• APAC stocks began the week with a positive bias but with gains capped amid mass closures across the region.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.4% after the cash market closed up 1.6% Friday.
• DXY has retreated further beneath the 102 mark, EUR/USD is at a 9-month high, JPY lags G10 FX.
• ECB’s Knot said to expect the ECB to hike by 50bps in February and March, followed by more steps in May and June.
• Looking ahead, highlights include EZ Consumer Confidence (Flash), US Leading Index, Speeches from ECB’s Lagarde & Panetta, EU Syndication, Holiday closures including China, Hong Kong, Taiwan, South Korea & Singapore.

US TRADE

• US stocks rallied on Friday in which the Nasdaq outperformed and wiped out all the losses seen earlier in the week with the tech sector buoyed by Netflix and Alphabet after the former posted much better-than-expected subscriber metrics for Q4, while Alphabet shares gained on the announcement of 12k layoffs at Google.
• SPX +1.89% at 3,973, NDX +2.86% at 11,619, DJI +1.00% at 33,375, RUT +1.69% at 1,867

NOTABLE HEADLINES

• WSJ’s Timiraos writes Fed officials are preparing to slow interest-rate increases for the second consecutive meeting and debate how much more they would need to raise rates after gaining more confidence inflation will ease further this year, while Timiraos added the Fed could start to deliberate at the upcoming meeting how much more softening in labour demand, spending and inflation they would need to see before pausing rate hikes in the spring.
• US Department of Justice searched US President Biden’s home on Friday and found 6 additional documents with classified markings which were from President Biden’s time in the Senate and when he was Vice President, while President Biden’s lawyer said the President and First Lady were not present during the search and that Biden had offered access to allow the DoJ to conduct the search, according to Reuters.
• White House Chief of Staff Klain is reportedly planning to leave the role in the approaching weeks and President Biden is to name Jeff Zients as the new Chief of Staff, according to sources cited by Reuters and Washington Post.
• NABE survey showed 53% of respondents see more than an even chance the US will enter a recession in the next 12 months, while 3% of respondents from private-sector firms and industry trade associations said the economy is already in a recession, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks began the week with a positive bias but with gains capped amid mass closures across the region.
• ASX 200 was rangebound as weakness in the defensive sectors was counterbalanced by gains in energy and tech, in which the latter took impetus from last Friday’s outperformance in the Nasdaq after Netflix’s strong subscriber numbers and Google’s announcement to cut its workforce by 12,000.
• Nikkei 225 was the biggest gainer and rose above 26,900 to print a fresh monthly high where it then met some resistance, while overnight newsflow was extremely light and China, Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Indonesia and Vietnam are all closed for the Lunar New Year holiday.
• US equity futures were rangebound (ES -0.1%) and plateaued at Friday's best levels.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.4% after the cash market closed up 1.6% Friday.

FX

• DXY continued to soften after its recent retreat beneath 102.00 with markets practically fully pricing in the Fed to slow the pace of rate hikes to 25bps at the upcoming meeting which Fed officials have already entered a blackout period for, while WSJ’s Timiraos noted the Fed could start to deliberate how much more softening in labour demand, spending and inflation they would need to see before pausing rate hikes in the spring.
• EUR/USD climbed to a 9-month high after the latest hawkish commentary from ECB’s Knot who said to expect the ECB to hike by 50bps in February and March, followed by more steps in May and June.
• GBP/USD benefitted from a subdued dollar and marginally extended its footing above 1.2400.
• USD/JPY was choppy amid a lack of drivers and outdated minutes from the BoJ’s December meeting.
• Antipodeans were contained as participants await upcoming CPI data from both sides of the Tasman.
• Brazil and Argentina aim for greater economic integration and decided to advance discussions regarding a common South American currency that could be used for financial and commercial flows, according to an article jointly penned by the countries' leaders.

FIXED INCOME

• 10yr UST futures traded rangebound with slight gains amid anticipation for the Fed to slow down the pace of rate hikes for a second consecutive occasion at the FOMC meeting next week.
• Bund futures languished near Friday’s lows after the continued pushback against the prospect of the ECB slowing hikes in March, while a Reuters poll showed raised forecasts for the Deposit Rate to reach 3.25% in Q2 (prev. 2.75%).
• 10yr JGB futures strengthened on a break above 147.00 and with the BoJ announcing to supply JPY 1tln of funds.

COMMODITIES

• Crude futures lacked firm direction with much of the region away and amid mixed COVID commentary from China where the chance of a large rebound of the outbreak within the next 3 months was seen as very small as 80% of the population had already been infected, while COVID deaths in the week heading to the Lunar New Year surpassed 12.6k.
• Kuwait temporarily suspended operations at three ports on Sunday due to bad weather, according to state news agency KUNA.
• US Treasury Secretary Yellen said western countries are working on price caps for Russian refined petroleum products to ensure the continued flow of diesel but added it is complicated and there is a possibility that things may not go to plan, according to Reuters.
• Japanese insurers will raise insurance by about 80% on ships carrying LNG in Russian waters, according to Nikkei.
• Netherlands seeks to close the Groningen gas field this year which is the largest in Europe and earthquake-prone, while an official noted that it was very dangerous to keep operating the field and that they aim to shut it by October 1st but would wait to see if there is a shortage of gas after the winter, according to FT.
• Spot gold was choppy and only marginally benefitted from a softer dollar.
• Copper futures gradually extended on Friday's advances to test USD 4.30/lb.

CRYPTO

• Bitcoin traded rangebound and took a breather after a brief incursion above 23,000 over the weekend.
• US Federal prosecutors seized almost USD 700mln of FTX assets in the Sam Bankman-Fried criminal case, according to a CNBC report on Friday citing court filings.

NOTABLE ASIA-PAC HEADLINES

• China CDC chief epidemiologist said the possibility of a large-scale rebound of a COVID outbreak during the next two or three months is very small as 80% of China’s population has already been infected, according to Reuters. Furthermore, China reported that COVID-19 deaths in the week leading to the Lunar New Year topped 12,600.
• Japanese PM Kishida said will pick the new BoJ Governor by taking the economic situation in April into account and it is too soon to say if there is a need to change the government-BoJ accord, according to Reuters. It was also separately reported that PM Kishida said the government will nominate the new BoJ Governor in February.
• BoJ December meeting minutes stated the central bank will add some easing if necessary and several members said the effect of powerful monetary easing will continue even if the BoJ widens the yield target band. Furthermore, a few members said the BoJ must clearly explain that widening of the yield band is not a move eyeing the exit from ultra-loose policy, while a member said the BoJ must conduct a review of its policy framework sometime in the future.
• New Zealand’s ruling Labour Party voted to choose Chris Hipkins as the new PM and Carmel Sepuloni was named as the Deputy PM, while incoming PM Hipkins stated that Finance Minister Robertson indicated that he wants to continue in the role, according to Reuters.

GLOBAL

• US Treasury Secretary Yellen said she believes China understands the need to address debt issues, while she warned that a failure by heavily indebted countries to reduce the debt overhang would set back development in poor countries and could increase the risk of war, terrorism and migration for those countries, according to Reuters.
• Turkish President Erdogan announced that the election will take place on May 14th which is a month earlier than scheduled, according to Reuters.

GEOPOLITICS

• Joint French-German statement following a summit between French President Macron and German Chancellor Scholz stated they will support and assist Ukraine for as long as necessary and they support efforts to prosecute perpetrators of war crimes, according to Reuters. Furthermore, French President Macron commented at the summit that he doesn’t rule out sending Leclerc tanks to Ukraine and that training time needs to be taken into account, while he added that sending tanks should not endanger France’s own security.
• German Defence Minister Pistorius said he thinks there will be a decision soon regarding tanks for Ukraine whichever way it may fall, while it was also reported that German Foreign Minister Baerbock said Germany would not stand in the way if Poland sends Leopard tanks to Ukraine, according to Reuters and French television LCI.
• A Russian warship armed with hypersonic missiles will participate in joint naval exercises with China and South Africa in February, according to Reuters.

EU/UK

• UK electricity network operator National Grid had emergency coal-fired plants warm up amid expectations of tight supply and increased demand due to cold weather, while it will pay households to use less power during early Monday evening, according to FT.
• UK has started a post-Brexit review of EU's investor fund regulations amid concerns that Europe is not acting fast enough on appropriate safeguards, according to FT.
• ECB’s Knot said to expect the ECB to hike by 50bps in February and March, followed by more steps in May and June, according to Reuters.
• French President Macron said Germany is to join the new hydrogen pipeline project between Spain and France, according to Reuters.
• Fitch affirmed Ireland at AAA; Outlook Stable and affirmed Norway at AAA; Outlook Stable, while it affirmed Hungary at BBB; Outlook Cut to Negative from Stable.