• Asia equities traded mixed after a similar performance of stock markets on Wall St and amid quiet conditions
• USD firmer post-Trump comments, ECB sources show divide in views on the Bank’s next move
• Looking ahead, highlights include UK GDP, US Durables, GDP, Trade, Canadian CPI and a slew of speakers

ASIA

Asia equities traded mixed after a similar performance of stock markets on Wall St and amid quiet conditions with both Australia and India shut today for national holidays. Nikkei 225 (-0.2%) was negative as the index gradually pared the initial support seen from a recovery in USD/JPY which reclaimed the 109.00 handle on Trump comments. Chinese markets were higher in which the Hang Seng (+1.3%) advanced to fresh record levels amid strength in Tencent and China’s largest banks, while the Shanghai Comp. (+0.3%) was choppy after the PBoC refrained from open market operations which resulted to a net weekly drain of CNY 320bln. Furthermore, participants also digested Industrial Profits which grew a slower pace, but continued to show double-digit growth for December, while FY Industrial Profits grew at its fastest pace since 2011. Finally, 10yr JGBs were slightly higher as prices retained marginal opening gains and with the BoJ also present in the market for JPY 820bln in JGBs under its Rinban operation.

PBoC skipped open market operations for a net weekly drain of CNY 320bln vs. last week's CNY 590bln net injection. (Newswires)

PBoC set CNY mid-point at 6.3436 (Prev. 6.3724)

Chinese Industrial Profits (Dec) Y/Y 10.8% (Prev. 14.9%), 2017 Industrial Profits grew by fastest in 6 years of 21.0% Y/Y. (Newswires)

BoJ Minutes from December 20th-21st meeting stated Japan's economy was expanding moderately and exports had been on increasing trend. The minutes also stated that most members saw price momentum was maintained and viewed that it was appropriate to continue powerful monetary easing. (Newswires)

Japanese National CPI (Dec) Y/Y 1.0% vs. Exp. 1.1% (Prev. 0.6%). (Newswires)

Japanese National CPI Ex. Fresh Food (Dec) Y/Y 0.9% vs. Exp. 0.9% (Prev. 0.9%)

Tokyo CPI (Jan) Y/Y 1.3% vs. Exp. 1.1% (Prev. 1.0%)

Tokyo CPI Ex. Fresh Food (Jan) Y/Y 0.7% vs. Exp. 0.8% (Prev. 0.8%)

UK

UK Conservative MPs were reported to be considering a coup against PM May amid an increase in frustration. (Guardian)

EU is reportedly open to Brexit transition lasting past 2020 (official deadline), according to sources. (Newswires)

A Downing Street source rebuked UK Chancellor Hammond for suggesting that there will only be 'very modest' changes after Brexit. 'We are leaving the Single Market and Customs Union [this] could not be described as very modest changes.' (Telegraph/Times)

Reports suggested that US President Trump & UK PM May want to reach a trade deal as soon as is possible. (Newswires)

EU

Sources suggested that ECB rate setters are split about the next move as the EUR’s rise complicates the outlook. Sources added that some want to remove the easing bias about ramping up QE if needed in March, although others were more cautious and want a full reassessment at the next meeting, while some ECB officials are also said to prefer June for a next policy shift. (Newswires)

FX

In FX markets, major FX currencies nursed the prior day’s losses against the greenback, which were due to President Trump who stated that Treasury Secretary Mnuchin's comments were taken out of context and that he ultimately wants to see a stronger USD. This provided relief from the greenback’s recent woes and dragged EUR/USD and GBP/USD briefly back below the 1.2400 and 1.4100 handles respectively, although both have since recovered off their lows. Elsewhere, the remainder of FX trade was relatively quiet overnight with USD/JPY range-bound above 109.00 as mixed CPI data and an uneventful BoJ minutes release failed to spur price action.

COMMODITIES

Commodities were relatively subdued overnight after prices were pressured as the greenback found reprieve from President Trump comments that he ultimately wants to see a stronger USD. As such, WTI crude futures languished following a brief test of USD 65/bbl to the downside, while Brent crude also slipped but found support at USD 70/bbl. Elsewhere, gold fell around USD 18/oz in the wake of the Trump comments, although the precious metal is off worst levels and has since retraced nearly half the move, while copper was largely unfazed and saw range-bound trade.

GEOPOLITICAL

South Korean Unification Ministry said that North Korea may hold a tspaneatening military parade one day before the open of the Winter Olympics. (Newswires)

US

Treasuries took a hit in the early part of the ECB press conference as Draghi sounded relatively upbeat and didn’t push back against the recent bout of Euro strength, and which was also aided by sell side flow in Bunds. However, Draghi then stressed that current data does not point towards a deposit rate hike in 2018, and reiterated previous comments on ECB policy sequencing. This helped put a bid back in to fixed income, before a stellar US 7-year note auction (although some sources suggest that the >1bps stop tspanough came via one aggressive bid). US T-Note Futures settled 7+ ticks higher at 122-14.

US President Trump said that Treasury Secretary Mnuchin's comments were taken out of context and said that he ultimately wants to see a stronger USD. (Newswires)

US President Trump said that he may terminate NAFTA or he may not, while there were separate comments from Mexico's lead NAFTA negotiator who stated that good discussions were had in NAFTA talks on Thursday. (Newswires)

US President Trump is said to have ordered for special counsel Mueller to be fired in June 2017, but then backed down after White House counsel McGahn tspaneatened to quit. (NYT)

White House presented immigration plan with path to citizenship for 1.8mln dreamers, but would limit chain migration /family sponsorship and end visa lottery system. Furthermore, reports stated the plan will also include USD 25bln for a border wall, while House Republicans are reportedly unhappy with President Trump's immigration proposal. (Newswires/Politico)