Investment Bank Outlook 04-03-2022
Citi
In focus
Geopolitics – What happened overnight?
Geopolitics was once again the main driver of moves overnight. Late into the NY session, we saw headlines that Ukraine and Russia had agreed on humanitarian corridors. The Asian session saw the most notable geopolitical developments with major risk-off move over a fire at a Ukrainian nuclear power plant. This risk-off move gave way after the power plant situation came under control. Details below
The Asia session saw a pendulum swing in risk sentiment. A major risk-off move took place initially as Reuters reported that the Zaporizhzhia Nuclear Power Plant (ZNPP), the largest in Europe, was on fire, citing the local mayor, while AP reported Russia troops had been shelling the power plant. More details in CitiFX Wire’ Stephen Spratt note Treasuries surge after reports of Ukraine power plant on fire. A tweet by the Ukrainian Foreign Minister stated that should there be a disaster in ZNPP, it could be 10 times larger than Chernobyl.
–Risk off price action hit bonds and equities more. 5y treasury yields led the losses at -15bps, with 10y at -12bps. S&P eminis were down 1.3% while Nasdaq100 futures were down 1.31%. Gold was up 0.36%
–European assets were hit harder than Asian assets. Euro STOXX 50 futures were down 2.27%. Losses were also seen in Bund futures with implied yields down by about 8bps. In Asia, Kospi was down -1.44% and Nikkei down -2.45%.
European Open
Markets in Asia trading saw pendulum swings in risk sentiment following a relatively calmer NY session. Early Asian trading saw headlines that a fire had broken out in a Ukrainian nuclear power plant, the largest in Europe, while AP reported Russia troops had been shelling the power plant. Risk-off sentiment prevailed in markets. Later on, news broke that the situation was under control, with risk-off sentiment retreating, and markets retracing most of the moves. UST 10y yields moved as low as -15bps, before retracing to trade at -5bps.
FX moves were more muted, with DXY popping slightly higher on the move. DXY now sits slightly in the green. PLN and HUF underperform at around -0.85%. USD funding stress returns with FRA/OIS surging wider again during Asia hours. Over in Asia, CPI prints for PHP and THB did not move markets, with the former printing lower than expectations, and the latter printing higher than expectations.
Looking ahead, aside from geopolitics, market attention turns to NFP later today in the US at 13:30 GMT. EUR and HKD see retail sales prints and BRL sees a 4Q GDP print.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.