• Markets saw risk-off trade following reports of mounting tensions in Ukraine via Russian press – awaiting confirmation from Ukraine/NATO
• Russian-backed separatists claimed that Ukraine opened fire in the Donbas region;  a US official said there are more Russian troops at the border and not fewer
• FOMC minutes saw little new information; markets reacted to the lack of hawkish surprises
• Crude futures collapsed post-settlement on positive nuclear deal headlines from both the US and Iran
• Looking ahead, highlights include US IJC, Japanese CPI, CBRT Policy Announcement, ECB’s Lane, Schnabel, de Cos, Fed’s Bullard & Mester, supply from Spain, France & US
• Earnings: Standard Chartered; Airbus, Orange, Commerzbank, Walmart

FOMC MINUTES

• The minutes saw little new information that markets were not aware of and were viewed as somewhat stale given how fast the data has moved since the confab.
• The release was framed more as a lack of hawkish surprises, rather than any outright dovish surprises. There was no clarity on a 50bps rate liftoff, nor did we get much new regarding balance sheet reduction rather than its expected by "a number" of participants "later this year".
• There was some attention on the comment that the Fed Funds rate could increase at a faster pace than the post-2015 period, but given where markets are priced and the recent Fed speak projections, that's not so surprising.
• On QE, there were a "couple" who favored ending net asset purchases sooner.
• The minutes also reinforced the data dependence mode from the Fed, particularly around inflation where "most" said "if inflation does not move down as they expect", it would be appropriate to "remove policy accommodation at a faster pace than they currently anticipate".
• Click here for the full release.

US TRADE

• US stocks closed little changed after earlier weakness pared in wake of the FOMC minutes, which gave little new for hawks to feast on.
• CLOSES: S&P 500 +0.1% at 4,475, Nasdaq 100 -0.1% at 14,603, Dow Jones -0.2% at 34,934, Russell 2000 +0.0% at 2,077.
• NVIDIA (NVDA) shares fell around 2.6% post-earnings

Click here for more detail.

NOTABLE US HEADLINES

• US President Biden is reportedly expected to seek over USD 770bln for the US defense budget in 2023, according to Reuters sources.
• US Treasury Secretary Yellen said US inflation is "not acceptable" but the country's economic recovery is on track, via an AFP interview

GEOPOLITICS

• Ukrainian armed forces fired mortar shells, grenades on four Luhansk People's Republic (LPR) localities, Sputnik Reported. Russian-backed rebels in Eastern Ukraine confirmed Ukraine govt forces have shelled their territories with mortars; no casualties reported so far. Note: all the reports so far have only been released by the Russian side - some speculate a False Flag attempt.
• Senior US Administration Official on Russian claims it’s withdrawing troops from the border with Ukraine: “We now know it was false. In fact in the last several days, Russia has increased its troop presence.. by as many as 7,000 troops" according to NBC. Ukrainian Defense Minister said latest intelligence shows no signs of Russian military withdrawal and still roughly 140k troops on the border
• US State Department said more Russian forces, not fewer, are on the Ukraine border and are moving concerningly into fighting positions; US particularly concerned regarding Russian President Putin and other officials mention of a genocide in Donbass, according to Reuters.
• Estonian Foreign Intelligence Service Chief said Russia is moving circa 10 battle groups towards an area near Ukraine, where 100 groups already are; adds escalation of fighting out of Ukraine's eastern breakaway provinces is 'highly likely', according to Reuters.
• NATO says it is prepared to further strengthen its defensive and deterrent posture, Defense ministers have tasked commanders to consider new battlegroups in Central and Southeastern Europe.
• Russia doesn’t have enough forces in place for a full-scale invasion of Ukraine and full occupation, but a limited attack is considered “likely”, according to Sky News citing Estonia's Spy Chief.
• US and Russian aircraft operating in the Mediterranean Sea flew dangerously close to each other in three separate incidents over the weekend, according to WSJ citing Defense Officials.
• European Commission President von der Leyen is set to brief EU leaders on a potential sanctions package against Russia. (Politico)
• G7 foreign ministers to meet in Munich on Saturday, according to French foreign minister.

APAC TRADE

EQUITIES

• APAC stocks traded mixed as the region trimmed earlier gains on reports of tensions in Ukraine.
• ASX 200 was propped up by its Healthcare and Mining sectors whilst Telstra and Wesfarmers fell on earnings.
• Nikkei 225 saw upside capped by manufacturers after Japanese exports missed forecasts, with Nikkei citing slowing overseas demand for cars and global supply constraints.
• Hang Seng and Shanghai Comp. were non-committal in early trade and the indices swung between gains and losses.
• US equity futures were initially subdued after reports did the rounds that Russia deployed as many as 7,000 troops to its borders, thereafter sentiment was hit by Russian press reporting an attack by the Ukrainian government.
• European equity futures are indicative of a lower cash open with Euro Stoxx 50 futures -0.8% after the cash market closed -0.2% yesterday.

FX

• DXY looked heavy at the start of the session before being propelled briefly above 96.00 on the Ukraine tensions.
• EUR/USD and GBP/USD were flat for most of the session but later succumbed to the Dollar.
• USD/JPY slipped from around 115.50 to 115.10 on haven flows, but before that remained choppy within a tight range.
• AUD and NZD gave their earlier gains due to their high-beta statuses and the former and moved toward the bottom of the G10 bunch
• RUB saw weakness on reports that many speculate could be a Russian False Flag operation.
• Turkish President Erdogan said Turkey price increases are "transitory", to see inflation decelerate every month. He said Turkey will widen support to tackle electricity prices, according to Reuters.

FIXED INCOME

• 10yr UST and Bund future rose on haven demand, but initially traded sideways.
• JGB yields meanwhile have been rising across the curve with the Japanese 20yr yield hitting the highest since Feb 2017, 5yr yield hitting the highest since Oct 2015 and 30yr eyeing 1.0% at one point.

COMMODITIES

• WTI and Brent saw a bid from the geopolitical tensions, but both benchmarks remain far off yesterday's best after the complex decline post-settlement on positive commentary from both the US and Iran regarding the nuclear deal.
• US State Department said US is 'in the midst of' the very final stages in Iran nuclear talks, according to Reuters. Iran's nuclear top negotiator Kani said after weeks of intensive talks "we are closer than ever to an agreement", but caveated that nothing is agreed until everything is agreed, via Twitter.
• Spot gold also gained after initially trading sideways, but the yellow metal remains under USD 1,875/oz.
• Iron ore futures saw another downbeat session with the Dalian contract losing 5% at one point.

CRYPTO

• Bitcoin traded flat just under 44k.

NOTABLE APAC HEADLINES

• China's Securities Times citing analysts notes the CNY is expected to weaken slightly this year; an analyst cited in the piece suggests the recent strength matches fundamentals. (Securities Times)

DATA RECAP

• Australian Employment (Jan) 12.9k (Exp. -15k, Prev. 64.8k)
• Australian Unemployment Rate (Jan) 4.2% vs. Exp. 4.2% (Prev. 4.2%)
• Australian Participation Rate (Jan) 66.2% vs. Exp. 66.0% (Prev. 66.1%)
• Australian Full Time Employment (Jan) -17.0k (Prev. 41.5k)
• Japanese Trade Balance Total Yen (Jan) -2191.1B vs. Exp. -1607.0B (Prev. -582.4B, Rev. -583.3B)
• Japanese Imports YY (Jan) 39.6% vs. Exp. 37.1% (Prev. 41.1%)
• Japanese Exports YY (Jan) 9.6% vs. Exp. 16.5% (Prev. 17.5%)

CENTRAL BANKS

• Fed's Harker (2023 voter) said he would support as early as March a 25bp increase in the Fed Funds Rate, according to MarketWatch
• Republican Senator Toomey says he's happy to proceed with four Fed nominees, according to Reuters.
• Fed's Daly (2024 voter) reiterated it is appropriate to start raising rates at March meeting and next Fed steps depend on data. She added long-run inflation expectations have been very stable, according to Reuters.
• BoC Deputy Governor Lane said they will be nimble, and if necessary, forceful in using monetary policy tools to tackle inflation; "we are alert to the risk that inflation may again prove more persistent." Lane said quite likely we will be saying something regarding QT at next rate decision, according to Reuters.