• APAC stocks gained as the region took impetus from the US where participants digested a slew of data releases including stronger-than-expected retail sales.
• European equity futures are indicative of a positive open with the Euro Stoxx 50 +0.4% after the cash market closed up 1.0% yesterday.
• DXY is back on a 103 handle, EUR/USD lingers around the 1.07 mark and Cable has recovered from its brief move below 1.20.
• Crude futures benefitted from the positive risk appetite which helped oil prices recover from the prior day's selling pressure.
• Looking ahead, highlights include US Building Permits/Housing Starts, Philly Fed, PPI, IJC, ECJ Provisional Mortgage Opinion re. Poland, Speeches from Fed's Bullard, Cook & Mester, ECB's Lane, Panetta & de Guindos, BoE's Pill, Supply from France & Spain.
• Earnings from Renault, Pernod Ricard, Commerzbank, Orange, Airbus, Standard Chartered, Nestle, Paramount & Dropbox.

US TRADE

EQUITIES

• US stocks clawed back the initial weakness and finished in the green with early trade dictated by hot retail sales in the US which added to the signs of a strong economy to start the year. Other data releases were mixed in which the latest NY Fed Manufacturing survey was better than feared, although prices rose and employment fell, while Industrial Production disappointed and printed flat M/M.
• SPX +0.28% at 4,147, NDX +0.77% at 12,687, DJI +0.11% at 34,128, RUT +1.09% at 1,960.
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NOTABLE HEADLINES

• White House is reportedly considering nominating Austan Goolsbee, who became Chicago Fed President last month, to serve as Vice Chair, according to WSJ sources. However, it was also reported that a White House official said they will move quickly to nominate someone for the Fed Vice Chair seat in the near future and do not have anyone to preview at this time.
• US CBO forecasts FY2023 US deficit at USD 1.41tln (prev. 1.375tln Y/Y) and deficits to average USD 2.0tln annually over 2024-2033, based on current tax and spending laws.

APAC TRADE

EQUITIES

• APAC stocks gained as the region took impetus from the US where participants digested a slew of data releases including stronger-than-expected retail sales and better-than-feared NY Fed Manufacturing.
• ASX 200 was firmer after several key earnings releases although gains were capped by disappointing jobs data which showed a surprise contraction in Employment Change and a higher Unemployment Rate.
• Nikkei 225 was led by strength in auto manufacturers including Toyota which plans to boost output next month, while data releases were varied as machinery orders disappointed but trade data was mixed.
• Hang Seng and Shanghai Comp. conformed to the improved risk tone with tech front running the outperformance in Hong Kong and with the mainland also underpinned by China's support pledges.
• US equity futures (ES +0.1%) remained afloat after the recent bout of firm US data releases.
• European equity futures are indicative of a positive open with the Euro Stoxx 50 +0.4% after the cash market closed up 1.0% yesterday.

FX

• DXY retraced some of its data-driven advances after a brief foray above the 104.00 level with headwinds from the positive risk tone and slightly softer yields overnight.
• EUR/USD reclaimed the 1.0700 handle amid a softer dollar and after ECB's Lagarde reaffirmed guidance for a 50bps hike next month and commitment to returning inflation to the target.
• GBP/USD gradually extended on the modest rebound from a floor around 1.2000 and composed itself after suffering from the prior day’s underperformance across cyclical currencies and soft UK inflation.
• USD/JPY pulled back from the 134.00 handle as the dollar softened in Asia-Pac trade but with price action contained after mixed data releases from Japan.
• Antipodeans ultimately strengthened despite early pressure from disappointing Australian jobs data and calls by Kiwibank for the RBNZ to pause on rates amid a national state of emergency.
• PBoC set USD/CNY mid-point at 6.8519 vs exp. 6.8524 (prev. 6.8183)

FIXED INCOME

• 10yr UST futures rebounded from a floor near the 112.00 level and reversed some of the declines from yesterday's bear steepening which was triggered by strong US data and a heavy debt supply.
• Bund futures were lacklustre after recent declines and ECB President Lagarde’s hawkish reiterations.
• 10yr JGB futures remained subdued and failed to benefit despite a stronger 5yr JGB auction.

COMMODITIES

• Crude futures benefitted from the positive risk appetite which helped oil prices recover from the prior day's selling pressure and bounce back from the lows seen after bearish inventory data.
• Spot gold traded rangebound and gradually eked mild gains amid a softer dollar.
• Copper futures were firmer with prices underpinned amid the broad constructive mood.

CRYPTO

• Bitcoin extended on yesterday's rally and briefly approached 24,800 to print a 6-month high.

NOTABLE ASIA-PAC HEADLINES

• Chinese President Xi said China is willing to share ultra-large-scale markets, complete industrial systems and advanced technologies with central Asian countries, while he added they will promote high-quality regional economic development and build a closer China-central Asia community with a shared future, according to state media.
• China's NDRC said shortcomings and difficulties still exist in employment, education, medical care, childcare, elderly care, housing and ecological protection. NDRC added that it will boost the income of urban and rural residents, as well as improve the consumption capacity of low and middle-income residents. Furthermore, it will support improvement in spending on housing, NEVs and elderly care services, among other areas of consumption, according to Reuters.
• China's Industry Minister said China's industrial and information development is facing a more severe and complex external environment as the US escalates suppression of China's advanced manufacturing industry, according to Reuters.

DATA RECAP

• Chinese House Prices YY (Jan) -1.5% (Prev. -1.5%)
• Japanese Trade Balance (JPY)(Jan) -3.50T vs. Exp. -3.87T (Prev. -1.45T)
• Japanese Exports YY (Jan) 3.5% vs. Exp. 0.8% (Prev. 11.5%)
• Japanese Imports YY (Jan) 17.8% vs. Exp. 18.4% (Prev. 20.6%, Rev. 20.7%)
• Japanese Machinery Orders MM (Dec) 1.6% vs. Exp. 3.0% (Prev. -8.3%)
• Japanese Machinery Orders YY (Dec) -6.6% vs. Exp. -6.0% (Prev. -3.7%)
• Australian Employment (Jan) -11.5k vs. Exp. 20.0k (Prev. -14.6k)
• Australian Full-Time Employment (Jan) -43.3k (Prev. 17.6k)
• Australian Unemployment Rate (Jan) 3.7% vs. Exp. 3.5% (Prev. 3.5%)
• Australian Participation Rate (Jan) 66.5% vs. Exp. 66.6% (Prev. 66.6%)

GEOPOLITICS

• Russian embassy to the US said the destruction of Nord Stream pipelines was an act of international terrorism and the US should prove it was not involved, according to Reuters.
• US Senate passed a resolution condemning China over the spy balloon, according to Bloomberg. It was also reported that US officials said the downed Chinese spy balloon was aimed at US bases in Guam and Hawaii but was blown off course, according to NYT.

EU/UK

• A Northern Ireland Protocol deal could be sealed in the early part of next week, according to BBC.
• ECB President Lagarde said the ECB is committed to bringing inflation back to the 2% medium-term target and will take the necessary measures to do so, while she added that price pressures remain strong and underlying inflation is still high. Lagarde also stated that risks to the inflation outlook have also become more balanced, especially in the near term and that the parameters for reducing the APP portfolio will be similar to what they have done in the past.