• APAC stocks traded cautiously heading into month-end and following on from the soft close on Wall St. on Friday.
• European equity futures are indicative of a slightly positive open with the Euro Stoxx 50 +0.1% after the cash market closed down 1.9% on Friday.
• DXY sits on a 105 handle, JPY marginally leads G10 FX, Antipodeans lag.
• UK PM Sunak's office said he will meet with EU's von der Leyen for talks on Northern Ireland Brexit deal late lunchtime on Monday.
• Looking ahead, highlights include EU Consumer Confidence (Final), US Durable Goods, Pending Home Sales.

US TRADE

EQUITIES

• US stocks and bonds took a hit to end the week on Friday after more hot inflation data saw a hawkish shift to Fed pricing. The Fed's preferred gauge of inflation topped expectations and accelerated from the prior which added to the chorus of hot data we've seen in January and spurred a higher terminal rate pricing of 5.4%. The data also led to more hawkish commentary from Mester who said it shows the Fed have to do "a little more", while Collins said the data affirms the case for more rate hikes and Jefferson warned high inflation may come down only slowly.
• SPX -1.05% at 3,970, NDX -1.73% at 11,969, DJI -1.02% at 32,817, RUT -0.92% at 1,890.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US Treasury Secretary Yellen said she expects readjustments of housing rental contracts to lower rates will help drive a reduction in inflation this year, while she added that the US consumer spending report shows that disinflation is not a straight line and inflation remains a problem. Furthermore, she disagrees with the premise that the Fed needs a recession to win the inflation fight and also said that she was willing to negotiate with Republicans regarding the budget proposal to be unveiled next month but not as a condition of raising the debt limit, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded cautiously heading into month-end and a slew of upcoming releases including Chinese PMI data, with headwinds also from the US where firmer-than-expected Core PCE data spurred hawkish terminal rate bets.
• ASX 200 was negative as participants digested a deluge of earnings and with the mining industry leading the retreat seen across nearly all sectors aside from energy which benefitted from a jump in Woodside Energy’s profits.
• Nikkei 225 price action was contained by a lack of pertinent macro drivers and with BoJ Governor nominee Ueda’s largely reiterated prior comments at the upper house confirmation hearing.
• Hang Seng and Shanghai Comp. were choppy with initial pressure amid geopolitical frictions after the G20 finance ministers meeting failed to agree on a communique due to opposition from Russia and China, while National Security Adviser Sullivan also warned there will be a real cost if China provides military assistance to Russia for the Ukraine war. However, Chinese stocks gradually recovered from the early weakness and briefly turned positive with sentiment helped by a continued liquidity injection and after China drafted guidelines to regulate financial support in the housing rental market, although the gains proved to be short-lived.
• US equity futures (ES Unch.) lacked direction after last week's data-induced selling.
• European equity futures are indicative of a slightly positive open with the Euro Stoxx 50 +0.1% after the cash market closed down 1.9% on Friday.

FX

• DXY was rangebound above the 105.00 level as it holds on the last Friday’s gains in the aftermath of the firmer-than-expected Core PCE price data which resulted in a higher terminal rate pricing of 5.4%.
• EUR/USD attempted to nurse some of its losses although the rebound was mild and recent comments from ECB’s Lagarde were nothing groundbreaking as she noted inflation is still unacceptably high and reiterated data-dependence.
• GBP/USD was lacklustre at a sub-1.2000 handle despite the hopes for reaching a Brexit deal on Northern Ireland trade when UK PM Sunak meets with EU’s von der Leyen later today.
• USD/JPY slightly pulled back after last week’s advances albeit with downside stemmed after support held at 136.00 and with BoJ Governor nominee Ueda reiterating that current monetary easing is appropriate at the upper house hearing,
• Antipodeans were subdued alongside the cautious risk tone and recent losses in commodities.
• PBoC set USD/CNY mid-point at 6.9572 vs exp. 6.9586 (prev. 6.8942)

FIXED INCOME

• 10yr UST futures remained lacklustre after last Friday’s selling pressure owing to the hotter-than-expected reading from the Fed’s preferred inflation gauge which also spurred further hawkish Fed speak.
• Bund futures were uneventful and took a breather around the 134.00 level after recent price swings.
• 10yr JGB futures followed suit to the recent selling pressure across global peers but with downside limited by the BoJ’s presence in the market for more than JPY 1.5tln of JGBs on top of its fixed-rate operations.

COMMODITIES

• Crude futures lacked firm direction and pared early gains amid the subdued risk tone.
• Russia halted supplies of oil to Poland via the Druzhba pipeline, according to PKN Orlen's CEO.
• Crude oil deliveries via the Druzhba pipeline to the Czech Republic are running as planned, according to Mero.
• Spot gold was contained as the greenback held on to its recent post-PCE price gains.
• Copper futures were lacklustre and languished below USD 4.00/lb and at their weakest since early January.

CRYPTO

• Bitcoin was indecisive and swung back and forth around the 23,5000 level.
• RBI Governor Das said at the G20 that there is now wide recognition of major risk with crypto.

NOTABLE ASIA-PAC HEADLINES

• China drafted guidelines to regulate financial support in the housing rental market and began to solicit public opinion, according to China.org.cn.
• Macau dropped COVID-19 mask mandates for most locations aside from public transportation, hospitals and some other areas, according to Reuters.
• BoJ Governor Kuroda commented that he is resolved to keep ultra-loose policy and that the BoJ expects core consumer inflation to slow beyond 2% in both fiscal 2023 and 2024, according to Reuters.
• BoJ Governor nominee Ueda says CPI growth will slow below 2% in fiscal 2023 and that it takes time for CPI to meet the 2% target stably and sustainably, while he added that the BoJ's current monetary easing is appropriate and that it is appropriate to continue monetary easing from now on as well.

DATA RECAP

• Australian Gross Company Profits (Q4) 10.6% vs. Exp. 1.5% (Prev. -12.4%, Rev. -11.5%)
• Australian Business Inventories (Q4) -0.2% vs. Exp. -0.2% (Prev. 1.7%, Rev. 2.1%)

GEOPOLITICS

UKRAINE/RUSSIA

• G20 Finance Ministers meeting concluded without a joint communique as China and Russia opposed the draft with the two countries said to be upset by the use of a G20 platform to discuss political matters, according to sources cited by Reuters. India’s chair statement noted that there was a discussion about the war in Ukraine and it reiterated the G20 position on deploring in the strongest terms aggression by Russia, as well as reiterated the G20 position demanding Russia’s complete and unconditional withdrawal from Ukrainian territory.
• Russian President Putin said Russia has taken into account NATO’s nuclear potential and claimed that the west wants to liquidate Russia, according to TASS.
• Russian Wagner Group boss Prigozhin said his fighters captured the village of Yahinde which is north of Bakhmut, according to Reuters.
• US President Biden said on Friday that he is ruling out Ukraine’s request for F-16 aircraft for now but added they have to put Ukrainians in a position where they can make advances this spring and summer. Biden also said he doesn’t anticipate a major initiative on the part of China to provide weapons to Russia and that he hasn’t seen anything in the Chinese peace plan that would be beneficial for anyone but Russia, while he also suggested it is possible that Chinese President Xi did not know about the Chinese spy balloon, according to an ABC News interview.
• US National Security Adviser Sullivan said China has made the final decision regarding providing aid to Russia and has not taken the possibility of providing lethal aid to Russia off the table, while he noted the consequences have been made clear to China and warned there will be a real cost if China provides military assistance to Russia for the Ukraine war, according to an interview with ABC News. There were also comments from Republican lawmaker McCaul that China is thinking of sending drones and other lethal weapons.
• Germany, France, and the UK are considering making concrete security guarantees to Ukraine as an incentive for Ukrainian President Zelensky to engage in peace talks with Russia, accorrding to WSJ.
• German Defence Minister Pistorius commented regarding the Chinese peace plan and stated that they will judge China by its actions, not its words, according to Reuters.
• Saudi Foreign Minister Farhan visited Ukraine and discussed ways to reduce escalation with Ukrainian President Zelensky, as well as announced USD 400mln in humanitarian aid agreements.

OTHER

• Israel and Palestinian officials agreed to de-escalate on the ground and prevent more violence, while they agreed to meet again next month and stressed the joint readiness and commitment to work immediately to stop unilateral measures for 3-6 months, according to the joint statement at the end of the meeting in Aqaba, Jordan.

EU/UK

• UK PM Sunak said they are giving it everything they’ve got regarding talks for a post-Brexit deal for Northern Ireland and he will try to resolve the concerns the DUP Party have regarding a new Brexit deal for Northern Ireland. It was later reported that PM Sunak said he won big concessions from the EU, according to The Sunday Times and The Times.
• UK PM Sunak's office said UK PM Sunak will meet with EU's von der Leyen for talks on Northern Ireland Brexit deal late lunchtime on Monday and will hold a Cabinet meeting later on Monday. Furthermore, PM Sunak and von der Leyen will hold a news conference if a deal is reached, while Sunak will also address parliament if there is a deal.
• UK Deputy PM Raab said there is real progress on a trade deal and he is hopeful for good news on the Brexit deal within days, not weeks, and also noted that Northern Ireland’s DUP does not have a de-facto veto over the Brexit deal. In other news, Raab said he will resign if an allegation of bullying against him is upheld, according to Reuters.
• ECB’s Lagarde said headline inflation is still unacceptably high and core CPI is at a record level, while she added that they want to bring inflation back to the 2% target and noted that rate decisions are to be data dependent.