• Equities are entirely in the red; the NQ lags, dragged down by Apple and Tesla
• Dollar is flat, with G10’s mostly lower though the Yen holds firm post-CPI
• Bonds are firmer, though revised EZ PMIs spurred a gradual hawkish move for EGBs
• Crude lacks direction, XAU continues to trade higher and base metals are mixed
• APAC focus on hot Tokyo CPI and China’s 2024 GDP target being set around 5%, as expected
• Looking ahead, US PMI, US IBD/TIPP Economic Optimism, Durable Goods, ISM, US Primary “Super Tuesday”, Comments from Fed's Barr, Earnings from Target & Crowdstrike

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (-0.3%) began the session mostly in modest negative territory, and EZ Composite/Services PMIs (which were revised higher) did little to sway the indices.
• European sectors hold a strong negative tilt, with the typical Defensive sectors (Utilities/Healthcare) able to remain afloat. Autos is found at the foot of the pile, with sentiment hampered following poor Tesla Chinese shipments data yesterday, with a factory fire at the Co's German plant also not helping.
• US Equity Futures (ES -0.4%, NQ -0.7%, RTY -0.4%) are entirely in the red, taking impetus from a downbeat sentiment in Europe. The NQ underperforms, hampered by losses in Tesla (-1.9%), after news that its plant in Germany was powerless, following a fire caused by “eco-activists”. Elsewhere, Apple (-1.5%) continues to sink lower, on reports that iPhone sales in China plunged.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
• Click here for more details.

FX

• Uneventful trade for the dollar with DXY consolidating on a 103 handle and respecting yesterday's 103.72-96 range. Downside sees the 200DMA at 103.73. Upside focus is on reclaiming 104.
• EUR is steady vs. the USD and contained within a tight 1.0842-58 range and yesterday's 1.0837-67 parameters. Final PMIs had little sway on the EUR with attention turning to Thursday's ECB announcement.
• Contained trade for Cable with a range of 1.2672-94 which sits within yesterday's 1.2650-1.2707 bounds. PMIs had little sway on the pound with traders more mindful of tomorrow's budget and potential forthcoming tax cuts, latest via the Times seemingly cements a National Insurance cut.
• JPY a touch firmer vs. the USD following hot Tokyo inflation metrics overnight, which were followed up by comms from Japanese officials that markets must brace for higher rates. That being said, still remains above 150.50 and close to 150.88 YTD peak.
• Antipodeans are both softer vs. the USD with potential disappointment out of China weighing on sentiment. AUD/USD has lost 0.65 status and gone as low as 0.6478. If downside extends, YTD trough at 0.6442 could come into view.
• PBoC set USD/CNY mid-point at 7.1027 vs exp. 7.1961 (prev. 7.1020).
• Click here for more details.

FIXED INCOME

• Bunds began the session on the front foot, extending to a 133.28 peak before stalling and as such remained shy of 133.30 & 133.37 from 21st & 23rd February. Thereafter, EZ Final PMIs spurred a gradual hawkish move across the regional and pan-EZ figures, a move which was sufficient to bring Bunds back to the 133.00 mark, though still remain firmer on the day.
• USTs are in-fitting with European peers and pulled back alongside EZ PMIs. Holds towards the upper end of a 110-23-111-00 range. A high point which resides just a tick shy of Monday's best.
• Gilts initially moved in tandem with EGBs, awaiting its own PMI release, which saw a modest revision lower and as such lifted Gilts by a handful of ticks to just above 98.50 but shy of the earlier 98.61 peak.
• UK sells GBP 3.75bln 3.75% 2027 Gilt: b/c 3.01x (prev. 3.04x), average yield 4.314% (prev. 4.131%) & tail 0.5bps (prev. 0.5bps)
• Germany sells EUR 3.316bln vs exp. EUR 4bln 2.10% 2029 Bobl: b/c 2.50x (prev. 2.30x), average yield 2.40% (prev. 2.30%), and retention 17.10% (prev. 17.68%)
• Click here for more details.

COMMODITIES

• Crude futures are choppy after seeing little notable fallout from the China Two-Session and as geopolitical updates remain sparse, though crude prices clambered off lows as EZ PMIs saw upward revisions. Currently crude holds below USD 83/bbl.
• Precious metals see modest gains despite a flat Dollar and relatively light macro and geopolitical newsflow this morning, with prices seemingly continuing the momentum from yesterday; XAU rose above yesterday's peak (2,119.97/oz) as it continues to hone in on the 2023 peak near USD 2,148/oz.
• A mixed session for base metals after some APAC weakness following the underwhelming China Two-Sessions which provided little in the way of policy details, particularly for the Real Estate sector; 3M LME copper briefly dipped under USD 8,500/t before finding support, currently printing a USD 8,496.00-8,541.50/t range.
• Alberta oil production fell by 380k BPD M/M to 3.81mbpd in January amid to cold weather, according to the Alberta energy regulator
• Click here for more details.

NOTABLE EUROPEAN HEADLINES

• Barclays said UK consumer spending in February rose 1.9% Y/Y and was dampened by wet weather, while it noted that consumer confidence about non-essential spending was the highest since November 2021, according to Reuters.
• ECB insider expects inflation forecasts to be cut this year and maybe next year, according to Econostream Media.
• UK Chancellor Hunt will cut national insurance by 2pp in the Spring Budget on Wednesday, according to Times' Swinford.

DATA RECAP

• Italian HCOB Composite PMI (Feb) 51.1 (Prev. 50.7); HCOB Services PMI (Feb) 52.2 vs. Exp. 52.3 (Prev. 51.2)
• German HCOB Composite Final PMI (Feb) 46.3 vs. Exp. 46.1 (Prev. 46.1); HCOB Services PMI (Feb) 48.3 vs. Exp. 48.2 (Prev. 48.2)
• French HCOB - Services PMI (Feb) 48.4 vs. Exp. 48.0 (Prev. 48.0); HCOB Composite PMI (Feb) 48.1 vs. Exp. 47.7 (Prev. 47.7)
• EU HCOB Services Final PMI (Feb) 50.2 vs. Exp. 50.0 (Prev. 50.0); HCOB Composite Final PMI (Feb) 49.2 vs. Exp. 48.9 (Prev. 48.9); "This heightens concerns regarding the potential emergence of a wage-price spiral and stagflation"
• UK S&P Final Global Services PMI (Feb) 53.8 vs. Exp. 54.3 (Prev. 54.3); S&P Final Global Composite PMI (Feb) 53 vs. Exp. 53.3 (Prev. 53.3); "Job creation remained relativity subdued as elevated wage pressures meant that cautious hiring strategies prevailed for most businesses."
• UK BRC Retail Sales YY (Feb) 1.0% (Prev. 1.4%); BRC Total Sales YY (Feb) 1.1% (Prev. 1.2%)
• French Industrial Output MM (Jan) -1.1% vs. Exp. -0.1% (Prev. 1.1%, Rev. 0.4%)
• Italian GDP Final YY (Q4) 0.6% vs. Exp. 0.5% (Prev. 0.5%); GDP Final QQ (Q4) 0.2% vs. Exp. 0.2% (Prev. 0.2%)
• EU Producer Prices YY (Jan) -8.6% vs. Exp. -8.1% (Prev. -10.6%, Rev. -10.7%); Producer Prices MM (Jan) -0.9% vs. Exp. -0.1% (Prev. -0.8%, Rev. -0.9%)

NOTABLE US HEADLINES

• Tesla's (TSLA) facility outside Berlin and some of the surrounding area are powerless following a fire caused by 'eco activists', via BZ; plant outside Berlin has been evacuated and production is at a standstill, with suspected arson reported
• Foxconn (2317 TT) sales -12.3% Y/Y in Feb (prev. -20.9% in Jan); outlook for Q1 2024 is expected to decrease Y/Y.
• Alphabet's Google (GOOG) rolls out changes for users and app developers as EU tech rule looms.
• NIO Inc (NIO) Q4 2023 (USD): EPS -0.45 (exp. -0.33), Revenue 2.4089bln (exp. 2.33bln); Quarterly deliveries were 50,045 units, sees Q1 deliveres between 31-33k vehicles

GEOPOLITICS

MIDDLE EAST

• Hamas said in a message they will be flexible on the issue of the number of prisoners if Israel is flexible on the issue of returning Palestinians to northern Gaza, according to Axios' Ravid on X.
• US Central Command said Yemen's Houthis fired an anti-ship ballistic missile from Yemen into the southern Red Sea on March 4th although there were no reported damages or injuries to commercial or US Navy ships. Houthis also fired two anti-ship ballistic missiles into the Gulf of Aden at M/V MSC Sky II which is a Liberian-flagged, Swiss-owned container vessel, while one of the missiles impacted the vessel and caused damage but initial reports indicated no injuries. Furthermore, CENTCOM said its forces conducted strikes against two anti-ship cruise missiles that presented an 'imminent threat' to merchant vessels and US Navy ships in the region.
• Gaza ceasefire talks between Hamas and mediators broke up on Tuesday in Egypt with no breakthrough as the Ramadan deadline looms, according to Reuters

OTHER

• China's coastguard took control measures against Philippine vessels that 'illegally' intruded into waters adjacent to the Second Thomas Shoal, according to state media. Philippines coastguard spokesperson said vessels faced dangerous manoeuvres and blocking from China's coastguard and maritime militia during a resupply mission, while the reckless and illegal actions led to a collision between the Philippines and Chinese coastguard vessels in which the Philippine vessel sustained minor structural damage.
• North Korea’s Defence Ministry said South Korean-US military drills are not defensive and should stop, while it added that South Korea and the US will face consequences for their wrong choice, according to KCNA.

CRYPTO

• Bitcoin takes a breather and holds just beneath USD 67k, whilst Ethereum (+3.6%) continues to advance higher.

APAC TRADE

• APAC stocks traded mixed as the region digested China's Work Report and Caixin Services PMI data.
• ASX 200 closed slightly lower as strength in mining and health care was offset by losses in the consumer sectors.
• Nikkei 225 initially retreated beneath the 40,000 level after the latest Tokyo CPI data showed an acceleration in price growth, but then gradually recovered its losses and returned to positive territory.
• Hang Seng and Shanghai Comp. were mixed with notable underperformance in the Hong Kong benchmark amid weakness in tech and health care, while the miss on Chinese Caixin Services PMI also provides a headwind for risk appetite. Conversely, the mainland just about remained afloat after the announcement of the government Work Report with the GDP growth target maintained at around 5%, as expected, although Premier Li noted the foundation of China's economic recovery is not solid yet and domestic demand is not strong.

NOTABLE HEADLINES

• China unveiled the government work report with the 2024 GDP growth target set at around 5%, as expected, but noted achieving this year's economic growth target will not be easy, while it will continue to implement proactive fiscal policy and prudent monetary policy, as well as noted that China should intensify cross-cyclical and counter-cyclical adjustments through macro policies. China will launch a year-long program to stimulate consumption and roll out a "worry-free consumption" initiative to improve the consumption environment and will make concerted efforts to defuse local government debt risks. Furthermore, China will take tough measures against illegal financial activities and will move faster to foster a new development model for real estate.
• Chinese Premier Li said the foundation of China's economic recovery is not solid yet and China's domestic demand is not strong with social expectations relatively weak. Li also commented that some small and medium-sized enterprises are facing operational difficulties but added that China will stabilise and expand private investment.
• China's state planner said it will lift all foreign investment restrictions in the manufacturing sector and it will relax market access restrictions in service industries such as telecoms and medical services, according to Reuters.
• Japan Minister of State for Economic and Fiscal Policy Shindo said they are not thinking now of declaring anything when asked whether the government could call an end to deflation, while Finance Minister Suzuki also said there was no truth to the media report that government is considering announcing the end of deflation.
• Japan's Top Currency Diplomat Kanda must brace for higher interest rates environment given assumed interest rates raised to 1.9% from 1.1%; must strive for responsible fiscal management by achieving primary budget balancing in FY25/26.
• Click here for the China Two-Sessions highlights and analyst thoughts

DATA RECAP

• Chinese Caixin Services PMI (Feb) 52.5 vs Exp. 52.9 (Prev. 52.7); Composite PMI (Feb) 52.5 (Prev. 52.5)
• Tokyo CPI YY (Feb) 2.6% vs. Exp. 2.5% (Prev. 1.6%); CPI Ex. Fresh Food YY (Feb) 2.5% vs. Exp. 2.5% (Prev. 1.6%); Ex. Fresh Food & Energy YY (Feb) 3.1% vs. Exp. 3.1% (Prev. 3.1%)
• Australian Current Account Balance (AUD)(Q4) 11.8B vs. Exp. 5.6B (Prev. -0.2B); Net Exports Contribution (Q4) 0.6% vs. Exp. 0.2% (Prev. -0.6%)