• European equities are mixed, with mild outperformance in the CAC 40, lifted by post-earning gains in Air Liquide; US equity futures are entirely in the red, RTY lags
• Dollar is modestly weaker and Antipodeans outperform, supported by the PBoC 5yr LPR cut
• Bonds are firmer with specifics-light; Bunds unreactive to the latest ECB EZ negotiated wages metrics
• Crude is softer alongside base metals, with Chinese stimulus efforts unable to lift sentiment
• Looking ahead, Canadian CPI, US Philly Fed Nonmanufacturing Business Outlook Survey, New Zealand PPI, Japanese Trade, Earnings from Walmart & Medtronic

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (-0.1%), began the session on a weaker footing and trade throughout the morning has been choppy/mixed. The CAC 40 (+0.2%) outperforms, lifted by post-earning strength in Air Liquide (+5.9%).
• European sectors hold a negative tilt; Chemicals outperform, with the sector lifted by Air Liquide. Basic Resources is hampered by poor BHP results, peers Anglo American and Rio Tinto lag.
• US Equity Futures (ES -0.3%, NQ -0.4%, RTY -0.9%) are trading modestly weaker, with clear underperformance in the RTY, as it continues the prior session’s weakness; focus ahead on key retail earnings including Walmart (WMT)
• In terms of stock specifics, Capital One (-4.5%) is to acquire Discover Financial Services (+14.6%) in an all-stock transaction valued at USD 35.3bln.
• Click here and here for the sessions European pre-market equity newsflow, including earnings from Air Liquide, Antofagasta, Barclays, IHG, Fresenius Medical Care and more.
• Click here for more details.

FX

• Tight parameters (104.06-41) for the DXY with catalysts lacking. In recent trade, the Dollar has been making its way lower towards the round 104.00 mark, pressured by mild upside in G10 peers.
• EUR is edging mild gains vs. USD but focus remains on whether the incremental move above 1.08 sticks or not, with EUR/USD having now surpassed the 21DMA at 1.0796. The ECB EZ wage metrics provided little impetus for the EUR.
• JPY back on a 150.00 handle with the pair having chopped and changed around this in recent sessions. Focus remains on the 150.88 YTD peak.
• CNH is around flat vs. the USD despite PBoC easing measures overnight. ING suggests this and the muted reaction to Lunar NY spending shows "expectations of a recovery in China’s growth sentiment will be gradual at best".
• Antipodeans are both a touch firmer vs. the USD with AUD supported by Chinese stimulus efforts and considerations of an RBA high in the latest minutes.
• PBoC set USD/CNY mid-point at 7.1068 vs exp. 7.2018 (prev. 7.1032).
• Click here for more details.

FIXED INCOME

• USTs are a touch firmer after the President's Day holiday. Newsflow has been limited thus far but the larger than expected PBoC LPR cut to the 5yr is perhaps having some influence given the US markets sensitivity to property/CRE-related updates; currently holds near highs at 109-30.
• Bunds are bid as action picks up after Monday's US holiday-induced lull. There was no reaction to the ECB negotiated wage metrics, which only incrementally lessened from the prior, therefore having little impact on market pricing for the April/June ECB decisions; Bund peak for today at 133.27 thus far.
• Gilt price action is in-fitting with EGBs directionally and in terms of magnitude; firmer by around 50 ticks at 97.98 high, surpassing Friday's 97.76 peak but stalling on approach to the figure
• UK sells GBP 1.75bln 4.00% 2063: b/c 2.92x, average yield 4.518%, tail 0.6bps. No pronounced reaction
• Germany sells EUR 4.138bln vs exp. EUR 5bln 2.50% 2026: b/c 1.91 (prev. 1.8x), average yield 2.79% (prev. 2.44%), retention 17.24% (prev. 17.40%). No pronounced reaction
• Click here for more details.

COMMODITIES

• Crude is subdued as China woes are reflected across commodities with one eye on geopolitics, with the situation in the Middle East expected to escalate in the coming month; Brent Apr currently holds below USD 83/bbl.
• Precious metals see a mild upward bias in tandem with price action in the Dollar and awaiting the next catalyst ahead of tomorrow's FOMC Minutes; XAU tests Monday's high (2,023.07/oz) ahead of the 50 DMA (2,030.32/oz).
• Base metals are mostly subdued, particularly for iron ore with traders citing ongoing woes surrounding China's economy, whilst the PBoC's 5yr LPR cut failed to provide relief.
• Three tankers with Russian Sokol oil onboard started to move to ports in China and India after being stored for three months, while two of the tankers are under US sanctions and are heading towards China.
• Click here for more details.

NOTABLE EUROPEAN HEADLINES

• EU New car registrations: +12.1% in January 2024; battery electric 10.9% (prev. 9.5%) market share; Volkswagen (VOW3 GY) +11.5% Y/Y; Stellantis (STLAM IM/STLAP FP) +15% Y/Y; Renault (RNO FP) -2.9% Y/Y; BMW (BMW GY) +28.2% Y/Y; Mercedes-Benz (MBG GY) -7.5% Y/Y; Volvo Cars (VOLCARB SS) +34.9%
• Goldman Sachs expects the BoE to begin cutting rates in June (prev. May)

BoE Treasury Select Hearing on the February MPR

• BoE Governor Bailey says BoE is looking beyond the temporary period when it expects CPI to return to target this year; thinks economy is already showing distinct signs of an upturn. ECONOMY Good news that the economy is at full employment. Looking for more sustained progress on reduction of more persistent element of inflation. Seeing some signs pay growth is adjusting down in line with lower headline inflation. POLICY Do not need inflation back at target before cutting rates.
• BoE Deputy Governor Broadbent says the question has moved on from one about the degree of policy restrictiveness to one about its duration; remains highly uncertain. The gradual easing in the tightness in the labour market is one indication that monetary policy is now restrictive. Doesn’t rule out a policy easing at some point this year. More persistent components of inflation (services and wages) may have peaked. One cannot be precise about how rapidly inflation will fall back. Timing of any adjustment can only depend on the actual evolution of the economic data, and in particular the three sets of indicators: 1. Tightness of the labour market. 2. Wage growth. 3. Services inflation

DATA RECAP

• ECB Euro Area Indicator of Negotiated Wage Rates Q4 4.46% Q/Q (Prev. 4.69%).
• Swedish Money Market CPIF Inflation 1 Yr (Feb) 1.9% (Prev. 2.0%); Money Market CPIF Inflation 5 Yrs (Feb) 2.1% (Prev. 2.0%)

EARNINGS

• Air Liquide (AI FP) - FY23 (EUR): Net 3.08bln (exp. 3.40bln), Op. 5.07bln (exp. 5.05bln), Revenue 27.6bln (exp. 27.7bln). Confirms its advanced financial objectives. Payment of EUR 3.20/shr will be proposed to shareholders for 2023, +8.5% Y/Y. Shares +5.9% in European trade
• Antofagasta (ANTO LN) – FY (USUD): Revenue 6.3bln (exp. 6.3bln), EBITDA 3.08bln (exp. 3.08bln), PBT 1.97bln (1.73bln). Outlook for the Co. and shareholders is positive. Recommenced a 0.243/shr dividend. (Newswires) Shares +4.1% in European trade
• Barclays (BARC LN) - Q4 (GBP): CIB revenue 2.39bln (exp. 2.55bln). NII 3.14bln (exp. 3bln). FICC 724mln (exp. 830.8mln). Sees 2024 rote above +10% (exp. +9.2%). Sees 2024 CET1 ratio 13-14% (exp. 14.2%). Plans to return at least GBP 10bln between 2024-2026. (Newswires)
• IHG (IHG LN) – FY23 (USD): Adj. EPS 3.76 (exp. 3.76), Revenue 2.16bln (exp. 2.16bln, prev. 1.84bln Y/Y), Op. 1.02bln (prev. 828mln Y/Y), RevPAR +16.1% Y/Y, +10.9% vs 2019. To commence 800mln share buyback. (Newswires)Shares +5.9% in European trade
• Mining names - BHP (BHP AT) - H1 (USD) profit after tax attributable 927mln (prev. 6.5bln Y/Y), underlying profit 6.6bln (prev. 6.6bln Y/Y), underlying EBITDA USD 13.9bln (prev. 13.2bln Y/Y), rev. 27.2bln (prev. 25.7bln Y/Y), lowers the H1 dividend by 20% to USD 0.72/shr. Says: The external operating environment in calendar year 2023 was relatively volatile. (Newswires) Shares fell 1.1% in Australian trade.
• Fresenius Medical Care (FME GY) - Q4 (EUR): EPS 0.88 (exp. 0.33), EBIT 428mln (exp. 382mln), Revenue 4.99bln (exp. 4.94bln). Guides initial FY24 Revenue "grow low to mid-single-digit % Y/Y", Op "grow mid to high teen % Y/Y". Affirms FY25 Op. margin 10-14% (prev. guided 10-14%). (Newswires) Shares +4.6% in European trade

NOTABLE US HEADLINES

• Capital One (COF) is to acquire Discover Financial Services (DFS) in all stock transaction valued at USD 35.3bln in which Discover shareholders will receive 1.0192 Capital One shares for each Discover share.

GEOPOLITICS

MIDDLE EAST

• EU Foreign Policy Chief Borrell said 26 EU countries called for an immediate humanitarian pause that would lead to a sustainable ceasefire in Gaza.
• US proposed a rival draft UN Security Council resolution that would underscore 'support for a temporary ceasefire in Gaza as soon as practicable' and would determine that a major ground offensive into Rafah would further harm civilians and potentially displace them into neighbouring countries. Furthermore, it stated that a major ground offensive into Rafah should not proceed under current circumstances, while a senior administration official later said there was no rush to vote on the UN Security Council resolution on Gaza and the US intends to allow some time for negotiations, according to Reuters.
• US President Biden's top Middle East adviser Brett McGurt will visit Israel and Egypt, according to Axios.
• Yemen’s Houthis said they attacked two US ships in the Gulf of Aden, while they also confirmed that they attacked a UK ship over the weekend which resulted in its sinking. In relevant news, UKMTO reported an incident with a vessel 90NM west of Jizan, Saudi Arabia and British maritime security firm Ambrey said a Marshall Island-flagged ship was physically damaged by an unmanned aerial vehicle in an attack 60NM north of Djibouti.
• IAEA Chief said Iran continues to enrich uranium just short of weapons-grade level, according to Reuters.

OTHER

• Ukrainian President Zelensky said the front-line situation is extremely difficult where Russian troops are concentrated and that Russia is exploiting delays in aid, while it was also reported that Ukrainian PM Shmyhal said Ukrainian forces are hampered by a lack of artillery and long-range munitions, according to Reuters.
• China’s military said it organised front-line naval and air forces to closely monitor the Philippines' 'joint air patrol' with foreign countries in the South China Sea on Monday, while it added the Philippine side 'brought together extraterritorial countries to stir up trouble in the South China Sea' and publicly hyped up the air patrol.
• Taiwanese minister expressed regret at China's coastguard boarding a Taiwanese tourist boat and said the incident harmed Taiwanese people's feelings and triggered panic, according to Reuters.

CRYPTO

• Bitcoin holds just shy of USD 52k, whilst Ethereum (-1.9%) gives back some of the recent advances.

APAC TRADE

• APAC stocks traded with mild losses with price action contained following the US holiday lull.
• ASX 200 was dragged lower by miners after BHP reported flat underlying profits and cut its dividend by 20%.
• Nikkei 225 reversed its earlier advances as momentum stalled and the 1989 record high remained elusive.
• Hang Seng and Shanghai Comp. were lacklustre as tech weakness in Hong Kong clouded over the gains in the energy sector, while the mainland was rangebound as participants digested the announcement of the PBoC's latest benchmark rates in which the 1-year LPR was surprisingly maintained at 3.45% (exp. 5bps cut), but the 5-year LPR was cut by 25bps (exp. 10bps cut).
• PBOC LPR REVIEW: 1yr maintained but the 5yr cut, likely designed to support the property sector. Click here for more details.

NOTABLE HEADLINES

• PBoC 1-Year Loan Prime Rate (Feb) 3.45% vs Exp. 3.40% (Prev. 3.45%); PBoC 5-Year Loan Prime Rate (Feb) 3.95% vs Exp. 4.10% (Prev. 4.20%)
• Chinese Foreign Minister Wang told his Spanish counterpart that China is ready to maintain high-level exchanges with Spain and strengthen the synergy of development strategies, as well as deepen mutually beneficial cooperation. Wang said China regards the EU as an important force in the multipolar pattern and supports European integration, the development and growth of the EU, and realising strategic autonomy. Furthermore, he said as long as China and the EU strengthen solidarity and cooperation, bloc confrontation will not arise and they are ready to work with the EU to uphold the free trade system, practice multilateralism, promote an equal and orderly multipolar world and inclusive economic globalisation.
• RBA Minutes from the February 6th Meeting stated that the board considered the case to hike by 25bps or hold steady, while the case to hold steady was the stronger one and appropriate given balanced risks to the outlook. The minutes also stated the data gave the board more confidence inflation would return to target in a reasonable timeframe although it would "take some time" before the board could be confident enough about inflation. Furthermore, the board agreed it was appropriate not to rule out another rise in rates and noted that hiking rates would not prevent it from cutting should the economy weaken.