• Asian equities mostly higher across the board with Hang Seng on course for a record close, while ASX 200 is weighed by Rio Tinto.
• JPY softens vs. counterparts despite Japanese Finance Minister Aso downplaying recent FX moves.
• Looking ahead, UK Inflation, Fonterra GDT Auction and earnings from Citi, UnitedHealth and CSX.

ASIA

Asia equity markets were mostly positive as region digested corporate updates and picked up the pace from the holiday-quietened lead due to the US market closure for Martin Luther King Jr Day. Nikkei 225 (+0.9%) and ASX 200 (-0.5%) traded mixed as Japan coat-tailed on a rebound in USD/JPY, while sentiment in Australia was dampened by weakness across commodity names including Rio Tinto which was pressured despite a beat on Q4 iron ore shipments, as the Co. also maintained full year guidance against expectations for an upgrade. Elsewhere. Hang Seng (+1.1%) outperformed and is on course for a record close, while Shanghai Comp. (+0.2%) was also in the green amid several positive profit alerts and after a firm liquidity operation by the PBoC, which resulted to a net daily injection of CNY 270bln. Finally, 10yr JGBs were flat with prices range-bound tspanoughout the day amid a lack of catalysts and after mixed results from a 5yr JGB auction.

PBoC injected CNY 160bln via 7-day reverse repos, CNY 150bln via 14-day reverse repos and CNY 10bln via 63-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.4372 (Prev. 6.4574)

The Bank of France has invested some of its FX reserves in Chinese yuan. (Les Echos)

Chinese President Xi said in a phone call with Donald Trump on that all sides should work to keep up the “hard won momentum” over the nuclear situation on the Korean peninsula and work to restart talks. (FT)

UK

EU is said to toughen conditions for a post Brexit agreement, as draft documents showed revised directives for EU chief negotiator Barnier with stricter conditions for a transition deal. (FT)

BOE’s external member Tenreyro said that at December meeting, she saw 'ample time' before the BOE would need to raise rates and expects a couple more hikes over next tspanee years if economy performs as expected. (Newswires)

UK PM May is planning a speech to outline Brexit policy next month, while reports also stated that the EU withdrawal bill is expected to move to the House of Lords this week and pass. (Newswires)

ECB's Lane said he sees an abrupt Brexit to be a genuine shock that would risk the stability of the European financial system. (FT)

Norwegian officials tell Brussels they may seek radical rethink of their terms if UK has access to single market for key sectors. (The Guardian)

EU

ECB's Hansson said that QE could be ended in one step without any problems. He also suggested that QE could end after September if the economy & inflation develop as now expected. He also noted that the Euro’s appreciation not a tspaneat to inflation up until now, its rise should not be overdramatized. He is also of the belief that there is a need to adjust ECB communication; and that the ECB should discuss 'intensively' how to change its language, and suggested that the ECB should adjust its policy guidance before summer. Hansson is also of the belief that the ECB should hike rates a "few times" before starting to reduce the size of its balance sheet. (Boersen-Zeitung)

Greece parliament approved austerity measures ahead of Jan 22nd Eurozone finance ministers meeting where they will review unlocking EUR 6.5bln in bail out funds for Greece. (Newswires)

German SPD party leader Schulz is `optimistic' that the majority will vote for talks with Merkel. (Newswires)

FX

In FX markets, USD/JPY found some reprieve from the recent selling and rose to within close distance of the 111.00 level, while JPY-crosses were also underpinned in tandem despite comments from Japanese Finance Minister Aso who downplayed the importance of the recent FX market situation and said he doesn’t see a big deal with USD/JPY at around 110.80. Elsewhere, the rest of major currencies were quiet and held on to the prior day’s gains against the greenback, with EUR/USD firmly above 1.2200 after the recent hawkish tone from ECB’s Hansson who said QE could be ended in one step without any problems, and with AUD/USD kept afloat after the PBoC set the firmest reference rate since December 2015.

COMMODITIES

Commodities were mixed overnight with a mild-pullback observed in oil, which saw Brent crude prices struggle to remain above USD 70/bbl. Fundamental news remained thin from yesterday’s US holiday closure which also delays this week’s API release to Wednesday, while reports also noted that Chinese crude oil futures trading is likely to be delayed till March instead of some prior expectations of a start this Thursday. Elsewhere, copper was indecisive and gold prices were also range-bound alongside a somewhat choppy greenback.

China crude oil futures trading will not begin this Thursday as some expected and instead could begin in March, according to press reports. (Newswires)

US

US GOP leaders are said to be considering a spending deal to February 16th as they reportedly do not believe there is enough time to complete a fiscal year deal by Friday. (Newswires)

China called on US to avoid having official contact with Taiwan which would harm US-China ties, after US House recently passed bill encouraging visits between US and Taiwan officials. (Newswires)