M Update Global Macro Commentary | Global February 5Morgan Stanley & Co. LLCMartin W Tobias, CFAStrategist Martin.Tobias@morganstanley.com +1 212 761-6076 Morgan Stanley & Co. International plc+Dominic J KrummenacherStrategist Dominic.Krummenacher@morganstanley.com +44 20 7425-9781 Morgan Stanley & Co. LLCEli P CarterStrategist Eli.Carter@morganstanley.com +1 212 761-4703 Lenoy DujonUS/Canada Economist Lenoy.Dujon@morganstanley.com +1 212 761-2779 Morgan Stanley & Co. International plc+Marie-Anais C FrancoisStrategist Marie-Anais.Francois@morganstanley.com +44 20 7425-1877 Morgan Stanley MUFG Securities Co., Ltd.+Koichi SugisakiStrategist Koichi.Sugisaki@morganstanleymufg.com +81 3 6836-8428 Morgan Stanley Asia Limited+Gek Teng KhooStrategist Gek.Teng.Khoo@morganstanley.com +852 3963-0303 Powell reiterates March cut "not likely"; UST losses extend amid ISM Services rebound; USD gains persist with fewer implied Fed cuts; China A-share small caps drawdown deepens; Spain outperforms peers before syndication; CLP breaks 950 against USD; DXY at 104.46 (+0.5%); US 10y at 4.158% (+13.8bp).• Fed Chair Powell reiterates it is “not likely that this committee will reach that level of confidence in time for the March meeting” to begin rate cuts. Given economic growth at a “solid pace,” a "strong" labor market, and continued declines in inflation, he said the Fed can “reduce interest rates carefully.”• USTs open weaker alongside Powell's remarks. Losses deepen with underperformance in the belly after a rebound in ISM Services employment, and as prices paid surges on higher shipping costs.• US dollar strength continues with the further rise in UST yields, fewer implied rate cuts, and more data which do not suggest an "unexpected weakening" in the labor market.• Drawdown in China A-share small-caps deepens (CSI 1000: -6.2%) amid lack of specific announced government support measures for small caps.• European duration trades heavily, but Spain outperforms peers with the 10y sector 1.5bp tighter against Bunds, ahead of a 30y syndication.• Risk-off sentiment weighs on CLP (-0.9%), which breaks through the 950 level against USD.Please refer to our latest Foundation (A Watershed Moment), Global Macro Strategist (Don't Stop Receivin'), as well as our recent publications and collaborations (LatAm Macro Strategy: The Relevance of US Rates 2.0; Global Macro Strategy: Global FX Positioning; Podcast: The Global Macro Guide | Ep. 60).Developed MarketsUnited States: Risk appetite remained beleaguered amid a further rise in global sovereign bond yields and an increasingly strengthening US dollar. Equity market technicals continued to flash concerning signals with respect to market breadth. Crude oil futures did manage mild gains as geopolitical tensions in the Middle East remained fluid. A television interview with Fed Chair Powell on Sunday evening in NY hours Morgan Stanley does and seek...
