OVERNIGHT NEWS
# Risk-on in Asia and Europe after third day of gains for the S&P (4,546), Nasdaq futures +1.1% after Google/Alphabet 4Q revenue beat forecasts. 10y UST steady at 1.79%.
# Fed: Bullard (voter) backs 25bp March increase and balance sheet runoff in 2Q, says market pricing five rate hikes in 2022 is not a bad bet. Harker (voter) says four hikes are appropriate this year but less convinced about 50bp in March.
# Day ahead: Euro flash CPI, US ADP, Brazil CB forecast to hike 150bp to 10.75%, OPEC+ to ratify 400kbpd output increase in March.
# RBA governor Lowe says it is too early for rate hike, will be watching ‘over the year’ scenario for/against 2022 tightening.
# Nikkei +1.7%, EUR 10y IRS unch at 0.48%, Brent crude +0.3% at $89.4/b, Gold -0.2% at $1,798/oz
Brazil: CB forecast to hike 150bp today. Real policy rate to turn positive for the first time since Jun-20
Latin America:
Latam currency performance was somewhat mixed as BRL, MXN, and COP ended the session stronger driven by a weaker USD and improved risk appetite; PEN and CLP were pressured by local developments. BRL appreciated by 0.8%, while MXN and COP each appreciated by ~0.5%. PEN depreciated by ~1%, driven by political uncertainty following the resignation of the country’s prime minister and ensuing changes to the cabinet. In Chile, a constitutional committee voted on a proposal to nationalize some of the country’s copper and lithium mines, triggering concerns about potential downside risks to foreign investment over the medium term. The same development led to the CLPxCAM curve steepening as 10y CAM closed 11bp higher, at 5.62%. The price action across the remaining regional curves was also mixed, as the TIIE curve remained broadly unchanged, while the IBR and DI curves rallied, mostly in the belly and long end.