• European indices are moving towards unchanged [Euro Stoxx 50 -0.1%] after a somewhat weaker start
• AUD underperforms, weighed on by; GDP miss, banks now expecting two rate cuts and RBA’s Lowe stating it is hard to imagine a rate hike this year
• EU official states that talks did not go well, as EU/UK talks continue, after ending without agreement yesterday
• 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
• Earnings: Dollar Tree & Brown-Forman

ASIA

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 (-0.6%) 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. (+1.6%) 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 by 50bps to 1% (Prev. unchanged) 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

US

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)

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

GEOPOLITICAL

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)

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)

US Ambassador to the UK says any trade deal between the two countries has to include farming, adding that they do not want to lower standards and just want more trade with the UK. (Newswires)

Irish PM Varadkar “The position as of today is we have no texts or draft texts to consider or get legal advice on. We have no legal texts or draft legal texts to consider, propose amendments to, or seek legal advice on" ; Guardian's Boffey. (Twitter)

UK Attorney General Cox says both sides have expressed strong views, and we are in robust talks on EU exit deal. (Newswires)

UK Trade Secretary Fox does not rule out voting for a no-deal Brexit next week. (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)

Italy's leading indicator shows further decline, and confirms the difficult current economic trend. (ISTAT)

EQUITIES

Major European indices are moving towards being unchanged [Euro Stoxx 50 -0.1%] after opening lower and subsequently extending losses; in spite of largely stronger performance overnight. The FTSE 100 (+0.1%) is marginally outperforming its peers boosted by strong performance in DS Smith (+4.1%) after the Co. announced they are selling their plastics division for GBP 585mln. Additional support for the index stems from heavyweights British American Tobacco (+3.8%) and Imperial Brands (+1.3%) in the green following FDA Chief Gottlieb resigning, as his tenure was highlighted by a high-profile push to lower youth smoking including e-cigarettes; this may have also result in some upside for US tobacco names such as Phillip Morris. Other notable movers include Schaeffler (-8.4%) at the bottom of the Stoxx 600 following the announcement of a restructuring program and issuing a warning about a challenging and demanding auto market ahead. Separately, Subsea 7 (+3.7%) are higher after they were awarded 3 contracts by Woodside, describe as major contracts, which may exceed USD 750mln in value.

FX

AUD/NZD – No respite for the Aussie as a disappointing Q4 growth update extends the run of mainly sub-forecast data releases and adds more justification for the RBA’s shift to neutral policy mode. In fact, comments from Governor Lowe in the run up to the GDP update could be construed as more dovish on balance given that he effectively ruled out any prospect of tightening this year, while reiterating equal odds of a hike or cut in terms of the next rate move, and the market certainly took heed as Aud/Usd collapsed from just under 0.7100 to circa 0.7024 amidst a cascade of calls for 2 OCR eases of 25 bp by the end of 2019 in line with Westpac’s pre-emptive downgraded forecasts in February. Predictably, the Kiwi saw some contagion to a low not far from 0.6750 at one stage, but Nzd/Usd has rebounded relatively firmly to 0.6780+ on favourable cross-winds as Aud/Nzd extends losses through 1.0400 to 1.0360. Note, however, Aud/Usd may yet derive some traction and get a reprieve to stave off a more concerted test of 0.7000 via decent option expiry interest between 0.7045-50 (1 bn).

GBP/CAD – The Pound continues to be buffeted by fluctuating Brexit sentiment after a brief boost courtesy of hawkish-leaning remarks from BoE Governor Carney late yesterday, with Cable back down near 1.3100 and a recent double-base a few pips short of the big figure, while Eur/Gbp has rebounded to the 0.8600 area again. Back to Brexit, and the bottom line remains no further progress after latest high level talks between UK and EU officials and apparently quite terse negotiations in Brussels as the baton passes to less senior personnel today. Turning to the Loonie, another downturn in crude prices and ongoing angst between Canada and China has culminated in Usd/Cad creeping up further towards the 1.3400 level, as offers said to be layered from 1.3375 to the next round number are soaked up, but the looming BoC policy meeting will likely provide more impetus. On that note, options pricing suggest a break-even of 67 pips for the impending event.

JPY/CHF/EUR – All relatively flat vs the Dollar, albeit erring towards the weaker side as the Greenback retains a firm underlying bid overall and the

DXY – Hovers just shy of the 97.000 handle and Fib resistance a whisker above (97.004 vs Tuesday’s 97.017 peak). Usd/Jpy is back below 112.00 after what appears to have been a false break-out to circa 112.12 yesterday (and also a fleeting Fib breach), but the pull-back could be shallow given 1.2 bn option expiries running off from 111.80-112.00 at the NY cut. The Franc is holding just off 1.0055 lows and pivoting 1.1350 vs the single currency, while Eur/Usd remains anchored around 1.1300 with 1.1305 eyed as a key chart point on a closing basis and expiries also in the mix as 1 bn resides at the 1.1300 strike.

FIXED INCOME

A further loss of the earlier bullish momentum and another retreat in 10 year benchmarks with Bunds and Gilts only just holding above big figures at 163.06 and 126.12 respectively, while BTPs have almost inevitably if not invariably retreated from parity-plus peaks to trade underwater. No obvious catalyst for any of the more pronounced pull-backs, but a relatively lacklustre DMO auction could conceivably and rightly be attributed to the UK debt downturn, albeit belatedly. A mild bounce in EU equities may also be a factor along with near techs, but it would be a stretch to suggest even a semblance of spill-over from a still hawkish or at least biased towards tightening CBRT. Elsewhere, US Treasuries are also whittling away more of their best overnight gains to virtually stand flat ahead of a busy agenda including ADP before NFP on Friday, trade data, several Fed speakers and the Beige Book for the eagerly awaited March FOMC.

COMMODITIES

Brent (-0.2%) and WTI (-0.9%) prices are in the red following the larger than expected build in API Crude Inventories yesterday of 7.4mln vs. Exp. 1.2mln. If the API build is confirmed by EIA data later on today this would be a large contrast to the prior draw. UBS highlight that a build of this size would not mean a major deviation from the seasonal average within the context of the prior two months data, as such should not result in a lasting impact on oil prices. Elsewhere, China have cancelled Canadian Co. Richardson Internationals registration to ship canola to China; following this, China’s foreign ministry state that harmful pests have been discovered in samples taken from Canadian Canola oil and a serious problem has been highlighted in one Co’s shipments. Although, it is currently not clear which company this refers to. Separately, US National Security Advisor Bolton says he is looking at fresh sanctions against Venezuela to increase the pressure on President Maduro.

Gold (-0.1%) is approaching the bottom of its narrow USD 4/oz range, but is largely unchanged on the day. Elsewhere, the World Platinum Investment Council stated that the global platinum market will this year experience the largest surplus since around 2013.

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)

ARA region crude inventories rose 610k BPD to 58.4mln BPD, week ending March 1st. (Newswires)

Nigeria's Bonny Oil Pipeline is expected to restart on Friday as according to Aiteo. (Newswires)