• European equities are on a very strong footing following Chinese RRR cuts, with Tech also doing much of the hefty lifting; US equity futures are firmer, with NQ outperforming
• NFLX +9.7% pre-market; SAP & ASML firmer, post-earnings
• Dollar is weaker, EUR and GBP firmer post PMI data and Yen continues prior day’s strength
• Bonds bid after softer German PMI data, Gilts turn negative after its own firmer release
• Crude is marginally firmer benefitting from softer Dollar; base metals bolstered by PBOC’s RRR cut
• Looking ahead, US PMIs, BoC Policy Announcement, Supply from the US, Earnings from AT&T, Tesla & IBM

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (+1.3%) started the session on a very strong footing, after pre-market news that China is to cut its RRR by 0.5ppts; with additional help from index heavyweights SAP (+7.2%) and ASML (+6.1%) post-earnings.
• European sectors have a strong positive tilt; Tech takes the top spot after strong earnings from SAP and ASML, whilst Basic Resources benefit from RRR cuts, helping to lift metals prices.
• US equity futures are firmer across the board, albeit with gains of a lesser magnitude than their European counterparts. The NQ outperforms, as it takes impetus from strong earnings at ASML and SAP, alongside pre-market strength in Netflix (+9.5%) post-earnings.
• Click here and here for the sessions European pre-market equity newsflow, including earnings from SAP, ASML, Barry Callebaut, Abrdn & more.
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FX

• A soft session for the DXY thus far amid the broader risk appetite in the market, a pullback in bond yields, the post-PMI EUR strength, and the firmer JPY due to continued tailwinds from the BoJ yesterday.
• EUR is firmer in the aftermath of the flash PMIs which were ultimately mixed whilst the commentary suggested the data aligns with the sentiment of the ECB hawks.
• The Pound is bolstered by the UK Flash PMI metrics which topped expectations across the board, whilst the commentary suggested that the strong data may "deter" the BoE from cutting rates as early as expected.
• DXY down to a test of 103.00, but holding, while EUR/USD eclipsed 1.09 and GBP/USD bested 1.2750.
• Yen is the G10 outperformer amid a continuation of the hawkish tailwinds from yesterday's BoJ press conference; USD/JPY pivoting 147.50.
• Antipodeans hold an upward bias amid the broader market risk tone coupled with a PBoC RRR cut aimed at releasing liquidity to bolster the Chinese economy.
• PBoC set USD/CNY mid-point at 7.1053 vs exp. 7.1825 (prev. 7.1117).
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FIXED INCOME

• USTs are bid, having printed its own 111-17+ peak on the German PMI data. Attention turns to the region's own PMIs later, alongside the next leg of the week's supply, after a well-received 2yr outing, supported by indirect demand.
• Bunds were initially steady around 134.00 before being bolstered by the region's Flash PMIs; on the release a 134.42 peak printed just shy of the round 134.50 and yesterday's best at 134.55.
• Gilts were initially moving in tandem with EGBs throughout the morning. After UK PMI's printed firmer across the board and noted a rise in factory costs, a hawkish move occurred with Gilts now in the red and sliding to a 98.30 trough, pressured further on the 2028 DMO outing.
• UK sells GBP 4bln 4.50% 2028 Gilt: b/c 2.86x (prev. 2.53x), average yield 3.946% (prev. 4.041%) & tail 1.2bps (prev. 0.9bps)
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COMMODITIES

• WTI and Brent are both firmer as a function of broader risk appetite (supported by the PBoC RRR cut coupled with positive stock earnings), with a softer Dollar also lending a helping hand; WTI & Brent Mar'24 tested/bested USD 75.00/bbl and USD 80.00/bbl respectively.
• Precious metals are mixed with gold flat intraday but spot silver gaining despite the lack of an obvious catalyst; XAU remains within yesterday's USD 2,019.67-2,037.97/oz range.
• Base metals are higher across the board and bolstered by the PBoC's RRR cut but unleashes some CNY 1tln into the world's second-largest economy.
• Magnitude 5.3 earthquake strikes Antofagasta, in the Chile region, according to EMSC; GFZ says magnitude 5.24 strikes Northern Chile
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NOTABLE EUROPEAN HEADLINES

• Hedge fund Qube reportedly builds a USD 1bln short bet against German stocks, according to Bloomberg; shorts include Volkswagen (VOW3 GY) and Deutsche Bank (DBK GY)

DATA RECAP

• UK Flash Composite PMI (Jan) 52.5 vs. Exp. 52.2 (Prev. 52.1); Manufacturing PMI (Jan) 47.3 vs. Exp. 46.7 (Prev. 46.2); Services PMI (Jan) 53.8 vs. Exp. 53.2 (Prev. 53.4); hawkish reaction in Cable and Gilts
• EU HCOB Services Flash PMI (Jan) 48.4 vs. Exp. 49.0 (Prev. 48.8); Manufacturing Flash PMI (Jan) 46.6 vs. Exp. 44.8 (Prev. 44.4); Composite Flash PMI (Jan) 47.9 vs. Exp. 48.0 (Prev. 47.6); two-way, but ultimately dovish intial reaction (more so on the German metrics)
• German HCOB Manufacturing Flash PMI (Jan) 45.4 vs. Exp. 43.7 (Prev. 43.3); Composite Flash PMI (Jan) 47.1 vs. Exp. 47.8 (Prev. 47.4); Services Flash PMI (Jan) 47.6 vs. Exp. 49.5 (Prev. 49.3)
• French HCOB Services Flash PMI (Jan) 45.0 vs. Exp. 46.0 (Prev. 45.7); Manufacturing Flash PMI (Jan) 43.2 vs. Exp. 42.5 (Prev. 42.1); Composite Flash PMI (Jan) 44.2 vs. Exp. 45.2 (Prev. 44.8)
• South African CPI YY (Dec) 5.1% vs. Exp. 5.2% (Prev. 5.5%)

NOTABLE US HEADLINES

• Donald Trump was declared the winner of the Republican New Hampshire primary although Nikki Haley said she would continue to continue fighting on, while Edison Research noted that Trump had 54.2% and Haley had 43.7% with 75% of estimated votes in.

EARNINGS

• Netflix Inc (NFLX) - Q4 2023 (USD): EPS 2.11 (exp. 2.22), Revenue 8.83bln (exp. 8.71bln), Streaming paid net change +13.12mln (exp. +8.91mln). Sees Q1 paid net additions to be down sequentially but to be up from Q1 23 net paid additions of 1.8mln. Sees Q1 EPS USD 4.49 (exp. 4.09). Sees Q1 revenue USD 9.24bln (exp. 9.28bln). FY24 forecasts. Sees 2024 double-digit revenue growth ex-FX. Sees free cash flow of about USD 6bln (exp. 6.03bln). Sees operating margin 24% (exp. 22.7%). "In FY24, we expect a high single-digit percentage year over year increase in content amortization". Continues to expect 2024 cash spend on content of up to USD 17bln. (Netflix IR) Shares rose 8.7% after-hours on strong net additions with soft EPS offset by strong Q1 EPS guidance. Shares +10.1% in pre-market trade.
• Texas Instruments Inc (TXN) Q4 2023 (USD): EPS 1.49 (exp. 1.46), Revenue 4.08bln (exp. 4.12bln). GUIDANCE: Q1 revenue view 3.45-3.75bln (exp. 4.09bln). Q1 EPS view 0.96-1.16 (exp. 1.42) COMMENTARY: Sequential decline in automotive and increasing weakness across industrial. (Texas Instruments) Shares -4% in pre-market trade
• ASML (ASML NA) - Q4 (EUR) Revenue 7.237bln (exp. 6.906bln). Bookings 9.19bln (exp. 3.57bln). Net Income 2.048bln (exp. 1.868bln); Sees Q1 net sales between 5-5.5bln (exp. 6.23bln); "there are some positive signs" on semiconductor market recovery. OTHER METRICS: Gross Margin 51.4% (exp. 50.8%). 2023 dividend +5.2% Y/Y to EUR 6.10/shr. "In the fourth quarter, we did not purchase any shares under the current 2022-2025 share buyback program." GUIDANCE: Sees 2024 net sales to be similar to 2023 "in spite of the positive signs". Sees Q1 net sales between 5-5.5bln (exp. 6.23bln). Sees Q1 gross margin between 48-49%. Sees R&D costs of around EUR 1.070bln and SG&A costs of around EUR 300mln. COMMENTARY: "Although our customers are still not certain about the shape of the semiconductor market recovery this year, there are some positive signs." "Industry end-market inventory levels continue to improve and litho tool utilization levels are beginning to show improvement." "Our strong order intake in the fourth quarter clearly supports future demand." (ASML) CFO says "as the impact of export regulations will have on the 2024 sales, we believe that will be somewhere between 10% to 15% of the China system sales in 2023." Shares currently higher by around 6.5% in Europe / as such US peers are benefitting in the pre-market: AMD +2.3%, NVDA +1.1%
• SAP (SAP GY) – FY23 (EUR): Revenue 31.207bln (exp. 31.225bln), Non-IFRS Basic EPS 5.01 (exp. 5.20). Non-IFRS Operating profit 8.721bln (exp. 8.523bln). Cloud revenue up +20% Y/Y. Cloud revenue backlog +25% Y/Y. FCF -4% Y/Y. Q4 Revenue 8.47bln (exp. 8.35bln). Q4 Operating profit 2.51bln (exp. 2.53bln). GUIDANCE: Co. does not provide Q1 revenue guidance. Co. said the 2024 outlook anticipates accelerating cloud revenue growth. Co. sees FY24 cloud revenue between EUR 17-17.3bln (exp. 17.207bln). Sees FY24 cloud and software revenue 29.0-29.5bln (exp. 29.477bln). SAP adjusted FY25 guidance and now sees FY 25 Free cash flow of approximately EUR 8.0bln (prev. EUR 7.5bln). Co. reaffirms FY25 cloud revenue and total revenue guidance. (SAP) Separately, Co. plans a restructuring that will affect some 8,000 jobs as the Co. focuses on AI. (Newswires) Shares are currently +5.5% in European trade / as such US peers such benefitting in the pre-market: Cloudflare +2.6%, Snowflake +3.5%

GEOPOLITICS

• A one-month Gaza truce is the focus of intensive mediation efforts by Qatar, US and Egypt, according to Reuters citing sources. It was later reported that Hamas is open to releasing some Israeli hostages for a pause in the fighting, according to mediators cited by WSJ.
• US and UK, with support from Australia, Bahrain, Canada, Netherlands and New Zealand, conducted additional strikes against eight targets in Houthi-controlled areas of Yemen, according to a UK government statement. Furthermore, a US official also announced that the US carried out a new strike against two Houthi anti-ship missiles in Yemen.
• White House National Security Adviser Sullivan spoke with Sweden's Landerholm about commitment to supporting Ukraine, while they also discussed Houthi attacks in the Red Sea and the Gaza conflict.
• US is deeply concerned regarding arrests of Democratic opposition in Venezuela, according to the State Department.
• North Korea fired multiple cruise missiles into the Yellow Sea, according to the South Korean military.
• Reports of imminent agreement with Hamas on detainees are untrue, according to Sky News Arabia citing IDF radio

CRYPTO

• Bitcoin finds its footing and holds around USD 40k, with Ethereum (+2.2%) also gaining to a similar magnitude.

APAC TRADE

• APAC stocks traded mixed following a similar lead from the US with participants digesting earnings, recent hawkish BoJ comments and Chinese support pledges ahead of this week's risk events.
• ASX 200 lacked direction as gains in the commodity-related sectors were offset by losses in financials, tech and defensives.
• Nikkei 225 was pressured amid the upside in Japanese yields and a more hawkish tone from BoJ Governor Ueda.
• Hang Seng and Shanghai Comp were somewhat mixed with outperformance in Hong Kong following the slew of recent support pledges by Chinese authorities, while the mainland was choppy and briefly wiped out its earlier gains after the PBoC continued to drain liquidity through OMOs, but then staged a mild comeback later in the session.

NOTABLE HEADLINES

• PBoC Governor says will use various policy tools to keep liquidity reasonably ample, will improve credit structure, and step up support for private firms and small firms; Will keep CNY exchange rate basically stable.
• PBoC says it will cut its RRR by 0.5ppts from Feb 5th and will continue to use liquidity injection tools; PBoC Governor says RRR levels are still relatively high; RRR cut is to release CNY 1tln into the economy

DATA RECAP

• Japanese Trade Balance (JPY)(Dec) 62.1B vs. Exp. -122.1B (Prev. -780.4B); Exports YY (Dec) 9.8% vs. Exp. 9.1% (Prev. -0.2%); Imports YY (Dec) -6.8% vs. Exp. -5.3% (Prev. -11.9%)
• Japanese Manufacturing PMI Flash (Jan) 48.0 (Prev. 47.9); Services PMI Flash SA (Jan) 52.7 (Prev. 51.5)
• Australian Manufacturing PMI Flash (Jan) 50.3 (Prev. 47.6); Services PMI Flash (Jan) 47.9 (Prev. 47.1)
• New Zealand CPI QQ (Q4) 0.5% vs. Exp. 0.5% (Prev. 1.8%); CPI YY (Q4) 4.7% vs. Exp. 4.7% (Prev. 5.6%)
• RBNZ Sectoral Factor Model Inflation Index (Q4) 4.5% (Prev. 5.2%)