• European bourses are in the red, Euro Stoxx 50 -1.0%, as a mixed APAC handover was superseded by a broad-based hawkish reaction to hot Spanish inflation.
• Stateside, futures are similarly pressured with the NQ -1.2% lagging though it remains above 12k.
• The DXY was already capped by 102.00 but following Spanish inflation has slipped to a 101.66 trough as EUR/USD lifts comfortably above 1.09 from a 1.0853 base in the ensuing hawkish reaction.
• EGBs are under pressure with Bunds down to a 136.51 base, As such, USTs are lower and yields are higher across the curve ahead of a limited US-specific docket before Tuesday's key data and Wednesday's FOMC.
• WTI and Brent March contracts are flat, with the complex fading initial upside that was partly attributed to China's return from Lunar New Year.
• Looking ahead, Japanese Retail Sales, Earnings from Whirlpool & NXP Semi.

EUROPEAN TRADE

EQUITIES

• European bourses are in the red, Euro Stoxx 50 -1.0%, as a mixed APAC handover was superseded by a broad-based hawkish reaction to hot Spanish inflation.
• Stateside, futures are similarly pressured with the NQ -1.2% lagging though it remains above 12k following Spain's Flash CPI release.
• European sectors are predominantly in the red with Tech the standout laggard amid pressure in chip names, following the US, Netherlands, and Japan reaching an agreement on chipmaking export controls
• Goldman Sachs (GS) has restructured its assets in Russia, according to Russian newspaper RBC; could mean the bank is moving closer to a full exit from the country.
• Click here for more detail.

FX

• The DXY was already capped by 102.00 but following Spanish inflation has slipped to a 101.66 trough as EUR/USD lifts comfortably above 1.09 from a 1.0853 base in the ensuing hawkish reaction.
• At the other end of the spectrum, AUD, CAD and JPY are the incremental laggards though are relatively rangebound overall and holding around 0.71, 1.33 and 130.00 respectively.
• Though, it is worth highlighting the relatively pronounced overnight JPY action in wake of Okina's and Kuroda's remarks regarding the inflation target (see below), resulting in the session's 129.21-130.29 parameters for USD/JPY.
• Elsewhere, GBP is little changed overall though the EUR-driven USD move has lifted Cable above 1.24 with attention entirely on Thursday's BoE.
• Japan think tank head and potential BoJ Deputy Governor candidate Okina says BoJ's monetary policy must be revamped and that monetary policy can become more flexible by making the 2% target a long-term goal. Subsequently, BoJ's Kuroda says they must continue easy policy and maintain the 2% inflation target.
• PBoC set USD/CNY mid-point at 6.7626 vs exp. 6.7660 (prev. 6.7702)
• Click here for more detail.

FIXED INCOME

• EGBs are under pressure with Bunds down to a 136.51 base in the wake of Spain's Flash inflation ahead of the German/French metrics and Wednesday's EZ-wide figure pre-ECB.
• Action which is similarly evident in the periphery, though the Greek 10yr yield is somewhat more contained vs Italy's, for instance, after Friday's upgrade to Greece by Fitch.
• Amidst this, Gilts have been pushed down to a 104.04 trough, though UK action is less pronounced pre-BoE with attention also on potential month-end demand.
• As such, USTs are lower and yields are higher across the curve ahead of a limited US-specific docket before Tuesday's key data and Wednesday's FOMC.
• Click here for more detail.

COMMODITIES

• WTI and Brent March contracts are softer, with the complex fading initial upside that was partly attributed to China's return from Lunar New Year.
• WTI resides under USD 80/bbl after falling from a USD 80.49/bbl high to a USD 78.73/bbl intraday low, while Brent resides around USD 86.50/bbl in a USD 85.74-87.48/bbl daily parameter.
• 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.
• Turkish Energy Minister says they will host a Nat Gas summit on February 14th-15th, bringing together gas producing and buyer countries.
• 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.
• The yellow metal found an interim floor around USD 1920/oz amid the morning's USD action, while base metals are mostly lower given the cautious tone.
• Click here for more detail.

NOTABLE HEADLINES

• 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.

NOTABLE DATA

• Spanish HICP Flash YY (Jan) 5.8% vs. Exp. 4.7% (Prev. 5.5%); MM -0.5% (prev. 0.00%)
• German GDP Flash QQ SA (Q4) -0.2% (Prev. 0.4%, Rev. 0.5%); YY SA (Q4): 1.1% vs Exp. 1.3% (prev. 1.3%)
• EU Consumer Confidence Final (Jan) -20.9 vs. Exp. -20.9 (Prev. -20.9, Rev. -22.1); Selling Price Exp. (Jan) 31.9 (Prev. 38.4, Rev. 37.8); Inflation Exp. (Jan) 17.7 (Prev. 23.7, Rev. 23.2)
• Swiss KOF Indicator (Jan) 97.2 vs. Exp. 93.3 (Prev. 92.2, Rev. 91.5)
• UK Lloyds Business Barometer (Jan) 22 (Prev. 17)

NOTABLE US 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.
• Click here for the US Early Morning note.

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.
• Senior Chinese Diplomat Wang Yi is reportedly to visit Moscow, Russia on February 20th, via Vedomosti Daily citing sources.
• 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.

CRYPTO

• Bitcoin is firmer overall, though resides towards the lower end of the day's USD 23.955-23.113k parameters and as such firmly within recent ranges.

APAC TRADE

• 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.

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.
• China's Ministry of Finance vows to undertake targeted tax reductions to assist the economy in 2023. China 2022 fiscal revenue +9.1% YY, ex-VAT credit rebate impact; fiscal expenditures 6.1% YY.
• 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); Imports (NZD) (Dec) 7.19B (Prev. 8.54B, Rev. 8.52B)