• European bourses have experienced a marked recovery throughout the session, Euro Stoxx 50 Unch., with the FTSE 100 (+0.4%) the marginal outperformer given its crude exposure.
• A recovery that comes amid numerous geopolitical developments and was seemingly led by oil upside and as we await clarity/insight into any Russian sanctions and as Ukraine's President remains confident that there will not be a war.
• EU ambassadors considered a four-part sanctions package against Russia, via Reuters sources; are unanimously in favour of sanctions.
• WTI and Brent are underpinned on geopolitics, Brent Apr soared to a high of USD 99.50/bbl (vs low USD 96.50 /bbl).
• DXY is held below 96.00 as safe-haven gains unwind while the RUB has seen extensive two-way action.
• Core debt was avidly in demand in early EU trade; however, benchmarks have pulled back amid the broader recovery.
• Looking ahead highlights include US Flash PMIs, Speeches from Fed's Bostic, US Supply.

As of 11:30GMT/06:30EST

LOOKING AHEAD

• US Flash PMIs, Speeches from Fed's Bostic, US Supply.
• Click here for the Week Ahead preview

GEOPOLITICS

Donetsk/Luhansk Updates

• 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.
• In response, Ukraine said their border remains unchanged.
• The DPR and LPR parliaments subsequently ratified the cooperation/friendship agreements with Russia; since then, Russia's Lower Parliamentary House has voted in favour of the treaty.
• 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.
• 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.
• Russian Foreign Minister Lavrov says Ukraine does not have a right to sovereignty, according to Interfax. Appears to be speaking in relation to the DPR/LPR updates
• Russian Foreign Ministry says that establishing Russian bases in Eastern Ukraine is not being discussed at the moment, according to Tass; however, steps could be taken if required.

Potential Sanctions/Measures & Response

• EU Ambassadors are unanimously in favour of sanctions on Russia, will meet later today to consider the details, via Reuters citing a Senior EU Diplomat; the ban of trade in Russian State bonds is being discussed within the EU, according to an EU Official; discussing sanctioning hundreds of individuals. EU Ambassadors are to meet at 16:00GMT/11:00EST
• EU ambassadors considered a four-part sanctions package against Russia, according to an European Commission source cited by Reuters; Sanctions against several hundred members of Russia's Duma will be discussed.
• Certification of the Nord Stream 2 pipeline cannot go ahead given the latest Russian move, according to German Chancellor Scholz. Earlier Austria said the EU sanctions package on Russia includes the Nord Stream 2 gas pipeline, according to Reuters.
• UK PM Johnson will, at around 12:30GMT, announce sanctions against Russia following the above developments, adding that sanctions will go further in the scenario of an invasion.
• 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.

Other Russian/Ukraine Commentary

• 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.
• Ukraine President says his foreign ministry has requested breaking diplomatic relations with Russia, believes there will be no war against Ukraine and no wide escalation, should not wait until the situation escalates before imposing sanctions.
• In response, Russia's Foreign Ministry says it does not want to sever ties with Ukraine; Russia recognises the breakaway Ukrainian regions within the borders they currently reside in, according to Interfax.

Other Updates

• 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.

EUROPEAN TRADE

EQUITIES

• European bourses have experienced a marked recovery throughout the session, Euro Stoxx 50 Unch., with the FTSE 100 (+0.4%) the marginal outperformer given its crude exposure.
• A recovery that comes amid numerous geopolitical developments and was seemingly led by oil upside and as we await clarity/insight into any Russian sanctions and as Ukraine's President remains confident that there will not be a war.
• Stateside, futures remain negative but have also experienced a marked pick-up; bringing the ES, for instance, to within 10-points of unchanged.

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FX

• Roller coaster ride for the Rouble after Russia recognises independent regions in Eastern Ukraine but only enters to keep the peace and reportedly rejects wider separatist claims. USD/RUB reaches circa 80.9275 before recoiling to sub-79.000 lows.
• Dollar unwinds safe haven gains around 96.000 in DXY terms as risk sentiment improves from an initial state of pronounced aversion.
• Kiwi holds firm on the 0.6700 handle awaiting RBNZ rate verdict amidst expectations for a 25bp hike, but outside bets of half point.
• Crude currencies underpinned by Brent hitting USD 99.50/bbl and WTI nearing USD 95.00/bbl.

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Notable FX Option Expiries, NY Cut:

• EUR/USD: 1.1300-05 (860M), 1.1330-40 (1.1BN), 1.1350-60 (1.1BN), 1.1400 (614M), 1.1450-55 (430M), 1.1500-05 (460M)
• USD/JPY: 114.00 (370M), 115.20-25 (1.87BN), 116.00 (530M)
• USD/CAD: 1.2500 (285M), 1.2600-10 (1.14BN), 1.2695-00 (1.3BN), 1.2750 (618M), 1.2800 (747M), 1.2825-55 (1.18BN)
• AUD/USD: 0.7050 (335M), 0.7190-00 (1.638BN), 0.7240-55 (835M), 0.7300 (806M)
• Full list available here

FIXED INCOME

• Core debt avidly in demand in early EU trade before falling from grace as Russia/Ukraine risk aversion wanes.
• US Treasuries retain flatter curve profile in the run-up to Usd 52 bln 2 year supply.
• Bunds also dragged back down in wake of an upbeat German Ifo survey.

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COMMODITIES

• WTI and Brent are underpinned on geopolitics, Brent Apr soared to a high of USD 99.50/bbl (vs low USD 96.50/bbl).
• Albeit, the benchmarks are off best levels at present; note, there was no settlement yesterday amid the US holiday.
• Saudi Arabia, Kuwait and Iraq would struggle to cover the shortfall in crude supply created by a blanket ban on Russian energy exports as they have already allocated their annual term supplies, according to Argus sources.
• Qatar's Emir has received a letter from Russian President Putin regarding supporting and strengthening bilateral relations.
• Spot gold lies below USD 1900/oz, as havens given up recent gains as officials are yet to label the Russia situation as a full-scale invasion.

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NOTABLE EUROPEAN 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.

DATA RECAP

• German Ifo Business Climate New (Feb) 98.9 vs. Exp. 96.5 (Prev. 95.7, Rev. 96.0); Current Conditions New (Feb) 98.6 vs. Exp. 96.6 (Prev. 96.1, , Rev. 96.2)
• Expectations New (Feb) 99.2 vs. Exp. 96.1 (Prev. 95.2, Rev. 95.8); survey was not influenced by the current situation in Ukraine.

US-SPECIFIC 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.

Click here for the US Early Morning Note.

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.

NOTABLE APAC HEADLINES

• 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.
• 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)