• APAC stocks traded mostly positive following gains in the US where stocks and yields climbed.
• European equity futures are indicative of a flat open after the Eurostoxx 50 cash market closed higher by 1.5% yesterday.
• DXY remains on a firm footing, EUR/USD hovers around 1.11 and Cable is circa 1.34.
• Interfax reported that Russia and Ukraine are to hold talks today. 
• Fitch and Moody's cut Russia's sovereign debt rating to junk, whilst FTSE Russell will remove Russia from all equity indices.
• Looking ahead, highlights include EZ, UK & US Composite/Services PMI (Final), US ISM Services PMI, Factory Orders, EZ Unemployment, Japanese Unemployment, Speeches from Fed's Powell & Williams, ECB Minutes, Supply from France & Spain.

US TRADE

• US stocks finished higher as part of a broader cyclical asset bid on Wednesday amid hopes over Ukraine peace talks.
• S&P 500 +1.9% at 4,386, Nasdaq 100 +1.7% at 14,243, Dow Jones +1.8% at 33,891, Russell 2000 +3.1% at 2,058.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian negotiator said a ceasefire will be discussed in talks with the Ukraine delegation, while it was also reported that Ukraine is to take part in talks with Russia on Thursday, according to Interfax.
• Russian Defence Ministry said 498 Russian soldiers have died in Ukraine and 1,597 have been wounded, according to Ria. However, Ukraine said over 7,000 Russian troops have been killed so far and it has taken hundreds of Russian soldiers prisoner, including senior officers.
• Russian forces have slightly increased the quantity of forces in Ukraine with an increase in missiles and artillery targeting Kyiv, according to a US official.
• Ukraine's state rail company initially stated that a Russian airstrike hit close to Kyiv rail station where thousands are being evacuated, although the Ukraine Interior Ministry Adviser later said the explosion near Kyiv station was caused by a wreckage from a downed Russian cruise missile and not a direct strike.
• US President Biden said Russia is responsible for the humanitarian crisis in Ukraine and for devastating human rights abuses.
• US State Department said Russia is engaged in a full assault on the truth regarding the war in Ukraine and that Russia is throttling Twitter, Facebook and Instagram platforms which Russians rely on for independent information.
• US Secretary of State Blinken said the value of Putin's "war fund" has vanished and the US is keeping the door open to a diplomatic path forward but it will be very hard without military de-escalation.
• US Treasury Secretary Yellen said US and allies will continue to impose severe consequences on Russian President Putin and that Russia is 'increasingly on an economic island', while she added the Treasury is prioritising sanctions on oligarchs key to Putin's power and is assembling a task force with justice department to 'uncover, freeze and seize' their wealth. Furthermore, she stated 80% of Russia's banking system assets now under restrictions and half of CBR assets were immobilised by Monday.
• US Transportation Secretary Buttigieg said the US could take additional action against Russia after airspace ban and that there are 'lots of things on the table'.
• US is to impose export controls targeting Russian oil refining and is to put full blocking sanctions on Russian defense entities. Furthermore, US Democrat Senator Manchin said a bipartisan bill to ban Russian oil imports is in the works, and Deputy National Security Adviser Singh said the administration is looking at ways to cut US consumption of Russian oil, according to CNN.
• US is expected to ban Russian-flagged ships from entering US ports.
• Canada imposed sanctions on a total of 10 individuals from Russian energy firms Rosneft and Gazprom.
• UK official Gove is drawing up plans to seize British property owned by Russian oligarchs with links to Russian President Putin, according to the FT.
• French Finance Minister Le Maire said short-term options to shield Co's. from Russia sanction impact can be subsidies and loans, while discussions on an EU level regarding this issue are continuing. Furthermore, he responded that 'this is a first decision' when asked why Gazprombank was not included in EU decisions on SWIFT ban and noted large consensus among EU leaders that crypto must not be overlooked regarding Russian sanctions and should not be loopholes.
• Russia Finance Ministry said it will suspend some budget rules relating to the use of extra oil and gas budget revenues in 2022, while it was separately reported that the CBR eased reserve requirements on banks in which measures will allow to cut the amount of mandatory reserves by RUB 2.7tln.
• FTSE Russell said Russia will be deleted from all FTSE Russell equity indices effective from the open on March 7th, while Japan's GPIF is looking into announcements by index companies on Russia as portfolios will need to reflect index changes they track.
• Fitch downgraded Russia's sovereign rating from BBB to B; Rating Watch Negative and Moody's also cut Russia's sovereign rating from Baa3 to B3; Outlook Negative which put its at junk status.

OTHER

• IAEA chief Grossi will visit Iran on Saturday, according to Nournews. In relevant news, diplomats were said to genuinely not know which way it was going on the Iran nuclear deal and most still think this could come together but confidence levels are low, according to WSJ's Norman.

APAC TRADE

EQUITIES

• APAC stocks traded mostly positive after the gains in the US where stocks and yields climbed amid peace talk hopes and hawkish central bank rhetoric, but with upside capped as the region digested a slowdown in Chinese Caixin Services PMI data.
• ASX 200 was underpinned by a commodity surge, spearheaded by the energy sector as Brent rose to its highest level since 2013.
• Nikkei 225 benefitted from a weak JPY but with gains capped as Tokyo and neighbours seek an extension of COVID measures.
• Hang Seng and Shanghai Comp. were mixed with the mainland clouded after PBoC's liquidity drain and soft PMI data.
• US equity futures were rangebound overnight and took a breather from the prior day's advances.
• European equity futures are indicative of a flat open with the Euro Stoxx 50 future unchanged after the cash market closed higher by 1.5% yesterday.

FX

• DXY marginally gained but with price action muted as Powell comments were offset by a lack of haven demand.
• EUR/USD was rangebound overnight after a pullback to 1.1100 despite the recent record-high eurozone inflation.
• GBP/USD reclaimed 1.3400 after yesterday's rebound and with slightly more hawkish rhetoric from BoE's Tenreyro.
• USD/JPY and JPY-crosses remained elevated on the risk environment.
• Antipodeans were indecisive after mixed data from Australia and slowdown in Chinese Caixin Services PMI.

FIXED INCOME

• 10yr USTs found some mild respite from yesterday's pronounced bear-flattening which was spurred as Fed Chair Powell affirmed plans to hike rates this month and kept the door open for more aggressive hikes in the future.
• Bunds were relatively flat with support at 169.00 helping ease the pressure from hawkish central bankers and hot CPI data.
• 10yr JGBs tracked recent declines in global counterparts amid gains in stocks and weaker results at the 30yr auction.

COMMODITIES

• WTI and Brent extended on gains in which Brent briefly reclaimed the USD 118/bbl level for its highest since early 2013.
• Japan plans to hold a ministerial meeting on Friday to compile measures to respond to higher oil prices.
• Spot gold was uneventful with the precious metal restricted by the mild gains in the greenback.
• Copper gained amid the positive risk tone and strength in Shanghai and Singapore commodity prices.

CRYPTO

• Bitcoin saw mild losses overnight with prices contained by resistance at the USD 44,000 level.

NOTABLE APAC HEADLINES

• PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.10% for a CNY 190bln drain.
• PBoC set USD/CNY mid-point at 6.3016 vs exp. 6.3012 (prev. 6.3351)
• South Korean Presidential candidate Ahn confirms support for candidate Yoon Suk-yeol ahead of March 9th elections.

DATA RECAP

• Chinese Caixin Services PMI (Feb) 50.2 (Prev. 51.4)
• Chinese Caixin Composite PMI (Feb) 50.1 (Prev. 50.1)
• South Korean GDP QQ (Q4 F) 1.2% (Prev. 1.1%)
• South Korean GDP YY (Q4 F) 4.2% (Prev. 4.1%)
• Australian Building Approvals (Jan) -27.9% vs. Exp. -3.5% (Prev. 8.2%, Rev. 9.8%)
• Australian Trade Balance (AUD)(Jan) 12.9B vs. Exp. 9.1B (Prev. 8.4B)
• Australian Exports MM (Jan) 8% (Prev. 1%)
• Australian Imports MM (Jan) -2% (Prev. 5%)

EUROPE

NOTABLE EUROPEAN HEADLINES

• BoE's Cunliffe said the heightened perception of geopolitical risks and the potential impacts on growth and inflation can only increase risks around adjustment away from riskier assets, while he added sanctions will do severe damage to the Russian economy but should not have material risks to financial stability more broadly.
• BoE's Tenreyro said inflation pressures have intensified in recent days with the war on Ukraine. Tenreyro also stated the high level of Cos. wage expectations in BoE agents' survey was a surprise and will see if it materialises, while the latest rise in oil prices will increase inflation and dampen economic activity in the UK.
• ECB's Centeno said the Russia-Ukraine conflict could lead to a stagflation scenario depending on the duration of the conflict and the European response.

US

NOTABLE US HEADLINES

• Fed Chair Powell suggested it would take something in the range of three years to get to where they would want to get to regarding the balance sheet and they may speed up or slow down after the set reduction course. Fed Chair Powell said a neutral rate is somewhere between 2.0-2.5% and it may need to go higher than that, while he added the Fed can achieve a soft landing.
• NY Fed markets head Logan said recent developments after Russia invaded Ukraine have led to volatility but markets are functioning in an orderly way and there is significant liquidity in the financial system. Logan also stated the Fed balance sheet reduction is likely to take place when markets are functioning well and she expects balance sheet reduction to go smoothly.
• Fed's Beige Book said contacts reported they expect the tight labor market and consequent strong wage growth to continue, although a few districts reported signs of wage growth moderating.
• US Treasury Secretary Yellen said the pace of the US recovery has exceeded the most optimistic expectations, while she added that US household finances are healthy and the economy appears to be poised for further growth.