• Asian equity markets traded mixed as the region failed to sustain the momentum from the tech-led advances on Wall St
• EU leaders will give the UK an extension until May 22nd if parliament agrees to May’s deal next week, if rejected, the UK will have until April 12th to indicate a way forward
• In FX markets, the DXY was subdued overnight below the 96.50 level as the prior day’s recovery from the post-FOMC selling eventually lost steam
• Looking ahead, highlights include French, German, EU & US PMIs (Flash), Canadian CPI & Retail Sales, US Existing Home Sales, Fed’s Bostic, ECB’s Mersch Speaking

ASIA-PAC

Asian equity markets traded mixed as the region failed to sustain the momentum from the tech-led advances on Wall St, where the sector rose by nearly 2.5% in the S&P 500 with Micron shares up over 9% post-earnings and with Apple the best performer in the DJIA on bullish broker calls. As such, ASX 200 (+0.5%) was positive as tech names tracked the upside of their US counterparts and with broad strength seen across sectors aside from the mining names amid a subdued metals complex, while attempts by the Nikkei 225 (-0.1%) to play catch up to the prior day’s Fed-inspired performance was cut short by recent JPY strength. Elsewhere, Hang Seng (-0.4%) and Shanghai Comp. (-0.3%) were negative with focus in China centred on earnings releases including Tencent and PetroChina which both fell short of net profit estimates and resulted in the latter leading the declines in Hong Kong. Finally, 10yr JGBs were higher with prices boosted in the wake of the dovish Fed and as longer-term yields dropped to multi-year lows last seen in late 2016.

PBoC skipped open market operations for a weekly net injection of CNY 90bln vs. Prev. CNY 20bln injection W/W. (Newswires) PBoC set CNY mid-point at 6.6944 (Prev. 6.6850)

Japanese National CPI (Feb) Y/Y 0.2% vs. Exp. 0.3% (Prev. 0.2%). (Newswires) Japanese National CPI Ex. Fresh Food (Feb) Y/Y 0.7% vs. Exp. 0.8% (Prev. 0.8%) Japanese National CPI Ex. Fresh Food & Energy (Feb) Y/Y 0.4% vs. Exp. 0.4%       (Prev. 0.4%)

UK/EU

EU summit final communique stated that EU leaders will give the UK an extension until May 22nd if parliament agrees to the deal next week, otherwise it will give the UK until April 12th to indicate a way forward if the deal is rejected, while the EU reiterated its stance that the WA cannot be renegotiated. (Newswires)

EU's Tusk said a cliff edge will be avoided and that all options for the UK are still open until April 12. Tusk added that a long extension will become impossible if UK has not decided by April 12th, while EU's Juncker said there is no more we can give the UK and that we are ready for a no-deal with emergency measures in place. (Newswires)

UK PM May said she welcomes council approval of assurances on the backstop and will work hard to get support for her deal. Furthermore, PM May added that a new Brexit plan is needed by April 12th if the deal is rejected but had also suggested confidence earlier that she can still get a Brexit deal passed. (Newswires)

UK 1922 Committee Chairman Brady is said to tell PM May that MPs want her to quit. (Telegraph)

Remain ministers have warned PM May that they are prepared to quit unless she gives them a free vote on a new backbench bid to stop no deal. (Telegraph)

FX

In FX markets, the DXY was subdued overnight below the 96.50 level as the prior day’s recovery from the post-FOMC selling eventually lost steam. This provided much needed reprieve for EUR/USD and GBP/USD which had been at the whim of the Brexit-related risks and helped the latter reclaim the 1.3100 handle. In terms of the latest developments in the Brexit saga, the EU have agreed to a 2-tier extension for Article 50 which will be pushed back until May 22nd if parliament agrees to the deal next week, otherwise it will give the UK until April 12th to indicate a way forward if the deal is rejected. Following the summit, EU’s Tusk commented that a cliff edge will be avoided and that he was much more optimistic, although some market watchers were less enthusiastic and viewed this as kicking the can down the road with Europe steadfast in its unwillingness to budge on the WA. In addition, JP Morgan adjusted its outcome probabilities and now sees a UK general election as the most likely scenario with a 30% probability (Prev. 15%), while it assigned a 20% chance for exiting with a deal (Prev. 35%) and 20% likelihood for an extension without no political process (Prev. 20%). Elsewhere, antipodeans were rangebound as AUD/USD and NZD/USD consolidated in the aftermath of this week’s Fed and data-induced fluctuations, while USD/JPY and JPY-crosses were tentative amid the mixed overnight risk tone.

COMMODITIES

Commodities were virtually unchanged overnight and have stabilized from the post-FOMC fluctuations with WTIcrude futures flat near the USD 60/bbl level amid a lack of overnight catalysts and an indecisive risk tone. Elsewhere, gold was flat after its recent pullback from 3-week highs and copper mirrored the lacklustre tone across the complex as reports also noted further Vale resumption approvals.

US DoE sold a total 4.32mln barrels of SPR crude to Marathon, Motiva and Phillips 66. (Platts)

Brazil state government in Minas Gerais authorises Vale to resume operations at Brucutu. (Newswires)

China’s Mofcom announced it will impose temporary antidumping measures on stainless steel billet and hot-rolled steel plate imports from EU, Japan, South Korea and Indonesia in which it will collect anti-dumping deposits of 18.1%-103.1%. (Newswires)

GEOPOLITICS

US Treasury Department issued new North Korea related sanctions against 2 Chinese shipping companies for conducting business with North Korea. (Newswires)

US

At settlement, changes in Treasuries yields were modest. Some desks noted that after the aggressive post-Fed buying on Wednesday, more measured trading was to be expected, and the buying was most likely short-covering, and with fewer shorts, the buyside action was naturally more subdued. It is interesting that the effective Fed Funds Rate rose 1bps today to 2.41%, vs 2.40% over the last few weeks, with 2s yields trading below that level for a lot of the session, while the Fed Funds Rate eclipsed the IOER for the first time since the rate was launched in 2008. There was also a lot of attention on the 3-month/10-year spread, which was compressed to just 3.9bps at one point on Thursday (folks look at this spread as a more accurate gauge of recession risks, rather than 2s10s). Mortgage rates also dropped, helping some of the homebuilding names. The Treasury's sale of USD 11bln of 10-year TIPS was soft, tailing 1.1bps; the internals provided some encouragement, with the indirect participation jumping to 77% from 69%, pushing direct buyers participation lower. Going forward, some expect that, given G10 central banks aren't likely to all follow the Norges Bank higher, Treasuries could still be attractive to yield-hunters. Next week, the Treasury will auction USD 113bln in 2s/5s/7s, sizes unchanged vs the priors. US T-note futures (M9) settled 1+ ticks lower at 123-11+

US President Trump said Fed Chair Powell was wrong to project diminishing growth in the US and stated we are not slowing, while he added that if it wasn't for Powell's mistakes, 2018 growth could have exceeded 4% instead of 3% and that he hopes he did not influence Fed decisions. (Newswires)

US President Trump is said to consider Stephen Moore for the Fed board. (Newswires)