• Asian equity markets were indecisive amid Chinese trade data and as senior level US-China trade talks began in Beijing
• ERG is said to have told the Chief Whip they will not back the government today unless the motion on leaving the EU was changed; Government has so far refused
• Looking ahead, highlights include German GDP (Flash), EZ Employment & GDP (Flash), US PPI & Retail Sales, BoE's Vlieghe, Fed's Harker, Norges' Olsen, HoC Vote on PM May's Brexit Plans, UK 2028 Gilt Auction
• EARNINGS: Coca-Cola, NVIDIA, Renault, Commerzbank, Credit Suisse, Nestle, Airbus Wirecard, Astrazeneca

ASIA-PAC

Asian equity markets were indecisive as the momentum from Wall St, where stocks notched a 4th consecutive gain and extended on YTD highs, was counterbalanced by cautiousness amid Chinese trade data and as senior level US-China trade talks began in Beijing. ASX 200 (-0.1%) was relatively flat following a deluge of earnings releases although the energy sector outperformed after the recent gains in crude prices, while Nikkei 225 (flat) was also flimsy due to mixed GDP data and a choppy currency. Elsewhere, Hang Seng (-0.3%) and Shanghai Comp. (-0.2%) declined at the open following another substantial liquidity drain by the PBoC and amid tentativeness heading into the key trade data which was expected to show continued ill-effects from the US-China trade dispute. Chinese stocks then only partially recovered despite the data topping estimates across the board with many wary due to Lunar New Year distortions and as the data also showed imports from US fell by 41.2% Y/Y, while reports that President Trump was mulling a 60-day extension to the tariff deadline was only gradual in its support. Finally, 10yr JGBs were higher following the less than inspiring Japanese GDP data which despite showing that Japan’s economy returned to an expansion, the headline Q/Q growth fell short of estimates and there were also downward revisions to the prior readings. Furthermore, the BoJ were present in the market for JPY 580bln of JGBs with the bulk concentrated on 5yr-10yr maturities.

US President Trump is said to weigh 60-day extension for tariff deadline according to sources, while there had been earlier comments from President Trump that the trade deal with China is going very well. (Newswires)

PBoC skipped open market operations for a net daily drain of CNY 200bln. (Newswires)
PBoC set CNY mid-point at 6.7744 (Prev. 6.7675)

Chinese Trade Balance (USD)(Jan) 39.16B vs. Exp. 33.5B (Prev. 57.06B). (Newswires)
Chinese Exports (Jan) Y/Y 9.1% vs. Exp. -3.2% (Prev. -4.4%)
Chinese Imports (Jan) Y/Y -1.5% vs. Exp. -10.0% (Prev. -7.6%)
China Customs said exports to the US fell 2.4% Y/Y and Imports from US were lower by 41.2% Y/Y.

Japanese GDP (Q4) Q/Q 0.3% vs. Exp. 0.4% (Prev. -0.6%, Rev. -0.7%). (Newswires)
Japanese GDP Annualised (Q4) 1.4% vs. Exp. 1.4% (Prev. -2.5%, Rev. -2.6%)

UK/EU

ERG is said to have told the Chief Whip they will not back the government today unless the motion on leaving the EU was changed (currently includes an amendment which Brexiteers believe removes the option of leaving without a deal) which the government refused. While the Brexiteer group have not decided if they will abstain or vote against it but will not be backing the government according to BBC correspondent. (Twitter)

Labour leader Corbyn is facing up to 10 resignations from Labour frontbenchers if he fails to back a second referendum in a fortnight’s time; according to MPs. (The Guardian)

40 former UK ambassadors are calling on PM May to delay the Brexit. (Times)

ECB's Visco says Italy's problem is debt, needs to intervene on public debt; doesn't see any attack on the Bank of Italy's autonomy, but rather uncertainties on responsibilities. (Newswires)

UK RICS Housing Survey Jan -22 vs. Exp. -20.0 (Prev. -19.0). (Newswires)

FX

In FX markets, the DXY was stable and held on to the prior day’s gains after yesterday’s firmer than expected inflation data supported a reclaim of the 97.00 level, while EUR/USD and GBP/USD have only partially nursed recent losses after having given up the 1.1300 and 1.2900 handles respectively. Elsewhere, price action in USD/JPY largely reflected the indecisive risk tone and antipodeans attempted to recover loss ground and were later underpinned by hopes of a potential extension to the tariff deadline. 

COMMODITIES

Commodities were mostly rangebound amid an indecisive risk tone overnight although there were mild gains observed in the complex as Chinese trade data proved to be better than many had feared, which helped WTI crude futures sustain the prior day’s strength with support provided near the USD 54.00/bbl level. Elsewhere, gold found some reprieve from yesterday’s losses amid a muted greenback, while copper also eked mild gains alongside similar cautious gains amongst its peers.

China customs stated that January iron ore imports 91.26mln tons vs. Prev. 86.64mln tons M/M and January copper imports incl. semis 479k tons vs. Prev. 420k tons, while Natgas imports were reportedly at the highest on record. (Newswires)

GEOPOLITICS

US Senators are to introduce a bipartisan bill seeking to introduce stiff sanctions on Russia's banking, energy and debt over election interference and Ukraine. (Newswires)
 

US House defied President Trump and voted to drop support for Saudi Arabia in Yemen. (Newswires)
 

US

Treasuries sold off on Wednesday – seeing the US 10-year yield break through 2.70% - as risk appetite grew on China trade progress and hopes a government shutdown would be avoided. Corporate issuance saw USD 11.85bln raised in the market, following on from yesterday’s USD 16.3bln, also adding to the sell off. The yield curve flattened today with spreads contracting between all maturities, the most profound being the 2s/30s and 5s/30s which both flattened by c. 2.3bps. US T-note futures (H9) settled 6+ ticks at 121-24.

US President Trump said he would look for "land mines" in the government funding bill but doesn't want to see a shutdown and will make decision to sign it or not when he gets it. (Newswires)

US Republican Senator Graham said President Trump is "inclined" to sign bipartisan funding bill if provisions on barriers and beds are as he expects, while he added President Trump will look for additional border wall funds and is "very inclined" to declare a national emergency. (Newswires)

Fed's Harker (Non-Voter, Down) expects one rate hike in 2019 and one in 2020, while he has a patient "wait-and-see" policy stance and sees "very slight" downside risks to the US economic outlook. (Newswires)