• APAC stocks were mostly positive after a decline in global yields and further Chinese support efforts; Hang Seng and Shanghai Comp were mixed despite early momentum.
• Moody's downgraded New York Community Bancorp's (NYCB) long-term issuer rating to junk status of Ba2 and said most ratings remain on review for a further downgrade.
• Fed's Mester (voter) said the Fed can lower rates later this year if the economy performs as expected and when the Fed cuts rates, it will likely be at a gradual pace, while she does not want to offer timing on a rate cut and sees no need to rush. 
• ECB's Schnabel said lower borrowing costs risk flare-up of inflation and that the last mile in bringing down inflation could be the most difficult one.
• Highlights include German Industrial Output, UK Halifax House Prices, French Trade Balance, Italian Retail Sales, US Trade Data, NBP Policy Announcement, US Budget and Economic Outlook 2024 to 2034, Comments from, BoE’s Breeden, Fed’s Kugler, Barkin, Collins & Bowman, Supply from UK, Germany & US, Earnings from TotalEnergies, Pandora, Carlsberg, Siemens Energy, Equinor, Uber & PayPal.

• Click here for the Newsquawk Week Ahead.

US TRADE

EQUITIES

• US stocks eked slight gains with price action choppy amid a softer yield environment and after banking concerns were stoked by a further plunge in NYCB shares, while data releases were light and there were comments from Treasury Secretary Yellen in the Senate who voiced concerns over commercial real estate.
• SPX +0.23% at 4,954, NDX -0.23% at 17,572, DJIA +0.37% at 38,521, RUT +0.85% at 1,953.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Mester (voter) said the Fed can lower rates later this year if the economy performs as expected and when the Fed cuts rates, it will likely be at a gradual pace. Mester also stated that monetary policy is in a good place to assess what’s next for rates and if inflation doesn’t fall, the Fed can maintain current policy. Furthermore, she does not want to offer timing on a rate cut and sees no need to rush, while she still leans towards three rate cuts in 2024.
• Fed's Harker (non-voter) said the Fed's decision to hold rates was the correct move and noted that data shows inflation is falling and the labour market is in better balance. Harker also said consumer spending has been resilient and sees real progress on getting inflation back to 2%, while he added that the economy is on track for a soft landing.
• Fed's Kashkari (non-voter) said inflation has come down very quickly and the labour market is very strong, while he added it's a conundrum and that recession is not his base case. Furthermore, Kashkari said they are not all the way there yet on inflation but added that data is looking positive.
• US Treasury said the IRS now estimates USD 80bln in Inflation Reduction Act funding would increase revenue by as much as USD 561bln from 2024-2034 (prev. USD 390bln) and if full IRS funding is continued in accordance with Biden proposals, revenue gains could be as high as USD 851bln.
• US House rejected the Republican-led effort to pass a standalone Israel aid bill without funds for Ukraine with the final vote at 250 to 180, which is short of the two-thirds majority required for the expedited procedure.
• Moody's downgraded New York Community Bancorp's (NYCB) long-term issuer rating to junk status of Ba2 and said most ratings remain on review for a further downgrade. Moody's added that NYCB's elevated use of market funding may limit the bank's financial flexibility in the current environment and that pressure on profitability could challenge NYCB's internal capital generation plans.
• New York Community Bancorp (NYCB) issued current liquidity and deposit information in which it noted that it maintains over USD 10bln of reciprocal deposit capacity to offer expanded deposit insurance to its clients and that total uninsured deposits excluding collateralised and internal deposits are USD 22.9bln. NYCB said it took decisive actions to fortify the balance sheet and strengthen risk management processes during Q4, while it added that total deposits are around USD 83bln and total liquidity of USD 37.3bln exceeds uninsured deposits with a coverage ratio of 163. Furthermore, it stated that Moody's downgrade is not expected to have a material impact on contractual arrangements.

APAC TRADE

EQUITIES

• APAC stocks were mostly positive after a decline in global yields and further Chinese support efforts.
• ASX 200 gained with the index led by outperformance in mining and property sectors amid lower yields.
• Nikkei 225 was indecisive amid a slew of earnings and with the BoJ reportedly on track for a policy shift by April.
• Hang Seng and Shanghai Comp were mixed despite early momentum following the latest support efforts from China which were targeted at real estate financing and new energy vehicles. Nonetheless, Chinese stocks gradually faded some of their initial gains and the Hong Kong benchmark ultimately turned negative.
• US equity futures traded flat with price action contained amid lingering US regional banking sector concerns.
• European equity futures indicate a slightly higher open with Euro Stoxx 50 future +0.1% after the cash market closed up 0.8% on Tuesday.

FX

• DXY remained lacklustre following its recent decline alongside softer yields and as banking fears resurfaced.
• EUR/USD traded steadily after recovering from YTD lows but languishes beneath its nearby 100 DMA (1.0784).
• GBP/USD continued its gradual rebound and just about reclaimed the 1.2600 handle.
• USD/JPY attempted to reclaim the 148.00 status amid headwinds from narrowing yield differentials.
• Antipodeans marginally gained amid the mostly positive risk environment and with NZD/USD briefly supported by stronger jobs growth and firmer than expected labour cost data.
• PBoC set USD/CNY mid-point at 7.1049 vs exp. 7.1858 (prev. 7.1082).

FIXED INCOME

• 10-year UST futures kept afloat after gaining yesterday as banking fears resurfaced in a data-light US session, while the 3-year auction stateside was decent ahead of the upcoming 10-year and 30-year offerings.
• Bund futures took a breather after the recent rebound and as German Industrial Production data looms.
• 10-year JGB futures were rangebound after stalling around the 146.50 level and amid a mixed 30-year JGB auction.

COMMODITIES

• Crude futures were marginally higher albeit with gains capped after mixed private sector inventory data and promising geopolitical updates.
• US Energy Inventory Data (bbls): Crude +0.7mln (exp. +1.9mln), Gasoline +3.7mln (exp. +0.1mln), Distillate -3.7mln (exp. -1.0mln) Cushing +0.5mln.
• EIA STEO raised the 2024 forecast for world oil demand growth by 30k BPD to a 1.42mln BPD Y/Y increase and raised the 2025 forecast for world oil demand growth by 80k BPD to a 1.29mln BPD Y/Y.
• OPEC executive sees global oil demand to grow by 2.2mln bpd this year and to taper to 1.8mln bpd next year, while the executive added to expect 2022-2045 to see incremental additional demand of at least 60mln bpd, according to Reuters.
• Russia's oil exports from its western ports in February are to rise by 0.7mln tonnes from the initial plan after the Tuapse refinery outage, according to Reuters sources.
• Spot gold traded sideways after mildly benefitting from the prior day's Dollar weakness.
• Copper futures were rangebound and failed to take advantage of the mostly positive risk appetite.
• Chile’s Codelco CEO said their copper production reached 1.325mln tonnes in 2023 and could reach 1.353mln tonnes in 2024 Chile's Codelco expects a month-long stoppage at the Chuquicamata mine in 2025 to change the conveyor belt and expects to reach processing capacity at the underground mine by 2030, according to Reuters.

CRYPTO

• Bitcoin was slightly pressured overnight in which prices retreated back beneath the USD 43,000 level.

NOTABLE ASIA-PAC HEADLINES

• China's MOFCOM issued guidelines to support the new energy vehicle industry and will optimise credit support for the NEV sector, as well as improve management for exports. MOFCOM encourages NEV firms to set up R&D centres overseas and will optimise export procedures for NEVs and batteries, while it will guide banks to provide domestic and overseas financial services for the NEV supply chain.

DATA RECAP

• New Zealand HLFS Job Growth QQ (Q4) 0.4% vs. Exp. 0.3% (Prev. -0.2%)
• New Zealand HLFS Unemployment Rate (Q4) 4.0% vs. Exp. 4.2% (Prev. 3.9%)
• New Zealand Labour Cost Index QQ(Q4) 1.0% vs. Exp. 0.8% (Prev. 0.8%)
• New Zealand Labour Cost Index YY (Q4) 3.9% vs. Exp. 3.8% (Prev. 4.1%)

GEOPOLITICS

• Qatar PM Al Thani said the Hamas response in negotiations is "positive" and makes Qatar "optimistic" although he couldn't give details on the framework of the deal at this time.
• Hamas reportedly said they have dealt with the proposal in a positive spirit to ensure a comprehensive ceasefire, end to the aggression, lift of the siege and exchange of prisoners, according to Al Jazeera. Furthermore, a Hamas senior official later told Reuters that it took them time to respond to the framework agreement because many of its issues were unclear and ambiguous, while the official said Israeli PM Netanyahu is trying to make everyone believe that he has or will achieve victory to preserve his coalition government.
• Israel said regarding a potential Gaza truce that Hamas's response is being studied thoroughly by all parties involved in negotiations.
• US Secretary of State Blinken said the US is reviewing Hamas’s response to the framework on a hostage deal and will discuss it with the Israeli government on Wednesday, while there is a lot of work to be done but US continues to believe an agreement is possible. Blinken also said the US is determined to use any pause to continue to build the diplomatic path forward to a just and lasting peace.
• US and four European allies hope to announce in the next few weeks a series of commitments made by Israel and Hezbollah to diffuse tensions and restore calm to the Israel-Lebanon border, according to two Israeli officials and a source cited by Axios.
• Saudi's Foreign Ministry said there will be no diplomatic relations with Israel without recognising an independent Palestinian state and ending Israeli aggression in Gaza, according to Reuters.
• US Central Command said Iranian-backed Houthi terrorists conducted multiple anti-ship ballistic missile attacks in the southern Red Sea and Gulf of Aden, according to Reuters.
• Iraq's Foreign Minister stressed in a call with US Secretary of State Blinken a need to return to the negotiation table over the future of the US-led coalition in Iraq and asked Blinken for the US to reconsider sanctions imposed on Iraqi banks, according to Reuters.

EU/UK

NOTABLE HEADLINES

• UK may have narrowly slipped into a technical recession at the end of 2023, according to NIESR estimates cited by FT.
• UK will wave through animal products from the EU without checks under a contingency plan if there are capacity issues as ports, according to documents cited by FT.
• ECB's Schnabel said lower borrowing costs risk flare-up of inflation and that the last mile in bringing down inflation could be the most difficult one. Schnabel also noted that commercial lenders are reducing borrowing rates on mortgages in expectation the ECB will start cutting interest rates soon and that if demand is held back by restrictive monetary policy, it will be much harder for firms to pass through higher costs to consumers, according to FT.
• Dutch NSC Party walked away from talks on forming a majority government, according to local press.