• APAC stocks mostly took impetus from the rebound on Wall St after the Fed downplayed the recent CPI report.
• Japanese Q4 GDP showed that the nation's economy entered into a technical recession.
• European equity futures indicate a higher open with Euro Stoxx 50 future +0.4% after the cash market closed up 0.4% on Wednesday.
• DXY has pulled back a touch after failing to breach 105, JPY leads G10 FX.
• Looking ahead, highlights include UK GDP Estimate, US NY Fed Manufacturing, US Export & Import Prices, IJC, Philly Fed data, US Retail Sales, IEA OMR, Comments from ECB’s Lagarde & Lane, BoE’s Greene & Mann, RBNZ’s Orr & Fed's Waller, Supply from Spain, France & US

US TRADE

EQUITIES

• US stocks and bonds rebounded as markets pared some of the post-CPI extremes which helped the S&P 500 to just about reclaim the 5k status, while the gains were helped after the Fed appeared to downplay the impact of the hot January CPI report as Fed Chair Powell told Congress in a closed-door meeting that the inflation data was consistent with what they had been anticipating and they will be looking to the PCE report to give them more intel, while Fed's Goolsbee also stated it is still clear that inflation is coming down.
• SPX +0.96% at 5,000, NDX +1.18% at 17,807, DJIA +0.40% at 38,424, RUT +2.44% at 2,012.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barr (voter) said January data was stronger than expected for both jobs and inflation, while he added the Fed is looking at the totality of numbers and a lack of historical parallels makes current monetary policy decisions difficult. Barr also stated that data suggests the Fed is on a good path but it is still early to say there will be a soft landing, while he added that they are seeing liquidity pressures in the banking system today and that CRE pressures seen today are more "old-fashioned" risks banks typically face.
• US Treasury Secretary Yellen, addressing the market reaction to CPI, said it is a tremendous mistake to focus on minor fluctuations and inflation overall is coming back down to normal levels. Yellen also said they know there's more work to do, but good jobs are being created all over the US.
• WSJ’s Timiraos noted “Forecasters who translate the CPI into the PCE are currently tracking January core PCE to rise 0.3%, which would lower the 12-month rate to 2.7%", while he added that these figures are preliminary and could change after the PPI is released on Friday.

APAC TRADE

EQUITIES

• APAC stocks mostly took impetus from the rebound on Wall St after the Fed downplayed the recent CPI report.
• ASX 200 was led higher by a rally in tech and real estate but with upside capped by disappointing jobs data.
• Nikkei 225 climbed back above the 38,000 level and printed a fresh 34-year high with the index largely unfazed by the surprise contraction in Q4 GDP which showed that Japan's economy entered into a technical recession.
• Hang Seng traded rangebound amid quiet newsflow and the continued absence of mainland participants.
• US equity futures took a breather after clawing back most of the post-CPI losses.
• European equity futures indicate a higher open with Euro Stoxx 50 future +0.4% after the cash market closed up 0.4% on Wednesday.

FX

• DXY lacked direction after reversing some of the CPI-induced advances and failing to breach 105.00.
• EUR/USD was uneventful amid a lack of fresh catalysts but held on to the prior day's spoils.
• GBP/USD traded flat as participants awaited UK data releases including GDP and Industrial Production.
• USD/JPY declined but just about retained the 150.00 status amid gains in stocks and Japan's surprise recession.
• Antipodeans conformed to the humdrum mood across the FX space with brief pressure in AUD/USD following disappointing jobs data including a higher-than-expected Unemployment Rate.

FIXED INCOME

• 10-year UST futures continued to recover after recent Fed commentary moderated post-CPI extremities.
• Bund futures remained afloat and briefly climbed back above the 134.00 level after yesterday's rebound.
• 10-year JGBs were supported after data showed Japan's economy unexpectedly entered a technical recession.

COMMODITIES

• Crude futures extended on the prior day's declines after recent bearish crude inventory data but with losses stemmed amid the mostly constructive risk tone and ongoing geopolitical angst.
• Spot gold traded sideways beneath USD 2,000/oz despite the Fed downplaying the recent CPI data.
• Copper futures were rangebound and failed to meaningfully benefit from the mostly positive risk environment with its largest buyer still on holiday.

CRYPTO

• Bitcoin climbed above the USD 52,000 level with prices at their highest level in more than two years.

NOTABLE ASIA-PAC HEADLINES

• Japan's Cabinet Office said 2023 nominal GDP undershoots Germany's to become the world's fourth largest economy in dollar-denominated terms and that weak domestic demand for clothing and eating out caused a decline in private consumption.
• Japan's Economy Minister Shindo said consumer spending lacks strength and capex is taking time to realise, while he added the government aims to achieve wage increases that surpass inflation, leading to consumption growth. The government also aims to boost the potential growth rate by promoting domestic investment and aims to realise a virtuous cycle of wage increase and economic growth.
• Monetary Authority of Singapore official said monetary policy is appropriate and the next policy statement is scheduled for April. MAS also noted there are continuing uncertainties on growth and inflation which it is monitoring the implications of quite closely.
• RBA Governor Bullock said the global economy held up better than initially expected and had been worried about hard landings and recessions, while she added they are in a good position to get inflation down in a reasonable amount of time.

DATA RECAP

• Japanese GDP QQ (Q4) -0.1% vs. Exp. 0.3% (Prev. -0.7%, Rev. -0.8%)
• Japanese GDP QQ Annualised (Q4) -0.4% vs. Exp. 1.4% (Prev. -2.9%, Rev. -3.3%)
• Singapore GDP QQ (Q4 F) 1.2% vs Exp. 1.4% (prev. 1.4%, Rev. 1.3%)
• Singapore GDP YY (Q4 F) 2.2% vs Exp. 2.5% (prev. 2.8%)
• Australian Employment (Jan) 0.5k vs. Exp. 30.0k (Prev. -65.1k)
• Australian Unemployment Rate (Jan) 4.1% vs. Exp. 4.0% (Prev. 3.9%)

GEOPOLITICS

MIDDLE EAST

• Israeli PM Netanyahu said they will fight until complete victory which includes a strong operation in Rafah after allowing civilians to leave combat zones, according to Al Jazeera.
• Australia, New Zealand and Canada issued a joint statement that they are gravely concerned by indications Israel is planning a ground offensive into Rafah which would be catastrophic, while it was added that an immediate humanitarian ceasefire is urgently needed.

OTHER

• US informed Congress and European allies of new intelligence regarding Russian nuclear capabilities although they do not pose an urgent threat to the US and are related to attempts by Russia to develop a space-based weapon, according to sources cited by Reuters.
• US Treasury Secretary Yellen said Russian President Putin will continue to threaten other countries if the US is not supportive of Ukraine, while she urged US House members to approve the supplemental funding bill with aid for Ukraine and said US national security is at stake. Furthermore, she said Trump's remarks on NATO and Russia were highly irresponsible and could undermine national security.
• Japanese Chief Cabinet Secretary Hayashi said North Korea is strengthening surprise attack capabilities by launching missiles from various platforms such as from submarines to trucks, according to Reuters.

EU/UK

NOTABLE HEADLINES

• UK Chancellor Hunt is exploring a fresh squeeze on public spending to fund tax cuts, according to FT.
• German government expects GDP to grow by 1% in 2025 (prev. forecast 1.5% in October) and sees inflation at 2.8% in 2024 and 1.9% in 2025, according to Reuters via government sources.
• ECB's Nagel said inflation is going in the right direction but it is not there yet, while Nagel also said there's a lot to do for the German economy which may have contracted in Q1.