• Catalan President Puigdemont announced that he had received the mandate to pursue independence from Spain but said it would not be implemented for a few weeks
• Asian equities traded broadly higher following a positive Wall St close. USD nursed losses against majors overnight
• Looking ahead, highlights include US JOLTS, FOMC minutes, Fed’s Evans, Williams and ECB’s Praet

ASIA

Asian equity markets were mostly positive as the region got a tailwind from Wall St where all 3 major indices posted fresh all-time highs amid optimism ahead of earnings and with strength in retailers after Wal-Mart’s investor day in which it announced profit guidance and a USD 20bln share repurchase. This broadly supported sentiment with ASX 200 (+0.6%) also lifted by energy names after WTI reclaimed the USD 51/bbl level to the upside. Nikkei 225 (+0.3%) pared opening weakness as USD/JPY nursed losses, although Kobe Steel woes persisted after further confirmation of product data falsification. Elsewhere, Shanghai Comp. (+0.3%) and Hang Seng (Unch.) were choppy after a feeble liquidity effort by the PBoC and with Hong Kong benchmark just about kept afloat amid Chief Executive Lam’s policy address and profit tax cut announcement. Finally, 10yr JGBs were subdued amid a positive risk tone in Japan and after a mixed 30yr auction where the b/c increased but accepted prices declined from last month.

PBoC injected CNY 20bln via 7-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.5841 (Prev. 6.6273)

EUROPE/UK

Catalan President Puigdemont announced that he had received the mandate to pursue independence from Spain and later signed a document declaring independence from Spain, but said it would not be implemented for a few weeks. (Newswires) Spanish Deputy PM Saenz said Catalan President has put Catalonia into an uncertain situation and that PM Rajoy is to consider next steps at cabinet meeting tomorrow. (Newswires)

UK Chancellor Hammond said he will not commit money for a no Brexit deal in the budget. (Newswires)

FX

FX price action was relatively rangebound in which most major currencies initially extended on the prior day’s gains against the greenback amid a lack of fresh catalysts and light economic calendar. However, price action then reversed as the USD nursed losses which saw GBP/USD briefly dip below the 1.3200 handle and EUR/USD test 1.1800 to the downside, while antipodeans also failed to hold on to early advances as AUD/USD and NZD/USD met resistance around the 0.7800 and 0.7100 levels respectively.

COMMODITIES

Commodities were quiet overnight in which WTI crude futures mildly extended on yesterday’s 3% increase to above the USD 51/bbl level. Elsewhere, gold was flat with demand subdued amid gains in riskier assets and as the USD nursed losses, while copper was indecisive amid a similar tone in its largest consumer China.

GEOPOLITICAL

US President Trump was briefed by Defence Secretary Mattis and a top military leader, in which they discussed a range of options to respond to any North Korea aggression. (Newswires)

There were reports that 6 planes including 2 US B1-B bombers flew over the Korean peninsula as a show of force. (Newswires)

North Korea is reportedly looking as if it could be ready to launch multiple scud missile. (Asian Business Daily)

US

Treasuries were choppy and initially benefited from a notable flattener block trade, although US fixed income finished shy of best levels in which US Dec’17 10y T-note futures settled 5+ ticks at 125.08+, before paring the moves post-settlement.

Fed's Kaplan (voter, soft hawk) said will be assessing progress of US economy towards full employment and looking for more signs of upward inflation. Kaplan added that he is mindful waiting too long to raise rates could leave the Fed behind the curve and increases chances of a recession, but also commented that the Fed can afford to be patient on rate hikes because economic growth is not running away. (Newswires)

US President Trump dismissed rumours that Chief of Staff Kelly will be fired soon, in which he blamed the dishonest media and said Kelly is doing a fantastic job. (Twitter)

US may seek stricter NAFTA rules of origin and may require 85% of content to come from 3 NAFTA countries, may also seek 50% US content requirement, according to reports. (Newswires)