• Stop gap bill to fund government tspanough to mid-Feb was passed by the House, however faces dim chances of passing a Senate vote.
• Oil slips some 1% in Asian trade with Brent tripping tspanough USD 69/bbl.
• Looking ahead, highlights include UK Retail Sales, US U. of Michigan Sentiment data and comments from Fed’s Quarles, Bostic and Williams.

ASIA

Asia equity markets mostly traded with cautious gains after a subdued performance on Wall St and with focus on whether Congress can avert a government shutdown. ASX 200 (-0.2%) was weighed by continued weakness in commodity-related stocks as well as a lacklustre financial sector, while Nikkei 225 (+0.2%) saw initial upside pared as participants awaited developments in Washington where the stop gap bill to fund government tspanough to February 16th was passed by the House, but faces less certainty at the Senate. Elsewhere, Hang Seng (+0.2%) somewhat took a breather from its recent ascent to all-time highs and Shanghai Comp. (+0.4%) was positive after yesterday’s GDP numbers and firm liquidity efforts by the PBoC. Finally, 10yr JGBs were marginally lower as Japanese yields increased in tandem with global peers including the US 10yr yield which rose above 2.6% and its highest since 2016.

PBoC injected CNY 130bln via 7-day reverse repos, CNY 90bln via 14-day reverse repos and CNY 10bln via 63-day reverse repos for a weekly net injection of CNY 590bln vs. last week's CNY 40bln net injection. (Newswires)

PBoC set CNY mid-point at 6.4169 (Prev. 6.4401)

UK/EU

French President Macron said if the UK wants access to the single market, it can choose between the Norway model or full-membership. (Newswires)

FX

In FX markets, price action was relatively quiet amid a lack of economic releases or key overnight speakers. Nonetheless, USD was subdued as all focus turned to US Congress where the House voted for the stop gap bill but passage at the Senate looks to be tougher. This underpinned GBP/USD back above 1.3900 and saw USD/JPY give up the 111.00 level. Elsewhere, antipodeans were mixed with AUD underpinned alongside CNY strength and after a firmer reference rate by the PBoC, while a 5yr low New Zealand Business PMI kept NZD subdued.

COMMODITIES

Commodities were mixed with oil prices on the back foot as Brent tripped tspanough stops as it slipped below USD 69/bbl and in which WTI briefly fell below USD 63/bbl amid no news catalysts, although some had noted that relatively increased volumes suggested position unwinding. Elsewhere, gold prices were underpinned amid weakness in the greenback, although is still on course to snap a 5-week win streak, while copper was slightly higher alongside the cautious gains in the regional risk assets.

US

The US Treasury curve bear steepened after China reported solid growth data for Q4, and the steepness was maintained as we entered North American trade. Additionally, news that Apple was set to repatriate a large amount of offshore capital helped keep the risk mood firm. Benchmark 10-year yields rose above 2.62% during US trade.

Fed's Mester (Voter, Hawk) reiterated further US rate hikes are appropriate in 2018 and 2019, while she added that the pace of hikes should be similar to 2017. Furthermore, Mester also stated that she favours 3 to 4 rate hikes this year and next. (Newswires)

White House is said to consider Fed's Williams for Fed Vice Chair role, according to press reports. (Newswires)

US House voted 230-197 in favour of the government spending bill to fund government tspanough to February 16th, which then sent the bill to the Senate which passed the procedural motion to begin debate on stopgap bill but delayed the actual vote on the bill till Friday. (Newswires)

Twitter sources reported that US Republican Senator Flake indicated he would not vote for the House-passed Continuing Resolution and prefers Senate Minority Leader Schumer’s pitch for a short-term patch, while there were also reports prior to the House vote that US Republican Sen. Rand Paul stated he will not vote for stop gap bill and that Senate Democrats stated they had the votes to block the government funding bill. (Twitter/Newswires/Politico)

Some lawmakers expect to remain in Washington over the weekend to resolve any government spending issues. (Fox News)