• European equities are generally firmer, though the FTSE 100 lags, hampered by AstraZeneca; US equity futures are around flat, with slight outperformance in the RTY
• Dollar is marginally firmer, the Kiwi underperforms despite hawkish-leaning speak from RBNZ officials overnight
• Bonds are little changed amid catalyst thin trade and will likely take impetus from upcoming central bank speak
• Crude is softer on the session despite geopolitical escalation in Gaza; base metals are softer as Chinese participants remain on holiday
• Looking ahead, US Federal Budget, NY Fed Survey of Consumer Expectations, Japanese Corporate Good Prices, BoC SLOOS, Comments from ECB’s, Lane, de Cos, Cipollone, RBA’s Kohler, Fed’s Barkin & Kashkari

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (+0.4%), are generally firmer, with the exception of the FTSE 100 (-0.3%), which is hampered by losses in AstraZeneca (-2.2%) after PT cuts.
• European sectors are almost entirely in the green; Consumer Products and Services is propped up by a Tod's (+16.9%) bid, which has lifted Luxury. Healthcare is hampered by AstraZeneca, as mentioned.
• US equity futures (ES U/C, NQ +0.1%, RTY +0.3%) are trading around flat with the ES continuing to hold above the 5k mark. Slight outperformance in the RTY, extending on Friday's strength.
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FX

• DXY saw a dip to 103.89 (10DMA) in early European trade, taking out Friday's low of 103.95 before recovering to current levels just above 104.00; Friday's high at 104.26 is still in place, 104.18 the current peak.
• EUR is trivially softer vs. the USD after a brief foray above the 1.08 mark in quiet newsflow. A more sustained breach of 1.08 could bring the 200DMA into view at 1.0830 with the 21DMA just above at 1.0836.
• JPY experiences relatively steady trade with the pair maintaining 149.00 status, Japanese participants away from the market overnight. For now, broadly contained in Friday's 149.00-57 range.
• NZD the laggard across the majors vs. the USD despite hawkish-leaning RBNZ comments. NZD/USD still within Friday's range of 0.6093-0.6158 and stuck in consolidation mode after the mid-Jan sell-off.
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FIXED INCOME

• USTs are little changed on the day, with no cash trade overnight due to Tokyo being on holiday for Foundation Day. Session ahead thin from a data perspective aside from the NY Fed SCE so focus will be on Fed speak from voters Bowman & Barkin before non-voter Kashkari.
• Bunds are contained, with slight pressure seen as oil lifted from lows but within earlier ranges. ECB's Lane added little so attention turns to de Cos who will be joined with Lane once again; 133.36-133.66 bounds are within Friday's range. Initial modest bid attributed to weekend remarks from Panetta.
• Gilt price action is in-fitting with the above and ultimately will take impetus from a busy particularly UK schedule this week. Before that, BoE Governor Bailey is set to speak; 10yr yield remains around the 4.0975 YTD high from Friday.
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COMMODITIES

• Crude price action is choppy and ultimately remains subdued despite the heightened geopolitical landscape and some verbal intervention from Saudi, with the Saudi Energy Minister stating OPEC+ is ready to tweak supply up or down as required by the market; Brent Apr touched a low of USD 81.26/bbl.
• Mixed trade across precious metals with spot gold flat intraday amidst a relatively contained Dollar ahead of tomorrow's US CPI metrics; XAU resides within recent ranges around USD 2,025/oz with the 50 DMA (USD 2,032.86/oz) to the upside.
• Subdued but contained trade across base metals with the complex also influenced by the Chinese New Year break which sees Chinese participants return in a week.
• Saudi Energy Minister said there is a huge cushion when asked if 1.5-2mln BPD is sufficient spare capacity; adds oil demand is consistently bigger than some projections; Ready to tweak supply up or down as required by the market. "Prince Abdulaziz said there was a lot of misinterpretation around the decision to stick to the 12 million bpd MSC… he noted that increased gas production will be able to free up more of Aramco’s oil", according to Energy Intel. When asked if Saudi is comfortable with OPEC demand projections for 2024 and 2025, says OPEC's job is not to be comfortable, "our job is to be attentive". OPEC ready to tweak policy at any time.
• Saudi Aramco CEO says not in agreement there will be peak demand; expects 104mln BPD demand in 2024 and 105mln BPD in 2025 A rebound in the crude complex was seen in tandem with these comments.
• 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.
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NOTABLE EUROPEAN 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 shown 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.
• ECB's Lane's speech on "Euro area international financial flows: analytical insights and measurement challenges" Speech was analytical in nature and did not contain commentary in relation to monetary policy / wages

NOTABLE US HEADLINES

• 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.

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.
• Yemeni Houthis said they targeted Star Iris in the Red Sea, according to Reuters citing the group's military spokesmen.
• Israel PM Netanyahu says Israel will not pass up on any chance to free hostages. Adds, that military pressure should be sustained until "Gaza victory"

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.

CRYPTO

• Bitcoin (+0.9%) is modestly firmer and holds just beneath USD 48k, whilst Ethereum is softer on the day.

APAC TRADE

• 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.

NOTABLE 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.