• APAC stocks traded mixed and were mostly subdued in holiday-thinned conditions ahead of the Lunar New Year.
• European equity futures indicate a slightly softer open with Euro Stoxx 50 future -0.2% after the cash market closed up 0.7% on Thursday.
• DXY is a touch firmer in contained trade for the FX space, NZD outperforms following a hawkish ANZ call on the RBNZ.
• Crude futures took a breather after rallying by over 3% yesterday, whilst Bunds remain subdued after slipping beneath 134.
• Looking ahead, highlights include German CPI (Final), Italian Industrial Output, Canadian Employment, US CPI Seasonal Factor Revisions, BoC SLOOS, Comments from ECB’s Cipollone & Fed's Logan, Earnings from Pepsi.

US TRADE

EQUITIES

• US stocks eked slight gains in choppy trade with the S&P 500 briefly touching 5k for the first time although closed marginally beneath the level, while the Russell 2000 outperformed with decent gains in the majority of its heavyweights. Furthermore, energy was the front runner among sectors as oil prices rallied amid geopolitical concerns with no progress made on the Gaza ceasefire proposal and Maersk also warned the Red Sea threat has not yet peaked.
• SPX +0.06% at 4,997, NDX +0.16% at 17,783, DJIA +0.13% at 38,726, RUT +1.50% at 1,979.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barkin (voter) reiterated the Fed can take time on the decision to cut rates and needs to see more data to build confidence inflation is falling. Barkin said upcoming inflation data will almost assuredly get even better over the next five months as we cycle over last year’s inflationary winter and spring but noted that upside inflation risks are still around. Furthermore, Barkin noted ample evidence Americans continue to spend and that past rate hikes are still working their way into the economy.
• Fed's Collins (non-voter) said her baseline for rate cuts this year is similar to the 75bps Fed policymakers' median view from December, while she expects an orderly slowdown in growth this year. Collins said some wage growth exceeding inflation is consistent with the continued move towards 2% inflation and a higher productivity provides some room for higher wage growth, according to a SiriusXM interview.

APAC TRADE

EQUITIES

• APAC stocks traded mixed and were mostly subdued in holiday-thinned conditions ahead of the Lunar New Year.
• ASX 200 was rangebound amid light catalysts, while RBA Governor Bullock reiterated a focus on bringing inflation down but noted that the Board hasn't ruled in or out a further rate hike and even touched upon cuts.
• Nikkei 225 breached 37,000 for the first time since February 1990 amid a weaker currency and earnings updates.
• Hang Seng was pressured amid losses in property and tech in a shortened trading session and with mainland participants already away for Chinese New Year celebrations.
• US equity futures (ES -0.1%) were uneventful after Wall Street stalled around fresh record levels.
• European equity futures indicate a slightly softer open with Euro Stoxx 50 future -0.2% after the cash market closed up 0.7% on Thursday.

FX

• DXY kept within a very tight range of between 104.12-104.21 following the prior day's indecisive performance and absence of major macro drivers, while the data calendar is light on Friday with the spotlight on US CPI seasonal factor revisions.
• EUR/USD traded indecisively after recent two-way price action and as ECB speakers continued to stress data dependence, while Holzmann also suggested a certain chance the ECB will not cut rates this year.
• GBP/USD was steady after recovering from a brief dip below 1.2600, while recent BoE rhetoric had little impact.
• USD/JPY posted fresh YTD highs after the recent upside in US yields and BoJ commentary as Governor Ueda echoed comments made by Deputy Governor Uchida and stated that chances are high for accommodative conditions to stay even if negative rates are abandoned.
• Antipodeans were higher to varying degrees with AUD/USD contained amid the mixed risk appetite, while NZD/USD outperformed after ANZ Bank forecasted the RBNZ to hike the OCR at the February and April meetings.
• PBoC set USD/CNY mid-point at 7.1036 vs exp. 7.1996 (prev. 7.1063).
• Mexican Central Bank kept its interest rate at 11.25%, as expected, with the decision unanimous and it removed the previous guidance about needing to hold the key rate for some time.

FIXED INCOME

• 10-year UST futures nursed some of the prior day's losses after slipping beneath the 111.00 level and with mild support following a strong 30yr auction which helped treasuries just about avert making fresh YTD lows.
• Bund futures moved off worse levels but remained subdued after a recent slump beneath 134.00.
• 10-year JGB futures were gradually pressured in the aftermath of the latest 5yr JGB auction which resulted in a lower bid-to-cover despite slightly lower accepted prices.

COMMODITIES

• Crude futures took a breather after rallying by over 3% yesterday amid concerns of a widening Middle East conflict as Israel and Hamas have yet to come to a ceasefire agreement.
• US DoE seeks to buy 3mln bbls of oil for the SPR for July delivery.
• Spot gold struggles for direction after recent whipsawing and amid a lack of fresh catalysts.
• Copper futures were rangebound amid the mixed risk appetite and absence of Chinese buyers.

CRYPTO

• Bitcoin extended on this week's gains and briefly climbed back above the USD 46,000 level.

NOTABLE ASIA-PAC HEADLINES

• US President Biden's administration is said to consider restrictions on China EVs to address data security concerns, while the move would be an additional hurdle beyond tariffs to keep out Chinese smart cars, according to Bloomberg.
• BoJ Governor Ueda said the chances are high for accommodative conditions to stay even if negative rates are abandoned, while he added they will pay heed to the health of the balance sheet if exit from stimulus policy draws near.
• RBA Governor Bullock said the Board is focused on bringing inflation down and recent developments in inflation are encouraging but they have some way to go to meet the inflation target and noted while there are some encouraging signs, Australia’s inflation challenge is not over. Bullock also stated the Board hasn’t ruled out a further increase in interest rates but neither has it ruled it in, while she added that inflation doesn't need to be in the 2%-3% band for them to think about rate cuts and if consumption slows more quickly than expected, it will be an opportunity to cut rates.

GEOPOLITICS

MIDDLE EAST

• US President Biden said the conduct of Israel's response in the Gaza strip has been over the top and he is pushing very hard now to get a sustained pause in Gaza.
• White House said negotiations are ongoing regarding a hostage release and ceasefire deal, while it added that Secretary of State Blinken made it clear the US has concerns regarding Rafah operations. The White House also said that President Biden and German Chancellor Scholz will discuss Ukraine, the Middle East and the Red Sea shipping attacks.
• US Central Command said its forces conducted seven self-defence strikes against four Houthi unmanned surface vessels on Thursday and conducted strikes against seven mobile anti-cruise missiles that were prepared to launch against ships in the Red Sea.
• Iraq and the US resumed negotiations over the future of the US-led coalition in Iraq, according to a military spokesperson.

OTHER

• Russian President Putin said Russia has not yet achieved its goals in Ukraine and suggested the US should encourage Ukraine to resume talks, while he was said to sincerely believe that Russia has a historic claim to land in Ukraine. Putin said the US and Russia hold contacts at different levels and that Russia has no interest in Poland, Latvia or anywhere else, as well as noting that WSJ reporter Evan Gershkovich may be freed if the special services agree. Furthermore, he said those in power in the West have come to realise it is impossible to inflict strategic defeat on Russia and are wondering what to do next, while he added that they are ready for this dialogue.
• German economy ministry sources confirmed Germany is considering expropriating assets of Russia's Rosneft although no decision had yet been taken, according to FT.
• North Korean leader Kim said the country will wipe out enemies if they use force against it, according to KCNA.
• Venezuela vowed a 'forceful' response in the disputed region, according to Bloomberg.

EU/UK

NOTABLE HEADLINES

• UK Chancellor Hunt said his priority is to bring down the tax burden and that they want the London Stock Exchange to become Europe's Nasdaq, according to Reuters.
• BoE's Haskel said signs of lower inflation are encouraging but not sufficient and more evidence on reduced inflation persistence is needed to stop voting for higher rates, while he added the February decision was finely balanced but wants to wait a bit longer.
• BoE's Mann said she cannot say if there will be rate cuts this year and noted that a durable drop in services inflation could persuade her to vote to hold rates, according to Reuters.
• ECB's Holzmann said there is a certain chance that the ECB will not cut rates this year and must be sure inflation is in check before the first cut, while he added that high wage deals will show up in inflation eventually, according to Faz interview.
• ECB Kazaks said monetary policy is working and inflation has strongly fallen. Kazaks also stated this will be a year of rate cuts but noted that investor hopes for monetary easing at one of the next two meetings might be too aggressive, while he added that he would be cautious and would wait until the inflation story is over, according to an interview in Latvia radio cited by Bloomberg.