• Sentiment in equities has moved to risk-off as the mornings Russia-Ukraine updates are generally downbeat; Euro Stoxx 50 -2.5%, ES -0.5%
• US futures are lower across the board, ES -0.5%, though magnitudes are more contained than their European peers as participants look to a heavy data-docket ahead and Fed speak incl. Powell later in the week
• Ukrainian President Zelensky says that negotiations with the Russian side have not achieved required results while Russian Defense Minister Shoygu says Russia will continue operations in Ukraine until it achieves its goals
• A choppy session for FX with havens bid and the DXY benefitting as such to the detriment of peers across the board though petro-FX benefits from crude benchmarks
• Fixed income has experienced substantial upside briefly sending the German 10yr yield negative; though, volumes do remain relatively thin
• WTI and Brent are bolstered as geopolitics continue to dominate newsflow, Brent May'22 above USD 103/bbl at best, ahead of Wednesday's OPEC+ meeting
• Looking ahead, highlights include US Final PMIs, German Prelim. CPI, US ISM Manufacturing PMI & Construction Spending, New Zealand Export/Import Prices, Speeches from Fed's Bostic & Mester, ECB's Lagarde, BoE's Saunders & US President Biden's State of the Union Address

As of 11:25GMT/06:25EST

LOOKING AHEAD

• US Final PMIs, German Prelim. CPI, US ISM Manufacturing PMI & Construction Spending, New Zealand Export/Import Prices, Speeches from Fed's Bostic & Mester, ECB's Lagarde, BoE's Saunders & US President Biden's State of the Union Address.
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GEOPOLITICS

RUSSIA-UKRAINE

• 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.
• EU Competition Commissioner Vestager says Russian gas cannot be banned completely, via Spiegel.
• Ukrainian President Zelensky says that negotiations with the Russian side have not achieved required results, via AJA Breaking.
• Russian Foreign Minister Lavrov says Ukraine still has Soviet nuclear technologies, cannot fail to respond to this danger, Russia is prepared for joint work with the US on strategic stability. Unacceptable for Russia that some European countries host US nuclear weapons, and should be returned to US territory.
• Russian Defense Minister Shoygu says Russia will continue operations in Ukraine until it achieves its goals, according to Interfax.
• Russia's Kremlin says it is too early to assess results of talks at the moment; no plans at the moment from President Putin to speak with Ukraine President Zelensky.
• Belarus troops have reportedly entered Ukraine territory through Chernihiv region, according to Ukrainian parliament twitter.
• Russia stated that the US expulsion of 12 diplomats is a hostile act, according to AFP.
• SWIFT Messaging System says it is engaging with authorities to understand which entities are subject to new measures, will disconnect these on receipt of legal instruction to do so.
• US Senator Graham called for sanctions on Russia's energy sector.
• Russia Security Council Deputy Chair says: "Some French minister has said that they declared an economic war on Russia. Watch your tongue, gentlemen! And don’t forget that in human history, economic wars quite often turned into real ones". In response to earlier commentary from French Finance Minister Le Maire
• Mastercard (MA) blocked multiple financial institutions from the Mastercard payment network following sanctions.
• EU Commission is to propose sanction restrictions on RT and Sputnik's access to the European media market.
• Italian PMI Draghi has made a proposal to intensify pressure on the CBR and wants the BIS to take part in sanctions, via Reuters.

OTHER

• 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.

EUROPEAN TRADE

EQUITIES

• Sentiment in equities has moved to risk-off as the mornings Russia-Ukraine updates are generally downbeat, albeit at a limited frequency vs recent sessions.
• Currently, Euro Stoxx 50 -2.5% after an indecisive open given a largely update APAC handover post-data.
• Stateside, US futures are lower across the board, ES -0.5%, though magnitudes are more contained than their European peers as participants look to a heavy data-docket ahead and Fed speak incl. Powell later in the week.

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FX

• Very choppy start to March in FX circles as safe havens climb amidst a further deterioration in Russia-Ukraine sentiment.
• However, petro and commodity currencies derive protection from strength in underlying prices as WTI and Brent top Usd 99/bbl and Usd 102/bbl respectively.
• Franc mixed following retreat vs Dollar and test of key Fib retracement level against underperforming Euro - Usd/Chf back up near 0.9200, DXY close to 97.000, but Eur/Chf sub 1.0300 after dip through 1.0250.
• Rouble hands back some recovery gains as Russian officials maintain that Ukraine mission will continue until objectives met - Usd/Rub around 96.8000 vs sub-89.5000 low.

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Notable FX Expiries, NY Cut:

• EUR/USD: 1.1100-10 (570M), 1.1200-10 (955M), 1.1265-70 (1.2BN), 1.1345-60 (1.4B)
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FIXED INCOME

• Bonds charge higher as risk sentiment sours again on Russia-Ukraine angst.
• EZ periphery debt front runs the rebound on expectations of delayed ECB tightening, but Bunds catch up and 10 year German yield briefly turns negative.
• Trading volumes relatively thin so some reason to be wary of sharp retracement and corrective price action on any constructive news.

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COMMODITIES

• WTI and Brent are bolstered as geopolitics continue to dominate newsflow, Brent May'22 above USD 102/bbl at best, ahead of Wednesday's OPEC+ meeting.
• IEA extraordinary ministerial meeting on the impact of Russia's invasion of Ukraine on oil supply will take place at 13:00-15:00GMT/08:00-10:00EST, according to the Japanese Industry Ministry.
• Russian President Putin discussed the OPEC+ deal with the Abu Dhabi crown prince, according to Reuters citing Tass; reminder, the JTC commences today from 12:00GMT/07:00EST.
• IOG committed to sell its share of output from Elgood Gasfield to Gazprom unit for two years, according to FT.
• Yamal-Europe pipeline has stopped after shipping gas westwards to Germany overnight, preliminary bids have emerged to ship gas eastwards from Germany to Poland through the pipeline, according to Reuters citing Gascade data; subsequently, the pipeline has resumed eastbound flows.
• Spot gold and silver are supported in-line with haven assets as risk-sentiment sours while base-metals, such as Nickel, are bid on potential Russian supply risks.

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CRYPTO

• Bitcoin remains bid and has extended above yesterday's best levels thus far.

NOTABLE EUROPEAN HEADLINES

• 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.
• ECB's Rehn says stagflation is possible, but the ECB has tools, via Kauppalehti.

DATA RECAP

• EU Markit Manufacturing Final PMI (Feb) 58.2 vs. Exp. 58.4 (Prev. 58.4)
• UK Markit/CIPS Manufacturing PMI Final (Feb) 58.0 vs. Exp. 57.3 (Prev. 57.3)

NOTABLE US HEADLINES

• 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.

Click here for the US Early Morning Note

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.

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.
• China's Foreign Ministry, regarding the visit of former US officials to Taiwan, says any attempts at support for Taiwan are bound to be futile. Urges the US to handle the situation prudently and stop additional harm to China-US relations, via Reuters.
• 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); 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%)