• Asian equity markets were mostly higher as sentiment in the region recovered from the recent China-triggered weakness
• UK PM May allies said that German Chancellor Merkel has offered PM May certain last-minute assistance, while reports also noted that PM May is considering a 2nd vote on Brexit deal if first one is rejected
• UK cabinet ministers suggested that PM May will be expected to stand down if she is heavily defeated in the Brexit vote, according to source report
• Looking ahead, highlights include US NY Fed Manufacturing & Final PPI, Fed Discount Minutes, UK Parliament vote on the Brexit deal, ECB's Draghi, Fed's Kashkari, Kaplan & George
• Earnings: JP Morgan, Wells Fargo, Charles Schwab, UnitedHealth, Delta Air Lines & Kinder Morgan

ASIA-PAC

Asian equity markets were mostly higher as sentiment in the region recovered from the recent China-triggered weakness that had been due to disappointing trade data which dragged the US major indices to their first consecutive loss of the year. Nonetheless, risk appetite improved overnight with both ASX 200 (+0.7%) and Nikkei 225 (+0.9%) positive, in which the latter recovered from early selling pressure as it initially tracked the prior day’s losses on return from its long weekend. Elsewhere, Shanghai Comp. (+0.9%) and Hang Seng (+1.6%) were underpinned amid a deluge of comments from Chinese agencies including the Finance Ministry which stated that China will implement larger tax and fee cuts, while the NDRC said China will continue implementing proactive fiscal policies. In addition, the PBoC conducted a respectable liquidity injection of CNY 180bln but expects a rapid decline of banking liquidity in the approaching days, while there were also hopes for an improvement in the trade environment after reports that super tankers carrying 6mln bbls of crude left the Texas coast and are likely heading to China. Finally, 10yr JGBs were subdued as the gains in stocks sapped demand for safe-havens and following the recent similar pressure in T-notes, but with losses stemmed amid the BoJ’s presence for JPY 1tln of JGBs with maturities spread across the curve.

PBoC injected CNY 80bln via 7-day and CNY 100bln via 28-day reverse repos, for a net daily injection of CNY 180bln. (Newswires)
PBoC set CNY mid-point at 6.7542 (Prev. 6.7560)

PBoC said it will make monetary policy more forward-looking, flexible and targeted, while it added that it will not make monetary policy too tight nor too loose and that it expects banking liquidity to decline rapidly in approaching days. Furthermore, PBoC Deputy Governor Zhu said prudent policies does not mean there will be no changes and that prudent policies should remain in line with economic conditions, while Zhu also commented they will encourage banks to lend more to small firms. (Newswires)

China Finance Ministry said will implement larger tax and fee reductions, while it added the government will reduce general expenditures by over 5%. There were also comments from Vice Finance Minister Xu that detailed tax cuts will be included in government work report or budget plan. (Newswires)

NDRC said China will strengthen counter-cyclical adjustments in its macro policies, while it will also implement larger tax and fee cuts this year, as well as ease funding difficulties for small and private firms. Furthermore, NDRC Vice Chairman Lian said China will speed up investment projects and local bond issuances but will not resort to flood-like stimulus. (Newswires)

Super tankers carrying 6mln bbls of crude left the Texas coast and are likely heading to China, according to sources. (Newswires)

UK/EU

UK PM May said she does not believe the March 29th Brexit date should be delayed and commented that the EU does not agree on a time limit on the backstop. (Newswires)

UK PM May allies said that German Chancellor Merkel has offered PM May certain last-minute assistance, while reports also noted that PM May is considering a 2nd vote on Brexit deal if first one is rejected. (Sun)

UK cabinet ministers suggested that PM May will be expected to stand down if she is heavily defeated in the Brexit vote, according to source report. (Telegraph)

UK Labour MP Benn is to pull amendment this morning as part of an effort by Labour party to table vote of no confidence this evening. The amendment, if passed, would reject the withdrawal agreement, convey a lack of support for no deal and pave the way for MPs to put forward alternative plans for Brexit. Opposition for the amendment comes from Labour leadership believing that it’s passage would offer PM May the opportunity to pull her deal, therefore sparing her a crushing defeat. (Telegraph)

A letter from 129 MEPs urges the UK to reconsider their decision to leave the European Union as they believe there is support for a second Brexit referendum. (Sky News)
 

FX

In FX markets, the greenback was slightly subdued with the DXY stuck near the 95.50 level as its major counterparts eked mild gains, in which GBP/USD just about reclaimed the 1.2900 handle ahead of today’s key Brexit deal vote. The consensus remains for parliament to vote against PM May’s Brexit deal and some have even suggested a potential no-confidence vote against the government or that PM May will be expected to stand down if she is heavily defeated, although there were also reports that German Chancellor Merkel has offered certain last minute assistance and that PM May is considering a 2nd vote on the Brexit deal if the first one is rejected. Elsewhere, antipodeans were lifted with AUD/USD back at the 0.7200 handle, amid the improvement in risk appetite which also underpinned USD/JPY and JPY-crosses due to safe-haven outflows from the JPY.
 

COMMODITIES

Commodities were mostly higher with the improvement in risk tone overnight driving price action, which saw WTI crude futures pare most the prior day’s losses to trade back above the USD 51.00/bbl level, while focus for the energy complex now shifts to the upcoming API inventory report later today. Elsewhere, copper was also underpinned by the rebound in sentiment, which conversely kept gold subdued due to lack of safe-haven demand.

 

CME raised NatGas Henry Hub futures margins to USD 4200 from USD 3600 per contract. (Newswires)

GEOPOLITICAL

US President Trump is said to have sent a letter to North Korea leader Kim and reports also noted North Korean official Kim Yong Chol may visit Washington D.C. this week regarding a 2nd Trump-Kim summit. Furthermore, it was also reported that US Secretary of State Pompeo may conduct talks this week with North Korea. (Newswires)

US President Trump tweeted that he spoke with Turkish President Erdogan in which topics discussed included economic development between US and Turkey, while he also suggested that there is great potential for a significant expansion. (Twitter)

US

Treasuries were bid at the European open amid disappointing Chinese imports and exports figures; the complex stabilised at the European close but then ended today’s US session mixed. Yields at the front end and longer end were slightly negative while the belly of the curve slightly positive, moves were less than 1bps. The yield curve saw some steepening mostly seen in 2s30s. US T-Note futures (H9) settled 1+ ticks lower at 121-29.

US House is to consider stopgap spending bill that would run till Feb 28th. In related news, the White House has invited group of House Democrats for discussions on border security this week, while the White House also commented that certain lawmakers are to attend lunch with President Trump today. (Newswires)

Fed's Clarida (voter, neutral) said it is not the case that Fed policy is a headwind for the US economy and commented that the economy has good momentum. Furthermore, Clarida added that the Fed can be "very patient" this year and that the FOMC will take policy decisions "meeting by meeting". (Fox)