• The BoJ defied some market bets and stuck with its ultra-easy policy settings and reaffirmed its dovish guidance.
• European bourses are contained overall, Euro Stoxx 50 +0.1%, as the dovish BoJ fails to provide impetus with US futures similarly steady
• USD/JPY jumps to 131.57 from the low 128.00 area at one stage, DXY rebounds accordingly to 102.900 before experiencing a sharp reversal
• Core fixed benchmarks have picked off the European morning's lows to near unchanged levels, but remain shy of overnight BoJ-inspired peaks.
• Crude benchmarks are bid and have broken out of contained overnight ranges following the latest geopolitical rhetoric, lifting the complex to fresh YTD peaks.
• Looking ahead, highlights include US Retail Sales & Industrial Production, Speeches from Fed's Bostic, Bullard, Harker & Logan, Supply from the US, Earnings from Charles Schwab, Prologis & Kinder Morgan.

BOJ

• BoJ kept its policy settings unchanged with rates at -0.10% and YCC maintained to target 10yr JGBs at 0% via unanimous vote, while it kept the yield band and yield target unchanged. BoJ stuck with its forward guidance on interest rates and guidance that it will continue large-scale JGB buying and make nimble responses for each maturity, while it reiterated that it will not hesitate to take additional easing measures as necessary. Furthermore, the BoJ extended the fund operation to support financial lending by one year and the Outlook Report contained cuts to Real GDP growth forecasts and mostly upward revisions to Core CPI estimates, although fiscal 2023 and fiscal 2024 Core CPI forecasts remained below the 2% price goal.
• BoJ Governor Kuroda (post-meeting press conference) says he is not expecting 10yr JGB yields to continue trading with yields above 0.5%, and there is no need to further expand its bond target band; today's decision is not a change in BoJ's monetary policy. It is still early days since the adjustment to yield bands made in December, BoJ needs more time to assess impact on market functions. YCC is fully sustainable, widening band has made YCC more sustainable. Important for FX rates to move stably, reflecting fundamentals; he has no specific comments on FX levels, noting that currency policy is the jurisdiction of the government.
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EUROPEAN TRADE

EQUITIES

• European bourses are contained overall, Euro Stoxx 50 +0.1%, as the dovish BoJ fails to provide impetus.
• US futures are similarly steady ahead of earnings, data and Fed speak, ES +0.1%.
• Within Europe, sectors are mixed with marked outperformance in Tech after updates from Just Eat and ASM International.
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FX

• Yen yields gains made on the premise of further BoJ YCT adjustment as the Bank holds fire.
• USD/JPY jumps to 131.57 from the low 128.00 area at one stage, DXY rebounds accordingly to 102.900 before sharp reversal on the back of strength elsewhere in the index.
• Sterling extends on UK pay gains as services and core inflation top consensus, Cable breaches 1.2300 on the way to 1.2360+ peak.
• Euro eyes resistance in the high 1.0800 zone as the Dollar recoils and Kiwi approaches 0.6500 and Aussie takes firmer hold of 0.7000 handle
• PBoC set USD/CNY mid-point at 6.7602 vs exp. 6.7644 (prev. 6.7222)
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FIXED INCOME

• Core benchmarks have picked off the European morning's lows to near unchanged levels, but remain shy of overnight BoJ-inspired peaks.
• The overnight BoJ derived upside seemingly fizzled out amid ECB's Villeroy dismissing the dovish source reports and hot UK core CPI.
• Stateside, USTs are holding firmer than their EGB peers ahead of a packed afternoon docket.
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COMMODITIES

• Crude benchmarks are bid and have broken out of contained overnight ranges following the latest geopolitical rhetoric, lifting the complex to fresh YTD peaks.
• WTI Feb’23 and Brent Mar’23 are at the top-end of USD 80.55-81.86/bbl and USD 86.13-87.43/bbl parameters, ranges that mark fresh YTD peaks for the complex, though, the benchmarks remain well within late-2022 extremes.
• China's NDRC warned iron ore trading companies and iron ore futures companies against price gouging and speculation, while it will step up supervision on iron ore's spot and futures markets, according to Reuters.
• IEA Oil Market Report: Demand set to increase by 1.9mln BPD to a record of 101.7mln BPD.
• Spot gold is essentially unchanged and unable to derive much support from the Dollar’s weakness as the overall tone remains a tentative one post-BoJ.
• Copper prices are bid this morning in the wake of disruption to Glencore’s Antapaccay copper mine in Peru, which is operating at restricted capacity amid anti-government protests, according to Reuters sources.
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NOTABLE HEADLINES

• ECB's Villeroy reaffirms that a European recession should be avoided in 2023, will bring inflation back to target around 2024/2025. Lagarde's 50bp guidance remains valid. Will remain at the terminal rate for as long as is necessary; will go to the terminal by summer, not there yet.
• UK Chancellor Hunt is reportedly planning a "slimmed down" spring budget which will not feature tax cuts within the statement, via The Guardian citing sources which add that there will be tax cuts before the next election, with the autumn statement the most likely point to announce such a change.
• Germany is reportedly to narrowly avoid a 2023 recession, with price-adj. growth of 0.2%, via Reuters citing source/draft of the economic report; Inflation: 2023 6.0%, 2024 2.8%.
• Magnitude 7.0 earthquake strikes off Sulawesi, Indonesia; Tsunami waves are possible for coasts located within 300km of Indonesia's quake epicentre, Pacific Tsunami Centre says.

NOTABLE DATA

• UK CPI YY (Dec) 10.5% vs. Exp. 10.5% (Prev. 10.7%); MM (Dec) 0.4% vs. Exp. 0.4% (Prev. 0.4%)
• UK Core CPI YY (Dec) 6.3% vs. Exp. 6.2% (Prev. 6.3%); MM (Dec) 0.5% vs. Exp. 0.4% (Prev. 0.3%)
• UK ONS HousePrice Index (Nov) 10.3% Y/Y vs. Exp. 10.3% (prev. 12.6%)

NOTABLE US HEADLINES

• IMF Deputy Managing Director Gopinath says upcoming World Economic Outlook forecasts will be similar to the prior update.
• US Treasury Secretary Yellen sees a pressing need to the US and China to closely communicate; misunderstandings mustn't worsen US-Sino relations; Chinese Vice Premier Liu He tells Yellen that the two sides need serious communication and coordination on climate change, macroeconomic and other issues.
• Click here for the US Early Morning note.

GEOPOLITICS

• US reportedly sends Ukraine US arms which were stored in Israel, according to NYT.
• Russian Foreign Minister Lavrov says discussions with Ukraine President Zelenskiy are not possible; ready to respond to Western proposals on Ukraine but have not seen any serious proposals; adds, that they will have to take corresponding military measures if Finland/Sweden were to join NATO.
• Ukrainian Minister of Internal Affairs has died in a helicopter crash near Kyiv, according to local journalists.
• Serbian President Vucic says Crimea is Ukraine, and the EU path is the only one for Serbia.

CRYPTO

• Coinbase (COIN) says it has made the decision to halt operations within Japan, customers will have until February 16th to withdraw their holdings.

APAC TRADE

• APAC stocks were positive albeit with price action mostly kept rangebound after the weak lead from Wall Street, while focus overnight centred on the BoJ policy announcement in which the central bank defied the increased speculation for a policy tweak.
• ASX 200 was flat with strength in the tech and consumer sectors offset by losses in commodity-related stocks.
• Nikkei 225 was boosted after the BoJ stuck with its ultra-easy policy settings and reaffirmed its dovish guidance.
• Hang Seng and Shanghai Comp were choppy but with strength in key tech names after China approved licences for 88 new games including titles from Tencent and NetEase in a further sign of an end to its tech crackdown.

NOTABLE ASIA-PAC HEADLINES

• PBoC injected CNY 133bln via 7-day reverse repos with the rate kept at 2.00% and injects CNY 447bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 515bln net injection.
• China's NDRC's said the economic development situation this year is still complicated, external environment is turbulent and pressure is still large, but it is confident and capable of promoting the continuous recovery and overall improvement of China's economy, according to Reuters.
• Hong Kong is expected to end its COVID mask mandate by March or April, according to sources cited by Ming Pao News.

DATA RECAP

• Japanese Machinery Orders MM (Nov) -8.3% vs. Exp. -0.9% (Prev. 5.4%); YY (Nov) -3.7% vs. Exp. 2.4% (Prev. 0.4%)