M Update Global Macro Commentary | Global February 21Morgan Stanley & Co. LLCMartin W Tobias, CFAStrategist Martin.Tobias@morganstanley.com +1 212 761-6076 Zoe K StraussStrategist Zoe.Strauss@morganstanley.com +1 212 761-0407 Eli 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+Min DaiStrategist Min.Dai@morganstanley.com +852 2239-7983 FOMC minutes accentuate upside risks from momentum in aggregate demand; USTs bear-flatten; AUD/NZD slips; European rates underperform cross-market; CLP lags despite copper rise; CNH pares gains against USD, closes unchanged; DXY at 103.99 (-0.1%); US 10y at 4.319% (+4.3bp).• January FOMC Minutes introduce an "upside risk" to both inflation and economic activity, as participants note "momentum in aggregate demand may be stronger than currently assessed."• UST sell-off deepens after the $16bn 20y auction tails by 3.3bp; the curve bear-flattens into the NY close with FOMC participants' focus on risk of a stall in progress toward price stability.• AUD/NZD (-0.2%) slips despite slightly more robust-than-anticipated 4Q23 Australian wage growth.• Despite limited data releases and ahead of release of preliminary February PMIs, European rates underperform on a cross-market basis.• CLP (-0.8%) leads LatAm currencies lower despite a rise in copper prices.• CNH retraces initial gains, alongside a rally in local equities, against USD to close little unchanged.Please refer to our recent publications and collaborations (Global Macro Strategy: February Index Extensions; South Africa Economics and Strategy: Budget Review; EM Sovereign Credit Strategy: Rich & Cheap Watch).Developed MarketsUnited States: After a healthy sense of apprehension across macro markets, minutes from the January FOMC meeting memorialized the unease of the Committee around premature rate cuts. “Most participants” noted the risks of moving too quickly to ease the stance of policy, while only “a couple of participants” pointed to downside risks to the economy associated with maintaining an overly restrictive stance for too long. The Committee even introduced a new “upside risk” to both inflation and economic activity, should momentum in aggregate demand be stronger than currently assessed. Should financial conditions become less restrictive than appropriate, this Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consi...
