• APAC stocks mostly took impetus from the tech-led advances on Wall St.
• US Congress passed the stopgap funding bill to avert a government shutdown.
• European equity futures are indicative of a higher open with Euro Stoxx 50 future +0.4% after the cash market closed up 1.1% on Thursday.
• DXY is steady below 103.50, EUR/USD eyes 1.09, JPY has lost further ground vs. the USD.
• Japanese inflation mostly matched estimates but showed the slowest pace of increase in Core CPI since June 2022.-
• Looking ahead, highlights include German Producer Prices, UK Retail Sales, EZ Construction Output, Consumer Confidence (Flash), Canadian Retail Sales, US UoM Prelim, Speakers including ECB’s Lagarde, Fed’s Daly & Barr.

US TRADE

EQUITIES

• US stocks were firmer with big tech leading the gains on the back of TSMC's solid earnings and after encouraging data with initial jobless claims at the lowest level since September 2022. There was further upside seen in New York afternoon trade which some traders attributed to the passing of the government stopgap funding bill in the Senate and a post from WSJ's Timiraos citing analyst forecasts for next Friday's PCE showing progress on the Fed's inflation battle.
• SPX +0.88% at 4,780, NDX +1.47% at 16,982, DJIA +0.54% at 37,468, RUT +0.55% at 1,923.
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NOTABLE HEADLINES

• Fed's Bostic (voter) said he is open to rate cuts before July if there is convincing evidence inflation is slowing faster than he anticipates and repeated his baseline forecast for rate cuts beginning in Q3 with care needed not to cut too soon. Bostic said the possibility of conflicts around the world could again complicate supply chains and noted risks that US budget fights and elections could affect the economy and financial markets, while he added that given the uncertainty, it is unwise for the Fed to "lock in" any approach at this point.
• US Senate voted (77 vs 18) to pass the stopgap funding bill to avert a government shutdown and the House also voted (314 vs 108) to approve the bill, while the White House said President Biden will sign the stopgap funding bill.
• WSJ's Timiraos posted on X that core PCE is projected to have been mild last month and the modellers who forecast this expect core PCE to rise 0.17% from November which would lower the 12-month rate to 2.9%, while the 3-month and 6-month annualised rates would fall to 1.5% and 1.9%.

APAC TRADE

EQUITIES

• APAC stocks mostly took impetus from the tech-led advances on Wall St where sentiment was underpinned after initial jobless claims fell to the lowest since September 2022 and with tech encouraged by TSMC's earnings which lifted the Co.'s shares by over 6% and underpinned other chipmakers including Samsung Electronics.
• ASX 200 climbed back above 7,400 with the advances led by tech after similar outperformance stateside.
• Nikkei 225 was underpinned and briefly climbed above 36,000 after Japanese CPI data continued to soften and a source report noted there was no pressure for the BoJ to rush towards the exit.
• Hang Seng and Shanghai Comp were subdued amid the lingering concerns surrounding an uneven recovery in the Chinese economy, while a restriction on short sales by China's largest brokerage did little to spur a recovery.
• US equity futures traded sideways with the E-mini S&P hovering not far off its contract high.
• European equity futures are indicative of a higher open with Euro Stoxx 50 future +0.4% after the cash market closed up 1.1% on Thursday.

FX

• DXY lacked direction after having failed to sustain yesterday's initial data-driven gains.
• EUR/USD edged closer towards 1.0900 following a rebound from near its 200-day MA (1.0844).
• GBP/USD sat at the prior day's best level after reclaiming the 1.2700 handle amid the upbeat risk tone, while participants now await incoming UK retail sales data.
• USD/JPY continued to extend above 148.00 following the latest inflation data which mostly matched estimates but showed the slowest pace of increase in Japan's Core CPI since June 2022.
• Antipodeans were mixed with price action rangebound despite the mostly positive risk appetite.
• PBoC set USD/CNY mid-point at 7.1167 vs exp. 7.1972 (prev. 7.1174).

FIXED INCOME

• 10yr UST futures remained subdued after bear-steepening in the wake of the notable drop in jobless claims.
• Bund futures languished around yesterday's worst levels following a slip beneath the 134.00 level.
• 10yr JGB futures were choppy as initial tailwinds from the BoJ's presence in the market for nearly JPY 1.4tln of JGBs eventually petered out.

COMMODITIES

• Crude futures took a breather with WTI near the prior day's highs after rallying on geopolitical risks.
• Some US natgas suppliers have claimed force majeure and US ethanol output is curbed on natgas supply disruptions, according to RFA.
• Spot gold plateaued overnight amid a lack of fresh catalysts to extend on the recent bounceback.
• Copper futures marginally benefitted from the mostly positive risk environment albeit with gains capped as its largest purchaser China underperformed its regional peers.

CRYPTO

• Bitcoin remained subdued but is off the intraday low seen following a brief dip beneath USD 41,000.

NOTABLE ASIA-PAC HEADLINES

• China's MOFCOM said it hopes all parties concerned will restore and ensure the security of shipping lanes in the Red Sea and it hopes all parties jointly safeguard the smooth flow of global production, supply chains and normal order of international trade. Furthermore, it stated that China will strengthen coordination with relevant departments, closely track developments and provide timely support and assistance to foreign trade enterprises.
• Japanese Finance Minister Suzuki said forex moves are driven by various factors and the government is watching forex developments carefully, while he reiterated it is important for FX to move stably reflecting fundamentals. Suzuki also stated that he won't comment in advance about what the government expects the BoJ to do but hopes the BoJ guides policy appropriately, working closely with the government to sustainably achieve the 2% inflation target.

DATA RECAP

• Japanese National CPI YY (Dec) 2.6% vs. Exp. 2.5% (Prev. 2.8%)
• Japanese National CPI Ex. Fresh Food YY (Dec) 2.3% vs. Exp. 2.3% (Prev. 2.5%)
• Japanese National CPI Ex. Fresh Food & Energy YY (Dec) 3.7% vs. Exp. 3.7% (Prev. 3.8%)

GEOPOLITICS

MIDDLE EAST

• Israeli PM Netanyahu said the war will continue on all fronts until the goals Israel set are achieved.
• US President Biden said air strikes in Yemen will continue.
• Yemen's Houthis military spokesman said naval forces carried out an operation against American ship Chem Ranger in the Gulf of Aden with naval missiles, while the US military later stated Houthis launched two anti-ship ballistic missiles at a US-owned tanker ship and that there was no reported damage or injuries.
• White House's Kirby said Iran’s attack was another example of Iran's destabilising behaviour in the region and does not want to see an Iran with nuclear weapons.

OTHER

• North Korea said it conducted a test of an underwater nuclear weapons system and that the test was in response to joint military drills involving South Korea, the US and Japan, according to KCNA.

UK/EU

NOTABLE HEADLINES

• German lawmakers approved the delayed 2024 federal finance plan, while the budget is said to foresee EUR 39bln in net new borrowing, which would allow it to stay within its brake on issuances, according to Reuters sources.
• German Finance Minister Lindner said he cannot see a situation that would justify suspending the debt brake, while he added that Germany will see a higher level of growth in the mid-term.
• UK Chancellor Hunt has given strong hints that he wants to cut taxes in the spring budget, according to the BBC. He did not offer any further detail on the scale of potential future tax cuts, as the government awaits an assessment from the Office for Budget Responsibility (OBR). It is widely expected that the chancellor will focus on income tax in the budget on 6 March, BBC says.