• Asian equity markets traded mixed with the Nikkei 225 lagging its peers amid a firmer JPY
• In FX, USD woes persisted in which the DXY slipped to below 90.00 for the first time since late 2014
• Looking ahead, highlights include Eurozone and US Manufacturing PMI, UK Jobs Report, DoEs and NZ CPI

ASIA

Asian equity markets traded mixed following an unconvincing close on Wall St. where all majors posted fresh record highs and the Nasdaq 100 outperformed as Netflix led post-earnings, although DJIA failed to hold onto gains and finished flat. ASX 200 (+0.3%) and Nikkei 225 (-0.7%) were varied with Japanese exporter sentiment weighed by a firmer currency and following a miss on trade data. Elsewhere, a cautious tone was seen in Chinese markets with mild profit taking in the Hang Seng (-0.1%) and the Shanghai Comp. (+0.1%) was choppy alongside early weakness in Shenzhen, as ChiNext heavyweight Leshi Internet & Tech Co. returned from a 9-month trading halt to hit limit down with losses of 10% at the open. Finally, 10yr JGBs were range-bound as initial support from a risk averse tone was later pared, while the BoJ were also in the JGB market for between 1yr-10yr maturities with all the amounts of its Rinban operation kept unchanged.

PBoC injected CNY 110bln via 7-day, CNY 100bln via 14-day and CNY 10bln via 63-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.3916 (Prev. 6.4009)

Japanese Trade Balance Total Yen (Dec) 359.0B vs. Exp. 535.0B (Prev. 112.2B). (Newswires)

Japanese Exports YY (Dec) 9.30% vs. Exp. 10.00% (Prev. 16.20%)

Japanese Imports YY (Dec) 14.90% vs. Exp. 12.40% (Prev. 17.20%)

UK/EU

UK PM May reportedly faces backlash over claims in Brussels that the UK has agreed in principle to Norway-style transition period for Brexit, while other reports stated that UK Conservative MPs told PM May the UK must not be bound by EU rules during the Brexit transition period. (Newswires/Independent)

FX

USD woes persisted in which the DXY slipped to below 90.00 for the first time since late 2014. This underpinned its major counterparts with EUR/USD supported at 1.2300 and in which GBP/USD gained a firmer footing above 1.4000, while the PBoC also took a swipe and set a firmer reference rate of below 6.4000 for the first time since December 4th 2015. Elsewhere, a subdued risk tone facilitated flows into safe-haven JPY and alongside the underperformance in the greenback, resulted to a breakdown of the 110.00 handle for USD/JPY.

COMMODITIES

Commodities were relatively lacklustre in which WTI crude futures pared some of the prior day’s gains in late US trade after the latest API inventory report showed an unexpected build in headline crude stockpiles. Meanwhile, gold was flat but held near the prior day’s best levels amid further weakness in the greenback, and copper nursed some of its recent losses on short-covering.

US API weekly crude stocks (19 Jan, w/e) +4.755M vs. Exp. -1.600M (Prev. -5.120M). (Newswires)

Qatar’s energy minister sees oil market reaching balance by Q3 2018 and sees an excellent opportunity for OPEC and Non-OPEC to continue cooperation beyond 2018. (Newswires)

GEOPOLITICAL

US CIA Director Pompeo said that CIA believes North Korea weapons aimed at coercion and not just defense, while he also commented that US President Trump is focused on achieving a diplomatic solution regarding North Korea, although if this is not possible the CIA is working to provide Trump with a range of options to respond to the situation. (Newswires)

US

With President Trump in Davos, and a government shutdown potentially kicked down the road to 8/Feb, Treasury trade has been cautious, staying within recent ranges. The curve was narrower on the day, with yields in the belly falling by around c4.5bps on the day, while 10s were off by c4bps. The short end was bid ahead of the 2-year auction, which stopped tspanough the screens by 0.1bps, and saw solid demand. With said government shutdown still looming in February, there was also attention on the four-week bill auction, which was also received well, stopping tspanough by 2.5bps. The Treasury will auction 5s and a 2-year FRN tomorrow.  US T-Note futures (March) settles 10+ ticks higher at 122-13+.

US Senate voted 85 vs. 12 in favour of confirming Fed’s Powell as the next Fed Chair. (Newswires)

US President Trump said that they are looking at tariffs for steel and aluminium, while he separately commented that NAFTA negotiation talks are progressing well. (Newswires) US President Trump also tweeted overnight that 'Cryin Chuck Schumer fully understands, especially after his humiliating defeat, that if there is no Wall, there is no DACA. We must have safety and security, together with a strong Military'. (Twitter)

US Republican Senator Roberts said President Trump's trade policies are raising concerns within the Republican Party. (Newswires)

White House Economic Adviser Cohn said President Trump's message at Davos will be to invest in America, while he added that doesn't mean he is withdrawing US from the global trade scene. (Newswires)

US Special Counsel Mueller said he wants to question US President Trump over Comey. (Washington Post)