• Equities are mixed, with sentiment improving across the indices throughout the European morning
• Dollar is lower weighed on by a strong JPY after further BoJ speak & Rengo wage demands; USD/JPY back below 148.00
• Treasuries are modestly firmer with EGBs boosted by a strong French auction and awaiting the ECB
• Crude is softer, XAU remains at highs and base metals are entirely in the green
• Looking ahead, US Challenger Layoffs, International Trade, Initial Jobless Claims, Canadian Trade, Japanese Household Spending, ECB Policy Announcement, Comments from ECB President Lagarde, Fed’s Powell & Mester, Supply from the US, Earnings from Costco & Marvell.

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (+0.1%) began the session entirely in the red, though sentiment has since improved, with the Euro Stoxx 50 (+0..2%) modestly firmer, ahead of the ECB announcement today.
• European sectors are mixed; Healthcare is the clear outperformer, propped up by gains in Novo Nordisk (+5.1%), which is on its Capital Markets Day. Insurance is also firmer today, assisted by post-earning strength in Aviva. Autos is found at the foot of the pile, hampered by Continental (-4.1%).
• US Equity Futures (ES U/C, NQ +0.1%, RTY -0.1%) are tentative and trade on either side of the unchanged mark, with direction generally mirroring the price action seen in Europe.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
• Click here for more details.

FX

• DXY is on the backfoot following yesterday's selling pressure, with JPY strength possibly acting as a drag on the USD. There is not much in the way of support until 103, below which lies the Feb low at 102.90. NFP on Friday looms large.
• EUR is steady vs. the USD and lingering around the 1.09 mark after matching yesterday's best at 1.0907. If the ECB comes in "hawkish", next upside target is via the Jan 24th peak at 1.0932.
• JPY the clear outperformer following yesterday's hawkish source reporting, BoJ commentary today and details over Rengo wage demands. USD/JPY has declined from a session high of 149.39 to a trough of 147.82, which coincides with the 50DMA.
• Antipodeans are both notably firmer vs. the USD. AUD potentially garnering support via Chinese trade metrics and rising iron ore prices. AUD/USD has eclipsed its 50DMA at 0.6585 with all eyes on a test of 0.66; not breached since Feb 2nd - 0.6610 was the high that day.
• PBoC set USD/CNY mid-point at 7.1002 vs exp. 7.1898 (prev. 7.1016).
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FIXED INCOME

• USTs are incrementally firmer but steady overall at the low-end of slim 111-11 to 111-17+ bounds. Continued upside brings 111-20+, 7th Feb high into play. If the bearish action returns support resides at 111-01+, 110-23 & 110-21 from the last three sessions. Docket ahead features a number of US data points around the ECB and thereafter Fed's Powell & Mester. Just before Mester, the 3, 10, 30yr refunding announcement is due.
• Bunds began the European session on a weaker footing, with hawkish impetus potentially taken from BoJ commentary and Rengo demands. Thereafter, soft German Industrial Orders and a significant upward revision seemingly pushed Bunds below the 133.00 handle to the current 132.93 trough. Following the strong French outing, Bunds lifted back above 133.00 to a peak at 133.29.
• Gilt price action is in-fitting with peers as action settles somewhat post-budget, the Chancellor's media round added little this morning, though he did hint that income tax and national insurance could be combined as an alternative to abolishing NI. Gilts currently holds around 99.20.
• Spain sells EUR 6.058bln vs exp. EUR 5.5-6.5bln 3.50% 2029, 0.50% 2031, 3.25% 2034 Bono & EUR 0.51bln 0.25-0.75bln 2.05% 2039 I/L
• France sells EUR 12.997bln vs exp. EUR 11.5-13bln 3.50% 2033, 1.25% 2034, 1.25% 2038 and 3.25% 2045 OAT
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COMMODITIES

• Crude is softer on the session, failing to benefit from the weaker Dollar, and reports that ceasefire talks were unsuccessful have also failed to lift the complex; currently, Brent Apr is just under USD 82.50/bbl.
• Precious metals vary with spot gold continuing to rise to fresh ATHs above USD 2,150/oz as the upward momentum holds, whilst a subdued Dollar and heightened geopolitics only provide tailwinds. Spot silver takes a breather after yesterday's gains; XAU posts an intraday range between USD 2,144.26-2,161.59/oz.
• Base metals are firmer trade across the board with the complex seemingly seeing tailwinds from the constructive Chinese Trade data overnight; 3M LME copper reclaimed a USD 8,600/t handle.
• Click here for more details.

NOTABLE EUROPEAN HEADLINES

• German Economic Institute DIW says GDP expected to contract by 0.1% in Q1 (vs -0.3% in Q4 2023); 2024 forecast cut to 0% (prev. +0.6%), 2025 forecast upgraded to +1.2% (prev. +1.0%).
• BoE Monthly Decision Maker Panel - One-year ahead CPI inflation expectations declined further to 3.3% in February, down from 3.4% in January. Three-year ahead CPI inflation expectations fell to 2.8% in the three months to February, 0.1pp lower than reported in the three months to January. Expected year-ahead wage growth remained unchanged at 5.2% on a three-month-moving-average basis. Businesses expect their output price inflation to decline over the next year.
• Britain's renewable scheme gets more than GBP 1bln from Governments upcoming auction.

DATA RECAP

• Swiss Unemployment Rate Adj (Feb) 2.2% vs. Exp. 2.2% (Prev. 2.2%); Unemployment Rate Unadj (Feb) 2.4% (Prev. 2.5%)
• UK Halifax House Prices MM (Feb) 0.4% (Prev. 1.3%, Rev. 1.2%); "figures continue to suggest a relatively stable start to 2024 and align with other promising signs of increased housing activity, such as mortgage approvals."
• German Industrial Orders MM (Jan) -11.3% vs. Exp. -6.0% (Prev. 8.9%)

NOTABLE US HEADLINES

• Fed's Kashkari (non-voter) said the base case is for no more rate hikes and if inflation is more entrenched than we think, the first thing the Fed would do is hold for longer. Kashkari added that if inflation flares again, that could justify a rate hike and that he currently thinks there will be two rate cuts for 2024 which could potentially just be one.
• US House voted 339 to 85 to approve the package of spending bills which extends funding for some federal agencies through to September, while the bill now heads to the Senate, according to CBS News.
• EU antitrust regulators have requested further explanation from Apple (AAPL) after it blocked Epic Games in the EU; EU is also evaluating whether Apple's actions comply with EU rules, according to Reuters. Apple (AAPL) says it exercised its right to block Epic Games because of Co's breach of contractual obligations.
• US President Biden, on Thursday, is poised to unveil a proposal that will increase the minimum corporate tax to 21% from 15%, alongside a 25% minimum tax for billionaires, according to FT

GEOPOLITICS

MIDDLE EAST

• US Central Command said an anti-ship ballistic missile was launched from Houthi-controlled areas in Yemen towards M/V True Confidence while transiting through the Gulf of Aden, while the multinational crew reported three fatalities, at least four injuries and significant damage to the ship, according to Reuters.
• US military said it conducted self-defence strikes against two unmanned aerial vehicles in Yemen, according to Reuters.
• Several people have died in an explosion at Iran's Bandar Abbas Refinery (320k BPD capacity), via IRNA
• "Mediators tried to bridge the gap between Hamas and Israel, but their efforts were unsuccessful", according to Al Jazeera sources. "Israel rejected Hamas' request for a permanent ceasefire, the withdrawal of the army from the Gaza Strip and the unconditional return of displaced persons".
• Hamas delegation has left Cairo, ceasefire negotiations to resume next week, according to Al-Qahera News citing an official source

OTHER

• Chinese Foreign Minister Wang said they resolutely oppose all acts of power and bullying, while it will vigorously safeguard sovereignty, security, and development of the country. Wang commented that maintaining and developing Sino-Russian relations is a strategic choice based on the fundamental interests of both nations and China is willing to work with Russia to foster new drivers of cooperation and consolidate friendship. Furthermore, he stated that Taiwan election results cannot change the historical trend that it will return to the 'motherland' and pro-Taiwan independence forces are the biggest factors undermining peace and stability in the Taiwan Strait.
• North Korean leader Kim inspected military training and ordered an upgrading of war preparations, according to KCNA.

CRYPTO

• Bitcoin takes a breather and holds just below USD 67k, whilst Ethereum (-1.4%) slips lower.

APAC TRADE

• APAC stocks were mixed as participants second-guessed central bank policies and digested Chinese trade data.
• ASX 200 finished higher but with trade choppy after disappointing home loans and trade data from Australia.
• Nikkei 225 initially climbed to a fresh record high but then slumped amid increasing hawkish BoJ speculation.
• Hang Seng and Shanghai Comp. were subdued with heavy losses in WuXi Biologics and Wuxi Apptec after the US Senate's Homeland Security Committee voted to move forward with a bill that could restrict business with Chinese biotech companies, while the mainland was cautious despite the stronger-than-expected Chinese trade data, as the double-digit rise in exports had already been flagged by officials and with data likely to be influenced due to seasonality factors owing to the Lunar New Year holiday.

NOTABLE ASIA-PAC HEADLINES

• Chinese Foreign Minister Wang Yi said China has maintained continuity and stability of its policy towards the US, while he added that only by respecting and recognising differences can exchanges continue. Wang said they have to point out that the US's wrong perception of China has continued and challenges facing the US are in itself not China, according to Reuters.
• HKMA advised banks to take extra care when lending to property speculators, according to SCMP.
• US Senate's Homeland Security Committee voted to move forward with a bill that could restrict business with Chinese biotech companies like BGI and WuXi AppTec (603259 CH) on national security grounds.
• BoJ Board Member Nakagawa said Japan's economy making steady progress towards the achievement of the price target and given the risks and uncertainties, she would like to gather information without any pre-set idea and make the appropriate monetary policy decision. Nakagawa said if they judge that sustained achievement of price goal foreseen, they will decide whether or not to tweak YCC, risky asset buying and other policy means, while she added the main scenario is that expectations of rising wages will underpin consumer sentiment, but there is risk that real income will undershoot and weigh on demand, economy and prices.
• BoJ Governor Ueda says fully possible to seek exit from stimulus while striving to achieve 2% target, says will mull adjusting easing if they can achieve price target and chance of reaching target is gradually rising. Will consider rolling back massive stimulus programme once positive cycle of wages and inflation is confirmed.
• Japan's Rengo wage demand this year reportedly at 5.85% (4.49% in 2023), via Bloomberg.
• Chinese regulators are scrutinizing regional banks’ bond buying amid concerns the banks are speculating on securities as opposed to lending to boost the economy, according to Bloomberg sources.
• Click here for a full Newsquawk overview of the recent Japanese developments.

DATA RECAP

• Chinese Trade Balance (USD)(Feb) 125.16B vs. Exp. 103.7B (Prev. 75.34B); Exports YY (USD)(Feb) 7.1% vs. Exp. 1.9% (Prev. 2.3%); Imports YY (USD)(Feb) 3.5% vs. Exp. 1.5% (Prev. 0.2%)
• Chinese Trade Balance YTD (CNY)(Feb) 890.9B (Prev. 540.9B); Exports YTD YY (CNY)(Feb) 10.3% (Prev. 3.8%); Imports YTD YY (CNY)(Feb) 6.7% (Prev. 1.6%)
• Japanese Labour Cash Earnings YY (Jan) 2.0% vs Exp. 1.3% (Prev. 1.0%, Rev. 0.8%); Real Cash Earnings YY (Jan) -0.6% vs Exp. -1.5% (Prev. -1.9%, Rev. -2.0%)
• Australian Trade Balance (AUD)(Jan) 11.0B vs. Exp. 11.5B (Prev. 11.0B); Exports MM (Jan) 1.60% (Prev. 1.80%); Imports MM (Jan) 1.30% (Prev. 4.80%)
• Australian Home Loans MM (Jan) -3.9% vs Exp. 2.0% (Prev. -4.1%)