• Russian President Putin said Russia will recognize the independence of Donbas LPR and DPR separatists
• The US will announce fresh sanctions against Russia on Tuesday in which it will coordinate with allies on the announcement
• APAC stocks traded negatively amid Russia-Ukraine developments. US equity futures also retreated overnight
• European equity futures are indicative of a weaker open with the Euro Stoxx 50 future -1.4% after cash markets closed lower by 2.2% yesterday
• DXY maintains 96.00 status, EUR/USD hovers around 1.13, Cable lost 1.36 and NZD remains firm
• Looking ahead, highlights include German Ifo, US Flash PMIs, Speeches from Fed's Bostic and BoE's Ramsden, US Supply, Earnings from Home Depot

US TRADE

• US cash markets were closed for Presidents' Day although US equity futures weakened amid geopolitical concerns.

NOTABLE US HEADLINES

• Fed's Bowman (voter) said she supports a March rate hike and is watching data closely to determine the appropriate size for the rate hike, while she noted it is too soon to say if the US economy needs a 50bps hike at the March meeting and will be watching data closer in coming weeks.

GEOPOLITICS

• Russian President Putin said Russia will recognize the independence of Donbas LPR and DPR separatists, while he ordered a peacekeeping operation involving Russian troops being sent to eastern Ukraine's two breakaway regions.
• Russian President Putin said Ukraine is an integral part of Russian history and they are ready to show Ukraine what genuine de-communisation looks like, as well as accusing Ukraine of stealing Russian gas in the past and using energy to blackmail Russia. Putin stated that Ukraine is managed by foreign powers which affects all levels of authority and that Ukraine is a US colony with a puppet regime, while he added that Ukraine plans to create its own nuclear weapons and if Ukraine gets weapons of mass destruction, the global situation will change drastically which they cannot ignore and that nuclear weapons amount to preparation for an attack on Russia.
• Russian President Putin said any grounds for sanctions will be found or fabricated and thinks the West will impose sanctions anyway, while he added that Russia has the right to take retaliatory measures and has every right to protect its security which is what they will do.
• US President Biden signed an executive order prohibiting new investment, trade and financing to the DNR and LNR regions of Ukraine, while the US will announce fresh sanctions against Russia on Tuesday in which it will coordinate with allies on the announcement.
• US Secretary of State Blinken said recognition of Donetsk and Luhansk People's Republics as independent requires a swift and firm response, while he added that they will take appropriate steps in coordination with partners.
• US Ambassador to the UN said Russian recognition of eastern Ukraine is clearly the basis for an attempt to create a pretext for a further invasion.
• UK PM Johnson will convene a COBRA meeting Tuesday morning to coordinate response including agreeing a significant package of sanctions to be introduced immediately after Russia's actions on Ukraine. Sanctions will be announced on Tuesday and the UK government said sanctions will go further if invasion happens, according to The Guardian. Sanctions will include the defence industry, oil and gas companies, banks, financial institutions and chemical companies, according to Sky News Arabia.
• Dutch PM Rutte said a limited package of EU sanctions is agreed against Russia and the sanctions will target those responsible for the move to recognise independence of Ukraine rebel regions. - Austria said the EU sanctions package on Russia includes the Nord Stream 2 gas pipeline, according to Reuters. EU is likely to impose limited sanctions, which would be largely a symbolic move given the regions are already under sanctions, via Politico citing diplomats; such sanctions could include listing more individuals and cutting trade with the separatists.
• EU's Von Der Leyen said the recognition of the two separatist territories in Ukraine is a blatant violation of international law, the territorial integrity of Ukraine and the Minsk agreements.
• Ukrainian representative to the UN said their border will remain unchanged regardless of the steps announced by Russia, while they requested to activate the security and cooperation mission in Ukraine to prevent any future escalation.
• NATO SecGen Stoltenberg said Moscow continues to fuel conflict in Eastern Ukraine and that Moscow is creating a pre-text to try and invade Ukraine again.
• CLICK HERE FOR A RECAP OF THE RUSSIA-UKRAINE SITUATION
• Diplomats said an agreement on restoring the Iran nuclear deal is nearing which could be reached in the next couple of days, although issues remain, including the exact scope of sanctions, according to WSJ.
• Saudi-led coalition said four were injured after a drone was launched at the King Abdallah Airport in Jizan.

APAC TRADE

EQUITIES

• APAC stocks traded negative as focus remained on geopolitics after Russian President Putin announced Russia is to recognise LPR and DPR as independent states and ordered a ‘peacekeeping’ operation in the two breakaway regions
• ASX 200 declined as the geopolitical concerns sunk most sectors although energy and gold miners bucked the trend after oil prices advanced on the geopolitical risk premium and with the precious metal underpinned by haven demand.
• Nikkei 225 was pressured as detrimental currency flows added to the headwinds for the index.
• KOSPI suffered after daily COVID-19 cases topped 100k for a third consecutive day
• Hang Seng and Shanghai Comp. conformed to the glum mood with notable weakness in the tech sector after China told banks and state firms to report their exposure to Alibaba affiliate Ant and with Tencent also subdued by recent concerns of a crackdown, while Rusal shares dropped nearly 20% on geopolitical tensions and looming Russian sanctions.
• US equity futures retreated overnight but are off their lows with the Emini S&P finding a floor at 4250.
• European equity futures are indicative of a weaker open with the Euro Stoxx 50 future -1.4% after cash markets closed lower by 2.2% yesterday.

FX

• DXY was rangebound with initial support seen as haven currencies benefitted from the geopolitical concerns, although the dollar then pared the gains as markets priced out the risk of a 50bps hike in March.
• EUR/USD languished after failing to sustain Monday’s gains and struggled to hold above the 1.1300 level.
• GBP/USD trickled beneath 1.3600 despite the recent strong UK PMI data and removal of COVID-19 restrictions.
• USD/JPY retreated on haven flows but is off lows are it bounced off a floor near 114.50
• Antipodeans were choppy amid a lack of key data releases and with participants awaiting tomorrow’s RBNZ rate decision where the central bank is expected to conduct a third consecutive 25bps rate increase.
• RUB initially weakened beyond 80.00 against the Dollar but later nursed some of its recent losses.

FIXED INCOME

• 10yr UST futures climbed above the 127.00 level amid haven demand due to the geopolitical concerns from Russia’s decision to recognise Donetsk and Lugansk republics as independent which saw money markets continue to price out the risk of a 50bps Fed lift off in March. Bunds also benefitted from the risk aversion and approached the 167.00 level to the upside, while 10yr JGBs gained due to the flight to quality and following firmer demand at the enhanced liquidity auction for 10yr, 20yr & 30yr maturities.

COMMODITIES

• WTI and Brent gained on the heightened geopolitical tensions in which the latter rose above USD 97/bbl. Note, there was no WTI settlement yesterday on account of the US holiday
• Spot gold reclaimed the USD 1900/oz level due to haven demand.
• Copper futures weakened due to the broad risk aversion.

CRYPTO

• Bitcoin suffered mild losses as the geopolitical concerns weighed on risk sentiment.

NOTABLE APAC HEADLINES

• PBoC injected CNY 100bln via 7-day reverse repos with the rate at 2.10% for a CNY 90bln net injection.
• PBoC set USD/CNY mid-point at 6.3487 vs exp. 6.3448 (prev. 6.3401)
• Senior Chinese Diplomat Wang Yi spoke with US Secretary of State Blinken via phone but did not discuss Ukraine, while Wang reiterated the US should fulfil US President Biden's commitments from November and that the US attempt to include Taiwan in its Indo-Pacific strategy is sending the wrong signal of trying to contain China.

EUROPE-SPECIFIC HEADLINES

• UK PM Johnson confirmed the removal of all COVID-19 restrictions, according to Reuters.
• EU's Sefcovic and UK Foreign Secretary Truss agreed to discuss any points raised by either side if relevant to the withdrawal agreement, while Truss said triggering Article 16 remained an option but added that her focus was on finding a negotiated solution with the EU, according to Reuters and Independent.
• EU is to unveil a law proposal obliging EU firms to check suppliers, observe human rights and environmental standards, according to a draft.