• APAC stocks failed to sustain the broad positive momentum from Wall St with the region mostly lower in quietened conditions and amid a lack of fresh drivers.
• Tokyo inflation data showed the slowest pace of core inflation in Japan's capital area since March 2022.
• FX markets are contained with the DXY sitting just above the 103.50 mark, USD/JPY was indecisive post-Tokyo CPI.
• European equity futures indicate a flat open with Euro Stoxx 50 future unchanged after the cash market closed up 0.4% on Thursday.
• Looking ahead, highlights include EZ M3, US PCE, ECB Survey of Professional Forecasters, Earnings from Volvo, Remy Cointreau, Lonza & American Express.

US TRADE

EQUITIES

• US stocks were generally bid with the upside supported by a much stronger-than-expected Q4 GDP print which was also accompanied by some encouraging signs on PCE for Q4 ahead of the December PCE on Friday, while all major indices finished in the green albeit with underperformance in the NDX after weak Tesla (TSLA) earnings.
• SPX +0.53% at 4,894, NDX +0.10% at 17,516, DJIA +0.64% at 38,049, RUT +0.71% at 1,975.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US Treasury Secretary Yellen said tax fairness with wealthy people and corporations paying more, will be an 'important part' of President Biden's second-term agenda and Biden wants to leave Trump-era tax cuts in place for those earning less than USD 400k a year. Yellen added that Biden does not want to continue business tax deductions and credits due to expire in 2025. Furthermore, Yellen said a strong Q4 GDP performance is a good thing and is not likely to create an inflationary challenge, while she does not see anything in the report that threatens a soft landing scenario for the US.

APAC TRADE

EQUITIES

• APAC stocks failed to sustain the broad positive momentum from Wall St with the region mostly lower in quietened conditions amid a lack of fresh drivers and as markets in Australia and India were closed for holiday.
• Nikkei 225 was pressured and retreated beneath the 36,000 level despite softer-than-expected Tokyo inflation data which showed the slowest pace of core inflation in Japan's capital area since March 2022.
• Hang Seng and Shanghai Comp were choppy as the effects of recent Chinese support measures waned.
• US equity futures (ES -0.4%) were subdued following mixed earnings with underperformance in Nasdaq 100 futures after Intel provided disappointing guidance and T-Mobile missed on the bottom line.
• European equity futures indicate a flat open with Euro Stoxx 50 future unchanged after the cash market closed up 0.4% on Thursday.

FX

• DXY lacked direction after the dust settled from the recent mixed data releases and ahead of PCE inflation.
• EUR/USD remained lacklustre after slipping post-ECB announcement and press conference.
• GBP/USD traded little changed after recent oscillations around the 1.2700 focal point.
• USD/JPY was indecisive despite softer Tokyo inflation, while the BoJ's December meeting minutes were stale.
• Antipodeans were uneventful amid a lack of fresh catalysts and holiday closure in Australia.
• PBoC set USD/CNY mid-point at 7.1074 vs exp. 7.1733 (prev. 7.1044).

FIXED INCOME

• 10yr UST futures Remained afloat following yesterday's bull steepening as the data showed soft PCE within a strong GDP report and a rise in jobless claims, while a dovish leaning Lagarde and decent 7yr auction had also facilitated the upside in treasuries.
• Bund futures extended on post-ECB gains with a source report noting ECB policymakers are open to discussing future rate cuts in March if the data points to inflation hitting 2% this year and that a March pivot would pave the way for a rate cut most likely in June.
• 10yr JGB futures tracked peers higher following softer-than-expected Tokyo inflation for January.

COMMODITIES

• Crude futures marginally pulled back amid light catalysts and after the prior day's upward momentum which was facilitated by Middle East tensions, residual China stimulus tailwinds and strong US GDP data.
• Qatar informed Endesa of a 10-12 day delay of its LNG cargo due to the Red Sea conflict, according to Reuters sources.
• Spot gold kept within a thin range ahead of the release of the Fed's preferred inflation measure.
• Copper futures traded sideways amid the flimsy risk sentiment across the Asia-Pacific region.

CRYPTO

• Bitcoin prices were mildly higher and climbed back above the psychological USD 40,000 level.

NOTABLE ASIA-PAC HEADLINES

• Chinese Commerce Minister said China's trade faces a more complex and severe external situation, while the rise of trade protectionism, intensification of geopolitical conflicts and the risk of spillover has increased significantly, according to Reuters.
• BoJ Minutes from the December 18th-19th meeting stated that members agreed they must patiently maintain easy policy and must confirm a positive wage-inflation cycle to consider ending negative rates and YCC. Furthermore, a few members said the decision on whether a positive wage-inflation cycle is in place must be made comprehensively and not by looking at particular data, while a few members said they don't see the risk of the BoJ being behind the curve and can wait for developments in the spring annual wage talks. Members also agreed they must continue deepening the debate on exit timing and the appropriate pace of hiking rates after the end of negative rates.

DATA RECAP

• Tokyo CPI YY (Jan) 1.6% vs. Exp. 2.0% (Prev. 2.4%)
• Tokyo CPI Ex. Fresh Food YY (Jan) 1.6% vs. Exp. 1.9% (Prev. 2.1%)
• Tokyo CPI Ex. Fresh Food & Energy YY (Jan) 3.1% vs. Exp. 3.4% (Prev. 3.5%)
• Japanese Services PPI YY (Dec) 2.4% vs Exp. 2.4% (Prev. 2.3%)

GEOPOLITICS

MIDDLE EAST

• Israeli war council discussed a possible exchange deal with Hamas, according to Sky News Arabia.
• Hamas said if the ICJ issues a ruling for a ceasefire, Hamas will abide by it if Israel reciprocates, while Hamas will release all Israeli hostages in Gaza if Israel releases all Palestinian prisoners.
• US established a channel with Israel focused on discussing concerns and seeking information on incidents in Gaza where civilians were killed or injured, according to Reuters citing US officials.
• American weapons arrived in Israel including dozens of F-35 and F-15 fighters and Apache helicopters, according to Al Jazeera.
• US National Security Adviser Sullivan is to meet with Chinese Foreign Minister Wang Yi for talks on Houthi attacks in the Red Sea, according to WSJ. It was later reported that the White House confirmed National Security Adviser Sullivan will travel to Bangkok this week to meet with Thailand's PM and will also meet with Chinese Foreign Minister Wang, according to Reuters.
• Chinese officials asked their Iranian counterparts to help rein in attacks on ships in the Red Sea by the Iran-backed Houthis, or risk harming business relations with Beijing, according to Iranian sources and a diplomat familiar with the matter cited by Reuters.
• US and Iraq are to shift to bilateral military relations and US officials will stay in Iraq to defeat Islamic State, according to Bloomberg.
• Explosive-laden drone struck an area in Khor Mor gas field in Northern Iraq, according to Reuters sources

OTHER

• Russian President Putin is reportedly to signal to the US that he's open to talks on Ukraine and sources added that Moscow is floating ideas on Ukraine security and territory, according to Bloomberg.
• US officials said North Korean leader Kim could take some form of lethal military action against South Korea in the coming months after switching to a policy of open hostility, according to the New York Times.
• Venezuelan President Maduro says the deal with the political opposition for elections this year could collapse after he alleged "conspiracies" against him, according to Reuters.

UK/EU

NOTABLE HEADLINES

• ECB policymakers are reportedly open to start discussing future rate cuts in March if the data points to inflation hitting 2% this year, according to Reuters citing sources who added that a March pivot would pave the way for a rate cut most likely in June.
• Britain has suspended discussions over a free trade deal with Canada amid discontent on both sides over the lack of access to agricultural markets, according to Reuters.

DATA RECAP

• UK GfK Consumer Confidence (Jan) -19.0 vs. Exp. -21.0 (Prev. -22.0)