• APAC stocks began the month mostly on the front foot with the region digesting encouraging Chinese PMI data
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -1.0% after the cash market closed lower by 1.2% yesterday
• DXY is marginally firmer but sub-97.00, AUD steady after the RBA maintained rates and its dovish tone
• US State Department said the US is prepared to walk away from Iran nuclear talks if Iran displays a refusal to change its views
• US Defense Department spokesperson Kirby said that Russian President Putin still has "significant combat power" to use
• Looking ahead, highlights include EU, UK & US Final PMIs, German Prelim. CPI & Retail Sales, US ISM Manufacturing PMI & Construction Spending, Speeches from Fed's Bostic & Mester, ECB's Lagarde, BoE's Saunders & US President Biden's State of the Union Address, Earnings from Bayer, HelloFresh, Abrdn & Flutter

US TRADE

• US stocks finished mixed in which the NDX and R2K notched mild gains as markets shrugged off the weekend's nuclear war fears and ramped western financial sanctions on Russia with month-end flows at play.
• S&P 500 -0.3% at 4,371, Nasdaq 100 +0.4% at 14,237, Dow Jones -0.5% at 33,892, Russell 2000 +0.4% at 2,045.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky urged the US and NATO to impose a "no-fly zone" over "significant parts" of the country, while a Ukrainian official in peace talks said Russia is still extremely biased and negotiations are difficult.
• US President Biden said Americans should not be worried about nuclear war, while the White House Press Secretary said a no fly zone would be a step towards sending US troops to fight a war with Russia and that energy sanctions remain on the table.
• US State Department said the US will do more on sanctions as it has seen no indication that Russia is prepared to de-escalate and US measures will increasingly be symmetrical with those of allies.
• US Defense Department spokesperson Kirby said Ukraine's resistance makes it a "tough slog" for Russia but added that President Putin still has "significant combat power" to use.
  • Ukraine's ports are to remain shut until the end of the Russian invasion and the Port of Mariupol was damaged by Russian shelling with the extent of damage still being assessed, while 100 foreign flagged ships are stuck in Ukrainian ports and unable to sail.
  • Western officials said Russia has deployed about half of the forces it had at Ukraine's border into Ukraine, while satellite image company Maxar said new images showed military convoy seen north of Kyiv is considerably longer than the 17 miles initially reported with the convoy stretching approximately 40 miles
• Russia’s Kremlin said the latest counter-measures will not be the only response, according to Tass. Furthermore, Russia's Foreign Ministry said that those supplying lethal weapons to Ukraine will bear responsibility should these weapons be used during Russia's military operation, according to Interfax.
• US ordered 12 Russian UN diplomats to leave by March 7th, according to Russia's UN envoy and Russia later stated that the US expulsion of diplomats is a hostile act, according to AFP.
  • Russian foreign ministry said Germany's decision to supply Ukraine with lethal weapons is 'outrageous' and by Germany deciding to supply Kyiv with weapons, according to Interfax.
  • Germany sent tornado warplanes and maritime patrol aircraft to Baltic sea area for reconnaissance, according to German NATO mission tweet.
  • Senator Graham called for sanctions on Russia's energy sector.
• UK Business Secretary Kwarteng said overseas agents will no longer be able to create UK companies on behalf of criminals and will legislate for new powers to seize crypto assets.
• French Foreign Minister Le Drian said Russian oligarchs in France and Europe should be worried and that Russian President Putin's nuclear threats make no sense.
• Mastercard (MA) blocked multiple financial institutions from the Mastercard payment network following sanctions.

OTHER

• US State Department said the US is prepared to walk away from Iran nuclear talks if Iran displays a refusal to change its views to making progress. Furthermore, a European official said final decisions have to be taken this week and they either have a deal or not, while it was assed that the context of the current international crisis means the window of opportunity is closing, according to WSJ's Norman.
• Iran's Foreign Ministry spokesman said a deal is at hand if Washington makes its mind up, but added Iran is willing but will not wait forever. There were also comments from Russia's envoy to Iran nuclear deal talks who said completion of talks will be in the beginning of March, according to Argus' Itayim.

APAC TRADE

EQUITIES

• APAC stocks began the month mostly on the front foot after Monday's intraday rebound on Wall St where the major indices finished mixed but off worse levels and following talks between Russia and Ukraine with another round of discussions to take place in the coming days, while the region also digested encouraging Chinese PMI data.
• ASX 200 gained amid a cyclical bias with outperformance in tech, financials and industrials leading the index.
• Nikkei 225 traded higher and briefly climbed above 27k where it then met some resistance.
• Hang Seng and Shanghai Comp. were mixed with the mainland kept afloat after the better than expected Chinese Official Manufacturing and Caixin Manufacturing PMI data, while Hong Kong lagged with the city set for a 9-day lockdown later this month alongside mass COVID-19 testing.
• US equity futures were rangebound overnight; ES +0.1%
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.8% after the cash market closed lower by 1.2% yesterday.

FX

• DXY was marginally higher but remained below 97.00 following yesterday’s month-end unwinding of haven flows.
• EUR/USD was lacklustre as price action continued to oscillate through 1.1200 and after ECB's Panetta called for moderate and careful steps in adjusting policy to avoid suffocating the recovery.
• GBP/USD traded sideways after reclaiming the 1.3400 handle.
• USD/JPY bounced back from beneath 115.00 amid the positive risk appetite .
• Antipodeans were steady with only slight pressure seen after the RBA maintained rates and its dovish tone.
• RUB continued to pare some of the recent weakness.

FIXED INCOME

• 10yr USTs marginally pulled back as treasuries took a breather from the prior day’s surge.
• Bunds traded positively but were off their highs after hitting resistance near 168.00.
• 10yr JGBs were little changed with demand sapped by the mostly positive mood in the region and with the results of the latest 10yr auction relatively inline with the previous.

COMMODITIES

• WTI and Brent gained amid the constructive risk tone and with focus turning to looming OPEC+ meeting.
• European Commission is to propose EU countries tax energy companies' windfall profits from gas price rise, according to Reuters sources.
• IOG committed to sell its share of output from Elgood Gasfield to Gazprom unit for two years, according to FT.
• Spot gold trades rangebound with support at the USD 1900/oz level.
• Copper recovered from the prior day's selling pressure helped by encouraging Chinese PMI data.

CRYPTO

• Bitcoin was steady overnight and heads into the European morning little changed.

NOTABLE APAC HEADLINES

• PBoC injected CNY 50bln via 7-day reverse repos with the rate at 2.10% for a CNY 50bln net drain.
• PBoC set USD/CNY mid-point at 6.3014 vs exp. 6.2991 (prev. 6.3222)
• China Commerce Minister said some recovery momentum in consumption was seen in February and they must do everything possible to spur consumption, but noted the challenge to stabilising consumption is not small. China's Commerce Minister added that pressure from foreign trade on China is very large this year and the situation is very severe, while external demand is still uncertain.
• Hong Kong is expected to conduct a 9-day lockdown when it launches its mass testing, according to SCMP sources.
• RBA kept Cash Rate Target unchanged at 0.10% as expected, while it reiterated the board is prepared to be patient and noted that the war in Ukraine is a major new source of uncertainty. The board is committed to maintaining highly supportive monetary conditions and it will not raise the Cash Rate until actual inflation is sustainably within 2%-3% target, while it stated the pick up for wages is only expected to be gradual and that the length of time to resolve supply chain disruptions is a vital source of uncertainty for the inflation outlook.

DATA RECAP

• Chinese NBS Manufacturing PMI* (Feb) 50.2 vs. Exp. 49.9 (Prev. 50.1)
• Chinese NBS Non-Manufacturing PMI* (Feb) 51.6 vs. Exp. 50.7 (Prev. 51.1)
• Chinese Composite PMI (Feb) 51.2 (Prev. 51.0)
• Chinese Caixin Manufacturing PMI Final (Feb) 50.4 vs. Exp. 49.3 (Prev. 49.1)
• Australian Current Account Balance (AUD)(Q4) 12.7B vs. Exp. 14.9B (Prev. 23.9B)
• Australian Net Exports Contribution (Q4) -0.2% vs. Exp. -1.0% (Prev. 1.0%)

EUROPE

NOTABLE EUROPEAN HEADLINES

• ECB President Lagarde reiterated the ECB will implement sanctions decided by the EU and are ready to do all that is needed within their mandate to ensure price stability and financial stability.
• MSCI is to retain Israel's regional classification within the Middle East and will continue to engage market participants on the topic, while it noted market participants were divided on their views of the appropriate regional classification of the MSCI Israel Index due to the current misalignment of trading days between Israel and European markets. MSCI is also seeking feedback on the current level of accessibility and investability of the Russian equity market for international institutional investors.

US

NOTABLE US HEADLINES

• US President Biden said the State of the Union Address will lay out a plan to lower costs and is to offer a plan for energy, child care and health costs, according to the White House.
• US Financial Stability Oversight Council said the US financial system continues to function in an orderly manner and they will continue to monitor financial developments, according to the Treasury Department.