• APAC stocks traded mixed after the losses in the US (SPX -1.11%) as participants focused on hawkish aspects of Fed rhetoric.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.4% after the cash market closed flat yesterday.
• DXY is a touch softer but maintaining 103 status, antipodeans lead the majors, EUR/USD is attempting to recoup lost ground.
• Bund futures were confined to a tight range overnight whilst price action in the crude space was largely sideways.
• Looking ahead, highlights include Riksbank Policy Announcement & Press Conference, EU Leaders Summit, Speeches from BoE's Bailey, Pill, Tenreyro, Haskel, ECB's de Guindos, Supply from the US.
• Earnings from Euronext, L'Oreal, Siemens, ArcelorMittal, AstraZeneca, BATS, Compass, PepsiCo, Phillip Morris, AbbVie, PayPal & Kellogg.

US TRADE

• US stocks declined amid a slew of Fed rhetoric which was received hawkishly with comments from Fed's Williams and Cook pressuring stocks in early trade and although the rhetoric from Fed officials was actually two-sided, markets were eager to cherry-pick the hawkish remarks.
• SPX -1.11% at 4,118, NDX -1.83% at 12,495, DJIA -0.61% at 33,949, RUT -1.52% at 1,943.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Kashkari (voter) said the services side of the economy is still hot on inflation and there is not much evidence that rate hikes so far have had much effect on the labour market, while he added they will need to do more but how much more is not clear.
• Fed's Waller (voter) said the job on inflation is "not done" which might be a "long fight" and rates may stay higher for longer than some are currently expecting. Waller said the US economy is adjusting well to higher interest rates but noted inflation remains quite elevated and that "more needs to be done", while he added that surprisingly strong January jobs means labour income will also be robust and buoy spending which puts upward pressure on inflation in the months ahead.
• US Treasury Secretary Yellen says inflation remains elevated but they are seeing encouraging signs that supply-demand mismatches are easing in many sectors, while she added that the increases in interest rates are a drag on the federal budget although have been built into budget projections

APAC TRADE

EQUITIES

• APAC stocks traded mixed with some cautiousness after the losses in the US where risk assets were pressured as markets focused on the hawkish aspects of the recent two-sided remarks from Fed officials.
• ASX 200 was dragged lower by underperformance in tech and utilities with the latter not helped by a near-10% slump in AGL Energy after H1 generation volumes fell 7% Y/Y and it cut its FY guidance.
• Nikkei 225 was subdued with individual stock movers influenced by the slew of earnings results.
• Hang Seng and Shanghai Comp. were initially lacklustre amid the absence of any major catalysts but shrugged off the opening losses and edged higher after the PBoC’s liquidity injection which provided some relief against the rising funding costs from a recent jump in loan demand.
• US equity futures (ES +0.3%) partially nursed some of the Fed-triggered losses.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.4% after the cash market closed flat yesterday.

FX

• DXY was contained amid the mixed risk appetite and eventually retraced some of the mild gains from the choppy performance in the prior session.
• EUR/USD recouped some of its recent losses, while the focus for the single currency now turns to the delayed German CPI data due later.
• GBP/USD rebounded from support near 1.2050 and looks to retest resistance at 1.2100.
• USD/JPY was choppy with participants on the fence as they await the BoJ nominations.
• Antipodeans reversed the prior day's selling amid mild gains in commodities.
• PBoC set USD/CNY mid-point at 6.7905 vs exp. 6.7900 (prev. 6.7752)
• BoC Minutes stated they raised rates in January due to labour market tightness and stronger than expected Q3 GDP, while data on the labour market and economic activity suggested there was more excess demand in the economy during Q4 than thought. Furthermore, the council wanted to convey that the bar for additional rate hikes was now higher and it debated whether to leave the policy rate unchanged on the grounds it was starting to work and just needed more time.

FIXED INCOME

• 10yr UST futures remained afloat but were off earlier highs after fading some of the mild gains which were facilitated by a significantly strong 10yr auction and somewhat mixed Fed rhetoric.
• Bund futures were confined to a tight range with prices reverting towards the 136.00 level.
• 10yr JGB futures traded slightly in the aftermath of a weaker 10yr inflation-indexed JGB auction.

COMMODITIES

• Crude futures traded sideways and took a breather after this week's streak of gains despite mixed inventory data, as prices continued to benefit from the recovering China demand narrative.
• Spot gold was uneventful and eked slight gains amid the lacklustre greenback.
• Copper futures pared some of the prior day's losses as the mood in China improved.

CRYPTO

• Bitcoin was pressured after a failure to sustain the 23,000 level and briefly dipped below 22,500.
• Coinbase (COIN) CEO Armstrong said he's heard rumours that the US SEC would like to ban cryptocurrency staking, but added that he hopes this is not the case as it would be a terrible path for the US if it happens, according to CoinDesk

NOTABLE ASIA-PAC HEADLINES

• PBoC injected CNY 453bln via 7-day reverse repos at a rate of 2.00% for a CNY 387bln net injection.
• Japan's ruling LDP is said to be divided if PM Kishida seeks a BoJ pivot. Report notes that people say Yamaguchi as BoJ head choice would be controversial.
• US President Biden answered no when asked if relations with China have taken a big hit, while he added that the US is going to compete fully with China but is not looking for conflict which has been the case so far, according to a PBS interview.
• White House said Chinese balloons have been spotted over countries across five continents and the US has been in touch with allies on this issue, while Japanese Chief Cabinet Secretary Matsuno said Japan is exchanging information with the US on China's spy balloon, according to Reuters.

GEOPOLITICS

• UK PM Sunak said the first step in providing advanced aircraft is to train Ukrainian forces on how to use them, while it was separately reported that the Russian embassy warned that deliveries of British fighter jets to Ukraine would have military and political consequences for the entire European continent, according to TASS.
• German Chancellor Scholz said will continue to support Ukraine as long as necessary, while he added Russia must not win the war and that Ukraine belongs to the European family, according to Reuters.
• North Korea unveiled a potentially new solid-fuel ICBM during a night-time parade, according to analysts citing commercial satellite imagery. Yonhap reported that North Korean leader Kim oversaw the military parade and North Korean state media later confirmed that a military parade was held in Pyongyang which displayed ICBMs and demonstrated the greatest nuclear strike capability, as well as featured tactical nuclear operations units, according to KCNA
• G7 is reportedly mulling sanctioning Chinese firms for military assistance to Russia and is also considering sanctions on North Korea and Iran.

EU/UK

• UK Chancellor Hunt is under pressure from the CBI to provide tax breaks in the budget to avert a recession, according to The Times.
• ECB's Kazaks said there is no reason to pause or stop hikes after March and that rates must hit "significantly" restrictive levels, while he added markets should listen to Lagarde on the rate outlook.

DATA RECAP

• UK RICS Housing Survey* (Jan) -47 (Prev. -42.0)