• European equities are softer across the board, with Tech lagging following poor Siltronic guidance, weighing on heavyweight ASML (-2.7%)
• US equity futures mirror price action in Europe, though the NQ slightly underperforms.
• Dollar is flat and awaiting US CPI; GBP is bid post-UK jobs data and CHF suffers after significantly cooler CPI
• Bonds are divergent, with USTs in a holding pattern ahead of US inflation, whilst Gilts were pressured on the regions jobs/wage data, since pared
• Crude is firmer and near session highs, base metals modestly firmer
• Looking ahead, US CPI, OPEC MOMR, Earnings from Moody’s, Marriott & Datadog.

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (-0.3%), initially opened on a mixed footing before dipping into the red as sentiment waned throughout the early hours. The Eurostoxx50 (-0.7%) is dragged down by Tech names Infineon (-2.3%), SAP (-2.3%) and ASML (-3.8%), after Siltronic (-8.1%) issued a profit warning.
• European sectors are generally lower, though the overall breadth of the market is fairly narrow (ex-Tech). Tech is the clear laggard, after Siltronic announced poor guidance. Healthcare marginally outperforms after GSK (+1.1%) received a broker upgrade at Citi.
• US Equity Futures (ES -0.3%, NQ -0.6%, RTY -0.4%) are softer across the board, with price action generally following that seen in European trade. The docket for today sees US CPI where expectations are for the headline to cool to 0.2% (prev. revised 0.3%).
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FX

• USD firmer vs. most peers but gains tentative as US CPI looms large. DXY incrementally took out yesterday's best of 104.27 with the next upside target the 8th Feb high at 104.43.
• EUR is contained within Monday's 1.0756-1.0805 range with that session's venture above 1.08 unconvincing. However, a soft US CPI print could change that and prompt a test of the 200DMA at 1.0829.
• GBP is the best performer vs. the USD and EUR/GBP is at its lowest level since August post-jobs data. Cable shot to a high of 1.2655, matching yesterday's best but stopped ahead of its 21DMA at 1.2665.
• Antipodeans are both softer vs. the USD but to varying degrees with NZD more so, following soft inflation expectation survey data. NZD/USD has now pared all of Friday's upside. AUD remains rangebound since printing a YTD low last week with AUD/USD chopping and changing around the 0.65 mark.
• CHF is the worst performer across the majors following soft Swiss CPI metrics which have boosted the odds of a March SNB cut to over 50% from 28%. EUR/CHF advanced to a high of 0.9493 (highest since Dec 18th) with all eyes on a potential test of 0.95.
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FIXED INCOME

• Bunds were initially bearish as the complex reacted to hawkish UK wage data, resulting in the 133.28 session trough. This move has now entirely pared and back towards session highs of 133.65, after an additional boost on a well-received German outing.
• USTs moved in tandem with Bunds post-UK data, but magnitudes more limited as we await US CPI where downward inflation trends are expected to be evident once again, headline & core seen easing further.
• Gilts opened lower by 20 ticks from Monday's 97.68 close and thereafter slipped incrementally further to a 97.42 trough as the benchmark reacted to the earlier UK data. However, the move has since pared with Gilts now back towards the mentioned close as focus turns to upcoming events today before UK inflation & GDP later in the week.
• Germany sells EUR 3.292bln vs exp. EUR 4.0bln 2.10% 2029 Bobl: b/c 2.30x, average yield 2.30%, and retention 17.68%.
• UK sells GBP 1.5bln 0.75% 2033 I/L: b/c 2.97x (prev. 2.68x) and real yield 0.634% (prev. 0.724%).
• Italy sells EUR 8.5bln vs exp. EUR 7-8.5bln 2.95% 2027, 3.70% 2030, 4.00% 2030, and 4.45% 2043 BTP.
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COMMODITIES

• Crude complex trades with gains after settling relatively flat yesterday, although off Monday's intraday troughs amid heightened geopolitics and Saudi jawboning. Trade is within a tight range as markets look ahead to the OPEC Monthly Oil Report followed by US CPI. Upside in crude prices coincided with commentary from the OPEC Sec Gen with Brent near peaks of USD 82.50/bbl.
• Precious metals hold an underlying bid despite the somewhat resilient pre-CPI Dollar and steady USTs, potentially propped up by the ongoing geopolitical developments which are showing no signs of cooling; XAU found support at USD 2,016.67/oz as it eyes its 21 DMA (USD 2,027.66/oz) to the upside.
• Base metals are modestly firmer despite the resilient Dollar and subdued risk tone, with no obvious catalyst to explain broader base metals' price action, whilst Chinese markets remain on holiday.
• Morgan Stanley raises oil demand growth forecast to 1.5mln BPD (prev. 1.3mln BPD) and reduces non-OPEC growth forecast to 1.5mln BPD (prev. 1.7mln BPD); bringing the two in-line.
• IEA sees 2024 global oil demand growth between 1.2-1.3mln BPD (vs 1.24mln BPD in Jan OMR), according to IEA Executive Director Birol cited by BBG TV. IEA expects more comfortable oil markets and moderate prices this year. Oil supply growth will more than satisfy demand this year. OPEC+ is largely showing good discipline with cuts. Warns against moves that push oil prices up.
• OPEC Secretary General Al Ghais stands by long-term demand outlook; says Saudi decision to postpone capacity expansion should not be misconstrued as a view demand is falling; voluntary cuts show OPEC+ flexibility. Sees strong global economy this year with positive implications. Market is in a good state and rather stable.
• EIA said US oil output from top shale-producing regions in March is due to climb to its highest since December 2023.
• American Petroleum Institute sues the Biden administration over offshore drilling curbs, according to FT
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NOTABLE EUROPEAN HEADLINES

• BoE reportedly plans to stress test insurers on exposure to reinsurance firms, according to FT.
• Riksbank's Jansson says hard to believe that rates could be cut at each meeting when the time comes for rate cuts to be lowered. There is not a zero chance that the first rate cut could come after this summer. Can not exclude that we could cut rates before Fed and ECB.

DATA RECAP

• ILO Unemployment Rate (Dec) 3.8% vs. Exp. 4.0% (Prev. 3.9%) A hawkish release that spotlights some of the inflation persistence that hawks at the BoE have been highlighting; sparked initial upside in the Pound and downside in Bunds (pre-Gilt open) - click here for more
• UK Employment Change (Dec) 72k (Prev. 73k)
• UK HMRC Payrolls Change (Jan) 48k (Prev. -24k); Claimant Count Unemployment Change (Jan) 14.1k (Prev. 11.7k, Rev. 5.5k)
• Avg Wk Earnings 3M YY (Dec) 5.8% vs. Exp. 5.6% (Prev. 6.5%, Rev. 6.7%); Earnings (Ex-Bonus) (Dec) 6.2% vs. Exp. 6.0% (Prev. 6.6%, Rev. 6.7%)
• Swiss CPI YY (Jan) 1.3% vs. Exp. 1.7% (Prev. 1.7%); CPI MM (Jan) 0.2% vs. Exp. 0.6% (Prev. 0.0%) The much cooler than forecast print is at odds with recent remarks from SNB Chair Jordan that Swiss inflation "probably accelerated in January" and that he expected inflation to rise again a little bit to remain shy of 2.0% in 2024; a release that sparked immediate and sustained CHF pressure - click here for more
• French ILO Unemployment Rate (Q4) 7.5% vs. Exp. 7.4% (Prev. 7.4%, Rev. 7.5%)
• EU ZEW Survey Expectations (Feb) 25.0 (Prev. 22.7)
• German ZEW Current Conditions (Feb) -81.7 vs. Exp. -79.0 (Prev. -77.3); ZEW Economic Sentiment (Feb) 19.9 vs. Exp. 17.5 (Prev. 15.2)

NOTABLE US HEADLINES

• US Senate voted 66-33 to advance the aid bill for Ukraine, Israel and Taiwan for a possible Wednesday vote on passage. However, it was separately reported that House Speaker Johnson rejected the Senate's Ukraine and Israel aid bill as written and indicated his Republican-led chamber would not take up the bill to provide billions in additional aid to Ukraine and Israel, according to AFP.

GEOPOLITICS

MIDDLE EAST

• Israeli warplanes reportedly bombed areas in northern Rafah, according to Al Arabiya via social media platform X.
• The heads of the CIA and Israel’s Mossad spy agency are expected to hold talks with senior Egyptian and Qatari officials on Tuesday in a bid to revive negotiations on a deal to stop the war and release hostages, according to FT sources.
• France's proposal for a truce on the Lebanon-Israeli border was delivered to Lebanon by France which called for fighters including Hezbollah elite forces to withdraw 10km away from the Israel border and aims to enforce a potential ceasefire when the conditions are right, while the proposal also called for the resumption of talks to demarcate the border. Hezbollah official Fadlallah said the group won't discuss the matter relating to south Lebanon before the Israeli offensive in Gaza stops and that Israel is not in a position to impose conditions.
• Russia's Kremlin said they invited Palestinian President Abbas and hope that he will visit Russia, according to RIA.
• US military said Houthi militants fired two missiles from Yemen towards the ship Star Iris in the Bab Al-Mandeb, while the ship reported being seaworthy with minor damage and no injuries to the crew, according to Reuters.
• "Israeli newspaper Haaretz: Some progress has been made in detainee deal negotiations in recent days", according to Sky News Arabia
• Iranian Revolutionary Guards says "if the enemy hits our ships, we will hit the same number or more", according to Sky News Arabia citing Tasnim

OTHER

• White House said the US sees no indication there are about to be hostilities at the Venezuela-Guyana border.
• Japanese PM Kishida is seeking a summit with North Korean leader Kim, according to FT.

CRYPTO

• Bitcoin continues to hold above the USD 50k mark and Ethereum (+1.2%) plays catch-up.

APAC TRADE

• APAC stocks traded mixed albeit with a positive bias as several markets reopened from the extended weekend.
• ASX 200 was choppy as gains in mining, utilities and financials were offset by weakness in healthcare, telecoms and tech, while data showed an improvement in Westpac Consumer Sentiment but NAB Business Confidence and Conditions were mixed.
• Nikkei 225 outperformed and extended on its highest levels since February 1990 as the earnings deluge resumed.

NOTABLE HEADLINES

• RBA's Head of Economic Analysis Kohler said inflation is coming down but is still too high and it will take some time for inflation to get back within the 2%-3% target range and based on their central forecast, inflation is expected to return to the target range in 2025 and to the midpoint in 2026. Furthermore, Kohler said services price inflation remains high and broadly based, while she also noted that high inflation, higher tax payments and higher interest rates have significantly reduced household incomes.
• Brussels is now reportedly preparing to sanction four Chinese entities which it believes are helping the Kremlin buy European dual-use goods, according to a draft of the proposal cited by Politico

DATA RECAP

• Japanese Corp Goods Price MM (Jan) 0.0% vs. Exp. 0.1% (Prev. 0.3%); Corp Goods Price YY (Jan) 0.2% vs. Exp. 0.1% (Prev. 0.0%, Rev. 0.2%)
• Australian Westpac Consumer Confidence Index (Feb) 86.0 (Prev. 81.0); Westpac Consumer Sentiment MM (Feb) 6.2% (Prev. -1.3%)
• Australian NAB Business Confidence (Jan) 1.0 (Prev. -1.0); NAB Business Conditions (Jan) 6.0 (Prev. 7.0)
• New Zealand 1-Year Inflation Forecast (Q1) 3.22% (Prev. 3.60%); 2-Year Inflation Forecast (Q1) 2.50% (Prev. 2.76%)