• APAC stocks were mostly positive as the majority of bourses took impetus from last Friday’s gains on Wall St.
• China will target 2023 GDP growth of about 5.0% (exp. 5.0%-5.5%) and CPI around 3%.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.4% after the cash market closed up 1.3% on Friday.
• DXY is a touch softer vs. peers, EUR saw mild gains post-Lagarde, antipodeans softer vs. USD.
• ECB President Lagarde said underlying inflation will stay high and they must take whatever measures necessary to bring inflation back to 2%.
• Looking ahead, highlights include Swiss CPI, EZ Sentix & Retail Sales, US Factory Orders, Speech from ECB’s Lane.

US TRADE

EQUITIES

• US stocks and bonds strengthened on Friday amid a lack of an obvious catalyst, while the Dollar closed near lows. The duration appetite kicked off in the European morning, but also carried through the US session which saw big tech lead the strength in US stocks, while there was a brief pullback in bonds after the US ISM Services came in hotter-than-expected, although Treasuries ultimately went on to print new highs into the close with the cash 10yr yield back beneath 4%.
• SPX +1.61% at 4,045, NDX +2.04% at 12,290, DJIA +1.17% at 33,390, RUT +1.35% at 1,928.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed’s Daly (non-voter) said they will continue policy tightening and hold rates for a longer time until the job on inflation is done. Daly added she would adjust her rate path higher and longer if inflation data comes in hot again and interest rates need to be higher if the labour market continues to accelerate. Furthermore, Daly said she would need to be certain about how high rates need to rise to support a 50bps hike but noted that she now has less certainty, while she also commented that the work on inflation is far from done and the disinflation momentum they need is far from certain, according to Reuters.
• Fed's Barkin (non-voter) says he could envisage rates going to 5.5-5.75% if inflation is persistent. Barkin also noted that inflation expectations are well-anchored but under-the-surface movements warrant caution.
• US Treasury Department is preparing new rules on investing in technology abroad which could prohibit US investment in certain sectors of adversary nations, according to WSJ.
• US Republican Senator Hawley is expected to introduce legislation on Monday that would ban senior executive branch officials from owning or trading individual stocks, according to WSJ.

APAC TRADE

EQUITIES

• APAC stocks were mostly positive as the majority of bourses took impetus from last Friday’s gains on Wall St where the Nasdaq outperformed amid a softer yield environment, although gains were capped after China announced a modest growth target of about 5% for 2023.
• ASX 200 was positive as strength in tech, financials and the consumer sector offset the weakness in the mining industry but with further upside limited heading into the RBA rate decision tomorrow where the central bank is widely expected to deliver a 10th consecutive rate hike.
• Nikkei 225 outperformed after topping the 28k level for the first time this year with SoftBank leading the advances following reports that its Arm unit is seeking to raise at least USD 8bln from a US IPO.
• KOSPI gained as softer-than-expected CPI data eased the pressure for the BoK to resume rate hikes and with South Korea unveiling a plan to ease tensions with Japan regarding wartime forced labour compensation.
• Hang Seng and Shanghai Comp. traded mixed with early pressure after China set its slowest growth target in over two decades and with the PBoC’s operations resulting in a significant net liquidity drain of CNY 329bln, although some of the losses were pared given that China also made several support pledges and following the announcement of further inclusions to the Stock Connect.
• US equity futures (ES +0.1%) took a breather and just about extended on last week's highs with the help of softer yields.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.4% after the cash market closed up 1.3% on Friday.

FX

• DXY softened amid the mostly positive risk tone and recent pullback in yields, while participants await this week’s key events stateside including Fed Chair Powell’s testimony in Congress from Tuesday and Friday's jobs data.
• EUR/USD eked mild gains owing to the softer dollar and following comments from ECB’s Lagarde that underlying inflation will stay high and they must take whatever measures necessary to bring inflation back to 2%.
• GBP/USD was uneventful amid a lack of catalysts and with price action stuck near resistance at 1.2050.
• USD/JPY remained subdued beneath 136.00 due to the dollar retreat and narrowing yield differentials.
• Antipodeans were rangebound with price action choppy ahead of tomorrow’s RBA rate decision.
• PBoC set USD/CNY mid-point at 6.8951 vs exp. 6.8932 (prev. 6.9117)
• Norway’s government lowered its 2023 mainland GDP growth forecast to 0.9% from 1.7% and lowered the 2024 GDP growth forecast to 1.4% from 2.0%, while the government is to present a financially responsible budget which prioritises the expense imposed by the war in Ukraine, public services and helping those who are most in need, according to Reuters.

FIXED INCOME

• 10yr UST futures extended on gains after the recent pullback in yields with the US 10yr yield below 4%.
• Bund futures retained a firm footing above 131.00 after Friday’s advances and softer-than-expected PMIs in Europe, with prices also unfazed by the hawkish reiterations from ECB’s Lagarde.
• 10yr JGB futures lacked direction amid the absence of additional purchases by the BoJ and with participants awaiting the BoJ Governor Kuroda’s last policy meeting due later in the week.

COMMODITIES

• Crude futures declined in which WTI retreated from resistance near the USD 80/bbl level after China set the weakest growth target in more than a quarter of a century, while mostly higher Saudi OSPs for April failed to boost prices.
• Saudi Arabia raised most of its official selling prices for April with the Arab light crude OSP to Asia set at Oman/Dubai + USD 2.50/bbl (prev. +2.00/bbl) and to Northwest Europe was set at ICE Brent + USD 1.00/bbl (prev. +0.50/bbl), while the OSP to the US was maintained at ASCI + USD 6.65/bbl, according to Reuters.
• Spot gold lacked direction but remained near a 2-week high amid the softer greenback.
• Copper futures were rangebound as tailwinds from the mostly positive risk tone in Asia were offset by the underperformance in its largest purchaser China.

CRYPTO

• Bitcoin remained subdued after Friday's slump with prices languishing beneath 22,500.

NOTABLE ASIA-PAC HEADLINES

• Chinese Premier Li announced at the National People’s Congress that China’s 2023 GDP growth target is about 5.0% (exp. 5.0%-5.5%), while the target for CPI is around 3% and the jobless rate at around 5.5% for 2023. Premier Li also stated that China aims to create 12mln urban jobs and that it is essential to prioritise the economic recovery, as well as reiterated to expand domestic demand and prioritise the consumption recovery. China will step up proactive fiscal policy and effectively boost investment, extend and further refine policies on tax and fee cuts, and will implement prudent monetary policy in a targeted way.
• China will prevent and control the epidemic in a more scientific, precise and efficient way, according to the work report. China is to support financial institutions to meet the effective needs of the real economy and will increase the proportion of direct financing, while it will increase loans to small and micro businesses, as well as further enhance credit support to tech and innovative SMEs. Furthermore, China’s public expenditure will grow 5.7% this year and military spending will increase at a faster pace of 7.2%, according to Reuters and FT.
• NDRC Vice Chairman said China's economy is steadily improving and consumption will be the main driver for growth this year, while they will prudently tackle risks related to real estate, finance and local government debt.
• Taiwan’s government said China should respect the Taiwanese people’s commitment to core concepts of sovereignty, democracy and freedom, while it added that China should deal with cross-strait affairs pragmatically in a rational, equal and mutually respectful manner, according to Reuters.
• South Korean Foreign Minister Park announced a plan for South Korea to compensate victims of Japan's forced labour through its public foundation in which companies will voluntarily donate to the fund and said that cooperation between the two nations is critical in the face of the serious international security situation. It was later reported that Japanese PM Kishida said they welcome the South Korean government's measures on wartime labour compensation and will work closely with South Korean President Yoon, while Japan's Foreign Minister noted that South Korea's plan will help restore healthy ties.

DATA RECAP

• South Korean CPI MM (Feb) 0.3% vs. Exp. 0.5% (Prev. 0.8%)
• South Korean CPI YY (Feb) 4.8% vs. Exp. 5.1% (Prev. 5.2%)

GEOPOLITICS

• UK military intelligence said Ukrainian defence of the Donbas town of Bakhmut is under increasingly severe pressure with intense fighting taking place in and around the city, while regular Russian army and Wagner Group forces have made further advances into the suburbs of the city.
• US Chairman of the Joint Chiefs of Staff General Milley made an unannounced visit to Syria to assess the mission, while the visit drew condemnation from Syria which stated that the visit was illegal and a flagrant violation of the country’s sovereignty, according to SANA.
• IAEA report stated that Iran has given high-level assurances that it is open to resolving the safeguards issues and engaging in follow-up technical discussions. IAEA chief Grossi stated that he believes they can start implementing very concrete measures soon and that they agreed on access to information and places, according to Reuters.
• North Korea said US-South Korea military drills are raising tensions to an extremely dangerous level and called on the UN to demand an immediate end to US-South Korea military drills. Furthermore, it said the US is causing the collapse of international arms control systems and the US, South Korea and Japan are crossing a dangerous line which cannot be tolerated, while North Korea said its nuclear weapons will ensure the balance of power in the region, according to KCNA.

EU/UK

• ECB President Lagarde said underlying inflation will stay high in the near term and that a 50bp rate hike later this month is increasingly certain, while she added that they must continue to take whatever measures necessary to bring inflation back to 2%, according to Spanish media group Vocento cited by Reuters.
• Citi/YouGov Poll: UK public inflation expectations for 5-10yrs jump to 3.8% in February from 3.5% in January; 1yr ahead jumped to 5.6% from 5.4%; says unexpected increases reaffirms continued upside risks that have stalked UK inflation expectations.