• Asian stocks were relatively mostly higher following a muted lead from Wall Street, Nikkei 225 underperformed
• AUD was dealt a triple-whammy from Aussie GDP, Governor Lowe and JPM downgrading RBA rate forecasts
• UK and EU negotiators reached no agreement yesterday, an EU official said the talks did not go well, dialogue will continue today
• Looking ahead, highlights include US ADP National Employment & International Trade, Canadian Trade Balance, BoC Rate Decision, BoE's Cunliffe, Haldane & Saunders. Fed's Williams Speaking, supply from the UK
• Earnings: Legal & General, Just Eat, Paddy Power Betfair, Dollar Tree, Brown-Forman

ASIA-PAC

Asian stocks were mostly higher following a muted lead from Wall Street in which the Dow, S&P and Nasdaq all closed just below breakeven. ASX 200 (+0.7%) shrugged off poor economic data and advanced as the material and mining sectors lead the gains, while Nikkei 225 (-0.8%) underperformed as the index is weighed on by a marginally firmer domestic currency alongside China-exposed sectors after China’s announcement of tax cuts yesterday. Elsewhere, Shanghai Comp. (+0.9%) and Hang Seng (+0.2%) gained momentum following yesterday’s NPC announcement alongside effects from the MSCI upgrade last week.

RBA Governor Lowe reiterated his neutral stance; RBA has flexibility to adjust monetary policy in either direction, probabilities of a rate hike or cut are evenly balanced. He also stated it is hard to imagine a rate hike this year, and it is unlikely inflation will be a problem anytime soon. Lowe added that he is confident inflation will get back to the middle of 2-3% target range, Q3 and Q4 GDP likely to be significantly below trend. (Newswires)

Australian Real GDP QQ SA Q4 0.2% vs. Exp. 0.3% (Prev. 0.3%) (Newswires) Australian Real GDP YY SA Q4 2.3% vs. Exp. 2.5% (Prev. 2.8%)

JP Morgan now expects the RBA to cut rates by 25bps in July followed by another 25bps cut in August; noting that growth is not likely to be enough to lower the jobless rate. Meanwhile, Macquarie Bank sees RBA cutting rates in May or August. (Newswires)

China State Planner Chairman is confident that China will achieve growth target this year, whilst the Vice Chairman said China will protect foreign investors' Intellectual Property rights. (Newswires)

PBoC set CNY mid-point at 6.7053 (Prev. 6.6998) (Newswires) PBoC drained a net CNY 60bln on the day

BoJ Board Member Harada (Dissenter) opposed the BoJ's new forward guidance due to the view that guidance must be data-dependent and not calendar-dependent. In his view, forward guidance must have a commitment to keep rate low until inflation beats expectations. He also said underlying inflation weakness could weigh on inflation expectations and delay the acceleration of inflation, and despite the rising household income (Newswires)

Japan Finance Ministry's Currency Head Asakawa said the link between JPY and Japanese exports have been "severed". (Newswires) Note: This comes ahead of US-Japan trade talks

UK/EU

EU and UK Brexit talks ended with no agreement but are to continue on Wednesday; according to sources. Furthermore, an EU official said the talks did not go well. (Newswires)

A senior UK minister, who is directly involved in Brexit planning, said: "It's inevitable there would have to be a technical extension” and added that a month is unlikely to be enough, two months would be needed to get the legislation through, and this is accepted in government. (Sky News)

If UK MPs reject PM May's deal a second time next week, parliament would take control and force a softer Brexit; according to Chief Whip Smith. (The Guardian)

Labour MP Fitzpatrick has signalled he is ready to back PM May's deal and tells colleagues to get behind withdrawal agreement as the PM unveiled plans to protect workers’ rights. (HuffPost) However, TUC union movement said that the post-Brexit worker’s rights proposals offered "flimsy procedural tweaks". (BBC)

The UK Department for International Trade intends to cut 80-90% of tariffs imposed on goods imported into the UK; according to Sky News citing Whitehall sources. (Sky News)

Irish police are said to be assisting UK police on three London bombs sent through the mail, after the three IEDs found earlier were found to have Irish stamps on them. (Newswires)

Italy planned to sign a memorandum of understanding to become part of China's Belt and Road global investment drive; in a move that is likely to cause alarm in Brussels; according to FT citing Italian Economic Development Undersecretary Geraci. (FT)

FX

In FX markets, DXY initially eased from post-ISM highs wherein the index tested 97.000 to the upside and straddled around 2-week highs. AUD was the marked underperformer after being dealt a series of blows, with below-forecast Australian Q4 GDP signalling that the country officially entered a “per capita” recession for the first time since 2006. The Aussie was originally pressured by Governor Lowes reiteration of his neutral stance whilst he also noted that is hard to see an RBA rate hike this year. This coupled with the disappointed GDP caused AUD/USD to plummet before testing 0.7050 to the downside. Another hit was dealt after JP Morgan downgraded their RBA rate forecast to two 25bps rate cuts in July and August 2019, in-line with Nomura’s forecast. Hence, AUD/USDsaw another leg lower and extended losses below 0.7050 to a low just shy of 0.7025, and in sympathy, NZD/USD fell below its 50 DMA (at 0.6796) and 100 DMA (at 0.6768) to a sub-0.6760 low. Barclays analysts noted that they are watching the Aussie labour market data for the three months, and if unemployment rates start to rise towards the 5.3-5.5% area, then the analysts believe the RBA will consider cutting rates by 25-50bps in H2 2019. However, Barclays left their base case unchanged at zero cuts this year, for now.

The move in AUD/USD pushed DXY higher towards the 96.980 level and subsequently, EUR/USD slipped below 1.1300 ahead of major support at 1.1280. Meanwhile, GBP/USD was initially dented by source reports that the EU and UK failed to reach an agreement yesterday’s talks, but the pair fell below the 1.3150 level amid the Aussie-induced USD strength. Furthermore, the JPY experienced gains which coincides with comments from US National Security Advisor Bolton, who stated that the US will increase sanctions on North Korea if there are no movements towards denuclearisation, although the demise of AUD/JPY was also a factor for the Yen strength, amid a decline from 79.24 highs to a sub-78.60 low ahead of its 50 DMA at 78.39. Finally, CAD was amongst the laggards, albeit to a lesser extent, due to the aforementioned pick-up in the greenback coupled with the decline in the energy complex, ahead of the BoC interest rate decision later today.

COMMODITIES

The energy market was on the back-foot following the much wider-than-expected build in API crude inventories alongside a firmer greenback. WTI futures tested USD 56.00/bbl to the downside while Brent futures declined below USD 65.50/bbl. Analysts also attributed some downside to Chevron and Exxon’s production forecasts upgrades, in which the former expects shale output from the Permian Basin to reach 600K BPD by the end of next year, +59% from current production. Meanwhile Exxon forecasts production of 1mln BPD from the same basin by 2024. As usual, traders will be eyeing today’s DoE release as shale production remains at record highs. Elsewhere, metals were mixed as gold held onto most of the prior day’s gains ahead of today’s ADP report, whilst copper fell upon the release of the Australian GDP. Furthermore, Chinese steel and iron ore futures edged higher after China's top steel-making city Tangshan extended production curbs on steel mills due to air pollution. Finally, nickel posted gains for a fourth consecutive day as low stock levels and a rebound in demand kept the base material at six-month highs.

US National Security Adviser Bolton said US is looking at fresh sanctions against Venezuela to increase pressure on Venezuelan President Maduro's government. (Newswires)

China's top steel-making city Tangshan has extended curbs on steel production until further notice amid air pollution. (Newswires)

US API Weekly Crude Stocks (1 March) +7.29mln vs. Exp. +1.2mln (prev. -4.2mln) (Newswires)

GEOPOLITICS

North Korea was reportedly taken aback by the sudden end to the Trump-Kim summit; and it will take North Korea some time to review what happened; according to Korean press citing the South Korean government. (Newswires)

US National Security Adviser Bolton said US will increase sanctions on North Korea if it does not move towards denuclearisation. (Newswires)

NORTH AMERICA

The complex ends the day with yields a touch higher, partly on the back of a decent headline for the Feb ISM non-manufacturing survey, while some traders cited decent corporate earnings from Target (TGT) which pushed back on some data hinting at a slowdown in the retail sector. The developments helped shrug-off overnight 'risk-off' stories (China PMIs, China cutting growth). Major curve spreads were mixed heading into the close.  US T-Note Future (H9) settles half-a-tick higher at 121-22

Fed is reportedly mulling tighter liquidity requirements for foreign banks operating in the US to reduce reliance on Fed Fund Reserves; according to sources. (Newswires)

Fed's Barkin (non-voter, hawkish) said wages have started to increase, workforce attrition is not as big a driver of wage increases as it used to be. (Newswires)

Senate Majority Leader McConnell said US President Trump’s veto of border emergency bill likely sustained. (Newswires)

Bank of International Settlement said the very gradual global monetary tightening process has become less predictable; warns of corporate debt crash risk from sudden ratings cuts. (Newswires)

US Senate Panel to hold a hearing with USTR Lighthizer regarding WTO on March 12th. (Newswires)