• APAC stocks were mostly lower amid headwinds from Wall St where risk assets suffered after Powell's hawkish testimony.
• European equity futures are indicative of a slightly softer open with the Euro Stoxx 50 -0.2% after the cash market closed down 0.8% on Tuesday.
• DXY lingers around YTD highs post-Powell, AUD is attempting to claw back recent losses, JPY lags.
• Hawkish Fed pricing saw the curve hit its most-inverted levels in over 40 years with both the 2s10s and 2s30s spreads falling beneath -100bps.
• Looking ahead, highlights include German Industrial Output & Retail Sales, US ADP, International Trade & JOLTS, Canadian Trade Balance, BoC Policy Announcement, Speeches from Fed's Powell, Barkin, ECB's Lagarde, Wunsch, Panetta & BoE's Dhingra, Supply from UK, Germany & US, Earnings from Oracle.

US TRADE

EQUITIES

• US stocks tumbled and the dollar surged after Fed Chair Powell put a 50bps March hike and higher terminal rate in play ahead of the March 22nd FOMC meeting, while treasuries saw pronounced flattening as hawkish Fed pricing saw the curve hit its most-inverted levels in over 40 years with both the 2s10s and 2s30s spreads falling beneath -100bps.
• SPX -1.53% at 3,986, NDX -1.22% at 12,152, DJIA -1.72% at 32,856, RUT -1.11% at 1,879.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US Senate Republican Leader McConnell said the Biden tax plan on Medicare will not see the light of day in the House.

DATA RECAP

• US Consumer Credit (Jan) 14.80B vs. Exp. 20.0B (Prev. 11.56B)

APAC TRADE

EQUITIES

• APAC stocks were mostly lower amid headwinds from Wall St where risk assets suffered after Powell's hawkish testimony in which he put a 50bps hike for March in play and flagged higher terminal rate projections.
• ASX 200 was negative with the declines led by underperformance in the commodity-related sectors, in particular, energy after a slump in underlying oil prices, while comments from RBA Governor Lowe failed to appease investors despite opening the door for a pause at the next meeting as he also noted that it will depend on the data and that further tightening is likely to be required to return inflation to the target.
• Nikkei 225 bucked the trend with the index kept afloat on currency effects and as record current account and trade deficits in Japan add to the case for a slow exit from the BoJ’s ultra-easy policy.
• Hang Seng and Shanghai Comp. conformed to the downbeat mood with Hong Kong heavily pressured by weakness in property stocks and tech amid the higher global yield environment and considering that the HKMA would have to move in lockstep should the Fed turn more aggressive.
• US equity futures remained subdued (ES flat) by a hawkish Powell and deepest inversion in four decades.
• European equity futures are indicative of a slightly softer open with the Euro Stoxx 50 -0.2% after the cash market closed down 0.8% on Tuesday.

FX

• DXY printed fresh YTD highs after the hawkish comments from Fed Chair Powell who noted they are prepared to accelerate the pace of rate hikes if incoming data indicates faster tightening is required and also touted the potential for a higher terminal rate.
• EUR/USD languished firmly beneath the 1.0600 handle amid the advances in the USD.
• GBP/USD was despondent after cyclical currencies broadly suffered from Powell’s testimony.
• USD/JPY continued to advance and broke above its 200DMA amid widening yield differentials and after the recent record current account and trade balance deficits.
• Antipodeans were initially subdued amid the risk aversion and after RBA Governor Lowe kept his options open for the next meeting in which he noted that they could pause if that’s what the data suggests but if it suggests to keep going, then they will do that and will have a completely open mind at board meetings. Thereafter, AUD/USD picked up a touch ahead of the European entrance to market.
• PBoC set USD/CNY mid-point at 6.9525 vs exp. 6.9551 (prev. 6.9156)
• SNB Chairman Jordan said Swiss inflation is low in international comparison but above the SNB's price stability target and that CHF appreciation has protected Switzerland from imported inflation. Jordan said they can use interest rates but also sell foreign currencies to get the right monetary conditions to achieve price stability, while he added that they are ready to sell currencies.

FIXED INCOME

• 10yr UST futures remained pressured after Fed Chair Powell’s comments rattled markets and saw the yield curve at its most-inverted levels in over 40 years with both 2s10s and 2s30s spreads beneath -100bps, while the remarks spurred a higher terminal rate pricing north of 5.6%.
• Bund futures traded lower after Powell’s comments overshadowed the softer inflation expectations survey for the bloc and with ECB officials also providing hawkish comments including ECB’s Knot who noted the ECB can be expected to keep raising rates for quite some time after March.
• 10yr JGB futures were subdued after the recent pressure in major counterparts but with downside stemmed after the weak data from Japan and with the BoJ in the market for JPY 1.9tln of JGBs on top of its fixed-rate operations.

COMMODITIES

• Crude futures were contained after yesterday's slump owing to a firmer dollar and with the demand outlook dampened by expectations of a more aggressive Fed and economic slowdown fears.
• US Energy Inventory Data (bbls): Crude -3.8mln (exp. +0.4mln), Cushing unchanged, Gasoline +1.8mln (exp. -1.9mln), Distillate +1.9mln (exp. -1mln).
• EIA STEO stated 2023 world oil demand growth forecast was raised by 370k BPD to a 1.48mln BPD Y/Y increase and the 2024 forecast was left unchanged at a 1.79mln BPD increase, while it expects 2023 world oil production to average 101.5mln BPD in 2023 which is up 1.6mln BPD from 2022.
• OPEC Secretary General said the group is focusing on stability and less volatility, while he added that China is to account for 500k-600k BPD of oil demand in 2023.
• Saudi Foreign Minister said they are committed to a stable oil market and his view is that they do not need production changes this year, while he added that every statement he’s seen made on the record is from all of the partners in OPEC+ reflecting a consensus approach and said that reports of divergence in UAE/Saudi relations are often overdramatised.
• Spot gold failed to nurse recent losses as the greenback further extended on its YTD highs.
• Copper futures languished near the prior day's lows after risk assets suffered in the aftermath of Fed Chair Powell's hawkish testimony.

CRYPTO

• Bitcoin was subdued amid the risk aversion but with losses stemmed by a floor at 22,100.
• Crypto bank Silvergate (SI) is reportedly in talks with FDIC officials on ways to salvage the lender, according to Bloomberg.

NOTABLE ASIA-PAC HEADLINES

• US House Speaker McCarthy confirmed plans to meet with Taiwanese President Tsai in the US this year but stressed the meeting doesn't preclude a trip to Taiwan later, according to Bloomberg. Taiwan's Presidential Office also said authorities are making plans and preparations for President Tsai's foreign visit this year and will announce when decisions are made, according to Reuters.
• US CDC is to lift COVID-19 testing travel restrictions from China on Friday, according to a Reuters source. South Korea is also to lift the pre-departure COVID-19 test requirements for travellers from China starting on March 11th, according to health authorities.
• Chinese Embassy in Germany commented on the report that Germany could ban Huawei and ZTE from parts of 5G networks in which it stated that China is very puzzled and strongly dissatisfied with the rash decision by Germany with no factual basis if the report is true, according to Reuters.
• Japanese Ministry of Finance said the January trade deficit was the largest on record and that the trade deficit tends to swing during the export-slowing month of January due in part to the Lunar Year Holidays in China, according to Reuters.
• RBA Governor Lowe said they are closer to the point where it will be appropriate to pause and the timing of the pause will be determined by data and assessment of the outlook, while he added further tightening is likely to be required to return inflation to the target. Lowe also stated there will be several data releases before the next board meeting and if the data suggests a pause, they will do that but if the data suggests to keep going, then that is what they will do and will have a completely open mind at board meetings.

DATA RECAP

• Japanese Current Account NSA JPY (Jan) -1976.6B vs. Exp. -818.4B (Prev. 33.4B)
• Japanese Trade Balance Customs Basis (JPY)(Jan) -1695.9B (Prev. -1431.7B)

GEOPOLITICS

• Russian embassy to the US said US media leaks on sabotage of the Nord Stream pipelines are intended to confuse. Furthermore, Kremlin spokesperson Peskov said the Kremlin is wondering how US officials can suggest anything regarding the 'terrorist' attack on Nord Stream without an investigation, while he suggested it is strange and smells of a 'monstrous crime', according to RIA.

EU/UK

• UK Chancellor Hunt is considering providing British firms with additional tax relief on investment spending in an attempt to boost economic growth, according to Bloomberg sources.
• ECB's Knot said the ECB can be expected to keep raising rates for quite some time after March.
• Ireland Central Bank said significant uncertainty remains for inflation and it cut its 2023 HICP forecast to 5.0% from 6.3% but raised its 2024 forecast to 3.2% from 2.8%.