• European bourses are pressured, Stoxx 600 -0.8%, after a negative US close on hot-CPI was exacerbated by further hawkish Fed speak/speculation.
• US futures are in-fitting with their European peers with the NQ -0.8%, modestly underperforming.
• Buck boosted by hawkish rate rise and balance sheet reduction preferences from Fed’s Bullard; peers pressured across the board.
• Bonds lick some wounds post-hot US inflation metrics, but curves stay flat amidst heightened Fed tightening expectations; BTPs underperform.
• WTI and Brent are firmer in an attempt to recuperate from yesterday's pressure as the overall geopolitical situation remains tense.
• Looking ahead highlights include US University of Michigan Preliminary, BoC Survey & earnings from Under Armour.

As of 11:20GMT/06:20EST

LOOKING AHEAD

• US University of Michigan Preliminary, BoC Survey & earnings from Under Armour

Click here for the Week Ahead preview

EUROPEAN TRADE

EQUITIES

• European bourses are pressured, Stoxx 600 -0.8%, after a negative US close on hot-CPI was exacerbated by further hawkish Fed speak/speculation.
• Sectors within Europe are all in the red though Tech lies as the clear laggard amid rate expectations.
• US futures are in-fitting with their European peers with the NQ -0.8%, modestly underperforming.

Click here for more detail.

FX

• Buck boosted by hawkish rate rise and balance sheet reduction preferences from Fed’s Bullard.
• Aussie undermined as risk sentiment sours amidst heightened inflation concerns, but RBA Governor remains patient.
• Euro recoils after another effort to manage hyper market tightening expectations by ECB President Lagarde.
• Rouble unable to benefit from 100 bp CBR hike as geopolitical angst rumbles on.
• CBR Key Rate (Feb) 9.50% vs. Exp. 9.50% (Prev. 8.50%); if situation develops in-line with the baseline forecasts they hold open the prospect of further hikes in coming meetings. Key Rate Forecast (2022): 9.0-11.0% (prev. 7.3-8.3%). Click here for more detail.

Click here for more detail.

Notable FX Option Expiries, NY Cut:

EUR/USD: 1.1300 (1.82BN), 1.1340-50 (610M), 1.1400 (506M), 1.1475 (590M), 1.1495-05 (2.93BN), 1.1550 (1.0BN), 1.1600 (609M)

USD/CAD: 1.2570-75 (545M), 1.2600-10 (480M), 1.2635 (256M), 1.2650-60 (4.7BN), 1.2665-75 (1.0BN), 1.2680-90 (1.7BN), 1.2695-00 (655M), 1.2710 (292M), 1.2725-30 (510M), 1.2795-00 (740M), 1.2810-15 (500M)

Full list available here

FIXED INCOME

• Bonds lick some wounds post-hot US inflation metrics, but curves stay flat amidst heightened Fed tightening expectations.
• UST yields still elevated as 2022 FOMC voter Bullard gets aggressive and mentions inter-meeting moves and 100 bp hikes by end H1.
• BTPs bogged down by issuance and hardly helped by Italy's Treasury Debt chief claiming no significant selling.
• Italian Treasury Debt Head says they have not seen significant selling trend in Italian gov't bonds; says a hike in interest rates will reflect on the average cost of debt very slowly. Italy's average cost of debt will continue below nominal growth rate.

Click here for more detail.

COMMODITIES

• WTI and Brent are firmer in an attempt to recuperate from yesterday's pressure as the overall geopolitical situation remains tense.
• US President Biden said he will work to bring gas prices down and strengthen supply chains to bring the cost of energy and goods down, according to the White House.
• IEA OMR: Global oil supply 98.7mln BPD (+560k BPD); oil market is still set to shift to a surplus in Q2/H2-2022. OPEC+ effective spare capacity could fall to 2.5mln BPD (prev. 5.1mln BPD) by end-2022.
• Spot gold and silver are continuing to err lower though the yellow-metal has settled just above the 21-DMA at 1819/oz.
• Brazilian miner Vale Q4 iron ore production at 82.47mln tons and its 2021 iron ore output reached 315.61mln tons. Click here for more detail.

CRYPTO

• Crypto markets remain relatively contained, in-fitting with APAC trade; Bitcoin -0.6%.

NOTABLE EUROPEAN HEADLINES

• ECB's Lagarde said raising rates would not solve any of the current problems and that they don't want to choke off the recovery. Lagarde is confident inflation will fall back during the year and stated the EU situation cannot be compared with US and UK, while she added they will act if needed but all moves will be gradual, according to Reuters citing Redaktionsnetzwork Deutschland.
• UK PM Johnson and Chancellor Sunak are seeking to reform Solvency II rules, to allow insurance names to invest into infrastructure, according to FT sources; BoE will announce the reform details later in the year.
• UK PM Johnson is seeking closer ties with China via the the restart of trade discussions that have been on hold, via Politico; trade department is to organise high-level ministerial discussions with the Chinese gov't.

DATA RECAP

• UK GDP Estimate MM (Dec) -0.2% vs. Exp. -0.6% (Prev. 0.9%); YY (Dec) 6.0% vs. Exp. 6.3% (Prev. 8.0%)
• UK GDP Preliminary QQ (Q4) 1.0% vs. Exp. 1.1% (Prev. 1.1%); YY (Q4) 6.5% vs. Exp. 6.4% (Prev. 6.8%)

US-SPECIFIC HEADLINES

• Fed's Barkin (2024 voter) said he would like to be in a position to move where they need to move in a year from now, which means getting back to pre-pandemic rate levels by then, while he supports a more forward-leaning notion of how to normalise rates but would have to be convinced of a screaming need to do a 50bps hike now, according to Reuters.
• SGH Macro's Tim Duy noted that he would not be surprised by an inter-meeting move either Friday or Monday although a Bloomberg article stated that Fed officials are in no hurry to hike rates before the March meeting and a 50bps move in March is not yet likely despite the speculation.
• Federal Reserve released scenarios for 2022 bank stress tests with 34 large banks to be tested against a severe global recession with heightened stress in commercial real estate and corporate debt markets, according to Reuters.

Click here for the US Early Morning note.

APAC TRADE

EQUITIES

• Asian stocks declined after hot US CPI and hawkish Bullard comments fuelled expectations for 7 Fed hikes this year.
• ASX 200 (-1.0%) was pressured with the tech sector suffering the brunt of the higher yield environment.
• Nikkei 225 was closed.
• Hang Seng (-0.1%) and Shanghai Comp. (-0.7%) were also subdued but with losses in the mainland stemmed after stronger than expected Aggregate Financing data from China and with press reports speculating that the PBoC could ease again next week.

NOTABLE APAC HEADLINES

• PBoC injected CNY 20bln via 7-day reverse repos with the rate at 2.10% for a CNY 180bln net drain
• PBoC set USD/CNY mid-point at 6.3681 vs exp. 6.3665 (prev. 6.3599)
• RBA Governor Lowe reiterated the board is prepared to be patient and that they have scope to wait and see how the data develops and how some of the uncertainties are resolved. Lowe recognises there is a risk to waiting but there is also a risk to moving too early and noted a big deviation between what they expect to do on rates and what markets expect, while he would like to see a couple more CPIs before deciding on rates, according to Reuters.
• RBNZ said OCR expectations continue to increase in the short and medium-term with mean estimate for the OCR on year ahead at 2.11% and mean estimates two years ahead at 2.47%, according to Reuters.

DATA RECAP

• New Zealand RBNZ 1-Year Inflation Expectations (Q1) 4.4% (Prev. 3.7%); 2-Year Inflation Expectations (Q1) 3.3% (Prev. 3.0%)

GEOPOLITICS

• Russian Kremlin envoy Kozak said there were no results at the meeting that could be transformed into an agreement and they hope that Ukraine is wise enough not to start military action against its own citizens, according to Reuters.
• Russia's Kremlin notes that yesterday's 4-Nation (Normandy) talks regarding Ukrainian tensions yielded no results.
• Ukraine's Head of the Presidential Office Yermak said all parties confirmed they are ready to continue negotiations but could not agree on signing of a document in Berlin, while he added everyone expressed support for the cease-fire and there is a will to continue negotiating in Russia talks, according to Reuters.
• US President Biden said Americans should leave Ukraine now and that things could turn crazy very quickly, while the State Department also issued an advisory that Americans should depart Ukraine now, according to Reuters.
• US Secretary of State Blinken says they continue to see very troubling signs re. Russian escalation over Ukraine, continues to draw down its embassy in Ukraine, an invasion of Ukraine could occur at any point, including during the Beijing Olympics; notes new forces are arriving near the border.
• NATO Secretary General Stoltenberg says they are assessing if longer-term presence in the eastern-flank is needed.