• European bourses are a touch softer overall, Euro Stoxx 50 -0.2%, and relatively unreactive to better-than-expected EZ Flash PMIs.
• Stateside, futures are posting similar price action with the ES -0.2% but above 4k, ahead of data points and key earnings including MSFT.
• The USD has benefitted from a PMI-induced decline in Sterling while JPY is the marked outperformer but has eased from best levels.
• EGBs were initially bolstered by technical factors and marked Gilt outperformance, however Bunds have since faded post-PMIs and bearish UK syndication.
• Crude benchmarks are little changed/slightly softer having recovered from fleeting USD-induced pressure.
• Looking ahead, highlights include US Flash PMIs. Earnings from Microsoft, Verizon, JNJ & General Electric, Supply from the US. Holiday in China & Hong Kong.

EUROPEAN TRADE

EQUITIES

• European bourses are a touch softer overall, Euro Stoxx 50 -0.2%, and relatively unreactive to better-than-expected EZ Flash PMIs.
• Albeit, the FTSE 100 -0.4% is lagging slightly following its own PMIs, which point to a particularly grim start to the UK economy for 2023.
• Stateside, futures are a touch softer but contained overall, ES -0.2% but above 4k, ahead of data points and key earnings including MSFT.
• Click here for more detail.

FX

• The USD has benefitted from a PMI-induced decline in Sterling, with the DXY lifted to a 102.17 peak and Cable testing 1.23 to the downside.
• In contrast, the EUR was underpinned by Monday's late-doors ECB speak though EUR/USD stalled on a test of 1.09 before contrasting EZ/regional PMIs.
• JPY is the marked outperformer having been below 130.00 against the USD, though it has given back some of this recovery momentum in face of the above USD action.
• CAD is contained pre-BoC with the Antipodeans equally rangebound ahead of inflation data.
• Brazil's Finance Minister Haddad said President Lula and Argentina's President Fernandez requested the creation of a clearing house with a common currency to settle accounts, but added it has no name or deadline and their idea does not seek monetary unification as is the case with the Euro, according to Reuters.
• Click here for more detail.

FIXED INCOME

• EGBs perhaps gleaned initial support on technical factors, though subsequent action was driven by a marked spike in Gilts to near 105.00.
• Much of the UK move was driven by the region's PMI release though subsequent bearish fiscal developments served as a fleeting headwind for Gilts and, to a lesser extent, peers more broadly with Bunds continuing to slip post-PMIs.
• USTs are a touch firmer given the above action and ahead of its own data release and 2yr issuance.
• UK sells GBP 6bln 2053 Gilt via syndication, order book closed in excess of GBP 65bln, according to a bookrunner.
• Click here for more detail.

COMMODITIES

• The crude benchmarks are little changed/slightly softer as a GBP-induced lift to the USD weighs on the complex.
• However, WTI and Brent remain underpinned overall by the broader improving demand picture amid the Lunar New Year holiday.
• US is weighing the cancellation of the next SPR sale, according to sources cited by Energy Intel.
• Dubai sets the official crude differential to DME Oman for April at a USD 0.20/bbl discount.
• Norwegian Energy Ministry plans a 2023 APA oil and gas licensing round, adding acreage to the Norwegian and Barents sea.
• 5.4 magnitude earthquake strikes Nepal, via EMSC.
• Spot gold has slipped from its intraday peak given USD action, though the yellow metal continues to glean support from the slightly softer equity tone while LME Copper has slipped from best but remains in proximity to USD 9.5k/T.
• Click here for more detail.

NOTABLE DATA

• EU S&P Global Composite Flash PMI (Jan) 50.2 vs. Exp. 49.8 (Prev. 49.3); Click here for more detail.
• “The region is by no means out of the woods yet, however, as demand continues to fall – merely dropping at a reduced rate – and an upturn in the rate of inflation of selling prices for both goods and services will add encouragement to the hawks to push for further monetary policy tightening. The case for higher interest rates is fuelled further by the upturn in employment growth recorded during the month and signs of higher wages driving the latest upturn in price pressures."
• EU S&P Global Manufacturing Flash PMI (Jan) 48.8 vs. Exp. 48.5 (Prev. 47.8); Services Flash PMI (Jan) 50.7 vs. Exp. 50.2 (Prev. 49.8)
• German S&P Global Composite Flash PMI (Jan) 49.7 vs. Exp. 49.6 (Prev. 49.0); Click here for more detail.
• German S&P Global Manufacturing Flash PMI (Jan) 47.0 vs. Exp. 47.9 (Prev. 47.1); Services Flash PMI (Jan) 50.4 vs. Exp. 49.6 (Prev. 49.2)
• UK Flash Composite PMI (Jan) 47.8 vs. Exp. 49.1 (Prev. 49.0); Click here for more detail.
• "Jobs also continued to be lost as firms tightened their belts in the face of these headwinds, though many other firms reported being constrained by an ongoing lack of available labour."
• UK Flash Services PMI (Jan) 48.0 vs. Exp. 49.7 (Prev. 49.9); Manufacturing PMI (Jan) 46.7 vs. Exp. 45.5 (Prev. 45.3)
• German GfK Consumer Sentiment (Feb) -33.9 vs. Exp. -33.0 (Prev. -37.8, Rev. -37.6)
• UK PSNB, GBP (Dec) 26.581B GB (Prev. 21.196B GB, Rev. 18.819B GB); Ex Banks GBP (Dec) 27.402B GB vs. Exp. 17.75B GB (Prev. 22.017B GB, Rev. 19.640B GB)

NOTABLE HEADLINES

• Britain and the EU are unlikely to make major changes to the underlying Brexit deal, according to a report by the academic body UK in a Changing Europe cited by Reuters.
• ECB's Nagel said ECB is not done on far too high inflation, according to L'Express; additionally, Villeroy said the ECB probably will reach peak rates by summer.

NOTABLE US HEADLINES

• USTR office said US officials continue to engage with Mexican counterparts at the highest levels to address grave concerns with Mexico's biotechnology policies, while US officials made it clear it will consider all options including formal steps to enforce its rights under the USMCA if the issue is not resolved.
• Click here for the US Early Morning note.

GEOPOLITICS

• Russian Chief of the General Staff Gerasimov said the new army plan considers threats such as Finland and Sweden's desire to join NATO, and the use of Ukraine as a tool of hybrid war against Russia, according to TASS.
• Polish Defence Minister said Germany has now received Poland's official request to re-export Leopard tanks to Ukraine; following the German Defence Minister saying there is no new position on the Leopard tanks.

CRYPTO

• FBI said two hacker groups associated with North Korea were behind the USD 100mln theft from US crypto firm Harmony Horizon Bridge last June, according to Reuters.

APAC TRADE

• APAC stocks were positive and took impetus from the tech rally on Wall Street but with trade quiet amid a lack of fresh catalysts and as many participants in the region remained absent with markets in China, Hong Kong, Taiwan, South Korea, Singapore, Malaysia and Vietnam all closed for the holiday.
• ASX 200 was underpinned by strength in the real estate, tech and mining industries albeit with gains capped after a mixed NAB business survey and soft PMI data which showed a contraction in the manufacturing and services.
• Nikkei 225 continued its outperformance and climbed above the 27,000 level with the index unaffected by the latest preliminary PMI data in which Manufacturing PMI contracted for the 3rd consecutive month although Services and Composite PMIs improved with the latter back in expansionary territory, while reports also noted that Japan is considering early May for its planned downgrade of COVID policy.

NOTABLE ASIA-PAC HEADLINES

• US President Biden's Administration reportedly confronted China's government with evidence that suggested some China SOEs may be providing assistance to Russia's war effort, according to Bloomberg.
• The first three days of the Chinese Spring Festival holidays saw bookings for domestic hotel and scenic spots increase by 56% and 79% Y/Y, according to data by online travel agency Tongcheng Travel cited by these Global Times; Domestic air ticket bookings rose by 30%, China's passenger trips via railway, road, waterway and plane amounted 23.53 million on Monday, up 67.7% Y/Y.
• BoJ Governor Kuroda says markets moves are becoming more stable, via Reuters.

DATA RECAP

• Japanese Manufacturing PMI (Jan P) 48.9 (Prev. 48.9); Services PMI (Jan P) 52.4 (Prev. 51.1)
• Japanese Composite PMI (Jan P) 50.8 (Prev. 49.7)
• Australian Manufacturing PMI (Jan P) 49.8 (Prev. 50.2); Services PMI (Jan P) 48.3 (Prev. 47.3)
• Australian Composite PMI (Jan P) 48.2 (Prev. 47.5)
• Australian NAB Business Confidence (Dec) -1 (Prev. -4); Conditions (Dec) 12 (Prev. 20)