• European bourses are contained/slightly firmer, with fresh drivers limited as the focus is on geopolitics and upcoming US data.
• Stateside, futures are softer but with the ES just above 4k, the NQ is the laggard following some recent pressure in the fixed income complex.
• DXY remains firmer on the session though is yet to meaningfully advance higher, to the mixed fortune of peers with JPY lagging post-Ueda while EUR & GBP are flat.
• EGBs are little changed having faded from a failed test of recent peaks while USTs are slightly negative pre-PCE/Fed speak.
• Crude continues to consolidate while metals are generally rangebound.
• US has announced new Russian sanctions, affecting metals, minerals and chemicals alongside measures on Cos supporting their defence sector.
• Looking ahead, highlights include US PCE Price Index, New Home Sales, US President Biden visiting Europe, Speeches from BoE's Tenreyro, Fed's Collins, Mester, Jefferson, Bullard & Waller.

EUROPEAN TRADE

EQUITIES

• European bourses are contained/slightly firmer, Euro Stoxx 50 +0.1%, with fresh drivers limited as the focus is on geopolitics and upcoming US data.
• Sectors are predominantly in the green, with Construction names bolstered post-Saint Gobain while Basic Resources lag slightly given recent commodity action.
• Stateside, futures are softer but with the ES still above 4k, the NQ -0.7% is the laggard following some recent pressure in the fixed income complex.
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FX

• The DXY remains firmer on the session though the upside has peaked at a 104.74 session high with Thursday's high at 104.78 just above.
• Action which comes to the modest detriment of peers, with the JPY lagging as nominee Ueda said the BoJ's current policy is appropriate, with USD/JPY above 135.00 from a 134.07 base.
• In close proximity to the JPY are the antipodeans, with the AUD affected by Yuan action and has slipped below 0.68 vs USD while the NZD remains just above 0.62, aided by RBNZ commentary.
• EUR and GBP are the relative outperformers with catalysts light thus far and the EUR unreactive to German data or ECB's Nagel while Sterling awaits BoE's dove Tenreyro late-doors; holding around/above 1.06 and 1.20 respectively.
• PBoC set USD/CNY mid-point at 6.8942 vs exp. 6.8948 (prev. 6.9028)
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FIXED INCOME

• Core benchmarks are little changed on the session, having seemingly faded after being unable to test Monday's peak or Friday's high, with some pre-PCE action perhaps factoring.
• USTs are in-fitting directionally but are modestly negative on the session with yields elevated across the curve ahead of a busy afternoon agenda with the potential for month-end demand later also worth bearing in mind.
• Specifically, Bunds, Gilts and USTs have peaked at 135.20, 102.67 and 111.19 respectively.
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COMMODITIES

• WTI and Brent are firmer on the session with the April contracts residing around/just above Thursday’s peaks of USD 75.99/bbl and USD 82.77/bbl respectively.
• Both TTF and Henry Hub gas contracts are firmer thus far, following a settlement in excess of 6% for Henry Hub on Thursday.
• Spot gold is essentially unchanged on the session as while the USD remains firmer it is yet to advance significantly from early European morning levels; circa. USD 10/oz shy of Thursday’s USD 1833/oz peak which itself is just below the 10-DMA of USD 1836/oz.
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NOTABLE HEADLINES

• Former UK PM Johnson has refused to support PM Sunak's Brexit deal, which poses a major blow to Downing Street's hopes of avoiding a Eurosceptic Conservative rebellion, according to The Telegraph.
• ECB's Nagel says the latest data shows core inflation is still too high, stopping tightening soon would be a cardinal sin. Cannot exclude more and significant hikes beyond March. Cannot rule out that headline inflation has plateaued, too speculative to say.

DATA RECAP

• UK GfK Consumer Confidence (Feb) -38 vs. Exp. -43.0 (Prev. -45.0)
• German GfK Consumer Sentiment (Mar) -30.5 vs. Exp. -30.4 (Prev. -33.9, Rev. -33.8)
• German GDP Detailed QQ SA (Q4) -0.4% vs. Exp. -0.2% (Prev. -0.2%); YY NSA (Q4) 0.3% vs. Exp. 0.5% (Prev. 0.5%)

NOTABLE US HEADLINES

• US Assistant Secretary for Economic Policy Ben Harris is planning to leave, according to Axios.
• US and China are to hold deputy-level bilateral discussions today on debt issues and sustainable finance, according to Reuters sources.
• US Treasury Secretary Yellen says the Inflation Reduction Act is not a subsidy war with Europe, not trying to steal jobs. Soft landing for the US economy is possible.
• Click here for the US Early Morning note.

GEOPOLITICS

• Ukrainian President Zelensky said the military situation in the south is quite dangerous in some places and is very difficult in the east, according to Reuters.
• White House said the US will announce sanctions against Russian individuals and entities on Friday which will affect the banking, defence and tech sectors, while National Security Adviser Sullivan said G7 sanctions being announced on Friday will include countries that are trying to backfill products being denied to Russia.. Subsequently, US is to increase tariffs on 100 Russian metals, minerals and chemical products worth circa. USD 2.8bln; announces USD 2bn in security aid to Ukraine; announces export control measures against 90 Cos that support Russia's defence sector..
• China's Foreign Ministry released a paper regarding China's position on the political solution to the Ukraine crisis which noted respect for the sovereignty of all countries and that regional security cannot be guaranteed by strengthening or expanding military blocs, while it also called for a cease-fire (which would see Russian troops remaining in in Ukraine territory) to prevent Ukraine crisis from further aggravating or getting out of control. Furthermore, it stated that dialogue and negotiation are the only viable ways to resolve the crisis and that nuclear weapons should not be used in the Ukraine war. The proposal was quickly rebuffed by US National Security Advisor Jake Sullivan
• EU delegation head in China said China should fulfil its responsibility to defend the UN Charter in the face of Russian aggression and that China's position paper on Ukraine is not a peace proposal, while Ukraine's Charge D'affaires said that they have a peace plan which they hope China supports and would like to see China do more to end the war.
• French Finance Minister Le Maire said the G20 must condemn Russia's aggression against Ukraine and must condemn Russia at the finance level, while he added Europe is thinking and working on new sanctions on Russia.

NORTH KOREA

• North Korea conducted "strategic cruise missile" launching drills in which it fired four strategic cruise missiles towards the East Sea at dawn on Thursday, according to state media.
• North Korea said if the US continues its hostile practices against the country, it will be considered a declaration of war, according to Yonhap.
• US and South Korea agreed to hold additional tabletop exercises to enhance joint deterrence against North Korean nuclear threats, according to the US DoD cited by Reuters and Yonhap

CRYPTO

• Bitcoin is essentially unchanged on the session, currently resides just shy of the USD 24k mark within narrow USD 23.76-24.13k boundaries.

APAC TRADE

• APAC stocks traded mostly rangebound after the choppy but positive performance on Wall St where markets spent most of the session recovering from the initial data-induced selling.
• ASX 200 was positive with the index led by outperformance in tech although gains are limited amid another batch of earnings releases and continued weakness in the mining industry.
• Nikkei 225 outperformed as the focus centred on comments from BoJ Governor nominee Ueda at the lower house confirmation hearing in which he noted that current monetary policy is appropriate and that Japan still needs more time for inflation to sustainably hit the 2% target.
• Hang Seng and Shanghai Comp. were lower after a substantial liquidity drain by the PBoC and as the US looks to include Chinese companies in a fresh round of Russian sanctions, while Hong Kong underperformed amid heavy losses in tech owing to weaker earnings from NetEase.

NOTABLE ASIA-PAC HEADLINES

• BoJ Governor nominee Ueda said current monetary policy is appropriate and that Japan still needs more time for inflation to sustainably hit the 2% target, while he added it is appropriate to continue monetary easing from now on. Ueda stated that if trend inflation improves significantly, the BoJ needs to move toward monetary policy normalisation but if it does not improve, the BoJ must consider ways to maintain YCC while being mindful of market distortions. He also stated that the BoJ won't conduct bond-selling operations and if it were to normalise policy, it would likely do so by raising interest paid to reserves parked with the central bank. Furthermore, he said must think about what to do with ETF holdings if the BoJ were to exit easy policy but now is not the time to do so and said the BoJ will stop massive bond buying if the 2% target is met.
• BoJ Deputy Governor nominee Uchida said uncertainty regarding Japan's economy is very high and BoJ must support Japan's economy by maintaining ultra-easy policy, while he added it is wrong to tweak monetary policy just to address side effects and the right approach is to come up with ways to mitigate side-effects and effectively maintain current policy.
• BoJ Deputy Governor nominee Himino said it is important to conduct economic policy flexibly and that current monetary policy is appropriate, while he added that they must aim for structural rises in wages. Furthermore, Himino said uncertainty over the global economy is very large and that they need to continue monetary easing for now.

DATA RECAP

• Japanese National CPI YY (Jan) 4.3% vs Exp. 4.3% (Prev. 4.0%)
• Japanese National CPI Ex. Fresh Food YY (Jan) 4.2% vs Exp. 4.2% (Prev. 4.0%)
• Japanese National CPI Ex. Fresh Food & Energy YY (Jan) 3.2% vs Exp. 3.2% (Prev. 3.0%)