• US stocks finished higher as buying late in the session helped stocks breakout from early tentativeness (S&P 500 +0.6%)
• Asian stocks were positive as the region took impetus from Wall St's best 3-day performance since 2020
• US equity futures traded mostly higher overnight led by the Nasdaq 100 futures after strong Alphabet and AMD earnings; E-mini S&P +0.5%
• European futures are indicative of a positive open with the Eurostoxx 50 future up by 0.8% after the cash market closed higher by 1.2% yesterday
• DXY was uneventful and languished near the prior day’s lows as continued upside in stocks dampened haven appeal
• Looking ahead, highlights include EZ CPI (Flash), US ADP, Australian Composite/Services PMI, OPEC+ Meeting, Speeches from BoC’s Macklem & Gravelle, US Quarterly Refunding, Earnings from Meta, AbbVie, T-Mobile, Novartis, Santander and Vodafone.

US TRADE

• US stocks finished higher as buying late in the session helped stocks breakout from early tentativeness following ISM data which saw a hefty jump in the prices paid component and stoked inflationary concerns.
• CLOSES: S&P 500 +0.6% at 4,542, Nasdaq 100 +0.6% at 15,019, Dow Jones +0.8% at 35,404, Russell 2000 +1% at 2,045.

APAC TRADE

EQUITIES

• Asian stocks were positive as the region took impetus from Wall St's best 3-day performance since 2020.
• ASX 200 (+1.2%) was led higher by outperformance in the commodity related sectors and after RBA Governor Lowe stuck to his dovish message that the board is prepared to be patient and the end of QE does not imply an imminent hike.
• Nikkei 225 (+1.7%) climbed above 27,500 amid a predominantly weaker currency and as Japan continues to hold off on considering a state of emergency.
• US equity futures traded mostly higher overnight led by the Nasdaq 100 futures after strong Alphabet and AMD earnings; E-mini S&P +0.5%
• European futures are indicative of a positive open with the Eurostoxx 50 future up by 0.8% after the cash market closed higher by 1.2% yesterday.

FX

• DXY was uneventful and languished near the prior day’s lows as continued upside in stocks dampened haven appeal.
• EUR/USD climbed above 1.1250 but with upside capped near yesterday’s peak, while focus turns to inflation data.
• GBP/USD held on to recent gains amid expectations of a rate hike this week, UK BRC prices rose most since 2012.
• USD/JPY remained choppy beneath 115.00, although JPY crosses were propped up by the risk appetite.
• Antipodeans were steady with gains limited after RBA Governor Lowe reiterated a patient tone and kept the door open for when the first rate hike will occur, while New Zealand jobs and wages data mostly missed expectations although the Unemployment Rate fell to the lowest on record.

FIXED INCOME

• 10-year USTs traded flat after yesterday’s pullback beneath 128.00 as hot ISM Prices Paid stoked inflation concerns.
• 10-year JGBs were choppy with support from the BoJ’s presence in the market for JPY 1.2tln of JGBs, partially offset by the positive risk appetite.
• Bund futures nursed some of the prior day’s losses but failed to reclaim 169.00.

COMMODITIES

• WTI and Brent gained amid the positive risk tone, subdued USD and surprise crude draw in private inventories.
• Spot gold was rangebound and gradually trickled below USD 1800/oz.
• Copper traded sideways near the prior day's highs due to the constructive mood but with gains capped by closures.
• US Private Inventory Data (bbls): Crude -1.6mln (exp. +1.5mln), Cushing -1.0mln, Gasoline +5.8mln (exp. +1.6mln), Distillates -2.5mln (exp. -1.5mln)
• OPEC+ JTC slightly trimmed 2022 supply surplus forecast to 1.3mln BPD (prev. 1.4mln BPD) and cautioned against continued COVID Omicron risks, central bank policy shifts, underinvestment and geopolitical risks, but expects world oil demand to surpass pre-COVID levels in H2 22, according to Argus.
• US is talking with countries and suppliers on how to meet any shortage of natural gas if there is an invasion of Ukraine, according to Reuters.
• Russian President Putin said increasing gas exports to Hungary by 1BCM per year is not a problem for Russia and that European partners may have gas problems next year but Hungary will not thanks to Russian gas, according to Reuters.
• Texas Governor Abbott warned Texas roads could become treacherous over the coming days amid winter storm and said Texas has over 15k MW of excess power available, but later stated that no one can guarantee there won't be power outtages, according to Axios.

NOTABLE APAC HEADLINES

• US House will hold a procedural vote on the China competition bill today, according to a source cited by Reuters.
• RBA Governor Lowe said they are in sight of achieving inflation and unemployment goals, while he reiterated it is too early to conclude the inflation is sustainably within the target range and the end of bond purchases does not mean a Cash Rate hike is imminent. He also said it remains to be seen if rates will increase this year and there are clearly scenarios where they would be hiking this year, but added it is still plausible that the first rate hike is a year or longer away, according to Reuters.

DATA RECAP

• New Zealand HLFS Job Growth QQ* (Q4) 0.1% vs. Exp. 0.3% (Prev. 2.0%)
• New Zealand HLFS Unemployment Rate* (Q4) 3.2% vs. Exp. 3.4% (Prev. 3.4%, Rev. 3.3%)
• New Zealand Labour Cost Index - QQ* (Q4) 0.7% vs. Exp. 0.9% (Prev. 0.7%)

EUROPE-SPECIFIC HEADLINES

• UK PM Johnson reportedly attended a colleague leaving party on January 14th, 2021 during a COVID lockdown period, according to The Guardian.
• UK PM Johnson is set to unveil billions of GBP in state-backed loans to lower the impact of rising energy prices on households. (Telegraph)
• The Times' Shadow MPC says the BoE should hike rates by at least 25bps on February 3rd; 5/9 voted for a 25bps hike, 2/9 voted for a 50bps hike and 2/9 voted for a 75bps hike. (Times)
• EU will outline a more aggressive approach to setting global standards for cutting-edge and green technologies in an effort to counter China's influence, according to FT.

DATA RECAP

• UK BRC Shop Price Index (YY) 1.5% (Prev. 0.8%)

GEOPOLITICS

• US reportedly told the Kremlin it is willing to discuss giving Russia a way to verify there aren’t Tomahawk cruise missiles stationed at NATO bases in Romania and Poland on condition Russia shares similar info on certain bases in Russia, according to Bloomberg sources.
• US Defense Secretary Austin will travel to Europe later this month to meet with NATO allies regarding Ukraine, according to Reuters citing a VOA reporter.
• Joint UK-Ukraine statement noted that Ukraine's President agreed to maintain peace in the Black Sea region, while they agreed to work together to strengthen Ukraine's security and ability to defend itself, as well as its energy security. Furthermore, UK PM Johnson said he will speak to Russian President Putin on Wednesday, according to Reuters.
• Russian President Putin said the west did not satisfy its two main security demands and also noted that missile launches in Romania and Poland are a threat to Russia. Putin said US wants to contain Russia in which it is using Ukraine to do that and could drag Russia into war with the aim of imposing sanctions on Moscow, while he added that Russia wants to avoid such negative scenarios and hopes dialogue on Ukraine will continue, according to Reuters.
• Russian press RT.com tweeted “Military personnel 'killed' after a Ukrainian drone strike on the frontline in Eastern Ukraine... One person has been killed Tuesday according to the head of the self-declared Donetsk People's Republic”.
• US requested a UN Security Council meeting on Thursday regarding North Korea's latest missile launch, according to diplomats, according to Reuters.
• Turkish Defence Ministry announced air strikes against Kurdish militant targets in Iraq and Northern Syria, according to Reuters.

NOTABLE US HEADLINES

• Fed's Bullard (2022 voter) said he would support a rate increase at the March meeting and if he was to decide today, he would vote to hike in May as well but does not think a 50bps increase really helps right now. Bullard is thinking of the March meeting and Q2 for potential rate hikes, then getting going on the balance sheet reduction, while thinks market pricing in five hikes this year is not too bad a bet, according to Reuters.
• US Senator Brown said the Senate Banking Committee will vote Feb. 15 on Federal Reserve Chair Jay Powell for a second term, as well as four other Fed nominees, according to Punchbowl.
• US Moderate Democratic Senator Manchin responded "it's dead" when asked about Build Back Better, while he later said that whatever they come up with, it will be a different bill, according to CNN and NBC.
• US House Majority Leader Hoyer tested positive for COVID-19, according to Fox's Pergram.
• Alphabet Inc (GOOGL) Q4 2021 (USD): EPS 30.69 (exp. 27.32), Revenue 75.33bln (exp. 72.13bln), approved 20-for-1 stock split in the form of a one-time special stock dividend.