• Major European indices are predominantly in the green [Euro Stoxx 50 +0.4%] with CAC and SMI leading gain
• DXY flirts with new YTD high but NZD outperforms
• Looking ahead, highlights include US PPI & Retail Sales, Fed's Harker, Norges' Olsen, HoC Vote on PM May's Brexit Plans
• EARNINGS: Coca-Cola, Duke, CME Group, Zoetis, IQVIA, Waste Management, NVIDIA

ASIA

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 (-0.2%) and Shanghai Comp. (-0.1%) 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) This was however downplayed by the China Global Times Editor. (Twitter)

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. (Newswires)

UK PM May spokesman says a no-deal Brexit remains on the table, and PM May is expected to speak to other EU leaders today. (Newswires)

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)

Sky's Cohen tweets, Government source tells me the wording isn’t going to change and message to ERG is “that’s the state of play, we’ll have to agree to disagree”. They don’t want defeat, but say the PM has made clear no deal is on the table. (Twitter)

Conservative Lawmaker Baker says that conservative lawmakers should not be associated with anything which appears to remove the no-deal Brexit from the table; adds that compromising no-deal would impact the negotiation strategy. (Twitter)

BoE's Vlieghe says he considers appropriate pace of monetary tightening is somewhat slower. (Newswires)

- The degree of future monetary tightening will in part depend on how large GBP appreciation is

- In the case of a no-deal scenario I judge that an easing or an extended pause in monetary policy is more likely to be the appropriate policy response than a tightening

- If a Brexit deal is made, a path of Bank Rate that involves around one quarter point hike per year seems a reasonable central case

- As before, this future rate path is a forecast not a promise, and just as there is considerable uncertainty around the forecast for growth and inflation

- The BoE would hike rates after a no-deal Brexit if needed, even if it is politically unpopular

Spanish Budget Minister Calvino says the budget bloc does not necessarily mean there will be consequences, and that the cabinet are to discuss the budgets defeat tomorrow. (Newswires)

German GDP Flash QQ SA Q4 0.0% vs. Exp. 0.1% (Prev. -0.2%)

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

EU Employment Flash QQ (Q4) 0.3% vs. Exp. 0.20% (Prev. 0.30%)

EQUITIES

Following an earnings filled open, major European indices are predominantly in the green [Euro Stoxx 50 +0.4%] with some slight outperformance in the CAC (+0.7%) and SMI (+0.7%), following earnings from Airbus (+4.5%) and Nestle (+3.2%); with the latter the largest Co. in Europe carrying a 3% weighting in the Euro Stoxx 600. Sectors are also predominantly in positive territory, although there is some slight underperformance in Financial names; weighed on by the likes of Credit Suisse (-1.4%) who have moved lower following earnings, where they proposed a dividend of CHF 0.26 vs. Exp. CHF 0.30. Other notable movers include, AstraZeneca (+4.9%) who are higher after their earnings beat on expectations, with Legrand (+7.9%) also in the green after earnings. Towards the bottom of the Stoxx 600 are Telenet (-4.4%) who’s full-year operating profit missed expectations. Elsewhere, Wirecard (+7.4%) are higher, with latest reports in German press suggesting that short sellers were aware about the FT article relating to the Co before it’s publication.

EU is reportedly mulling potential retaliatory tariffs for US products including Tesla (TSLA) electric cars; according to WiWo. (WiWo)

FX

USD - The Dollar continues find buyers on dips, and the latest pull-back in the DXY was notably shallow before the index reclaimed 97.000+ status on its way to another fresh ytd best (albeit marginal at 97.291). The Buck remains supported on encouraging US-China trade developments and prospects that President Trump will sign-off on the bipartisan funding proposal in time to avoid another Government shutdown, but also as major and EM currency counterparts weaken further on independent/specific bearish factors.

NZD/AUD - Some erosion of momentum due to the aforementioned general Greenback bid, but the Kiwi and Aussie are still outperforming in wake of overnight Chinese trade data showing a larger than expected surplus. Nzd/Usd is holding firm above 0.6800 and also deriving support from cross-positioning as Aud/Nzd ducks under 1.0400 and Aud/Usd retreats faster from 0.7130+ peaks again to test support around 0.7100.

EUR/CHF/JPY/GBP/CAD - All narrowly mixed vs the Usd, with the single currency trying to keep tabs on the 1.1300 handle, but weighed down by the latest weaker than expected German macro release as the former Eurozone powerhouse stagnated in Q4 following contraction in the previous quarter. Meanwhile, the Franc is edging closer to 1.1000, with sub-forecast and deflationary Swiss producer/import prices a drag, and its safe-haven peer has also extended losses through 111.00 to new 2019 lows. The Pound lost more ground ahead of today’s Brexit vote, with Cable only saved by short covering/profit taking after testing the 55 DMA (1.2813) and withstanding broadly dovish rhetoric from BoE’s Vlieghe. Elsewhere, the Loonie is pivoting 1.3250 ahead of Canadian manufacturing sales and new home price data, with the ongoing recovery in crude only mildly supportive.

EM  - As noted above, regional currencies are underperforming against the Usd, and with the Rub and Try also negatively impacted by sanctions and data misses respectively. Rouble back below 66.7500 and Lira under 5.3100 at worst.

FIXED INCOME

Bunds and Gilts remain elevated, though unable to sustain earlier momentum and threaten the next bullish technical targets protecting loftier peaks and contract highs. Perhaps the in line pan-EZ GDP data dampened demand for Germany’s 10 year benchmark along with the failure to clear 166.38-43 nearest chart resistance, while its UK equivalent could be running into auction-related offers on top of any hedging for the latest Parliamentary Brexit vote. Elsewhere, US Treasuries also hovering just shy of overnight session highs ahead of PPI and Retail Sales and a speech from Fed’s Harker.

COMMODITIES 

WTI (+1.0%) and Brent (+1.5%) continue on their upward trajectory with prices underpinned by trade hopes alongside lower Saudi output forecasts. In early EU trade, Russian Energy Minister Novak noted that there are no proposals as of yet to lift oil production due to tail risk from Venezuela. Furthermore, Novak stated that Moscow are aiming to cut February output ahead of schedule. Overnight, Chinese trade balance numbers were released wherein imports of crude in January topped 10mln BPD, +5% Y/Y/. ING notes that despite the Y/Y increase, this is still off from record levels seen at the back-end of 2018; 10.48mln BPD in November and 10.35mln BPD in December, “the very strong imports seen towards the end of last year seem to reflect refiners using their import quota licences before the end of the year” says ING.

Metals are relatively mixed with gold (Unch) flat ahead of the widely watched trade talks in Beijing. Elsewhere, copper climbed higher following a wider-than-expected trade surplus from China, the world’s largest consumer of the red metal. Furthermore, copper imports into China rose by 12% from December to just under 480k tonnes in January, the highest level since September 2018; according to customs data. Finally, Dalian iron ore rebounded after declining over 4% in the last two sessions, though the recent Vale-induced rally in the base metal have reportedly damped appetite at Chinese Steel mills.

Russian Energy Minister Novak says there are currently no proposals to lift oil production; citing concerns over Venezuela, Russia are aiming to cut February's oil output ahead of plan. Could sign new OPEC and non-OPEC alliance memorandum in April. (Newswires)

India is said to be mulling a compliance deadline extension on tougher steel import rules for automakers; according to sources. (Newswires)