• European bourses are modestly firmer, Euro Stoxx 50 +0.2%, after yesterday's pronounced pressure and ahead of key Central Bank speak.
• Stateside, the picture is very similar to the above though the NQ +0.3% is the incremental outperformer with US yields ever so slightly softer.
• DXY steady around 103.500 in advance of Fed chair Powell, Aussie boosted by hawkish RBA hike and guidance overnight
• Core EGBs are softer, though off worst levels, with pressure emanating from hawkish remarks from ECB's Villeroy with Gilts similarly softer
• Crude benchmarks continue to climb as the momentum from APAC trade remains in play, with fresh developments somewhat limited after Monday's OSP updates; WTI and Brent are firmer by over 2.0%.
• Looking ahead, highlights include Fed's Powell & Barr, ECB's Schnabel, BoE's Cunliffe, BoC's Macklem, Supply from the US, and Earnings from Centene, DuPont and Royal Caribbean.

EUROPEAN TRADE

EQUITIES

• European bourses are modestly firmer, Euro Stoxx 50 +0.2%, after yesterday's pronounced pressure and ahead of key Central Bank speak.
• Within Europe, sectors are mixed with Energy the clear outperformer post-BP, with the FTSE 100 bid, while Banking names are bolstered on yields/BNP Paribas.
• Stateside, the picture is very similar to the above though the NQ +0.3% is the incremental outperformer with US yields ever so slightly softer.
• BP (BP/ LN) Q4 2022 (USD): Adj. Net 4.81bln (exp. 5.11bln), Revenue 69.3bln (exp. 59.5bln). Adj. EPS 0.2644 (exp. 0.2713); Co. plans a further USD 2.75bln share buyback; Co. increases dividend by 10%
• Nintendo (7974 JT) 9-month (JPY): Net Profit 346mln, -5.8%; Operating Profit 410mln, -13%; Recurring Profit 482mln, -6%; Switch unit sales 14.91mln (prev. 18.95mln). FY22/23: Switch unit sales 18mln (prev. guided 19mln), Op. Income 480bln (exp. 500bln)
• Click here for more detail.

FX

• DXY solid around 103.500 in advance of Fed chair Powell, Aussie boosted by hawkish RBA hike and guidance overnight, as AUD/USD rebounds firmly from sub-0.6900 lows to probe 0.6950 and AUD/NZD from 1.0908 to 1.0985.
• Yen rebounds circa 100 pips vs Dollar between 131.70-132.71 bounds as strong Japanese wages more than offset weak household consumption.
• Franc, Kiwi and Loonie claw back some heavy post-NFP losses vs Buck, but Euro and Sterling lag on 1.0700 and 1.2000 handles.
• PBoC set USD/CNY mid-point at 6.7967 vs exp. 6.7962 (prev. 6.7737)
• Russian Government is said to be pushing the CBR to hint at looser policy; Bank of Russia is unwilling to signal that easing is imminent; CBR is under pressure from the government to improve forecasts, according to Bloomberg.
• Click here for more detail.

FIXED INCOME

• Core EGBs are softer, though off worst levels, with pressure emanating from hawkish remarks from ECB's Villeroy; Bunds down to 136.49 at worst.
• Gilts are similarly lower by just under 20 ticks ahead of BoE's Pill and despite a well received 2027 sale.
• Stateside, USTs are little changed overall with yields slightly lower though very much at the top-end of Monday's parameters ahead of Chair Powell and a 3yr sale.
• Click here for more detail.

COMMODITIES

• Crude benchmarks continue to climb as the momentum from APAC trade remains in play, with fresh developments somewhat limited after Monday's OSP updates; WTI and Brent are firmer by over 2.0%.
• BP alongside earnings remarked that it expects oil prices to remain supported in Q1 by recovering Chinese demand, ongoing uncertainty around the level of Russian exports and low inventory levels.
• Pumping has begun on the Kirkuk-Ceyhan oil pipeline from Iraq; exports from Ceyhan expected to being on Tuesday, according to an energy official.
• Fire at the Norsi Nizhny Novgorod (340k BPD) oil refinery in Russia has been extinguished, site is operating normally, via Lukoil.
• 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.
• Spot gold is modestly firmer and at the top-end of the session's ranges, while base metals are mixed overall with LME Copper moving back towards the USD 9k/t mark.
• Click here for more detail.

NOTABLE HEADLINES

• ECB's Villeroy says we are not very far from the peak in inflation, does not think the ECB needs to choose between fighting inflation and avoiding a recession; better economic environment does make the monetary task easier.
• HS2 faces more delays and cuts as the UK looks to rein in the costs of the project, according to FT.
• Ion Markets began bringing clients back onto the clearer derivatives platform overnight following the ransomware attack, according to a Reuters source.
• UK Cabinet Reshuffle: Grant Shapps expected to be new energy security secretary, Kemi Badenoch expected to be new business and trade secretary, according to Times' Swinford; Greg Hands will be the new Conservative Party Chairman.

NOTABLE DATA

• UK BRC Retail Sales YY (Jan) 3.9% (Prev. 6.5%); Total Sales YY (Jan) 4.2% (Prev. 6.9%)
• Halifax UK House Prices (Jan): +1.9% YY, +0.00% MM
• 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
• NielsenIQ UK household/supermarket survey: UK grocery sales on a value basis rose 7.6% in the four weeks to Jan. 28, due to an increase in food price inflation to 13.8%; volume sales -6.9%

NOTABLE US HEADLINES

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

CRYPTO

• Coinbase (COIN) says due to an issue with a 3rd party vendor, deposits and withdrawals are currently impacted within Australia.
• Kraken says it is investigating reports from clients who are having difficulty connecting to the site.

GEOPOLITICS

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

APAC TRADE

• 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.

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.
• 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.
• Chinese President Xi says will strive to achieve overall improvement in economic operations, via state media; Premier Li says China's economy still faces many challenges.

DATA RECAP

• Japanese All Household Spending MM (Dec) -2.1% vs. Exp. 0.3% (Prev. -0.9%); 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%); Imports MM (Dec) 1% (Prev. -1%)