• European bourses are mixed and in proximity to the unchanged mark following an indecisive open; sectors similarly mixed.
• US futures are also mixed/unchanged, action directionally following European peers but has been more contained thus far.
• China State funds have reportedly purchased stocks to slow the market decline, according to Bloomberg.
• DXY firmer around 95.50 pivot point as UST curve flips and flattens; peers mixed but magnitudes currently relatively slim.
• USTs remain soft while Bunds derive support from ECB speak and the broader tone; US issuance due later.
• WTI & Brent are pressured but remain within recent parameters as geopolitics continues to dominate.

LOOKING AHEAD

• US International Trade, Canadian Trade Balance, EIA STEO, Supply from the US, Earnings from Pfizer, Warner Music, SYSCO.

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EUROPEAN TRADE

EQUITIES

• European bourses are mixed and in proximity to the unchanged mark following an indecisive open.
• Performance briefly picked up amid reports regarding China State funds, but this was shortlived and followed by a pullback.
• Sectors are mixed as Basic Resources & Banks outperform on base metals/yields while Tech lags on the latter and as the NQ probes negative territory.
• US futures are similarly mixed/unchanged, action directionally following European peers but has been more contained thus far.

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FX

• DXY firmer around 95.50 pivot point as UST curve flips and flattens.
• Euro hands back more ECB inspired gains as President Lagarde warns against hasty hawkish conclusions.
• Loonie and NOK recoil in tandem with WTI and Brent.
• Yen yields to Buck bounce and technical headwinds after failing to breach resistance.
• Sterling boosted by EUR/GBP reversal, but Cable faces upside option expiry interest.
• Former RBA board member Edwards sees the RBA to start moving rates in August and thinks there could be four rate hikes this year, according to WSJ. Also, ANZ Bank sees every meeting by the RBA in June to be live.

Notable FX Option Expiries, NY Cut:

• EUR/USD: 1.1200 (1.24BN), 1.1250-60 (977M), 1.1300-10 (1.4BN), 1.1320-25 (950M), 1.1350 (597M), 1.1380 (551M), 1.1400 (1.3BN), 1.1570-75 (380M), 1.1600 (396M), 1.1750 (254M)
• EUR/CHF: 1.0475 (442M), 1.0595-00 (1.24BN)
• GBP/USD: 1.3495-10 (1.05BN), 1.3560 (1.53BN)
• Full list available here

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FIXED INCOME

• A more concerted rebound in EZ debt after ECB President Lagarde tempers tightening expectations.
• Gilts lag as the DMO issues a new 2071 bond via syndication.
• US Treasuries retain softer tone and fractionally steeper trajectory ahead of the first leg of Quarterly Refunding.
• UK 2071 Gilt deal size set at GBP 4.25bln, according to a bookrunner; demand was in excess of GBP 38bln, guidance 3.0bp below the 2017 Gilt at the last update.

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COMMODITIES

• WTI and Brent have been extending to the downside throughout the European morning, with focus firmly on geopolitics; sending the benchmarks to lows of USD 89.01/bbl & USD 90.18/bbl
• Numerous updates regarding Russia after yesterday's talks with Macron who voiced progress; albeit, the Kremlin as expected highlighted a failure to achieve a deal.
• Iranian Vienna talks resume today and initial commentary has Iran sounding somewhat less optimistic.
• Spot gold/silver are softer but contained and in familiar levels around numerous DMAs.

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NOTABLE EUROPEAN HEADLINES

• China State funds have reportedly purchased stocks to slow the market decline, according to Bloomberg
• French Finance Minister Le Maire says we are moving towards a monetary policy normalisation, rates will increase.
• Italian League leader Salvini says the government is working on an emergency decree which is worth at least EUR 5bln, designed to curb energy bills.

DATA RECAP

• UK BRC Retail Sales YY (Jan) 8.1% (Prev. 0.6%); Total Sales YY (Jan) 11.9% (Prev. 2.1%), largest increase since May last year.
• Barclaycard UK January Consumer Spending rose 11.9% compared to January 2019, smallest increase since April last year.

US-SPECIFIC HEADLINES

• US House Rules Committee is preparing a stopgap spending bill to fund the government through to March 11th and avert a shutdown next week, according to Fox's Pergram.
• US President Biden's administration has written to EU's Schwab, who is leading the Digital Market Act negotiations, to relay concerns around the implementation period for the legislation; in response, Schwab accused US officials of using security concerns to perpetuate big tech's power, via FT citing letters.

Click here for the US Early Morning note.

DATA RECAP

US NFIB Business Optimism Index (Jan): 97.1 (Prev. 98.9)

APAC TRADE

EQUITIES

• Asian stocks were mixed after the choppy mood in the US with global newsflow dominated by geopolitical headlines despite a lack of developments.
• ASX 200 (+1.1%) was led by miners and with the top-weighted financials sector lifted after earnings updates from Macquarie and Suncorp.
• Nikkei 225 (+0.1%) was supported by favourable currency flows and after US agreed to roll back Trump-era steel tariffs on a quota of Japanese steel products, but with upside limited after disappointing data including the miss on Household Spending and Labour Cash Earnings.
• Hang Seng (-1.0%) and Shanghai Comp. (+0.7%) initially pressured with Hong Kong announcing tighter COVID-19 restrictions and amid US-China related frictions in which WuXi Biologics slumped more than 30% and its shares were halted after the inclusion of two units in the US ‘unverified’ list, while tech was also subdued with the ChiNext board now eyeing a bear market.

NOTABLE APAC HEADLINES

• PBoC injected CNY 20bln via 7-day reverse repos with the rate at 2.10% for a CNY 130bln net drain.
• PBoC set USD/CNY mid-point at 6.3569 vs exp. 6.3543 (prev. 6.3580)
• US announced restrictions on transactions with 33 Chinese organisations whose ownership is deemed to be unverified, according to Xinhua.
• WuXi Biologics (2269 HK) said the inclusion of its two subsidiaries to the US unverified list will have no impact on business or services to partners and it is pursuing interim measures to remove them from the list, according to Reuters.
• US announced a new Section 232 tariff agreement with Japan which will remove tariffs on up 1.25mln tons of Japanese steel products, although the deal excludes aluminium and requires steel imports to be melted and poured in Japan for duty-free access, according to Reuters.
• Nvidia (NVDA) - SoftBank (9984 JT) deal to sell Arm unit to Nvidia collapses amid serious concerns on effect to competition, according to sources cited by FT. (FT) These sources were subsequently confirmed. Softbank is reportedly planning an IPO for Arm, according to BloombergTV.

DATA RECAP

• Japanese All Household Spending MM (Dec) 0.1% vs. Exp. 0.7% (Prev. -1.2%); YY (Dec) -0.2% vs. Exp. 0.3% (Prev. -1.3%)
• Japanese Current Account NSA JPY (Dec) -370.8B vs. Exp. 73.5B (Prev. 897.3B)
• Australian NAB Business Confidence (Jan) 3 (Prev. -12); Conditions (Jan) 3 (Prev. 8)

GEOPOLITICS

• Russian President Putin said there is no alternative to Minsk accords on Ukraine and hopes that the situation around Ukraine can eventually be resolved peacefully. Putin warned that European countries will be drawn to military conflict with Russia if Ukraine joins NATO and there will be no winners, but added Russia will do everything from its side to find compromises that suit everyone, according to Reuters. Furthermore, the Kremlin says Russia and France were not able to strike a deal in yesterday's talks, as expected.
• French President Macron said Putin agreed to review "concrete" de-escalation steps and saw terms of converging views, according to Reuters.
• Russia says six of its warships are heading to the Black Sea area for drills, according to Interfax; Warships are in planned transit from Mediterranean Sea, via Reuters.
• Ukraine's army will conduct military drills from Feb. 10 to Feb. 20 in response to Russian exercises in Belarus near the Ukrainian northern border, according to journalist Stein.
• UK PM Johnson noted in The Times Op-Ed that he still believes diplomacy can prevail and defuse the Ukraine crisis, while he added UK Defence Secretary Wallace and Foreign Secretary Truss will travel to Moscow soon.
• Iranian Government spokesman says Iran is not looking for an interim agreement in Vienna, via AJA Breaking. Subsequently, Iran's Supreme Leader Khamenei criticized US President Biden and said he damages US reputation, via Reuters.
• North Korea reportedly targeted the IAEA for cyberattacks, according to Nikkei. In relevant news. North Korea denied allegations it conducted cryptocurrency thefts and cyberattacks on other countries, while it slammed the US as being the hacking empire, according to Yonhap.
• Chinese Foreign Ministry expresses opposition to the US equipment sale to Taiwan, via Reuters.