• APAC stocks were mostly firmer following the positive handover from Wall St. post-CPI.
• European equity futures are indicative of a relatively flat open with the Euro Stoxx 50 -0.1% after the cash market closed up 0.7% yesterday.
• DXY is on a 102 handle, EUR/USD holds on to most of its recent spoils, USD/JPY briefly slipped below 129.
• 10yr UST futures slightly eased off yesterday’s best levels but with the pullback only marginal.
• Looking ahead, highlights include UK GDP, US Export/Import Prices, ECB TLTRO Repayment Amount Publication, Speeches from Fed's Williams, Harker & Kashkari, Earnings from United Health, Blackrock, BNY Mellon, Bank of America, JPMorgan, Wells Fargo & Citi.

US TRADE

• US stocks gained following the third consecutive decline in CPI which puts a shift to a 25bps move at the February FOMC to a near certainty and took hawkish pressure off the Fed.
• SPX +0.34% at 3,983, NDX +0.50% at 11,460, DJIA +0.64% at 34,189, RUT +1.74% at 1,876.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barkin (non-voter) said the last three months of inflation prints have been a "step in the right direction," but cautioned that while the average has dropped, the median stayed high. Barkin reiterated that it makes sense to steer more deliberately as the Fed works to bring inflation down, while he added that inflation is too high and the Fed still has work to do.
• Fed's Bostic (non-voter) said the US inflation report was welcome news and may allow the Fed to move more slowly. Bostic added he would be comfortable moving at 25bps if conversations with business leaders are consistent with slowing inflation and noted that signs of slowing wage increases are also positive.
• Fed's Bullard (non-voter) said it looks like they had an above-trend rate of economic growth in Q4 and H2 2022, while he added that US households remain flush which should support household spending this year. Bullard reaffirmed the view that something north of 5% is the lowest level Fed could use to credibly restrict inflation and his preference is for getting north of 5%.

APAC TRADE

EQUITIES

• APAC stocks were mostly firmer following the positive handover from Wall St.
• ASX 200 was firmer with the advances led by the energy sector after this week’s rebound in oil prices and with sentiment also encouraged by a somewhat thawing of relations between Australia and China after officials in Guangdong received a notice from the local government to clear Australian coal shipments.
• Nikkei 225 failed to join in on the global upbeat mood with Japanese markets hampered amid a firmer currency and higher yields as BoJ watchers begun to expect a sooner-than-anticipated shift in policy.
• KOSPI gained despite a 25bps hike by the BoK which was expected and its statement made no reference to the need for further rate hikes, although Governor Rhee later suggested the door was open for future adjustments.
• Hang Seng and Shanghai Comp were kept afloat after press reports outlined details of China’s support measures for the property sector but with gains capped amid a further deterioration in Chinese exports.
• US equity futures traded rangebound and the E-mini S&P (-0.2%) just about failed to sustain the 4k level.
• European equity futures are indicative of a relatively flat open with the Euro Stoxx 50 -0.1% after the cash market closed up 0.7% yesterday.

FX

• DXY attempted to compose itself after the recent losses and slip beneath the 103.00 level in the aftermath of the softening US inflation data.
• EUR/USD was contained on a 1.08 handle and held on to most of its gains after it benefitted from the dollar's demise.
• GBP/USD was lacklustre below the 1.22 mark following yesterday’s choppy performance and recent Brexit-related headlines including comments from a UK PM spokesperson who noted that they still see significant issues regarding Brexit talks.
• USD/JPY briefly dipped beneath 129.00 to its lowest level in 7 months as BoJ watchers started to anticipate a policy shift by the BoJ sooner than previously anticipated with 38% of analysts surveyed by Bloomberg now looking for a policy adjustment in either April or June.
• Antipodeans were marginally softer with AUD not helped by weaker-than-expected Home Loans data and the continued contraction in Chinese exports and imports in December.
• PBoC set USD/CNY mid-point at 6.7292 vs exp. 6.7295 (prev. 6.7680)

FIXED INCOME

• 10yr UST futures slightly eased off yesterday’s best levels but with the pullback only marginal after treasuries had rallied as the softer December CPI increased bond allure and simultaneously took the pressure off the Fed.
• Bund futures were lacklustre overnight after hitting resistance yesterday at 139.00.
• 10yr JGB futures were pressured as the 10yr yield surpassed the BoJ’s 50bps ceiling to print its highest since June 2015 amid increasing views for the BoJ to shift its policy sooner than previously forecast to improve market functioning, while the rise in yields prompted further rounds of unscheduled purchase announcements.

COMMODITIES

• Crude futures lacked direction but held on to the prior day's gains which were facilitated by a weaker dollar and with growth conditions improved as cooling inflation data keeps a "soft landing" in play.
• Venezuela's PDVSA assigned a third crude cargo to Chevron (CVX) under the US authorisation that restarted exports to the US, according to Reuters sources.
• Spot gold was rangebound with price action contained by resistance at USD 1900/oz.
• Copper futures were uneventful and remained around their best levels in 7 months.

CRYPTO

• Bitcoin traded flat overnight as it took a breather from the prior day's rally and brief incursion above 19,000.
• US SEC is charging Genesis and Gemini for the unregistered offer and sale of crypto asset securities through the Gemini Earn lending program, according to CNBC.

NOTABLE ASIA-PAC HEADLINES

• China is to issue further policies to support the housing rental market including a CNY 100bln housing rental loan plan, while China will increase financing to quality developers via loans and bond issuance. Furthermore, China's plan to improve developers' balance sheets mainly targets high-quality property firms of relatively large size and systemic importance, according to Xinhua.
• China's customs said foreign trade continues to face many challenges and difficulties this year, but added that the fundamentals of long-term improvement remain unchanged and the economy is expected to rebound as a whole.
• White House is to discuss export curbs on China with Japanese and Dutch officials although upcoming meetings will not result in immediate announcements, according to a source cited by Reuters.
• BoK raised its base rate by 25bps to 3.50%, as expected, although board members Joo and Shin dissented. BoK said GDP growth will be slower than expected and inflation is to slow gradually, while it noted that policy focus will remain on containing inflation and the statement made no reference to the need for more rate hikes. However, Governor Rhee later noted that the statements and comments do not promise rates will be kept unchanged in the future and he also stated that it is premature to talk about a rate cut.

DATA RECAP

• Chinese Trade Balance (USD)(Dec) 78.0B vs. Exp. 76.2B (Prev. 69.84B)
• Chinese Exports YY (USD)(Dec) -9.9% vs. Exp. -10.0% (Prev. -8.7%)
• Chinese Imports YY (USD)(Dec) -7.5% vs. Exp. -9.8% (Prev. -10.6%)

GEOPOLITICS

• Russian Foreign Ministry said Russia-Belarus military drills are devised to discourage opponents from military escalation, according to TASS.
• Japan and the US reportedly approved the way to start planning specific ways to deploy counterstrike capabilities in their joint defence and foreign policy talks, including sharing intelligence from spy satellites, according to Nikkei.

EU/UK

NOTABLE HEADLINES

• BoE's Mann said the underlying UK inflation dynamic looks pretty robust, while she added that households and firms see inflation at 4% in the years ahead. Furthermore, she said they must not let inflation expectations drift and that they need to do more on raising interest rates.
• Irish PM Varadkar said his understanding from the EU is that they are not in the tunnel on negotiations yet with Britain and said it is possible that reaching an agreement on the NI protocol may not be enough to re-establish the NI executive.
• Italian PM Meloni renewed criticism of the eurozone bailout fund in a meeting with the heads of the fund. Meloni also noted that the decision not to renew the fuel tax cut will limit inflation and said Italy is to slightly limit fuel cost if oil prices increase.