• All major US indices finished lower after attempts to recover earlier losses were reversed into the last hour of trade
• APAC markets were subdued ahead of the FOMC and holiday-quietened conditions
• European futures are indicative of a firmer open with the Eurostoxx 50 future higher by 0.6%
• DXY traded sideways beneath 96.00. EUR/USD and GBP/USD hover around 1.13 and 1.35 respectively
• Microsoft shares recouped initial post-earnings losses to trade higher by 1.2% after-hours
• Looking ahead, highlights include FOMC & BoC Policy Announcements/Press Conferences, Supply from UK, Italy & Germany, Earnings from AT&T, General Dynamics, Nasdaq, Abbott, Boeing, Intel, Tesla

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US TRADE

• All major US indices finished lower after attempts to recover earlier losses were reversed into the last hour of trade as participants gear up for Wednesday's FOMC decision.
• S&P 500 fell 1.2% and failed to sustain the 4,400 level.
• DJIA closed with marginal losses of 0.2%.
• Nasdaq closed lower by 2.5%
• Russell 2000 ended the session with losses of 1.5%

APAC TRADE

EQUITIES

• APAC markets were subdued ahead of the FOMC and holiday-quietened conditions.
• Nikkei 225 (-0.4%) oscillated around the 27k level after record daily COVID-19 cases.
• KOSPI (-0.2%) faded opening gains with attention on earnings.
• Hang Seng (-0.3%) and Shanghai Comp. (+0.7%) were mixed as PBoC liquidity efforts and government support signals were offset as Evergrande default woes resurfaced.
• US equity futures were choppy but recouped early losses as Microsoft shares whipsawed post-earnings; e-mini S&P +0.2%. European futures are indicative of a firmer open with the Eurostoxx 50 future higher by 0.6% after the cash market closed higher by 0.7% yesterday.

FX

• DXY traded sideways beneath 96.00 as markets await the Fed policy announcement.
• EUR/USD was uneventful with a base at 1.1300
• GBP/USD holds on to the 1.3500 handle ahead of the potential release of the Sue Gray report.
• USD/JPY little changed below 114.00 amid lacklustre Tokyo mood.
• Antipodeans were rangebound with minimal support in AUD amid the holiday closure and as the trade weighted CFETS RMB basket Index rose to its highest since 2015 following another firm PBoC fix.

FIXED INCOME

• 10-year USTs took a breather from recent swings.
• 10-year JGBs were rangebound beneath 151.00 despite risk off mood in Japan and BoJ purchases.
• Bunds remained lacklustre near Tuesday's lows.

COMMODITIES

• WTI and Brent crude futures were rangebound as risk assets lacked commitment pre-FOMC.
• US Private Energy Inventory Data (bbls): Crude -0.9mln (exp. -0.7mln), Gasoline +2.4mln (exp. +2.5mln), Distillates -2.2mln (exp. -1.3mln), Cushing -1.0mln. (Newswires)
• Some OPEC+ delegates said the recent rally in oil prices has been stoked by geopolitical risks and fuel switching, rather than demand-side improvements alone, while this shift in focus away from demand could suggest the coalition is leaning towards another monthly increase of just 400k bpd in crude quotas at next week’s meeting after it failed to achieve its output target last month. (Argus)
• Qatar's Emir is to meet US President Biden on Monday to discuss Afghanistan and contingency plans to supply natural gas to Europe in the event of a Russian invasion of Ukraine. (Axios)
• White House Press Secretary Psaki said US is in discussions with major natural gas producers and are working to identify more volumes of non-Russian natgas in North Africa. (Newswires)
• US Department of Energy approved seven additional exchanges of 13.4mln bbls of crude oil for release from the SPR. (Newswires)
• IMF's Gopinath said escalation in Russia-Ukraine conflict could result in 'bigger, broad based increase in commodity prices' and could increase risks of entrenched inflation expectations, feeding into wage-price spirals. (Newswires)
• Spot gold was contained near USD 1850/oz and mirrored a flatlining dollar.
• Copper was little changed.

CRYPTO

• Crypto markets continued to retrace some of the prior day's slump.
• US House Committee is to hold a hearing on digital assets and stablecoin on February 8th. (Newswires)

NOTABLE APAC HEADLINES

• PBoC injected CNY 200bln via 14-day reverse repos with the rate at 2.25% for a CNY 100bln net injection. (Newswires)
• US House Speaker Pelosi released the China competitiveness bill related to investments in semiconductors and supply chains. (Newswires)
• Evergrande (3333 HK) offshore bondholders did not receive dollar coupon payments due Monday and the Co. is to hold investor call with financial advisers today at 13:00GMT/08:00EST. (Newswires)
• BoJ Summary of Opinions from January meeting stated consumer inflation is likely to gradually accelerate as more firms pass on costs to households and the output gap improves but noted that it's hard to achieve BoJ's price target by end of fiscal 2023. Furthermore, it stated that consumer inflation may temporarily approach 2% from April onwards although key is whether the economy has momentum for such a move to be sustainable, while it reiterated the BoJ must take additional easing steps as needed and it is appropriate to maintain current forward guidance on interest rates and monetary base commitment. (Newswires)

EUROPE-SPECIFIC HEADLINES

• EU Brexit negotiator Sefcovic told member states there is no prospect of an imminent breakthrough in NI Protocol negotiations, according to RTE's Connelly. (RTE)

GEOPOLITICS

• US President Biden said personally sanctioning Russian President Putin would be possible, while it was also reported that US and EU are close on agreeing Russian financial sanctions over Ukraine. (Newswires/FT)
• US State Department said the US hasn't seen the de-escalation that is necessary if diplomacy and dialogue with Russia is to prove successful, while US Department of Defense Spokesman Kirby said the US will not rule out adding further troops to the already 8,500 on alert. (Newswires)
• Ukrainian President Zelensky said the situation in the east is under control and they are working to establish that the meeting of Presidents of Ukraine, Russia, Germany, and France takes place as soon as possible. (Newswires)
• Ukraine envoy to Japan said that they are fully committed to a diplomatic solution to the current tensions with Russia, while the envoy also stated that a full-scale war is very difficult to expect although they may see more localised conflict. (Newswires)

NOTABLE US HEADLINES

• US President Biden will meet with CEOs of Ford (F), GM (GM), Microsoft (MSFT), Siemens (SIE), Corning (GLW) and others on Wednesday regarding Build Back Better. (Newswires)
• US Senate will hold hearings for Sarah Bloom Raskin, Lisa Cook and Philip Jefferson nominations to the Fed board on February 3rd.
• GOP Senator Toomey raised concerns over Fed nominees' lack of diversity and oil groups were reported to prepare letters in opposition to Sarah Raskin's Fed nomination. (Newswires)
• US House Speaker Pelosi will seek re-election. (MSNBC)
• Microsoft (MSFT) Q2 2022 (USD): EPS 2.48 (exp. 2.31), Revenue 51.73bln (exp. 50.88bln). Co. sees Q3 product revenue between USD 15.6bln-15.8bln and expects Azure revenue growth to increase significantly, while it guides Q3 rev. USD 48.5bln-49.3bln (implied) vs exp. USD 47.7bln. (Newswires)