• APAC stocks traded mostly higher amid tailwinds from the US and as the region also digested further strong Chinese Caixin PMI data.
• Fed's Bostic (non-voter) said the Fed may be in a position to pause by mid-to-late summer.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.6% after the cash market closed up 0.6% yesterday.
• DXY is a touch softer and back on a 104 handle, EUR/USD hovers just above 1.06, Cable is unable to retake 1.20.
• Looking ahead, highlights include German Trade Balance, EZ/UK/US Composite & Services PMIs, US ISM Services, Speeches from Fed's Logan, Bostic, Bowman, Barkin & ECB's de Guindos

US TRADE

EQUITIES

• US stocks finished higher and the SPX edged closer to the 4k level after comments from Fed's Bostic (non-voter) about the Fed potentially being able to pause in mid-to-late summer, alongside some pushback on a 50bps hike. The rhetoric from Bostic unwound the initial selling pressure coming out of Europe and from the hawkish US data including the seventh consecutive sub-200k print in weekly initial US jobless claims and the significant upward revision in Q4 Labor Costs.
• SPX +0.76% at 3,981, NDX +0.89% at 12,045, DJIA +1.05% at 33,003, RUT +0.22% at 1,903
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Waller (voter) said the Fed may need to raise rates beyond the December central tendency view of 5.1%-5.4% if incoming jobs and inflation data does not pull back from the strong readings for January, while Waller added that his view will depend on what the data says.
• Fed's Bostic (non-voter) said the Fed may have to do more given high inflation and strong jobs market. Bostic said he won't decide until the meeting on the proper policy path and is firmly in favour of a 25bps hike path, while he added they could be in a position to pause by mid-to-late summer.

APAC TRADE

EQUITIES

• APAC stocks traded mostly higher amid tailwinds from the US where risk appetite was bolstered by comments from Fed's Bostic that they could be in a position to pause by mid-to-late summer and as the region also digested further strong Chinese Caixin PMI data.
• ASX 200 was led by strength in telecoms, healthcare and financials albeit with gains limited ahead of next week’s RBA meeting where the central bank is widely expected to hike again.
• Nikkei 225 outperformed after recent data which showed Tokyo-area headline and core inflation began to soften and the Unemployment Rate edged lower, while a recent source report noted that the BoJ is to prefer watching how the impact of earlier policy tweaks works out for now.
• Hang Seng and Shanghai Comp. gained after strong Caixin Services and Composite PMI data which showed the fastest pick-up in activity since August. However, upside was capped heading into China’s ‘Two Sessions’ where participants will be eyeing a major overhaul of President Xi’s leadership team and the Government Work Report including this year’s official growth target, while US-China frictions continued to linger with the Biden administration adding 28 Chinese entities to the US trade blacklist.
• US equity futures were contained (ES -0.1%) as yields remained elevated with nearly the entire curve above 4%.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.6% after the cash market closed up 0.6% yesterday.

FX

• DXY marginally softened and eased back from the 105.00 level after yesterday’s strengthening which was spurred by hawkish data as jobless claims remained below 200k and labour cost in Q4 was revised higher, while some of the gains were also pared after commentary from Fed's Bostic who suggested a potential pause from mid-to-late summer.
• EUR/USD nursed some of its recent losses after giving way to the dollar strength despite the hot inflation prints from Europe, although the single currency has since reclaimed the 1.0600 handle and ECB's Wunsch suggested rates could increase to as much as 4% if underlying inflation remains persistently high.
• GBP/USD bounced off lows but remained firmly beneath 1.2000 after dovish-leaning BoE comments and with the BoE Monthly Decision Maker Panel data showing a decline in inflation expectations.
• USD/JPY was quiet after Tokyo CPI data which mostly topped forecasts but softened from the prior.
• Antipodeans were kept afloat owing to the risk environment but with price action contained after mixed tier-2 data releases from Australia and an uneventful mood across the commodities complex.
• PBoC set USD/CNY mid-point at 6.9117 vs exp. 6.9132 (prev. 6.8808)

FIXED INCOME

• 10yr UST futures attempted to recoup some of the data-triggered losses following the low jobless claims and high labour cost data, but with the recovery only modest despite the pause rhetoric by Fed’s Bostic who also noted they may have to do more given high inflation and strong jobs market.
• Bund futures languished not far off contract lows after the recent bout of hot EU inflation readings.
• 10yr JGB futures were underpinned after the recent dovish source regarding the BoJ and with the central bank also present in the market for nearly JPY 1.5tln of JGBs on top of its fixed-rate operations.

COMMODITIES

• Crude futures were uneventful as the energy complex lacked any major drivers to spur prices.
• PetroChina International executive said China gas demand is expected to pick up in 2023 from last year's level but does not expect a quick rebound in China LNG imports this year if spot prices are as high as last year, while they expect business as usual in Russia-China gas trade, according to Reuters.
• Spot gold kept to within a tight range with minimal upside seen as the dollar took a breather.
• Copper futures traded sideways and notched gains amid the mostly positive risk tone.
• Chile's Codelco copper production rose 5.1% Y/Y in January to 127k tons, while Escondida copper output rose 15.2% Y/Y to 93.3k tonnes and Collahuasi copper output fell 16.4% Y/Y in January to 42.9k tonnes.

CRYPTO

• Bitcoin prices slumped by more than USD 1,000 within a 30-minute timeframe and Ethereum dropped nearly 5% despite the lack of immediate catalysts behind the sell-off which some attributed to liquidations and fallout from the uncertainty regarding the viability of crypto lender Silvergate.
• Three US Senators requested that Binance and its US partner provide information about their regulatory compliance and finances, according to Reuters.

NOTABLE ASIA-PAC HEADLINES

• PBoC Governor Yi said they will keep the yuan exchange rate and prices stable, while he added that the yuan has become more flexible and helps stabilise the economy. Yi stated they will safeguard the bottom line for preventing systemic risks and will support the healthy development of platform companies. Yi also noted that China's real interest rates are at an appropriate level now and using RRR to release long-term liquidity will still be an effective tool for the economy, according to Reuters.
• PBoC Deputy Governor Liu said China's economy is improving but there are still uncertainties and they will adjust policy in a timely way, but will not resort to flood-like stimulus and will steer monetary policy based on domestic conditions.
• US President Biden's administration added 28 Chinese entities to the US trade blacklist, according to a filing cited by Reuters. US Commerce Department later confirmed that it added 37 entities to the entities list with many of them from China, while the additions were due to nuclear and missile-related activities, supporting China's military, human rights violations and support for the Russian military.

DATA RECAP

• Chinese Caixin Services PMI (Feb) 55.0 vs. Exp. 54.7 (Prev. 52.9)
• Chinese Caixin Composite PMI (Feb) 54.2 (Prev. 51.1)
• Tokyo CPI YY (Feb) 3.4% vs. Exp. 3.3% (Prev. 4.4%)
• Tokyo CPI Ex. Fresh Food YY (Feb) 3.3% vs. Exp. 3.3% (Prev. 4.3%)
• Tokyo CPI Ex. Fresh Food & Energy YY (Feb) 3.2% vs. Exp. 3.1% (Prev. 3.0%)
• Japanese Unemployment Rate* (Jan) 2.4% vs. Exp. 2.5% (Prev. 2.5%)

GEOPOLITICS

• US Department of Defense Spokesperson Kirby said the US will announce a new military aid package for Ukraine on Friday.
• US senior official said Ukraine will be a major topic in talks between US President Biden and German Chancellor Scholz, while the leaders are also expected to discuss challenges posed by China. Furthermore, the US has so far not seen that China has provided lethal aid to Russia and it is engaging with partners in Europe on sanctions against third countries aiding Russia, according to Reuters.
• US State Department said it is not expecting any more formal senior dialogue with Russia in the short term and expects there will be US calls and engagements with China in the coming weeks.
• US agencies' advisory listed China, Armenia, Turkey and Uzbekistan as points potentially used in order to redirect restricted items to Russia or Belarus.

EU/UK

• ECB's Wunsch said the ECB could consider raising its key interest rate to as high as 4% if underlying inflation remains persistently high and noted if core inflation remains above 5% and there is no clear signal it is going down, they would have to do more, according to Reuters.