• European bourses are lower across the board, Euro Stoxx 50 -1.5%, as Friday's post-NFP price action continues to reverberate with the NQ lagging.
• DXY continues to climb as US yields rise across the curve, to the detriment of G10 peers.
• Additionally, the JPY has been particularly hampered by since refuted reports that current BoJ Deputy Amamiya could be the gov'ts nominee for Governor
• Core fixed income continues to fall with yields higher across the board and Gilts lagging somewhat in the wake of BoE's Mann.
• Crude benchmarks are firmer on the session and have largely been consolidating after the substantial post-NFP losses
• A magnitude 7.7 earthquake occurred in Turkey near the Syrian border, with multiple aftershocks of a similar intensity reported.
• Looking ahead, highlights include BoE's Pill & ECB's Lagarde.

EUROPEAN TRADE

EQUITIES

• European bourses are lower across the board, Euro Stoxx 50 -1.5%, as Friday's post-NFP price action continues to reverberate.
• Stateside, futures are similarly pressured ES -1.0% given the hawkish repricing, as such the tech-laden/yield-sensitive NQ -1.3% is lagging.
• Dell (DELL) will reportedly be cutting some 6,650 jobs (~5% of global workforce) in the latest round of tech job cuts, according to Bloomberg.
• Apple (AAPL) internally discussed adding a higher-end iPhone to the top of its smartphone line-up and there is speculation the Co. could potentially add a new top-end “the Ultra” model in 2024, according to a Bloomberg report.
• Click here for more detail.

FX

• DXY continues to climb and has lifted to a 103.38 peak from a 103.00 base given the broad-based hawkish price action and despite fleeting/limited bids in GBP and EUR.
• Specifically, the EUR saw some shortlived support amid familiar commentary from hawkish ECB officials and upside in the region's construction PMIs; though, EUR remains lower and at the 1.0761 trough vs USD.
• Similarly, GBP received a slight bid following BoE's Mann; though, as above, this has been eroded by the USD's underlying strength and as such Cable is at the lower end of 1.2023-1.2070 parameters.
• JPY is the standout laggard amid, since refuted, reports that current BoJ Deputy Amamiya could be the gov'ts nominee for Governor, with USD/JPY up to 132.56 given Amamiya's dovish stance.
• Elsewhere, the non-US dollars are succumbing to the USD's bid with the RBA due this week and attention on the regions geopolitics.
• PBoC set USD/CNY mid-point at 6.7737 vs exp. 6.7755 (prev. 6.7382)
• Click here for more detail.

FIXED INCOME

• A continuation of Friday’s post-NFP hawkish repricing has pushed Bunds to retest and eventually lose Thursday’s 137.00 trough after opening just below the post-NFP 137.70 low this morning.
• In the wake of BoE's Mann, Gilts slipped to a 106.29 low at the time; a trough that has since been significantly eclipsed with the contract down to 105.65 as the session’s broader hawkish tone intensifies.
• Stateside, the picture is very much the same as above. With the post-NFP hawkish repricing in full swing as participants await guidance from numerous Fed officials this week, with Chair Powell on Tuesday the on-paper highlight.
• US yields continue to lift with action much more pronounced at the short-end of the curve; nonetheless, the 10yr yield has printed a 3.616% peak ahead of the YTD 3.84% best.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are firmer on the session and have largely been consolidating after the substantial post-NFP losses, with geopolitics and the halt of some oil deliveries in Turkey post-earthquake occurring perhaps factoring.
• Currently, the benchmarks reside towards the top-end of USD 73.13-74.03/bbl and USD 79.61-80.81/bbl parameters for WTI Mar and Brent Apr.
• IEA chief Birol said the price cap on Russian oil achieved the objectives of stabilising the oil markets and cutting Russia’s oil revenues with its oil and gas export revenues in January down by almost 30% or around USD 8bln in January from a year ago. Birol also commented that the largest uncertainty this year is China and expects half of global oil demand growth will be from China this year, while he also stated that China’s jet fuel demand is exploding this year which puts upward pressure on global demand and noted that the products markets will stabilise in H2 as more refineries come online, according to Reuters.
• Saudi’s Energy Minister said he hopes that sanctions, embargoes and a lack of investment don’t lead to a shortage of energy supplies, according to Reuters.
• UAE’s ADNOC set March Murban crude OSP at USD 82.63/bbl vs USD 80.11 in February. It was separately reported that the UAE, France and India established a tripartite initiative as they seek to cooperate in areas including energy and climate change, according to state news agency WAM.
• Saudi Arabia sets its March Arab Light Crude OSP to Asia at +2.00/bbl (+0.20/bbl vs exp. USD -0.30/bbl) vs Oman/Dubai averages, according to Reuters sources; the first increase in six months.
• Spot gold is attempting to nurse losses but has been drifting from USD 1881/oz best levels as the renewed upside in yields supports the USD; while base metals are succumbing to the broader risk tone.
• Click here for more detail.

NOTABLE HEADLINES

• A magnitude 7.7 earthquake hit Turkey near the border with Syria which killed dozens on both sides and injured hundreds, while Turkey's disaster agency reported that 76 were killed and 440 were injured, according to Reuters. Subsequently, a new earthquake of magnitude 7.8 has struck southern Turkey, according to journalist Stein; earthquake was also reported in the Syrian capital Damascus.
• EU will accept the principle that GB goods shipped to N. Ireland and staying there should be treated differently to goods moving into the single market, as such will agree to a green & red lane model at ports, via RTE's Connelly citing a senior EU source; a separate source adds that there will not be an announcement this week.
• UK PM Sunak was warned by senior Tories that he would face a backlash from the party and certain defeat in the House of Commons if he attempts to take Britain out of the European Convention on Human Rights, according to FT.
• ECB’s Visco said short-term inflation expectations are dropping sharply and policy tightening can continue with due caution, while he added that longer-term inflation expectations are consistent with the price stability goal. Visco also commented that the risk of the Italian bond spread increasing will be contained as long as budgetary policies remain cautious and said that supervisors are monitoring credit, liquidity and refinancing risks as higher interest rates could impact banks’ funding costs quicker than in the past, according to Reuters.

CENTRAL BANKS

• BoE's Mann says looking for a significant and sustained deceleration in higher frequency price increases, "We need to stay the course, and in my view the next step in Bank Rate is still more likely to be another hike than a cut or hold." adding "In my view, a tighten-stop-tighten-loosen policy boogie looks too much like fine-tuning to be good monetary policy."
• BoE and UK Treasury draft document said that they believe a central bank digital currency will likely be needed by later in the decade, according to The Telegraph.
• ECB's Kazaks says if the data is in-line with expectations then rates will be hiked by 50bp in March, decision could be changed if the incoming data differs significantly.
• ECB's Holzmann says the risk of over-tightening policy appears to be dwarfed by the risk of doing too little.

NOTABLE DATA

• EU S&P Global Construction PMI (Jan) 46.1 (Prev. 42.6)
• EU Sentix Index (Feb) -8.0 vs. Exp. -12.8 (Prev. -17.5)
• UK S&P Global/CIPS Construction PMI (Jan) 48.4 (Prev. 48.8)

NOTABLE US HEADLINES

• Democrat National Committee approved US President’s Biden revamped 2024 primary calendar in the latest signal of an expected re-election bid, according to Reuters.
• Click here for the US Early Morning note.

CRYPTO

• Frictions between nations means there will not be full interconnectedness between all central bank digital currencies, according to BIS.

GEOPOLITICS

• Ukrainian President Zelensky said there are fierce battles in the Donetsk region and the situation is very difficult with Russia intensifying pressure on various fronts and in terms of information heading into the first anniversary of the war, according to Reuters.
• Ukraine’s Defence Minister Reznikov was transferred to another ministerial job and the head of the Main Directorate of Intelligence of the Ministry of Defence Budanov was named as the new Defence Minister. Furthermore, there were prior comments by Reznikov that they expect a possible major Russian offensive this month and that Ukraine has the reserves to hold back the Russian offensive despite not receiving all of the latest military supplies from the west by then, according to Reuters.
• UK PM Sunak spoke with Ukrainian President Zelensky over the weekend and agreed it was vital for the international community to speed up assistance for Ukraine, according to Reuters.
• Russian Defence Ministry said Kyiv is preparing to blow up buildings in the eastern Ukrainian city of Kramatorsk and accuse Russia of war crimes in a false flag operation, according to Reuters. Russia’s Defence Ministry also announced that 63 Russian POWs were returned from Ukrainian captivity after complex negotiations with Ukraine that were mediated by the UAE.
• Russia and Iran advance plans for an Iranian-designed drone facility in Russia, according to WSJ.
• Russian Kremlin says a meeting between President Putin and IAEA Chief Grossi is not planned but Rossi will meet with the foreign ministry and Rosatom officials.
• Iran’s Supreme Leader Khamenei pardoned a large number of security-related prisoners that were arrested due to recent protests, according to state TV.
• US cybersecurity agency CISA is assessing the impact of reported incidents after Italy raised the alarm regarding a global hacking attack, according to Reuters.

APAC TRADE

• APAC stocks began the week mostly on the back foot after last Friday’s losses in the US where a blowout jobs report spurred hawkish rate bets and was seen to boost the Fed’s resolve of lifting rates further to above 5%.
• ASX 200 was subdued heading into tomorrow’s RBA decision and after a jump in the MI Inflation Gauge added to the inflationary narrative, although the downside was limited after quarterly Retail Sales data printed not as bad as feared and amid M&A prospects with Newmont making a USD 16.9bln offer for Newcrest Mining.
• Nikkei 225 outperformed after a report that Japan’s government sounded out BoJ's Amamiya about becoming the next BoJ Governor with Amamiya seen as more dovish compared to other candidates and was also a key architect in many of the BoJ’s policies including QQE with YCC, although the report was later refuted by a senior government official.
• Hang Seng and Shanghai Comp. were lower with Hong Kong pressured by losses in tech, healthcare and property, while risk sentiment was also clouded by tensions after the US shot down China’s spy balloon.

NOTABLE ASIA-PAC HEADLINES

• Japan’s government has sounded out BoJ Deputy Governor Amamiya about becoming the next BoJ Governor with the government to present its nominee to parliament this month, while Amamiya is seen as more dovish than the other potential candidates and will face the task of normalising the BoJ’s ultra-loose policy, according to Nikkei citing government and ruling party sources. However, Finance Minister Suzuki said he hasn't heard anything on BoJ Governor nominations yet and Deputy Chief Cabinet Secretary Isozaki later said there was no truth to the report that BoJ Deputy Governor Amamiya was sounded out for the next BoJ Governor.
• Japanese government is likely to present nominees for the new BoJ governor next week, according to Kyodo.
• US military shot down the Chinese spy balloon off the US coast after US President Biden issued the order to take down the balloon, while a US defence official said it was a spy balloon intended to spy on sensitive military sites and part of a fleet of surveillance balloons that have spied over five continents, according to Reuters.
• China’s Foreign Ministry said it expresses strong dissatisfaction and opposition towards the US’s use of force to attack the airship, while it claimed that the balloon incident was a complete accident caused by a force majeure. Furthermore, it noted that top diplomat Wang Yi communicated with US Secretary of State Blinken on how to deal with accidental incidents in a calm and professional manner, as well as told Blinken that both parties need to communicate in a timely manner and avoid misjudgements, according to Reuters.
• China’s Defence Ministry said the use of force against the Chinese civilian unmanned airship was an obvious overreaction and China reserves the right to use necessary means to deal with similar situations, according to Reuters.
• US is considering sanctions for Chinese surveillance companies regarding sales to Iran’s security forces, according to WSJ.
• US is reportedly mulling deploying medium-range missiles in Japan as part of a plan to bolster defences against China along the East and South China Seas, according to Sankei.
• China's Commerce Ministry says the Australian and Chinese trade ministers held a virtual meeting on February 6th, conducted pragmatic and candid exchanges; meeting was an important step in getting relations back on track, willing to restart the economic and trade exchange mechanism with Australia.

DATA RECAP

• Australian MI Inflation Gauge MM (Jan) 0.9% (Prev. 0.2%); YY (Jan) 6.4% (Prev. 5.9%)
• Australian Retail Trade (Q4) -0.2% vs. Exp. -0.6% (Prev. 0.2%, Rev. 0.3%)