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Euro Market Open: European/US Futures are non-committal, awaiting geopolitical developments

  • APAC stocks traded mostly lower following a similar handover from Wall Street (S&P 500 -0.4%); mainland China outperformed
  • European and US equity futures traded with a non-committal tone overnight but tilted lower as European players entered the fray
  • Kremlin spokesperson struck a conciliatory tone, but satellite images show increased Russian military action
  • Iron ore futures slumped over 10% amid the continued crackdown on prices by China; Spot gold hit 8-month highs
  • Looking ahead, highlights include UK Unemployment, EZ GDP (Estimate, Flash), German ZEW, US NY Fed Manufacturing, PPI Final Demand, German-Russian meeting, supply from the  Netherlands, UK & Germany. Earnings from Glencore, Restaurant Brands, ViacomCBS
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  • Click here for updated analysis on Russia-Ukraine

US TRADE

  • US majors closed mostly lower after a choppy session which saw sentiment swayed by geopolitics.
  • The risk tone was hit in the Wall Street afternoon after Ukrainian President Zelensky said he was told February 16th was the "day of the attack", but it was later clarified this was said with irony - equities trimmed losses.
  • CLOSES: S&P 500 -0.4% at 4,400, Nasdaq 100 +0.1% at 14,268, Dow Jones -0.5% at 34,566, Russell 2000 -0.7% at 2,019.

NOTABLE US HEADLINES

  • Federal investigators are probing block trading at Morgan Stanley (MS), Goldman Sachs (GS) and several hedge funds to examine whether bankers may have improperly tipped hedge-fund clients in advance of large share sales, according to WSJ sources.
  • Canadian Prime Minister Trudeau has taken the step of invoking the Emergencies Act to crack down on anti-vaccine mandate protests. Banks will be able to freeze the personal accounts of anyone linked with the anti-vaccine mandate protests, according to BBC.

APAC TRADE

EQUITIES

  • APAC stocks traded mostly lower following a similar handover from Wall Street.
  • ASX 200 was subdued as the energy and mining names gave back some of yesterday’s gains, whilst the RBA minutes offered no fresh information.
  • Nikkei 225 was pressured by its industrial sector and with a resilient Yen providing further headwinds.
  • Hang Seng continued to be overpowered by the COVID situation in Hong Kong which prompted Chief Executive Lam to announce new measures to curb the spread.
  • Shanghai Comp. bucked the trend and posted mild gains after the PBoC decided to inject CNY 300bln via 1yr MLF, albeit at a maintained rate of 2.85%.
  • US equity futures traded with a non-committal tone overnight but tilted lower as European players entered the fray.
  • European equity futures are indicative of a softer open with the Eurostoxx 50 future -0.4% after the cash market closed lower by 2.2% yesterday.

FX

  • DXY traded within a tight range but off yesterday’s 96.441 high, downside levels include the 21 DMA (96.016) and 50 DMA (96.000).
  • EUR/USD and GBP/USD were similarly contained with the former eyeing the 21 and 50 DMAs both around 1.1325.
  • USD/JPY looked heavy around the Tokyo open and dipped back under 115.50 as the risk tone remained cautious.
  • AUD trimmed earlier gains as iron ore prices slumped; RBA minutes resulted in modest downticks with the patient message reiterate and no explicit mention to the plausibility of a rate hike this year.
  • NZD benefitted after China upgraded its free trade deal with New Zealand.
  • CAD was lacklustre as oil prices remain subdued, whilst the Canadian PM took what was described as an unprecedented step to tackle anti-vaccine mandate protests.
  • RUB was softer among the EMs with Moscow facing potential sanctions.

FIXED INCOME

  • 10yr UST and Bund futures held modest gains after the complex bounced off the lows in the Wall Street afternoon amid Russia/Ukraine concerns.
  • JGBs were mostly subdued across the curve except for the 10yr following the BoJ’s operation yesterday.

COMMODITIES

  • WTI and Brent futures traded sideways with losses awaiting the next geopolitical update.
  • Spot gold has extended on yesterday’s gains and tested resistance around USD 1,877-78/oz area - representing some highs from June and November 2021.
  • Iron ore futures slumped over 10% in China and Singapore amid the continued crackdown on prices by China.
  • China's NDRC and SAMR will reportedly be holding a meeting on iron ore in Qingdao on Feb 17th; Glencore (GLEN LN) and Trafigura are among those required to submit recent transaction data and port stockpiles, according to Chinese press.
  • Barclays raised its WTI and Brent price forecasts, both by USD 7/bbl, to USD 89/bbl and USD 92/bbl respectively, according to Reuters.

NOTABLE APAC HEADLINES

  • PBoC injected CNY 300bln via 1yr MLF at a maintained rate of 2.85%
  • PBoC injected CNY 10bln via 7-day reverse repos at a maintained rate of 2.10% for a daily drain of CNY 10bln
  • PBoC set USD/CNY mid-point at 6.3605 vs exp. 6.3595 (prev. 6.3664)
  • China upgraded its free trade deal with New Zealand, effective April 7th, according to Reuters.
  • China is said to strengthen regulations on the car-hailing sector, according to reports.
  • Hong Kong Chief Executive said there are no plans for a widespread city lockdown, according to Bloomberg.

DATA RECAP

  • Japanese GDP QQ (Q4) 1.3% vs. Exp. 1.4% (Prev. -0.9%)
  • Japanese GDP QQ External Demand (Q4) 0.2% vs. Exp. 0.3%
  • Japanese GDP QQ Private Consumption Prelim (Q4) 2.7% vs. Exp. 2.2% (Prev. -1.3%)
  • Japanese GDP QQ Annualised (Q4) 5.4% vs. Exp. 5.8% (Prev. -3.6%)
  • Japanese GDP QQ Capital Expend. (Q4) 0.4% vs. Exp. 0.5% (Prev. -2.3%)

CENTRAL BANKS

  • ECB President Lagarde said the ECB target is at 2% inflation over the medium term, will take action at the right time to achieve that; bottlenecks will still persist for some time but there are signs they are starting to ease. She reiterated inflation is likely to remain high in the near term and risks to the inflation outlook are tilted to the upside, particularly in the near-term. She noted the solid anchoring of long-term inflation expectations in the euro area is reassuring. She said a rate hike will not occur before net asset purchases finish, and any adjustment to our policy will be gradual, according to Reuters.
  • China Security Journal suggested the PBoC may opt to cut the RRR or interest rate "later".
  • RBA Minutes from the February meeting reiterated the Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve. Members observed that inflation had picked up more quickly than the Bank had expected and underlying inflation was expected to increase further over coming quarters. The release made no explicit mention of the plausibility of a rate hike this year.
  • CBA now sees an RBA rate hike in June 2022 (prev. view August 2022).
  • BoJ Governor Kuroda said the central bank does not intend to conduct the 10yr JGB operation too often, will do as needed; weak JPY impact on domestic inflation is not that large at the moment, via Reuters.

GEOPOLITICS

  • Kremlin spokesperson Peskov said Russian President Putin is "willing to negotiate", has always demanded negotiations and diplomacy; adding the Ukraine crisis was only one part of Russia's larger security concerns, via CNN
  • A US official said satellite images show Russian troops leaving assembly points and moving to attack positions, according to CBS News.
  • US State Department advises US citizens to immediately depart Belarus, according to Bloomberg.
  • US is reportedly closing its embassy in Kyiv and relocating diplomatic operations to Western Ukraine. US State Department ordered destruction of computer equipment amid warnings of Russian invasion, according to WSJ.
  • Biden admin is offering USD 1bln in loan guarantees to Ukraine to ease market concerns regarding a possible war, according to Reuters citing a source familiar with the matter.
  • Biden admin officials are reportedly running out of patience regarding talks on China's shortfalls under the Phase One deal, but the White House plans to let the talks play out before considering the next steps, according to Bloomberg sources. This is in-fitting with reports from last Monday.
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