• APAC stocks were mixed with some of the regional bourses cautious heading into this week’s plethora of risk events.
• European equity futures are indicative of a weaker open with the Euro Stoxx 50 -0.4% after the cash market closed up 0.1% on Friday.
• DXY lingers just below 102 with FX markets largely contained. JPY narrowly leads the majors, AUD lags.
• US President Biden will host House Speaker McCarthy at the White House on Wednesday; will discuss the debt ceiling.
• Looking ahead, highlights include Swiss KOF, German GDP Flash, Japanese Retail Sales, EU Supply, Earnings from Ryanair, Whirlpool & NXP Semi.

US TRADE

• US stocks extended their gains on Friday and E-mini S&P futures briefly rose above 4,100 before pulling back ahead of the closing bell, while the upside was led by the large caps, which helped the Nasdaq outperform amid strong gains in Tesla, while Amazon, Google and Apple were boosted ahead of their earnings releases this week.
• SPX +0.25% at 4,070, NDX +0.96% at 12,166, DJIA +0.08% at 33,977, RUT +0.44% at 1,911.
• Click here for a detailed summary.

NOTABLE HEADLINES

• White House spokesperson said US President Biden will host House Speaker McCarthy at the White House on Wednesday to discuss a range of issues. Biden will ask McCarthy if he intends to meet his constitutional obligation to prevent a default and what his plan is to bring the deficit down and grow the economy, according to Reuters.
• US House Speaker McCarthy said he will discuss with US President Biden a reasonable and responsible way to control spending and raise the debt ceiling, while he added that the GOP will not allow the US to default on its debt and that he wants to strengthen social security and medicare but will take those off the table in any debt ceiling negotiations, according to Reuters and CBS.
• WSJ’s Timiraos wrote that the Fed debates whether wage or low employment will drive inflation and that officials voiced unease that prices could reaccelerate due to the tightness of labour markets.

APAC TRADE

EQUITIES

• APAC stocks were mixed with some of the regional bourses cautious heading into this week’s plethora of risk events including Chinese PMI and US jobs data, as well as the rate decisions from the Fed, BoE and ECB.
• ASX 200 was restricted by weakness in the consumer sectors and with mining-related industries also pressured following several weaker quarterly activity updates.
• Nikkei 225 pared initial gains with the index capped beneath the 27,500 level as participants digested earnings.
• Hang Seng and Shanghai Comp. were mixed with early outperformance in the mainland on return from holiday, while the PBoC extended three structural monetary policy tools and the State Council pledged to consolidate and expand the momentum of the economic rebound, accelerate consumption recovery and stabilise foreign trade and investment.
• US equity futures began the week subdued and the Emini S&P (-0.4%) pulled back from resistance around 4,100.
• European equity futures are indicative of a weaker open with the Euro Stoxx 50 -0.4% after the cash market closed up 0.1% on Friday.

FX

• DXY traded rangebound and briefly eyed the 102.00 level to the upside with trade calm before the potential storm from the upcoming key risk events including the FOMC rate decision and NFP jobs data.
• EUR/USD was uneventful ahead of the ECB meeting scheduled later in the week in which officials have already signalled to maintain the current pace of 50bp rate hikes.
• GBP/USD remained little changed with price action contained around the 1.2400 level which follows last Friday’s choppy performance.
• USD/JPY saw two-way price action in which early momentum facilitated a climb above the 130.00 level although the gains were later wiped out and there were also comments from think tank head and potential BoJ Deputy Governor candidate Okina who suggested monetary policy can become more flexible by making the 2% target a long-term goal.
• Antipodeans were lacklustre alongside the indecision in the commodities complex and cautious mood.
• PBoC set USD/CNY mid-point at 6.7626 vs exp. 6.7660 (prev. 6.7702)

FIXED INCOME

• 10yr UST futures traded flat amid a non-committal mood heading into month-end and this week’s risk events.
• Bund futures were contained amid a lack of notable drivers with the ECB meeting due later in the week.
• 10yr JGB futures nursed some of last week’s late selling pressure with prices helped by the BoJ’s presence in the market for over JPY 1.8tln of JGBs on top of its fixed-rate operations.

COMMODITIES

• Crude futures were initially buoyed whereby WTI rose back above USD 80/bbl amid geopolitical risk and with China returning from the holiday, although the gains were eventually reversed due to the cautious mood.
• QatarEnergy entered an agreement with Lebanon, TotalEnergies (TTE FP) and ENI (ENI IM) to take a 30% stake in two exploration blocks offshore of Lebanon, according to a statement cited by Reuters.
• ENI (ENI IM) CEO announced a 25-year deal valued at USD 8bln for energy production in Libya.
• Spot gold proceeded sideways for most of the session before edging marginal gains in late Asia trade.
• Copper futures failed to benefit from the return of its largest buyer and were subdued amid the mixed sentiment.
• MMG (1208 HK) said it was forced to commence a progressive slow-down of its Las Bambas operation in Peru due to a shortage of critical supplies and if the situation remains unchanged, the Las Bambas mine will be unable to continue copper production from February 1st.

CRYPTO

• Bitcoin traded flat overnight and took a breather after the weekend climb to above 23,700.

NOTABLE ASIA-PAC HEADLINES

• PBoC will extend three structural monetary policy tools which include the carbon reduction credit facility which will be extended to end-2024 and the special relending facility for the transport and logistics sector will be extended to June this year, while it will continue to increase support for inclusive finance, green development, infrastructure construction, scientific and structural innovation, as well as other key areas, according to Xinhua.
• PBoC injected CNY 222bln via 7-day reverse repos with the rate kept at 2.00% for a CNY 476bln net daily drain on Saturday and injected CNY 128bln via 7-day reverse repos at a rate of 2.00% for a CNY 128bln net injection on Sunday and a net weekly drain of CNY 348bln, while it injected CNY 173bln via 7-day reverse repos with the rate kept at 2.00% for a CNY 99bln net injection on Monday, according to Reuters.
• China's State Council said it will consolidate and expand the momentum of the economic rebound, accelerate consumption recovery and stabilise foreign trade and investment.
• China is to push for a steady economic recovery early this year, according to CCTV.
• China CDC said there was no significant COVID rebound in China during the Lunar New year and that the current round of infections in China is nearing an end, while it added the number of severe COVID cases and deaths is on a downtrend, according to Reuters.
• China approved two COVID-19 oral medicines for patients with mild symptoms, according to Reuters.
• China’s top nuclear weapons research institute bought sophisticated US chips at least a dozen times in the past two and half years, despite being on a US export blacklist since 1997, according to WSJ.
• Japan is considering relaxing export controls to South Korea as South Korean President Yoon seeks improved bilateral relations, while Japan will decide on export controls after reviewing Seoul’s plan to solve the wartime forced labour dispute, according to Sankei.

DATA RECAP

• New Zealand Trade Balance (NZD)(Dec) -475M (Prev. -1863.0M, Rev. -2180M)
• New Zealand Exports (NZD)(Dec) 6.72B (Prev. 6.68B, Rev. 6.34B)
• New Zealand Imports (NZD)(Dec) 7.19B (Prev. 8.54B, Rev. 8.52B)

GEOPOLITICS

• Ukrainian President Zelensky said the situation is very tough in Donetsk and that they need extraordinary resilience, while he added that Russia wants the war to drag on and that Ukraine needs faster weapons supplies and new types of weapons. Furthermore, Zelensky criticised attempts by the IOC to allow Russia back into the Olympic Games which he said would show that terror is acceptable.
• Ukrainian presidential adviser Podolyak said Ukraine is engaged in expedited talks with western allies regarding the possibility of equipping Ukraine with long-range missiles and military jets, according to Reuters. However, there were comments from German Chancellor Scholz who said sending fighter jets to Ukraine is not an option.
• Russian Deputy Foreign Minister said with the US supplying tanks to Ukraine, there is no sense to talk to Kyiv or its 'puppet masters', according to RIA.
• An explosion was reported at a military plant in Isfahan, central Iran which Iranian officials said was due to an unsuccessful drone attack, while a US official later commented that Israel appeared to be behind the attack, according to Reuters.
• Twitter sources noted unverified reports of airstrikes on the Iraq-Syria border that were carried out against a "meeting of Iranian commanders.
• US Secretary of State Blinken said all options are on the table to prevent Iran from acquiring a nuclear weapon and said that Iran has rejected the current proposal to return to the nuclear agreement, according to Al Arabiya.
• EU is to consider listing Iran’s Revolutionary Guards as terrorists, according to FT.
• Turkish President Erdogan suggested that they may respond differently to Finland’s NATO bid which may shock Sweden, according to Anadolu Agency.
• US Treasury senior official Nelson will visit Oman, UAE and Turkey from January 29th to February 3rd and will warn countries and companies of the risk of losing US market access by doing business with US-sanctioned entities, while he will also warn banks and businesses to avoid transactions using dual-use technology transfers, according to Reuters.

GLOBAL NEWS

• Former NATO commander Petr Pavel was elected as the next President of the Czech Republic.

EU/UK

• UK PM Sunak fired Conservative Party Chair Zahawi from the government and said it is clear that there was a serious breach of the ministerial code regarding the tax issue.
• EU’s Gentiloni called on Germany to back the plan for new EU debt, while he commented that EU economies face energy price and competition pressures, according to FAZ.
• Fitch raised Greece from BB to BB+; Outlook Stable and affirmed Denmark at AAA; Outlook Stable.

DATA RECAP

• UK Lloyds Business Barometer (Jan) 22 (Prev. 17)