• APAC stocks were mixed amid a lack of drivers and with US markets to remain closed on Monday.
• Mainland China gained on return from the Lunar Year Holiday where China's travel spending topped pre-COVID levels.
• European equity futures indicate a lower open with Euro Stoxx 50 future -0.3% after the cash market closed up 0.5% on Friday.
• DXY is steady vs. peers, EUR/USD remains sub-1.08 and USD/JPY hovers around the 150 mark.
• Israeli PM Netanyahu said Hamas's demands in negotiations are delusional and they will keep fighting until their goals are achieved.
• Looking ahead, highlights include Swedish CPI & Canadian Producer Prices. Note, US markets are closed today on account of President's Day. 

US TRADE

EQUITIES

• US stocks and bonds were pressured on Friday following hot US PPI data which resulted in the underperformance of the rate-sensitive Russell 2k amid higher yields, while the dollar was initially lifted by the data but then pared its gains following a downbeat UoM survey.
• SPX -0.48% at 5,005, NDX -0.90% at 17,685, DJIA -0.37% at 38,627, RUT -1.39% at 2,032.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Daly (voter) said on Friday there is more work to do on inflation and "remarkable progress" on inflation is not victory, while she added the Fed needs to resist the temptation to act quickly when patience is needed. Daly said none of the recent data was surprising and are within bounds of recent volatility, as well as noted that turning points are always bumpy. Daly also stated that three cuts are a reasonable baseline for the year and the real neutral rate estimate is now between 0.5-1.0% with a nominal rate between 2.5-3.0%.
• WSJ Timiraos wrote on Friday that "The core PCE index in January is likely to have risen 0.4%, the largest increase in a year, according to the forecasters who translate the CPI and PPI into the PCE. That would hold the 12-month rate steady at 2.9%".
• EU is to hit Apple (AAPL) with a EUR 500mln fine for allegedly breaching EU competition law regarding its music streaming service, according to FT.
• Goldman Sachs has raised its 2024 S&P target to 5200 vs. prev. target of 5100; cites increased profit estimates.

APAC TRADE

EQUITIES

• APAC stocks were mixed amid a lack of drivers and with US markets to remain closed on Monday.
• ASX 200 lacked firm direction as gains in mining and telecoms were offset by weakness in real estate, tech and defensives, while participants also digested several earnings releases.
• Nikkei 225 traded indecisively albeit with the downside cushioned after better-than-expected machinery orders.
• Hang Seng and Shanghai Comp. were mixed with the former dragged lower amid weakness in property and tech, while the mainland gained on return from the Lunar Year Holiday where China's travel spending topped pre-COVID levels.
• US equity futures traded steadily after Friday's whipsawing and with US cash markets shut for a holiday.
• European equity futures indicate a lower open with Euro Stoxx 50 future -0.3% after the cash market closed up 0.5% on Friday.

FX

• DXY was flat amid quiet newsflow and with US participants away on Monday for Presidents' Day, while the key highlight for the US this week is the release of the FOMC minutes on Wednesday.
• EUR/USD languished beneath the 1.0800 level and nearby 100 and 200 DMAs at 1.0799 and 1.0826, respectively.
• GBP/USD briefly prodded last Friday's best levels but lacked any major catalysts to spur price action.
• USD/JPY slightly retreated beneath 150.00 amid weakness in Japanese stocks and after Machinery Orders topped forecasts.
• Antipodeans mildly strengthened alongside gains in the CNH as Chinese markets reopened from the holiday closures and the PBoC maintained its 1-year MLF rate at 2.50%.
• PBoC set USD/CNY mid-point at 7.1032 vs exp. 7.1970 (prev. 7.1036).

FIXED INCOME

• 10-year UST futures were contained amid the US holiday and after recent inflation metrics.
• Bund futures partially nursed some of the previous declines and just about reclaimed the 133.00 level.
• 10-year JGBs lacked direction amid the absence of additional BoJ purchases and ahead of tomorrow's 20-year auction.

COMMODITIES

• Crude futures pulled back amid light energy-specific news aside from ongoing geopolitical concerns.
• Spot gold eked marginal gains after last Friday's intraday rebound from beneath the USD 2,000/oz level.
• Copper futures were subdued after last week's advances and despite the return of Chinese buyers.

CRYPTO

• Bitcoin was ultimately little changed with price action choppy although held above the USD 52,000 level.

NOTABLE ASIA-PAC HEADLINES

• PBoC conducted a CNY 500bln 1-year MLF operation with the rate kept at 2.50%, as expected.
• Chinese Premier Li said departments under the cabinet should do more to boost confidence and expectations, as well as noted that policymaking and implementation should be consistent and stable, according to Reuters.
• Chinese state-owned lenders have earmarked at least CNY 60bln of loans for property projects eligible for support, according to Bloomberg.
• China’s travel spending during the Lunar New Year holidays rose 47.3% Y/Y to CNY 632.7bln which surpassed 2019 levels.
• Chinese Foreign Minister Wang Yi discussed lifting sanctions against Chinese companies and individuals in talks with US Secretary of State Blinken. It was separately reported that Wang said in talks with German Chancellor Scholz that both countries should eliminate interference and continue with open and free trade. Furthermore, Wang spoke with Canada’s Foreign Affairs Minister and said the current difficult situation in relations is not what China wants to see and the sides are not rivals or enemies, while he added both sides should build trust and achieve win-win cooperation, as well as hopes that Canada will establish a correct understanding of China and stop hyping the ‘China threat theory’.
• FBI warned that Chinese malware could threaten critical US infrastructure and the FBI is laser-focused on Chinese efforts to insert malicious software code in computer networks that could disrupt critical infrastructure.

DATA RECAP

• Japanese Machinery Orders MM (Dec) 2.7% vs. Exp. 2.5% (Prev. -4.9%)
• Japanese Machinery Orders YY (Dec) -0.7% vs. Exp. -1.4% (Prev. -5.0%)

GEOPOLITICS

MIDDLE EAST

• Israeli PM Netanyahu said Hamas's demands in negotiations are delusional and they will keep fighting until their goals are achieved. Netanyahu said their military pressure is working and that whoever tells them not to operate in Rafah is telling them to lose the war, while he added that a deal with Palestinians will only be reached through direct negotiations between the sides without preconditions.
• Israel's cabinet unanimously approved a motion rejecting international calls for a permanent settlement with the Palestinians including the unilateral recognition of a Palestinian state, according to FT.
• Hamas chief Ismail Haniyeh blamed Israel for the lack of progress in achieving a ceasefire agreement and said they would not accept anything less than a complete cessation of aggression and withdrawal of the occupation army from Gaza. In relevant news, it was also reported that Gaza’s second-largest hospital is now completely out of service, according to Reuters citing a Health Ministry spokesman.
• Qatar’s PM said the pattern of the last few days is not very promising for Israel/Hamas negotiations, while he added time is not in their favour as the situation in Rafah is evolving and will be very dangerous for the region.
• US plans to send weapons to Israel amid President Biden’s push for a ceasefire deal, according to WSJ.
• US military said it conducted five self-defence strikes in Iranian-backed Houthi-controlled areas of Yemen.
• UKMTO announced an incident that occurred on Sunday 35NM south of Al Mukha, Yemen in which an explosion was reported near a vessel that caused damage, while it later updated that that the crew abandoned the vessel and military authorities assisted.
• Yemeni armed forces spokesman said via X that they will shortly release an important statement.
• UK Foreign Secretary Cameron urged China to use its influence on Iran to pressure the Houthis over their actions in the Red Sea.
• Palestinian Authority PM said Russia invited Palestinian factions to meet in Moscow on February 26th.

OTHER

• Russia’s Defence Ministry said Russian troops took full control of the city of Avdiivka.
• Ukrainian President Zelensky said Ukraine will surprise Russia with its drone systems and electronic warfare capability this year, while he added that keeping Ukraine in an artificial deficit of artillery and long-range capabilities allows Russian President Putin to adapt to the current intensity of war.
• US President Biden called Ukrainian President Zelensky on Saturday to underscore US commitment to continue supporting Ukraine and emphasised the need for Congress to urgently pass a national security supplemental funding bill to resupply Ukraine.
• US VP Harris said the US will work to ensure Russia pays damages to Ukraine and the US stands ready to support Ukraine in its war with Russia for as long as it takes.
• G7 Presidency statement noted that G7 expressed outrage at the death in detention of Alexei Navalny and demanded that Russian authorities fully clarify the circumstances of the death.
• UK PM Sunak spoke with European Commission President von der Leyen in which they underscored the importance of continuing support to Ukrainian people and Sunak welcomed the announcement that the EU will provide EUR 50bln support to Ukraine, according to Reuters citing Downing Street.
• German Chancellor Scholz said Germany is discussing developing distance-capable precision weapons with France and Britain.
• Estonia’s PM said the EU should work on a plan to issue EUR 100bln in Eurobonds to bolster the European defence industry and called for allies to do more to get Kyiv the weapons it needs, according to Bloomberg.
• Hungarian PM Orban said they can ratify the Swedish NATO bid at the beginning of the new session of Parliament.

EU/UK

NOTABLE HEADLINES

• BoE Chief Economist Pill said on Friday that the economic situation in the UK looks a little less benign than in the US and weak economic activity in the UK is not putting much downward pressure on inflation. Pill said they have to maintain a restriction in rates until the persistent inflation component is gone and noted that based on the data, getting to the point of reducing the bank rate is still some way off, while they have to wait several more months before they can be convinced persistent inflation is gone.
• The EY Item Club expects that UK bank lending to businesses will rise by only 0.8% this year (vs. a 2.1% contraction last year), according to The Times.
• French Finance Minister Le Maire lowered France’s 2024 economic growth forecast to 1.0% from 1.4% and announced plans to cut spending by EUR 10bln, according to Bloomberg citing an interview with TF1.
• Fitch affirmed Netherlands at AAA: Outlook Stable and affirmed Belgium at AA-; Outlook Negative.

DATA RECAP

• UK Rightmove House Price Index MM (Feb) 0.9% (Prev. 1.3%)
• UK Rightmove House Price Index YY (Feb) 0.1% (Prev. -0.7%)