• Europe Stoxx 600 -2.3% on the session, as sentiment continues to deteriorate following a softer open/APAC handover.
• Pressure that has seen the NQ flip from the US outperformer to the underperformer, -0.5%.
• Dollar firmer as longs pare back from overextended long base ahead of the Fed and GS flags risks of the FOMC hiking at each meeting this year kicking off in March.
• Core debt climbs to new recovery highs amidst another downturn in risk appetite; BTPs in focus.
• Crude benchmarks are softer this morning; downside in the space comes amid the intensification of pressure seen in Equities this morning; eroding geopolitical driven upside that was in-play overnight.

As of 11:05GMT/06:05EST

LOOKING AHEAD

• US Flash PMIs, Italian Presidential Elections, primer here, and US supply.

Click here for the Week Ahead preview

EUROPEAN TRADE

EQUITIES

• Europe Stoxx 600 -2.3% on the session, as sentiment continues to deteriorate following a softer open/APAC handover.
• Pressure that has seen the NQ flip from the US outperformer to the underperformer, -0.5%
• In Europe, sectors are all in the red with Telecom the relative outperformer on stock specifics while Travel & Tech names post notable losses.

Click here for a detailed summary.

FX

• Dollar firmer as longs pare back from over extended long base ahead of the Fed and GS flags risks of the FOMC hiking at each meeting this year kicking off in March.
• Yen and Franc outperform on safe haven grounds.
• Euro and Pound hampered by mixed to soft preliminary PMIs.
• Rouble is rattled by heightened concerns about Russia rift with the West over Ukraine.
• Aussie undermined by mostly contractionary flash PMIs.
• Yuan goes from strength to strength after PBoC cuts 14 day reverse repo rate, adds more liquidity and sets a firmer CNY midpoint rate.

Click here for a detailed summary.

Notable Expiries, NY Cut:

• AUD/USD: 0.7195-05 (960M), 0.7225-35 (1.83BN)
• Click here for the full list.

FIXED INCOME

• Core debt climbs to new recovery highs amidst another downturn in risk appetite.
• Italian BTPs elevated before voting starts in the Presidential Election race.
• US 2yr due later, Bond Auction Preview available here.

Click here for a detailed summary.

COMMODITIES

• Crude benchmarks are softer this morning, albeit, they remain a similar magnitude above overnight lows.
• Downside in the space comes amid the intensification of pressure seen in Equities this morning; eroding geopolitical driven upside that was in-play overnight.
• Spot gold and silver are diverging modestly with the yellow metal bid on the risk tone, while silver has continued to dip since it briefly surpassed the 200-DMA at USD 24.59/oz on the 20th.
• Iraq's Ministry of Electricity announces the suspension of the Iranian electricity and gas line, via Sky News Arabia. (Sky News)
• Russia's Norilsk Nickel reiterates FY 2022 production guidance; Oktyarbsky and Taimysky mines and the Norilsk concentrator have recovered and are operating at full capacity. (Newswires)

Click here for a detailed summary.

NOTABLE EUROPEAN HEADLINES

• UK Downing Street aides admitted holding back information as part of the Sue Gray inquiry on lockdown parties. (LBC)
• Sue Gray has interviewed police who guard Downing Street. Their testimonies could form a key part of her report. (Telegraph)
• UK Tory MPs were warned that they risk undoing Brexit and putting the country in perpetual lockdowns if they attempt to oust UK PM Johnson in the week ahead. (Express)
• UK Foreign Secretary Truss said ahead of her meeting with EU VP Sefcovic that there is a deal to be made regarding the Northern Ireland protocol that protects peace, stability and works for all sides. (Newswires)
• ECB's Holzmann said there is a great deal of uncertainty regarding how long inflation will remain above the central bank's target of around 2%. (Newswires)
• ECB’s Rehn said inflation drivers will subside over the course of the year and expects euro zone inflation of around 2% in the next two years, while he added a rate hike in 2023 is logical in the case of no new disruptions. (Handelsblatt)
• Former Italian PM Berlusconi dropped his long-shot bid for the Italian presidency. (FT)
• WHO said the end of the pandemic in Europe is plausible after Omicron. In relevant news, Israel said a fourth dose of the COVID-19 vaccine for over-60s made them twice as resistant to infection and three times more resistant to serious illness compared with those in the same age group that are thrice-vaccinated. (Newswires)

DATA RECAP

• EU Markit Composite Flash PMI (Jan) 52.4 vs. Exp. 52.6 (Prev. 53.3). Click here for commentary.
• EU Markit Manufacturing Flash PMI (Jan) 59.0 vs. Exp. 57.5 (Prev. 58.0); Services Flash PMI (Jan) 51.2 vs. Exp. 52.2 (Prev. 53.1)
• UK Flash Composite PMI (Jan) 53.4 vs. Exp. 55.0 (Prev. 53.6). Click here for commentary.
• UK Flash Services PMI (Jan) 53.3 vs. Exp. 54.8 (Prev. 53.6); Manufacturing PMI (Jan) 56.9 vs. Exp. 57.9 (Prev. 57.9)

US-SPECIFIC HEADLINES

• NIH’s Dr Fauci stated that the US Omicron outbreak is going in the right direction and that the trend looks good but uneven. It was also reported that the FDA took action to expand use of treatment for patients with mild-to-moderate COVID-19 including expanding the use of Remdesivir to some non-hospitalised adults and paediatric patients.(Newswires)
• Goldman Sachs sees the risk of Fed tightening at every meeting beginning in March. (Goldman Sachs)

Click here for the US Early Morning note.

APAC TRADE

• APAC markets were mostly lower after the worst weekly performance on Wall St since the start of the pandemic.
• ASX 200 (-0.5%) was pressured by losses in mining names and following weaker production by South32.
• Nikkei 225 (+0.2%) initially fell as more areas sought virus measures but gradually recovered on JPY outflows.
• Hang Seng (-1.2%) and Shanghai Comp. (+0.1%) were somewhat varied with large tech selling in Hong Kong although the mainland was cushioned after a PBoC liquidity injection and 14-day reverse repo rate cut.

NOTABLE APAC HEADLINES

• PBoC injected CNY 150bln via 14-day reverse repos with the rate lowered by 10bps to 2.25% for a net CNY 50bln injection and stated it will keep liquidity stable before the spring festival. (Newswires)
• China Environment Ministry said weather conditions ahead of Winter Olympics is very unfavourable for air quality, while it added that Beijing and Hebei authorised to take necessary action to curb operations of polluting companies with relatively small impact. (Newswires)
• Taiwan reported 39 Chinese warplanes entered its air defence identification zone which was the largest incursion since October. (Al Jazeera)
• Japan government is to place 16 additional areas under COVID-19 quasi-state of emergencies. (Newswires)

DATA RECAP

• Japanese Manufacturing PMI (Jan P) 54.6 (Prev. 54.3); Services PMI (Jan P) 46.6 (Prev. 52.1); Composite PMI (Jan P) 48.8 (Prev. 54.5)
• Australian Manufacturing PMI (Jan P) 55.3 (Prev. 57.7); Services PMI (Jan P) 45.0 (Prev. 55.1); Composite PMI (Jan P) 45.3 (Prev. 54.9)

GEOPOLITICS

• US Secretary of State Blinken warned a significant US response would be triggered if one more Russian force entered Ukraine in an aggressive way and stated that they are prepared to deal with a range of options Russia may take towards Ukraine. (CNN)
• US State Department authorised the voluntary departure of US direct hire employees and ordered the departure of eligible family members of diplomats from the Embassy in Kyiv, while it added there are reports Russia is planning significant military action against Ukraine. US State Department advised Americans do not travel to Ukraine due to increased threats of Russian military action and COVID-19, while it also advised not to travel to Russia due to ongoing tension along the border with Ukraine and noted potential for harassment against US citizens. (Newswires)
• NATO and allies are to send more ships and jets to enhance deterrence and defence in Eastern Europe, according to NATO; allies will put forces on standby and send further ships and fighter jets to NATO deployments in Eastern Europe. (Newswires)
• UK Deputy PM Raab said there will be severe economic consequences if Russia installs a puppet regime in Ukraine and that they would readily look at financial sanctions but added that it is extremely unlikely UK would send troops to defend Ukraine, Ukrainian presidential office said Britain’s claims of Russia wanting to install a puppet government need to be considered seriously and that this confirms the west should act tough towards Russia now. (Newswires)
• UK Foreign Office has begun withdrawing staff from the embassy in Kiyv, Ukraine, via the BBC; amid increasing fears that Russia may be preparing an invasion. Decision not the result of specific intelligence targeting British diplomats. (BBC)
• Iran says they are closer than ever to securing a nuclear deal. Prior to this, US Special Envoy for Iran Malley said the US is unlikely to reach an agreement with Iran to save the 2015 Iran nuclear deal unless Iran releases four US citizens 'held hostage'. Subsequently, Iran rules out any preconditions from the US in reviving the 2015 nuclear deal, including the release of prisoners; spokesperson blames the US' lack of readiness as the main reason for the slow pace of nuclear talks. (Newswires)
• 13 Chinese military craft entered Taiwan's ADIZ on Monday. (Newswires)
• Twitter sources reported explosions in Abu Dhabi and the UAE later announced it thwarted two Houthi ballistic missiles targeting UAE which resulted in no casualties. (Newswires/Twitter)