• Sentiment picked up following reports of a meeting between the US Secretary of State and Russian Foreign Minister late next week
• US President Biden is to hold a meeting on Friday with the heads of NATO, EU, France, Germany, UK, Italy, Poland, and Romania
• APAC stocks maintained a mild downside bias, US and European equity futures traded with gains
• DXY saw a modest downtick on the Blinken/Lavrov meeting headlines. Antipodeans lead in the G10 FX space
• Fed's Bullard (2022 voter) said an unscheduled FOMC is not imminent but is something to think of; 100bps rate hikes could be managed many ways
• Looking ahead, highlight include UK Retail Sales, Swedish CPIF, US Existing Home Sales, EZ Consumer Confidence (Flash), Fed’s Williams, Brainard, Evans; ECB’s Elderson, Panetta; Earnings: NatWest; Allianz, EDF, Deere

US TRADE

• US stocks were lower across all major indices with the tech and cyclicals leading the losses amid the risk aversion surrounding Ukraine.
• CLOSES: S&P 500 -2.14% at 4,379, Nasdaq 100 -2.96% at 14,172, Dow Jones -1.78% at 34,312, Russell 2000 -2.65% at 2,025.
• Intel (INTC) said it would be interested in participating in a chip industry consortium to invest in Arm if there is one; says there has been chatter about a consortium to own Arm even before the deal with Nvidia (NVDA), according to Reuters.

Click here for a detailed summary.

NOTABLE US HEADLINES

• Senate has voted to pass the stopgap funding bill until March 11th, according to Reuters

GEOPOLITICS

• US Secretary of State Blinken is to meet Russian Foreign Minister Lavrov late next week, according to the US State Department.
• Russian Foreign Minister Lavrov reportedly agreed to the talks on the US condition that there will be no invasion of Ukraine, according to CNBC's Tausche.
• US President Biden is to hold a meeting on Friday with the heads of NATO, EU, France, Germany, UK, Italy, Poland, and Romania, according to the Canadian PM's office.
• Ukraine Commander-in-Chief said "evacuation of the local population is planned in some settlements in the temporarily occupied territory, in particular in Donetsk, due to possible aggravation", via a Facebook post.
• Lithuanian President Gitanas Nauseda said Russia has amassed 45k soldiers, military equipment, and air forces in Belarus and their presence is threatening to Baltic states and Poland, according to The Guardian.
• DPR (Russian separatists) military spokesman said "we were forced to respond to fire from the neighbouring side and destroy these firing points. If they continue it further, accordingly, we will destroy", cited by Sputnik.
• Russian Foreign Ministry says Moscow expelled the US Deputy Ambassador Gorman in a tit-for-tat move following an earlier expulsion of Russian diplomat from Washington, according to Reuters
• Fox News reported that there are indications shelling has resumed in eastern Ukraine. Ukrainian rebels claim to have been shelled by govt forces in one incident, according to reports via Russian press Interfax

APAC TRADE

EQUITIES

• APAC stocks traded with a mild downside bias but off worst levels amid confirmation of a meeting between the US Secretary of State and Russian Foreign Minister late next week.
• ASX 200 continued to be pressured by its tech and healthcare sectors, albeit gold miners saw a decent outperformance.
• Nikkei 225 saw losses across energy names but the recent weakening in the Yen kept the index underpinned.
• Hang Seng was pressured by EV names and some oil giants.
• Shanghai Comp. narrowly outperformed as hopes of monetary policy easing supports the index.
• US equity futures are firmer across the board but are still some way off yesterday’s best levels.
• European equity futures are indicative of a firmer open with the Euro Stoxx 50 future +0.2% after cash markets closed lower by 0.6%.

FX

• DXY was relatively flat and contained, the index saw a modest downtick on the Blinken/Lavrov meeting headlines.
• EUR/USD was modestly firmer and GBP/USD meandered just above 1.3600.
• USD/JPY is back on a 115.00 handle after finding support at its 50 DMA (114.79).
• Antipodeans outperform with the NZD leading the gains in the run-up to the RBNZ’s first meeting in three months
• The risk gauge AUD/JPY spiked higher from around 82.50 to test 83.00 on the Russian/US meeting headline.
• RUB saw mild gains against the Dollar at its open but remained within recent ranges.

FIXED INCOME

• 10yr UST and Bund initially drifted higher amid the soured tone handed over from Wall Street, but later, after the US/Russia meeting headline, the contracts slid on haven outflow. JGB futures followed suit.

COMMODITIES

• WTI and Brent continued to decline as the Iranian nuclear deal takes the spotlight for now and as the Ukraine-Russia theme looks for the next meaningful escalation/de-escalation.
• Spot gold unwound some of its geopolitical premia and fell under USD 1,900/oz but found an overnight floor around USD 1,890/oz.
• Iron ore saw another session of pain with the futures lower by over 5% in early trade in a continuation of China’s crackdown on rising raw material prices.
• US officials spoke to Saudi regarding market pressures given the geopolitics with Russia, according to Reuters.

CRYPTO

• Bitcoin traded sideways overnight after declining to 40k in the prior session
• US President Biden to issue an executive order on regulating crypto next week, according to Yahoo! Finance. This has been subsequently denied by the White House, according to Bloomberg.

NOTABLE APAC HEADLINES

• PBoC injected CNY 10bln via 7-day reverse repos at a maintained rate of 2.10% for a daily drain of CNY 10bln; PBoC drained a net CNY 150bln for the week via OMO, including the MLF injection earlier in the week
• PBoC set USD/CNY mid-point at 6.3343 vs exp. 6.3332 (prev. 6.3321)
• China halted flights to Beijing from Zhuhai amid COVID, according to reports citing CCTV.
• Japanese Finance Minister said the prices increase was driven mostly by energy, but FX had some impact, according to Reuters.

DATA RECAP

• Japanese CPI, Overall Nationwide (Jan) 0.5% (Prev. 0.8%)
• Japanese CPI, Core Nationwide YY (Jan) 0.2% vs. Exp. 0.3% (Prev. 0.5%)
• Japanese CPI Index Ex Fresh Food* (Jan) 100.1 (Prev. 100.0)

EUROPE-SPECIFIC HEADLINES

• Italy is finalising new measures worth at least EUR 5bln to help consumers and firms hit by the rise in energy bills; expected to be approved by cabinet on Friday, according to Reuters sources.

CENTRAL BANKS

• Fed's Bullard (2022 voter) said an unscheduled FOMC is not imminent but is something to think of; 100bps rate hikes could be managed many ways. He noted the Fed may have to go beyond the neutral rate to control prices. He said the Fed should have an asset-sales plan if inflation is not slowing and added that a lot of normalisation already priced into 2yr notes. He reiterated he wants the Fed to play the balance-sheet card as soon as possible, and he feels tip yields provide 'some comfort' that market feels Fed will succeed in inflation fight. Bullard echoed 'we're at risk' and the Fed's credibility is at risk, according to Reuters.
• Fed's Mester (2022 voter) reiterated support for a March hike. She said it will be appropriate to hike Fed Fund at a faster pace than after the GFC and can hasten H2 tightening pace if inflation doesn't ease. She expects inflation above 2% and noted that risks tilted to the upside. She supports selling some MBS at some point during the balance sheet reduction process and suggested the pace will be data-driven.
• RBA's Harper said financial markets are misguided in thinking the RBA will follow the Fed when raising interest rates, and added that the RBA has good reasons to wait, via a WSJ interview
• Norges Bank Governor Ohlson said there is growing international concern about whether inflation will remain elevated, activity in Norwegian economy has recovered firmly from the pandemic, according to Reuters.
• Banxico Deputy Governor Heath says Mexico has no economic growth engine for 2022, core inflation is persistent with a clear upward trajectory, Bank is at a difficult crossroads. Banxico will continue to see outlook for more interest rate hikes in Mexico, according to Reuters.
• Argentina's Central Bank reportedly plans to raise its benchmark interest rate to 42.5% from 40%, according to a Reuters source.