• Major European indices trimming earnings-fueled gains seen at the open [Euro stoxx 50 -0.3%]
• Dovish Fed coupled with some ‘strong’ sell signals for month end portfolio rebalancing saw the Buck slump to new recent lows vs G10 peers
• US President Trump will meet with Chinese Vice Premier Liu He at 15:30 EST today
• Looking ahead, highlights include Canadian GDP, ECB’s Weidmann Speaking
• EARNINGS: Celgene, General Electric, Northrop Grumman, Altria Group, ConocoPhillips, Amazon.com, United Parcel Service, Raytheon, Mastercard, Charter Communications, Sprint Corp

ASIA

Asian stocks were mostly higher across the board as they took impetus from their counterparts in US where sentiment was lifted on the back of earnings and a dovish Fed, while the region also digested better than expected Chinese PMI data. ASX 200 (-0.4%) and Nikkei 225 (+1.1%) both initially benefitted from the rising tide in the aftermath of the FOMC, although weakness in Australia’s largest weighted financial sector later dragged on the local bourse, while a slew of corporate updates shared the focus for Japan. Hang Seng (+1.1%) and Shanghai Comp. (+0.4%) conformed to the positive tone following better than expected Chinese Manufacturing PMI and Non-Manufacturing PMI data, while another PBoC liquidity injection ahead of next week’s Lunar New Year and ongoing US-China trade talks also contributed to the optimism. Finally, 10yr JGBs were initially higher as they tracked the upside in T-notes post-FOMC and as the BoJ Summary of Opinions unsurprisingly reiterated the need to persistently continue powerful monetary easing, although gains were later pared despite stronger 2yr auction results as upside was restricted by the firm risk sentiment.

PBoC injected CNY 50bln via 14-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.7025 (Prev. 6.7343)

Chinese Manufacturing PMI (Jan) 49.5 vs. Exp. 49.3 (Prev. 49.4). (Newswires)
Chinese Non-Manufacturing PMI (Jan) 54.7 vs. Exp. 53.9 (Prev. 53.8)
Chinese Composite PMI (Jan) 53.2 (Prev. 52.6)

BoJ Summary of Opinions from the January meeting reiterated that although it will take time to achieve the price stability target, it is necessary to persistently continue with the current powerful monetary easing. Furthermore, the BoJ stated that risks to overseas economies are tilted to the downside, while there was an opinion that there is room for JGB purchases to be revised and that If downside risks to economy and prices materialize, the BoJ should be ready to respond with policy. (Newswires)

Reports note that hundreds more Chinese firms warned on profits this week. (Newswires)

US

US President Trump will meet with Chinese Vice Premier Liu He at 15:30 EST/20:30 GMT today. (Newswires)

US President Trump said it is highly unlikely he would be willing to include 'Dreamers' in negotiations regarding border security and government funding, while there were separate reports that the White House is said to prepare an emergency wall plan. (Newswires) US Democrats reportedly suggested openness for a compromise with President Trump, despite unveiling initial proposal for border security which doesn't include a physical barrier. (The Hill)

Facebook Inc (FB) -  Q4 EPS USD 2.38 vs. Exp. USD 2.19, revenue USD 16.9bln vs. Exp. USD 16.4bln. Company shares +11% pre-market. (Newswires)

Microsoft Corp (MSFT) - Q4 EPS USD 1.08 vs. Exp. USD 1.09, revenue USD 32.5bln vs. Exp. USD 32.5bln. Co. shares -2% pre-market

UK/EU

The EU stands ready to take Brexit to a last-minute summit rather than bend the knee to demands from UK PM May, according to diplomats citing the scheduled summit on March 21-22. (Newswires)

UK PM May is said to be putting together a series of measures in an attempt to woo Labour MPs to support her Brexit deal; measures include cash injections into leave-supporting deprived areas. (The Guardian)

Britain must pay the GBP 39bln Brexit bill even if it leaves the EU without a deal, the European Commission has warned. (Telegraph)

UK PM May’s chief Brexit negotiator warned against backing a Conservative plan to go back to Brussels and reopen negotiations in a series of emails to senior officials. (Telegraph)

US Representative Boyle (D) has warned that UK PM May’s attempts to renegotiate the UK’s withdrawal from the EU and its potential impact on the Irish border could pose a risk to future UK and US trade talks. (Newswires)

EU Lawmaker Hubner says additional assurances over the backstop may be given in the political declaration on future EU-UK ties, additional assurances are possible if the UK changes its red lines and moves towards a permanent customs union with the EU. (Newswires) 

Confederation of British Industry small business survey showed export sentiment declinied at the fastest pace since the GFC, while overseas political and economic concerns are highest since the survey began in 1988. (Newswires)

Italian GDP Prelim QQ Q4 -0.2% vs. Exp. -0.1% (Prev. -0.1%) (Newswires)

EU GDP Flash Prelim QQ Q4 0.2% vs. Exp. 0.2% (Prev. 0.2%)

EQUITIES

All Major European indices initially opened higher [Euro Stoxx 50 -0.3%] continuing the overnight gains seen in Asia which benefited from a dovish Fed alongside strong earnings from Facebook, who were up 11.5% after-market; although European indices have since reverted much of this following an earnings dominated open. FTSE 100 (+0.5%) is benefitting from Shell (+4.1%) and Diageo (+4.0%) due to both companies’ earnings beating on expectations; Shell’s strong performance has subsequently led to outperformance in the energy sector (+2.3%). The SMI (U/C) is the underperforming sector, weighed on by Swatch (-5.4%) who are at the bottom of the Stoxx 600 after their FY group sales missed expectations; although losses are capped by strong performance in Roche (+2.2%) following their earnings. Other notable movers include, Unilever (-3.7%) who anticipate 2019 underlying sales growth at the bottom of their 3-5% range; and as such are down on the day. Elsewhere, Wirecard (+1.8%) have recouped some of the losses seen in the previous session due to an FT article reporting that an executive has been accused of using forged contracts. And BT (-2.6%) are down despite reiterating EBITDA guidance at the top end of expectations for FY18/19, as Philip Jansen is to take over as CEO from Gavin Patterson on Friday.

FX

USD -The odds looked stacked against the Greenback following an arguably even more dovish twist from the FOMC than many or most were looking for (effectively announced a pause in the tightening cycle, with patience going forward and not necessarily further hikes at this stage, or much more balance sheet reduction). This, coupled with some ‘strong’ sell signals for month end portfolio rebalancing saw the Buck slump to new recent lows vs G10 peers, while the DXY slipped under its 200 DMA (95.290) at one stage to 95.127 before stabilising and perhaps benefiting from early SOMA-related positioning (front-running ahead of the usual flow window).

JPY - The main beneficiary of post-Fed Dollar weakness and pronounced US Treasury curve bull-steepening, as Usd/Jpy reversed sharply from 109.50+ peaks into the FOMC to circa 108.50. Note, however, option expiries between 108.90-109.00 in 1 bn may limit further downside in the headline pair ahead of the NY cut.

AUD/NZD - Also revelling in the broadly bearish Usd hue, plus a revival in risk appetite, which partly Fed induced and underscored by improvements in China’s manufacturing and services PMIs overnight. Aud/Usd is consolidating off fresh multi-week highs circa 0.7275 having blasted through daily tech resistance around 0.7207 that had been containing advances ahead of the FOMC, while Nzd/Usd is pivoting 0.6900 with the Kiwi drawing additional momentum from S&P’s NZ rating outlook upgrade to positive from stable.

GBP/CHF/CAD - All firmer vs the US Dollar, albeit marginally, as Cable continues to trade heavily around 1.3150 amidst the ongoing Brexit hiatus, while the Franc remains in a 0.9900-50 range and Loonie meanders between 1.3120-55 awaiting some independent impetus from looming Canadian GDP and PPI data before a speech from BoC’s Wilkins.

EUR - The single currency finally breached its 100 DMA around 1.1443, and 1.1450 on its way to a 1.1515 peak vs the Usd, but has been undermined by more poor Eurozone data in the shape of German retail sales and Italian GDP (both negative and worse than forecast). Note, the aforementioned SOMA interests also have a tendency to weigh on Eur/Usd more than other Usd/major pairings.

FIXED INCOME

Bunds and Gilts both took another look at intraday highs around the release of EZ GDP data (meagre in terms of the pan Eurozone print, and just plain bleak for Italy that is in a technical recession), but the core EU bonds were unable to extend further to the upside and have subsequently topped out again within 165.31-63 and 123.36-57 ranges. This mirrors recent price action in US Treasuries, although the latter did carve out new overnight session peaks with the aid of a hefty 10.5k+ block purchase of 10s that also augmented curve re-flattening. Ahead, more pre-NFP proxies after Wednesday’s upbeat ADP survey, Chicago PMI and new home sales.

COMMODITIES 

A relatively mixed session in the commodities complex thus far, as the energy benchmarks pare back a bulk of yesterday’s Fed-induced gains with WTI (-0.2%) drifting into negative territory and Brent (+0.5%) off best levels. Oil prices have been on a downwards trajectory for most of the EU session with a brief Brent dip below USD 61.50/bbl, coinciding with the Iraqi oil ministry stating 40 oil wells are to be drilled in the Southern Manjoon oilfield. As reference the Manjoon oil field is estimated to have reserves of almost 12.6bln barrels. Otherwise, new-flow has been light in the complex with traders keeping a close eye on US-Sino trade developments with Vice Premier Liu He due to meet US President Trump at the Oval office around 20:30 GMT. On the Venezuelan front, Chinese energy giant PetroChina is reportedly planning to drop Venezuelan state-owned PDVSA amid the US oil sanctions on the company in the backdrop of Venezuela’s political turmoil. The sanctions seem to have a muted impact in the oil market thus far as US already stated that any shortfalls in output will be countered with the use of the US Strategic Petroleum Reserve. Meanwhile, prices are somewhat underpinned by the OPEC production cuts with figures stating output amongst the members fell 900k BPD, (vs. 800K planned at the latest meeting); as according to JBC.

Elsewhere, metal prices are supported by the still-subdued dollar with spot gold poised to end the month with a fourth consecutive monthly gain, prices reached levels last seen in May 2018 as the yellow metal advances above USD 1320/oz. Citigroup notes that the precious metal is benefitting from a weaker buck alongside safe-haven buyers hedging against the outcome of the US-China trade talks. Moving on, nickel and steel prices are expected to be weighed on by a soaring output of the raw material in China and Indonesia and as such, BMO analysts expect the nickel deficit to narrow to 96k tonnes in 2019 vs. current 129k tonnes.

Russian oil output has been reduced to 11.38mln bpd in January, according to Interfax. (Interfax) In the period of Jan 1st-22nd, Russia slightly increased its output to 11.39mln BPD according to a source familiar with the Energy Ministry data.

OPEC output fell 900k BPD in January as cuts started as according to JBC. (Newswires)

Indian Oil Official says they have been talking to the US for an extension of the waiver from Iran sanctions. (Newswires)