• European bourses trade mostly lower, with little in terms of news flow since the cash open as participants look ahead to the US jobs number.
• US tech giants see losses in the pre-market following earnings, AAPL -3.5%, AMZN -5.7%, GOOG -4.9%.
• DXY has given up earlier gains after testing levels close to 102.00 before warning towards 101.50, EUR and GBP reside as the current outperform.
• Bunds have been down to 138.56 for a 137 tick retracement from Thursday peak following hawkish ECB commentary.
• Looking ahead, highlights include US Labour Market Report, ISM Services PMI, Speeches from Fed's Daly, BoE's Pill & ECB's Elderson.

3rd February 2023

• US Labour Market Report, ISM Services PMI, Speeches from Fed's Daly, BoE's Pill & ECB's Elderson. - Earnings from LyondellBasell & Regeneron.
• Click for the newsquawk NFP preview.

EUROPEAN TRADE

EQUITIES

• European bourses trade mostly lower, with little in terms of news flow since the cash open as participants look ahead to the US jobs numbers.
• Sectors are now mixed with Energy, Basic Resources, and Healthcare as the top performers, with the former two aided by gains in underlying commodities, whilst healthcare is driven by gains in Roche (+3.0%) and AstraZeneca (+1.7%) whilst Sanofi (-2.9%) slips after poorly-received earnings. Sticking with sectors, the sectoral laggards comprise of Real Estate, Utilities, Construction and Financial Services.
• US futures are softer across the board with the NQ the underperformer amid disappointing earnings from highly concentrated mega-cap names (AAPL, AMZN, GOOG).
• Click here for more detail.

FX

• DXY has given up earlier gains after testing levels close to 102.00 before warning towards 101.50.
• EUR and GBP reside as the current outperformers, with the former lifted by hawkish commentary from several ECB members, whilst both currencies benefit from upward revisions to January PMIs.
• CAD is the lagged as USD/CAD continued its rebound from sub-1.3300 and y-t-d low, while the AUD suffers some contagion from a Yuan retreat.
• Click here for more detail.

FIXED INCOME

• 10yr USTs is nearer 115-13+ than 115-22+ extremes vs 116-00 at best in the previous session as eyes turn to the NFP.
• Bunds have been down to 138.56 for a 137 tick retracement from Thursday peak following hawkish ECB commentary.
• Gilts sub-107.00 at 106.89 having hit 107.78 yesterday, but downside is cushioned by dovishly-received remarks from BoE's Pill.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are choppy as the contracts trimmed their earlier modest gains, while complex-specific news flow has been rather light in the European morning.
• Spot gold is flat intraday but with a downside bias despite the dollar waning throughout the European morning.
• Base metals are mostly lower whilst copper bucks the trend; LME copper tested levels close to USD 9,050/t (vs high 9,091/t) before finding some support.
• Russia's Kremlin said the EU embargo on Russian petroleum products will further unbalance energy market, according to Reuters.
• Click here for more detail.

NOTABLE HEADLINES

• BoE's Chief Economics Pill said the UK has had some better times as of late, he is confident yesterday's hike was necessary and appropriate, and there is still a lot of policy in the pipeline. Pill said the MPC has changed language quite substantially and the MPC's job is to return inflation to the target and hold it over the medium term. He said he does not want to steer market rates on a day-to-day basis and they have to be prepared for shocks. He said it is important to guard against the possibility of doing too much. He has reasonably high confidence we will see inflation fall this year, focus is on whether inflation declined further ahead, and the notion of whether we are in a recession or not may vary throughout the year, via Times Radio.
• ECB's Simkus said inflation has probably peaked but core has yet to do so; 50bps hike in March may not be the last half-point move. He said a rate hike in May is possible, could be 25bps or 50bps but hardly 75bps. Rate reduction this year is unlikely but possible next year if the situation changes. Inflation trends are positive and approaching the terminal rate, according to Reuters and Bloomberg.
• ECB's Kazimir said March hike will not bring rates to peak. ECB will decide how many hikes take place beyond March, and fears that inflation could stay at levels too high. He said the fight against inflation is far from won.
• ECB's Rehn said the Governing Council intends to raise rates by 50bsp in March, via Twtter.
• ECB's Muller said core inflation is a cause for concern, via Bloomberg.
• ECB's Wunsch said a 25bps or 50bps rate hike is possible; will not go from 50bps in March to zero in May, and adds that 3.5% terminal rate is the minimum. He said core inflation remains persistent. He said Thursday's decision was hawkish, market reaction was surprising.
• ECB Survey of Professional Forecasters: 2023 inflation nudged higher to 5.9%, 2025 seen just above target at 2.1%.

NOTABLE DATA

• EU Producer Prices YY (Dec) 24.6% vs. Exp. 22.5% (Prev. 27.1%, Rev. 27.0%)
• EU Producer Prices MM (Dec) 1.1% vs. Exp. -0.4% (Prev. -0.9%, Rev. -1.0%)
• EU S&P Global Composite Final PMI (Jan) 50.3 vs. Exp. 50.2 (Prev. 50.2)
• EU S&P Global Services Final PMI (Jan) 50.8 vs. Exp. 50.7 (Prev. 50.7)
• UK Composite PMI Final (Jan) 48.5 vs. Exp. 47.8 (Prev. 47.8)
• UK S&P Global/CIPS Services PMI Final (Jan) 48.7 vs. Exp. 48 (Prev. 48)

NOTABLE US HEADLINES

• US CFTC said the weekly commitments of traders report will be delayed due to the ransomware attack on ION Trading UK, according to Reuters.
• Apple Inc (AAPL) Q1 2023 (USD): EPS 1.88 (exp. 1.94), Revenue 117.15bln (exp. 121.1bln), Products 96.39bln (exp. 98.98bln), iPhone 65.78bln (exp. 68.3bln), Mac 7.74bln (exp. 9.72bln), iPad 9.40bln (exp. 7.78bln). Co. said Q2 2023 revenue growth will be higher than the previous year and it sees a 5% impact from FX rates in Q2, while it expects iPhone revenue growth to accelerate in Q2 compared to Q1. Shares are lower by 3.3% pre-market.
• Alphabet Inc (GOOGL) Q4 2022 (USD): EPS 1.05 (exp. 1.18), Revenue 76.05bln (exp. 76.53bln). Google advertising 59.04bln (exp. 60.64bln). Significant work underway to improve all aspects of cost structure, in support of investments in highest growth priorities. Shares are lower by 4.1% pre-market.
• Amazon.com Inc (AMZN) Q4 2022 (USD): EPS 0.03 (exp. 0.18), Revenue 149.2bln (exp. 145.42bln).AWS net sales USD 21.38bln (exp. 21.76bln). Co. said in the short-term, it faces an uncertain economy but remain quite optimistic about the long-term opportunities for the Co. Shares are lower by 5.5% pre-market.
• Qualcomm Inc (QCOM) Q1 2023 (USD): Adj. EPS 2.37 (exp. 2.34), Revenue 9.46bln (exp. 9.6bln).Shares are lower by 3.9% pre-market.
• Tesla (TSLA) prelim Jan deliveries 66.1k vs. prev. M/M 55.8k, according to prelim CPCA. Shares are lower by 0.9% pre-market.
• Click here for the US Early Morning note.

CRYPTO

• Bitcoin trades flat in European hours on either side of USD 23,500 awaitng the US NFP.

GEOPOLITICS

• US is tracking a suspected Chinese spy balloon which entered US airspace a couple of days ago which US military officials recommended to not shoot down because of safety risks, while President Biden was briefed regarding the spy balloon and asked the military to present options, according to a senior administration official cited by Reuters. It was later reported that Canada's Department of National Defence was monitoring a possible 2nd balloon incident.
• Chinese Foreign Ministry, on the US Pentagon suspecting a Chinese spy balloon over US, said speculation and hype are not conducive until the facts are clear, according to Reuters.
• US CIA Director Burns said China is the biggest geopolitical challenge that the US faces and the CIA assessed that Chinese President Xi has been a little sobered by Ukraine but has serious focus and ambition on Taiwan, according to Reuters.
• Chinese Foreign Ministry said there is no news to release at this time on US Secretary of State Blinken's visit to China, according to Reuters.
• Secretaries of Security Councils of Central Asia, Pakistan, India, China are to meet on Afghanistan in Moscow next week, according to Tass.
• Reports of air raid sirens in Kyiv before EU-Ukraine summit started, according to AFP.
• Russia's Kremlin has rejected reports that the US offered Russia a secret peace plan on Ukraine, according to Reuters.

APAC TRADE

• APAC stocks were mixed as participants digested the latest bout of central bank rate hikes and a slew of earnings releases, while strong Chinese Caixin Services and Composite PMI data also failed to inspire.
• ASX 200 was led by healthcare and real estate, while the top-weighted financial sector also benefitted amid reports of early merger talks between regional lenders Bank of Queensland and Bendigo & Adelaide Bank.
• Nikkei 225 briefly breached the 27,500 level as earnings remained in focus with Sony among the best performers after it reported higher 9-month profits, as well as raised its FY net guidance and PS5 sales target.
• Hang Seng and Shanghai Comp. weakened despite the easing of border restrictions between mainland China, Hong Kong and Macau, while the rebound in Chinese Caixin PMI data also failed to spur risk appetite after the bout of global central bank policy tightening and with China’s Commerce Ministry warning that the nation’s imports and exports face an extremely severe environment on slowing external demand.

NOTABLE ASIA-PAC HEADLINES

• Hong Kong Macau Affairs Office said will drop cross-border restrictions between the mainland, Hong Kong and Macau, as well as end pre-arrival PCR testing for some travellers and will resume group tours effective February 6th. Hong Kong Chief Executive Lee also announced that all border points between mainland China and Hong Kong are to resume without quotas on travel, according to Reuters.
• Chinese policymakers are planning on supporting domestic demand in 2023 but are unlikely to "splash out" on direct consumer subsidies, keeping their focus on investment, according to Reuters sources.
• China's Cabinet stated that China's economy still faces difficult and challenges, according to state media, adding that China's economic operations are recovering, and will consolidate and expand economic recovery momentum, via Reuters.

DATA RECAP

• Chinese Caixin Services PMI (Jan) 52.9 vs Exp. 51.0 (Prev. 48.0)
• Chinese Caixin Composite PMI (Jan) 51.1 (Prev. 48.3)