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Euro Market Open: A mixed APAC session on China's return following a similar US handover post-NFP

  • US stocks finished mostly positive on Friday in what was a choppy session as investors digested a blow-out NFP report
  • Asian stocks were mixed with mainland Chinese participants returning from the Lunar New Year holiday
  • European futures are indicative of a higher open with the Eurostoxx 50 future up by 0.5% after the cash market closed lower by 1.3% on Friday
  • DXY climbed back above 95.50 post-NFP beat with participants eyeing this week's US CPI for further Fed clues
  • Looking ahead, highlights include German Industrial Output, ECB’s Lagarde Speech, German Chancellor Scholz & US President Biden Meeting

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US TRADE

  • US stocks finished mostly positive on Friday in what was a choppy session as investors digested a blow-out NFP report which raised expectations of a 50bps March Fed rate hike, while the Nasdaq led the upside after strong earnings from Amazon's (AMZN) earnings, as well as those from Pinterest (PINS) and Snap (SNAP) helped ease some of the fears about the health of large cap tech companies.
  • CLOSES: S&P 500 +0.6% at 4,503.60, Nasdaq-100 +1.3% at 14,694.35, Dow Jones -0.1% at 35,089.74.

NOTABLE US HEADLINES

  • Fed Chair Powell was appointed as Chair Pro Tempore, pending Senate confirmation to a second term, according to a statement.
  • China Competition Bill to boost US chip making passed the House and now must be joined with the Senate bill, according to Reuters.
  • US CDC Director endorsed CDC ACIP for use of Moderna’s (MRNA) COVID-19 vaccine for adults aged 18 years and older, according to Reuters.

APAC TRADE

EQUITIES

  • Asian stocks were mixed amid recent increases in global yields and after the blowout NFP data stoked bets for a more aggressive Fed rate hike in March, while geopolitical concerns also lingered.
  • ASX 200 (-0.1%) was dragged lower by weakness in real estate, healthcare and financials although finished off its lows amid resilience in the commodity-related sectors and stronger than expected quarterly Retail Trade data.
  • Nikkei 225 (-0.8%) suffered as Japan plans an extension of COVID-19 measures for Tokyo and other areas.
  • Hang Seng (-0.5%) and Shanghai Comp. (+2%) were varied as Hong Kong stocks took a back seat to the outperformance in the mainland which re-opened for the first time since the Lunar New Year, while Chinese Caixin Services and Composite PMIs slowed but remained in expansion territory.
  • US equity futures were flat overnight; E-mini S&P +0.0%, E-mini Nasdaq 100 +0.1%.
  • European futures are indicative of a higher open with the Eurostoxx 50 future up by 0.5% after the cash market closed lower by 1.3% on Friday.

FX

  • DXY climbed back above 95.50 post-NFP beat with participants eyeing this week's US CPI for further Fed clues.
  • EUR/USD took a breather from recent outperformance, but pullback is limited as ECB's Knot sees first hike in Q4.
  • GBP/USD was rangebound as reports suggested Downing Street is bracing for a no-confidence vote soon.
  • USD/JPY traded choppy amid the mixed risk appetite.
  • Antipodeans were subdued after China set a significantly weaker than expected reference rate.
  • Turkish President Erdogan tested positive for COVID-19, according to Reuters.
  • South Africa’s Eskom announced that loadshedding was suspended from Sunday evening amid a sufficient recovery in generation capacity, according to Reuters.

FIXED INCOME

  • 10-year USTs languished beneath 127.00 after the blowout NFP report spurred bets of a more aggressive Fed lift off, while US 2-yr yield rose to its highest since February 2020.
  • 10-year JGBs were lacklustre as the benchmark yield remained around 0.20%, while reports speculate BoJ is likely to defend yields if there are further increases towards the 25bps cap.
  • Bund futures found support near 166.00 but with the rebound only trivial compared to last week’s selling pressure.

COMMODITIES

  • WTI and Brent were choppy in which the latter tested the 94.00/bbl level to the upside.
  • Spot gold was kept rangebound above USD 1800/oz amid a firmer greenback.
  • Copper was marginally lower amid the indecisive mood in the region and despite the return of its largest purchaser.
  • US Baker Hughes Rig Count (w/e Feb 4th): Oil +2 at 497, Nat Gas +1 at 116, and Total +3 at 613.
  • Marathon’s Galveston Bay Refinery (593k bpd) and Valero’s Texas City refinery (225k bpd) were knocked out of production due to a power outage on Friday amid severe cold weather, according to Reuters.
  • Saudi Arabia raised oil prices for customers in Asia, US and Europe, according to Bloomberg.
  • Turkey lifted its ban on importing scrap metals from Lebanon, according to Reuters.

NOTABLE APAC HEADLINES

  • PBoC injected CNY 20bln via 7-day reverse repos with the rate at 2.10% for a CNY 130bln net drain.
  • PBoC set USD/CNY mid-point at 6.3580 vs exp. 6.3235 (prev. 6.3746)
  • US officials said their patience is wearing thin regarding talks with China and they are seeking concrete action, while they added there are no real signs China will make up for shortfalls in purchase commitment under the Phase 1 trade deal, according to Reuters.
  • China's NDRC expects China’s inflation risks to decline this year as adverse impacts of COVID and global supply shortages grow less sever, according to Bloomberg.
  • China's A-share market is supported in the medium and long-term, while a gradual easing of investor concerns regarding the economy, capital flows and policies is expected, according to China Securities Journal.
  • Chinese Center for Disease Control and Prevention chief epidemiologist said China will not adjust its zero-COVID policy for now, according to Global Times. It was also reported that China’s southern city of Baise imposed a lockdown affecting 4mln people after 98 tested positive for COVID-19, according to CCTV.
  • Japan is planning to extend COVID-19 measures in Tokyo and other areas, according to Asahi.
  • Australian PM Morrison said they will reopen borders to all visa holders on February 21st and that visitors coming to Australia must be double vaccinated, according to Reuters.
  • RBI rescheduled its policy meeting by a day later to February 8th-10th due to a public holiday being announced in Maharashtra after the death of a legendary Bollywood singer, according to Reuters.

DATA RECAP

  • Chinese Caixin Services PMI (Jan) 51.4 (Prev. 53.1)
  • Chinese Caixin Composite PMI (Jan) 50.1 (Prev. 51.0)
  • Australian Retail Trade (Q4) 8.2% vs. Exp. 8.1% (Prev. -4.4%)

EUROPE-SPECIFIC HEADLINES

  • Downing Street reportedly fears that UK PM Johnson is close to a no-confidence vote with former vice-chairman of the 1922 Committee Sir Charles Walker warning the end is now 'inevitable', according to Independent.
  • UK Business Minister Kwarteng said he doesn’t think it is inevitable that UK PM Johnson will be removed from his position, while it was also reported that PM Johnson appointed Steve Barclay as his new Chief of Staff, according to Reuters.
  • Three cabinet ministers have turned on Chancellor Sunak and said that he should be sacked for disloyalty as PM Johnson fights to save his premiership, according to The Times.
  • ECB’s Knot suggested they should end the asset purchasing program ASAP and that the first rate hike is possible in Q4 this year with a second hike likely early next year. Knot also said inflation in the Netherlands is very concerning and eurozone inflation to stay above 4% this year and will be higher in the Netherlands, while he thinks inflation will stay elevated longer than initially anticipated but then decline, according to Reuters.
  • ECB's Kazaks says a July hike would imply an extremely quick and unlikely tapering pace, with an increased risk of persistent inflation net-new asset purchases become less necessary

GEOPOLITICS

  • US National Security Adviser Sullivan said Russia could conduct military action on Ukraine within days and weeks or they could choose to pursue diplomacy. Sullivan added that Russian actions could take many forms including annexing Donbass, cyberattacks or a full-scale invasion of Ukraine, while in a separate interview he said military action could occur as early as tomorrow and could take several weeks, according to NBC News and ABC News.
  • UK Foreign Secretary Truss said Russia’s actions show their claims to have no plans to invade Ukraine are false and she vowed to raise the cost if Russia takes further action, according to Reuters.
  • Ukraine’s presidency said that the chance of a diplomatic solution is higher than military escalation, according to AFP News Agency.
  • Iran’s top security official Shamkhani tweeted that Tehran’s right to research and development cannot be curbed by a nuclear deal.
  • US Special Representative for North Korea Sung Kim is to visit Hawaii between February 10th-15th for a trilateral meeting with Japanese and South Korean officials, according to a statement cited by Reuters.
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