• Choppy trade in EU stocks after mixed cue from Asia, and awaiting Wall St.’s return
• DXY retests 97.000 to the upside while EUR and GBP decline on Brexit and growth woes
• Looking ahead, highlights include Fed’s Mester, ECB’s Praet, Riksbanks’ Ingves Speaking & Earnings from Walmart

RECAP

EU Commission President Juncker says Trump gave his word there wouldn't be tariffs on European cars for the time being; if Trump breaks the promise, EU will break its promise to buy more soy and LNG; according to Stuttgarter Zeitung

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

The following Labour MP's have announced their resignation from the party: Chuka Umunna, Luciana Berger, Chris Leslie, Angela Smith, Mike Gapes, Gavin Shuker, Anne Coffey

ECB's Praet says TLTROs have been very useful tool to deal with impairments in the transmission of monetary policy and are part of the toolbox; need to monitor transmission of monetary policy through the banking system carefully

ASIA

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 (+0.1%) just about remained afloat with price action largely reflecting jittery trade in the domestic currency, while Hang Seng (-0.4%) and Shanghai Comp. (U/C) 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)

GEOPOLITICS

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

US

Japanese Economy Minister Motegi said PM Abe confirmed with US President Trump that auto tariffs will not be applied while talks continue. (Newswires)

UK/EU

EU Commission say the EU 27 will not reopen the withdrawal agreement and will not accept a time-limit to the backstop. (Newswires)

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)

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)

ECB's De Guindos says that rates are still low and our monetary policy stance will remain accommodative for a long while yet, as we are going through a period of uncertainty.

- A disorderly Brexit will represent a significant macroeconomic shock at a time when EZ economy has weakened

- Even if energy prices were to fall a little in the coming months, we are confident that inflation will, over the medium term, converge towards our aim of below, but close to, 2%.

UK Employment Change (Dec) 167k vs. Exp. 152k (Prev. 141k)

- UK Average Earnings (Ex-Bonus) Dec 3.4% vs. Exp. 3.4% (Prev. 3.3%)

Swedish CPI MM Jan -1.0% vs. Exp. -0.7% (Prev. 0.4%)

- Swedish CPI YY Jan 1.9% vs. Exp. 2.2% (Prev. 2.0%)

Italian Industrial Orders MM SA Dec -1.8% (Prev. -0.2%, Rev. -0.4%)

- Italian Industrial Orders YY NSA Dec -5.3% (Prev. -2.0%, Rev. -2.2%)

- Italian Industrial Sales MM SA Dec -3.5% (Prev. 0.1%, Rev. -0.1%)

- Italian Industrial Sales YY WDA Dec -7.3% (Prev. 0.6%, Rev. 0.5%)

EQUITIES

Major European indices are mostly lower after trading choppily this morning, taking the lead from a directionless Asia session [Euro Stoxx 50 -0.6%]. The FTSE 100 (-0.6%) is weighed on by poor performance in HSBC (-4.0%) following their earnings; the Dax (-0.2%) is outperforming its peers bolstered by Wirecard (+4.5%) and Heidelberg Cement (+3.4%) following Bafin prohibiting new/extending shorts yesterday and a Q4 revenue beat respectively. Sectors are broadly in the red, with some underperformance in banking names, weighed on by the aforementioned HSBC who carry around a 2% Stoxx 600 weighting; and are the largest banking component. Other notable movers include, Danone (-0.7%) who are in the red in-spite of a beat on their sales, with some analysts highlighting weaker than expected margins. Automakers, such as Volkswagen (-0.9%) and Daimler (-1.0%) are in negative territory after EU Commission President Juncker stating that US President Trump gave his word that there wouldn’t be tariffs on European cars for the time being; alongside the EU agreeing to cut new truck CO2 emission levels by 30% before 2030.

FX

SEK - The Swedish Crown has slumped in wake of much softer than expected inflation data, and a slump in housing starts that together raise valid question marks over the Riksbank’s relatively confident outlook on the domestic economy and CPI/CPIF remaining close to target. On that note, Governor Ingves is due to speak later today and will get a chance to comment, as Eur/Sek spikes from sub-10.5000 through several chart resistance levels and only a whisker away from offers said to be lined up at 10.6000.

AUD/NZD - Very volatile trade overnight on the back of latest RBA minutes that initially underpinned the Aud on confirmation of no likelihood of a change in policy rates for some time (so no ease in the offing), but then underlined the shift to a more neutral stance and highlighted significant risks to the economic outlook. Aud/Usd retreated swiftly in response and is currently holding just above 0.7100, while the Kiwi has been dragged down in sympathy as the cross remains just above 1.0400, with Nzd/Usd hovering around 0.6825 vs just a few pips short of 0.6900 on Monday.

JPY/CAD - The next worst G10 performers, as Usd/Jpy grinds back up into a higher range and closer to 111.00 again amidst dovish rhetoric if not firm or official guidance from BoJ Governor Kuroda (mulling more accommodation if Jpy strength weighs on growth and hampers efforts to achieve the 2% inflation target, which has already proved extremely elusive of course). The headline pair is now probing 110.80, but could be held back by decent option expiry interest at 110.60 (1 bn). Meanwhile, the Loonie remains anchored around 1.3250 vs its US counterpart, eyeing crude to see whether prices push further ahead or consolidate around 2019 peaks.

GBP/EUR/CHF - All narrowly mixed and pretty flat vs the Dollar that has edged up from yesterday’s lows (DXY close to 97.000 at one stage), with Cable maintaining 1.2900+ status, albeit just, awaiting more Brexit developments/headlines following a solid if not quite as upbeat as forecast UK labour market report. Similarly, the single currency is clinging to 1.1300 and showing resilience in the face of yet more dire Italian data, perhaps drawing a degree of encouragement from a more mixed ZEW survey, while the Franc is still chipping away at recent losses and inching through 1.0050 after a wider Swiss trade surplus.

EM - More depreciation for the likes of the Rand and Lira, but the pressure and spotlight may switch somewhat to the Real later given political jitters due to the dismissal of a key aide to President Bolsonaro and potential adverse repercussions for pension reform. For reference, Usd/Brl settled around 3.7330 on Monday.

FIXED INCOME

Only limited reaction to a solid UK jobs and earnings report, as Gilts track a more pronounced rebound in Bunds largely at the expense of Italian debt that has suffered another data-related dump in wake of dire industrial orders and sales in December. The former has faded from a 124.29 high, after eyeing last Thursday’s 124.49 intraday peak, but failing to get close enough to trigger any stops, while its German equivalent reached 166.75 and only 8 ticks shy of its 166.83 contract pinnacle, as the corresponding 10 year yield trades in single digits again. In stark contrast, 10 year BTP futures have recoiled from 128.34 at one stage to 127.27 before paring some lost ground as attention turned to the ZEW survey, which was mixed as sentiment beat expectations but current conditions fell short of consensus. Elsewhere, US Treasuries have inched up with their core EU peers, but incrementally awaiting the return of domestic market participants after Monday’s Presidents Day holiday. Note, no US data on the slate today, but a speech from Fed’s Mester is due.

COMMODITIES 

The energy complex is ultimately flat-to-lower on the day thus far, with WTI (+1.0%) little changed net-net after missing a price settlement yesterday due to the President’s Day holiday over in the States. The holiday has also delayed the release of the API weekly inventory release by a day. In terms of macro themes for the complex, eyes remain on whether the OPEC-led supply curbs will ultimately ease glut concerns against the backdrop of 5 consecutive weeks of record-high US crude output. Furthermore, sources stated today that Saudi are mulling diminishing exports of Arab extra-light crude to the Asia region from March. The sources added that the move has improved demand in Abu-Dhabi’s Murban and Das in Asia’s spot market.

Elsewhere, spot gold (+0.2%) is on the front foot and hovers near 10-month highs despite a rise in the USD as demand for the yellow metal grows ahead of the widely-anticipated dovish FOMC minutes tomorrow. Meanwhile, Shanghai aluminium fell following Malaysia announcing it will not extend a prohibition on mining bauxite when it expires on March 31st, with some noting it’ll potentially reduce costs in the aluminium supply chain for China.

UAE Energy Minister Mazrouei says they are currently producing 3.072mln BPD of oil. (Newswires)