• APAC stocks traded mostly lower with the region cautious heading into month-end and following the Shanghai lockdown announcement.
• The next round of face-to-face talks between Russia and Ukraine will be held in Turkey on March 28th-30th.
• US President Biden stated that Russian President Putin cannot remain in power; White House official later said Biden was not calling for a change of regime in Russia.
• European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 future up 0.2% after the cash market closed higher by 0.1% on Friday.
• DXY climbed back above 99.0, EUR/USD is back on a 1.09 handle, USD/JPY rose above 123.00.
• Looking ahead, highlights include ASEAN summit, US 2yr and 5yr supply, Speech from BoE Governor Bailey.

US TRADE

• US stocks finished mixed on Friday with trade choppy as yields surged on hawkish Fed calls.
• S&P 500 +0.5% at 4,542, Nasdaq 100 -0.1% at 14,754 , Dow Jones +0.4% at 34,861, Russell 2000 +0.1% at 2,077.

NOTABLE US HEADLINES

• White House Principal Deputy Press Secretary Karine Jean-Pierre tested positive for COVID-19 and last saw President Biden in a socially-distanced meeting on Saturday, but added that the President is not considered a close contact.

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

• Ukrainian President Zelensky said he would like an all for all prisoner exchange with Russia and that they have handed over a list to Russia. Zelensky added that they will not sit down for talks with Russia if discussions are about "demilitarisation and some kind of denazification". Zelensky stated that Ukraine is ready to discuss neutrality and non-nuclear status if backed by security guarantees, while he added that a deal is only possible with a troop withdrawal and that he wants a compromise with Russia regarding Donbass.
• Turkish President Erdogan told Russian President Putin in a call that there needs to be a quick ceasefire with Ukraine and that they need to improve the humanitarian situation in the region, while it was also reported that the next round of face-to-face talks between Russia and Ukraine will be held in Turkey on March 28th-30th.
• US President Biden said NATO is a defensive alliance and it has never sought Russia’s demise and that “swift and punishing” costs are the only things that will influence Russia to change course. Biden added that US forces are in Europe to defend NATO allies, not to engage with Russian forces and stated that Russian President Putin cannot remain in power, although Biden later said that he was not calling for a regime change in Russia.
• White House official said President Biden was not calling for a change of regime in Russia and the US envoy to NATO also commented that the US does not have a policy of regime change in Russia. In relevant news, a Kremlin spokesman responded that it is not for US President Biden to decide and said the President of Russia is elected by Russians.
• German Chancellor Scholz said a regime change in Russia is not NATO’s goal. Furthermore, Scholz said that Germany is considering purchasing a missile shield.
• US Secretary of State Blinken said Israeli efforts to mediate on Ukraine-Russia are important and closely coordinated with the US.

DEFENCE/MILITARY

• Russia launched 70 missiles on targets in Ukraine on Saturday which was the largest daily amount since the war began, although reports added only 8 of the 70 missiles reached the target, according to Pravda with most shot down by Ukrainian defence.
• UK Ministry of Defence said Russia is maintaining a distant blockade of Ukraine’s Black Sea coast and effectively isolating Ukraine from maritime trade, while it noted that Russian naval forces are continuing their sporadic missile strikes against targets throughout Ukraine. UK Defence Ministry also said Russia is stepping up attempts to encircle Ukrainian forces directly facing the separatist regions in the east, advancing from the direction of Kharkiv in the north and Mariupol in the south, according to Bloomberg.
• US is to provide an additional USD 100mln in civilian security assistance to Ukraine, according to the State Department.

ENERGY/ECONOMIC SANCTIONS

• US is to sanction companies providing technology for Russian military and intelligence services, according to a WSJ report late on Friday.
• Japanese Finance Minister Suzuki said the government cannot confiscate foreign central banks' reserves parked with the BoJ under current laws, while Chief Cabinet Secretary Matsuno said they will revise FX control laws swiftly to strengthen sanctions against Russia and hope to submit a bill at the current parliamentary session.

OTHER

• Iranian Foreign Minister said that France, Germany and UK agree on the text and that the US ‘accepts’ it must address some remaining issues, while he also stated that a deal hinges on the US removing the IRGC from the terror list, according to Bloomberg. Furthermore, Iran’s Foreign Minister said Tehran welcomes normalisation of ties with Saudi Arabia and is determined to expand cooperation with Syria, according to state TV.
• EU's Borrell said a nuclear agreement with Iran is very close.
• US Special Envoy for Iran Malley said he can’t be confident that a deal is imminent and said they also thought they were close a few months ago.
• US Secretary of State Blinken said a return to the JCPOA is the best way to put Iran’s nuclear program back in the box and that US commitment to the principle of Iran never acquiring a nuclear weapon is unwavering, while he added the US will continue to stand up to Iran if it threatens the US and its allies.
• Israeli PM Bennett said that he hopes the US will heed calls against the delisting of the IRGC from its terrorism blacklist, while Israel’s Foreign Minister said Israel and the US will continue working together to prevent a nuclear Iran.
• Two police officers were killed and four people were injured during a shooting attack in Israel's Hadera, which ISIS claimed responsibility for.
• North Korean leader Kim said North Korea will keep developing formidable striking capabilities and their self-defence force cannot be bartered nor be bought according to KCNA, while it was separately reported that North Korea is to accelerate the restoration of its demolished nuclear test site, according to South Korea press.

APAC TRADE

EQUITIES

• APAC stocks traded mostly lower with the region cautious heading into month-end and this week's various risk events, while higher yields and a lockdown in Shanghai contributed to the headwinds for risk sentiment.
• ASX 200 shrugged off weak business confidence and was kept afloat by strength in mining stocks and financials.
• Nikkei 225 is set to snap its 9-day win streak and tested the 28,000 level to the downside.
• Hang Seng and Shanghai Comp. were mixed with early weakness in the mainland amid a two-stage lockdown in Shanghai after asymptomatic cases in the city rose to a record high and with data also showing a slowdown in Industrial Profits for February YTD. However, the PBoC’s liquidity boost eventually helped stem some of the losses in China, while the Hong Kong benchmark recovered into the green with advances led by Meituan Dianping and Sinopec post-earnings.
• US equity futures were subdued overnight with price action rangebound at the start of a risk-packed week.
• European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 future up 0.2% after the cash market closed higher by 0.1% on Friday.

FX

• DXY climbed back above the 99.00 level amid the cautious risk tone and the recent hawkish Fed calls.
• EUR/USD retreated further beneath 1.1000 but eventually found a floor around 1.0950.
• GBP/USD remained weak with the government expected to consider proposals to address higher costs of living.
• USD/JPY rose above 123.00 after the BoJ intervened to protect its yield cap.
• Antipodeans were mixed with underperformance in NZD/USD after Westpac noted that financial markets seem to be overpricing the extent of RBNZ rate hikes during the next couple of years.
• SNB Chairman Jordan said Swiss inflation is high for Switzerland but low in international comparison, while they will make policy adjustments to keep inflation under control if needed and consider the inflation difference between Switzerland and other countries when deciding on currency interventions. SNB Chairman Jordan added that the nominal value of CHF is different to its real value and businesses can cope with a stronger nominal CHF due to higher inflation abroad. Furthermore, he added that CHF remains highly valued and that they are ready to intervene to prevent it from becoming too strong, while parity with EUR is symbolic but not economically important and they look at all currencies and inflation differences not just at the euro.

FIXED INCOME

• 10yr USTs were subdued on hawkish Fed calls, while the 5yr/30yr yield curve inverted for the first time since 2006.
• Bunds prodded Friday's lows and fell below 158.00.
• 10yr JGBs were lacklustre as the 10yr yield approached the BoJ's yield cap which prompted the BoJ to step in with an offer to buy an unlimited amount of JGBs at a yield of 0.25%, although no one took up the central bank on its offer, while the 10yr yield later reached 0.25% which prompted the BoJ to announce a second special operation for today.

COMMODITIES

• WTI and Brent futures were pressured at the open amid a lockdown in Shanghai and as reports suggested an Iranian nuclear deal is close with Iran's Foreign Minister stating that France, Germany and the UK agreed on the text.
• US Baker Hughes Rig Count (w/e Mar 25th): Oil +7 at 531, Nat Gas unch. at 137, and Total +7 at 670
• US officials are considering another US SPR release but nothing has been decided yet, while it could be more than the 30mln bbls released earlier in the month, according to a Reuters source.
• Saudi-led coalition said it began an operation to neutralise the targeting of oil facilities with the goal to protect global energy sources from hostile attacks and ensure supply chains, while it carried out airstrikes against sources of threats in Yemeni cities of Sanaa and Hodeidah, according to Al Arabiya.
• SGH Macro Advisers noted on Friday that Russia is in active talks with Asian partners about the possibility of sending further oil supplies to the Asian market, while SGH Macro understands that China will import at least 10mln tons of Russian oil on top of its original import plan for this year and Beijing sources said the price that Russia offered is equivalent to about USD 70/bbl which is to be settled directly in CNY and RUB.
• Qatar’s Foreign Minister said the conflict in Ukraine and its geopolitical ramifications, is spurring some countries to explore new ways of pricing oil outside of the dollar, according to CNBC.
• US, UK and Japanese banks are considering jointly extending USD 1bln in loans to Kuwait Petroleum Corp to help in increasing oil production, according to Nikkei.
• Spot gold marginally declined with the precious metal subdued by a firmer greenback.
• Copper was subdued amid the cautious risk tone.

CRYPTO

• Bitcoin took a breather overnight after it gained throughout the weekend and briefly pared all its YTD losses.
• Exxon is reportedly utilising excess natural gas to mine Bitcoin.
• Florida Governor DeSantis said the state should allow businesses to pay tax in crypto.
• UK is to disclose cryptocurrency regulations proposals in the coming weeks, according to CNBC.

NOTABLE APAC HEADLINES

• PBoC injected CNY 150bln via 7-day reverse repos with the rate at 2.10% for a CNY 120bln net injection.
• PBoC set USD/CNY mid-point at 6.3732 vs exp. 6.3719 (prev. 6.3739)
• Shanghai announced a four-day lockdown of its financial district and nine other areas, in which it is to lockdown each half of the city by turns for mass COVID testing beginning on Monday after the city reported a new record high of asymptomatic COVID-19 cases.
• US FCC designated China Telecom Corp and China Mobile International USA as a threat to national security.
• BoJ offered to buy an unlimited amount of 5yr-10yr JGBs at a fixed rate of 25bps although no one took up the central bank's offer for unlimited 5yr-10yr JGBs. BoJ said it made the offer in light of recent moves in long-term rates and that they need to guide 10yr yield around 0%, while it later announced a second similar operation.

DATA RECAP

• Chinese Industrial Profits YTD YY (Feb) 5.0% (Prev. 34.3%)
• Australian NAB Quarterly Business Confidence (Q1) 9 (Prev. 18, Rev. 14)

EUROPE

NOTABLE EUROPEAN HEADLINES

• UK PM Johnson is expected to hold discussions with senior cabinet ministers this week regarding plans to address rising bills and bolster the country’s energy security, according to The Observer.
• UK Chancellor Sunak is considering proposals for a new council tax rebate after his Spring statement failed to ease panic in Downing Street regarding the spiralling cost of living crisis, according to Sunday Times.
• German Chancellor Scholz said the ruling coalition has an agreement on debt brake and tax hikes, while he added that all parties will stick with them.
• ECB President Lagarde said euro area growth could be as low as 2.4% this year in a severe scenario due to the war and that inflation is expected to decrease and settle at levels around the 2% target in 2024 in all their scenarios, while she also commented that they stand ready to revise the schedule for net asset purchases in terms of size and duration.