 2,000 cases filed by companies seeking tariff refunds at the CIT. Back in December, the CIT put a stay on the cases until after the Supreme Court announced its decision. (CNBC – Continue Reading)
Tokyo CPI cools below BOJ’s 2% target; JGBs rally
Tokyo core CPI rose 1.8% year-over-year in February, easing from 2.0% in January and coming in slightly above the 1.7% consensus. Headline Tokyo CPI edged up to 1.6% from 1.5%, while the core-core measure excluding food and energy fell to 1.9% from 2.2%. The print marks the first time core Tokyo inflation has slipped below the BoJ’s 2% target since March 2022, tempering expectations for aggressive near-term tightening despite the hawkish rhetoric from BoJ board members earlier in the week. JGBs rallied sharply in response, with the 10-year yield falling 3.8 basis points to 2.118%. The data is a more timely measure for the national CPI series, which will only be released later this month. Sources: Investing.com, TE
Japan data mixed: Industrial output disappoints, retail sales surge
Japan’s industrial output rose 2.2% month-over-month in January (preliminary), rebounding from a 0.1% decline in December but falling well short of the 5.3% consensus forecast. METI maintained its assessment that production “continues to fluctuate indecisively.” In contrast, retail sales surged 1.8% year-over-year, sharply rebounding from a 0.9% decline and crushing the consensus forecast of -0.4%. On a seasonally adjusted monthly basis, retail sales jumped 4.1%, led by machinery and equipment (+12.4%) and automobiles (+9.6%). Sources: TE, TE
BOJ’s Takata calls for policy “gear shift,” warns of inflation overshoot
Bank of Japan board member Hajime Takata, regarded as the most hawkish member of the policy board, called for the BoJ to “make a further gear shift” in its communication during a speech to business leaders in Kyoto. Takata argued that the 2% price stability target is “almost achieved” and warned of inflation overshoot risks, noting that medium- and long-term inflation expectations are rising as second-round price effects become more evident. The remarks, seen alongside similarly hawkish comments from Governor Ueda, were interpreted as a coordinated signal that further rate hikes remain firmly on the table. Source: CNBC
UK GFK consumer confidence drops to -19
UK GfK consumer confidence fell to -19 in February from -16 in January, missing the consensus forecast of -15 and reversing two months of gains. Personal finance perceptions deteriorated significantly, with both backward- and forward-looking indices dropping 4 points each, while the major purchase index fell to -14. Rising fears about job security, particularly among lower-income households facing weak wage growth, were cited as the primary drag. The data adds to evidence of a deteriorating consumer backdrop in the UK ahead of the spring budget. Source: Yahoo Finance
UK Labour loses key seat to Greens in setback for Starmer
Prime Minister Keir Starmer's Labour faced a humiliating election defeat to the left-wing Green Party on Friday in an area of Manchester that it had controlled for nearly a century. The result highlighted the collapse of Britain's traditional two-party system. Losing one of Labour's safest seats in the biggest electoral test for nearly a year adds more pressure on Starmer to demonstrate he should remain in his position, following weeks of political upheaval and calls for his resignation. (US News)
NZ consumer confidence drops 7 points to 100.1
The ANZ-Roy Morgan New Zealand Consumer Confidence Index fell 7.1 points to 100.1 in February, more than unwinding January’s sharp improvement from 107.2. The current conditions sub-index dropped to 90.0 from 97.7, while future conditions fell to 106.9 from 113.5. Inflation expectations edged up 0.1 percentage points to 4.7%. Source: TE
Today’s Macro Roadmap: Swiss GDP & KOF, BOE’s Pill, US PPI & Chicago PMI, CFTC Positioning Data
In the morning, we get inflation data from a few eurozone members, Germany, France and Spain. Analysts expect a significant rise in French inflation in February as the base effect from the February 2025 electricity price cut drops out. French core inflation remains low compared to the rest of the region, partly owing to lower wage inflation. Spain’s inflation is underpinned by strong domestic demand. SEB notes ‘remaining differences among economies with strong demand lifting Spanish numbers, Germany showing signs of stagflation, while French and Italian numbers are rather muted.
The US PPI is the most important release on Friday because it provides the final missing input for the January core PCE inflation estimate — the Fed’s preferred measure. Analysts expect a slowdown in annual and monthly producer price inflation. Still, the ISM prices paid series and rising commodity prices would point to continued inflation pressure further down the road. One investment bank forecast, which is above the consensus, is driven by rising natural gas and refined petroleum prices during Winter Storm Fern.
Bank of England chief economist Pill is due to speak at 14:00 CET. Pill struck a notably hawkish tone at a Fireside chat at Santander UK macroeconomic event on 13 February, stating that rates at 3.75% are ‘a little bit too low’ and that the BoE had made ‘an error by cutting rates too far and too fast.’ He pegged underlying UK inflation at approximately 2.5% per year and argued that any near-term dip in headline inflation would be temporary. He advocated holding rates at 3.75% for longer until disinflation is complete. This puts him firmly at odds with the more dovish members of the MPC and Governor Bailey, who sees ‘scope for some further easing.’ Pill’s appearance on a UK & US economics panel suggests he may draw comparisons between the two economies’ inflation dynamics — watch for comments on wage growth persistence and the labour market. (BBG)
Good luck today, and feel free to ping me in the chat to discuss markets and views!
PS:
· Did you know that you can register and follow us 24/7 here? Then download our app from the Apple Store to listen to our Squawk on the go or chat with us live.
· If you are on Bloomberg and would like to see my comments in real-time, or if you are a MacroBond user and would like to get access to my chart bank, please send an email to: info@ggma.ch .
Disclaimer: This article is for informational and educational purposes only and should not be construed as financial, investment, or professional advice. The content represents the author's personal views and analysis and does not constitute a recommendation to buy, sell, or hold any securities or financial instruments. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results, and all investments carry risk, including the potential loss of principal.