• APAC stocks were somewhat mixed as Chinese market stabilisation efforts offset the early headwinds from Wall Street.
• Fed SLOOS (Q4) noted that tighter standards and weaker demand were reported.
• RBA kept rates unchanged at 4.35% as expected, while it reiterated that a further increase in interest rates cannot be ruled out.
• European equity futures indicate a higher open with Euro Stoxx 50 future +0.4% after the cash market closed flat on Monday.
• DXY remains at elevated levels, AUD outperforms post-RBA, USD/JPY stalled after climbing to fresh YTD highs.
• Looking ahead, highlights include German Industrial Orders, EZ Retail Sales, Canadian Ivey PMI, NZ Jobs data, ECB Consumer Expectations Survey, Comments from Fed’s Mester, Harker, Kashkari, Collins & BoC's Macklem, Supply from Netherlands, UK & US, Earnings from BP, Infineon, UBS, BMPS, Eli Lily, Ford, GE Healthcare & Chipotle.

US TRADE

EQUITIES

• US stocks declined but finished off their lows with early pressure from the broader hawkish reaction to the hot ISM Services PMI data which lifted yields to YTD highs and underpinned the dollar, while the recent Fed comments were also hawkish-leaning.
• SPX -0.32% at 4,943, NDX -0.17% at 17,613, DJI -0.71% at 38,380, RUT -1.30% at 1,937.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bostic (voter) said wage growth is settling back into more normal patterns, while he didn’t comment on the rate outlook in prepared remarks.
• Fed SLOOS (Q4) noted that tighter standards and weaker demand were reported. Survey respondents, on balance, reported tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes, while banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories. For loans to households, banks, on balance, reported that lending standards tightened across all categories of residential real estate (RRE) loans other than government residential mortgages and government-sponsored enterprise (GSE)-eligible residential mortgages, for which standards remained basically unchanged.
• NYT's Smialek and WSJ's Timiraos played down CBS reporter commentary that Fed Chair Powell alluded to the first rate cut occurring mid-year.
• US Commerce Secretary Raimondo said the US expects to announce several more semiconductor chips funding announcements in the next six to eight weeks, while she added there is no artificial timeline and vowed to award funds as soon as possible but get it right.
• White House said the administration strongly opposes a standalone Israel aid bill which President Biden would veto.

APAC TRADE

EQUITIES

• APAC stocks were somewhat mixed as Chinese market stabilisation efforts offset the early headwinds from Wall Street where yields climbed to YTD highs after hot ISM Services data and recent hawkish Fed rhetoric.
• ASX 200 declined with weakness in tech and real estate amid rising yields, while attention was also on the RBA which maintained its rates as expected and reiterated its hawkish rhetoric.
• Nikkei 225 was subdued after disappointing household spending and soft wage data but with the downside cushioned amid a slew of earnings releases.
• Hang Seng and Shanghai Comp outperformed with sentiment boosted by China's latest market stabilisation efforts including reports China's sovereign fund will further increase ETF holdings, while the CSRC also encouraged listed firms to buy back more shares to inject more capital into the A-share market.
• US equity futures (ES +0.1%) were rangebound after the prior day's choppy performance and hawkish impulse.
• European equity futures indicate a higher open with Euro Stoxx 50 future +0.4% after the cash market closed flat on Monday.

FX

• DXY held on to most of the prior day's gains after strong ISM Services data and hawkish Fed rhetoric.
• EUR/USD remained lacklustre after having recently slipped beneath its 100-day moving average of 1.0783.
• GBP/USD loitered beneath 1.2600 after recent underperformance and a slowdown in UK retail sales growth.
• USD/JPY stalled overnight following its recent climb to fresh YTD highs on widening yield differentials.
• Antipodeans were marginally lifted amid a firmer CNH and China's latest market stabilisation efforts, while AUD/USD was also supported after the RBA rate decision where the central bank kept the Cash Rate unchanged at 4.35% and reiterated its hawkish tone with the door kept open for a further increase in the interest rate.
• PBoC set USD/CNY mid-point at 7.1082 vs exp. 7.2057 (prev. 7.1070).

FIXED INCOME

• 10-year UST futures found mild reprieve following yesterday's losses in which a busy supply calendar, hot ISM Services data and recent Fed rhetoric triggered further selling in treasuries and lifted US yields to YTD highs.
• Bund futures recovered some of their recently lost ground after rebounding from a brief dip below 134.00.
• 10-year JGB futures nursed some of their opening losses after disappointing Household Spending and Labour Cash Earnings.

COMMODITIES

• Crude futures traded rangebound following the prior day's choppy performance and after Saudi Aramco kept OSP premiums unchanged for customers in Asia and North West Europe.
• Saudi Aramco kept Arab Light OSP for Asia unchanged at Oman/Dubai plus USD 1.50/bbl for March, while it kept March Arab Light crude oil OSP to NW Europe unchanged at a premium of USD 0.90/bbl to ICE Brent and cut March OSP to US to a premium of USD 4.85/bbl vs ASCI (prev. plus USD 5.15/bbl).
• Petrobras CEO said the Co. will expand refining capacity by 25% in four years, according to Reuters.
• Spot gold price action was contained following recent dollar and data-related headwinds.
• Copper futures rebounded from the prior day's lows albeit with the upside limited after recent dollar strength.

CRYPTO

• Bitcoin gradually traded higher after finding support just above the 42,500 level.

NOTABLE ASIA-PAC HEADLINES

• China's securities regulator said it encourages listed firms to buy back more shares to inject more capital into the A-share market and make every effort to maintain stable market operations, while it will guide institutional investors to increase stock investment. Furthermore, it was later reported that Chinese President Xi is set to discuss China's stock market with regulators.
• Chinese sovereign wealth fund CIC's unit Central Huijin said it fully recognises A-shares' allocation value and increased ETF holdings recently, while it will continue to increase holding size, according to Bloomberg.
• US President Biden's administration sent five senior Treasury officials to Beijing this week for economic talks including on subsidies and China's "non-market" policies that are ending excess industrial capacity, according to a Treasury official cited by Reuters.
• RBA kept rates unchanged at 4.35%, as expected, while it reiterated that the board remains resolute in its determination to return inflation to the target and that a further increase in interest rates cannot be ruled out. RBA also repeated that returning inflation to the target within a reasonable timeframe remains the board's highest priority and although it noted that inflation continued to ease in the December quarter, it added that inflation remains high at 4.1%. Furthermore, it stated the Board needs to be confident that inflation is moving sustainably towards the target range and said that inflation is still weighing on people’s real incomes and household consumption growth is weak, as is dwelling investment. RBA's quarterly Statement on Monetary Policy lowered the forecasts for inflation and GDP, while it noted that risks to the outlook are balanced and stated the level of demand is still above the economy's capacity to supply, creating price pressures.
• RBA Governor Bullock said at the press conference that the situation is more back to normal than during the pandemic and that everyone is focused on inflation, while she added there is still more work to do and still a little way to go to get inflation down. Furthermore, she stated that risk remains that inflation expectations drift further and they are not ruling anything in or out on policy, while they need to be convinced on inflation before thinking of cutting rates.

DATA RECAP

• Japanese All Household Spending MM (Dec) -0.9% vs. Exp. 0.2% (Prev. -1.0%)
• Japanese All Household Spending YY (Dec) -2.5% vs. Exp. -2.1% (Prev. -2.9%)
• Japanese Overall Labour Cash Earnings (Dec) 1.0% vs. Exp. 1.3% (Prev. 0.2%)
• Australian Retail Trade (Q4) 0.3% vs. Exp. 0.1% (Prev. 0.2%, Rev. -0.1%)

GEOPOLITICS

• Major and regional countries are preparing an action plan that begins with a truce in Gaza and ends with a major regional agreement before June, according to a post by Al Arabiya on X.
• Pentagon said there likely were casualties in US strikes in Iraq and Syria, but added that the assessment is still ongoing.
• US Central Command said its forces conducted a strike in self-defence against two Houthi explosive uncrewed surface vehicles, according to Reuters.

EU/UK

NOTABLE HEADLINES

• BoE's Pill said UK economic activity has been quite weak and supply-side constraints limit UK GDP growth, while he added it is "early days" to declare inflation has been suppressed. Pill also stated that rates would be restrictive even after cuts and rates will fall as the BoE forecasts progress on inflation. Furthermore, he is not yet confident in inflation to reduce rates but noted that the emphasis now is on when there is enough evidence to cut rates, not if.
• Barclays noted that UK January consumer spending rose 3.1% Y/Y with more consumers shopping online due to cold weather, while consumer confidence about personal finances was at the highest since November 2021.

DATA RECAP

• UK BRC Retail Sales YY (Jan) 1.4% (Prev. 1.9%)
• UK BRC Total Sales YY (Jan) 1.2% (Prev. 1.7%)