• APAC stocks were subdued with trade mostly kept rangebound in the absence of a lead from Wall Street.
• European equity futures are indicative of a softer open with the Euro Stoxx 50 -0.1% after the cash market closed down 0.1% yesterday.
• DXY is marginally firmer and back on a 104 handle, FX markets were broadly contained overnight, NZD marginally lags.
• UK PM Sunak was warned not to undermine Northern Ireland and that an N.I. deal could trigger resignations, according to The Times.
• Looking ahead, highlights include EZ, UK & US Flash PMIs, German ZEW, Canadian CPI, New Zealand Trade Balance, Speeches from Russian President Putin, US President Biden & ECB's Lagarde, Supply from UK, Germany & US, Earnings from Antofagasta, HSBC, Home Depot, Walmart & Medtronic

US TRADE

EQUITIES

• US markets were closed for Presidents' Day.

APAC TRADE

EQUITIES

• APAC stocks were subdued with trade mostly kept rangebound in the absence of a lead from Wall Street.
• ASX 200 traded lower amid a deluge of earnings releases including a decline in BHP's profits.
• Nikkei 225 was contained after mixed PMI data in which Manufacturing PMI declined by the fastest pace in two and a half years although Services PMI showed a firmer expansion.
• Hang Seng and Shanghai Comp. were mixed with Hong Kong dragged lower by tech losses, while the mainland was just kept afloat amid strength in developers after China launched an investment pilot for the property sector.
• US equity futures (ES -0.4%) drifted lower overnight with US participants yet to return to the market.
• European equity futures are indicative of a softer open with the Euro Stoxx 50 -0.1% after the cash market closed down 0.1% yesterday.

FX

• DXY eked modest gains and reclaimed the 104.00 level as trade somewhat began to pick up from the holiday lull.
• EUR/USD remained pressured and prodded Monday’s lows but with price moves confined to a narrow range.
• GBP/USD was uninspired with UK PM Sunak was warned that a N.I. deal could trigger resignations.
• USD/JPY traded indecisively after mixed PMI data and comments from BoJ Governor Kuroda who believes inflation will begin to slow in mid-FY23 but noted that wages are likely to rise due to labour demand and inflation.
• Antipodeans lacked firm direction after mixed PMI data, while the RBA minutes reiterated the view for further hikes in the months ahead, as well noted that it considered either a 25bps or 50bps hike and that a pause was not an option unlike in December.
• PBoC set USD/CNY mid-point at 6.8557 vs exp. 6.8550 (prev. 6.8643)

FIXED INCOME

• 10yr UST futures languished at a sub-112.00 level with demand hampered after the market holiday closure.
• Bund futures were lacklustre beneath 135.00 but with downside stemmed amid the quietened conditions.
• 10yr JGB futures followed suit to the weakness seen in global counterparts and following mixed results at the 20yr auction.

COMMODITIES

• Crude futures were on the back foot and re-approached Monday's lows amid headwinds from the cautious mood.
• Iran set March Iranian light crude price to Asia at Oman/Dubai +USD 2.00/bbl, according to a Reuters source.
• Spot gold slightly softened owing to a firmer greenback albeit with price action contained.
• Copper futures faded some of the prior day's gains amid the cautious mood during Asia-Pac trade.

CRYPTO

• Bitcoin marginally extended on recent advances and briefly climbed above the 25,000 level.

NOTABLE ASIA-PAC HEADLINES

• UK Foreign Secretary Cleverly said he spoke with Chinese Foreign Minister Qin Gang and raised human rights abuses in Xinjiang and the need for peace in the Taiwan Strait during the call, according to Reuters.
• RBA Minutes from the February meeting noted that the board considered a hike of 25bps or 50bps and that a pause was not an option. RBA said there were arguments in favour of both options but it concluded that the case to increase the Cash Rate by 25bps was the stronger one and the Board also agreed further increases would be needed over the months ahead. Furthermore, the RBA noted that monthly meetings allowed for frequent adjustments and that rates have already risen substantially, while it stated the Board will do what is needed to return inflation to the target and that data suggested more breadth and persistence in inflation than expected.

DATA RECAP

• Japanese Manufacturing PMI (Feb P) 47.4 (Prev. 48.9)
• Japanese Services PMI (Feb P) 53.6 (Prev. 52.3)
• Japanese Composite PMI (Feb P) 50.7 (Prev. 50.7)
• Australian Manufacturing PMI (Feb P) 50.1 (Prev. 50.0)
• Australian Services PMI (Feb P) 49.2 (Prev. 48.6)
• Australian Composite PMI (Feb P) 49.2 (Prev. 48.5)

GEOPOLITICS

• Ukrainian President Zelensky said he sees resolve from the US and President Biden to end Russian aggression this year and also stated that a world order based on rules, humanity and predictability depends on what happens now in Ukraine, according to Reuters.
• EU's Borrell said he is confident EU members will approve the next Russian sanctions package within the next hours or days and said the sanctions agreement should be reached before the end of the week.
• Japanese PM Kishida said they plan to pledge another USD 5.5bln in aid to Ukraine and announced that they will host a G7 summit meeting this Friday in which Ukrainian President Zelensky will be invited to join. Japanese Finance Minister Suzuki separately announced to hold the G7 financial leaders meeting on February 23rd and will reaffirm a stern stance against Russia at the G7 meeting, while he added they will continue to closely coordinate with other countries on sanctions to achieve the ultimate goal of Russia's withdrawal from Ukraine, as well as noted that measures against Russia and support for Ukraine will be the main topics on the G7 agenda.
• China seeks to broker Russia-Ukraine peace and urged the world to stop saying Taiwan is next after Ukraine, according to Bloomberg.
• Senior aides of Israeli PM Netanyahu and Palestinian President Abbas have been conducting secret talks for almost two months in an effort to de-escalate rising tensions in the occupied West Bank, according to Axios sources.

EU/UK

• BoE Deputy Governor Woods said he will consult on changes to UK insurance capital rules in June and September, while he added that insurers will have a very good sense of what the changes to capital rules will be by year-end, according to Reuters.
• UK PM Sunak was warned not to undermine Northern Ireland and that an N.I. deal could trigger resignations, according to The Times.
• Germany's tax revenues rose 0.8% Y/Y, which was driven by higher sales taxes and wages taxes, according to the Finance Ministry.
• Hungary's EU funds negotiator said access to the grants and cheap loans could be delayed until the summer (vs prior April guidance) to resolve remaining issues with Brussels over democratic reforms.