• European bourses ex-FTSE 100 are in the green though US futures remain lower after choppy APAC trade, ES -0.4% pre-data
• DXY is benefitting from marked GBP pressure following UK CPI, with Cable sub-1.21 and the index holding around 103.50 though off 103.63 best
• Gilts are significantly outpacing their European and US peers post-inflation, with pricing for a 25bp BoE hike in March moving below 70% vs 89% pre-release
• Crude benchmarks are softer intraday after a much larger-than-expected Private build, though internals were  mixed, and the IEA report which chimed with OPEC and EIA re. 2023 demand
• Looking ahead, highlights include US Retail Sales, NY Fed Manufacturing, Industrial Production & Japanese Trade Balance, Speech from ECB's Lagarde, Supply from the US, Earnings from Cisco, Biogen, Analog Devices, Marathon Oil & Shopify.

EUROPEAN TRADE

EQUITIES

• European bourses are in the green, Euro Stoxx 50 +0.6%, picking up from choppy APAC trade though this is with the exception of the FTSE 100 -0.1% amid Barclay's losses.
• Sectors, are mixed though with a positive skew as Consumer Products/Services are buoyed by LVMH and Kering while Banking names lag given the above and yield action.
• Stateside, futures are lower across the board, ES -0.4%, awaiting key US data incl. Retail Sales and Empire Fed with today's calendar notably devoid of Fed speak.
• US President Biden's administration has issued a final rule requiring federally funded EV chargers to be built in the US; effective immediately. Under the new rules Tesla (TSLA) will open chargers to other car models.
• Click here for more detail.

FX

• The USD remains resilient heading into the afternoon's data releases, with the DXY holding around 103.50 though shy of earlier 103.63 best, as the index benefits from favourable European yield and GBP action.
• Specifically, GBP/USD has been pushed to a 1.2074 trough vs 1.2182 best following unexpectedly 'cooler' UK CPI, with market pricing seeing a marked dovish shift for March.
• However, the Antipodeans are the laggards irrespective of hawkish RBA commentary amid underlying commodity pressure and the fallout from Cyclone Gabrielle; AUD/USD sub-0.69 and NZD/USD sub-0.63.
• Amidst this, EUR and JPY are fairly contained vs USD with the morning's ECB speak via de Cos adding little and USD/JPY now at the mid-point of 132.55-133.50 parameters.
• PBoC set USD/CNY mid-point at 6.8183 vs exp. 6.8196 (prev. 6.8136)
• Fitch says there is some room for South Africa's BB- sovereign rating to absorb a temporary impact on economic metrics from load shedding; should infrastructure problems cause further declines in potential growth, this could potentially weigh on its sovereign rating.
• Click here for more detail.

FIXED INCOME

• Gilts are significantly outpacing their EGB & US peers in wake of softer than expected UK inflation data, with pricing for a 25bp BoE hike in March dropping to sub-70% from circa. 89% pre-release.
• Action which pushed Gilts to a test of 1.04 to the upside, though they are yet to breach the figure.
• In wake of this, Bunds and USTs are firmer though magnitudes are much more contained and the benchmarks are well off best levels, posting gains of circa. 10 ticks currently.
• As such, the UK 10yr yield is markedly lagging with Bunds and USTs softer but essentially unchanged in comparison ahead of yet more key US data.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are softer intraday after a much larger-than-expected Private build, though internals were mixed, and the IEA report which chimed with OPEC and EIA re. 2023 demand.
• Currently, WTI Mar and Brent Apr are lower by just under 1.0% and are around/below USD 78/bbl and USD 85.00/bb respectively.
• US Energy Inventory Data (bbls): Crude +10.5mln (exp. +1.1mln), Cushing +2mln, Gasoline +0.8mln (exp. +1.5mln), Distillate +1.7mln (exp. +0.4mln).
• IEA Monthly Oil Market Report: global oil demand is set to rise by 2mln BPD in 2023 to 101.9mln BPD (+200k BPD on the prior forecast). Click here for more detail.
• Spot gold is being weighed on by the firmer USD and has retested the January 6th trough at USD 1831/oz, with support next at USD 1825/oz and 1823/oz via the January 5th and 3rd lows respectively.
• Base metals are hampered by the USD and broader risk tone, with LME Copper slipping further below USD 9k/T.
• Click here for more detail.

NOTABLE HEADLINES

• UK PM Sunak is exploring a public sector pay deal that backdates wage offer, according to FT.
• CBRT is to buy gov't bonds and Sukuk via the quotation method on Wednesday, intend to buy up to TRY 8bln incl. USD 3bln of bonds/Sukuk on Wednesday.
• ECB's de Cos says recent data on EZ inflation and some key determinants are somewhat encouraging; withdrawal of fiscal support measures could make inflation more persistent. Workers pressures to reclaim their lost purchasing power might be significant, particularly with a tight labour market.
• EU sues Poland; EU Commission refers Poland to ECJ For violations to EU law by its constitutional tribunal.

DATA RECAP

• UK CPI YY (Jan) 10.1% vs. Exp. 10.3% (Prev. 10.5%); MM (Jan) -0.6% vs. Exp. -0.4% (Prev. 0.4%)
• UK Core CPI MM (Jan) -0.9% vs. Exp. -0.5% (Prev. 0.5%)
• UK Services CPI declined 0.9% M/M with the Y/Y rate falling to 6% from 6.8%.
• UK ONS House Price Index (Dec) 9.8% Y/Y vs. prev. 10.6%.
• EU Eurostat Trade NSA, Eur (Dec) -8.8B EU vs. Exp. -12.5B EU (Prev. -11.7B EU, Rev. -11.6B EU)

NOTABLE US HEADLINES

• US President Biden named Fed's Brainard as top economic adviser and Jared Bernstein as Chief White House Economist, as expected, while the Fed announced that Vice Chair Brainard submitted her resignation effective on or about February 20th to become the NEC Director.
• Click here for the US Early Morning note.

GEOPOLITICS

• US forces shot down an Iranian-made drone in Syria, according to the US military cited by Reuters.
• Chinese President Xi vowed to step up trade and investment cooperation with Iran and constructively participate in efforts to revive its nuclear deal, according to FT.
• Japan is considering expanding the use of weapons against intrusion into its airspace after it recently noted that it strongly suspects past intrusions of Chinese surveillance balloons, according to Kyodo. Furthermore, Japanese Chief Cabinet Secretary Matsuno said they told China that airspace violation by unmanned surveillance balloons is absolutely unacceptable.
• EU Commission President von der Leyen suggests a 10th tranche of sanctions against Russia, with trade bands. Sanctions could occur on electronic components against Russia that could deal with items incl. drones.
• Russian Foreign Minister Lavrov says a renewed Russian foreign policy concept will focus on ending Western dominance in the world, according to Tass.
• German Vice Chancellor says the delivery of Leopard tans is a "bit too late" and that time is running out ahead of expected Russian offensive, via Die Zeit.

CRYPTO

• Bitcoin is essentially unchanged after reclaiming USD 22k in limited specific newsflow with the session's parameters particularly slim.

APAC TRADE

• APAC stocks were mostly lower following the choppy performance on Wall Street as markets digested sticky US inflation data and the plethora of Fed commentary that ensued.
• ASX 200 declined amid underperformance in its top-weighted financials sector after results from Australia’s largest bank CBA which despite posting a record cash profit for H1, still fell short of estimates and the Co. flagged a moderation in business loan growth.
• Nikkei 225 was subdued with several of the biggest movers in Tokyo driven by earnings results.
• Hang Seng and Shanghai Comp. conformed to the downbeat mood with Hong Kong dragged lower by weakness in the property sector, although losses in the mainland were stemmed after the PBoC boosted funds through its Medium-term Lending Facility at an unchanged rate.

NOTABLE ASIA-PAC HEADLINES

• PBoC conducted CNY 499bln of 1-year MLF (vs CNY 300bln maturing) with rate kept at 2.75%.
• RBA Governor Lowe said the current monetary policy stance is restrictive and inflation is way too high which needs to come down, while he noted risks are two-sided and that there is the risk they have not yet done enough on interest rates. Furthermore, Lowe said Q4 inflation result showed strong domestic demand and they are seeing some early evidence that demand is moderating but also noted rates have not yet peaked and he is still unsure how far rates have to go.
• Moody's says China faces a difficult transition period amid property market correction, risks for gov't. Sectors contribution to growth will likely remain materially lower over the medium-term.
• Indian Trade Official says UK-FTA conversations are ongoing and there is positive movement. Fourth round of talks on the EU-India FTA is schedule for March 2023.