• Asian stocks were mixed as the region struggled for firm direction following yesterday’s rally and after a non-existent lead from the US
• UK Brexit Minister Barclay said he had a positive meeting with EU Chief Brexit negotiator Barnier and agreed to meet again mid-week
• US and China are reportedly scrambling to at least produce a memorandum of understanding by the end of today which could help pave the way for a Trump-Xi meeting
• EU’s Juncker said President Trump gave his word there wouldn't be tariffs on European cars for the time being
• Looking ahead, highlights include Swedish CPI, UK Labour Market Report, German ZEW, ECB’s de Guindos & Praet, Fed’s Mester Speaking
• Earnings: Walmart, Danone, BHP, HSBC

ASIA-PAC

Asian stocks were mixed as the region struggled for firm direction following yesterday’s rally and after a non-existent lead from the US which was shut for President’s Day. ASX 200 (+0.3%) was positive with the index led higher by outperformance in the tech and financials sectors, although consumer staples and healthcare were on the other end of the spectrum amid losses in Coles and Blackmores due to weak earnings. Elsewhere, Nikkei 225 (+0.2%) just about remained afloat with price action largely reflecting jittery trade in the domestic currency, while Hang Seng (-0.1%) and Shanghai Comp. (-0.3%) were indecisive as focus remained on US-China trade discussions which will resume today before the higher level talks on Thursday, and with some disappointment from a miss on HSBC earnings. Finally, 10yr JGBs were initially softer amid a pullback from the prior day’s gains and with demand suppressed by the mild upside across stocks, although prices later recovered after firmer results at the 20yr JGB auction.

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.7642 (Prev. 6.7659)

China Vice Premier Liu He will visit Washington for trade talks on February 21st-22nd, while there were comments from White House Press Secretary Sanders that trade meetings with China in Washington D.C. will begin today and that higher-level talks which will be led by USTR Lighthizer are to begin on Thursday. Furthermore, trade talks are said to focus on needed structural changes in China which impact trade, as well as China's pledge to buy a substantial amount of goods and services from the US. (Newswires)

Huawei founder Ren Zhengfei said if US doesn't trust us, we will shift our investment from US to the UK on an even greater scale. (Newswires)

BoJ Governor Kuroda said will consider easing policy further if FX moves hurt economy and prices, as well as threaten reaching 2% target, while he added various steps are available if BoJ needs to ease further but must balance the costs and benefits. (Newswires)

UK/EU

UK Brexit Minister Barclay said he had a positive meeting with EU Chief Brexit negotiator Barnier and agreed to meet again mid-week, while there were separate reports that 4 cabinet ministers told UK PM May to stop using a no-deal Brexit threat to negotiate. (Newswires/Guardian)

Two Tory members are reportedly thinking about joining the ex-Labour MPs’ Independent Group amid unhappiness over the government’s Brexit policy; according to the BBC citing sources. Meanwhile, there were reports that Labour leader Corbyn was warned by his deputy that more Labour MPs could resign over the party’s antisemitism problem. (BBC/Sky News)

UK Home Secretary Javid urged for EU counterparts to be prepared for the discontinuation of current joint policing systems from March 30th in the event of a no-deal Brexit, while he added that no-deal is in place regarding extradition, data sharing and arrest warrants. (Guardian)

European Commission President Juncker said if UK requested extension of talks, no one in Europe would oppose it while he added he has no timeframe for length of extension. (Newswires)

EU official said Greece is at risk of not receiving some of the EUR 750mln from debt relief agreement in April as it has not fulfilled the agreed reforms. (Newswires)

FX

In FX markets, price action across currencies was mostly lacklustre amid a sparse calendar and following the North American closures which kept the DXY subdued below the 97.00 level, while its major counterparts across the pond were worse off in which EUR/USD and GBP/USD trickled below the 1.1300 and 1.2900 handles respectively. Antipodeans were choppy with AUD/USD initially underpinned in a knee-jerk reaction to the RBA minutes which reiterated there is no strong case for a near-term move in rates and that it is better to be a source of stability, although the currency pared the gains shortly after as attention turned to the dovish tone by the board which saw significant uncertainties on the economic outlook and suggested a more evenly balanced view on rates. Elsewhere, USD/JPY was also somewhat temperamental as it initially pulled back amid the tepid sentiment but then found mild support after BoJ Governor Kuroda suggested a willingness to consider further easing if there was a threat to the price target from moves in the currency.

RBA Minutes from the February 5th meeting stated the board saw significant uncertainties on the economic outlook and that outlook for consumption is a key uncertainty. RBA also reiterated there is no strong case for near-term move in rates and it is better to be a source of stability, while the board saw scenarios where rates could be increased or decreased and that probabilities for these scenarios are more evenly balanced. (Newswires)

COMMODITIES

Commodities were lacklustre overnight amid the indecisive risk tone in which WTI crude futures pulled back from the USD 56.00/bbl level and which saw underperformance in natgas and Brent crude prices. Elsewhere, gold was kept rangebound by a subdued greenback, while the recent rally in copper also somewhat stalled on the tepid risk sentiment.
 

GEOPOLITICS

US President Trump said US is seeking a peaceful transition of power in Venezuela but added that all options are open. (Newswires)

US

A coalition of states led by California filed a suit against the Trump administration regarding emergency declaration to fund the border wall. (Newswires)

EU’s Juncker said President Trump gave his word there wouldn't be tariffs on European cars for the time being and that if President Trump were to go back on promise of no tariffs on European cars, the EU would no longer feel bound to buy US soya beans and LNG. In related news, Japanese Economy Minister Motegi said PM Abe confirmed with US President Trump that auto tariffs will not be applied while talks continue. (Newswires)