• A subdued tone was seen across Asian stock markets following a lacklustre lead from Wall St
• The greenback continued to languish after yesterday’s comments from US Treasury Secretary Mnuchin
• Looking ahead, highlights include German IFO, Norwegian and ECB rate decisions, US weekly jobs, Japanese CPI

ASIA

A subdued tone was seen across Asia stock markets following a lacklustre lead from Wall St, where the Nasdaq underperformed on tech weakness and most major indices finished negative despite hitting fresh intraday all-time highs. ASX 200 (-0.1%) and Nikkei 225 (-1.1%) were lower in which Japanese exporters felt the brunt after USD/JPY briefly slipped to below 109.00, while losses in Australia were stemmed as miners benefited from the recent USD-induced commodity rally. Hang Seng (-0.2%) and Shanghai Comp. (Unch.) were cautious after the PBoC skipped open market operations and amid trade war concerns due to protectionist messages from US Treasury Secretary Mnuchin and Commerce Secretary Ross at Davos. Finally, 10yr JGBs weakened on spill-over selling from their US counterparts and with demand also dampened by weaker 20yr auction results.

PBoC skipped open market operations for today to safeguard bank liquidity stability, while it stated that targeted RRR cut is to offset reverse repo demand. (Newswires)

PBoC set CNY mid-point at 6.3724 (Prev. 6.3916)

PBoC Governor Zhou was not re-elected into the CPPCC National Committee, which some reports speculated could be a sign of a looming retirement. (Newswires)

China Mofcom stated that China strongly opposes the US Trade Representative report which showed unilateralism and overlooks facts. Furthermore, it added that China doesn't want an escalation of trade dispute with the US and will take appropriate measures against unilateral moves. (Newswires)

South Korean GDP (Q4 P) Q/Q -0.2% vs. Exp. 0.1% (Prev. 1.5%); 1st contraction since 2008. (Newswires)

South Korean GDP (Q4 P) Y/Y 3.0% vs. Exp. 3.1% (Prev. 3.8%)

UK/EU

UK Transport Secretary and Brexit advocate Grayling said non-EU bilateral post-Brexit talks are progressing well. (Newswires)

UK Office for Budget Responsibility's Chote said the UK economy is 'weak and stable' and sees the chances of another recession in the next 5 years at 50%. (Newswires)

Finland reportedly warned the EU that it will not help fill the EUR 15bln Brexit budget hole. (Newswires)

FX

The greenback languished after yesterday’s comments from US Treasury Secretary Mnuchin that the weaker USD is good for trade. This further added to the ongoing USD-dump and saw GBP/USD attempt a claim on the 1.4300 handle to the upside, while USD/JPY tested a breakdown of the 109.00 level and the USD-index briefly fell below 89.00 for the 1^st time in over 3 years. Elsewhere, commodity-linked currencies were also underpinned by gains in energy and metals, although NZD/USD briefly took a dive after a miss on Q4 CPI data which led to speculation that market forecasts for a rate hike later this year would be pushed back.

New Zealand CPI (Q4) Q/Q 0.1% vs. Exp. 0.4% (Prev. 0.5%). (Newswires)

New Zealand CPI (Q4) Y/Y 1.6% vs. Exp. 1.9% (Prev. 1.9%)

COMMODITIES

Commodity prices extended on gains overnight with the advances fuelled by a weaker USD. As such, WTI crude futures rose above USD 66/bbl to print its highest since late-2014, while the latest comments from Saudi’s Oil Minister also suggested unlikelihood of a early exit from the output cut deal. Elsewhere, gold rose to levels not seen since mid-2013 and copper also rallied despite the risk averse tone, as the greenback’s woes solely fuelled gains across the complex.

Saudi Energy Minister Al-Falih said the oil glut could return if the market is out of balance for a few months and added it is highly unlikely that we will exit cuts in June. (Newswires)

GEOPOLITICAL

North Korea is said to be calling for rapid improvement in North-South relations and said it will smash all challenges against reunification of the Korean peninsula. (KCNA)

US President Trump has warned Turkey that an expansion of their military offence in Syria could lead to direct conflict with US forces. (Newswires)

US

Treasury prices fell on Wednesday after US Treasury Secretary Mnuchin endorsed a weak US dollar, resulting in the curve bear steepening. The steeper curve contributed to some modest widening of curve spreads (2s30s was slightly wider, as was 5s30s at settlement), however, 2s5s and 2s10s saw some (again, modest) narrowing. The US auctioned $34bln of 5-year notes in an average sale, tailing by 0.4bps despite better cover than the prior auction. Internals were mostly in-line with recent averages, though the auction was, perhaps, not as bad as some had feared given today’s steeper Treasury curve. US 10-Year T-Note futures settle 7 ticks lower at 122-06+.

US President Trump said infrastructure plan will total around USD 1.7tln and will be part of State of Union Address next Tuesday.(Newswires)

US President Trump told reporters he is open to the concept of giving DACA recipients citizenship in 10-12 years as part of immigration plan, while he added that immigration bill must include measures to curb family sponsorship of immigrants and a visa lottery system. (Newswires)

US President Trump said he would answer questions from Special Counsel Mueller under oath and tell him there was no collusion with Russia, while there were also reports that US Special Counsel Mueller team is to give President Trump potential interview topics. (Newswires)