• European bourses are firmer, with outperformance in the CAC 40 after several strong results; US equity futures firmer to a slightly lesser degree, though the RTY continues to outperform
• Dollar is around flat, GBP softer and JPY firmer as the regions enter a technical recession
• Bonds are firmer after UK GDP data, numerous speakers ahead
• Crude is subdued in a continuation of price action yesterday; base metals are generally firmer amid the constructive risk tone
• Looking ahead, US NY Fed Manufacturing, US Export & Import Prices, IJC, Philly Fed data, US Retail Sales, Comments from ECB’s Lane, BoE’s Greene & Mann, RBNZ’s Orr & Fed's Waller, Supply from US, Earnings from Deere.

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (+0.5%) began the session entirely in the green and continued to extend throughout the European morning. The CAC 40 (+0.9%) incrementally outperforms after a slew of strong results from heavyweight names within the index.
• European sectors hold a positive tilt with Autos parked at the top of the pile, assisted by gains in Renault (+5.5%), with Industrials also benefitting from post-earning strength in Safran (+3.6%) and Schneider Electric (+3.2%).
• US Equity Futures (ES +0.1%, NQ +0.1%, RTY +0.9%) are modestly firmer, though with clear outperformance in the RTY, as it continues the prior day's outperformance. Cisco (-5.5%) reported generally strong metrics, though did provide soft guidance.
• Goldman Sachs on European Stocks: raises 12-month Stoxx 600 target to 510 (prev. 500; last close 485). upgrade Travel & Leisure to Overweight from Neutral; upgrade Consumer Products & Services to Overweight from Neutral; downgrade Energy to Neutral from Overweight; downgrade Utilities to Underweight from Neutral.
• Click here and here for the sessions European pre-market equity newsflow, including earnings from Safran, Schneider Electric, Airbus and more.
• Click here for more details.

FX

• USD is steady ahead of a deluge of US data. For now, a test of 105.00 in the index is yet to materialise after yesterday's 104.97 peak. If 105.00 goes, there is clean air until 105.73 which was the November 14th peak.
• EUR has picked up from yesterday's 1.0695 YTD trough in light of EZ-specific newsflow, and unreactive to ECB Lagarde. Upside sees the 10DMA at 1.0755 and 100DMA at 1.0794 ahead of the 1.08 mark.
• GBP is softer vs. the USD as GDP data sees the UK enter into a technical recession. Cable printed a low of 1.2543 but stopped short of yesterday's 1.2536 trough.
• JPY is firmer vs. the USD despite soft Japanese GDP metrics. Pullback could be a combination of technical factors after the pair ran out of steam at 150.88 as well as increased jawboning from Japanese officials.
• AUD a touch firmer vs. the USD despite disappointing jobs data overnight. AUD/USD has made a high of 0.6501 but is yet to materially clear the level or test the pre-US CPI peak of 0.6537.
• Click here for more details.

FIXED INCOME

• Gilts are firmer after the regions GDP print sparked a dovish gap-up of 49 ticks to a 98.29 open before extending to a 98.59 peak. Overall, the data was dovish but is unlikely to have any significant impact on the BoE's calculus for the first cut.
• USTs are in-fitting with price action seen in Gilts/Bunds; specifics light into a busy afternoon agenda; usual weekly data and Fed's Waller the highlights. As it stands, USTs at the top-end of 110-00+ to 110-10 bounds while the yield curve is slightly flatter.
• Bunds are firmer in tandem with Gilts. Currently up to 134.18 at best, but have since retreated back beneath 134.00 as newsflow slows with Chief Economist Lane the afternoon highlight.
• Spain sells EUR 5.896bln vs exp. EUR 5-6bln 2.50% 2027, 3.50% 2029 and 2.35% 2033 Bono
• France sells EUR 11.992bln vs exp. EUR 10.5-12bln 2.50% 2027, 2.75% 2029 and 0.00% 2031 OAT
• Click here for more details.

COMMODITIES

• Crude is subdued following the large inventory builds in the prior session. Markets are seemingly putting more weight on the demand implications of recession as opposed to the supply concerns from expanding geopolitics. Currently, Brent holds just above USD 81.00/bbl.
• Upward biases across precious metals following the recent pullback in the Dollar, yields and amidst the heightened geopolitical landscape; XAU found intraday support close to its 100 DMA (1,990.35/oz).
• Base metals are mostly firmer albeit with mild gains amid the slight pullback in the Dollar after Fed officials downplayed the recent hot US CPI report.
• IEA OMR: 2024 global oil demand growth downgraded by 200k BPD to 1.22mln BPD (prev. 1.24mln); says global oil demand growth is losing momentum, with pace of expansion set to decelerate from 2.3mln BPD last year, in part due to China. With the robust outlook for non-OPEC+ supply, our balances suggest a slight build in inventories in 1Q24 despite the extension and deepening of OPEC+ supply curbs. From 2Q24 onwards, continuation of this strength could leave OPEC+ pumping above requirements for its crude oil if extra voluntary cuts are unwound in the second quarter.
• Iran sets the March Iranian light crude OSP to Asia at Oman/Dubai + USD 1.75/bbl
• Click here for more details.

NOTABLE EUROPEAN HEADLINES

• Goldman Sachs cuts the UK's 2024 GDP growth forecast to 0.4% (prev. 0.6%)
• ECB President Lagarde says "the latest data confirm the ongoing disinflation process and is expected to bring us gradually further down over 2024 as the impact of past upward shocks fades and tight financing conditions help to push down inflation". New framework will most likely compromise bond portfolio and lending operations; we will be done with framework review in a couple months. "Last thing I want is hasty decision and then inflation rises again".
• ECB's de Cos says bank's projections foresee inflation to continue falling; still need some time on the exact timing of rate cut
• Germany's DIHK: German Co's expect economy to shrink in 2024 and GDP to contract by 0.5%; 35% of surveyed Co's expect business to worsen in next 12m, 14% expect improvements. Bad sentiment in German economy is rising. Expects inflation of 2.7% exports to grow by 0.5%, private consumption spending to grow by 0.5% in 2024. 57% of Co's see economic policy framework in Germany as business risk. 33% of German Co's plan to decrease investments in Germany, 24% plan investment expansions.
• Maersk (MAERSB DC) says as security risks remain highly elevated, vessels previously bound to transit area continue to be diverted south via Cape of Good Hope.

DATA RECAP

• UK GDP Prelim QQ (Q4) -0.3% vs. Exp. -0.1% (Prev. -0.1%); Modest dovish reaction; Click here for more details.
• UK GDP Estimate YY (Dec) 0.0% vs. Exp. 0.3% (Prev. 0.2%, Rev. -0.3%); GDP Estimate MM (Dec) -0.1% vs. Exp. -0.2% (Prev. 0.3%, Rev. 0.2%); GDP Prelim YY (Q4) -0.2% vs. Exp. 0.1% (Prev. 0.3%, Rev. 0.2%); GDP Est 3M/3M (Dec) -0.3% vs. Exp. -0.1% (Prev. -0.2%)
• UK Industrial Output YY (Dec) 0.6% vs. Exp. -0.4% (Prev. -0.1%, Rev. 0.1%); Industrial Output MM (Dec) 0.6% vs. Exp. -0.1% (Prev. 0.3%, Rev. 0.5%)
• UK Goods Trade Balance GBP (Dec) -13.989B GB vs. Exp. -14.9B GB (Prev. -14.189B GB, Rev. -15.125B GB); Goods Trade Bal. Non-EU (Dec) -3.319B GB (Prev. -2.838B GB, Rev. -3.747B GB)
• UK Manufacturing Output YY (Dec) 2.3% vs. Exp. 0.6% (Prev. 1.3%, Rev. 1.9%); Manufacturing Output MM(Dec) 0.8% (Prev. 0.4%, Rev. 0.8%)
• UK Construction O/P Vol MM (Dec) -0.5% vs. Exp. -0.2% (Prev. -0.2%, Rev. -0.7%); Construction O/P Vol YY (Dec) -3.2% vs. Exp. -1.4% (Prev. 0.9%, Rev. -0.7%)
• UK Business Invest QQ Prelim (Q4) 1.5% (Prev. -3.2%, Rev. -2.8%); Business Invest YY Prelim (Q4) 3.7% (Prev. 2.3%, Rev. 2.6%)
• UK Services YY (Dec) 0.1% vs. Exp. 0.5% (Prev. 0.1%, Rev. -0.3%); Services MM (Dec) -0.1% vs. Exp. -0.2% (Prev. 0.4%, Rev. 0.2%)
• Swiss Producer/Import Price YY (Jan) -2.3% (Prev. -1.1%); Producer/Import Price MM (Jan) -0.5% (Prev. -0.6%)
• Spanish CPI MM Final NSA (Jan) 0.1% vs. Exp. 0.1% (Prev. 0.1%); CPI YY Final NSA (Jan) 3.4% vs. Exp. 3.4% (Prev. 3.4%)
• Italian Global Trade Balance (Dec) 5.614B EU (Prev. 3.889B EU); Trade Balance EU (Dec) -2.75B EU (Prev. -2.385B EU)

EARNINGS

• Cisco Systems Inc (CSCO) - Q2 2024 (USD): Adj. EPS 0.87 (exp. 0.84), Revenue 12.8bln (exp. 12.71bln); to cut about 5% of global workforce. KEY METRICS: Networking revenue 7.08bln (exp. 7.16bln). Security revenue 973mln (exp. 956.8mln). Collaboration revenue 989mln (exp. 966mln). Adj. gross margin 66.7% (exp. 65.7%). Adj. operating margin 33% (exp. 32.1%). FY24 GUIDANCE: Revenue 51.5-52.5bln (prev. 53.8-55.0bln, exp. 54.33bln). Adj. EPS 3.68-3.74 (prev. 3.87-3.93, exp. 3.87). Q3 GUIDANCE: Revenue 12.1-12.3bln (exp. 13.1bln). Adj. EPS 0.84-0.86 (exp. 0.92). Adj. gross margin 66-67% (exp. 65.8%). Adj. operating margin 33.5-34.5% (exp. 33.8%). Shares -5.5% in pre-market trade
• Airbus (AIR FP) - Q4 (EUR): Adj. EBIT 2.21bln (exp. 2.26bln). Revenue 22.9bln (exp. 22.5bln), sees 2024 deliveries about 800 planes (exp. 826). Co. is to propose a special dividend of EUR 1/shr. Sees 2024 adj. EBIT between 6.5-7bln (exp. 7.15bln). On widebody aircraft, the Co. continues towards a monthly rate of 4 aircraft for the A330 in 2024 and rate 10 in 2026 for the A350. Co. assumes no additional disruptions to the world economy, air traffic, the supply chain, the Company’s internal operations, and its ability to deliver products and services. (Airbus) Index Weightings: CAC 40 (4.8%), Euro Stoxx 50 (2.6%), Stoxx 600 (0.8%). Shares -1% in European trade
• Pernod Ricard (RI FP) - H1 (EUR): Sales 6.59bln (exp. 6.58bln), Net 1.57bln (exp. 1.43bln), Operating Profit 2.14bln (prev. 2.42bln), FCF 301mln. FY24 Outlook: Broadly stable net sales in H2 vs H1. EUR 300mln buyback for the year, EUR 150mln completed in H1. (Newswires) Shares +3.8% in European trade
• Renault (RNO FP) - FY23 (EUR): Net 2.32bln (exp. 3.52bln), Revenue 52.38bln (exp. 52.88bln). Proposes 1.85 dividend (exp. 1.37). FY24 Operating Margin view of "at least" 7.5%, FY24 FCF view "at least" 2.5bln. (Newswires) Shares +7.5% in European trade
• Schneider Electric (SU FP) - FY23 (EUR): adj. EBITA 6.41 (exp. 6.03bln, prev. 6.02bln Y/Y), Revenue 34.2bln (exp. 36.04bln, prev. 35.9bln Y/Y). Guides initial FY24 adj. EBITA organic +8-12%, organic sales +6-8%, Adj. EBITA margin +40-60%. CFO does not expect to implement big increases this year. (Newswires)
• Safran (SAF FP) - FY23 (EUR): Adj. Revenue 23.2bln (exp. 23.3bln), Op. 3.17bln (prev. 2.41bln Y/Y), Op margin 13.6% (exp. 13.8%). Guides initial FY24 adj. recurring op. close to 4bln, adj. revenue 27.4bln (exp. 26.69bln), FCF 3bln. Expects M&A activity to accelerate. (Newswires) Shares +2.5% in European trade
• Stellantis (STLAM IM/STLAP FP) - H2 (EUR): Net Revenue 91.176bln (exp. 91.1bln). Adj. Operating Income 10.217bln (exp. 9.54bln; -10% Y/Y). Adj. Operating Margin 11.2% (prev. 14.4% in H1). Co. plans a EUR 3bln open market share buyback program this year. OTHER METRICS: Dividend proposed of EUR 1.55 per common share, increase of approximately 16% compared to prior year, pending shareholder approval. Industrial free cash flows of EUR 12.9bln; +19% Y/Y. LEV sales up 27% in 2023, with PHEVs at 1 in U.S. and #2 for LEVs in US 21% increase in global BEV sales in 2023. OUTLOOK The Company is reiterating a minimum commitment of double-digit adjusted operating income (AOI) margin in 2024. Shares +4.5% in European trade

NOTABLE US 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.
• Fed's Bowman (voter) did not comment on monetary policy in pre-prepared remarks (07:00GMT/02:00EST).

GEOPOLITICS

MIDDLE EAST

• 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.

CRYPTO

• Bitcoin (+0.9%), continues its advances, but did find resistance around the USD 52.5k level. Ethereum currently just shy of USD 2.8k.

APAC TRADE

• 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.

NOTABLE 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.
• Japanese Chief Cabinet Secretary, when asked about GDP, says they will mobilise all available policies to achieve higher growth and wage increases that exceed inflation

DATA RECAP

• Japanese GDP QQ (Q4) -0.1% vs. Exp. 0.3% (Prev. -0.7%, Rev. -0.8%); 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%); 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); Unemployment Rate (Jan) 4.1% vs. Exp. 4.0% (Prev. 3.9%)