• APAC stocks were subdued amid quiet weekend newsflow and mass holiday closures in the region.
• ECB Panetta said the time for a reversal of the ECB’s monetary policy stance is fast approaching.
• European equity futures indicate a mildly positive open with Euro Stoxx 50 future +0.3% after the cash market closed up 0.1% on Friday.
• DXY is steady around the 104 mark, EUR/USD is eyeing 1.08, USD/JPY sits on a 149 handle.
• Looking ahead, highlights include US Federal Budget, NY Fed Survey of Consumer Expectations, Japanese Corporate Good Prices, BoC SLOOS, Comments from ECB’s Lane & Cipollone, RBA’s Kohler, Fed’s Barkin & Kashkari, Earnings from Michelin.

US TRADE

EQUITIES

• US stocks finished mostly positive on Friday in which the SPX climbed to new ATHs above 5,000 as the bull ride continued amid a lack of an obvious catalyst, while the gains were even more pronounced in the NDX and RUT with risk sentiment also helped by a relief rally in NYCB shares. Furthermore, attention on Friday was on the US CPI revisions, which on net, left the inflation picture as it was with 3m and 6m annualised core CPI metrics remaining unchanged after the revisions heading to Tuesday's January CPI report.
• SPX +0.57% at 5,027, NDX +1.01% at 17,962, DJI -0.14% at 38,672, RUT +1.53% at 2,010.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bostic (voter) said on Friday that inflation has been too high for too long and there is still "a ways to go" for a return to the target, while he added the US is on a pathway to get back to pre-COVID economic strength and wants to avoid a new spike in inflation, according to Atlanta NPR.
• Fed's Logan (non-voter) said on Friday that she doesn't see any urgency to adjust rates and needs to take time to look at data and build confidence on inflation, while she added that the Fed has made "tremendous progress" on inflation, but there is more work to do.
• US senior administration official said as someone who works closely with President Biden, the Special Counsel’s claims about Biden’s memory are completely ridiculous.
• US Defense Secretary Austin has transferred duties to Deputy Secretary during treatment in hospital, according to the Pentagon.
• US Senate voted 67-28 to advance a foreign aid bill that puts legislation for a USD 95bln aid package for Ukraine, Israel and the Indo-Pacific on track for a vote on final passage later this week, although some Senate Republicans had reservations about moving forward with the aid package without border security provisions and others rejected the package flat out, which puts the legislation's path forward into question, according to CBS News.

APAC TRADE

EQUITIES

• APAC stocks were subdued amid quiet weekend newsflow and mass closures in the region as markets in China, Hong Kong, Taiwan, Japan, South Korea, Singapore, Malaysia & Vietnam were all shut for holiday.
• ASX 200 declined amid underperformance in healthcare and the commodity-related sectors, with the former the worst-hit amid losses in CSL after top-line results from the phase 3 trial of its cardiovascular drug failed to meet the primary efficacy endpoint.
• Nifty 50 was pressured with some of the worst-performing stocks in the index suffering post-earnings.
• US equity futures plateaued after Friday's fresh record levels on Wall Street where the S&P 500 closed above 5,000 for the first time.
• European equity futures indicate a mildly positive open with Euro Stoxx 50 future +0.3% after the cash market closed up 0.1% on Friday.

FX

• DXY sat around the 104.00 level in a very tight range amid light newsflow and with US CPI due on Tuesday.
• EUR/USD eked mild gains but with upside capped by resistance at 1.0800, while there were recent comments from ECB's Panetta that the time for a reversal of the ECB’s monetary policy stance is fast approaching.
• GBP/USD was quiet in the absence of pertinent catalysts heading into BoE Governor Bailey's speech later and a busy week for UK data.
• USD/JPY traded little changed with Japanese participants on an extended weekend.
• Antipodeans conformed to the unexciting performance across the FX space with slight underperformance in the Kiwi despite hawkish-leaning comments from RBNZ officials.

FIXED INCOME

• 10-year UST futures nursed some of Friday's losses in an uneventful session with overnight cash treasuries trade shut owing to the holiday closure in Tokyo.
• Bund futures found some reprieve and bounced off YTD lows to around the 133.50 level which also follows the latest ECB commentary.

COMMODITIES

• Crude futures were subdued due to a lack of pertinent catalysts and despite the escalating geopolitical concerns after Israel conducted strikes on Rafah in southern Gaza amid plans for a ground offensive.
• Spot gold traded rangebound alongside a flat dollar and ahead of US CPI data on Tuesday.
• Copper futures lacked demand amid the absence of many participants in Asia including its largest buyer.
• BHP (BHP AT) was notified by iron ore train drivers that they will conduct a 24-hour stoppage this Friday. BHP responded that it is reviewing a revised set of claims provided by union representatives and believes an agreement can be reached without the need for protected action, while it has contingency plans if the action goes ahead.

CRYPTO

• Bitcoin marginally pulled back overnight after its recent rally to above the USD 48,000 level.

NOTABLE ASIA-PAC HEADLINES

• RBNZ Governor Orr said it is concerning that the population is growing so rapidly at a time when residential construction is slowing, while he added that inflation is still too high which is why they have kept the Cash Rate at 5.50%
• RBNZ Deputy Governor Hawkesby said New Zealand's financial system remains strong and prices have stabilised in house markets over the last six months, as well as noted that the system can cope with high interest rates.

GEOPOLITICS

MIDDLE EAST

• Israeli military conducted a series of strikes on southern Gaza and said two hostages were freed by special forces in Rafah, while it was reported that dozens were killed and injured in the strike on Rafah, according to Reuters.
• Israeli PM Netanyahu pushed back against international concerns regarding Israel’s preparation to enter the southern Gaza city of Rafah and stated that those who say not to enter Rafah are basically saying lose the war, according to Politico. It was separately reported that Israeli PM Netanyahu said enough of the 132 remaining hostages are still alive to warrant the kind of efforts they are making.
• US President Biden and Israeli PM Netanyahu held a phone call in which Biden emphasised the need to capitalise on progress made in the negotiations to secure the release of all hostages as soon as possible, while Biden called for urgent and specific steps to increase the throughput of humanitarian aid to Palestinian civilians. Furthermore, Biden reaffirmed his view that a military operation in Rafah should not proceed without a plan to ensure the safety of 1mln people sheltering there and they both agreed to remain in close contact, according to Reuters.
• US senior official said real progress was made over the last few weeks on a framework deal for the release of hostages and ‘it’s pretty much there’ although there are still significant gaps that need to be closed, while the official said they do not support a military operation in Rafah under current circumstances and that Israelis made it clear they see the safety of civilians as a clear precondition for operations in Rafah, according to Reuters.
• Hamas said any Israeli ground offensive in Rafah would blow up exchange talks, while it was later stated that Israel's attack on Gaza's Rafah is a continuation of the genocidal war and forced displacement attempts it wages against Palestinians.
• Iran’s Foreign Minister said any step by Israel towards a widespread attack on Lebanon would be Israeli PM Netanyahu’s final day and only a political solution can resolve the Gaza conflict, according to Reuters.
• US Central Command said its forces conducted self-defence strikes against two unmanned surface vessels and three anti-ship cruise missiles north of Yemen’s Hodeidah on Saturday.
• US-led coalition’s air defence systems blocked six drone attacks at Conoco oil field in eastern Syria.
• Iraq and the US are in talks to set a timetable for a gradual phase-out of US-led coalition forces mission in Iraq.

OTHER

• Ukraine’s military intelligence released an intercept it said confirms the use of Starlink by Russian forces on the battlefield. However, it was separately reported that Elon Musk denied a number of false news reports that claim SpaceX is selling Starlink terminals to Russia and said to his knowledge, no Starlinks have been sold directly or indirectly to Russia, according to Reuters.
• Ukrainian President Zelensky appointed former Deputy Defence Minister Pavliuk as the new ground forces chief, according to Reuters.
• Former US President Trump said he would "encourage" Russia to attack any NATO member country that didn’t meet its financial obligations to the defence alliance, while a White House spokesperson said encouraging invasions of allies is appalling and unhinged.
• NATO said any suggestions that allies will not defend each other undermines all of their security including the US’ and puts American and European soldiers at increased risk, while it added that any attack on NATO will be met with a united and forceful response.
• North Korea said it has developed a rocket launcher controller, according to KCNA.

EU/UK

NOTABLE HEADLINES

• ECB's Centeno said he prefers interest rates to decline gradually and in a steady way instead of dropping more rapidly, while he added that the indicators they have show that inflation has been falling, according to Bloomberg.
• ECB's de Cos said March staff projections will be key to assessing whether they can be sufficiently confident that the 2% medium-term target, according to Bloomberg.
• ECB Panetta said the time for a reversal of the ECB’s monetary policy stance is fast approaching and that they must weigh the pros and cons of cutting rates “quickly and gradually” vs “later and more aggressively” which could stoke market volatility, while he added any speculation on the exact timing of monetary policy easing would be a sterile exercise and disrespectful to the Governing Council.
• European Union reached a tentative agreement on fiscal reform that will aim to reduce debt and protect investment in key areas such as defence and the green transition, according to Bloomberg.
• Gertjan Vlieghe (ex-MPC), and Clare Lombardelli (an ex-Treasury official now at the OECD in Paris), are the leading contenders to replace BoE Deputy Governor Ben Broadbent, according to The Times.
• Finland’s former PM Stubb is to become the country’s next President after winning 52% of votes in the second round of the presidential election held on Sunday.
• Fitch affirmed Finland at AA+; Outlook Stable, while S&P affirmed Denmark at AAA; Outlook Stable.