• APAC stocks were positive as the region took encouragement from the strong US and European leads.
• Fed's Mester (2022 voter) said she thinks 50bps increases will be needed at some meetings based on her forecasts.
• DXY hovers around 98.50, USD/JPY extended its rise to 121.40, GBP is on the front-foot ahead of the Spring Statement.
• WTI and Brent gained as storm damage to the CPC pipeline could impact up to 1mln bpd of supply.
• Looking ahead, highlights include UK CPI, US New Home Sales, EZ Consumer Confidence (Flash), Australian Flash PMIs, UK Spring Statement, BoJ Minutes, Speeches from ECB's Lagarde, Fed's Bullard & Fed's Daly, US 20yr Auction.

US TRADE

• US stocks finished higher in which the more speculative/oversold sectors led the charge despite the continued rise in yields and lack of fresh developments on the Russia-Ukraine front.
• S&P 500 +1.1% at 4,512, Nasdaq 100 +1.9% at 14,654, Dow Jones +0.74% at 34,807, Russell 2000 +1.1% at 2,088.

NOTABLE US HEADLINES

• Fed's Mester (2022, 2024 voter) said she fully supports the Fed's actions last week and that raising the Fed Funds Rate to about 2.5% this year will be appropriate, with further hikes next year. Mester added that front-loading rate hikes is appealing and they can slow or speed up in H2 depending on data, while she doesn't think a 50bps rate hike should be off the table and thinks 50bps increases will be needed at some meetings based on her forecasts.
• Fed's Daly (2024 voter) said inflation is too high and that there are two supply chain shocks further pushing up on inflation. Daly added the main risk she sees is inflating pressure which is more than the Fed wanted, needed, or thought of three months ago. Furthermore, Daly said it is time to remove accommodation and get up to neutral, while she is looking at if they need to go over neutral.
• White House Press Secretary Psaki said she has tested positive for COVID-19, while she had two socially distanced meetings with US President Biden on Monday and he tested negative on Tuesday.

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

• Ukrainian President Zelensky said talks with Russia are difficult and sometimes confrontational, while he also commented that 100k people are living in Mariupol under inhumane conditions without food, water or medicine.
• Ukrainian President Zelensky is to take part virtually in the NATO summit on Thursday, with details to be worked out, according to Interfax Ukraine citing a press aide.

DEFENCE/MILITARY

• Kremlin spokesman Peskov said Russia would only use nuclear weapons if its very existence were threatened.
• US Department of Defense spokesperson Kirby said there had been no decision on permanent troop levels in Eastern Europe and that Russian vessels are contributing to the bombardment of Mariupol.
• UK Ministry of Defence said the Ukrainian civilian population in Russian-occupied cities continue to protest against Russian control, while Russia's efforts to subdue population have failed and it will probably employ increasingly violent and coercive measures.
• US NEC Director Deese said they have seen some Russian cybersecurity threat in Ukraine that has spilt over and had some impact on European and American companies.

ENERGY/ECONOMIC SANCTIONS

• US President Biden is to announce sanctions on more than 300 members of Russia's lower chamber of parliament as soon as Thursday, according to WSJ citing administration officials.
• US National Security Adviser Sullivan said President Biden will join partners in imposing additional sanctions on Russia and tighten existing ones, while he added that President Biden will announce joint action on enhancing European energy security and reducing its dependence of Russian gas.
• US Senators are to discuss freezing Russian gold assets with US Treasury Secretary Yellen, according to Axios.

FUND/SOVEREIGN ACTION

• Russian Central Bank said stock market trading will remain closed on Wednesday, according to Interfax.

APAC TRADE

EQUITIES

• APAC stocks were positive as the regional bourses took impetus from Europe and the US where stocks gained despite the continued upside in yields and lack of fresh developments on the Ukrainian front.
• ASX 200 was led higher by tech and financials but with upside capped by weakness in miners.
• Nikkei 225 surged on ongoing currency weakness and reclaimed the 28,000 level.
• Hang Seng and Shanghai Comp. were underpinned as tech stocks gained including Xiaomi post-earnings and buyback announcement, while ZTE surged as much as 60% on a favourable court ruling.
• US equity futures marginally extended on the prior day's gains.
• European equity futures are indicative of a firmer open with the Euro Stoxx 50 future up 0.9% after the cash market closed higher by 1.1% yesterday.

FX

• DXY was uneventful and languished below 98.50 despite the continued hawkish Fed rhetoric.
• EUR/USD held on to most of the prior day’s gains at the 1.1000 handle amid a lacklustre greenback.
• GBP/USD edged higher amid the US-UK steel agreement, while focus turns to the Spring statement.
• USD/JPY continued its upward trend to above 121.00 on widening yield differentials.
• Antipodeans were kept afloat by their high beta statuses but with upside capped amid a quiet calendar.

FIXED INCOME

• 10yr USTs extended beneath 123.00 after the recent bond rout and continued rise in yields.
• Bunds remained pressured but with downside stemmed by support at yesterday’s low.
• 10yr JGBs lacked demand amid the outperformance in Tokyo stocks, although the downside was stemmed amid the BoJ purchasing over JPY 1.3tln of JGBs with 1yr-10yr maturities.

COMMODITIES

• WTI and Brent gained as storm damage to the CPC pipeline could impact up to 1mln bpd of supply.
• US Energy Inventory Data (bbls): Crude -4.3mln (exp. +0.1mln), Cushing +0.6mln, Gasoline -0.6mln (exp. -2.0mln), Distillate -0.8mln (exp. -1.4mln)
• Pipeline operator CPC said two of three mooring points in Russia's Novorossiysk were damaged by a storm, while CPC may reduce oil transportation by two thirds and repairs are likely to take an extended period of time, according to reports in Interfax and Tass.
• Black Sea crude exports face a prolonged outage as repairs may take as long as two months with the outage at 1mln bpd, according to Energy Intel's Bakr.
• BoE and ECB have been talking with energy trading firms on market strains but are unlikely to provide immediate support, according to FT sources.
• Belgium PM Croo says the EU needs to make a combined effort to secure large quantities of gas, to avoid competition for bilateral deals, suggesting a solidarity mechanism and a ceiling on gas prices, according to the FT.
• Spot gold traded rangebound amid the uneventful greenback.
• Copper returned flat after prices faded the early marginal gains.
• Ukraine's 2022 spring crop sowing area could be slashed to 7mln hectares from 15mln, while it is mulling lifting export licence requirements for corn and sunflower oil for the 2021/22 season, according to the agricultural minister cited by Reuters.

CRYPTO

• Bitcoin weakened overnight in which prices briefly fell below the USD 42,000 level.

NOTABLE EUROPEAN HEADLINES

• UK and US agreed to allow historically-based sustainable levels of steel and aluminium goods from the UK to enter the US without being subject to Section 232 tariffs, effective June 1st. Furthermore, the UK will suspend retaliatory tariffs on US products including whiskey, blue jeans and motorcycles which would lift retaliatory tariffs on more than USD 500mln of American goods.
• UK Treasury sources have warned that Chancellor Sunak’s room for manoeuvre is limited with inflation expected to stay high for months. Sources added that a fuel duty reduction of less than GBP 0.05/litre is anticipated, according to The Times.
• The UK government is said to be drawing up contingency plans for a potential collapse of Russia’s Gazprom’s UK-based global energy trading business, according to The Times.

NOTABLE APAC HEADLINES

• PBoC injected CNY 20bln via 7-day reverse repos with the rate at 2.10% for a CNY 10bln net injection.
• PBoC set USD/CNY mid-point at 6.3558 vs exp. 6.3522 (prev. 6.3664)
• Japanese PM Kishida is likely to order compiling an additional economic stimulus package by month-end to cushion the impact from rising oil and goods prices, according to Yomiuri.
• IMF's Rhee was nominated for the BoK Governor position by outgoing South Korean President Moon.