• APAC stocks traded higher as sentiment picked up from the choppy mood and mixed data releases stateside.
• Fed Chair Powell said if the economy evolves as the Fed expects, most on the FOMC expect to cut rates later this year.
• European equity futures indicate a slightly positive open with the Euro Stoxx 50 future +0.1% after the cash market closed up 0.5% on Wednesday.
• DXY has pulled back further from 105, antipodeans outperform, EUR/USD extended on gains above 1.08.
• Looking ahead, highlights include Swiss CPI, EZ & UK Final Services & Composite PMI, EZ Producer Prices, US Challenger Layoffs, IJC, Canadian Trade, BoE Decision Maker Panel, ECB Minutes, Comments from Fed’s Harker, Barkin, Goolsbee, Mester & Kashkari, Supply from Spain, France, UK & US.

US TRADE

EQUITIES

• US stocks and bonds were choppy as participants digested mixed data releases and the latest Fed commentary with the dollar pressured after the softer-than-expected ISM services PMI. Stocks began the session on the front foot in the wake of the ISM data and T-notes pared the earlier weakness that was triggered by a strong ADP report, while Fed Chair Powell largely stuck to the script which only pushed stocks and bonds higher and the DXY lower as the Fed Chair remained seemingly unfazed by the recent hot data releases. However, the major indices then pulled back from their best levels as traders unwound their positions in the last hour of trade.
• SPX +0.11% at 5,211, NDX +0.21% at 18,160, DJIA -0.11% at 39,127, RUT +0.54% at 2,076.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed Chair Powell said if the economy evolves as the Fed expects, most on the FOMC expect to cut rates later this year and it is too soon to say if the recent inflation readings are more than just a bump. Powell said inflation expectations are consistent with 2% inflation and the Fed is committed to returning inflation to the 2% target over time. Furthermore, he said policy is restrictive and is doing its job, while he repeated that there are risks of cutting rates too soon as well as waiting too long.
• Fed's Kugler (voter) said her policy rate expectation is consistent with March FOMC meeting policymaker projections and if disinflation and labour market conditions proceed as she is currently expecting, then some lowering of the policy rate this year would be appropriate. Kugler said policy is currently restrictive and her baseline expectation is that disinflation will continue without a broad economic slowdown, but added that inflation progress has sometimes been bumpy and such an outcome cannot be assured.

APAC TRADE

EQUITIES

• APAC stocks traded higher as sentiment picked up from the choppy mood and mixed data releases stateside, despite thinned conditions with markets across Greater China shut for the Qingming Festival.
• ASX 200 was led by strength in gold miners after the precious metal rose above USD 2,300/oz for the first time.
• Nikkei 225 outperformed and spent most of the session above the 40,000 level with the help of a predominantly weaker currency.
• KOSPI was boosted by tech strength with Samsung underpinned ahead of its preliminary earnings results on Friday with its profit seen to rise to the largest in six quarters on higher chip prices, while SK Hynix was lifted amid plans to invest USD 3.9bln to build an Indiana plant.
• US equity futures (ES +0.3%) mildly gained amid optimism in Asia but with the upside limited ahead of looming events.
• European equity futures indicate a slightly positive open with the Euro Stoxx 50 future +0.1% after the cash market closed up 0.5% on Wednesday.

FX

• DXY languished firmly beneath the 105.00 level after slumping on weaker-than-expected ISM Services data, while Fed Chair Powell continued to downplay recent inflation releases as he noted most on the FOMC expect to cut rates later this year and it is too soon to say if the recent inflation readings are more than just a bump.
• EUR/USD marginally extended on gains after having reclaimed the 1.0800 status on the back of recent dollar weakness and with participants looking ahead to the ECB Minutes, EZ Services PMI & EZ PPI releases.
• GBP/USD plateaued after the prior day's upward momentum stalled around 1.2650, while there are nearby key levels for the pair with the 50- and 100-DMAs at 1.2667 and 1.2663 respectively.
• USD/JPY traded rangebound after pulling back from resistance near 152.00, although the JPY suffered against other major counterparts aside from the dollar with several JPY-crosses at their best levels in more than a week.
• Antipodeans remained underpinned after advances in commodity prices and the mostly positive risk tone.

FIXED INCOME

• 10-year UST futures took a breather after whipsawing on mixed data and after Fed Chair Powell stuck to the script, while participants look ahead to more employment-related data and Fed speakers scheduled later today.
• Bund futures rebounded from yesterday's trough after finding support at the 132.00 level.
• 10-year JGB futures traded sideways amid a lack of tier-1 data releases and with only brief support from the mostly-improved 30-year JGB auction results.

COMMODITIES

• Crude futures were kept afloat albeit with price action rangebound against the backdrop of the ongoing geopolitical climate, mixed inventory data and the lack of surprises from the recent JMMC meeting.
• US Treasury officials are to say in India that enforcement of the price cap on Russian oil is working and kept the discount of Russian oil to the international Brent benchmark wide in February, while actions by Indian refiners to not take Russian oil on Sovcomflot tankers help bolster enforcement of Russian sanctions.
• Spot gold held on to recent gains after prices breached the USD 2,300 level for the first time.
• Copper futures extend on advances after climbing to their highest levels in more than a year.

CRYPTO

• Bitcoin was mildly pressured and dipped below USD 66,000 as markets favoured traditional risk assets.

NOTABLE ASIA-PAC HEADLINES

• US Treasury Secretary Yellen said it's important that the US and China maintain a level economic playing field and she is concerned about China's overcapacity fuelled by massive subsidies, while she added that the Biden administration will continue to have ongoing and deepening dialogue with China. Furthermore, Yellen said she would not comment directly on the possibility of new tariffs on China but won't rule out ways to protect the US’s clean energy supply chain.

DATA RECAP

• Australian Building Approvals (Feb) -1.9% vs. Exp. 3.3% (Prev. -1.0%, Rev. -2.5%)
• New Zealand ANZ Commodity Price MM -1.3% (Prev. 3.5%, Rev. 3.6%)

GEOPOLITICS

MIDDLE EAST

• Israeli Defence Minister said they are expanding their operation against Hezbollah and other entities that threaten them, according to Al Jazeera.
• IDF decided to call up Air Defence Force reservists as part of an assessment of the security situation. It was also reported that Israel's army cancelled its soldiers' weekend vacations in anticipation of Iran’s response to the raid in Damascus, according to Israel's Channel 14 cited by Al Jazeera.
• US President Biden is to speak with Israeli PM Netanyahu on Thursday, while a US official said the Biden administration is calling on the Israeli army to modify its way of transmitting information about the stationing of aid workers and Biden plans to demand these changes. Furthermore, Biden is angry and largely frustrated over the killing of aid workers in Gaza and is ready to clarify his view to Netanyahu during their expected phone call today, while the official added there is no shift in Washington's policy towards Israel, but there is a shift in President Biden's frustrations, according to CNN.
• US Pentagon said Defence Secretary Austin spoke with Israeli Defence Minister Gallant on Wednesday and expressed his outrage at the Israeli strike on a World Central Kitchen humanitarian aid convoy, while Austin stressed the need to immediately take concrete steps to protect aid workers and Palestinian civilians in Gaza after repeated coordination failures with foreign aid groups.

OTHER

• Russia's Defence Ministry said talks between Russian Defence Minister Shoigu and French Armed Forces Minister Lecornu noted readiness for dialogue on Ukraine, while Shoigu said any practical implementation of French President Macron's idea of sending troops to Ukraine would cause problems for France. However, it was later reported that France denied it showed any readiness for Ukraine dialogue in talks with Russia, according to a French government source.
• Russia widened grain export curbs and halted some Aston ships, according to Reuters citing sources.
• US Deputy Secretary of State Campbell said the trilateral summit next week between the US, Japan and the Philippines will bring closer coordination in the South China Sea and elsewhere.
• Tokyo is in talks with Manila over sending troops to the Philippines in which a possible deployment comes as they boost efforts to deter China in the South China Sea, according to FT.