• APAC stocks traded negatively as the regional bourses took their cues from the weak performance stateside
• European equity futures are indicative of a lower open; US equity futures remained subdued heading into a long weekend (ES -0.5%)
• DXY extended on gains above the 104.00 level amid the higher yield environment; antipodeans lagged amid the risk aversion
• US President Biden said he expects to be speaking with Chinese President Xi; Pentagon's top China official will visit Taiwan in the coming days, according to FT sources
• Looking ahead, highlights include UK Retail Sales, US Export/Import Prices, Speeches from Fed's Bowman & Barkin, and earnings from Mercedes-Benz, NatWest, Segro & Deere

LOOKING AHEAD

• Highlights include UK Retail Sales, US Export/Import Prices, Speeches from Fed's Bowman & Barkin, earnings from Mercedes-Benz, NatWest, Segro & Deere.

US TRADE

EQUITIES

• US stocks were lower in which the NDX led the declines in the major US indices and with the bulk of the pressure seen in the aftermath of the hot PPI data and fall in initial jobless claims. Selling was also exacerbated by comments from Fed's Mester who opened the door to a 50bps hike, while Fed's Bullard said he advocated a 50bps hike at the last meeting and is not ruling anything out for the next meeting.
• SPX -1.38% at 4,090, NDX -1.93% at 12,442, DJI -1.26% at 33,696, RUT -0.96% at 1,942.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bullard (non-voter) said continued rate increases would lock in slowing inflation and market-based expectations of inflation are now relatively low. Bullard also said the economy is growing faster than previously thought and that unemployment is below the long-run rate and output is above potential, while he added that inflation remains too high but has come down recently. Furthermore, Bullard said he advocated a 50bps hike at the last Fed meeting to get to an adequately restrictive level faster and he would not rule anything out for the next Fed meeting, while he noted the recent firming of market pricing is welcome and reaffirmed his view of a policy terminal rate in 5.25-5.50% range as appropriate.

APAC TRADE

EQUITIES

• APAC stocks traded negatively as the regional bourses took their cues from the weak performance stateside after firmer-than-expected PPI data and hawkish Fed rhetoric.
• ASX 200 was dragged lower by weakness in tech following the underperformance of the Nasdaq in the US and with sentiment also dampened as the RBA Governor Lowe reiterated the view for higher rates.
• Nikkei 225 suffered from the tech rout and as earnings began to quieten, although Bridgestone was among the best performers after a jump in revenue and forecasts for a 12% increase in FY23 profits.
• Hang Seng and Shanghai Comp. declined with Hong Kong pressured by tech losses and with frictions stoked after China unveiled sanctions against US firms related to Taiwan arms sales, while the mainland initially bucked the trend after a substantial liquidity injection by the PBoC.
• US equity futures remained subdued by recent hawkish undertones and with cash markets in North American heading towards a long weekend.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 -0.7% after the cash market closed up 0.4% yesterday.

FX

• DXY extended on gains above the 104.00 level amid the higher yield environment following the firmer-than-expected US PPI data and hawkish rhetoric from Fed speakers regarding a 50bps hike which Mester saw a compelling case for, and Bullard advocated at the last FOMC meeting.
• EUR/USD gave way to the firmer dollar and following mixed ECB rhetoric in which Lane and Nagel echoed the hawkish script, while Panetta warned about costs of going too high with rates and Stournaras noted rates may not need to be increased to a level that could lead the economy to a hard landing.
• GBP/USD remained beneath the 1.2000 level after recent underperformance in cyclical currencies.
• USD/JPY continued its advances north of 134.00 owing to a firmer dollar and higher US yields.
• Antipodeans were pressured by the riskaversion and decline across the commodities complex.
• PBoC set USD/CNY mid-point at 6.8659 vs exp. 6.8674 (prev. 6.8519)

FIXED INCOME

• 10yr UST futures continued to decline in the aftermath of the US PPI data and hawkish Fed rhetoric in which Mester and Bullard kept the door open for a return to a more aggressive pace of rate hikes.
• Bund futures languished near the prior day’s lows after recent price swings and mixed ECB rhetoric.
• 10yr JGB futures were lacklustre after recent pressure in global counterparts and the absence of additional purchases by the BoJ today.

COMMODITIES

• Crude futures declined alongside the risk-aversion and with headwinds from a firmer dollar.
• US Treasury department official said it is too early to tell whether the price cap on Russian refined products has been successful and if the price cap on Russian oil has expanded the gap between Urals and Brent, while the official added that Russia has much less money to fight the war.
• Qatar Energy set April-loading Al-Shaheen crude term price at a premium of USD 2.58/bbl above Dubai quotes, according to traders cited by Reuters.
• Spot gold remained pressured as the greenback continued to strengthen.
• Copper futures reversed some of their recent gains amid the cautious mood.

CRYPTO

• Bitcoin was firmer after a recent pullback was stemmed by support around 23,500.
• US SEC filed a securities fraud lawsuit against Terraform Labs and founder Do Hyeong Kwon which alleged that the defendants perpetrated a fraudulent scheme that led to at least USD 40bln of losses in market value, according to Reuters.
• Senior BoJ official Uchida said the BoJ decided to launch a pilot program this April on a CBDC which aims to test technical feasibility, as well as utilise skills and insights of private businesses.

NOTABLE ASIA-PAC HEADLINES

• PBoC injected CNY 835bln via 7-day reverse repos at 2.00% for a CNY 632bln net injection.
• RBA Governor Lowe said high inflation is damaging and that they will do what is necessary to make sure inflation returns to the target range, while he noted the Board expects that further increases will be needed over the months ahead. Lowe also reiterated that they are not on a predetermined path on interest rates and have an open mind but their assessment is that they have to go up further on rates. Furthermore, he added that they will slow down on rates if needed and that rates could start to come down next year if they get on top of inflation but a few things would have to go right for that to happen.

DATA RECAP

• Singapore Non-Oil Exports MM (Jan) 0.9% vs. Exp. -1.2% (Prev. -3.3%)
• Singapore Non-Oil Exports YY (Jan) -25.0% vs. Exp. -22.0% (Prev. -20.6%)

GEOPOLITICS

• US President Biden said the US will compete with China and expects to be speaking with Chinese President Xi.
• White House said Chinese sanctions on US defence contractors are symbolic and unnecessary.
• Pentagon's top China official Michael Chase will visit Taiwan in the coming days, according to FT sources.
• NORAD intercepted a Russian aircraft approaching Alaskan airspace in a routine interception.
• Ukrainian President Zelensky has ruled out giving up any of Ukraine's territory in a potential peace deal with Russia, according to the BBC.
• EU Commission abandoned Russian nuclear sanctions plans, according to Politico citing sources.
• North Korea said planned US-South Korean military drills will lead to increased tensions in the region and warned that the US and South Korea will face an unprecedently strong response if they go ahead with planned military drills, while it will also consider additional military action in protest against US pressure at the UN Security Council, according to KCNA.

EU/UK

• UK PM Sunak said in a statement that he would travel to Northern Ireland on Thursday evening to speak to political parties as part of an engagement process, while the BBC also reported that PM Sunak is due in Northern Ireland with a protocol deal imminent.
• BoE Chief Economist Pill said Tuesday's labour market report pointed to signs that it loosened a little in Q4 which is in line with the MPC narrative and the labour market remains tight in an absolute sense. Pill added that continuing to raise rates at the pace and magnitude seen over the past year would eventually, and perhaps soon, imply that monetary policy had cumulatively been tightened too much.
• ECB's Stournaras said interest rates may not need to be increased to a level that could lead the eurozone economy to a hard landing and opposition of a few countries to mutual borrowing is pushing the creation of a European sovereignty fund to the future. Stournaras added that the data points to easing inflation pressures and a modest expansion in economic activity which allows for more optimism.