• Asian equity markets were mostly higher as region attempted to track the rebound on Wall St.
• FX markets were relatively range-bound overnight with EUR and GBP holding on to recent gains against the USD
• Looking ahead, highlights include the weekly DoEs and a slew of speakers

ASIA

Asian equity markets were mostly higher as region attempted to track the rebound on Wall St. where stocks found reprieve from the 2-day market turmoil on dip buying, which saw S&P 500 briefly reclaim 2700 and the DJIA home in on the 25000 level. ASX 200 (+0.8%) traded positive in which energy and resources names led the recovery as commodities nursed losses, while Nikkei 225 (+0.5%)was initially the best performer and gained over 3% in early-trade before it gradually pared most the advances amid a choppy currency and as momentum waned. Elsewhere, Hang Seng (+0.5%) and Shanghai Comp. (-1.3%) were both lifted at the open by the early rising tide, although mainland stocks then retreated amid Shenzhen volatility and after the PBoC continued to drain liquidity from the banking system with its inaction. Finally, 10yr JGBs sspanugged off the initial safe-haven outflows and returned flat, as price action proved to be as indecisive as the recovery in Japanese stocks. Furthermore, the BoJ’s Rinban announcement failed to spur any market reaction as the bank kept its purchase amounts inline with the previous.

PBoC skipped open market operations again today for a net daily drain of CNY 100bln. (Newswires)

PBoC set CNY mid-point at 6.2882 (Prev. 6.3072)

UK/EU

European Commission reportedly wants the authority to punish UK non-compliance during the Brexit transition period by summarily blocking the UK's access to parts of the single market, according to a draft treaty. (FT) There were also separate reports that the UK could face a higher Brexit bill as EU is said to demand defence funding. (Newswires)

Ireland is said to be pushing for a settled 'legal text' over Brexit border issue as early as next month, which reports add could derail Brexit negotiations. (Telegraph)

NIESR raised its UK 2018 and 2019 GDP growth estimates to 1.9% for each year from prev. forecasts of 1.7% in November. (Newswires)

FX

FX markets were relatively range-bound overnight with EUR and GBP holding on to recent gains against the USD, while the PBoC was also a hindrance on the greenback after it set the strongest fix since August 2015. Elsewhere, NZD/USD was underpinned in early trade after strong jobs data in which Employment Change topped estimates and the Unemployment Rate unexpectedly declined, but then gave back gains in anticipation of the upcoming RBNZ rate decision. USD/JPY also traded choppy and was initially supported amid the improvement in risk appetite, but then reversed as momentum waned.

New Zealand Employment Change (Q4) Q/Q 0.5% vs. Exp. 0.4% (Prev. 2.2%). (Newswires)

New Zealand Employment Change (Q4) Y/Y 3.7% vs. Exp. 3.6% (Prev. 4.2%)

New Zealand Unemployment Rate (Q4) 4.5% vs. Exp. 4.7% (Prev. 4.6%)

South African President Zuma is to resign as soon as a list of preconditions are finalised, according to sources. Furthermore, there were also earlier reports that President Zuma is preparing to fire his deputy Ramaphosa and replace him with ex-wife Dlamini-Zuma. (Newswires)

COMMODITIES

Commodities saw mild gains overnight in which WTI crude futures attempted a reclaim of the USD 64/bbl level to the upside after the weekly API inventory report showed an unexpected drawdown in headline crude stockpiles, while there were also optimistic comments on the oil market from OPEC. Meanwhile, gold nursed losses amid a lacklustre greenback and copper benefitted from the improved risk sentiment.

US API Weekly Crude Stocks (Feb 2) -1.05M vs. Exp. 3.2M (Prev. 3.229M). (Newswires)

OPEC Secretary General Barkindo said that OPEC still has a way to go in market rebalancing and is satisfied with 2017 oil price gains. He also noted that the cartel is looking at 2018 with even more optimism. (Newswires)

The EIA raised its forecast for 2018 world oil demand growth by 10,000 bpd, now sees 1.73mln bpd Y/Y increase, also raised its 2019 forecast 70,000 bpd, now sees 1.72mln bpd Y/Y increase. (Newswires)

India is to lift the iron ore mining ban in Goa effective after March 15^th. (Newswires)

GEOPOLITICAL

US President Trump spoke with UK PM May in which they agreed all responsible nations must increase pressure on North Korea over its nuclear program. (Newswires)

China reportedly deployed 300K troops along border with North Korea as preparation to deal with a crisis in the event of war breaking out. (Twitter)

US

The sheer magnitude of the equity price swings (and spike in volatility) seems to have put a pause in the unrelenting surge higher in US yields (and more crucially, real yields), and the tplex was happy to resume its role as a haven amid this week’s market turmoil. The curve bull flattened, and major spreads narrowed slightly. The US will auction $68bln in new 3s/10s/30s this week, and with $46.6bln maturing at the mid-month settlement, net supply is seen at $21.4bln. The issuance gives traders an opportunity to assess whether the bond market sell-off has stabilised, or whether there is still room to run. Today’s 3s auction will not have answered that question given the sale was lacklustre. The auction tailed, cover was a touch weaker (though above recent averages), with dealer takedown particularly noteworthy at 40.5%, above recent averages. US T-Note futures settle +7 ticks at 121-15+.

Fed's Bostic (voter) said if robust growth and wage increases persist, we will see slow gradual rate hikes. (Newswires)

US House passed bill to fund government tspanough to March 23rd via vote of 245 vs. 182, which sends the bill to the Senate. (Newswires)

Goldman Sachs Chief Economist Hatzius still expects the Fed will hike 4 times this year, while he added that they haven't seen anything this year to change their view. (Newswires)

China filed new challenges against US tariffs for solar panels and washing machines at WTO. (Newswires)