Generous ECB

GENEROUS ECB (1039 GMT)

The European Central Bank turned out to be more generous than expected in setting the new ceiling for remuneration of the euro area government deposits and markets are reacting accordingly.

The central bank announced yesterday that it would pay the short-term euro rate (€STR) minus 20 basis points, taking effect on 1 May 2023.

“Under the previous arrangement, the ceiling was supposed to go back to 0% on the same date,” Citi analysts noted.

Sovereign deposits remuneration “is at the generous side of the range of outcomes we had sketched,” says Christopher Rieger, head of rates and credit research at Commerzbank.

“This is taking the edge out of the latest re-emergence of scarcity fears that had become more visible in higher demand for longer-dated BuBills since the start of this week,” he adds.

In September, the ECB decided to temporarily set the ceiling for the remuneration of government deposits held with the Eurosystem at the euro short-term rate (ESTR) from previous 0%.

Analysts argued that a zero per cent remuneration boosted demand for top-rated government bonds applying downward pressure on their yields.

(Stefano Rebaudo)

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ALL SECTORS FLASH GREEN IN EUROPE (0909 GMT)

All sectors are ticking higher in Europe today, as the STOXX 600 SXXP soars to its highest since April 2022, boosted by the oil and gas sector (.SXEP), which is up 1.5% after another set of bumper results from France's Total TTE and Norway's Equinor 02NG.

The chemicals sector is getting a helping hand from British industrial gas company Linde (LIN) and Dutch paints and coatings company Akzo Nobel AKZA. Meanwhile, Federal Reserve Chair Jerome Powell's speech is still permeating the wider market with a positive mood.

BP (.BP.L) is providing a boost to the index on a net weighted points basis, with shares rising 3.2% to their highest since August 2019 after the oil major reported record profits for 2022 on Tuesday.

Finnish refiner Neste NESTE is top riser, up 8.9% after the company posted comparable fourth-quarter core operating results that beat analysts' forecasts.

Not all stocks are enjoying the optimism. Dutch payments processor Adyen's ADYEN shares are at the bottom of the index after missing analysts' expectations, while shares in Handelsbanken SHB_A are down 6.3% after the Swedish bank reported in-line profits but higher-than-expected costs.

(Lucy Raitano)

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THE POWELL PUT (0752 GMT)

Wall Street must be hoping Federal Reserve Chair Jerome Powell would speak in public every day. Given a chance to react hawkishly to the bumper January payrolls report, Powell demurred and chose to stay boringly balanced on the rate outlook.

Asked if he regretted using "disinflation" 11 times in his media conference last week, he said no, he would do the same again.

He reiterated the "disinflationary process" was under way, but it would likely take a "significant" period of time and if the data kept coming in stronger than expected, the Fed would have to do more on rates.

Hardly earth shattering stuff, but for markets these days if Powell is not all-out in-your-face hawkish, then he's dovish. There's no middle ground. Wall Street duly rallied while Treasury yields and the dollar have eased a little, with futures priced for just two more hikes to 5.0-5.25%.