• APAC stocks traded higher as the region took impetus from the gains on Wall Street where tech outperformed.
• Fed's Bowman said policy appears to be sufficiently restrictive, Bostic reiterated his call for 2 x 25bps rate cuts this year.
• European equity futures are indicative of a higher open with Euro Stoxx 50 futures +0.3% after the cash market closed up by 0.5% on Monday.
• DXY is a touch softer but maintaining 102 status, JPY is the marginal G10 outperformer, EUR/USD lingers around 1.0950.
• Crude futures traded rangebound which provided some slight reprieve from the prior day's selling in which WTI fell by almost 4%.
• Looking ahead, highlights include German Industrial Output, US International Trade, Canadian Building Permits, Trade, US RCM/TIPP Economic Optimism, Japanese Labour Wages, Fed Discount Rate Minutes, Speeches from ECB’s Villeroy & Fed's Barr, Supply from Netherlands, UK, US & Japan.

US TRADE

EQUITIES

• US stocks traded higher with gains in the major indices led by the Nasdaq amid strong outperformance in the tech sector and with risk appetite facilitated by lower yields across the curve in the wake of the NY Fed Survey of consumer inflation expectations which saw declines across all forecast horizons. Furthermore, oil prices sold off throughout the session after Saudi Arabia cut its OSPs in what desks labelled as a sign of weak demand.
• SPX +1.41% at 4,764, NDX +2.11% at 16,650, DJIA +0.58% at 37,683, RUT +1.94% at 1,989.
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NOTABLE HEADLINES

• Fed's Bostic (voter) said inflation has come down more than he expected and the rise in unemployment has been 'far less' than what would typically be the case given the reduction in inflation. Bostic added the Fed can let restrictive policy continue to work to slow inflation and expects the process will remain "orderly", while he repeated his forecast for two 25bps rate cuts as appropriate by the end of the year.
• Fed's Bowman (voter) said policy appears to be sufficiently restrictive to hit the 2% goal but noted important upside inflation risks remain and she will stay cautious in her approach to considering changes to the policy rate. Bowman also commented that inflation could fall further with the policy rate held steady for some time and that it will eventually become appropriate to lower the Fed's policy rate should inflation fall closer to 2%, while she remains willing to raise the policy rate at a future Fed meeting should inflation progress stall or reverse.
• US Treasury Secretary Yellen said IRS funding is sufficient to continue modernisation efforts in the short- to medium-run and she believes the congressional top-line spending deal is consistent with the debt ceiling agreement last June. Furthermore, she said President Biden would like to continue individual tax cuts in place for Americans earning under USD 400,000 and will propose ways to raise revenues.
• United Airlines (UAL) found loose bolts so far on close to 10 Boeing (BA) 737 MAX aircraft during inspection with the loose bolts all in the same location, while it was separately reported that Alaska Airlines (AAL) found loose hardware on some Boeing (BA) 737 MAX 9 planes.

APAC TRADE

EQUITIES

• APAC stocks traded higher as the region took impetus from the gains on Wall Street where tech outperformed as risk appetite was fuelled by a lower yield environment and a drop in oil prices.
• ASX 200 climbed above 7,500 with the index led by tech and consumer-related sectors owing to softer yields.
• Nikkei 225 printed its highest since March 1990 and rallied to just shy of 34,000 where it hit resistance.
• KOSPI was clouded after disappointing preliminary quarterly earnings from Samsung Electronics.
• Hang Seng and Shanghai Comp initially benefitted amid the broad constructive mood and recent PBoC hints at tools to boost credit including RRR although the upside was reversed after the PBoC drained liquidity and with Chinese oil majors pressured by the recent fall in oil prices.
• US equity futures plateaued overnight and took a breather from yesterday's tech-led gains.
• European equity futures are indicative of a higher open with Euro Stoxx 50 futures +0.3% after the cash market closed up by 0.5% on Monday.

FX

• DXY remained subdued by the rally in equities and softer yields although held on to the 102.00 status.
• EUR/USD initially benefitted from the dollar weakness and support at 1.0950 although gains were pared.
• GBP/USD was ultimately flat overnight after testing the prior day's highs with a firm footing above 1.2700.
• USD/JPY slipped beneath the 144.00 level with early pressure from yield differentials and amid a lacklustre greenback, while the latest data releases from Japan printed mixed.
• Antipodeans were underpinned in early trade by the positive risk appetite and better-than-expected data from Australia in which Building Approvals and Retail Sales topped forecasts, although the moves were later reversed.
• PBoC set USD/CNY mid-point at 7.1010 vs exp. 7.1502 (prev. 7.1006).

FIXED INCOME

• 10yr UST futures pulled back following yesterday's advances which had been facilitated by declines in both energy prices and NY consumer inflation expectations.
• Bund futures were lower after hitting resistance north of the 136.00 level.
• 10yr JGB futures eked slight gains amid mixed data and the BoJ's presence in the market.

COMMODITIES

• Crude futures traded rangebound which provided some slight reprieve from the prior day's selling in which WTI fell by almost 4% after Saudi's OSP cuts were viewed by desks to be a sign of weak demand.
• Motiva's Port Arthur, Texas refinery (636k BPD) large crude unit and coker were shut on Monday.
• Spot gold remained afloat in uneventful trade as a weaker dollar offset the lack of haven demand.
• Copper futures were supported by the constructive mood but with gains capped as China lagged.

CRYPTO

• Bitcoin gave back some of the prior day's firm gains after briefly climbing above the USD 47,000 level.

NOTABLE ASIA-PAC HEADLINES

• Taiwan's ruling party presidential candidate Lai said Taiwan will build up defence deterrence and economic security, while he will maintain the status quo and current President Tsai's policies.

DATA RECAP

• Japanese All Household Spending MM (Nov) -1.0% vs. Exp. 0.2% (Prev. -0.1%)
• Japanese All Household Spending YY (Nov) -2.9% vs. Exp. -2.3% (Prev. -2.5%)
• Tokyo CPI YY (Dec) 2.4% vs. Exp. 2.5% (Prev. 2.6%, Rev. 2.7%)
• Tokyo CPI Ex. Fresh Food YY (Dec) 2.1% vs. Exp. 2.1% (Prev. 2.3%)
• Tokyo CPI Ex. Fresh Food & Energy YY (Dec) 3.5% vs. Exp. 3.5% (Prev. 3.6%)
• Australian Building Approvals (Nov) 1.6% vs. Exp. -2.0% (Prev. 7.5%, Rev. 7.2%)
• Australian Retail Sales MM (Nov) 2.0% vs. Exp. 1.2% (Prev. -0.2%)

GEOPOLITICS

• Israeli officials said they will tell US Secretary of State Blinken that Palestinians will not return to northern Gaza unless Hamas releases more hostages, according to Al Jazeera.
• US Secretary of State Blinken said he found leaders in the Middle East determined to prevent a wider conflict but added they all recognised hurdles and nobody thinks anything will happen overnight.
• US State Department said Secretary of State Blinken and Saudi’s Crown Prince discussed ongoing efforts to reduce regional tensions including deterrence of Houthi attacks on commercial shipping in the Red Sea.

UK/EU

NOTABLE HEADLINES

• Barclays said UK December consumer spending rose 2.3% Y/Y (prev. 2.9%).
• French PM Borne resigned and will act as caretaker until a new government is named. It was later reported that a new French PM is to be named on Tuesday morning, according to AFP.

DATA RECAP

• UK BRC Retail Sales Like-For-Like YY (Dec) 1.9% (Prev. 2.6%)
• UK BRC Total Sales YY (Dec) 1.7% (Prev. 2.7%)