• European bourses are firmer, Euro Stoxx 50 +0.5%, but are currently still set to end the week with modest losses
• Stateside, futures are mixed/flat, ES +0.1% holding around 20 points above the 3900 mark, with the 100- & 21- DMAs at 3900 and 3904 respectively.
• DXY has struggled to make any meaningful headway thus far, though it has derived support from a marked pullback in the JPY while antipodeans lead.
• EGBs continue to slip as ECB's Lagarde maintains they will "stay the course" on policy, with Bunds down to a 138.49 low vs Thursday's 140.73 peak.
• Crude benchmarks are firmer on the session, taking advantage of the rosier demand outlook going into the Lunar New Year holiday.
• Looking ahead, highlights include US Existing Home Sales, Speeches from Fed's George, Harker & Waller and ECB's Elderson, earnings from State Street.

EUROPEAN TRADE

CENTRAL BANKS/WEF

• SNB's Jordan says we should not underestimate second round effects of inflation, firms are not hesitating to increase prices; not easy to bring inflation back to 2%; once inflation is high, pressure from wages is here. Would not hesitate to go back to negative rates again, to deal with negative inflation. Had to expand the balance sheet as exchange rate was too strong, now able to sell some FX reserves again.
• ECB's Lagarde says "stay the course" is her mantra on monetary policy, china's reopening will have inflationary pressure.
• BoJ's Kuroda said widening the 10yr YCC band in December was not a mistake, will continue with accommodative monetary policy, expects inflation rates to start to decline from February, overall 2023 to see inflation less than 2%.
• IMF's Georgieva says the outlook is less bad than feared a couple of months ago, the potential for China to boost growth is an improvement; sees no dramatic improvement in the current IMF 2023 global growth forecast of 2.7%.

EQUITIES

• European bourses are firmer, Euro Stoxx 50 +0.5%, but are currently still set to end the week with modest losses.
• Sectors are mostly firmer with modest outperformance in Energy and Travel & Leisure, heading into the Lunar New Year.
• Stateside, futures are mixed/flat, ES +0.1% holding around 20 points above the 3900 mark, with the 100- & 21-DMAs at 3900 and 3904 respectively.
• Alphabet (GOOG) is planning to cut roughly 12k jobs globally; around 6% of workforce, according to Bloomberg citing an internal email.
• Japanese Lawmaker Amari says that Japan needs to join the US in the imposition of restrictions on exports of chip material/machinery to China, via Bloomberg.
• Regions Financial Corp (RF) Q4 2022 (USD): EPS 0.70 (exp. 0.66), Adj. Revenue 1.951bln (exp. 1.95bln).
• Click here for more detail.

FX

• DXY has struggled to make any meaningful headway thus far, though it has derived support from a marked pullback in the JPY while antipodeans lead.
• USD/JPY has lifted above 129.50 vs an earlier 128.36 trough, amid unfavourable yield action.
• CHF slipped a touch in wake of remarks from SNB's Jordan on second round inflation effects while Cable ran out of steam on an initial test of 1.24 and slipped further after poor retail data.
• Antipodeans are the relative outperformers as they regain their composure from Thursday's data/political-induced pressure.
• PBoC set USD/CNY mid-point at 6.7702 vs exp. 6.7708 (prev. 6.7674)
• Click here for more detail.

FIXED INCOME

• EGBs continue to slip as ECB's Lagarde maintains they will "stay the course" on policy, with Bunds down to a 138.49 low vs Thursday's 140.73 peak.
• In addition, attention has been placed on Italy's 2033 exchange auction as another factor behind the pronounced EGB pressure, BTPs lower by 100+ ticks.
• Stateside, USTs have been moving in tandem though with action more pronounced at the short-end of the curve ahead of the final Fed speakers pre-blackout.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are firmer on the session, taking advantage of the rosier demand outlook going into the Lunar New Year holiday.
• Currently, WTI and Brent are posting upside of around USD 0.30/bbl.
• Spot gold is choppy in a ~USD 15 range as the yellow metal moves in tandem with the Dollar, with spot gold around the middle of a USD 1,937.50-1,923.29/oz parameters.
• 3M LME copper is flat around USD 9,300/t after rising some USD 1,000/t over 15 calendar days .
• Click here for more detail.

NOTABLE HEADLINES

• UK Chancellor Hunt wants to extend the 5p cut in the price of petrol and diesel for another year, according to The Times
• Irish PM Varadkar says the possibility of an EU-UK agreement in the next few months is “very real” and can be achieved with “reasonableness and flexibility on both sides”. (BBC)
• JPMorgan forecasts UK FY23 GDP -0.1% (prev. forecast -0.3%). Raises BoE Q2-2023 rate forecast to 4.50% (prev. 4.25%).

NOTABLE DATA

• UK Retail Sales MM (Dec) -1.0% vs. Exp. 0.5% (Prev. -0.4%, Rev. -0.5%); Ex-Fuel MM (Dec) -1.1% vs. Exp. 0.4% (Prev. -0.3%, Rev. -0.3%)
• ONS: Between 2021 and 2022, retail sales volumes fell by 3.0%, as the lifting of restrictions on hospitality led to a return to eating out, and rising prices and the cost of living affected sales volumes.
• UK Retail Sales YY (Dec) -5.8% vs. Exp. -4.1% (Prev. -5.9%, Rev. -5.7%); Ex-Fuel YY (Dec) -6.1% vs. Exp. -4.4% (Prev. -5.9%, Rev. -5.6%)
• UK GfK Consumer Confidence (Jan) -45 vs. Exp. -40 (Prev. -42)

NOTABLE US HEADLINES

• Fed's Williams (voter) said US inflation is too high and the Fed has more work to do on rate increases, while he added that the Fed must stay the course until inflation is brought back to 2% and still has a way to go on rate increases with the data to drive where the Fed stops raising rates. Williams also noted the destination, not speed, is the key issue for the rate hike question and that the Fed still has lots of room to run on shrinking the balance sheet.
• Click here for the US Early Morning note.

GEOPOLITICS

• US announced the authorisation of security assistance for Ukraine valued at up to USD 2.5bln which includes 59 Bradley fighting vehicles, 90 Stryker armoured personnel carriers and air defence systems.
• CIA Director Burns travelled to Ukraine's capital last week and held a secret meeting with Ukrainian President Zelensky on Russia's next steps and the CIA chief told Zelensky that aid will be ‘harder to come by’ in the future, according to Washington Post.
• Russian Ambassador to the US said Russia has warned the US its approach is leading the world to a catastrophic scenario, according to Sky News Arabia.
• Russian Kremlin says western tanks will change nothing and will not stop Russia from achieving its goals; sees no hope for improvement in ties with the US.
• German Foreign Ministry spokesperson says they intend to sanction further IRGC members at Monday's EU Foreign Ministers meeting.

CRYPTO

• UAE Foreign Affairs Minister says crypto is to play a major role for UAE trade, via Bloomberg.

APAC TRADE

• APAC stocks traded higher but with some of the gains limited ahead of mass holiday closures and after the weak performance by global peers due to hawkish ECB rhetoric and headwinds from firm US data.
• ASX 200 was led by commodity-related stocks as the energy sector was underpinned by the recent rebound in oil prices and with Whitehaven Coal boosted by a 50% jump in its quarterly coal output.
• Nikkei 225 gradually breached the 26,500 level to the upside after the latest inflation data which mostly printed in line with estimates and showed the fastest pace of increase in Core CPI since 1981.
• Hang Seng and Shanghai Comp were jubilant ahead of the Lunar New Year celebrations and after this week's record liquidity injection although further upside was capped given the upcoming mass holiday closures with mainland bourses to remain shut throughout the whole of next week, while there was a lack of surprise from the PBoC which maintained its benchmark lending rates.

NOTABLE ASIA-PAC HEADLINES

• PBoC 1-Year Loan Prime Rate (Jan) 3.65% vs Exp. 3.65% (Prev. 3.65%); 5-Year Loan Prime Rate (Jan) 4.30% vs Exp. 4.30% (Prev. 4.30%)
• US Treasury staff will visit China in February ahead of a visit by Treasury Secretary Yellen, according to Reuters sources.

DATA RECAP

• Japanese National CPI YY (Dec) 4.0% vs. Exp. 4.0% (Prev. 3.8%)
• Japanese National CPI Ex. Fresh Food YY (Dec) 4.0% vs. Exp. 4.0% (Prev. 3.7%); Ex. Fresh Food & Energy YY (Dec) 3.0% vs. Exp. 3.1% (Prev. 2.8%)