• APAC stocks eventually traded mixed after the weak lead from global counterparts as markets continued to ramp up hawkish Fed pricing.
• RBA lifted the Cash Rate by 25bps to a fresh decade-high and signalled further rate increases ahead.
• European equity futures are indicative of a contained open with the Euro Stoxx 50 +0.1% after the cash market closed down 1.2% yesterday.
• DXY has held onto a bulk of recent gains, AUD outperforms post-RBA, EUR/USD and Cable sit on 1.07 and 1.20 handles respectively.
• UK PM Sunak is to announce a mini-reshuffle on Tuesday and is considering major changes to Whitehall departments, according to The Times
• Looking ahead, highlights include Speeches from Fed's Powell & Barr, ECB's Schnabel, Kazimir & Knot, BoE's Cunliffe, BoC's Macklem, Supply from Netherlands, UK, Germany & US, Earnings from Evolution, asm-Osram, Carlsberg, Siemens Energy, BP, Centene, DuPont and Royal Caribbean.

US TRADE

• US stocks were lower with the declines led by the Nasdaq 100 and Russell 2k as markets further ramped their hawkish Fed expectations in the wake of the super hot jobs report on Friday with the terminal rate now priced just north of 5.1% for June this year vs. sub-4.9% before the NFP report.
• SPX -0.62% at 4,110, NDX -0.87% at 12,464, DJIA -0.11% at 33,889, RUT -1.40% at 1,957.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bostic (non-voter) said jobs data raises the possibility of a higher peak rate but added that the base case is still for two more hikes and Fed's main job is to control inflation. Bostic noted that there is a good chance of avoiding a recession and need to study if the January jobs reading was anomalous, while he also commented that the Fed could also consider moving back to a 50bps hike if it needed to.
• White House said President Biden will say the debt limit is not negotiable in the State of Union Address, while he is to urge a surcharge on corporate stock buybacks and call for a billionaire minimum tax.
• US House Speaker McCarthy said the greatest threat to the US's future is the national debt and that inflation is the result when debt is too high, while he added that they need a different approach to the debt ceiling and that Republicans will continue to sit down and negotiate, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks eventually traded mixed after the weak lead from global counterparts as markets continued to ramp up hawkish Fed pricing, while the region also digested the RBA rate decision.
• ASX 200 was initially kept afloat amid strength in the energy sector after a rebound in oil prices although the index was later pressured after the RBA lifted the Cash Rate by 25bps to a fresh decade-high and signalled further rate increases ahead.
• Nikkei 225 was indecisive after mixed data in which household spending disappointed but wages topped forecasts, while the earnings deluge also continued.
• Hang Seng and Shanghai Comp. were varied with Hong Kong led by a rebound in the tech, healthcare and property sectors following yesterday’s underperformance although the mood in the mainland was less decisive owing to the recent spy balloon frictions and with a lack of fresh drivers aside from Wuhan relaxing property buying restrictions.
• US equity futures (ES +0.2%) are uneventful as the focus shifts to upcoming comments from Fed Chair Powell.
• European equity futures are indicative of a contained open with the Euro Stoxx 50 +0.1% after the cash market closed down 1.2% yesterday.

FX

• DXY held on to the majority of the prior day’s gains which were spurred alongside a continuation of the post-NFP hawkish Fed pricing, while there were also comments from Fed's Bostic who noted the jobs data raises the possibility of a higher peak rate but added that the base case is still for two more hikes.
• EUR/USD attempted to nurse some of its recent losses after having suffered from the dollar strength; sits on a 1.07 handle.
• GBP/USD continued its rebound from a floor near 1.2000 following recent BoE commentary in which chief economist Pill reiterated the BoE is prepared to do more to get inflation back to the target.
• USD/JPY slightly pulled back but remained at the 132.00 handle after the recent widening of yield differentials and the report regarding a potential dovish succession at the BoJ’s top position.
• Antipodeans gained with AUD/USD boosted after the RBA hiked by 25bps, as expected, and signalled further rate increases, while CBA adjusted its forecast and now sees hikes at the next two meetings.
• PBoC set USD/CNY mid-point at 6.7967 vs exp. 6.7962 (prev. 6.7737)

FIXED INCOME

• 10yr UST futures moved off lows but with the rebound only modest after yesterday’s bear flattening as traders continued to ramp up terminal rate pricing following last week’s blockbuster jobs report which Fed’s Bostic also acknowledged as raising the possibility of a higher peak rate.
• Bund futures remained subdued after having slipped beneath the 137.00 level and with ECB officials continuing to point to further rate hikes.
• 10yr JGB futures were lacklustre on spillover selling from global counterparts albeit with losses stemmed amid mostly stronger results from the 30yr JGB auction.

COMMODITIES

• Crude futures extended their rebound after Saudi Arabia raised OSPs with prices to Asian buyers hiked for the first time in six months, while some flows were impacted in Turkey from the earthquake.
• Spot gold traded sideways after the recent dollar strength and hawkish Fed rate pricing.
• Copper futures were rangebound in tandem with the mixed risk appetite.
• US official later confirmed the US is considering raising the tariff on Russian aluminium to 200% but stated no decision was made and no announcement is expected this week, according to Reuters.

CRYPTO

• Bitcoin edged higher with prices making slight headway closer towards the 23,000 level.

NOTABLE ASIA-PAC HEADLINES

• US President Biden said the US made it clear to China what it would do regarding the balloon and it was always his view that the balloon should be shot down, while he added the balloon incident doesn’t weaken US-China relations, according to Reuters.
• White House Defence Department spokesman said nothing has changed regarding President Biden's view that US-China is a very important bilateral relationship, while the incident with the Chinese balloon has not helped improve relations and when the time is right, they will discuss what a future visit by Secretary of State Blinken to China will look like.
• RBA raised the Cash Rate by 25bps to 3.35%, as expected, while it stated that the Board expects further increases in interest rates and is resolute in its determination to return inflation to the target. RBA said inflation is expected to decline this year due to both global factors and slower growth in domestic demand, as well as noted that the path to achieving a soft landing remains a narrow one. Furthermore, it stated there is uncertainty around the timing and extent of the expected slowdown in household spending and that another source of uncertainty is how the global economy responds to the large and rapid increase in interest rates around the world, while these uncertainties mean that there are a range of potential scenarios for the Australian economy.

DATA RECAP

• Japanese All Household Spending MM* (Dec) -2.1% vs. Exp. 0.3% (Prev. -0.9%)
• Japanese All Household Spending YY* (Dec) -1.3% vs. Exp. -0.2% (Prev. -1.2%)
• Japanese Average Cash Earnings YY (Dec) 4.8% vs Exp. 2.5% (Prev. 0.5%)
• Australian Trade Balance (AUD)(Dec) 12.2B vs. Exp. 12.5B (Prev. 13.2B)
• Australian Exports MM (Dec) -1% (Prev. 0%)
• Australian Imports MM (Dec) 1% (Prev. -1%)

GEOPOLITICS

• North Korean leader Kim presided over a military meeting and vowed to expand drills and bolster war readiness posture, according to Yonhap.

EU/UK

• BoE chief economist Pill reiterated the BoE is prepared to do more to get inflation back to the target and that changing the 2% inflation target would not be a great idea, while he added that the chance of inflation getting embedded in the UK is probably higher than in continental Europe. Pill also stated that monetary policy tightening so far is having an impact with still a lot to come through and that they will do what is needed to get inflation back to the target sustainably.
• UK PM Sunak is to announce a mini-reshuffle on Tuesday and is considering major changes to Whitehall departments, while he is replacing Nadhim Zahawi as Tory chair but some in the government think it's much more far-reaching, according to The Times's Swinford.
• Barclaycard UK January consumer spending rose 9.7% Y/Y which was boosted by New Year sales, film releases and holiday bookings, while sales growth was also helped by comparison to January 2022 when COVID restrictions were in force. Furthermore, it noted that its measure of consumer confidence rose to 63% which is the highest since July last year, according to Reuters.
• HS2 faces more delays and cuts as the UK looks to rein in the costs of the project, according to FT.

DATA RECAP

• UK BRC Retail Sales YY (Jan) 3.9% (Prev. 6.5%)
• UK BRC Total Sales YY (Jan) 4.2% (Prev. 6.9%)