• APAC stocks declined amid a continuation of the selling in financials and with risk appetite constricted.
• European equity futures are indicative of a marginally higher open with the Euro Stoxx 50 +0.1% after the cash market closed down 3.1% on Monday.
• DXY is firmer but still on a 103 handle, JPY lags peers, EUR/USD hovers just above 1.07.
• 10yr UST futures pulled back from the historic bull-steepening on Monday whereby yields tumbled amid expectations of a less aggressive Fed.
• Looking ahead, highlights include UK Labour Market Report, US CPI, Speech from Fed's Bowman, BoJ Minutes (Jan), NBH Minutes (Feb), OPEC MOMR, Supply from UK, Italy & Germany.

US TRADE

EQUITIES

• US stocks were mixed with price action choppy and in a state of inertia amid jitters after the recent bank failures of SVB and Signature Bank. Financials were slaughtered despite the Fed's announcement of the Bank Term Funding Program and banking authorities declaring full protection to depositors, while tech and the defensive sectors fared better as money markets ramped up pricing of easier Fed policy.
• SPX -0.15% at 3,855, NDX +0.79% at 11,923, DJIA -0.28% at 31,819, RUT -1.60% at 1,744.
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NOTABLE HEADLINES

• Nomura forecasts a 25bps Fed rate cut and halt in QT at the March FOMC meeting.
• Barclays sees the Fed leaving rates unchanged at the March FOMC "with financial stability concerns moving to the forefront" but continues to believe more hikes will come.
• UBS expects the Fed to keep hiking despite banking troubles and feels the market is "overshooting in the opposite direction", while it expects 25bps hikes at the next three meetings to 5.5% and said if core CPI comes in at 0.5-0.6% M/M, "the Fed may feel they have the 'financial stability cover' to even do 50bps in March".

SVB/BANKS

• Fed said it will disclose total loan amounts under the new bank programme weekly and details of the borrowers are to be released a year after it closes. Fed is also to probe its supervision of SVB and release the review by May 1st, while Fed Chair Powell said the SVB failure demands 'thorough, transparent and swift review', according to Bloomberg.
• White House said the Treasury is working with bank regulators on the next steps and regulators have tools to deal with disruptions and supervise banks, while it reiterated that this is not a bailout.
• Top Senate and top House Democrats said Congress will be looking closely at the causes behind the run on SVB and other banks, as well as how a similar crisis can be prevented in the future.
• Silicon Valley Bank N.A. CEO said they are conducting business as usual within the US and expect to resume cross-border transactions in the coming days, while the CEO added the FDIC transferred all deposits and all assets of former Silicon Valley Bank to the newly created, full-service FDIC-operated 'bridge bank' and all depositors have full access to their money with deposits protected.
• FDIC is still looking to sell SVB (SIVB) and told GOP senators it is planning another auction, according to WSJ sources.
• Moody's withdrew Signature Bank's (SBNY) long-term and short-term local currency bank deposit ratings, while it downgraded its subordinate debt to C from BAA3 and will withdraw ratings. Furthermore, Moody's placed multiple US banks under review for downgrade including Zions Bancorporation (ZION), Comerica (CMA), UMB (UMBF), Western Alliance (WAL), First Republic (FRC), Signature Bank (SBNY) and Intrust.
• Large US banks are reportedly inundated with new depositors as smaller lenders face turmoil with JPMorgan (JPM), Citigroup (C) and other large financial institutions trying to accommodate customers wanting to move deposits quickly, according to FT.

APAC TRADE

EQUITIES

• APAC stocks declined amid a continuation of the selling in financials and with risk appetite constricted amid the fallout from the recent US bank collapses.
• ASX 200 spent most of the session beneath the 7,000 level with the index pressured by substantial losses in nearly all sectors and amid headwinds from weak data releases in which Westpac consumer sentiment remained near historic lows and NAB business surveys deteriorated.
• Nikkei 225 slumped due to heavy losses in financial stocks which occupied the list of the 10 worst performers, while the Tokyo Stock Exchange banking index suffered its worst day in over three years.
• Hang Seng and Shanghai Comp. retreated albeit with less aggressive selling in the mainland on reopening news as China is to resume the issuance of all types of visas for foreigners from March 15th.
• US equity futures were contained (ES +0.3%) as participants await the incoming US inflation data.
• European equity futures are indicative of a marginally lower open with the Euro Stoxx 50 -0.2% after the cash market closed down 3.1% on Monday.

FX

• DXY clawed back some of yesterday’s losses but remains on a 103 handle as 2-year yields rebounded from the largest drop since the early 1980s which was triggered by the dovish repricing of Fed rate expectations with money markets pricing rates to peak in May before potential cuts thereafter. Nomura became the first to call for a 25bps cut at next week’s FOMC meeting.
• EUR/USD continued its steady retreat from near-term resistance at 1.0750 and with sources noting that the ECB's hawkish plans are set to face bolder opposition amid the SVB fallout.
• GBP/USD mildly faded some of its recent gains after stalling just shy of the 1.2200 handle.
• USD/JPY rebounded overnight but failed to reclaim the 134.00 handle due to recent haven flows and following a brief dip to a four-week low at sub-133.00.
• Antipodeans were lacklustre as the greenback found some composure and following weak consumer and business confidence surveys from Australia.
• PBoC set USD/CNY mid-point at 6.8949 vs exp. 6.8933 (prev. 6.9375)

FIXED INCOME

• 10yr UST futures pulled back from the historic bull-steepening on Monday whereby yields tumbled on market repricing for a less aggressive Fed, while attention turns to the incoming US CPI data.
• Bund futures took a breather from yesterday’s surge and retreated to below the 136.00 level.
• 10yr JGB futures moved off contract highs after peaking near 149.00 but held on to much of yesterday's gains after the 5yr JGB auction attracted a higher price and as Japan's 10yr yield briefly slipped beneath the BoJ's previous target of 25bps.

COMMODITIES

• Crude futures remained pressured after recently testing YTD lows with headwinds from the depressed risk appetite after the US bank failures rather than anything energy-specific.
• EIA said US total shale regions oil production for April is seen up about 69k BPD at 9.214mln BPD (prev. 86k BPD rise in March).
• Spot gold gave back some of the prior day's gains but just about held on to the psychological USD 1900/oz level with price action driven by fluctuations in yields and dollar moves.
• Copper futures retreated after recent whipsawing and overnight risk aversion.

CRYPTO

• Bitcoin extended on gains after the prior day's surge and climbed above the USD 24,500 level.
• US DoJ is probing the collapse of Do Kwon's TerraUSD stablecoin and FBI and New York officials have questioned former Terraform Labs team members, according to WSJ.

NOTABLE ASIA-PAC HEADLINES

• China is resuming the issuance of all types of visas for foreigners from March 15th.
• US President Biden said he will talk to Chinese President Xi soon but didn't specify when. Furthermore, National Security Adviser Sullivan said President Biden anticipates a call opportunity with Chinese President Xi once China's government returns to work after the NPC, while Sullivan added the US had communicated with China over the AUKUS submarine pact and China's military build-up.
• EU seeks new controls to limit China acquiring high-tech and is exploring ways to police how European companies invest in production facilities overseas, according to FT.

DATA RECAP

• Australian Westpac Consumer Confidence Index (Mar) 78.5 (Prev. 78.5)
• Australian NAB Business Confidence (Feb) -4 (Prev. 6)
• Australian NAB Business Conditions (Feb) 17 (Prev. 18)

GEOPOLITICS

• White House National Security Adviser Sullivan said the US has been encouraging Chinese President Xi to reach out to Ukrainian President Zelensky, but Ukrainians have not received confirmation of a call.
• UK Royal Navy warship escorted a Russian task group in the English Channel.
• US President Biden said alongside Australian PM Albanese that he doesn't view what they are doing as a challenge to anybody but is more about stability in the Indo-Pacific after AUKUS leaders met and agreed on a plan to deliver nuclear-powered submarines to Australia.
• North Korea fired two short-range ballistic missiles into the East Sea. South Korea said the missiles flew 620km and the repeated launches are a grave act of provocation threatening peace and security in the region. South Korea also said it will carry out combined drills with the US as planned and maintain readiness based on overwhelming capability, while the US military said North Korean missile launches do not pose an immediate threat to US personnel or territory or to their allies.

EU/UK

• UK PM Sunak said UK banks are well capitalised and liquidity is strong.
• UK PM Sunak invited US President Biden to visit Northern Ireland for the anniversary of the Good Friday Agreement, while President Biden said that he intends to go to Northern Ireland
• UK Chancellor Hunt is to set out plans for 12 new investment zones in the Budget to "supercharge" growth in hi-tech industries, while the scheme is to be backed by GBP 80mln of investment over five years in each of the new high-growth zones, according to Sky News.